Mortgage Rates Fall, Pending Home Sales Rise

The news from the real estate market today was mostly good, although it's not clear how meaningful any of it is in the grand scheme of things. The good news follows some not so good tidings in recent weeks.

There was a big jump in the number of people signing contracts last month on home purchases and the cost of getting a mortgage keeps going down. Still, sales remain near historic lows and Realtors say, without adjustments in current lending standards, many otherwise qualified buyers remain shut out of the housing market.

In it's March report, the National Association of Realtors (NAR) said the Pending Home Sales Index, a forward-looking indicator based on contract signings, rose 5.1 percent to 94.1 in March from a downwardly revised 89.5 in February. The index was higher in March and April of last year, but that was because so many buyers were trying to meet the contract deadline for the home buyer tax credit.

The index reflects contracts but not closings, which normally occur with a lag time of one or two months. It is a hopeful sign, as it could possibly reflect a sharp increase in sales in the coming months.

Notable improvement

Lawrence Yun, NAR chief economist, said home sales activity has shown an uneven but notable improvement.

“Since reaching a cyclical bottom last June, pending home sales have posted an overall gain of 24 percent and demonstrate the market is recovering on its own,” he said. “The index means modest near-term gains in existing-home sales are likely, which would be even stronger if tight mortgage lending criteria returned to normal, safe standards.”

The most recent existing home sales report showed an increasing share of the market is among foreclosures and short sales, which typically sell for large discounts. Also, cash buyers now make up more than one third of buyers.

Mortgage rates keep falling

Meanwhile, those home buyers who are able to qualify for mortgages are getting lower interest rates. Freddie Mac reports the average mortgage rate continues to fall because of the stagnant housing market and a slowdown in economic growth.

Rates on the 30-year fixed-rate mortgage averaged 4.78% for the week ending April 28, down from 4.8% last week and 5.06% a year ago.

The 15-year fixed averaged 3.97 percent this week, the lowest since December. The five-year Treasury-indexed hybrid adjustable-rate mortgages averaged 3.51 percent.

“Mortgage rates followed Treasury bond yields lower this week amid weak local economic data reports on business conditions and house prices,” said Frank Nothaft, vice president and chief economist at Freddie Mac.