Fixed-rate mortgages moved higher this week, increasing to the highest level of the year, Freddie Mac reports in its weekly mortgage market survey.
Freddie Mac reports the following for the week ending May 28:
- 30-year fixed-rate mortgages: averaged 3.87 percent, with an average 0.6 point, rising from last week’s 3.84 percent average. Last year at this time, 30-year rates averaged 4.12 percent.
- 15-year fixed-rate mortgages: averaged 3.11 percent, with an average 0.5 point, up from last week’s 3.05 percent average. A year ago, 15-year rates averaged 3.21 percent.
- 5-year hybrid adjustable-rate mortgages: averaged 2.90 percent, with an average 0.5 point, increasing from last week’s 2.88 percent average. Last year at this time, 5-year ARMs averaged 2.96 percent.
Source: Freddie Mac
The 30-year fixed-rate mortgage rose above 4 percent last week, prompting home owners to stall in refinancing their loans, which sent overall mortgage applications down, the Mortgage Bankers Association reports.
An index reflecting demand for mortgage applications – both for refinancing and home purchases – dropped 1.6 percent on a seasonally adjusted basis for the week ending May 22, MBA reports. Still, volume is higher than a year ago, but demand has dropped 10 percent in the last four weeks.
“Mortgage rates continued to climb last week due to stronger home sales, rising inflation, and further signals that the Fed is likely to raise their target rate this year,” says Michael Fratantoni, with MBA. “Refinance volume dropped to its lowest level since January.”
Source: “Mortgage Applications Drop 1.6% as Refinancing Stalls,” CNBC (May 27, 2015)
Economic growth is expected to moderate for the rest of the year, but housing is one sector that is expected to post solid gains, according to Fannie Mae’s newly released report from its Economic & Strategic Research Group.
Economists with Freddie Mac also released a report this week revising housing forecasts upward for the remainder of the year. They expect that with tight for-sale inventories home prices will rise 4.5 percent this year, revised up from 4 percent in a prior report.
“The labor market has added 5 million additional jobs, the unemployment rate is significantly lower, and housing markets are generally in much better condition than two years ago,” says Len Kiefer, deputy chief economist at Freddie Mac.
Fannie Mae economists note that mortgage applications for home purchases –a gauge of home sales — have moved up consistently for the past couple of months.
The wild card for the market may be what happens with mortgage rates in the next few months. Low mortgage rates have helped to keep homebuyer affordability high in the first quarter of this year, but housing markets will likely see an increase in interest rates for the remainder of year, Freddie Mac economists note.
Source: Fannie Mae and Freddie Mac
Average fixed-rate mortgages moved slightly lower this week, a welcome reversal following three consecutive weeks of increases.
Freddie Mac reports the following national averages for the week ending May 21:
- 30-year fixed-rate mortgages: averaged 3.84 percent, with an average 0.7 point, dropping from last week’s 3.85 percent average. Last year at this time, 30-year rates averaged 4.14 percent.
- 15-year fixed-rate mortgages: averaged 3.05 percent, with an average 0.6 point, dropping from last week’s 3.07 percent average. A year ago, 15-year rates averaged 3.25 percent.
- 5-year hybrid adjustable-rate mortgages: averaged 2.88 percent, with an average 0.5 point, dropping from last week’s 2.89 percent average. Last year at this time, 5-year ARMs averaged 2.96 percent.
Source: Freddie Mac
Total mortgage applications, including both refinancing and home-purchase loans, dipped 1.5 percent last week from the week prior on a seasonally adjusted basis as mortgage rates continued to tick up, the Mortgage Bankers Association reports in its weekly mortgage market survey.
Applications for home purchases, viewed as a gauge of future homebuying activity, dropped 4 percent from the previous week to its lowest level since April. Yet, home purchase applications are still 11 percent higher than the same week one year ago.
“The drop this week may indicate borrowers being wary of the recent runup in mortgage rates,” said Mike Fratantoni, MBA’s chief economist.
