The number of homes under contract to sell increased in May.
It's the fourth straight month in which sales volume increased, corroborating the growing notion that housing is on the mend in most U.S. markets.
Consider these other housing-related stories from the past month:
Put it all together and it looks like the housing market is about to reach its bottom (if it hasn't already).
But just because homes are going under contract to sell doesn't mean that they actually will sell. A "deal" can fall apart for all sorts of reasons including failed home inspections, buyer-seller disputes, and mortgage-related problems.
In general, though, as the number of pending contracts increase, we find that Existing Home Sales rise, too, some 45-60 days into the future. And so long as buyers' demand for homes remains strong, we would expect that home prices edge higher.
It's too soon to say that housing has turned the corner for certain, but there's an awful lot of data lately that suggests that it has.
Tuesday -- for the first time in a long while -- members of the press met the monthly Case-Shiller Index data with enthusiasm. And why shouldn't they? 19 of the 20 measured markets showed a slowing pace of home price decline in April.
Here are some of the headlines about the story:
Now, the headlines feel negative, but they're actually highlighting some key strengths in April's figures. For example, nearly half of the Case-Shiller markets posted gains in April and all but one showed month-over-month improvement.
It's a step in the right direction but doesn't mean that housing has turned around for good.
We have to be careful about how we interpret the Case-Shiller Index because it's an imperfect housing gauge. The most obvious Case-Shiller flaw is that it only measures home values in 20 cities nationwide and they're not even the 20 biggest cities.
Houston, Philadelphia, San Antonio and San Jose are excluded from the report and each ranks among the country's 10 most populous areas.
That said, the report is still important because the Case-Shiller Index identifies broader housing trends and that helps to shape economic policy.
Not only versus last month but also versus last year, the pace at which home values are falling appears to be getting slower. This is the third straight month Case-Shiller has reported as such.
Now, three months makes a trend, but the data has to stay strong through the summer months to mark a bona fide turnaround. If the Case-Shiller Index shows strength for May and June, it could be the signal for which the markets have been waiting.
At the start of the year, the "experts" made a lot of predictions about the U.S. economy and what to expect in 2009.
And nobody predicted just how big the government's stimulus package would be.
Now, on June 30, with the year officially half-over, it's as good a time as any to remember that people are much better at interpreting the past than predicting the future. Economists can make educated guesses about the future, but they're guesses nonetheless.
It's like watching the Weather Channel. A meterologist can look at the data and say it's going to rain next week, but the forecast is never 100%.
So far this year, mortgage rates have been up and down, credit availability has been higher and lower, and home prices have varied immensely from neighborhood to neighborhood.
There's another 6 months until 2010 and there's no reason to expect the current volatility and uncertainty to change.
The world is unpredictable and so is the U.S. economy. Therefore, consider making your personal finance decisions based on the information at hand today instead of on an educated guess about the future.
After all, the weatherman's been wrong before.
In between visits from the exterminator, it's not uncommon to see the occasional ant, spider or roach or insect around the house.
But what to do about it?
One solution is Terminix SafeShield, a new, eco-friendly home pest control product introduced earlier this year.
Formulated by an independent pesticide company, Terminix SafeShield is a non-aerosol bug spray whose active ingredients are all-natural. The formula is said to control 25 types of in-home pests and kills bugs fast.
Because of its natural composition, SafeShield is safe for use around kids and pets -- a huge advantage over chemical-laden, off-the-shelf products. However, this same composition is also the product's weak spot. Its oils and ingredients are most effective as spot treatments -- not long-lasting ones.
Although it's meant to complement a professional Terminix treatment, SafeShield can be purchased by-the-bottle at the Terminix website.
If you only saw the headlines this week, you may have missed another positive sign in the housing market.
According to the Census Bureau, the supply of newly-built homes for sale fell to 10.2 months in May, its lowest level in 10 months.
Unfortunately, the New Homes Sales story wasn't positioned as a positively by the press. Instead, the most common headline on the data read "New Home Sales Dip 0.6%" with many journalists referring to the figures as "weak" or "disappointing".
Only, that's not completely true.
See, one of the nice elements of the monthly New Home Sales report is its footnote section in which the Census Bureau talks about statistical Margin of Error and that section tells us that if the Margin of Error is larger than the measurement itself, the report is useless.
And that's exactly what happened in May.
New Home Sales were measured to have fallen by 0.6 percent but that data point was dwarfed by its 17.8 percent Margin of Error, The "headline data", in other words, was just a guess.
The press reported it anyway.
Nonetheless, as it relates to the economy, falling home inventories are a positive. Having 10-plus months of homes on the market is still high historically, but a definite improvement over what we saw earlier this year.
So long as low mortgage rates and aggressive pricing persists from builders, we expect even less supply in the months ahead.
The Federal Open Market Committee voted to leave the Fed Funds Rate unchanged today within its target range of 0.000-0.250 percent.
The Fed also reiterated its plan to support the mortgage market to the tune of $1.5 trillion.
In its press release, the FOMC noted that the U.S. economy is not slowing with the same speed versus just two months ago and that financial markets, in general, are improving.
These are two signs that the country may be emerging from recession, if it hasn't already.
The news isn't all good, however. The Fed made a point to highlight the potential hazards the nations faces on its path to economic recovery:
- The prices of energy and commodities have been rising
- Job losses are still mounting nationally
- Businesses are reducing capital expenditures
Also in its statement, the Fed acknowledged a plan to hold the Fed Funds Rate near zero percent "for an extended period" and a re-commitment to the U.S. Treasury and Mortgage Bond markets.
