April Round Up: Rates Tie Record Low

In Freddie Mac's results of its Primary Mortgage Market Survey, the 30-year fixed-rate mortgage (FRM) averaged 4.78 percent with an average 0.7 point for the week ending April 30, 2009, down from the previous week when it averaged 4.80 percent. Last year at this time, the 30-year FRM averaged 6.06 percent. The 30-year FRM now equals the record low that was set the week of April 7, 2009. It has never been recorded lower in Freddie Mac’s survey, which goes back to 1970.

The 15-year FRM this week averaged 4.48 percent with an average 0.7 point, unchanged for the third week in a row. A year ago at this time, the 15-year FRM averaged 5.59 percent. This is tied with the last two weeks for the lowest the 15-year FRM has been since Freddie Mac began tracking it in August 1991.

Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 4.80 percent this week, with an average 06 point, down from the previous week when it averaged 4.85 percent. A year ago, the 5-year ARM averaged 5.73 percent. This is the lowest the 5-year ARM has been since Freddie Mac began tracking it in January 2005.

One-year Treasury-indexed ARMs averaged 4.77 percent this week with an average 0.7 point, down from the previous week when it averaged 4.82 percent. At this time last year, the 1-year ARM averaged 5.29 percent.

“Rates for fixed-rate mortgages hovered at record lows this week as ARM rates eased further,“ said Frank Nothaft, Freddie Mac vice president and chief economist. “Mortgage rates for 30-year fixed rate mortgages, the most popular loan among homebuyers and families seeking to refinance, are more than 1.6 percentage points below the recent peak set at the end of October 2008. For a $200,000 loan, this means a monthly savings of almost $212 in mortgage payments or over $2,500 per year. In aggregate, borrowers who refinanced during the first quarter reduced their mortgage payments by about $2.5 billion over the coming year.

“The housing market may be edging towards a bottom. Existing home sales stayed near its four-month average in March while new home sales were stronger than the market consensus. More importantly, the inventory of unsold new homes fell to the lowest number since January 2002. And, the S&P/Case-Shiller® 20-city composite index did not show a record year-over-year decline in February for the first time since December 2006. Finally, housing affordability hit record highs in the first quarter of this year, according to figures from the National Association of Realtors, which date back to January 1971."

Homes Are Increasingly Affordable:

Home prices have fallen to the point that the typical household can afford to buy, according to a quarterly report from economists at HIS Global Insight and PNC Financial Service Group.

The report examined price trends in 330 metropolitan areas. It said homes were "fairly" valued in 202 of the markets – prices were between 14 percent above or below the historic norm. Twenty-one markets were considered "overvalued," or between 14 percent and 34 percent above the norm. And 106 markets were dubbed "undervalued," or more than 14 percent below the norm.

The report takes into consideration household income, population density and differences in prices related to climate, schools and other factors.

Home prices appear likely to bottom out late this year or early in 2010 in most of the country, predicts Jeannine Cataldi, a senior economist at HIS Global Insight. Factors affecting how long the market stays stagnant include unemployment rates and the number of foreclosed homes lenders must unload.

Four Perks of New Homes:

It could be a great time to buy a brand new home because prices are down and builders are motivated to unload declining, but still significant, inventories. Marty Gillespie, president of Heartland Homes, a custom home builder in western Pennsylvania, offers these reasons for buying new rather than existing properties.

Buying new means new everything. New homeowners don’t have to replace carpeting, paint, or redo the kitchen.

Mortgages on new homes are often lower. That gives new homebuyers bargaining power.

Appreciation is greater. New homes tend to gain more value than existing homes during the first five to seven years.

New homes are often more energy efficient. Gillespie says his company’s research shows that new homes are 30 to 35 percent more energy efficient than a home built 10 years ago.

Six Reasons Why It's Still a Good Time to Buy:

The housing market is looking healthier. Sales and pending sales of homes have turned up sharply in hard-hit markets. House prices are more affordable. Consumer confidence polls show slight but noteworthy improvements in the public's outlook. With that in mind, here are six reasons why now is the time to jump into the market:

Uncle Sam is willing to help. First-time buyers (defined as anyone who hasn’t owned a home in the last three years) are entitled to a maximum $8,000 tax credit; interest rates are at record lows; and the Federal Reserve is doing its best to make mortgage loans available.

People have to live somewhere. About 800,000 new households are formed each year in this country, ensuring that the housing market will tighten, even if the economy doesn’t soar.

Borrowers leverage their investment. If you put $10,000 into the stock market and it earns 10 percent, you’ve earned $1,000. If you put $10,000 down on a home and its values increases 10 percent, you’ve made $10,000.

When prices come back up, you’ll have instant equity. In parts of the country where foreclosures have driven down prices, better times will mean the price of the home you buy will rise rapidly.

Mortgage costs stay the same. If you get a fixed-rate mortgage, the monthly payment stays the same – while everything else, including rent, goes upward.

You own it. There is something comforting in the notion that your home is your own. You can paint it any color you want, let the dog run in the back yard and hang a swing for the kids in the front.

Written by: Realty Times Staff

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