Mortgage rates continue to hover at yearly lows, but home buyers aren’t flocking to lock in the rates. Applications for mortgages dropped 6.6 percent last week for both home purchases and refinances, the Mortgage Bankers Association report.
Broken out, refinancing applications dropped 7.4 percent last week, while applications for home purchases, viewed as a gauge of future home sales, continued its drop, falling 5 percent last week. Last week, home purchase applications had fallen by another 5 percent and were about 9 percent from year-ago levels, the MBA reported.
Meanwhile, the 30-year fixed-rate mortgage continues to stay low by historical standards. The average rate nationwide was 4.13 percent week, up 3 basis points from 4.10 percent the week prior, according to the MBA’s survey, which reflects about 75 percent of the U.S. retail residential mortgage application market.
Source: “U.S. Mortgage Applications Fall in Latest Week as Rates Rise: MBA,” Reuters (Oct. 29, 2014)
The 30-year fixed-rate mortgage took another dip this week, staying below the 4 percent threshold and keeping borrowing costs at the lowest rate in more than a year. It marks the fifth consecutive week that mortgage rates decreased.
Freddie Mac reports the following national averages for the week ending Oct. 23:
- 30-year fixed-rate mortgages: averaged 3.92 percent, with an average 0.5 point, reaching a new low for the year and dropping from last week’s 3.97 percent. Last year at this time, 30-year rates averaged 4.13 percent.
- 15-year fixed-rate mortgages: averaged 3.08 percent, with an average 0.5 point, dropping from last week’s 3.18 percent average. A year ago, 15-year rates averaged 3.24 percent.
- 5-year hybrid adjustable-rate mortgages: averaged 2.91 percent, with an average 0.5 point, dropping from last week’s 2.92 percent average. Last year at this time, 5-year ARMs averaged 3 percent.
Source: Freddie Mac
Federal Housing Finance Agency Director Mel Watt said FHFA will release guidelines “in the coming weeks” to allow increased lending to borrowers with down payments as low as 3 percent. FHFA, which regulates Fannie Mae and Freddie Mac, also will help lenders who sell loans to the mortgage giants by easing standards on borrowers who don’t have perfect credit profiles. The move is expected to help open up the credit box to first-time buyers, self-employed borrowers, borrowers who have had recent job switches, and borrowers who faced financial hardship during the recession.
FHFA said it will clarify to lenders when it will force buy-back loans that were issued based on inaccurate information. FHFA acknowledges that it failed to provide lenders with enough clarity in the past. That caused lenders to get cautious with lending after facing a flood of high-dollar settlements from loans they issued that later turned sour.
“We know that this issue has contributed to lenders imposing credit overlays that drive up the cost of lending and also restrict lending to borrowers with less than perfect credit scores or with less conventional financial situations,” Watt said. Addressing such issues are “critical to ensuring that there is liquidity in the housing-finance market and to providing access to credit for borrowers.”
Source: “Regulator Unveils Plan to Spur Lending by Fannie, Freddie,” Los Angeles Times (Oct. 20, 2014) and “Fannie-Freddie Clarify Buyback Rules in Bid to Ease Credit,” Bloomberg (Oct. 20, 2014)
Borrowing costs sank to the lowest amounts in more than a year as the 30-year-fixed rate mortgage averaged 3.97 percent this week, Freddie Mac reports in its weekly mortgage market survey. The 30-year fixed-rate mortgage is at its lowest average since the week of June 20, 2013, when it averaged 3.93 percent.
“Mortgage rates were down sharply following the decline in the 10-year Treasury yield for the second straight week,” says Frank Nothaft, Freddie Mac’s chief economist.
Freddie Mac reports the following national averages for the week ending Oct. 16:
- 30-year fixed-rate mortgages: averaged 3.97 percent, with an average 0.5 point, posting a big drop from last week’s 4.12 percent. A year ago, 30-year rates averaged 4.28 percent.
- 15-year fixed-rate mortgages: averaged 3.18 percent, with an average 0.5 point, dropping from last week’s 3.30 percent average. Last year at this time, 15-year rates averaged 3.33 percent.
- 5-year hybrid adjustable-rate mortgages: averaged 2.92 percent, with an average 0.5 point, dropping from last week’s 3.05 percent average. A year ago, 5-year ARMs averaged 3.07 percent.
Source: Freddie Mac
Borrowers with minor imperfections on their credit applications — like a brief loss of employment or a temporary dip in their credit score — are starting to have better luck at snagging a loan with smaller lenders, Bloomberg reports. At least 15 smaller firms this year are offering slightly riskier mortgages, which in some cases come with higher interest rates and larger down payment requirements and aren’t backed by the government.
“Some lenders became afraid of their own shadows,” RPM Mortgage Inc. Chief Executive Officer Rob Hirt told Bloomberg. The bank started a program this summer for borrowers who have higher debt burdens or who had sold a home for less than the outstanding mortgage. “The market is beginning to realize that if you make smart and sound loans to people who don’t fit in the narrow box, it doesn’t make them a worse risk.”
On the other hand, larger banks, like Bank of America and JPMorgan Chase & Co., have generally tightened their credit standards over the last few years. The average score on mortgages that government-controlled Fannie Mae and Freddie Mac bought now stands at about 740 – well above the 660 level that is considered subprime.
“To us, it’s common sense,” says Jeff Seabold, chief lending officer at Banc of California. “There’s quite a few people who are boxed out that shouldn’t be.”
Source: “You Don’t Need to Be Perfect to Get a U.S. Loan Anymore,” Bloomberg Businessweek (Oct. 13, 2014)
You might want to take a closer look at your listing’s curb appeal: Upgrading a home’s landscape from average to excellent can raise its overall value by 10 percent to 12 percent, according to research from Virginia Tech.
