Mortgage Rates are Down but Housing Reports Remain Mixed

It is by far the best time for mortgage rates which have been sitting at historic lows for quite awhile. There will probably never again be a time like this when borrowing funds is so cheap for a home purchase or mortgage refinance. Regardless of this fact, while mortgage rates are down, housing reports continue to remain mixed without any clear signs of which direction they are heading.

At a time when most consumers should be purchasing homes, Pending Home Sales were reported down 5.5% in April according to the National Association of Realtors. Pending Home Sales represents the actual number of contracts that were signed for any given month. This report may actually be a preliminary indication of what the May existing home sales will reflect. At another look, the National Association of Realtors reported that Existing Home Sales, actual closings, were up 3.4% in April. Freddie Mac reported recently that low mortgage rates are driving home affordability way up when combined with low home prices and average incomes. Until last week, mortgage applications had been rising for several weeks, according to the Mortgage Banker's Association, with most of these accounting for mortgage refinances, not home purchases. HARP refinances, also known as the Home Affordable Refinance Program, have been steady at 28%. This number should grow as more people learn about HARP, re-apply or search through online sources for more information.

In other reports, new home sales increased 3.3% for the month of April as stated by the Commerce Department and HUD. The Federal Housing Finance Agency reported that the seasonally adjusted Home Price Index increased 0.6% during the first quarter of this year. On the other hand, the S&P/Case-Shiller's report showed that home prices hit new lows in March. There are clear differences in these reports that are relevant to the time of the month or combination of months that these surveys were taken, but still remain confusing to the average consumer.

Regardless of reports, consumers are not taking the leap into homeownership at numbers that would be expected. Reporting can be confusing and deceiving to consumers when all of the details of the surveys are not included. There is no doubt that current mortgage rates are down and existing homeowners are refinancing, whether through traditional mortgage refinances or HARP. In a few weeks, FHA's streamline refinance with reduced upfront and annual mortgage insurance premiums will be active and sending even more borrowers to refinance. As more consumers are able to successfully refinance, less are likely to default or try to short sell their homes, which will decrease the existing supply. Only then, depending on shadow inventory, will there be any significant increase in home prices. This is important information if someone is pursuing a home purchase because it reflects a period of time that may not happen again. Once home prices really begin to increase based on true inventory, the home affordability level will begin to decline and less consumers will be in the playing field to obtain homeownership.

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