Friday, January 30, 2015

Mortgage Rates Up for the First Time This Year

Fixed-rate mortgages reversed course this week, inching up, following weeks of declines, Freddie Mac reports in its weekly mortgage market survey. Still, mortgage rates remained near historical lows with the 30-year fixed-rate mortgage well-below 4 percent this week and the 15-year fixed-rate mortgage remaining under 3 percent.
"Mortgage rates ticked up this week for the first time in 2015 following positive home sales reports,” says Len Kiefer, Freddie Mac’s deputy chief economist. New-home sales jumped 11.6 percent in December, beating market expectations, while existing-home sales rose 2.4 percent to an annual rate of 5.04 million homes in December.
Freddie Mac reports the following national averages with mortgage rates for the week ending Jan. 29:
  • 30-year fixed-rate mortgages: averaged 3.66 percent, with an average 0.6 point, increasing from last week’s 3.63 percent average. Last year at this time, 30-year rates averaged 4.32 percent.
15-year fixed-rate mortgages: averaged 2.98 percent, with an average 0.5 point, rising from last week’s 2.93 percent average. A year ago, 15-year rates averaged 3.40 percent.
  • 5-year hybrid adjustable-rate mortgages: averaged 2.86 percent, with an average 0.4 point, rising from last week’s 2.83 percent average. Last year at this time, 5-year ARMs averaged 3.12 percent.
  • 1-year ARMs: averaged 2.38 percent, with an average 0.4 point, rising from last week’s 2.37 percent average. A year ago, 1-year ARMs averaged 2.55 percent.
Source: Freddie Mac

Inventory Problems Stall Home Sales

Pending home sales dropped in December, despite interest rates being at the lowest levels in more than a year, the National Association of REALTOR® reports. All regions across the country posted declines in December.
In December, pending home sales nationally fell 3.7 percent month-over-month. Still, NAR’s Pending Home Sales Index, a forward-looking indicator based on contract signings, remained about 6 percent above year-over-year levels for the fourth consecutive month.
Lawrence Yun, NAR’s chief economist, says that inventory problems mixed with slightly higher home prices attributed to December’s decline in contract signings.
Total inventory dropped in December for the first time in 16 months, which left homebuyers with fewer choices of homes for-sale.
“With interest rates at lows not seen since early 2013, the strength in existing-sales in upcoming months will largely depend on the willingness of current home owners to realize their equity gains from the past couple years and trade up,” Yun says. “More jobs, increasing consumer confidence, less expensive mortgage insurance, and new low down payment programs coming into the marketplace will likely lead to more demand from first-time buyers.”
Regional Look
Across the country, here’s how pending-home sales fared in December:
  • Northeast: posted the largest decline of any other region, dropping 7.5 percent in December month-over-month. Pending home sales, however, remain 6.3 percent above year ago levels.
  • Midwest: decreased 2.8 percent in December, but remains 1.9 percent above December 2013.
  • South: decreased 2.6 percent in December, but pending-home sales are 8.6 percent above the prior December’s levels.
  • West: declined 4.6 percent in December, but pending-home sales are 6.3 percent above a year ago.
Source: National Association of REALTORS®

