Low mortgage rates are helping to spur U.S. home sales.
With 30-year mortgage rates near 14-month lows, buyer purchasing power is up close to eight percent since January. U.S. homes are more affordable and properties are going under contract at the fastest pace since last fall.
Many mortgage lenders now quote rates in 3s.
Pending Home Sales Index: A Different Indicator Type
The Pending Home Sales Index (PHSI) is a monthly report, published by the National Association of Realtors® (NAR). It measures homes under contract, and not yet closed.
The Pending Home Sales Index is different from most housing market metrics.
Unlike traditional metrics which measure how housing performed in the past, the Pending Home Sales Index forecasts how housing will perform in the future.
The Pending Home Sales Index is forward-looking. It tallies U.S. homes recently gone into contract and uses the result to project future, closed home sales. This is possible because the National Association of REALTORS® knows that 80% of homes under contract “close” within 2 months of contract.
The June Pending Home Sales Index slipped 0.9 points as compared to May, falling to 102.7. June marks the second consecutive month in which the index bested its baseline reading of 100.
This is significant.
When the Pending Home Sales Index crosses 100, it’s an indication that homes are going to contract at a faster pace than during 2001, the first year in which the index was published. 2001 is generally considered a good year for U.S. housing. 2014 has lagged that benchmark overall, but June’s reading is a positive step.
Existing Home Sales topped five million on a seasonally-adjusted, annualized basis for the first time in eight months last month. The June Pending Home Sales Index suggests home resales will again top that figure for July.
Mortgage Loans For Home Buyers
First-time home buyers account for nearly one-third of today’s home buyers. Many first-time buyers are buying with the help of low- and no-downpayment mortgage programs.
Among the most common low-downpayment mortgages is the FHA loan.
FHA home loans are loans given by local banks, and insured against loss by the Federal Housing Administration (FHA). The FHA has been insuring loans since 1934. It’s biggest draw for buyers is that the program requires a downpayment of just 3.5 percent.
FHA loans are available in all 50 states and FHA mortgage rates are often as low — or lower — than comparable 30-year rates via Fannie Mae or Freddie Mac, both of which typically require a 5 percent downpayment or bigger.
FHA loans account for one-in-five mortgages in today’s mortgage market.
Another common loan choice among first-time buyers is the VA loan via the Department of Veterans Affairs. VA loans require no downpayment whatsoever and can be used by most military members and veterans of the armed services.
VA loans require no mortgage insurance and underwriting guidelines are often “loose”.
A third common low-downpayment option is the no-money-down mortgage backed by the USDA.
USDA mortgages are available in many suburban and rural areas nationwide, and allow for 100% financing. USDA mortgage rates are often the lowest as compared to FHA, conventional and VA mortgage rates.
Get A Live Mortgage Rate Quote
U.S. homes are going to contract quickly. More than 40 percent of MLS-listed homes are being sold in fewer than 30 days; and prices for homes are rising nationwide. Thankfully, mortgage rates are down. Since the start of the year, as rates have dropped, so have the costs of homeownership.
Compare today’s live mortgage rates now. Rates are available online for free, with no obligation to proceed, and with no social security number required to get started.
The information contained on The Mortgage Reports website is for informational purposes only and is not an advertisement for products offered by Full Beaker. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its officers, parent, or affiliates.