Pending Home Sales Index Points To A Budding Seller's Market

The Pending Home Sales Index surged 10 percent in October as low mortgage rates and low home prices spurred Corona buyers into action.

A "pending home sale" is an existing home under contract to sell, but not yet closed. The Pending Home Sales Index is at its highest level since April 2010 -- the contract deadline date for this year's federal home buyer tax credit program.

The jump may also explain why home builder confidence is rising even as the number of new homes sold fades. Builders are seeing buyers' renewed interest in housing first-hand and expect the next 6 months to be dramatically better.

On a regional basis, gains in October's Pending Home Sales Index varied as compared to September. The Midwest led the charge, and the West was the laggard.

• Northeast Region: +19.6%
• Midwest Region : +27.3%
• South Region : +7.1%
• West Region : -0.4%

Home buyers should take last month's Pending Home Sales Index to heart. According to the National Association of Realtors®, 80 percent of homes under contract close within 60 days, so we can reasonably expect November's and December's existing homes sales data to be similarly strong.

In other words, the housing market is heating up and may have already shifting toward sellers. Changes like that lower buyer leverage, and increase the cost of homeownership. Coupled with rising mortgage rates, the shift is even more defined.

The best time to buy a home this year may have already passed. The next best time may be right now.

Talk to your real estate agent if you're planning to buy a home in 2011. It may be smart to move up your time frame.

Jobs Data Shows Private Sector Growth, Hints At Lower Mortgage Rates

On the first Friday of each month, the Bureau of Labor Statistics releases its Non-Farm Payrolls report from the month prior.  This month, though, because the first Friday of the month was also the first day of the month, the report was delayed one week.

The report hit the wires at 8:30 AM ET this morning.

More commonly called "the jobs report", the government's non-farm payrolls data influences stock and bond markets, and, in the process, swings a big stick with home affordability figures in Corona and nationwide.

Especially in today's economic climate.

Although the recession has been deemed over, Wall Street remains unconvinced. Data fails to show the economy moving strongly in one direction or the other and, absent job creation, economists believe growth to be illusionary.

Consider:

1. With job creation comes more income, and more spending.
2. With more spending comes growth in business
3. With growth in business comes more job creation

And the cycle continues.

The prevailing thought is that, without jobs, consumer spending can't sustain and consumer spending accounts for two-thirds of the economy. No job growth, no economy recovery.

But there's another angle to the jobs report, too; one that connects to the housing market. As the jobs market recovers, today's renters are more likely to become tomorrow's homeowners, and today's homeowners are more likely to "move-up" to bigger homes. This means more competition for homes at all price points and, therefore, higher home values.

And that brings us to today's jobs data.

According to the government, 95,000 jobs were lost in September. Economists expected a net loss of 5,000.  However, if public sector jobs are excluded from the final figures, jobs grew by 64,000.  This is a positive for the private-sector, but still trailed expectations.

Wall Street is voting with its dollars right now and mortgage bonds are gaining, improving mortgage pricing.

So, although the September 2010 jobs report doesn't reflect well on the economy overall, home affordability in California and around the country should improve as a result. 

Home Affordability Gets A Boost From Weak Back-to-School Retail Receipts

The recent rise in mortgage rates was slowed this week after the government released its Retail Sales report for August.

Prior to Tuesday, mortgage rates had been spiking across California on the resurgent hope for U.S. economic recovery. The sentiment shift was rooted in reports including the Pending Home Sales Index and Initial Jobless Claims, both of which showed surprising strength last week.

August's Retail Sales, though, after removing motor vehicles, auto parts and gasoline sales, failed to maintain the momentum. Its figures were actually in-line with expectations -- it's just that expectations weren't all that high.

Wall Street now wonders whether the weak Back-to-School shopping season will trend forward into the holidays.

The doubt spells good news for mortgage rates and home affordability.

Because Retail Sales is tied to consumer spending and consumer spending accounts for two-thirds of the economy, a weak reading tends to drag down stock markets and pump up bonds, and when bonds are in demand, mortgage rates fall.

This is exactly what happened Tuesday. The soft Retail Sales data eased stock markets down, and generated new demand for mortgage bonds. This demand caused bond prices to rise, which, in turn, caused mortgage rates to fall.

Mortgage rates did not cut new lows this week, but they're very, very close.

With mortgage rates at historical lows, it's an excellent time to look at a refinance, or gauge what financing a new home would cost. Low rates like this can't last forever.

For Clues About The Future Of Mortgage Rates, Watch For Inflation

Homes are more affordable across the nation as the housing market emerges from a slow winter season with mortgage rates still near 5 percent.

Soft housing and low rates are an excellent combination for home buyers but whereas home values rise with a gradual pace, mortgage rates change in an instant.  It's something worth watching.

Each 0.25% increase to conventional or FHA rates adds approximately $16 per month for each $100,000 borrowed. Mortgage rate volatility can change your household budget.

If you're trying to gauge whether rates will be rising or falling, one keyword for which to listen is "inflation". Mortgage rates are highly responsive to inflation.

By definition, inflation is when a currency loses its value; when what used to cost $2.00 now costs $2.15. As consumers, we perceive inflation as goods becoming more expensive.  However, it's not that goods are more expensive, per se. It's that the dollars used to buy them are worth less.

This is a big deal to mortgage rates because mortgage bonds are denominated, bought, and sold in U.S. dollars.  As the dollar loses value to inflation, therefore, so does the value of every mortgage bond in existence. When bonds lose their value, investors don't want them and bond prices fall.  Mortgage rates move opposite of bond prices. 

Prices down, rates up.

In today's market, the relationship between inflation and mortgage rates is helping home buyers. The Cost of Living made its smallest annual gain in 6 years last month and the Fed has repeatedly said that inflation will stay low for some time. The combination is driving investors to buy mortgage bonds which, in turn, is suppresses rates.

So long as it lasts, the cost of homeownership will remain relatively low. Combined with the expiring tax credit, the timing to buy a Corona home may be as good as it gets.