Home Ownership Rate Falls to 20-Year Low

The U.S. home ownership rate posted declines across all four regions of the U.S. in the fourth quarter, plunging to its lowest level since the third quarter of 1994. But a sharp rebound in household formation during the quarter has more economists optimistic that a turnaround in the home ownership rate is on the horizon.
The home ownership rate fell from 64.3 percent in the third quarter to 63.9 percent in the fourth quarter, reaching a 20-month low, the Commerce Department reported Thursday. In 2004, the home ownership rate peaked at 69.4 percent.
While the home ownership rate fell, however, household formation more than quadrupled during the fourth quarter to 1.7 million from 356,000 a year ago. The gains were mostly driven by renter households, the Commerce Department reported.
Still, housing analysts are optimistic from signs that household formation is picking up, particularly as the labor market strengthens too and credit requirements for qualifying for a mortgage are loosened up. Economists are expecting a rise in first-time buyers and a regain of momentum in housing this year.
"The combination of a high share of young adults living in the parental home, falling mortgage rates, and loosening credit means that the outlook for household formation is strengthening," says Paul Diggle, a property economist at Capital Economics in London. "That's one of the reasons why we are optimistic about the prospects for homebuilding over the next few years."
Many economists are predicting that the home ownership rate will stabilize in the coming quarters.
"The decade-long decline in the share of the population who own their home may now be drawing to an end," Diggle told Reuters News. "Wage growth may soon accelerate, helping young households to make the leap into home ownership. The survey evidence certainly suggests that owning a home remains part of most people's perception of the American dream."
Source: “U.S. Home Ownership Hits 20-Year Low, But New Households Growing,” Reuters (Jan. 29, 2015)

Thursday, January 29, 2015

Mortgage Applications Cool Off

After recent highs—driven mostly by a refinancing rush—mortgage applications reversed course and tumbled 3.2 percent in the week ending Jan. 23, the Mortgage Bankers Association reported Wednesday in its weekly mortgage activity survey. The decrease occurred as mortgage rates posted a slight increase during the week.
Still, mortgage applications remain up 36 percent from a year ago.
"A 3.2 percent weekly decrease, after the two gigantic previous increases, leaves the index in stellar territory,” Matthew Graham of Mortgage News Daily told CNBC.
Low mortgage rates have boosted loan demand in recent weeks, particularly among refinancers looking to lock in lower monthly mortgage payments. The 30-year fixed-rate mortgage rose slightly to 3.83 percent last week, from 3.80 percent the week prior, MBA reports.
Applications for refinancings decreased 5 percent last week due to the slight uptick in rates, but for loans backed by the government, refinancings showed continued gains, MBA reports.
"We are closely watching for the impact of the FHA mortgage insurance premium decrease,” says Michael Fratantoni, MBA’s chief economist. “This week, it showed up in the refinance numbers.” The FHA share of total applications rose to 9.1 percent this week from 8 percent the prior week, while conventional refinances were down week-over-week.
Applications for home purchases—viewed as a gauge of future home buying activity—were mostly in a holding pattern compared to the previous week, dropping only 0.1 percent. These applications are one percent higher than the same week one year ago, MBA reports.
Source: “Weekly Mortgage Applications Drop After Tiny Rise in Rates,” CNBC (Jan. 28, 2015)