Source: “Weekly Mortgage Applications Drop 1.5% as Rates Rise,” CNBC (May 20, 2015)
As home prices inch up, more home owners are tapping into their equity. One in four home owners have a home equity line or loan, and more than half – 55 percent – opened it for a specific purpose and haven’t use it since, finds the 2015 BMO Harris Bank Homebuyers Report.
What are they using it for? Forty-seven percent of home owners say they use their home equity account for home improvements, followed by 22 percent who use it to consolidate debt and 20 percent who use it to make a major purchase, such as buying a car.
According to the survey, home owners say they turn to home equity lines of credit over other types of financing because the potential to use the interest paid as a tax deduction; it provides a better interest rate than other options; and the ease of accessing the funds and the ability to get the right amount needed.
Source: “Home Improvements Are the Most Popular Use of a Home Equity Account,” RISMedia (May 16, 2015)
Ordinarily under Proposition 13, the value of a home for property tax purposes is re-assessed to market level whenever a change in ownership takes place in California. This usually results in higher property taxes for the home buyer.
Proposition 90 provides homeowners who meet the requirements, to transfer the base year value from an original residence in any other county to a replacement residence in another county, providing the “gaining” county passed an ordinance authorizing the transfer. El Dorado County is the only rural California county to adopt Prop 90.
Please let us know if you are over the age of 55 and would like more details about the provisions of this Intra-County Base Year Transfers (Prop 90).
A sharp rise in mortgage rates dampened mortgage application volume last week, the Mortgage Bankers Association reports. Total mortgage application volume for both refinancings and home purchases fell 3.5 percent on a seasonally adjusted basis for the week ending May 8. Still, volume is 14 percent higher than a year earlier.
Broken out, applications for refinancings attributed to most of the drop in loan demand last week. Refinancing applications fell 6 percent week-over-week and have fallen 16 percent in the past four weeks alone, MBA reports. Applications for home purchases, which are viewed as a leading indicator of future home sales, mostly held steady last week, down just 0.2 percent from the previous week. Applications for home purchases are 12 percent higher than a year earlier.
MBA reports that the 30-year fixed-rate mortgage rose to 4 percent last week; it had averaged 3.93 percent the week prior.
Source: “Weekly Mortgage Applications Fall 3.5% as Rates Rise,” CNBC (May 13, 2015)
The Federal Housing Finance Agency announced that it would be extending its participation in the Home Affordable Mortgage Program and the Home Affordable Refinance Program through the end of 2016.
“These programs have provided critically important relief for many borrowers by allowing them to lower their monthly payments and, as a result, have prevented many foreclosures,” says Mel Watts, FHFA director, regulator of Fannie Mae and Freddie Mac.
Under HARP, home owners who have loans backed by Fannie Mae or Freddie Mac can refinance at lower interest rates, even if their home has lost value. HAMP, on the other hand, provides incentives for lenders to alter mortgage terms of borrowers in order to make the loans more affordable.
HAMP and HARP were started after the housing crisis to help home owners avoid foreclosure. While the number is lessening, Watt estimates that about 600,000 borrowers could still be helped by HARP.
Source: “Fannie, Freddie Participation in Foreclosure Prevention Programs Extended,” Reuters (May 8, 2015)
Home ownership can lead to higher levels of well-being, according to data from the OECD Better Life Index, which gauges the quality of life worldwide by factoring in such things like housing, jobs, civic engagement, health and safety.
The heightened sense of happiness that comes from home ownership may be more than just getting a new home but more closely tied to the basic need for shelter, says Aida Caldera Sanchez and Caroline Tassot, authors of an analysis about the index. Also, home ownership can lead to status and independence – qualities that often are linked to happiness, their analysis shows.
On the well-being index, housing outperformed all the all other indicators monitored – like education, safety, and environment – by the highest amount in the Midwest, with 75 percent of the states ranking housing as most important to happiness. In the South, housing tops all other indicators in 70.6 percent of the states, and in the West housing was tops in only 15 percent of the states compared to the other indicators.
View how housing stacks up in your area at the OCED Regional Well-being website.
Source: OCED Regional Well-being and “Homeownership Linked to Happiness,” RISMedia (May 7, 2015)