Fixed-rate mortgages reversed course this week, inching up, following weeks of declines, Freddie Mac reports in its weekly mortgage market survey. Still, mortgage rates remained near historical lows with the 30-year fixed-rate mortgage well-below 4 percent this week and the 15-year fixed-rate mortgage remaining under 3 percent.
“Mortgage rates ticked up this week for the first time in 2015 following positive home sales reports,” says Len Kiefer, Freddie Mac’s deputy chief economist. New-home sales jumped 11.6 percent in December, beating market expectations, while existing-home sales rose 2.4 percent to an annual rate of 5.04 million homes in December.
Freddie Mac reports the following national averages for the week ending Jan. 29:
- 30-year fixed-rate mortgages: averaged 3.66 percent, with an average 0.6 point, increasing from last week’s 3.63 percent average. Last year at this time, 30-year rates averaged 4.32 percent.
- 15-year fixed-rate mortgages: averaged 2.98 percent, rising from last week’s 2.93 percent average. A year ago, 15-year rates averaged 3.40 percent.
- 5-year hybrid adjustable-rate mortgages: averaged 2.86 percent, with an average 0.4 point, rising from last week’s 2.83 percent average. Last year at this time, 5-year ARMs averaged 3.12 percent.
Source: Freddie Mac
What type of impact will the Federal Housing Administration’s move to lower insurance premiums really have on the housing market? Housing experts are making predictions that the lower fees could translate into thousands of new home sales this year and next.
The Federal Housing Administration recently reduced its annual mortgage insurance premiums from 1.35 percent to 0.85 percent. According to estimates by the National Association of REALTORS®, the lower rates could result in big savings over time for borrowers. For example, a borrower with a $200,000 mortgage could unlock a savings of nearly $1,000 over the first year. By year five, the borrower may have saved nearly $4,800, and over 30 years potentially about an $18,000 savings.
The FHA’s lower pricing will likely draw thousands of credit-worthy borrowers back into the market, NAR notes. NAR Research has estimated that the fee reduction will price an additional 1.6 million to 2.1 million renters, along with many trade-up buyers. This could result in 90,000 to 140,000 additional annual home purchases, NAR estimates.
Estimates by Moody’s Analytics shows the reduction in the FHA premiums could amount to 45,000 additional new- and existing-home sales in 2015, and that single-family housing starts will rise by 20,000 as a direct result of the FHA reduction in premiums. But the maximum impact of the FHA’s premium cut likely won’t come to fruition until mid-2016, according to Moody’s report. Then, it expects home sales to increase by 100,000 due to the FHA reduction, with 40,000 additional single-family housing starts in 2016 due to it.
Source: “Moody’s: FHA Premium Cut Will Increase Home Sales By 45,000 This Year,” HousingWire (Jan. 28, 2015) and “FHA Lowers Pricing to Reflect Less Risk,” National Association of REALTORS® Economists’ Outlook Blog (Jan. 8, 2015)
At the combined International Builders Show and the Kitchen & Bath Industry Show in Las Vegas last week, REALTOR® Magazine picked up on the key trends to watch for in the coming year and beyond.
The question on everyone’s mind was what are going to be the game-changers in 2015? Looking over our notes, we found three major insights that the real estate industry should be watching out for. Find out how:
- Foodies are changing mainstream kitchen design
- Connected devices may be in for a tumble
- Gray is here to stay, but it’ll have to share the stage
Get the details on these three predictions for residential design in “Designers, Builders Reveal Hot Trends for 2015.” Also, be sure to check out our other show coverage, including a tour of the New American Home and a few things you might not know about what consumers want from outdoor kitchens.
Millennials will make their mark on the look of homes in the coming years as homes likely will get smaller, separate laundry rooms will become essential, and home technology will be a must, according to a panel of builders and designers speaking at the International Builder Show last week.
