Homes are Selling as Prices Continue to Rise

The Case-Shiller Home Price Index, which measures appreciation in single-family homes, increased by 0.1% for the month of September, bringing annual appreciation to 3.2%. 

The Federal Housing Finance Agency (FHFA) Home Price Index, which measures homes purchased with conforming mortgages, also rose in the month of September. This report went up 0.5%, bringing the annual appreciation rate to 4.6%! 

Existing Home Sales measures the sale amounts of existing home dwellings across the nation.  For the month of October, sales have increased from 5.36M to 5.46M.  This change represents a 17-month high and shows that sales increased by 4.6% from this time last year.  About 31% of these sales came from first-time homebuyers and about 80% of the total transactions used some type of financing. This is a very important gauge of the health of the housing market and is a good indicator of overall economic strength.

As homes across the nation continue to gain value, we are seeing that the demand and the appetite to get into the housing market is growing.  With lower inventories and strong levels of demand, homes will continue to stay on this path and continue to be a wise investment for those buyers. 

For those buyers looking to get in, yes, there are pockets of stronger or weaker appreciation levels across the US, so speaking with your trusted advisor is key to help you develop a plan that makes the most sense.

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30- Second Update:  US Housing Starts Hit Twelve Year High

US housing starts, which represent permits for future home construction, jumped 3.8% in October to 1.314 million units, representing a twelve-year high.  Single family homes jumped 2% to a rate of 936,000 units, the highest level in nine months.  Multi-family properties soared 8.6% to a rate of 378,000 units.  The report also indicated increases in home completions and homes already under construction.  Overall, these numbers are directly reflective of a strong housing market, and the increase in inventory is very encouraging to future home buyers.  With these positive housing numbers, coupled with interest rates that remain very low, now may be the perfect time for buyers that have remained on the sidelines to enter the housing market.


30-Second Update:  Sales of new home expected to reach 13 Year High in 2020


According to the National Association of Realtors (NAR), new home sales are expected to rise 11% to 750,000 in 2020.  This would be the highest reading since 2007.  In addition, the sales of existing homes are expected to rise to 3.7% to 5.56 million in 2020, the highest level since 2017.  The age group that continues to be the driving force behind the housing market is the Millennial Generation.  Data from reports that Millennials made up a staggering 46% of all mortgage originations in September, up 3% from the previous year. 

In addition to expected home sale increases in 2020, the median home price of an existing home is expected to increase as well.  Lawrence Yun, chief economist of the NAR expects the median price to be $270,400 next year, rising 4.3% from 2019.  Low interest rates and high demand are two of main factors that are expected to be the catalyst to rising home values. 



Home Prices Continue to Thrive

CoreLogic’s Home Price Index (HPI) continue to show that owner-occupied homes across the nation are increasing in value.  In September, values increased 0.4%, which is an increase of 3.5% since September of last year.    The HPI also gives us a forecast of appreciation showing that homes will appreciate by 0.3% over the next month and by a whopping 5.6% over the next year! 

Chief Economist for CoreLogic, Frank Nothaft said, “Mortgage rates were a full percentage point lower this September compared to a year ago, boosting affordability for first–time buyers and supporting a rise in homeownership.  In addition to lower interest rates, personal income grew faster than home prices during the past year.  This provided an additional lift for first-time buyer affordability and helped to boost the homeownership rate to the highest level in more than five years.”

CoreLogic also notes that all fifty states are currently seeing positive trends with home pricing.  Addiitonally, there is a lot of demand coming from millennial buyers, who are actually spending more on homes than they anticipated, while also on average putting less than 20% down.

Low interest rates and continued buyer demand are helping homes appreciate.  The housing market is very healthy and will continue to be healthy should the current market conditions continue.   

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30 second update:  Fed Cuts Interest Rates: How It Affects You!

On October 30th, the Federal Open Market Committee lowered its benchmark funds rate by 25 basis points to a range of 1.5% - 1.75%, which is down from 1.75% - 2.0%.  This was the third cut this year by the Fed.  Fed Chairman Jerome Powell stated, “The committee will continue to monitor the implications of incoming information for the economic outlook as it assesses the appropriate path of the target range for the federal funds rate.”

Let’s take a closer look at the Federal Funds Rate.  This rate is the rate banks charge each other for overnight lending and is tied to most forms of revolving consumer debt such as credit cards, home equity lines of credit, car loans and more.   A common misconception is that this rate is directly tied to mortgage rates.  When the Fed loosens its policy and cuts rates, this is to spur or ignite economic activity and can also stir up some inflation. Mortgage rates increase when there is a spike in inflation.  This is why we must keep an eye on the Fed rate, because sometimes it can actually push longer term interest rates higher. 

Following October 30th's rate cut, however, the Fed made several comments explaining that there are currently lower levels of inflation.  Because of these comments, the bond market improved in price which has helped keep mortgage rates low.  On top of all of this, the Personal Consumption and Expenditures (PCE) report came out, which reports on national levels of inflation, pointing to low levels of inflation as well. 

When inflation is flat or declining, mortgage rates tend to follow suit.  This is great news for those out shopping for a home or looking to refinance. 

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