Market reaction to the Fed's press release has been muted.
With no new stimulus and no new "tools" to spur the economy unveiled, Wall Street is business as usual. Mortgage rates are unchanged post-FOMC today.
The FOMC's next scheduled meeting is August 11-12, 2009.
The housing market got another dose of good news yesterday.
According to the National Association of REALTORS, the number of homes sold in May increased for the third straight month and the national housing supply fell by 5 months.
Furthermore, first-time home buyers are accounting for nearly one-third of the market activity.
But, before we declare a bottom in housing, it's important that we remember the First Rule of Real Estate:
All Real Estate Is Local
National housing statistics like Existing Home Sales are painted with a very broad brush. They lump disparate locales such as San Francisco and Seattle into one sample set and don't account for regional differences, let alone neighborhood ones.
Furthermore, getting down to a city-by-city, or even street-by-street basis, we can always find homes that are selling quickly and home that are languishing. Real estate is highly local and subject to countless influences.
That said, the national data isn't completely useless. From the patterns, we can infer that low mortgage rates, ample home supply and available tax credits are providing a quantifiable boost to the broader real estate market.
And based on recent pending sales data, we can expect June and July's Existing Home Sales figures to be similarly strong to May.
Therefore, if you're in the market for a new home right now -- or plan to be soon -- be conscious of home inventory levels in your target neighborhoods. Fewer homes on the market usually means less ability for buyers to negotiate and that leads to higher sales prices.
Plus, the NAR is reporting buyer activity up 10 percent from last year.
The housing market may not be fully recovered in every housing market just yet, but in studying the data, a lot of the pieces appear to be falling into place.
The Federal Reserve begins its scheduled two-day meeting this morning.
It's one of 8 scheduled meetings for the Federal Open Market Committee this year.
When the FOMC meets, it discusses the financial and economic conditions around the country and, when appropriate, the group makes new policy meant to speed up or slow down the economy.
The main tool for reaching this goal is the Fed Funds Rate and, earlier this year, the FOMC lowered it to "near-zero" percent in an attempt to stimulate growth.
But the Fed has other tools at its disposal, too, not the least of which is its $1.25 trillion pledge to the mortgage markets.
Now, if you'll remember, the Fed made that pledge in two parts:
- Part 1 came in November 2008 for $500 billion
- Part 2 came in March 2008 for $750 billion
After each announcement, mortgage rates reflexively dropped and stayed low for a period of a day or two. Then, fears of inflation set in on Wall Street, causing mortgage rates to pop back up because inflation is a mortgage-rate killer.
The Fed isn't expected to increase its mortgage market commitment this week, but because mortgage rates are above the government's "target zone", it's possible that the FOMC uses its post-meeting press release to give markets some guidance and its plan for the next several months.
A statement like this could alternately raise mortgage rates or lower them, depending on what the Fed says.
It's for this reason that floating a mortgage rate through tomorrow afternoon is extremely risky. The Fed could say nothing about mortgages, or it could say a lot. Either way, a small, quarter-percent change in mortgage rates can add tens of thousands of dollars to the lifetime cost of a person's pending home loan.
The Fed's press release hits the wires at 2:15 PM ET Wednesday. If you're the cautious type, consider locking your mortgage rate prior to its release.
Water high in mineral content -- specifically calcium and magnesium -- is more commonly known as "hard water".
There's no negative link between hard water and human health, but hard water has been known to mess with a homeowner's penchant for cleanliness. Over time, mineral deposits can collect and "stain" anywhere that there's running water.
In the home, hard water stains are most commonly found in bathrooms.
In this 2-minute video from Rachel Yatuzis, we see the Hard Water Stain Remedy in action. It doesn't take much time, or even much effort. Removing the stains can be as simple as mixing lemon juice, vinegar, and baking soda.
Mortgage rates are suffering through another volatile week, causing problems for home buyers.
After falling Monday and Tuesday, mortgage rates surged Wednesday and Thursday. The momentum higher appears to be carrying into the weekend, too.
There are several data-related reasons for the mortgage market's spastic activity this week:
- Unemployment claims fell
- Leading Economic Indicators rose
- Inflation readings are tame
But while each of the data points above fueled mortgage rate volatility, it's not the data that's making markets move the most. It's the psychological impact of the data.
See, data tells us about the past. It measures and reports on what's already happened. Unfortunately for rate shoppers, mortgage markets are not made on data from the past -- they're made on the expectations of what will happen next.
Mortgage rates reflect Wall Street's opinion of the future.
In reading the papers and watching the news, you'll notice ongoing debate about the U.S. economy. It's unclear whether the recession is worsening or improving.
On one hand, data is weak and sub-optimal. On the other hand, the data is not nearly as weak as it was 6 months ago and, in some cases, it's strong. To some, this is a signal that a recovery is already underway.
Or, it may just be a blip.
We can't be certain in which direction the economy is headed and the same can be said for mortgage rates. Because sentiment is changing so often, though, it forces us to be on our toes.
The last few months have been marked by large mortgage rate swings across small windows of time. A rate that's offered in the morning, for example, is rarely available in the afternoon. Therefore, do your rate shopping in a compressed period of time and be ready to lock at a moment's notice.
When markets move, they tend to move quickly.
