Each month, the National Association of REALTORS^® releases a study called the Existing Home Sales report. It’s a detailed look at “used” home sale data from all four regions of the country.

Among the key findings of each Existing Home Sales report is something called the “median sales price”, the statistical price point at which half of the homes in the U.S. sold for more, and half sold for less.

Last month, the median sales price in the United States fell to $165,400, down 15.5 percent from a year ago.

Nevertheless, just because the median sales price is lower from last year doesn’t mean that the housing market is losing steam. The median sales price is just the middle point of all home sales in all U.S. markets. By definition, it groups New York City and Danville, Illinois; Los Angeles and Cheyenne — markets that have little do with one another.

When median sales prices are falling, it doesn’t point to housing weakness, per se — just that more homes are selling at the lower end of the pricing spectrum than at the higher end.

Going forward, it’s believed that a reduction in home supplies is the key to a complete, national housing recovery. It’s encouraging, therefore, in a month known for a high volume of new listings, that the number of homes sold kept pace with the number of new homes available for sale.

The current housing inventory stands at 9.7 months, flat from January.

For the fifth time in a year, rate shoppers learned an important lesson this week: When mortgage rates plummet unexpectedly, they often recover just as fast.

Wednesday, the Federal Reserve’s newest $750 billion mortgage market pledge helped to push conforming mortgage rates near their lowest levels since WWII.

24 hours later, however, those rates were expired.

After considering the long-term implications of the Federal Reserve — literally — printing new money to service the recession, markets grew fearful that the Fed’s interventions will eventually lead to inflation. Inflation, of course, is the enemy of mortgage rates.

So, if you’re looking for the explanation of why rates rose as suddenly Thursday as they fell the day prior, this is it. And, in hindsight, rate shoppers might have seen it coming, if only because we’ve seen the exact pattern 4 other times:

1. After the Fed’s “surprise” rate cut in January 2008
2. After the Fannie Mae and Freddie Mac takeovers in September 2008
3. After the Fed announced its first $500 in support in November 2008
4. After the Fed zeroed out the Fed Funds Rate in December 2008

Sharp drops in mortgage rate, it seems, are followed by immediate bounce-backs.

Unfortunately, not every would-be refinancing homeowner saw the increase coming. People that locked Wednesday captured the lowest rates in 6 decades. Everyone else wishes they had.

From day-to-day, we don’t know if mortgage rates will rise or fall. Nobody knows that. But, we do know that mortgage rates tend to follow patterns and we’ve seen the above pattern 5 times now.

When mortgage rates plunge like they did Wednesday, they rarely low for long. When you find a rate you like, get in and get locked as soon as possible. By tomorrow, it’s likely to be gone.

The Federal Open Market Committee voted to leave the Fed Funds Rate unchanged today, within the target range of 0.000-0.250 percent. This doesn’t mean the Fed stood pat, however.

On plan to resurrect the economy using “all available tools”, today, the Fed announced a new, $1.5 trillion round of fiscal support for the treasury and mortgage markets.

The stimulus will likely be Thursday morning’s headline story.

In its press release, the FOMC touched upon a few of the prevailing economic issues, using these points as a legitimizing backdrop for its newest debt load:

• Job losses and wealth loss are dragging down consumer spending
• Some U.S. trading partners are falling into recession
• Businesses are cutting back on investment and inventory

Of interest is that the FOMC said today’s inflation levels may be too low to support economic growth at all. This condition is more commonly called deflation. The Fed’s latest actions, therefore, may be a deliberate attempt to induce inflation through unprecedented borrowing.

For home buyers and potential refinancers, this is terrific news — at least in the short-term. By introducing new demand for mortgage bonds, the Fed will help pressure mortgage rates lower. Already this afternoon, mortgage rates fell and they will continue to fall until the market reaches a new equlibrium.

After the Fed’s last intervention, markets reached their balance point in about a day-and-a-half.

Source
Parsing the Fed Statement
The Wall Street Journal Online
March 18, 2009
http://online.wsj.com/public/resources/documents/info-fedparse0903.html

There’s a mixed message in February’s Housing Starts data and it may be a good sign for home sellers in the near-term.

As reported by the government, new home construction rose by 22 percent last month. The press is running with the headline number, calling it evidence of a market bottom.

A more thorough inspection, however, reveals a different story.

The 22 percent figure applies to all homes built — including apartment building units. Isolating residential units, February’s housing starts rose by just 1 percent. Furthermore, the data’s margin of error is 11 percent.

Statistically, we can’t know if residential housing starts really rose last month, or if it fell instead. What we do know, though, is that the number of building permit requests rose.

Permits to build single-family homes were up 11 percent in February nationwide.

To home sellers, the rise in building permits may confirm that a housing market turnaround is already underway. Builders wouldn’t be putting new inventory on the market, after all, without being sure of their ability to sell it 9 months hence.

The headline figure of 22 percent is attractive, but it’s not completely honest. It’s not the number of housing starts that matter so much right now as the number of housing permits. A rise in permits signals that homebuilders — a group that’s lost a lot of money in the last 2 years — think the worst of housing is already over.