Monthly Archives: July 2014

Freddie Mac: Mortgage rates push buyers to market

Despite slight rises, rates still low

Although mortgage rates remained relatively still for the week ended July 24, they are still just above the lows for 2014, helping push more potential homeowners into the market, Freddie Mac’s latest Primary Mortgage Market Survey said.

The 30-year, fixed-rated mortgage was unchanged from last week and averaged 4.13%, but is down from 4.31% a year ago.

In addition, the 15-year, FRM averaged 3.26%, up from 3.23% last week, but slightly down from 3.39% in 2013.

The 5-year, Treasury-indexed hybrid adjustable-rate mortgage came in at 2.99%, increasing from 2.97% last week, but decreasing from 3.16% a year ago.

The 1-year Treasury-indexed ARM remained frozen from last week, staying at 2.39%, but is down from 2.65% this time last year.

“Mortgage rates were little changed for the week with the 30-year fixed-rate mortgage remaining unchanged,” Frank Nothaft, vice president and chief economist with Freddie Mac, said.

“Meanwhile, we received some good news on housing with existing home sales climbing 2.6% to a seasonally adjusted annual rate of 5.04 million in June, the highest pace since October 2013,” he added.

Bankrate posted similar results, with little movement in rates.

The 30-yr, FRM dropped from 4.30% to 4.28%.

Furthermore, the 15-yr, FRM increased to 3.41%, up from 3.40% last week, while the 5/1 ARM increased to 3.37%, up from 3.33% a week ago.

“Mortgage rates have entered the summer doldrums, showing very little movement one way or another. The benchmark 30-year fixed mortgage rates has fluctuated within a very narrow range – one-tenth of a percentage point – since mid-May as investors come to grips with the idea the Federal Reserve will hold interest rates steady into 2015,” Bankrate said.

Source: Brena Swanson / / July 24, 2014
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Demand for purchase mortgages still lagging

Applications down 15 percent from a year ago

Appetite for purchase mortgages stayed flat last week, clocking in well below the same week a year ago as costlier mortgage insurance and tight credit continued to hamper demand.

Applications for purchase loans increased a seasonally adjusted 0.3 percent for the week ending July 18 compared to a week earlier but were down 15 percent from a year ago, according to the latest Mortgage Bankers Association’s Weekly Mortgage Applications Survey.

Demand for purchase mortgages has lagged in 2014. One reason may be that the Federal Housing Administration is charging higher mortgage insurance premiums. For-sale inventory, mortgage rates, unemployment, and student loan debt among millennials who would otherwise be first-time homebuyers are other often-cited factors affecting demand.

Hoping to shore up the FHA’s reserves and shift market share back to the private sector, the Obama administration has tightened FHA underwriting standards and hiked annual premiums for most FHA mortgages from 0.55 percent in 2010 to 1.35 percent today. Off the record, Obama administration officials have told columnist Ken Harney they would like to see FHA’s market share pared back to 10 percent, in line with historical trends.

In a letter urging the Department of Housing and Urban Development to reduce FHA premiums, National Association of Realtors President Steve Brown recently claimed that costlier FHA insurance may have priced out between 125,000 and 375,000 renters in 2013.

Costlier FHA mortgage insurance also isn’t doing anything to help strengthen demand from first-time buyers. They accounted for only 28 percent of existing-home sales in June, the National Association of Realtors reported. Historically, that group has made up 40 percent of sales.

“For many would-be first time homebuyers, access to credit has been hampered by tight lending requirements on conforming loans (high credit score and 20 percent down payments) and by high fees and mortgage insurance premiums on FHA loans that don’t require 20 percent down payments,” said Jonathan Smoke, chief economist at operator Move.

Private mortgage insurers, who insure loans backed by Fannie Mae and Freddie Mac when borrowers take out loans with down payments of less than 20 percent, could also be forced to raise fees in order to meet risk-based standards proposed by the mortgage giants’ federal regulator.

Though the number of people applying for purchase mortgages has dropped significantly this year, sales of existing homes have almost recovered to their year-ago level following declines throughout the fall and winter.

NAR recently reported that existing-home sales were down 2.3 percent in June compared to a year ago.

While mortgage underwriting is still tight compared to the boom years, conditions have eased in the last year, according to the MBA’s Mortgage Credit Availability Index.

Mortgage credit loosened somewhat in June as a result of a slight net loosening in lender criteria for FHA and VA loans with respect to minimum credit scores and maximum loan-to-value (LTV) ratios, the MBA said this month.

Source: Teke Wiggin / Inman News / July 23, 2014
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Home price growth continued to cool in May

CoreLogic: Even higher-end homes showing weakness

Home prices rose just 0.4% in May from the previous month, the Federal Housing Finance Agency reported Tuesday, continuing the rapid cool down in price appreciation in the housing market.

The FHFA House Price Index is calculated using home sales price information from mortgages either sold to or guaranteed by Fannie Mae and Freddie Mac. 

From May 2013 to May 2014, house prices were up 5.5%. The U.S. index is 6.5% below its April 2007 peak and is roughly the same as the July 2005 index level.

