Pending home sales and mortgage applications
Like many economic signals in a newly recovering market, two key housing indicators out today conflict slightly, as according to the National Association of Realtors (NAR), pending home sales index rose 4.5 percent in January, meanwhile the Mortgage Banker’s Association (MBA) said today that mortgage application volume fell 3.8 percent in just the last week. The PHSI is a lagging indicator, while applications are forward-looking and have been on a tiny roller coaster so far in 2013.
The PHSI has steadily improved, marking 21 consecutive months of beating year-ago levels, and all regions saw an increase in contracts except for the West where inventory continues to be quite limited. NAR points out that the January PHSI reading is the highest since April 2010, just before the popular home buyer tax credit expiration date.
Dr. Lawrence Yun, NAR chief economist, said “Favorable affordability conditions and job growth have unleashed a pent-up demand. Most areas are drawing down housing inventory, which has shifted the supply/demand balance to sellers in much of the country. It’s also why we’re experiencing the strongest price growth in more than seven years.”
Looking forward by looking backwards
“Over the near term, rising contract activity means higher home sales, but total sales for the year are expected to rise less than in 2012, while home prices are projected to rise more strongly because of inventory shortages,” Dr. Yun noted.
The PHSI in the Northeast rose 8.2 percent to 84.8 in January and is 10.5 percent higher than January 2012. In the Midwest the index increased 4.5 percent to 105.0 in January and is 17.7 percent above a year ago. Pending home sales in the South rose 5.9 percent to an index of 119.3 in January and are 11.3 percent higher January 2012. In the West the index edged up 0.1 percent in January to 102.1 but is 1.5 percent below a year ago.
Mortgage rates continue to be low, but the volume of mortgage applications for new purchases fell 5.0 percent last week, which could put a slight dent in February’s PHSI. The volume of applications for refinances fell 3.0 percent and hit 77 percent of total applications, their lowest level since July 2012, after months of hovering around 80 percent of the total.