A growing number of first-time buyers will likely lead to smaller homes — a downsizing home trend that may start showing itself even in 2015, predicts Rose Quint, the assistant vice president of research at the National Association of Home Builders.
As younger, first-time buyers re-emerge on to the market, “they will demand smaller, more affordable homes,” Quint says. “Builders will build whatever demand calls out for.”
Seventy-five percent of millennials surveyed said they want to live in a single-family home, and 66 percent said they prefer to live in the suburbs.
Since millennials tend to be more cash-strapped than older home owners, they often seek less expensive, low-maintenance choices in a home, such as landscaping that needs less watering and mowing and larger patios instead, said Jill Waage, editorial director for home content at Better Homes and Gardens, surveys buyers on home preferences. Millennails are often very tech savvy, and increasingly are asking for ways to control their home’s heating, air conditioning, security, and lighting from their phones or tablets.
Source: National Association of Home Builders
Some home buyers are stepping off the sidelines as more lenders require less money up-front on a home purchase.
Recently, more borrowers are able to pay 3 percent or even less of a home’s purchase price to get a mortgage – a big change from when at least 20 percent down payments were practically the norm post-recession.
Additionally, some lenders are luring more home buyers back by waiving mortgage-related fees and even showing more acceptance of allowing down payments to be made by others, such as the borrower’s family members, The Wall Street Journal reports.
Still, borrowers must have good credit scores and a steady income to often qualify for these smaller down payment loans.
In two big moves in recent weeks, the Federal Housing Administration, which insures mortgages with down payments as low as 3.5 percent, announced it is lowering its annual mortgage-insurance premiums on new mortgages beginning Monday. The move is expected to save a typical first-time home buyer about $900 a year. What’s more, Freddie Mac and Fannie Mae recently lowered the minimum down payments they will accept on loans they back from 5 percent to 3 percent.
Source: “Down Payments Get Smaller,” The Wall Street Journal (Jan. 23, 2015) and “Loan Demand Posts Biggest Leap in 6 Years,” REALTOR® Magazine Daily News (Jan. 14, 2015)
Fixed-rate mortgages continue their free fall, with the 30-year fixed rate mortgage averaging 3.63 percent this week and the 15-year fixed-rate mortgage staying below 3 percent, Freddie Mac reports. The 30-year fixed-rate mortgage is at its lowest level since the week ending May 23, 2013, when it averaged 3.59 percent.
“Mortgage rates continued to fall, albeit at a slower pace,” says Frank Nothaft, Freddie Mac’s chief economist. Mortgage rates are falling amid declining bond yields and oil prices, Freddie Mac notes.
Freddie Mac reports the following national averages for the week ending Jan. 22:
- 30-year fixed-rate mortgages: averaged 3.63 percent, with an average 0.7 point, dropping from last week’s 3.66 percent average. Last year at this time, 30-year rates averaged 4.39 percent.
- 15-year fixed-rate mortgages: averaged 2.93 percent, with an average 0.6 point, dropping from last week’s 2.98 percent average. A year ago, 15-year rates averaged 3.44 percent.
- 5-year hybrid adjustable-rate mortgages: averaged 2.83 percent, with an average 0.4 point, dropping from last week’s 2.90 percent average. Last year at this time, 5-year ARMs averaged 3.15 percent.
Source: Freddie Mac
U.S. cities are poised to see a rise in employment this year but only about half of the nation’s cities are expected to return to the employment peaks they had reached before the recession, according to a newly released report by the U.S. Conference of Mayors.
All 363 metros analyzed are expected to see an uptick in job growth this year, marking the first strong comeback year post-recession. About 317 of the metro areas will likely see job growth of at least 1 percent in 2015.
Many local economies still have a ways to go in reaching higher employment levels. Only 164 metro areas, around 45 percent, had returned to their pre-recession peak employment levels by the beginning of 2015. This percentage is expected to reach 55 percent of the 363 metros by the end of 2015, according to IHS Global forecast.
