August Round Up: Rates Still Near Record Lows

In Freddie Mac's results of its Primary Mortgage Market Survey the 30-year fixed-rate mortgage (FRM) averaged 5.14 percent with an average 0.7 point for the week ending August 27, 2009, up from the previous week when it averaged 5.12 percent. Last year at this time, the 30-year FRM averaged 6.40 percent.

The 15-year FRM this week averaged 4.58 percent with an average 0.7 point, up from the previous week when it averaged 4.56 percent. A year ago at this time, the 15-year FRM averaged 5.93 percent.

Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 4.67 percent this week, with an average 0.6 point, down from the previous week when it averaged 4.57 percent. A year ago, the 5-year ARM averaged 6.03 percent.

One-year Treasury-indexed ARMs averaged 4.69 percent this week with an average 0.6 point, unchanged from the previous week when it averaged 4.69 percent. At this time last year, the 1-year ARM averaged 5.33 percent.

"Long-term mortgage rates were barely changed this week, remaining historically low, which is helping to sustain a high level of affordability in the home-purchase market," said Frank Nothaft, Freddie Mac vice president and chief economist." Low rates contributed to existing home sales rising for the fourth consecutive month to an annual pace of 5.24 million in July, the most since August 2007, according to the National Association of Realtors®.

"Similarly, new home sales rose for the fourth month in a row to 0.4 million, the strongest pace since September 2008, the Commerce Department reported. The sales gain helped to reduce the number of new unsold houses on the market to the lowest amount since March 1993. In addition, house prices in June rose nationally for the second consecutive month, according to the Federal Housing Finance Agency's purchase-only house price index."

Buyers Rush to Beat Tax Credit Deadline

Real estate professionals report that first-time home buyers are flooding the sale market, pressed to finalize a deal before the federal government's $8,000 tax credit offer expires on Nov. 30.

Because mortgage approvals, residential inspections, and other steps in the buying process typically take about two months, buyers hoping to take advantage of the incentive will need to have a contract by the end of September.

The new flurry of activity now as house-hunters try to meet the deadline is triggering bidding wars and energizing the property market, which historically is slow at the end of summer. As a result, more homes are getting their full asking price.

Bill Encourages Energy Improvements

A bill that helps home buyers afford energy improvements and encourages banks to offer a discount on loans to pay for reducing energy usage passed the U.S. House in June and could pass the Senate in the fall.

The American Clean Energy and Security Act of 2009 requires Fannie Mae and Freddie Mac to offer discounts on mortgages that include extra cash for making a home more energy efficient.

These discounts, which are already in effect at some lenders like J.P. Morgan Chase & Co. and Bank of America, include savings on closing costs for homes that have Energy Star appliances.

The Federal Housing Administration is offering a plan through its approved lenders that allows borrowers to add the cost of making efficiency improvements into the mortgage, but the extra money doesn’t count toward determining how much loan a borrower can qualify for. For instance, a borrower who adds $5,000 to a $100,000 loan to afford new Energy Star appliances would only have to qualify for $100,000 – not $105,000.

Encouraging Numbers

Encouraging numbers on the real estate front, including new housing construction and sales of existing homes, continue to point toward a sustained recovery in the months ahead.

Home builders -- who had been the most depressed segment of the real estate industry for the past two years -- are pulling permits again and starting to put up new houses.

The Commerce Department reports that single family starts last month were up nearly two percent over the prior month, while permits for future construction jumped by six percent.

Starts and permits are now at their highest levels in ten months.

Meanwhile, existing home sales and price reports from around the country show the breadth of the rebound getting underway.

In five large southern California counties that were near the epicenter of the bust, houses sold in July at the fastest pace in three years, according to MDA DataQuick researchers.

The five counties are San Diego, Orange, Los Angeles, Ventura and Riverside-San Bernadino. Sales there have risen for thirteen consecutive months compared with the previous year's levels. Even median prices are showing modest increases, as foreclosures decline as a percentage of total sales.
But John Walsh, president of DataQuick, cautions against overstating the positive news here though. Walsh believes that "we could bounce along" at this summer's slightly improved levels "for quite awhile" if California's economy doesn't improve.

Some lenders are beginning to take note of the improving numbers and are revising their controversial "declining area" designations that restrict mortgage lending or make it more costly for buyers.

This article appeared in Realty Times
Written by: Realty Times Staff

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