Buy Now Hard Money

After 3 straight months of improvement, the Pending Home Sales Index slid lower in September. As compared to August, September’s reading fell 2 percent.

A “pending home sale” is a home under contract to sell, but not yet closed. The data is drawn from a combination of local real estate associations and national brokers, and represents 20 percent of all purchase transactions in a given month.

Because of the large sample set, and because 80 percent of homes under contract close within 60 days, the Pending Home Sales Index is a terrific future indicator for the housing market. A high correlation exists between the Pending Home Sales Index and the NAR’s monthly Existing Home Sales report issued two months hence.

Expect home sales to idle into the New Year, therefore.

For home buyers in , this is good news. Over the last two months, housing markets have overwhelmingly favored home sellers.

Consider than, since June, the volume of both new home sales and existing home sales has increased, causing the available home inventory to fall by months. Meanwhile, helped by low interest rates, demand from buyers has remained relatively stable.

As with everything in economics, falling supply with constant demand leads to higher prices.

Therefore, the Pending Home Sales Index’s fading September figures suggest a more balanced supply-and-demand curve in the months ahead, a move that should suppress rising home prices and shift negotiation leverage back to the buy-side.

So long as mortgage rates remain rock bottom, the autumn season is looking like a terrific time to buy.

As the “pulse of the single-family housing market”, the Housing Market Index is a monthly product of the National Association of Homebuilders. Its scores range from 1-100, with a reading a 50 or better suggesting “favorable conditions” for builders.

Because of its methodology, the Housing Market Index can offer excellent insight into the market for newly-built homes. This is because its value is a composite of three survey questions:

1. How are market conditions today?
2. How do market conditions look 6 months from now?
3. How is the prospective traffic of new buyers for new homes?

Builder responses are collected, weighted, then presented as the Housing Market Index.

According to the NAHB, October’s HMI reading of 16 is its highest value in 5 months. The uptick hints that the market for newly-built homes may rebound more quickly that this summer’s weak new homes sales figures would otherwise suggest.

You’ll remember that, between April and August, the number of new homes sold per month fell by 30 percent and the available, new home inventory climbed 2.3 months.

This month, though, builders report much better foot traffic and, as a result, have raised their expectations for the next six months of sales. Low mortgage rates are likely aiding the optimism, too.

As compared to 1 year ago, average, 30-year fixed mortgage rates are lower by 0.75 percent, a payment savings of $45 per $100,000 borrowed.

Well, new home sales are not rebounding.  Existing home sales are.   Go figure.  There is enough inventory out there that it doesn’t make financial sense to build new houses if you are building on spec.    This is why we are not funding spec construction.  Read on…..  It may be good news still if you are in the market for a new home to purchase for yourself.  From Thanksgiving to New Years is a great time to make offers.

Existing Home Sales rebounded last month after a lackluster July. New Home Sales data, by contrast, did not.

After an upward revision to July’s data, New Home Sales remained unchanged at 288,000 units in August. It marks the second-lowest number of units sold in a month since 1963, the year government started its record-keeping.

At the current pace of sales, the newly-built home inventory would be depleted in 8.6 months.

The August New Home Sales was weaker-than-expected, but both Wall Street investors and Main Street economists are shrugging it off. The numbers were foreshadowed by weakening housing figures from earlier this summer.

For example:

1. Building Permits dropped between March and June
2. Housing Starts dropped between April and July
3. Homebuilder confidence continues to sag

Together, these three data points suggest that the market for new homes will be soft through at least this month.

With New Home Sales fading and colder months ahead, it may be an opportune time for home buyers to look at new construction. Builders are eager to move inventory and the cost of materials remains low.

Buying “new” may never be cheaper — especially with mortgage rates as low as they are. The 0.750 percent drop in rates since January has shaved $188 off of a $200,000 mortgage’s monthly cost. That’s $2,250 per year in savings.

As home supplies dwindle and mortgage rates rise, finding “great deals” in new construction will undoubtedly get tougher. Take advantage of today’s market conditions, combined with builder pessimism. It may be the right combination at the right time to get that new home for cheap.

What does this mean to you, the real estate investor?  Well, if you are a rehabber, it means your end buyer can buy a brand new home almost as inexpensively as that rehab that you just finished.  So you have to price accordingly.  To do that, you have to buy it right to start with.  Read on for more about New Home Sales….

One day after the National Association of Realtors released the softest Existing Home Sales report since 1995, the U.S. Census Bureau released a similarly-weak New Home Sales report.

Americans bought just 276,000 newly-built homes in July. That marks the fewest units sold since the government started keeping records in 1963.

In addition, although new home inventory actually dropped 2,000 units in July, the slowing sales pace still managed to push the national supply higher by 1.1 months.  At July’s rate of sales, the nation’s new home inventory would be exhausted in just about 9 months.

None of this news should surprise you, though. It’s all been foreshadowed for weeks.

First, Single-Family Housing Starts have dropped in every month since April.  A “housing start” is a when a home starts construction and, because fewer homes are under construction, we should expect fewer homes to be sold.

Second, Building Permits are down.  The number of new permits peaked in March and have fallen 23 percent since.

And, lastly, home builder confidence ranks at its lowest levels since early-2009. A contributing factor in that pessimism is dwindling buyer foot traffic.

Regardless, there’s two sides to the story. Although the New Home Sales data looks bad for builders, it can be terrific  for home buyers. This is because new homes are more likely to be discounted when the sales cycle favors buyers.

Coupled with ultra-low mortgage rates, the cost of buying a newly-built home may have just become cheaper.