Roller Coaster Rates

Early this week we saw the 30 year mortgage rates dipp as low as 4.25% for a short period. Since then we have bounced back and forth from the mid 4's to low 5's. We finished Friday at 4.75%. I would expect the volitility to continue for some time. With that said I dont think we are going to see rates jump back up to 6% anytime soon.

The housing sector will also receive close scrutiny on Tuesday with the release of both the existing and new home sales reports for last month. In October's report on existing home sales, the National Association of Realtors said that the seasonally adjusted, annualized pace fell by 3.1% to 4.98 million. This was down from September's rate of 5.14 million and all regions of the country saw declines.

Inventories of homes on the market declined by 0.9% but the drop in the sales pace pushed the turnover time up to 10.2 months from September's 10 months. The average home price fell by $10,300 or 4.4% to $224,700. This was the lowest average since March of 2004. The median price fell by 4.2% or $8,100 to $183,300 - the lowest since April of 2004.

Despite the latest decline in sales pace, lower prices have been providing some support for the market. September's sales pace was the highest in a year and October's sales were just 0.7% below where they were a year earlier (unadjusted).
Forecasters are calling for another decline in the sales pace in November to between 4.95 million and 4.90 million.

In the new home category, the Commerce Department said that the sales rate fell in October by 5.3% to 443,000, the lowest level since January of 1991. September's originally reported rate of 464,000 was revised down to 457,000.

With declining sales, builders have cut back on new construction. The level of new home inventory on the market at the end of the month (adjusted, annualized) was 381,000, the lowest since March of 2004. At the prevailing sales pace, this represented 11.1 months of supply, up from 10.9 months in September.

The average new home price fell by $11,400 in October to $272,300, the lowest since August of 2004. The median price fell by $3,700 to $218,000, the lowest since September of 2004. The average price was down by 12.2% from a year earlier and the median price was down by 7.0%.
For November, analysts are predicting another decline in the sales pace to between 415,000 and 420,000.