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If you work in anything related to housing or real estate, this year has probably felt like an incredible sprint. If this was the 100-meter dash, we would be at that final point in the race where it’s time to get ready for that last lean across the finish line. Mortgage volume and home sales have set a blistering pace.

Get that lean going because it’s time for that final 5 meters. I know you’ve got clients who want to get into a home for the holidays. Here’s the insight you can use to help them out!

The Big Story

It seems like we’ve said this a lot, but according to Freddie Mac, mortgage rates have held at lows not seen in the history of the survey for the last couple weeks. It’s hard not to have your interests piqued if you’re mostly interested in buying a home at the moment. It’s a great time to be prospecting for potential clients.

Low mortgage rates have certainly helped create a red-hot housing market. New home sales are on pace for nearly 1 million units sold for the year, so that market is scorching and even late October temps couldn’t cool it.

On the existing home sales front, home sales were up to a seasonally adjusted annual rate of 6.85 million, which represented 4.3% growth from September, but also up 26.6% from the same time a year ago.

The one downside of sales being at such high levels right now is that supply is definitely an issue. At the current sales pace, there’s only 3.3 months’ worth of supply on the new home sales side. When looking at existing homes, supply is down to just 2.5 months. Buyer and seller balance is generally considered achieved if supply is at 6 months.

In this incredibly tight market, it’s important to be patient with your buyers. It may take them longer to find a home that meets their needs and their price range. The good news is they’ll be relying on your insight more than ever to help negotiate.

Finally, as anyone who relies on clients will know, relationships are everything and it doesn’t stop at the close of the home. If you’ve got a client who you feel could benefit from refinancing in this market, provide value by being their expert and encourage them to take advantage of the environment we find ourselves in. The opportunity is vast!

More News You Can Use

This report was put together with the assistance of analysis from Econoday.1 Let’s run through what happened since our last report!

Housing Market Index

Builder confidence in the markets is at all-time highs as this index came in at 90 in November. Breaking it into its components, the current sales situation came in at a whopping 96. This was followed by an 89 for sales over the next 6 months. Finally, when looking at traffic of prospective buyers going through new homes, it’s 77.

Needless to say, there’s a ton of optimism out there right now.

New Construction

The annual rate for housing starts was up 4.9% in October to 1.53 million. This is very positive considering supply continues to be the number one boogie man serving as a threat to the momentum in the housing market. Single-family home starts were up 6.4% to 1.108 million. The downside is multifamily starts which are at 334,000, 34% below pre-COVID levels.

Meanwhile, looking at permits, the annual rate for new construction is 1.545 million, which is unchanged for the month but up 2.8% for the year. There was a 0.6% uptick in single-family permits at 1.113 million. On the multifamily side, it was 365,000 in October.

Finally, completions are in some ways most important because it affects housing supply right now. These are up 4.5% to 1.406 million. Multifamily completions came in at 444,000 and single-family completions were down 3.4% at 883,000.

Existing Home Sales

Existing home sales were up 4.3% to 6.85 million in the month of October, which is an increase of 26.6% for the year. Moreover, the median price of an existing home was $313,000, which is up 15.5% on the year.

In terms of supply, it was down 2.7% from September and has fallen from 1.77 million last year, down 19.8% from the same time a year ago. As mentioned above, there are only 2.5 months’ worth of supply available.

Sales in the Northeast were up 4.7% and 30.4% from a year ago as prices rose 20.2%. Meanwhile, the Midwest has sales up 28.1% from last year to a pace of 1.64 million with a 16.7% increase in prices over last year. In the South, home prices were up 15.7% on a 3.2% increase in the annual rate of sales at 2.91 million. Finally, in the West, sales are up 1.4% to 1.4 million on the month, up 22.8% from last year.

Case-Shiller House Price Index

Home prices were up 1.3% on a seasonally adjusted basis in this index and 1.2% overall in September. On the year, prices are up 6.6% in total.

This index covers 20 major cities and it’s a 3-month rolling average as opposed to the competing FHFA index below. Moreover, it covers all transactions as opposed to conventional loans alone.

FHFA House Price Index

Home prices for conventional loans were up 9.1% on the year after rising 1.7% in September this is based on conventional loans backed by Fannie Mae or Freddie Mac.

Gross Domestic Product (GDP)

The economy grew at a rate of 33.1% in the latest preliminary estimate for the third quarter, a bounce back after the effects of COVID-19 related shutdowns. Personal consumption expenditures accounted for 40.6% of that growth.

Of particular interest to this group, residential investment helped add 2.17% to GDP. Housing continues to be a major economic driver.

New Home Sales

As mentioned above, the pace of new home sales is 999,000 in October, down just slightly from the prior estimate. The median price of a new home was $330,600, up 2.5%.

Going a little bit deeper into the regional data, there were 41,000 homes sold in the Northeast on a seasonally adjusted basis. Meanwhile, 109,000 homes were sold in the Midwest, 580,000 homes sold in the South and 269,000 in the West.

Pending Home Sales Index

Pending home sales were down 1.1% to 128.9 in October. This is a sign that it’s possible that existing home sales could be lower in November, because this is a leading indicator.

MBA Mortgage Applications

On an unadjusted basis, purchase applications are up 22% from the same week last year. On the refinance side, applications are up 89% compared with a year ago.

Rates are extremely low, and that’s the driver. With 20% down and 0.35 points paid, the average interest rate across the industry for a 30-your mortgage is 2.9%, according to the MBA.

Consumer Price Index (CPI)

From a consumer perspective, inflation was up 0.2% from a month overall and 1.2% on the year. As part of that, the cost of shelter was up 0.1%. This appears to under index the housing gains that we’ve seen in other metrics.

Mortgage Rates

Mortgage rates have been hovering around record lows for the majority of the year, consistently hitting new bottoms, according to Freddie Mac. If you’ve got a client who’s on the fence about buying or refinancing, a better time is hard to see.

The average interest rate on a 30-year fixed-rate mortgage with 20% down and 0.7 points paid was at a record low of 2.71%, down from 3.73% last year.

Meanwhile, the average rate on a 15-year fixed mortgage with the same down payment and 0.6 points paid was 2.26%, having fallen from 3.19% a year ago.

Normally, we would give a rate for adjustable rate mortgages, but in the current market environment with fixed rates being the way they are, they don’t make a ton of financial sense for anyone.

Now that you have these insights, go forth and share them with your clients! For even more tips and tricks, check out our real estate agent page.

1 Important Legal Notice: Econoday has attempted to verify the information contained in this calendar. However, any aspect of such information may change without notice. Econoday does not provide investment advice, and does not represent or warrant that any of the information is accurate or complete at any time. Copyright 2020 Econoday, Inc. All rights reserved.

This Post Has 2 Comments

    1. Hey Ron,

      Thank you for your comment. We will refinance construction loans if there’s a house on the land. If you have questions about the specifics, I recommend calling one of our Home Loan Experts at (800) 508-0944. They will be able to go through your loan with you and tell you what we can do.

      Thanks again!

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