Home price increases continued to exceed CoreLogic's own projections in July. The company's Home Price Index (HPI) indicates that home prices nationwide, including distressed sales, rose 1.1 percent from June and were 6 percent higher than in July 2015. The month-over-month gain was identical to the rate of appreciation from May to June, but the year-over-year increase marked an acceleration from the 5.7 percent reported in June. In the last HPI, CoreLogic noted a deceleration in price gains.
Oregon and Washington continue to top the charts with double digit annual increases of 11.2 and 10.2 percent respectively. They were followed by Colorado at 9.3 percent, West Virginia (8.6 percent) and Utah (7.9 percent.) Only one state failed to post an annual gain; Connecticut, where prices fell by 1.2 percent. Other states had negligible changes; New Jersey saw appreciation of only 0.2 percent and in Vermont the gain was 0.8 percent.
"The strongest home price gains continue to be in the western region," said Anand Nallathambi, president and CEO of CoreLogic. "As evidence, the Denver, Portland and Seattle metropolitan areas all recorded double-digit appreciation over the past year."
CoreLogic is forecasting an increase in its HPI of 5.4 percent over the next 12 months (to July 2017) and a 0.4 percent uptick from July to August. The company's forecast is a projection of home prices using the CoreLogic HPI and other economic variables. Values are derived from state-level forecasts by weighting indices according to the number of owner-occupied households for each state. In the first six months of 2016 CoreLogic has projected monthly gains averaging 0.68 percent while reporting actual increases with a mean of 1.46 percent. CoreLogic had projected a June to July gain of 0.6 percent.
"If mortgage rates continue to remain relatively low and job growth continues, as most forecasters expect, then home purchases are likely to rise in the coming year," said Dr. Frank Nothaft, chief economist for CoreLogic. "The increased sales will support further price appreciation, and according to the CoreLogic Home Price Index, home prices are projected to rise about 5 percent over the next year."
Despite some predictions that pending home sales would fall in July, they actually rose modestly to reach their third highest level in nearly a decade. The National Association of Realtors® reported that its Pending Home Sales Index (PHSI) was up 1.3 percent to 111.3 from a downwardly revised (from 111.0) 109.9 in June and was up 1.4 percent compared to July 2015.
The index had reached its highest level since February 2006 this past April when it hit 115.0. The July index was second only to that number. NAR pronounced the increase in purchase contracts as broad-based; only the Midwest failed to improve on its June numbers.
Analysts surveyed by Econoday had projected the index could be in the range of a 1.8 percent decline to a 1.4 percent gain. The consensus was a positive move of 0.6 percent.
NAR's index is a forward-looking indicator based on contract signings for the purchase of homes. Those transactions are generally expected to close within two months.
Lawrence Yun, NAR chief economist, says a sizable jump in the West lifted pending home sales higher in July. "Amidst tight inventory conditions that have lingered the entire summer, contract activity last month was able to pick up at least modestly in a majority of areas," he said. "More home shoppers having success is good news for the housing market heading into the fall, but buyers still have few choices and little time before deciding to make an offer on a home available for sale. There's little doubt there'd be more sales activity right now if there were more affordable listings on the market."
Adds Yun, "The index in the West last month was the highest in over three years, largely because of stronger labor market conditions. If homebuilding increases in the region to tame price growth and alleviate the ongoing affordability concerns, the healthy rate of job gains should support more sales."
As Yun noted, the PHSI in the West surged 7.3 percent in July to 108.7, and is now 6.2 percent above a year ago. The index in the Northeast rose 0.8 percent to 96.8, putting it 1.1 percent higher than a year ago. It also rose 0.8 percent in the South to 123.9, up 0.4 percent year-over-year. The Midwest was an outlier, falling 2.9 percent to 105.8, leaving it down 1.1 percent from a year earlier.
Yun noted there has been a downward trend in the size and cost of new homes over the last year and says this could be an early indication that builders are starting to focus more on properties for buyers in the middle and lower price tiers rather than on the larger and more expensive homes they have been building.
"Realtors® in several high-cost areas have been saying for quite a while that there is robust demand for single-family starter homes and townhomes at an affordable price point for young buyers," adds Yun. "The homeownership rate won't move up from its over 50-year low without a meaningful boost from first-time buyers, whose participation has yet to noticeably increase so far this year despite mortgage rates near all-time lows."
NAR forecasts that existing-home sales will finish the year at around 5.38 million units, a 2.8 percent increase from 2015 and the highest annual pace since 6.48 million homes sold in 2006. After accelerating to 6.8 percent a year ago, national median existing-home price growth is forecast to slightly moderate to around 4 percent.
Welcome to our mortgage terms glossary,
featuring 47 frequently used words and phrases you need to know as a home buyer
or a homeowner.
(Some definitions contain additional
information, examples and answers to common questions. When available,
click on mortgage terms to learn more)
Adjustable-Rate Mortgage (ARM): A mortgage loan with an interest rate subject to change over the term of
the loan. The interest rate is tied to the performance of a specified market
Amortization: The paying down
of principal over time. In a typical mortgage loan, the principal is scheduled
to be paid off, or fully amortized, over the term of the loan.
