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Pending Home Sales Hit 2.5 Year High as Low Mortgage Rates and Home Affordability Fuel Demand
 

Pending Home Sales Hit 2.5 Year High as Low Mortgage Rates and Home Affordability Fuel Demand

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Another positive housing report was released this morning pointing to a housing market that is in full recovery thanks to record low mortgage rates in 2012. The National Association of Realtors® reported that pending home sales increased for the third consecutive month in November and are now at a 2.5 year high.

The NAR's Pending Home Sales Index is a forward looking indicator which points to a brighter future in housing. Contract signings in November rose 1.7 percent to 106.4, an increase from 104.6 in October and is 9.8 percent above November 2011 when it was 96.9. The last time activity was this high was in April 2010 when it hit 111.3 as buyers were rushing to beat the deadline for the home buyer tax credit which was about to expire.
The NAR chief economist, Lawrence Yun, said home sales are on a sustained uptrend. Even with market frictions related to the mortgage process, home contract activity continues to improve. Home sales are recovering now based solely on fundamental demand and favorable affordability conditions.

The Federal Reserve's efforts to lower mortgage rates at first only helped home-owners that were in a position to refinance their mortgage. It now looks like the Fed is helping the housing market for home sales as buyers get back into the market to take advantage of the lowest mortgage rates ever. Mortgage rates today on 30 year fixed conforming loans are averaging 3.35 percent in Freddie Mac's Primary Mortgage Market Survey this week.

You can find banks, credit unions and mortgage companies advertising 30 year conforming mortgage rates below the average reported by Freddie Mac. There are some lenders quoting 30 year conforming refinance rates as low as 2.875 percent with points in some states.  There are also some lenders quoting 30 year refinance rates without points below the average of 3.35 percent, you just have to take the time to search for the best rates.

Not only are home sales higher the average price of a home is also header higher after many years of declines. The NAR also reports that the median existing-home price is projected to rise just over 4 percent in 2013, after rising more than 7 percent in 2012. Higher home prices are welcome news not only for housing but for the overall economy in general.

Many economists believe the housing market will have a net positive impact on the overall economy in 2013 and will be a net contributor to Gross Domestic Product (GDP) in 2013. Of course Washington could derail the housing market if an agreement on taxes, spending and the debt ceiling isn't reached in a timely fashion.

 

Author: James Martin
December 28th, 2012