While home-price increases have slowed, they are still trending higher, and have seen 26 months of consecutive year-over-year increases nationally. This puts U.S. home prices at just 12% off their 2006 peak.

At the same time, wages and household income have been stagnant.

Home sales across all price points are beginning to suffer, with stale demand moving from lower-priced homes to middle- and higher-priced homes as well, according to CoreLogic’s (CLGX) MarketPulse report for July.

CoreLogic’s Deputy Chief Economist Sam Khater said that this is a reflection of weakening home sales that originally began at lower-priced segments, but are now moving up the price continuum to the higher-priced segments.

“It is well known that higher-end home sales activity has been strong over the last two years, however, recently there’s been a shift, from both directions. Not only have higher-end home sales themselves started to weaken over the last few months, but the weakness in the lower-end segment is expanding into the upper-middle segments of the price distribution,” Khater said.

For the nine census divisions, seasonally adjusted monthly price changes from April 2014 to May 2014 ranged from -0.7% in the East South Central division to +1.1% in the West South Central division.

The 12-month changes were all positive ranging from +2.5% in the Middle Atlantic division to +9.6% in the Pacific division.

The April index value has been revised to reflect a 0.1% monthly price increase, above the original estimate of no change.

Source: Trey Garrison / / July 22, 2014
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Pace of U.S. home resales rises to eight-month high

WASHINGTON (Reuters) – U.S. home resales rose in June to their fastest pace in eight months, a signal that the housing market was pulling out of a slump.

The National Association of Realtors said on Tuesday existing home sales increased 2.6 percent to an annual rate of 5.04 million units.

That was above analysts’ expectations and marked the third straight month the pace of home resales accelerated.

U.S. homebuilder stocks rose following the release of the data, with the Dow Jones index for home construction up 1.7 percent.

The U.S. housing recovery stalled in the second half of 2013 as interest rates increased and a dwindling supply of properties available for sale pushed prices sharply higher.

But mortgage rates have eased a bit in recent months and the nation’s job market has improved, helping the market for homes.

May’s rate of sales was revised upward to a 4.91 million unit pace from the previously reported 4.89 million unit rate.

In June, the average existing home sold after being on the market for only 44 days. It was the sixth straight month in which that rate had declined.

“Things are flying pretty fast,” said Lawrence Yun, the NAR’s chief economist.

More homes also are being put on the market, keeping prices from rising as quickly and providing potential buyers with more choices.

The number of homes on the market for resale rose to 2.3 million in June, the highest level since August 2012 and 6.5 percent more than in June of last year.

The median price was $223,300. That was 4.3 percent higher than in June 2013 and the slowest pace of appreciation in more than two years.

Source: Reuters / Reporting by Jason Lange; Editing by Paul Simao / July 22, 2014
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Existing home sales in June down 2.3% YOY

Slight uptick from May brings pace to highest since October 2013

Existing home sales declined 2.3% in June 2014 from June 2013, reaching an annual pace of 5 million sales for the first time since October 2013, while rising inventory continues to push overall supply towards a more balanced market, according to the National Association of Realtors.

Sales are at the highest pace since October 2013, but remain 2.3% below the 5.16 million-unit level a year ago.

The downward pressure on existing home sales comes from the West, where sales remain 7.3% below June 2013.

Total existing home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, climbed 2.6% from May 2014 to a seasonally adjusted annual rate of 5.04 million.

Single-family home sales rose 2.5% to a seasonally adjusted annual rate of 4.43 million in June from 4.32 million in May, but remain 2.9% below the 4.56 million pace a year ago.

The median existing single-family home price was $224,300 in June, up 4.5% from June 2013.

Lawrence Yun, NAR chief economist, said housing fundamentals are moving in the right direction.

“Inventories are at their highest level in over a year and price gains have slowed to much more welcoming levels in many parts of the country. This bodes well for rising home sales in the upcoming months as consumers are provided with more choices,” he said. “On the contrary, new home construction needs to rise by at least 50% for a complete return to a balanced market because supply shortages – particularly in the West – are still putting upward pressure on prices.”

Last month, many suggested existing home sales “may” be on a comeback based on May data.

Existing home sales jumped 4.9% in May on top of April’s 1.5% gain. This was the first back-to-back gain for this series going all the way back to April and May of last year.

May’s annual rate of 4.89 million was plus 5.1% on a year-ago basis versus a minus 5.0% rate for April.

Tight supply and rising prices did not hold back sales in May. Supply at the current sales rate fell to 5.6 months from 5.7 months.

“This morning’s report shows a welcomed rise in sales activity after dipping to a 4.6M unit pace at the end of Q1,” said Lindsey Piegza, chief economist with Sterne Agee. “Still, even with the recent acceleration in demand, existing home sales remain well below the previous post-recession peak. Short-term fluctuations are expected particularly given the extreme weather at the start of the year, but longer-term, demand will be fueled by subsequent gains in jobs and income. However, at this point, income gains are noticeably lagging behind a rise in home prices which continues to squeeze out new demand, particularly amid the younger generations.”

