Dennis' Mortgage Blog

The National Association of Realtors reported today that sales of existing homes were 0.8% lower than in March, not a big drop in total sales and only the third decline in the past nine months.  In looking at NAR's release the total sales number is probably what interested me the least.  Some of the nuggets I found interesting:

"Given the great affordability conditions, job creation and pent-up demand, home sales should be stronger," said Lawrence Yun, NAR chief economist (emphasis is mine).  Mr. Yun seems to think the 200,000 or so jobs reported to be added to the economy the last few months is strong job creation.  Take away the 125,000 jobs that need to be created due to new entries into the work place due to demographics and we have a paltry expansion of the job market of only about 70,000 jobs.  For four weeks in a row new jobless claims have topped 400,000 indicating employers are still laying off workers.  Our self-stated unemployment number is still at 9% nationally.  Included in the jobs Yun feels are created are numerous part-time and minimum wage jobs, jobs that are not going to support someone looking to buy a home.  Sorry Mr. Yun, I am not buying that the home buying market should be stronger based on "job creation."

The NAR is reporting that members, known as Realtors, reported that 11% had a sales contract canceled due to a low appraisal, 14% had a sales contract renegotiated lower due to a low appraisal and 10% had a transaction delayed due to a low appraisal.  Calling attention to this NAR President Ron Phipps said, "...existing guidelines from Fannie Mae and Freddie Mac must be fully implemented so all appraisals are done by valuators with local expertise."  Hear, hear!  Fannie, Freddie, FHA and lenders need to quit with the Home Valuation Code of Conduct experiment, it has failed.  Time to let local professionals back into the business.  When 35% of transactions are impacted by low appraisals there is a message between the disconnect between the market and the cover-my-butt appraisal valuations being conducted through Appraisal Management Companies and the HVCC.

Over one-third of transactions were negatively impacted by low appraisals, a similar number of existing homes sold were distressed property sales, either short-sales or foreclosures.  Down to 37% in April from 40% in March, and up from 33% last April, distressed sales are still a large component of the housing market--and impacting values negatively.  Before any comments about how the distressed sales volumes justifies lower appraisals, keep in mind buyers, sellers and agents consider distressed sales in the market when reaching a transaction price, the issue is the weight, adjustments and comps used by appraisers that are coming in low.

First-time buyers were 36% of the market in April, down significantly from the 49% of the April 2010 market when most were eligible for the homebuyer tax credits being offered.  Investors were 20% of April sales and 44% of the buyers were repeat buyers.  After reaching a record level of 35% of transactions in March, cash buyers made up 31% of existing home sales in April.

What is in the future?  A lot of inventory.  Total housing inventory on the market at the end of April was 3.87 million homes, up 9.9% from March, this represents a 9.2 month supply of homes at April's sales volumes.  

Despite low mortgage rates housing sales will remain soft into the summer due to the job market and the large amount of inventory from which buyers can choose for their offers.  Supply and demand is a universal constant in any market, supply still has the upper hand.

Rates jumped at opening today, mostly on the an increase in stock markets.  Stocks settled down and rates have eased up, but still higher than yesterday's close and they have lost all the gains from the past week.

Mortgage rates continue to remain low for the time being.  Call or email Dennis today to determine your purchasing power for a new home loan or monthly savings from a refinance.  Direct dial 562-472-1118