A Respectable Report

Given the spectacular showing of new home sales in July–up 12.4% and topping an annual rate of 600,000 for the first time since the crash–no one really expected August sales to continue the breakneck pace. And they didn’t. But last week’s report from the Census Bureau and the Department of Housing and Urban Development was none-the-less respectable.

Sales of newly constructed homes were at a seasonally adjusted annual rate of 609,000 units, a 7.6% decline from the upwardly revised July rate of 659,000 and a 20.6% year-over-year gain. Analysts had expected sales to dive back down under the 600,000 mark.

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Inventories remain tight; there were 235,000 new homes available at the end of August, an estimated 4.6-month supply. Even that estimate is generous as only 132,000 of those homes are completed and ready for occupancy.

Sales of existing homes haven’t been nearly as ebullient as those of new homes in recent months, and are now lagging 2015 numbers. This week’s Pending Home Sale Index doesn’t hold much promise for those sales in the short term. After a very slight uptick in July they resumed their trend down, falling for the third time in four months and are now below last year’s level.

The final two July home price indices showed fairly steady gains. CoreLogic Case-Shiller’s national index had gains of 0.7% and 5.1% for the month and year, about the same as in June. Black Knight’s HPI gained slightly less for the month and slightly more for the year, but the difference is hardly worth mentioning. The new home sales report put the average price of a home sold in August at $363,600.

Fannie Mae (with Freddie Mac sure to follow) has institutionalized their new “trending credit” standard into its automatic underwriting system. First introduced last October, trending credit gives the equivalent of bonus points to borrowers with credit histories showing responsible management of their debt. This means paying off revolving debt or making more than the minimum monthly payment. It is a small change, but may make the difference in approval or denial for some borderline borrowers.

Finally, far be it from us to spread rumors–except for this one. Inside Nonconforming Markets says it is likely that the baseline conforming loan limit for Fannie Mae and Freddie Mac mortgages will rise at the first of the year–the first upward revision in a very long time. It isn’t expected to be a big move–the guess is to $422,000 from the current $417,000, but still helpful for some. No word yet if those areas considered high-priced markets will also have their limits raised.