Last month, the National Association of REALTORS® reported that Existing Home Sales rebounded in April, increasing for the first time this year. Housing Starts also jumped from March to April to come in above expectations and at the highest level since November. The unexpected surge was led by multi-family dwellings or apartments, while single-family construction barely budged. Building Permits, a sign of future construction, also rose, with apartment buildings leading the way as well.
The takeaway is that builders are betting on the future expansion of renters. It’s also important to note that the price appreciation rate for homes has slowed and is expected to slow even further.
Speaking of home prices, research firm CoreLogic reported that home prices rose from March 2013 to March 2014. Similarly, the Case Shiller Index—which measures home prices in 20 cities—came in above expectations in March, but was still down from the annual rate recorded in February.
However, given the tighter credit standards and limited inventory that exists in many parts of the country, it seems likely that the big home price gains seen in 2013 will not be sustained. In fact, Case Shiller predicts less than a 6 percent increase for 2014.
Another key point to note is that home loan rates recently reached some of their best levels of the year. One of the main reasons home loan rates looked so good last month was due to a safe haven trade. What does this mean? It’s actually just what it sounds like. When there is uncertainty in the world, like the situation with Russia and the Ukraine, investors often move their money out of Stocks and into less risky assets like Bonds. This includes Mortgage Bonds, the type of Bond on which home loan rates are based. As tensions escalated overseas in the last month, Bond markets benefitted—and as Mortgage Bonds improve, so do home loan rates.
All in all, now remains a great time to consider a home purchase or refinance, as home loan rates remain attractive compared to historical levels. Let me know if I can answer any questions at all for you.