Yun also noted that stagnant wage growth is holding back what should be a stronger pace of sales.

“Hiring has been a bright spot in the economy this year, adding an average of 230,000 jobs each month,” he said. “However, the lack of wage increases is leaving a large pool of potential homebuyers on the sidelines who otherwise would be taking advantage of low interest rates. Income growth below price appreciation will hurt affordability.”

Total housing inventory at the end of June rose 2.2% to 2.3 million existing homes available for sale, which represents a 5.5-month supply at the current sales pace, unchanged from May. Unsold inventory is 6.5% higher than a year ago, when there were 2.16 million existing homes available for sale.

The median existing home price for all housing types in June was $223,300, which is 4.3% above June 2013. This marks the 28th consecutive month of year-over-year price gains.

Distressed homes – foreclosures and short sales – accounted for 11% of June sales, down from 15% in June 2013. Eight percent of June sales were foreclosures and 3% were short sales.

Foreclosures sold for an average discount of 20% below market value in June, while short sales were discounted 11%.

The share of first-time buyers continues to underperform historically, rising slightly to 28% in June (27% in May), but remain at an overall average of 28% over the past year.

NAR President Steve Brown, co-owner of Irongate Realtors, said Realtors are reporting that some prospective buyers who have above-average credit scores but low down payments are deterred from homeownership by the high cost of FHA mortgage insurance.

“Access to affordable credit continues to hamper young, prospective first-time buyers,” added Brown. “NAR recommends that FHA reduce high annual mortgage insurance premiums for all qualified homebuyers and eliminate the insurance requirement for the life of the loan. FHA’s HAWK program is a good start, but it should offer further reductions for participating home buyers.”

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage dropped for the second consecutive month to 4.16% in June from 4.19% in May, and is the lowest since last June (4.07%).

Properties sold faster for the sixth consecutive month in June; highlighting the fact that inventory is still lagging relative to demand. The median time on market for all homes was 44 days in June, down from 47 days in May; it was 37 days on market in June 2013. Short sales were on the market for a median of 120 days in June, while foreclosures sold in 54 days and non-distressed homes typically took 42 days. Of homes that sold in June, 42% were on the market for less than a month.

For the third consecutive month – as well as the average of the previous 12 months – all-cash sales in June were 32% of transactions, up from 31% in June 2013. Individual investors, who account for many cash sales, purchased 16% of homes in June, unchanged from May; they were 17% in June 2013. Last month 69% of investors paid cash.

Region Existing Home Breakdown

  • Existing home sales in the Northeast rose 3.2% to an annual rate of 640,000 in June, but are 3% below a year ago. The median price in the Northeast was $269,800, slightly below (0.1%) June 2013.
  • In the Midwest, existing home sales jumped 6.2% to an annual rate of 1.20 million in June, but remain 2.4% below June 2013. The median price in the Midwest was $177,900, up 4.6% from a year ago.
  • Existing home sales in the South inched 0.5% higher to an annual level of 2.06 million in June, and are up 1% from June 2013. The median price in the South was $192,600, up 3.4% from a year ago.
  • Existing home sales in the West rose 2.7% to an annual rate of 1.14 million in June, but remain 7.3% below a year ago. The median price in the West was $301,000, which is 7.2% above June 2013.

Source: Trey Garrison / / July 22, 2014
Link to article.

Buying a home is not an investment, it’s a hedge.

Buying a home to live in can always make financial sense, but not for the reasons most of us have been taught. If we take just a few minutes to remove ourselves from the traditional home-buying rationale, we can begin to see buying a home for what it really is…a hedge.

For so long, we’ve been told that buying a home is a good “investment”, but that’s not exactly accurate. An investment, according to is defined as “the investing of money or capital in order to gain profitable returns, as interest, income, or appreciation in value.” No one should buy their primary residence for this reason. Do not buy a home because you expect a return on investment. Buy a home because you want to live there. Buy a home because you don’t want to throw money away on rent. Whether that home goes up or down in value is really anyone’s guess and should be a secondary thought at best.

What you really accomplish when you buy a home is technically a “hedge”. As defined in this context by, hedge means “to mitigate a possible loss by counterbalancing”.

If you don’t buy, then you will be renting. The problem with renting is the unknown future cost of rent. To combat the unknown future cost of rent, people are willing to buy a home and pay more per month because they will have a known payment with a known time-frame until no more payments are due at the end of the loan term.

Sure, there are potential gains and losses involved with buying real estate and that automatically makes us think it’s an investment, but there are also potential gains or losses in hedging. The main reason you should consider buying a home is for the security of your family’s future. Just imagine if you didn’t have to pay rent or make a mortgage payment right now. How would that change your financial perspective? That’s what owning a home is all about; obtaining that peace of mind one day in the future.

Buying a home is like buying an insurance policy against housing costs. When the policy matures is the day you have it paid off. I hope you get to see that day.

Source: Derrick Evens / U-T San Diego / July 21, 2014
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