Average Hourly Earnings: A monthly reading by the Bureau of Labor Statistics of the earnings of
hourly plant and non-supervisory workers in the private sector.
Basis Point: One one-hundredth of a percentage point. For example, if mortgage rates
fall from 7.50% to 7.47%, then they’ve declined three basis points. A full
percentage point is 100 basis points.
Cash-Out Refi: A
refinancing of a mortgage in which the new principal (the borrowed amount)
exceeds the outstanding principal of the original loan by at least 5%. In other
words, the homeowner is taking equity out of the home.
Conforming Mortgage Loan: Any mortgage loan at or below the amount Fannie Mae and Freddie Mac can
purchase and/or securitize in the secondary mortgage market.
Construction Loan: A temporary loan used to pay for the building of a house.
Consumer Confidence Index: A measure of confidence households have in the economy. Released monthly
by the Conference Board.
Consumer Price Index (CPI): A measurement of the average change in prices paid by consumers for a
fixed-market basket of a wide variety of goods and services to determine the
underlying rate of inflation. The broadest, and most quoted, CPI figure
reflects the average change in the prices paid by urban consumers (about 80% of
the U.S. population). The so-called “core CPI” excludes the volatile food and
Conventional Mortgage Loan: Any mortgage loan not guaranteed or insured by the government (typically
through FHA or VA programs).
Credit Report: A report of borrowing and repayment history for an individual.
Credit Score: A three-digit number based on an individual’s credit report used to
indicate credit risk.
Employment (Payroll): The number of non-farm employees on the payrolls of more than 500 private
and public industries, issued monthly by the Bureau of Labor Statistics.
Employment Cost Index: A quarterly index used to gauge the change in the cost of civilian labor
that includes salaried workers.
Existing Home Sales: Based on the number of closings during a particular month. Because of the
one-to-two month period between a signed purchase contract and a closing,
existing home sales are more influenced by mortgage rates a month or two
earlier than the prevailing mortgage rate during the month of closing.
Fannie Mae and Freddie Mac: The nation’s two federally chartered and stockholder-owned mortgage
finance companies. Forbidden by their charters from originating loans (that is,
from providing mortgage loans on a retail basis), these two
Government-Sponsored Enterprises (GSEs) purchase and/or securitize mortgage
loans made by others. Due to their directive to serve low-, moderate-, and
middle-income families, the GSEs have loan limits on the purchase or
securitization of mortgages.
Federal Funds Rate: The rate banks charge each other on overnight loans made between them.
These loans are generally made so banks can cover their daily cash flow and
reserve requirements. The federal government doesn’t actually set the fed funds
rate, which is determined by supply and demand of the funds. Instead, it sets a
target rate and affects the supply of funds through its own purchases or
sales of securities.
Federal Open Market Committee (FOMC): The arm of the Federal Reserve that sets monetary policy, the FOMC is
scheduled to meet eight times a year. The 12 members of the FOMC include the
seven governors of the Federal Reserve System, the president of the New York
Federal Reserve Bank, and, on a rotating basis, four of the presidents
from 11 other regional Federal Reserve Banks.
Fixed-Rate Mortgage (FRM): A mortgage loan with an interest rate that does not change over the term
of the loan.
Gross Domestic Product (GDP): The value of all the final goods and services produced in the U.S. over a
particular period. Available quarterly from the Bureau of Economic Analysis.
Home Equity: The difference
between the current value of the house and the amount of money owed on the
Home Equity Line of Credit: An open credit line secured by the equity in your home.
Home Equity Loan: A loan that is
secured by a home and limited to one lump-sum amount.
Home Improvement Loan: Money lent to a property owner for home repairs and remodeling.
Home Loan: Money provided by a bank or lending institution to pay for a home.
Homeownership Rate: The number of households residing in their own home divided by the total
number of households in the U.S. The U.S. Census Bureau releases an estimate of
homeownership rate based on a quarterly survey.
House Price Index: A quarterly measure of the change in single-family house prices released
by the Office of Federal Housing Enterprise Oversight. The HPI is a repeat
sales index, meaning it measures average price changes in repeat sales or
refinancings on the same properties, and it is based on mortgages purchased or
securitized by Fannie Mae and Freddie Mac. Homes with mortgages above the
Fannie/Freddie conforming loan limit and homes insured or guaranteed by the
FHA, VA or other federal government entity are not included in the sampling.
Housing Starts: The Census Bureau’s monthly count of the number of private residential
structures on which construction has started or permits have been issued.
Interest Rate: A measure of the cost of borrowing.
Jumbo Mortgage Loan: A mortgage loan
for an amount exceeding the Fannie Mae and Freddie Mac loan limit. Because the
two agencies can’t purchase the loan from the lender, jumbo loans carry higher
Loan-To-Value Ratio (LTV): In a mortgage loan, the amount borrowed relative to the value of the
property. An LTV of 80% means the mortgage loan is for 80% of the value of the
property, with the borrower making a 20% down payment.