FHFA Defends Lower Down Payments

New programs that back mortgages with down payments as low as 3 percent are “just as safe” as a loan with a 10 percent down payment, Melvin Watt, director of the Federal Housing Finance Agency, assured lawmakers Tuesday.
When FHFA, the regulator of Fannie Mae and Freddie Mac, announced at the end of last year that first-time buyers would be able to qualify for loans with down payments as low as 3 percent, some expressed fears that the move could stir a wave of future defaults. The change was intended to expand credit for qualified home shoppers who had been sidelined from the housing market the last few years due to high down-payment requirements. Some lawmakers worry that smaller down payments may lead to the return to irresponsible lending practices blamed for the last housing crisis. Others express concern that smaller down payments will allow buyers to purchase homes they really can’t truly afford.
"When the down payment is lower, there’s the potential it can be a riskier loan," Watt told lawmakers. "But when you pair that with other compensating factors… you offset that additional risk. That’s exactly what we’ve done."
To qualify for the smaller down payment loans, Fannie and Freddie require full documentation, strong credit scores, housing counseling, and private mortgage insurance, Watt said. Also, the loans will comprise only “a very small percentage” of the mortgages in Fannie Mae and Freddie Mac’s portfolios.
Fannie began backing the loans with the smaller down payments in December; Freddie will begin in March.
"If somebody can’t pay a loan, they shouldn’t be given a loan," Watt told lawmakers. "It would be irresponsible to say we should be making those loans or that Fannie and Freddie should be backing those loans." Watt argued that the smaller down payments will allow those who have not been able to save enough for a large down payment to break into home ownership sooner.
The National Association of REALTORS® has voiced its support of the smaller down payments backed by Fannie Mae and Freddie Mac.
“REALTORS® support responsible lending to qualified buyers, which is essential for building strong communities,” NAR President Chris Polychron said in a statement released Tuesday. “NAR research shows that saving for a down payment is the biggest hurdle to home ownership for many first-time buyers, who have been entering the market at lower than normal rates. Improved access to safe, affordable mortgage credit through FHFA’s 3 percent down payment program will help new borrowers achieve the dream of home ownership.”
Housing and Urban Development officials also recently defended the Federal Housing Administration’s move to lower annual premiums on its insurance, which could save a typical first-time home buyer about $900 a year. FHA, which insures home loans with down payments as low as 3.5 percent, dropped its annual premiums this week from 1.35 percent to 0.85 percent. Some lawmakers and critics have voiced concern that the lower premium could lead to another FHA bailout from taxpayers. FHA last year had regained its financial footing, after requiring a $1.7 billion taxpayer bailout in 2013. But officials with HUD, FHA’s regulator, said that the lower premiums will not come at the cost of taxpayers and also will help FHA increase its market share.
Source: “Fannie Mae, Freddie Mac Regulator Defends 3% Down Payment Mortgages,” The Los Angeles Times (Jan. 27, 2015) and “FHA: Lower Premiums Will Not Cost Taxpayers,” REALTOR® Magazine Daily News (Jan. 27, 2015)

3 Big Trends in Residential Design

At the combined International Builders Show and the Kitchen & Bath Industry Show in Las Vegas last week, REALTOR® Magazine picked up on the key trends to watch for in the coming year and beyond.
The question on everyone's mind was what are going to be the game-changers in 2015? Looking over our notes, we found three major insights that the real estate industry should be watching out for. Find out how:
  • Foodies are changing mainstream kitchen design
  • Connected devices may be in for a tumble
  • Gray is here to stay, but it’ll have to share the stage
Get the details on these three predictions for residential design in "Designers, Builders Reveal Hot Trends for 2015." Also, be sure to check out our other show coverage, including a tour of the New American Home and a few things you might not know about what consumers want from outdoor kitchens.

Sunday, January 25, 2015

Mortgage Rates Fall Even Lower This Week

Fixed-rate mortgages continue their free fall, with the 30-year fixed rate mortgage averaging 3.63 percent this week and the 15-year fixed-rate mortgage staying below 3 percent, Freddie Mac reports. The 30-year fixed-rate mortgage is at its lowest level since the week ending May 23, 2013, when it averaged 3.59 percent.
"Mortgage rates continued to fall, albeit at a slower pace,” says Frank Nothaft, Freddie Mac’s chief economist. Mortgage rates are falling amid declining bond yields and oil prices, Freddie Mac notes.
Freddie Mac reports the following national averages with mortgage rates for the week ending Jan. 22:
  • 30-year fixed-rate mortgages: averaged 3.63 percent, with an average 0.7 point, dropping from last week’s 3.66 percent average. Last year at this time, 30-year rates averaged 4.39 percent.
  • 15-year fixed-rate mortgages: averaged 2.93 percent, with an average 0.6 point, dropping from last week’s 2.98 percent average. A year ago, 15-year rates averaged 3.44 percent.
  • 5-year hybrid adjustable-rate mortgages: averaged 2.83 percent, with an average 0.4 point, dropping from last week’s 2.90 percent average. Last year at this time, 5-year ARMs averaged 3.15 percent.
  • 1-year ARMs: averaged 2.37 percent, with an average 0.4 point, holding the same from last week. A year ago, the 1-year ARM averaged 2.54 percent.
Source: Freddie Mac