Some of the recent data on the housing front might suggest a market bottoming. Existing home sales for October came in at 4.91 million units versus an expectation of 4.8 million. The Mortgage Banker Association also reported that its purchase index was up 8.2% for the most recent week. Tomorrow, we will get the release for October new home sales. Market expectation is for 313,000 units. Don’t be surprised if it comes in higher.
Since the Fed announced in August “Operation Twist”, long term interest rates have been driven down. Ten year treasury rates are now below 2% and 30 year bonds now yield less than 3%, down from 4.5% earlier in the year. Mortgage rates have also fallen; Freddie Mac’s last reported 30 year mortgage commitment rate was 3.98% (see chart below). As the price of mortgage money goes down, home prices will find some support.
(source: Bloomberg, Freddie Mac)
JP Morgan just released their 2012 outlook for housing and forecasts an additional decline in home prices of 6% from Q2 2011, bottoming in Q2 2012. Peak to trough, that would represent, nationally, a 35% decline from the 2006 high.
