Even though the spring market should be in full flower as it were, this hasn’t been the best month for home sale news. Earlier we reported downturns in April’s new and existing sales; this week pending sales followed suit.
The National Association of Realtors (NAR) said its Pending Home Sales Index (PHSI), a leading indicator based on home purchase contract signings, slumped for the second month in a row, falling 1.3% from its March reading of 111.3 to 109.8. This meant it was also down by 3.3% from the April 2016 pace.
Econoday noted that, thus far in 2017, the Index has done what it was supposed to do, accurately telegraph the month-to-month performance of upcoming sales. The PHSI fell 0.8% in March and this was followed by an even more sizable decline (2.3%) in existing home sales the next month.
Lawrence Yun, NAR chief economist, said “weak supply levels” are behind the fading spring contract activity. Inventory issues are, in turn, spurring deteriorating affordability conditions. “Realtors are indicating that foot traffic is higher than a year ago,” Yun said, “but it’s obviously not translating to more sales.”
Yun isn’t expecting relief any time soon. He notes that homebuilding activity is still below what might be hoped and too few homeowners are listing their home for sale.
Home Price Appreciation Up Significantly
Home prices continue to rise; the last two indices for March, those from S&P Case-Shiller and Black Knight Financial Services verified that this week–and they are showing no sign of slowing down. Both indices put the annual increase at 5.8% and for both that was an 0.1% uptick from February’s reported gain. On a month-over-month basis, Case-Shiller put the March appreciation at 0.8%, while Black Knight said it was 1.3%; both were significantly larger gains than their February counterparts.
This last item takes us into the weeds, but since it will be good news for some readers, we will go there. Fannie Mae announced a new version of its automatic underwriting system will go into effect at the end of July. Among the changes is a loosening of the acceptable debt-to-income ratios. They were previously capped at 45% but, with compensating factors–for example, a low LTV (loan to value ratio) or a high FICO score–lenders could go as high as 50%. There are also some positive changes to the documents needed for self-employed borrowers. Freddie Mac is expected to follow suit.
With easing credit and interest rates down for the third straight week, it’s a good time to give me a call.