Home Loan Interest Rates Surge to 4-Year High

“Higher Treasury yields, driven by rising commodity prices, more Treasury issuance’s and the steady stream of solid economic news are behind the uptick in rates over the past week,” says Sam Khater, Freddie Mac’s chief economist. “Despite the increase in borrowing costs, demand for home purchase credit remains solid.” The Mortgage Bankers Association reported that mortgage applications were up 11 percent from a year ago.

Freddie Mac reports the following national averages for the week ending April 26:

  • 30-year fixed-rate mortgages averaged 4.58 percent, with an average 0.5 point, rising from last week’s 4.47 percent average. Last year at this time, 30-year rates averaged 4.03 percent.
  • 15-year fixed-rate mortgages averaged 4.02 percent, with an average 0.4 point, rising from last week’s average of 3.94 percent. A year ago, 15-year fixed-rate mortgages averaged 3.27 percent.

Source: Freddie Mac

Recovery Requires “Stable Home Prices”

For a recovery in the housing market to take hold, Fed Chairman Ben Bernanke said home prices need to stabilize, more loan modifications need to take place, and the foreclosure process needs to speed up.

Bernanke said that the high number of foreclosures for sale needs to be cleared from the market so prices can stabilize and “give people confidence that they can buy and not be buying into a falling market,” he said, during his second news conference of the year.

Bernanke also said banks need to help home owners who face foreclosure by modifying their mortgages and lowering their monthly payments. Or if modifications can’t be justified, he says banks need to speed up their foreclosure process.

“The housing sector is very important to the overall recovery, so we pay a lot of attention to that,” Bernanke told reporters at the press conference.

Bernanke said the Fed has lowered its economic forecast, expecting the economy to grow at a slower pace than originally projected and for problems to persist into the next year. High unemployment, he noted, continues to be a significant factor not only weighing down the economy but also stalling the housing recovery.

More details at source: “Bernanke Says That Economic Problems Likely Depressed Housing, May Persist into Next Year,” The Associated Press (June 22, 2011) and “Bernanke Says Home Price Stabilization Necessary to Woo Buyers,” HousingWire (June 22, 2011) 

Some of us even in the Placerville, California region have suggested some of these points for 2+ years!

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High Energy Costs Lead to Mortgage Delinquency?

Rising energy prices can raise mortgage delinquency rates, according to a new study in Energy Economics, “Do household energy expenditures affect mortgage delinquency rates?”

After all, rising utility costs can constrain home owners’ budgets, researchers from Boston University note. In fact, researchers found the rise in energy prices were connected to the 2008 financial crisis.

The researchers analyzed the percentage of U.S. mortgages that are 30 to 89 days past due and those that entered foreclosure, rates of home ownership, home prices, as well as the cost of household expenses on energy prices.

Researchers R.K. Kaufmann, as well as colleagues, from Boston University concluded: “Together, these variables account for much of the historical variation in the percentage of U.S. mortgages that are 30 to 89 days past due and indicate that the post 2006 rise in this measure of mortgage delinquency is associated with falling home prices, an increase in household expenditures on energy, and rising unemployment.”

Source: “Energy Economics: Research From Boston University Has Provided New Information About Energy Economics,” Investment Weekly News (May 7, 2011) and “Do Household Energy Expenditures Affect Mortgage Delinquency Rates?” ScienceDirect (March 2011) 

Other articles relating to the Sacramento and Placerville, California regions at: www.sierraproperties.com

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