mortgage rates Archives

Low Rates Help Sustain Market Momentum

Mortgage rates and home prices have been headed in opposite directions for a while now. Following the housing crash, rates dropped to record lows and have hovered there over the past few years while home prices skyrocketed back from their post-crash decline. This, of course, has been fortunate for the housing market and potential home buyers – as price increases and their effect on affordability conditions have been muted somewhat by consistently low mortgage rates. Buyers who may’ve been discouraged by price spikes in their local market continued to find opportunities because of their ability to lock in a low rate on a long-term loan. This remains true. In fact, according to Freddie Mac’s Multi-Indicator Market Index – which compares current conditions to historic norms – 75 percent of the top 100 metropolitan areas are showing a three-month improving trend, despite the fact that prices are still rising. Len Kiefer, Freddie Mac’s deputy chief economist, says mortgage rates are the reason. “Nationally, MiMi in July was largely unchanged for the third consecutive month,” Kiefer said. “Despite rising house prices, the majority of housing markets have sustained their momentum due in large part to low mortgage rates. For example, purchase applications, as measured by MiMi, were up more than 17 percent year-over-year and remain at their highest level since December 2007.” More here.

Permits To Build New Homes On The Rise

New numbers released by the U.S. Census Bureau and the Department of Housing and Urban Development show the number of authorized permits to build single-family homes rose 3.7 percent in August. That encouraging news was the bright spot in an otherwise lackluster August residential construction report. However, because permits are generally a good indicator of future activity, the rise in single-family authorizations could be a good sign for future new home construction. And, because new home construction helps balance the market, that could be good news for home buyers in the months ahead. Still, August’s numbers were lower than expected. In fact, overall housing starts – which refer to the number of homes that broke ground – fell 5.8 percent, largely due to a significant drop in construction in the South. The Northeast, West, and Midwest, on the other hand, all saw gains. New home construction is particularly important right now because many markets are suffering from a lower-than-usual number of homes for sale. Without a significant boost, low inventory will continue to push prices higher while limiting the number of homes prospective buyers have to choose from. Fortunately, buyer demand has remained high so far this year, mostly because low mortgage rates and rising incomes have helped offset the upward pressure on prices caused by limited inventory. More here.

More Americans Say It’s A Good Time To Buy

According to Fannie Mae’s August 2016 Home Purchase Sentiment Index, the number of Americans who say it’s a good time to buy a house rose from the month before, marking three straight months of improvement. It’s a sign that an increasing number of potential buyers are feeling secure in their jobs, optimistic about their futures, and eager to take advantage of mortgage rates still near record lows. It also bodes well for the housing market as it nears the end of its busiest season. Overall, the survey found sentiment essentially flat from the month before, when it reached an all-time high. Doug Duncan, Fannie Mae’s senior vice president and chief economist, said Americans are optimistic heading into the fall. “Consumers have a fairly optimistic, 12-month outlook on housing at the end of the summer home-buying season, supported by increased job confidence and more favorable expectations regarding their personal financial situations compared with this time last year,” Duncan said. “The return to a slight upward trend in the HPSI during the spring and summer is, thus far, in line with our forecast, which calls for 4 percent growth in home sales in 2016 to the best level since 2006 and continued improvement for 2017.” More here.

Mortgage Rates Mostly Flat In Latest Survey

The Mortgage Bankers Association’s Weekly Applications Survey has been conducted since 1990 and covers 75 percent of all retail residential mortgage applications. For this reason, it is a closely followed measure of where mortgage rates and application demand are headed. According to the most recent survey, average mortgage rates were mostly flat 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. As a result, both refinance and purchase application demand were also relatively flat from the week before. However, compared to last year both are up. Refinance demand is now 43 percent higher than at the same time last year and demand for loans to buy homes is up 7 percent. Michael Fratantoni, MBA’s chief economist, told CNBC the year-over-year improvement has been seen on both ends of the market. “Although the pace of job growth slowed in August, purchase volume continues to run strong at 7 percent above last year at this time,” Fratantoni said. “This strength is broad based, with growth at both the high and low ends of the market.” More here.

Hot Housing Market May Cool This Fall

The housing market had a strong first of half of the year. In fact, according to Jonathan Smoke, Realtor.com’s chief economist, it was the best spring in a decade. However, a number of factors will likely cause things to slow down in the second half of the year. “As a result of a very strong spring and summer leaving us with low inventories, mortgage rates potentially moving back up, and the presidential election creating more uncertainty, we may see a weaker housing market in September, October, and November,” Smoke says. “However, given the performance so far this year, 2016 should end as the best year in a decade.” And, though things may slow down in the months ahead, that’s no reason to believe the real estate market will have a bad 2017. Smoke says housing should remain strong next year, unless there is a substantial increase in mortgage rates over a short period of time. But that type of rate increase should only occur if the economy is also strong. And, if that’s the case, then lower unemployment and higher wages should help offset the effects of higher rates. Smoke feels that positive conditions and favorable demographics will keep the housing market strong and healthy for at least two more years. More here.

