mortgage rates Archives

Average Mortgage Rates Hit 3-Month Low

According to the Mortgage Bankers Association’s Weekly Applications Survey, average mortgage rates fell last week across all loan categories, including 30-year fixed-rate mortgages with both conforming and jumbo balances, loans backed by the Federal Housing Administration, and 15-year fixed-rate loans. The drop brought mortgage rates to their lowest level since last October. Michael Fratantoni, MBA’s chief economist, told CNBC rates fell because of volatility in global stock markets. “Global stock markets plunged last week, led by weakness in China, but further weakened by continued sharp drops in oil prices,” Fratantoni said. “Investors drove down Treasury yields in a flight to safety, and mortgage rates fell to their lowest level since last October.” As a result, refinance activity – which is most sensitive to rate fluctuations – spiked, rising 19 percent from the week before. Purchase application demand, on the other hand, slipped 2 percent, though it remains 17 percent higher than the same week one year ago. The MBA’s weekly survey has been conducted since 1990 and covers 75 percent of all retail residential mortgage applications. More here.

Housing Gains Balanced On Wages, Prices

Last year, the housing market posted its best numbers since 2007. Still-favorable affordability conditions, led by low mortgage rates, resulted in a strong year for home sales. But with the Fed’s decision to raise interest rates and the continuing climb of home prices, there is increasing concern that housing affordability may become an issue for prospective home buyers in 2016. So how are things likely to play out? According to Fannie Mae’s most recent Economic & Housing Outlook, the Fed’s rate hike hasn’t had much of an impact yet, so wage growth and home prices are the most important factors to watch. “Despite our expectation of only a small rise in mortgage rates, home price and income dynamics should inhibit home purchase affordability,” Duncan said. “In addition, continued rent increases will hinder renters’ ability to save for down payments. Therefore, we believe the pace of improvement in total home sales should moderate to 4 percent in 2016.” Still, Duncan expects an increasing number of single-family housing starts this year, which may provide some relief in markets where low inventory is pushing prices upward. Also, continued gains in job security and household income – along with eased lending standards – could help balance the effects of higher home prices and allow more Americans to pursue their dreams of homeownership. More here.

A Look Back At The 2015 Housing Market

All the numbers have yet to be reported but, according to Realtor.com’s chief economist Jonathan Smoke, 2015 was a year of growth and improvement for the housing market. New and existing home sales both rose, with gains seen among first-time and repeat buyers, as well as buyers who were relocating and/or changing jobs. Home prices also increased, helping homeowners see significant gains in equity. However, despite the fact that prices rose and demand was strong – which would normally lead to a boom in housing construction – most of the gains in residential construction were found among apartment buildings rather than single-family homes. With a lower-than-normal number of homes for sale putting upward pressure on prices, affordability was increasingly a concern for home buyers. Buyers, however, were helped by continued improvement in the job market and mortgage rates still hovering near historic lows, which boosted consumer confidence even as prices neared pre-crash levels in some markets. All in all, Smoke says the housing market is definitely stronger than it was a year ago but offers a few suggestions for further growth. “We need new construction to keep up with the household formations driven by demographics and healthy job creation,” Smoke writes in an article posted to realtor.com. “We need more affordable housing to decrease the impact of burdensome rents. And we need expanded, risk-appropriate access to credit to help households that can afford to buy.” More here.

Is Housing A Better Investment Than Stocks?

Recent volatility in the stock market raises the age old question of whether the housing market is a better investment than the stock market. While there are plenty of opinions on the matter – and the housing crash and financial crisis highlighted the dangers of putting too much faith in either as an all-in-one investment strategy – recent progress, combined with historic affordability conditions, have made the housing market an attractive buy over the past few years. Tim Rood, chairman of The Collingwood Group, is among those that think investing in housing is the way to go. He recently told Housing Wire that the stock market drop is proof buying real estate is a far better strategy. “While not every American dreams of owning stock, the majority of them have a bias for living indoors,” Rood said. “That bias coupled with the record affordability rate for homeownership are net positives for housing. Homeownership is the last legitimate wealth creation opportunity for most Americans.” And, though affordability has declined, that opportunity is still available. In fact, mortgage rates are still historically low and – though home prices have recovered much of their value – they still rose 5 percent in 2015 and are expected to continue at a similar pace in 2016. That means, this year’s home buyers may be able to find their dream house and a good investment all at once. More here.

Optimism High Despite Affordability Concerns

Since the Fed’s decision to increase interest rates, there has been a lot of discussion about whether or not tighter monetary policy will halt the housing market’s progress. According to Freddie Mac’s chief economist, Len Kiefer, there is no need for worry. “We do expect home buyer affordability to decrease in the coming year, but we don’t expect tighter monetary policy to generate a spike in longer-term interest rates in the foreseeable future,” Kiefer says. “The Fed has committed publicly to measured increases in short-term rates. While mortgage rates will rise modestly, they will still remain at historically low levels. Combined with stronger job and income growth, the net result may be strong growth in household formation, construction, and home sales.” Among the reasons for Kiefer’s optimism, Freddie Mac’s recently released Multi-Indicator Market Index ranks high. That’s because the latest index shows the best year-over-year improvement since July 2014 and an increasing number of states and metro areas whose local housing markets have entered their long-term stable range. That means more markets where home purchase applications and home values are headed upward and mortgage delinquencies are falling. Overall, though affordability conditions may decline this year, the strength of the economy and housing market should help lessen the impact for the average American home buyer. More here.

