Daily Forecast Update: New Home Sales, Mortgage Applications

January 27, 2010

By Gregg Stratton, Research Economist

New single-family home sales continued to struggle in December, falling by 7.6% from the previous month on a seasonally adjusted basis. New home sales are down 23% in 2009 from 2008. The median price of new single-family homes, however, rose in December to $221,300.
Although new sales and new home starts are well below their historical averages, the recent decline in new construction has helped keep additional inventory off the market to the benefit of the existing home sale market. From 2000 to 2006, there were approximately 5 existing single-family homes sold for every one new home sale. In 2009, there were 12 existing single-family homes sold for every one new home sale.
Mortgage loan applications declined this week for both refinancing and purchases despite interest rates still near 5%. The cessation in purchase applications is in part due to the initial expiration of the home buyer tax credit in November.
Although the MBA weekly survey is somewhat volatile from week to week, and it omits all cash purchases, the recent decline in purchase applications is likely an indication of lower home sales in the first quarter of 2010 following the huge surge in home sales in the fourth quarter of 2009. NAR is predicting a 5.5M annualized sales pace in the first quarter of 2010, compared with 6M in the fourth quarter of last year. The projected first quarter pace is still above the total 2009 existing home sales of 5.1M.

New single-family home sales fell in December to an annualized rate of 342,000.
Sales were revised upward for November by 15,000 to 370,000.
December sales were 28,000 below the consensus for December of 370,000, or 7.6%.
The median sales price of new single-family homes rose in December by 5.2% from November to $221,300.
Month’s supply of new single-family homes rose to 8.2 months in December from 7.6 months in November.

According to MBA’s weekly survey, refinancing loan applications decreased in the week of January 27th by 15.1% from the previous week.
Similarly, the index of purchase loan applications fell by 3.3% from the previous week.
Purchase applications reached their recent peak in early October, approximately two months before the initial expiration of the first-time HBTC.
The average contract interest rate on 30-year mortgages increased minimally to 5.02% in the current week.

This is one in a series of commentaries by the Research staff of the National Association of REALTORS®. Read more commentaries >

Comments? Questions? E-mail NAR Research.

NAR members, learn how you can add this commentary to your Web site, blog, or newsletter. Read more >