The housing market continues to improve however it is not without is challenges. Existing Home Sales climbed another 4.3% above last month’s increase. The increase in sales is coming at a cost...the median price of homes declined 4.6% and the average home price dropped 4.0%.

Mortgage rates continue to remain historically low however they are starting to creep up and borrower rate sensitivity is evident in the latest figures released by the Mortgage Bankers Association. Mortgage rates have risen slightly in the last week and the MBA has reported that applications for purchase applications declined 2.9% and refinances dropped 4.8%.

The only negative in housing is Friday’s New Home Sales Report. New home sales in December fell 2.2 percent to a disappointingly soft annual rate of 307,000. While the number fell short of expectations, the dip did follow three consecutive gains-4.1 percent in September, 1.7 percent in October, and 2.3 percent in November. It is not surprising to some that the number declined, as mentioned before, the continued reduction in median and average home prices works better for the existing home sale market versus new construction.

The stock market has been steadily increasing at a modest pace. The upward movement in the market is contributed to mainly positive economic news. In recent months manufacturing, retail sales and many of measurements of economic performance have all been improving steadily.

In addition, the employment picture continues to improve with First Time Jobless Claims remaining the same from the prior week. The current level of claims bodes well for the next highly anticipated jobs report to be released in 2 weeks. Almost all experts predict a further decline in national unemployment.

As great as the improving trend of economic news has been lately, there still remains two potential economic storms that can create havoc for the economy. The first is the rising gas prices which we all have been experiencing at the pump. So far we all seem to be taking it in stride and no large economic impact is being felt. The big question is at what price point will consumers once again begin curtailing spending? There is no agreement amongst experts as to what this number is. My feeling is simply let’s hope we don’t hit it whatever that number is.

The second potential economic storm is the continued uncertainty in Europe. For the last two weeks Greece potential debt default has been the focal point of the markets. For now, the good news is that it appears that many of the pieces are in place to avoid a default.

Housing Recommendation: Home prices are at the lowest point in 10 years. When you combine low mortgage rates with low home prices, affordability is now at one of the highest points on record. With the continuing improvement in home sales along with the improving employment picture, this can lead to more purchases and ultimately a reduction in home inventory. A reduction in inventory will cause home prices to rise. If you are thinking about purchasing a home, you may want to start your search now. If you own a home and have yet to refinance, it is likely that rates will rise impacting your potential interest rate savings. ACT NOW!