The latest housing market reports are indicating that the housing recovery is being hit by low inventory which is resulting in a drop in sales. Low supply is blamed for a decrease of 1% in existing home sales in December, although sales were still at the second highest level since November, 2009, according to the National Association of Realtors (NAR).
NAR also reported that pending homes sales fell 4.34% in December to 101.7, although it was 6.9% higher than December, 2011. New home sales in December fell 7.3%, but was 8.8% higher than December, 2011, according to the Census Bureau and the Department of Housing and Urban Development.
Despite these numbers, total new home sales in 2012 were at the highest level seen in three years. These results are being blamed on the inventory of homes for sale which dropped 8.5% from November and is at the lowest level since January, 2001. With inventories down 21.6% from December, 2011, rise in home prices is occurring as home sellers are receiving multiple bids for their homes. Less inventory and higher home prices may be turning the housing market around to a sellers market which may also make it difficult for some home buyers to qualify.
For the week ending January 18th, loan applications rose 7.0% on a seasonally adjusted basis and 8% on an unadjusted basis, according to the Mortgage Bankers Association. The Refinance Index was up 8% with refinances accounting for 82% of all applications. The seasonally adjusted Purchase Index increased 3% and reached the highest level since May, 2010. Most of the purchase applications were comprised of conventional loans which sent the seasonally adjusted Conventional Purchase Index to its highest level since October, 2009.
According to the most recent survey of wholesale and direct lenders done by FreeRateUpdate.com, conforming mortgage rates have remained steady over the past week. Current 30 year fixed mortgage rates are as low as 3.125%, 15 year fixed interest rates are as low as 2.375% and 5/1 adjustable mortgage rates are as low as 2.375%. These low rates require that borrowers have good credit and qualifications that are necessary for approval.
As home prices increase, more homeowners will be once again be eligible for regular mortgage refinances that require an appraisal. Under the HARP program, which is available for homeowners who are underwater and have loans that were sold to Fannie Mae or Freddie Mac prior to June 1, 2009, an appraisal is not needed, in most cases, since loan to value caps were removed. Many borrowers who use HARP loans to refinance have been taking on shorter term loans which help to gain equity back at a quicker pace. HARP refinances are available until the end of 2013 and can be obtained by any participating lender.
FHA 5/1 adjustable mortgage rates increased and are now as low as 2.500%. Remaining the same, current FHA 30 year fixed rates are as low as 3.250% and FHA 15 year fixed mortgage rates are as low as 2.750%. FHA's low down payment requirement draws many first time home buyers who, otherwise, would not be able to purchase a home. FHA mortgages also offer easier and flexible credit qualifying guidelines to home buyers. In order to bring costs down, borrowers often use housing grants or loans and approved gifts which are acceptable to FHA. Seller concessions up to 6% are still permitted to be used for the high FHA closing costs (APR) which is due to the upfront mortgage insurance premium and various FHA fees.
The FHA streamline refinance with no cash out is one of the best refinance deals available to homeowners. The streamline does not require an appraisal, a credit history or any other documentation in order to receive approval as long as there is no cash taken out and the current mortgage has been paid on time. Homeowners who have FHA loans that were endorsed prior to June 1, 2009 can use the FHA streamline program and will receive reduced upfront and annual insurance premiums, an offer that is available until the end of 2013.
Increasing by .125%, jumbo 30 year fixed mortgage rates are now as low as 3.500%. Jumbo 15 year fixed rates are as low as 2.700% and jumbo 5/1 adjustable interest rates are as low as 2.125%. In order to receive low jumbo rates, borrowers must have a history of excellent credit. Substantial assets must be available for the higher down payment and additional months of reserves which are usually required by lenders. The high priced property market has been on the increase which is creating more competition in the jumbo loan market. As more jumbo lenders become available, borrowers will need to shop around in order to make sure they are receiving a deal that is right for their situation.
MBS prices (mortgage backed securities) have suffered this past week which has put home loan rates at risk of rising. Mortgage rates are affected by MBS prices and move in the opposite direction. Several factors caused this to happen. Investors turned to riskier assets when economic news coming from Europe was stronger than expected. A drop of 1.5% in jobless claims, reported by the Labor Department, sent claims to a five year low that has not been seen since late January, 2008. The index of U.S. leading indicators, as reported by the Conference Board, increased 0.5 in December which was the most in three months. Leading indicators is the outlook for the next three to six months and signaled stronger housing and job markets.
FreeRateUpdate.com surveys more than two dozen wholesale and direct lenders' rate sheets to determine the most accurate mortgage rates available to well qualified consumers at about a 1 point origination fee.
Published: January 30, 2013
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