February 18th, 2013 By Tom Rebarchak in Blog.
It doesn’t matter where you look, the overall data regarding the housing market continues to show advances while, at the same time, mortgage rates remain mostly stable.
Last week CoreLogic, a data analysis firm, reported that home prices increased for the tenth straight month in December which was up 0.4% from the month before. Including distressed sales, prices nationwide rose on a year over year basis by 8.3%, the biggest increase sine May 2006, when compared to December 2011.
According to the National Association of Home Builders (NAHB) and First American Title Insurance’s Improving Markets Index (IMI) for February, improving markets expanded across the country in February to include all fifty states and the District of Columbia. The IMI now includes a total of 259 metropolitan ares with the addition of 20 cities. The most recent report from the National Association of Realtors (NAR) shows that the fourth quarter of 2012 home price appreciation was the best for any quarter since 2005.
Based on closings during the fourth quarter, the median home price for existing single family homes increased in 133 out of 152 metropolitan areas with price declines in only 19 areas. The median home price for existing single family homes was $178,000 which is an increase of 10.0% from the fourth quarter of 2011. Fannie Mae’s January 2013 National Housing Survey showed that confidence in home sales continues to increase as consumers show an improved sense of job security. According to the survey, respondents who feel it is a good time to sell a home continued to increase to 23% last month which is up from 11% for the same time last year.
Mortgage applications rose 3.4% on a seasonally adjusted basis for the week ending February 1st, according to The Mortgage Bankers Association’s Weekly Mortgage Applications survey. The Refinance Index was up 4% and the seasonally adjusted Purchase Index increased 2%. Conforming mortgage rates have remained the same again this past week, according to the most recent survey of wholesale and direct lenders done by FreeRateUpdate.com.
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 rates are as low as 2.375%. Lending is still tight and requires that borrowers have good credit in order to obtain low rates. Fannie Mae recently announced updates to the guidelines that allow lender incentives up to $2,000 for HARP refinances.
With this incentive, it is hoped that more eligible homeowners will come forward and refinance through the HARP program. HARP loans are for underwater homeowners who have loans that were sold to Fannie Mae or Freddie Mac prior to June 1, 2009. There is still a push in Washington to expand the HARP program so that more borrowers, including those that are not underwater, will be able to refinance.
While FHA 30 year fixed interest rates remain unchanged and as low as 3.250%, FHA 15 year fixed rates increased .250% and are now as low as 3.125% and FHA 5/1 adjustable mortgage rates increased by .250% and are now as low as 2.500%. Although FHA is undergoing many changes and tightening their belts, the FHA mortgage is still easier to obtain than a conventional mortgage. When compared to other types of loans that require credit scores above 700, the minimum credit score for FHA financing through automated underwriting is 620; scores below that require manual underwriting. FHA loans continue to permit borrowers to use housing grants and loans, as well as, approved gifts for a more affordable mortgage transaction.
In addition, FHA still allows up to 6% seller concessions that can be put towards the higher FHA closing costs (APR) which are due to various FHA fees and the upfront mortgage insurance premium. The FHA streamline will continue to offer drastically reduced mortgage insurance fees until the end of 2013 for loans that were endorsed prior to June 1, 2009. Using the streamlined FHA refinance is an easy way for homeowners to move to a better mortgage without the need of an appraisal, a credit history or other documentation provided it is a no cash out transaction. FHA encourages homeowners to refinance as a way to save money or reduce the term of the loan, both of which are a benefit to both FHA and the homeowner.
Jumbo interest rates also had some increases this past week. Increasing by .125%, jumbo 30 year fixed rates are now as low as 3.375% and increasing by .250%, jumbo 5/1 adjustable mortgage rates are now as low as 2.750%. Remaining the same, jumbo 15 year fixed mortgage interest rates are as low as 2.700%. Jumbo loans are often held within a lender’s portfolio and require that borrowers have excellent credit in order to obtain low rates.
Outstanding qualifications are necessary due to the large amount of funds financed. Substantial assets must be documented to show proof of funds for the larger down payments and additional months of reserves. Guidelines for jumbo mortgages can differ from lender to lender and, therefore, require that borrowers shop around for the lender, guidelines and the jumbo rates that will benefit them.
Mortgage rates are affected by MBS prices (mortgage backed securities) and typically move in the opposite direction. MBS prices have been hurt recently by positive economic data and not necessarily always U.S. data. Jobless claims fell by 5,000 to 366,000 for the week ending February 2nd, according to the Labor Department.
This was lower than expectations of 360,000. The Institute for Supply Management reported that the U.S. services sector index fell slightly to 55.2 in January from 55.7 in December. The Trade Deficit for December fell to $38.5B which was below expectations of $46.0B. This drop, which was caused by less oil imports, makes it is possible that the GDP will be revised higher for the fourth quarter.
by Ed Ferrara