A Set Up for a Strong Push Into Fall

Recent data point to home sales retaining momentum as we push into September and beyond.

The NAR’s Pending Home Sales Index posted at a respectable 111.3 for July, a 1.3% increase over June’s reading of 109.9. The index posted at its highest level since February 2006 and was second only to the 115 posting this past April. What’s more, NAR data show the increase as broad-based, with only the Midwest failing to improve on its June numbers. These contract signings usually lead sales by roughly  45 to 60 days, so we expect to see decent existing-home sales numbers for August and September.

A recent uptick in mortgage purchase applications also leads us to believe that we should see decent sales numbers. Purchase activity has been flat for most of August, but we have seen an uptick in activity over the past two weeks. Confirming our anecdotal evidence, the MBA reported purchase activity increased 1% last week.

We’re further encouraged by the fact that we’re seeing an uptick in mortgage availability. The MBA’s Mortgage Credit Availability Index increased 1% in July to post at 165.3. This is near the highs set earlier this year. The increase was driven by an increase in programs for lower-credit-score borrowers. The trend in lower-credit availability was seen in both conventional and government programs.

Even more encouraging, the overall health of credit servicing among consumers continues to improve. Fannie Mae reports that the single-family serious delinquency rate continues to decline. Mortgage loans of three monthly payments or more past due or in foreclosure dropped to 1.3% in July from 1.32% in June.  This is the lowest level since May 2008. Over the past year, the level has fallen by nearly 25%.

To get an idea of just how much the credit-servicing market has improved in the past five years, the delinquency rate was nearly five times the current rate when it soared to 5.59% in February 2010. And we still have room to improve. The average long-term normal serious delinquency rate is under 1%.

The bottom line is that housing and mortgage lending continue to serve as lead engines of economic growth. We expect that both will continue to serve in their respective capacity deep into 2017.

Information provided by Jessica Regan.

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