In keeping up with the housing recovery, new home building gained momentum in February despite a labor shortage in the trades necessary to build a home. According to the latest report from the Commerce Department, housing starts and permits both increased at the fastest rate in 4 1/2 years. Housing starts for homes and apartments were at a seasonally adjusted annual rate of 917,000 which is an increase from 910,000 in January. Over the course of the past 12 months, housing starts have increased 28%.
The number of building permits is a measure of future construction and rose 4.6% which is the highest since June 2008. Unfortunately, there is a labor shortage according to a survey conducted by the National Association of Home Builders. The survey showed that more than half of the builders had labor shortage issues over the past six months with 46% saying that they had delays in completion of projects, 15% had to turn down work and 9% either lost sales or canceled due to lack of appropriate help.
According to the most recent survey of wholesale and direct lenders done by FreeRateUpdate.com, conforming 30 year fixed rates remain as low as 3.250%, 15 year fixed mortgage rates are as low as 2.375% and 5/1 adjustable mortgage rates are as low as 2.375%. Mortgage application volume was down 7.1% for the week ending March 15th, according to the Weekly Mortgage Applications Survey by the Mortgage Banker's Association. Of that number, the Refinance Index fell 8% and the Purchase Index dropped 4%.
Refinance applications represented 75% of all mortgage activity for the week with HARP loans increasing to 31% of all refinancing application activity. With home prices on the rise, many homeowners are now entering positive equity which allows they to refinance through traditional channels. According to Corelogic, a data research firm, 21.5% (10.5 million ) of all properties with a mortgage continue to be underwater. There are many underwater homeowners who are still eligible for the HARP program which is for loans that were sold to Fannie Mae and Freddie Mac prior to June 1, 2009. Mortgage rates are still low, but have been at risk of rising in recent weeks which is bringing many homeowners forward to refinance, especially through HARP. This program is only available until the end of 2013.
FHA home purchase loans have been on the increase possibly due to the changes coming effective April 1st. Borrowers will need a minimum credit score of 620 and a debt to income ratio of 43% or below in order to receive approval through automated underwriting. In addition, the annual mortgage insurance premium is increasing and as of June 3rd, MIP can no longer be canceled. According to National Mortgage News, during the first quarter of fiscal year 2013, FHA lenders originated $51.8 billion in purchase loans as compared to $39.5 billion for the same period fiscal year 2012. Current FHA 30 year fixed mortgage interest rates are as low as 3.250% and FHA 15 year fixed mortgage rates are as low as 3.000%. Increasing by .250%, FHA 5/1 adjustable mortgage rates are now as low as 2.500%.
Regardless of any changes FHA institutes, borrowers will continue to use the FHA loan program while conventional mortgage guidelines remain stricter. While the housing recovery may be taking place for many, others are still eligible for special programs such as the FHA streamline refinance that is offering reduced upfront and annual mortgage fees until the end of 2013 for loans that were endorsed prior to June 1, 2009. Since no appraisal is necessary for the FHA streamline with no cash out, the program is perfect for those who continue to be underwater, but have still maintained a good mortgage payment history.
This past week, jumbo mortgage rates increased, but are still considerably low. Current jumbo 30 year fixed mortgage rates are as low as 3.500%, jumbo 15 year fixed rates are as low as 2.876% and jumbo 5/1 adjustable mortgage rates are as low as 2.500%. Jumbo loans are stricter than other mortgage programs and require that borrowers have excellent credit in order to obtain low rates. According to data released in February from the National Association of Realtors, sales of high priced properties between $750,000 and $1 million were up 38.7% above a year ago. Sales of over $1 million properties were up 25.7%. This market is also seeing a recovery from the housing crisis that occurred several years ago. More lenders are willing to offer jumbo mortgage lending which is increasing the competition for low jumbo rates. Borrowers in this category should shop around for a deal that will benefit their needs.
Mortgage rates, which move in the opposite direction of MBS prices, have been quite steady considering the volatility that has been hitting markets lately. Jobless claims for the week ending March 15th rose to 336,000 which was below expectations. February Existing Home Sales rose in January to an annual rate of 4.98M. Inventory for existing homes for sale rose to a 4.7 month supply and is the first monthly increase since July 2012.
FreeRateUpdate.com researches and reports advertised rates of active lenders within the FreeRateUpdate.com network.
Published: March 27, 2013
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