Freddie Mac's Multi-Indicator Market Index (MiMi) monitors the stability of the housing market by analyzing home purchase applications, payment-to-income ratios, on-time mortgage payments, and employment statistics. In June, the national MiMi value saw only a slight improvement from a month earlier, climbing 0.08 percent to 85. A MiMi value this high represents a housing market that, according to Freddie Mac, is "on the outer range of its historic benchmark level of housing activity." What's more, the MiMi was up both 1.37 percent over a three-month period and 5.76 percent over the past year. June's MiMi might be far from its all-time high of 121.7, but it is still 42 percent above its all-time low in October 2010.

A Positive Outlook for Fall
A lack of inventory impacted many regions over the summer, but the supply shortages were not enough to deter contract activity. Lawrence Yun, chief economist for the National Association of Realtors, believes that this bodes well for the fall housing market, but he cautions that "buyers still have few choices and little time before deciding to make an offer on a home available for sale. There's little doubt there'd be more sales activity right now if there were more affordable listings on the market."

Shrinking Costs
One way homebuilders are improving housing affordability is by building smaller. Over the last year, both the square footage and the cost of new homes have been shrinking. According to Yun, this proves that homebuilders are focusing less on the upper end of the market in favor of building more affordable homes for buyers in the middle and lower price tiers. This is good news for the homeownership rate. At a 50-year low, the homeownership rate won't see any gains unless more first-time buyers enter the market. As of now, the number of first-time buyers closing on homes is stagnant from month to month, even with mortgage rates approaching all-time lows. These buyers are demanding affordable single-family starter homes and townhomes, and builders are starting to listen.

Lower Prices, Higher Sales?
But it is not only new homes that are becoming more affordable. Economists are forecasting the national median existing-home price growth will moderate throughout the remainder of the year to around 4 percent, a drop from 6.8 percent a year ago. Existing-home sales, meanwhile, should reach around 5.38 million; not only is this 2.8 percent higher than a year ago, it is also the highest annual pace set since 2006.

Under Contract
Most regions of the country experienced an increase in pending home sales in July; according to the National Association of Realtors, this was the second highest reading of the Pending Home Sales Index (PHSI) in over 10 years. A slight decline in the PHSI in the Midwest was more than offset by gains in the West, where the index climbed to its highest level in over three years. The West is currently experiencing strong job growth. For those job gains to support more home sales, however, the pace of homebuilding needs to increase, which will in turn improve inventory levels, slow price growth, and improve housing affordability for home buyers.

Regional Breakdown

Northeast PHSI - up 0.8 percent to 96.8; the index is 1.1 percent higher than July 2015.

Midwest PHSI - down 2.9 percent to 105.8; the index is 1.1 percent lower than July 2015.

South PHSI - up 0.8 percent to 123.9; the index is 0.4 percent higher than July 2015.

West PHSI - up an impressive 7.3 percent to 108.7; the index is 6.2 percent higher than July 2015.