While employment is on the rise – viewed as an important factor in lifting housing – some mayors at a recent annual meeting expressed concerns that mostly low paying entry-level and part-time jobs were being created.
Source: “Jobs Growth Seen in U.S. Cities in 2015; Still Lagging Pre-Recession,” Reuters (Jan. 21, 2015)
Recent drops in oil prices and mortgage rates, along with positive tailwinds in the economy, are helping to jump-start the housing market in the new year, according to Freddie Mac’s newly released2015 U.S. Economic and Housing Market Outlook for January. Consumers are gaining confidence, which is expected to translate to higher home sales in the coming months. Some economists are skeptical on whether this latest jolt will stick around for the entire year, however.
Freddie Mac economists note that mortgage rates continue to remain well below expectations, and they predict that mortgage rates will remain low at the beginning of 2015, staying around 4 percent for the first two quarters of the year at least. Last week, mortgage rates dipped to a 20-month low with the 30-year fixed-rate mortgage rate plunging to a 3.66 percent national average and the 15-year fixed-rate mortgage dropping to 2.98 percent.
“We … expect these low mortgage rates to help the growing purchase market continue to expand and reach the highest levels we’ve seen since 2007,” the economists note.
But rates likely will move up by the end of the year. Lawrence Yun, chief economist for the National Association of REALTORS®, says that the 30-year fixed-rate mortgage could average around 5 percent – or higher – by the end of this year.
“I would not be surprised if it is above 5 percent because when mortgage rates move or interest rates move, it is generally not in a slow creep,” Yun told Bankrate.com.
Source: “January U.S. Economic & Housing Market Outlook,” Freddie Mac (January 2015) and “Housing Market’s ‘Interesting Times,’” Bankrate.com (Jan. 19, 2015)
Thursday and Friday are the most common days of the week when real estate professionals list a home, according to 2014 home sales data analyzed by the National Association of REALTORS®. Monday, Tuesday, and Wednesday follow in popularity in that order. The least popular days to post a new listing are Saturday and Sunday.
Also, “while home closings exhibit a strong tendency to get done at the end of the month, listings are much steadier throughout the course of the month, with a slight tendency to be posted earlier rather than later,” researchers write at NAR’s Economists’ Outlook blog.
Source: “EHS in 2014 by the Numbers – Part 3 – Popular Listing Dates,” National Association of REALTORS® Economists’ Outlook Blog (Jan. 14, 2015)
The Federal Housing Finance Agency has directed Fannie Mae and Freddie Mac to explore “alternate” credit-score models and the credit history of the loans they back. The move is part of several efforts by FHFA to ease tight mortgage standards and help more potential buyers qualify for financing.
FHFA Director Mel Watt has said expanding credit access is an important goal in 2015, but it needs to be balanced against the risk of loan losses. FHFA is the regulator of Fannie Mae and Freddie Mac; the two companies, which were brought under government conservatorship in 2008, purchase more than half of the new mortgages in the U.S. and then package them into securities.
Qualifying for financing has been a big hurdle that has sidelined many potential buyers from the housing market in recent years. REALTORS® continue to cite their clients’ financing struggles in qualifying for a mortgage as one of the top causes of derailing transactions, according to the latest REALTOR® Confidence Index, reflecting responses of more than 1,800 REALTORS® about their transactions in November.
At the end of 2014, FHFA made moves to expand credit availability, including offering loans through Fannie and Freddie that require down payments as low as 3 percent. FHFA also has ordered the GSEs to begin paying into the affordable housing fund, allocating millions of dollars a year to allow states and other government agencies to build low-income rental housing or rehab existing housing in an effort to increase affordability.
Source: “Fannie, Freddie Must Study ‘Alternate’ Credit Scoring: Regulator,” Reuters (Jan. 14, 2015) and “Fannie and Freddie Directed to Aid Underserved Borrowers in 2015,” Bloomberg (Jan. 14, 2015)