In spite of the disappointing existing home national sales figures, we seem to be on target for a slowed recovery that will gain in strength as the year progresses. Meantime, you may want to plan a summer vacation in Lake Tahoe and pluck one of the many excellent values in Incline Village Real Estate.

Happy 4th of July!!!  Tim 


Nevertheless, low interest rates and low home prices should entice many potential buyers to break from their summer fun to investigate their next home purchase.

 KEY INDICATORS [6/21/10]

 Gold $1241.90/ounce [up]

Crude Oil (Brent) $78.14/brl [up]

U.S. Dollar to…

    Euro .8115 [up]

    Japanese Yen 90.97 [down]

6-mo Treasury Bill Yield 0.17%

10-yr Treasury Note Yield 3.20%

[6-month unchanged, 10-yr down 12 bps]

11th Dist Cost of Funds 1.825%[-]

30-yr Fixed-rate Mortgage 5.12%

15-yr Fixed-rate Mortgage 4.57%

1-yr ARM 4.17%

[HSH averages rates: 30-yr

up 3 bps;15-yr up 4 bps; 1-yr ARM down 51 bps]

 

Mortgage Bankers Association Mortgage Applications Index

week ending 6/11

  Overall

    659.9 (up 17.7%; down 12.2%

the week prior)

  Purchase Money Loans

    180.0 (up 7.3%; down 5.7%

            the week prior)

  Refinancing Loans

    3461.5 (up 21.1%; down 14.3%

the week prior)

 

Jobless Claims 6/12

    472,000 – prior week 456,000 – continuing claims at 4.571 m

 

Existing Home Sales May

    Down 2.2% - 8.3 months of inventory on market – median price up 2.7% from a year ago

 

Consumer Price Index (CPI) May

    Down 0.2% - Core (with food and energy prices removed) up 0.1%.

 

Weekly Commentary

 

“So far, May housing data indicate a weak housing market, with residential construction throttling back and builders feeling less confident. This retrenchment can be explained as a post-tax credit breather. Tuesday’s [June 22] existing-home sales release, however, suggests that there may be greater fundamental weakness in housing demand than anticipated.” [Celia Chen, Moody’s Economy.com]

 

We need to remember, of course, that the existing-home sales data covers only closed sales. It does not include the contracts for sales that will close in the future. For that, we turn to the Pending Home Sales Index, which the National Association of RealtorsÒ developed a few years ago.

 

Intriguingly, the Pending Home Sales Index has been predicting more closed sales than the existing-home sale figures for May are showing us. Why would that happen? Two obvious reasons come to mind. One is that this is a rather volatile index, subject to revisions in the coming weeks. Another is that the numbers we see are being distorted through the lens of the expiring homebuyer tax credit programs.

 

Frankly, neither of these reasons is fully satisfactory. But there is a third, and it is probably very important. The volume of loan applications in the last week’s before the April 30 deadline for signed home purchase contracts created a backlog. Closings slowed as a result.

 

This, further, argues compellingly for a slight extension for the tax credit programs’ deadline for closings, even if only for transactions currently in progress (with signed purchase documents).

 

And it succeeds, to a large degree, in explaining the odd difference between the strong pending sales figures as against the weakening completed sales figures. Most likely, if we read these figures correctly, completed sales will be stronger in the coming month—maybe longer, if we get the extension.

 

More important, the distortion in sales figures, once clarified, no longer obscures a real estate market that is probably performing far more in line with consensus expectations. We’ll see a slowing of sales when the tax credit programs are gone, but we are also likely to have very low interest rates. If the employment situation improves near the end of the year and, with it, retail sales volume—as is reasonably to be expected—the real estate recovery will probably gain traction once again.

 

Meantime, expect a great deal of unneeded high-decibel worry from the economic Chicken Littles…and a relatively quiet summer sales season—unless buyers awaken to the opportunity inherent to today’s interest rates.