New Home Sales rise to 7 month high

Despite higher mortgage rates purchases of new homes in February 2017 increased to a seven month high.  This is a positive trend however it’s possible we won’t see the negative effects of higher rates in new home sales for a few more months.  Why is that?  Because with some new home sale purchases the contract to buy started as long as 9-12 months prior and for others it was more like 1-6 months.  Considering a buyer has a contract to buy a new home, let’s say prior to November 2016, it’s very possible that they may not be able to close until summer/fall 2017.  As the months go on the effect of higher mortgage rates will be more prevalent because those signing a contract now will be unable to afford the same type of house that would have been approved for prior to November 2017.  California mortgage rates remain above their summer 2016 lows however for now it appears they may have peaked for the time being.  California home loan volume remains below normal as lenders try to adjust to the higher rate environment.

The Commerce Department said there was 90% confidence that the change in sales in February ranged from an 11.2% drop to a 23.4% increase, this underscores the volatility of the data.