Rising Rent Motivates 1st Time Buyers

According to a recent survey of potential home buyers, the cost of renting is the main motivator for almost half of all first-time buyers and nearly a quarter of respondents overall. That is nearly double what it was last year at this time. That’s mostly due to the fact that, in recent years, rent has been rising at a rapid pace and – despite the fact that home prices have also been increasing – buying a home has generally remained the more affordable choice in many markets. That, and mortgage rates that have been hovering near record lows for some time now, are driving renters to the housing market. But that doesn’t mean there still aren’t concerns about the cost of buying a home. In fact, affordability was named by 28 percent of survey participants as their top concern, with too much competition and a lack of homes to choose from following close behind. For first-time home buyers, in particular, affordability is a growing worry. For that reason, inventory levels and new home construction are the keys to the current housing market. As more homes become available for sale, the rate of price increases should begin to moderate, which will help balance the market and provide more opportunities for buyers. More here.

Sales Of Previously Owned Homes Fall 3.2%

Sales of previously owned homes fell in July after four consecutive months of increases, according to the National Association of Realtors. The 3.2 percent decline was led by a 13.2 percent drop in the Northeast. The Midwest and South also saw decreases, while the West climbed 2.5 percent from the month before. Lawrence Yun, NAR’s chief economist, says inventory and affordability are behind the decline. “Severely restrained inventory and the tightening grip it’s putting on affordability is the primary culprit for the considerable sales slump throughout much of the country last month,” Yun said. “Realtors are reporting diminished buyer traffic because of the scarce number of affordable homes on the market, and the lack of supply is stifling the efforts of many prospective buyers attempting to purchase while mortgage rates hover at historical lows.” But though July’s numbers fell, home sales are still expected to finish the year at their strongest pace since the housing crash and the number of homes available for sale actually improved during the month – though only by 0.9 percent. Currently, unsold inventory is at a 4.7-month supply at the current sales pace. A six month supply is considered healthy for the housing market. More here.

Mortgage Rates See Slight Increase Last Week

According to the Mortgage Bankers Association’s Weekly Applications Survey, average mortgage rates moved up 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 increases, though slight, were enough to cause a dip in mortgage activity. Refinance demand – which is typically more sensitive to rate increases – fell 3 percent from the previous week, while purchase activity was down 0.3 percent from the week before. But though demand was slower on a week-over-week basis, it is still up significantly from last year when mortgage rates were higher. For example, refinance demand is now 45 percent higher than at this time last year and requests for applications for loans to buy homes are nearly 8 percent above last year’s level. Unfortunately, though rates remain low and buyer demand is strong, a lower-than-typical number of homes on the market could be suppressing sales which, despite this, are on track to have their best year in a decade. The MBA’s weekly applications survey has been conducted since 1990 and covers 75 percent of all retail residential mortgage activity. More here.

Housing Market Conditions Mixed But Steady

Today’s housing market is a mixed bag. On the one hand, a better job market, improving wage growth and low mortgage rates have driven buyer demand higher and made an increasing number of Americans consider buying a house. On the other, too few homes for sale are driving prices upward and new home construction isn’t keeping pace with the increase in demand. Fortunately, in some cases, these factors help balance each other out. For example, though prices continue to rise in most markets, mortgage rates remain low – making higher prices slightly more manageable. All in all, Fannie Mae’s chief economist, Doug Duncan, says the real estate market isn’t likely to change too much one way or the other before the end of the year. “Housing market fundamentals remain a mixed bag. During the second quarter of 2016, both new and existing home sales rose to expansion highs, while single-family starts pulled back, remaining historically low for an expansion,” Duncan explained as part of the group’s most recent Economic and Housing Outlook. “Tight housing inventory from a lack of new construction continues to create affordability challenges, particularly at the lower end of the market … We expect home buyers will benefit from improving job and wage growth, more favorable lending standards, and continued low mortgage rates through the rest of the year.” More here.

Home Sales To Have Best Year In A Decade

The housing market is likely to see its best year of sales in a decade, according to a new outlook from Freddie Mac. In fact, the group’s forecast calls for sales to reach 6.04 million by the end of the year. Sean Becketti, Freddie Mac’s chief economist, says the housing market still has some challenges but is far better balanced than it was even just a few years ago. “This is a good sign for the housing market as it continues to be an even brighter spot in the economy,” Becketti said. “However, the housing market still has challenges, which is reflected in our housing starts forecast. Low levels of inventory across many markets will continue to put upward pressure on house prices for the foreseeable future.” But though Freddie Mac expects home prices to continue to increase due to a lower than normal number of available homes for sale and has revised their forecast for new home construction downward, they also expect mortgage rates to remain low through the end of the year. In other words, the residential real-estate market will continue to look much as it does today for the next several months. Inventory will continue to be the big issue, causing prices to rise while mortgage rates near historic lows help support both refinance and home purchase activity. More here.