February Round Up: Rates Remain Very Affordable

Written by: Realty Times Staff

In Freddie Mac's results of its Primary Mortgage Market Survey (PMMS) in which the 30-year fixed-rate mortgage (FRM) averaged 5.07 percent with an average 0.7 point for the week ending February 26, 2009, up from the previous week when it averaged 5.04 percent. Last year at this time, the 30-year FRM averaged 6.24 percent.

The 15-year FRM this week averaged 4.68 percent with an average 0.7 point, unchanged from the previous week when it averaged 4.68 percent. A year ago at this time, the 15-year FRM averaged 5.72 percent.

Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 5.06 percent this week, with an average 0.7 point, up from the previous week when it averaged 5.04 percent. A year ago, the 5-year ARM averaged 5.43 percent.

One-year Treasury-indexed ARMs averaged 4.81 percent this week with an average 0.6 point, up from the previous week when it averaged 4.80 percent. At this time last year, the 1-year ARM averaged 5.11 percent.

"Mortgage rates were little changed this week amid mixed data reports of a slowing economy," said Frank Nothaft, Freddie Mac vice president and chief economist. "Both the core Producer Price and Consumer Price Indexes ticked up in January, higher than the market consensus, while consumer confidence in February fell to the lowest reading since records began in January 1967.

Signs of Turnaround?

Are we somewhere near the "tipping point" for real estate, where an accumulation of positive economic and government policy developments starts moving housing toward higher sales and stabilized prices?

There are some recent strong signs that we just might be there.

Tops on the list: The massive stimulus bill signed into law is certain to pull buyers into the market who otherwise would have stayed on the sidelines.

The new tax credit in the legislation goes up to $8,000 and is non-repayable -- unlike last year's ineffective credit program. It' s intended for "first time" purchasers, but under the program definition, you're a first timer as long as you haven't owned or co-owned a house during the previous three years.

You might have sold your long-time home in 2005 or early 2006, and haven't owned a house since, but you still qualify as a first timer for the $8,000 credit this year.

Most economists aren't sure just how many additional home sales the credit will stimulate, but even Mark Zandi of Moody's Economy.com says the "credit is a plus for the housing market." Brian Bethune, an economist with IHS Global Insight, says the $8,000 credit will not only push large numbers of consumers to buy homes, but will also "buffer the rate of decline in home prices" by creating more demand.

A second major government initiative should also be helpful: The government's massive $275 billion relief program to keep three to four million home owners out of foreclosure, and to refinance three to four million mortgages where owners can't otherwise qualify for a new loan because of property value declines.

The giant assistance program has its critics, who say it will reward people who bought pricier homes than they could really afford. But that's not the point here: The fact is that, costly though it may be, the program could prevent foreclosures and price declines in neighborhoods across the country.

Still another positive sign: Home buyers and owners are beating a wide path to their mortgage lenders not only to refinance but to take out new loans to buy houses. Total applications for new mortgages last week exploded -- up by an extraordinary 48 percent, according to the Mortgage Bankers Association. Applications for conventional loans to buy houses were up by 11 percent.

Part of the reason was that rates fell again -- this time to an average of just 5.07 percent for 30 year fixed rates and 4.68 percent for fixed rate 15 year loans.

The opportunities here are pretty tempting ... and it looks like buyers are getting the message.

Garages: Not Just for Cars Anymore

With larger, more luxurious kitchens now the heart of many houses, and first-floor laundry and mud rooms the new activity centers, it was only a matter of time before the garage also underwent a transformation.

Despite the fact that 82 percent of homes have garages, according to the NAR 2007 Profile of Buyers' Home Feature Preferences, the space is often "the largest, most underutilized, most abused, and most often ignored room in the house," wrote Bill West in his book, Your Garagenous Zone.

Many people still struggle to find enough space amid the junk in their garage to park a car. But there's a growing desire to create cleaner, more organized spaces that can contribute to a home's "wow" factor, says West.

It may not raise the price in most markets, but it helps win a beauty contest if the buyer is deciding among a few homes.

Do You Marry The Credit Score?

Some think that lenders average everyone's credit scores together. If Jane has an 800 credit score and John has a 400 credit score, their combined score would be 800 + 400 = 1200 divided by two, giving a not-so-terrible-after-all score of 600. Of course, that's not so.

Good credit doesn't erase bad credit. In fact, bad credit will kill the deal altogether. And scores aren't averaged, they're examined independently and the 400 score would render the 800 score impotent.

If a spouse or joint borrower has bad credit, and the person with good credit can qualify on her own, then leave the person with bad credit off the mortgage and simply include him on the title.

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