Mean Home Price (of New or Existing
Homes Sold): The mathematical average of the prices of
all homes sold in the period, typically monthly. The mean price of homes
sold generally runs higher than the median price due to the number of very
Median Home Price (of New or Existing
Homes Sold): The median price of all the homes sold
within a 30-day period. Median home prices are generally a better indicator of
home price trends than average home prices.
Mortgage: A loan lent for the purpose of buying real estate and secured by the real
Mortgage Application Index (Purchase): An index published weekly by the Mortgage Bankers Association of America
which gauges the number of applications submitted for the purchase of a home.
The survey covers about 40% of all retail residential mortgage transactions.
Mortgage Application Index
(Refinance): An index published weekly by the Mortgage
Bankers Association of America which gauges the number of applications
submitted for the refinancing of a home. The survey covers about 40% of all
retail residential mortgage transactions.
Mortgage Broker: A person or
company that acts as a mediator between borrowers and lenders.
Mortgage Calculator: An online form that calculates how much a borrower will pay each month for
a home loan.
Mortgage Quote: An interest rate offered on a home loan.
Mortgage Rate: The amount of interest charged on money lent for the purchase of a home.
Mortgage Refinancing: The process of taking out a new mortgage with different terms or interest
proceeds are used to pay off the original
loan on the same property.
New Home Sales: A survey of builders nationwide by the Census Bureau to determine the
number of contracts signed for new home.
Producer Price Index (PPI): A measurement of the average change in the selling prices of goods and
services sold by domestic producers and an indicator of inflation. Released
monthly by the Bureau of Labor Statistics.
Second Mortgage: A mortgage on real estate which has already been pledged as collateral
against another mortgage. Typically used to draw cash from a home for other
Securitization: The pooling of mortgage loans into a mortgage-backed security. The
principal and interest payments from the individual mortgages are paid out to
the holders of the MBS security.
Underwriting: The determination of the risk a lender would assume if a particular
mortgage loan application is approved.
Unemployment Rate: The percentage of the labor force out of work. To be considered a member of
the labor force, an individual must either be employed or actively looking for
employment, released by the Bureau of Labor Statistics.
Finance By: Craig DonofrioOctober 2nd, 2014
Picking out the perfect home can be a challenging task. But that’s only the first step.
You still need to be an attractive loan candidate, navigate the mortgage process and plan well for the future.
Since all that can get a little tricky, many home buyers made mortgage mistakes that cost them dearly.
In order to avoid some of the biggest missteps, you should first know what they are.
You don’t want to be saddled for even a short period of time with the wrong mortgage.
Investigate all of your options, and then you need to lay your choices side-by-side and do the math—making sure you have an emergency savings for worst-case scenarios.
Loan shop with several different lenders and use the realtor.com® mortgage calculator to fine-tune your estimates.
When you’re pre-qualified, the lender is simply giving you an estimate about how much you can borrow based on information you’ve provided.
When you’re pre-approved, the lender has verified everything you’ve provided and is offering to lend you up to a given amount at current interest rates—under certain conditions.
It’s much better to be pre-approved when shopping for a home, but it’s still not a guarantee: the lender’s final clearance and a loan commitment are subject to an appraisal satisfactory to the lender, a good title, a last-minute credit check and other verifications.
Even if you pay your bills on time, lenders tend to focus just as much on how much credit you have available to you—that is, your debt-to-income ratio—as they do on timeliness.
Being up to your ears in debt is a sure way to be turned down for a mortgage. Postpone any big-ticket purchases until after you buy your house.
Before you apply for a loan, you should know your credit score and credit report inside and out.
Thoroughly check your credit report for any possible mistakes. You can order a free credit report from each of the big three credit report agencies—Equifax, TransUnion and Experian—once a year.
If you see a mistake, dispute it. If your credit is bad, that’s okay: just work on repairing it before you apply for a mortgage.
Exaggerating your income on a mortgage application or putting down other untruths can be a federal offense.
If a lender finds out, they can make your loan due and payable. And while bad loan officers may stretch the truth to get a client approved, it’s the borrowers who end up paying the price.
The worst thing you can do is ignore phone calls and letters from your lender when you are behind on your payments.
Lenders have many options at their disposal to help keep borrowers from losing their homes to foreclosure, but they can’t do anything for you unless they can talk to you about your difficulties.
Failing to make your purchase contingent on a satisfactory home inspection could be a costly mistake.
Good home inspectors examine houses from stem to stern. They’ll be able to tell you whether the roof or basement leaks, whether the mechanical systems are in good shape and how long the appliances should last.
Don’t get caught off guard by needed repairs, or it will mean more money for your mortgage payments.
If you’re unsure of where to find a good home inspector, ask a REALTOR® for a referral.
Lenders like stability.
It’s a good idea to have kept your job for at least a year or two before applying for a mortgage, and it’s even more important to keep your job throughout the mortgage process.
If you’re looking to switch jobs, wait until after you’ve closed the deal.
Updated from an earlier version by Lew Sichelman.