Pending Home Sales Slow In November

The National Association of Realtors’ Pending Home Sales Index measures the number of contracts to buy homes that are signed during the month. Because it tracks signings, and not closings, it is considered a good indicator of future existing-home sales. In November, contract signings slowed from the month before but remained 2.7 percent above year-before levels. It was the 15th consecutive month pending home sales rose year-over-year. Still, the monthly trend shows sales beginning to slow. Lawrence Yun, NAR’s chief economist, says pending sales have been slowing ever since they hit a nine-year high in May. “Home prices rising too sharply in several markets, mixed signs of an economy losing momentum and waning supply levels have acted as headwinds in recent months despite low mortgage rates and solid job gains,” Yun said. “While feedback from Realtors continues to suggest healthy levels of buyer interest, available listings that are move-in ready and in affordable price ranges remain hard to come by for many would-be buyers.” Still, despite falling 0.9 percent in November, pending sales’ estimates from October were revised upward and regional results show contract signings were actually up in the Midwest and South. More here.

Housing Momentum To Carry Into Next Year

Freddie Mac’s recently released December Insight & Outlook takes a look at how far the housing market’s recovery has come and where it may be headed as we enter 2016. According to the report, the economy has largely rebounded from the financial crisis. With unemployment declining, consistent economic growth, and a strengthening housing market, residential real estate and the economy have come a long way and the outlook is mostly positive heading into next year. But the report cautions that those same economic gains could also begin to pose a problem for potential home buyers, as rising mortgage rates and increasing home prices lead to declining affordability conditions. So what should buyers expect in 2016? Freddie Mac believes that a strong job market combined with pent-up demand will overcome the challenges of decreasing affordability. In fact, their outlook calls for a 3 percent increase in home sales over 2015’s total – which is on pace to be the best since 2007. They also believe that – though mortgage rates will begin to rise – they will remain historically low. Additionally, home price increases will begin to moderate, as new home construction rises and buyer demand falls. Overall, Freddie Mac expects the strength of the economy will help alleviate home buyers’ affordability concerns and that 2015’s momentum should carry into the coming year. More here.

Mortgage Pros See Easier Credit Ahead

Fannie Mae’s quarterly Mortgage Lender Sentiment Survey polls mortgage professionals to get an idea of how they see the current market and the months ahead. Recently released, their fourth-quarter survey finds lenders reporting that credit standards continue to ease – which is good news for potential home buyers looking to purchase a house in the coming months. Doug Duncan, Fannie Mae’s senior vice president and chief economist, says increased credit availability should help home buyers affected by decreasing affordability conditions. “Several factors point to constrained housing affordability in 2016, particularly for first-time home buyers, including slow single-family supply response and limited inventory of starter homes on the market, strong inflation-adjusted house price appreciation outpacing household income growth, and an upward bias in mortgage rates. However, on net, lenders told us in our fourth-quarter Mortgage Lender Sentiment Survey that they have eased and expect to continue to ease credit standards, which was a consistent trend throughout 2015,” Duncan said. “Thoughtful easing will help mitigate some of the affordability decline moving into 2016.” The percentage of lenders reporting easing expectations reached a new survey high, according to the survey’s results. More here.

Mortgage Rates Mostly Down Last Week

According to the Mortgage Bankers Association’s Weekly Applications Survey, average mortgage rates were mostly down last week, in advance of the Fed’s latest policy announcement. Rates on 30-year fixed-rate mortgages with conforming balances were unchanged from the previous week while jumbo loans saw a slight decrease, as did loans backed by the Federal Housing Administration and 15-year fixed-rate loans. Because the Fed’s announcement may mean mortgage rates will be moving higher, refinance activity picked up from the week before. Michael Fratantoni, MBA’s chief economist, told CNBC borrowers were likely looking to move before rates do. “Some borrowers may have moved to lock in current rates in advance of the Fed’s likely increase this week,” Fratantoni said. Overall, demand for mortgage loan applications was down 1.1 percent from the week before, largely due to a 3 percent drop in the number of prospective buyers requesting applications. Still, purchase application demand remains 34 percent higher than at the same time one year ago. The MBA’s weekly survey has been conducted since 1990 and covers 75 percent of all retail residential mortgage applications. More here.

Fed To Decide On Interest Rates This Week

The Federal Reserve has kept interest rates low for the past seven years in order to encourage businesses and consumers to borrow money and take risks. But, as the economy has rebounded, the likelihood that the Fed will raise rates has increased. Now Federal Reserve chairwoman, Janet L. Yellen, is hinting that the decision to raise rates could come as soon as this week, when the Fed’s policy-making committee meets December 15 and 16. Yellen said recently that the move would be “a testament, also, to how far our economy has come in recovering from the effects of the financial crisis and the Great Recession.” Recent economic data, including a positive November jobs report, make the decision even more likely. The report showed that the economy added 211,000 jobs in November and that the unemployment rate is now at 5 percent. Despite the likely rate hike, however, analysts expect that the increase will be gradual and shouldn’t have a negative effect on home buyers, who will still be able to secure favorable mortgage rates that should remain low by historical standards. More here.