Researcher Alex X. Niemiera with the Department of Horticulture at Virginia Tech found that a $150,000 home with no landscaping could fetch an additional $8,300 to $19,000 by adding a landscape with color and large plants.
“The most preferred landscape included a sophisticated design with large deciduous, evergreen, and annual color plants and colored hardscape,” according to Niemiera. Adding different plant sizes to a front yard, for example, can boost curb appeal, as well as mixing fruit trees and flowers for added color.
“Survey results showed that relatively large landscape expenditures significantly increase perceived home value and will result in a higher selling price than homes with a minimal landscape,” Niemiera writes in the paper. “Design sophistication and plant size were the landscape factors that most affected value. The resulting increase in ‘curb appeal’ of the property may also help differentiate a home in a subdivision where house styles are similar and thereby attract potential buyers into a home. This advantage is especially important in a competitive housing market.”
Source: “Does Landscaping Increase Your Homes Value?” Realty Times (Oct. 13, 2014)
Borrowing costs were down once again this week, giving home buyers another opportunity to lock in some of the lowest rates of the year.
Freddie Mac reported the following rate averages for the week ending Oct. 9:
- 30-year fixed-rate mortgages: averaged 4.12 percent, with an average 0.5 point, dropping from last week’s 4.19 percent average. Last year at this time, 30-year rates averaged 4.23 percent.
- 15-year fixed-rate mortgages: averaged 3.30 percent, with an average 0.5 pont, dropping from last week’s 3.36 percent average. Last year at this time, 15-year rates averaged 3.31 percent.
- 5-year hybrid adjustable-rate mortgages: averaged 3.05 percent, with an average 0.5 point, dropping from last week’s 3.06 percent average. A year ago, 5-year ARMs averaged 3.05 percent.
Source: Freddie Mac
Home equity lines of credit surged nearly 20 percent compared to a year ago and are now at the highest level since the 12 months ending in June 2009, according to RealtyTrac’s Home Equity Line of Credit (HELOC) Trends Report. HELOC originations comprised 15.4 percent of all loan originations nationwide during the first eight months of the year, the highest percentage since 2008.
“This recent rise in HELOC originations indicates that an increasing number of home owners are gaining confidence in the strength of the housing recovery and, more importantly, have regained much of their home equity lost during the housing crisis,” says Daren Blomquist, vice president at RealtyTrac.
Nearly 10 million home owners nationwide, representing 19 percent of all home owners with a mortgage, have regained at least 50 percent equity in their homes, RealtyTrac data shows. Meanwhile the percentage of home owners with severe negative equity has fallen from 29 percent in the second quarter of 2012 to 17 percent in the second quarter of this year, Blomquist notes.
Despite home equity lines of credit rising significantly in the past year, they still remain 76 percent below the 2006 peak reached during the housing boom, RealtyTrac notes.
Mortgage rates are falling, despite the cuts to the Federal Reserve’s monthly bond purchases that were expected to send long-term rates higher. The 30-year fixed-rate mortgage, the most popular choice among home buyers, averaged 4.19 percent this week, down from a 4.53 percent average at the start of the year, Freddie Mac reports in its weekly mortgage market survey.
Freddie Mac reports the following national averages for the week ending Oct. 2:
- 30-year fixed-rate mortgages: averaged 4.19 percent, with an average 0.4 point, dropping from last week’s 4.20 percent average. Last year at this time, 30-year rates averaged 4.22 percent.
- 15-year fixed-rate mortgages: averaged 3.36 percent, with an average 0.5 point, holding the same average as last week. A year ago, 15-year rates averaged 3.29 percent.
- 5-year hybrid adjustable-rate mortgages: averaged 3.06 percent, with an average 0.5 point, dropping from last week’s 3.08 percent average. Last year at this time, 5-year ARMs averaged 3.05 percent.
Source: Freddie Mac (Oct. 2, 2014)
If income growth is key for greater household formation, housing analysts say some recent progress on the salary front may soon unleash pent-up housing demand among younger adults.
“For individuals in the key household formation period of age 25 to 34, a 0.87 percent decline in median income in 2012 reversed to a 1.1 percent increase in 2013,” notes economist Robert Dietz on the National Association of Home Builders’ blog. “If these improvements continue, it will be good news for housing demand going forward.”
Indeed, in recent commentary, a Fannie Mae economist notes an improving financial picture for young adults that could help jump-start household formations.
“The Great Recession and housing bust hit young adults hard,” writes Patrick Simmons, director of strategic planning for the economic research group at Fannie Mae. “The unemployment rate for 25- to 34-year-olds more than doubled between 2007 and 2010, and real median household income for this group fell by nearly 10 percent during the downturn. As economic conditions deteriorated, young-adult household formation and home ownership fell sharply. In recent years, however, young Americans’ economic circumstances have begun to brighten, with the unemployment rate for 25- to 34-year-olds dropping and their income stabilizing.”
“The continued slide in household formation and home ownership among young adults suggests that more robust labor market improvements, among other factors, are needed for young Americans to get a stronger foothold in the housing market,” Simmons says. “The large decline in home owner affordability problems among young adults indicates that substantial housing market changes in the wake of the housing bust have created a generation of young home owners who have housing costs that are much better aligned with incomes.”
Source: “Income Growth Key for Housing,” National Association of Home Builders’ Eye on Housing (Sept. 30, 2014) and “Young-Adult Housing Demand Continues to Slide, But Young Home Owners Experienced Vastly Improved Affordability,” Fannie Mae (Sept. 30, 2014)