Real Estate Finance Alerts

RATES DROP!

The FED announced today it will buy $300 Billion of Treasuries, double its purchase of Agency (Fannie Mae and Freddie Mac) debt from $100 billion to $200 billion, and more than double its purchases of Agency Mortgage Backed Securities from $500 billion to $1.25 trillion. 

The yield on the 10 Year Treasury dropped as much as 0.5% on the news.  Yields on Mortgage Backed Securities also improved. 

30 year mortgage rates are down 0.125% - 0.250% and should move lower tomorrow morning if today's gains hold.

The FED also said it will keep the FED Funds Rate between 0%-0.25% for the long-term. 
 

Housing Data Improves

Housing Affordability Index

The National Association of Realtors' Housing Affordability Index hit an all time high again in January rising to 166.8.  The index represents a relative measure of housing affordability based on home prices, mortgage rates, and, income.  The current reading means a family earning the median income has 166.8% of the required income to purchase a median-priced home.

Existing Home Supply

The Existing Home Supply, the number of months it will take for current sales to work through the current inventory, continues to improve. The current supply is 9.6 months and trending down. Last year’s numbers over 11 months were the highest since 1985 and consistent with a significant housing recession.

The higher the number, the longer it will take to sell your home because it is a buyer’s market. The smaller the number the less time it should take to sell a home and it signifies a seller’s market.

Existing Home Inventories are normally about 2.5 million and the Existing Home Supply is usually about 6 months. Averages for supply the last three years are: 2006 – 6.5 months,  2007 – 8.9 months, 2008 – 10.5 months

While we are still well above normal we have seen improvement and the numbers will continue to trend down now that new home starts are below household formation of about 1.2 million per year. People can put off buying a home for only so long even in a recession. They have to live somewhere and they will eventually buy or rent a home.

Considering the root cause of the current recession is depreciating home values, this is an important leading indicator. As the supply comes down, banking and the economy as a whole will improve having a significant impact on stocks, bonds, and real estate values.

With respect to using this indicator to buying a home, all real estate is local. You have to know your market. There are strong and weak areas in every town, city, state, and region.