November Round Up: Rates Still Under Five Percent

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 November 25, 2009, down from the previous week when it averaged 4.83 percent. Last year at this time, the 30-year FRM averaged 5.97 percent. The 30-year has not been this low since the week ending April 30, 2009, when it averaged 4.78 percent.

The 15-year FRM this week averaged 4.29 percent with an average 0.6 point, down from the previous week when it averaged 4.32 percent. A year ago at this time, the 15-year FRM averaged 5.74 percent. The 15-year FRM has never been this low since Freddie Mac started tracking it in 1991.

The 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 4.18 percent this week, with an average 0.6 point, down from the previous week when it averaged 4.25 percent. A year ago, the 5-year ARM averaged 5.86 percent. The 5-year ARM has never been this low since Freddie Mac started tracking it in 2005.

The 1-year Treasury-indexed ARM averaged 4.35 percent this week with an average 0.7 point, unchanged from the previous week when it averaged 4.35 percent. At this time last year, the 1-year ARM averaged 5.18 percent. The 1-year ARM has not been this low since the week ending July 7, 2005, when it averaged 4.33 percent.

"Long-term mortgage rates eased for the fourth consecutive week to record levels," said Frank Nothaft, Freddie Mac vice president and chief economist." Interest rates for 30-year fixed mortgage loans tied an all-time record low while both 15-year fixed mortgages and 5-year ARMs broke their corresponding records. Interest rates for 30-year fixed-rate loans are currently 0.8 percentage points below this year's peak set in mid-June, which shaves roughly $100 off the monthly payments on a $200,000 mortgage.

"House prices are slowly beginning to firm now. For instance, annual house price declines slowed for the sixth consecutive month in September, down only 3 percent, and represented the smallest decline since February 2008, according the Federal Housing Finance Agency's purchase-only house price index. Moreover, 11 of the 20 major metropolitan areas experienced monthly house price increases between August and September, based on the S&P/Case-Shiller® 20-city house price indexes ."

Green Renovations to Gain Market Share Green market research firm SBI Energy forecasts that in the next five years, the market for energy-efficient home renovation products will grow 15 percent, 50 percent faster than the renovations market as a whole.

According to the report, the energy-efficient market will reach $35 billion and claim 15 percent of all home renovation dollars spent.

"The growth will come as a result of the tax credits, new incentives, and the reality that more agencies and utilities are promoting the fact that adding improved energy efficiency is the most cost-effective way to decrease home utility bills," says Norman Deschamps, author and SBI Energy analyst.

How to Tell Mortgage Rates Are Rising

What are the signs that mortgage rates, now at historic lows, are about to go up?

One way to catch a clue is to read the minutes of the Federal Reserve. For instance, the Federal Open Market Committee said in its September minutes that when it came to interest rates, there is “no policy change.” And the minutes said that while the Fed believes “an economic recovery is underway,” it regards a weak economy as a greater risk than inflation. Upcoming meeting minutes are likely to be just as forthcoming if an uptick is in the cards.

Other signs include:
* Declining unemployment: The unemployment rate is sitting at 9.7 percent. If lots of Americans go back to work, an increase in interest rates is likely.
* Rising discount rate: The rate the Fed charges banks that borrow from it directly stands at 0.5 percent. If it rises or the spread between it and the Federal Funds rate widens, then mortgage rate increases won’t be far behind.

Real Estate Market Is Active

Sales of single family homes, townhouses, condos and co-ops surged by a little over 10 percent in October, and were 24 percent above where they were a year before.

Closed transactions rose by nearly 12 percent in the Northeast, 14. 4 percent in the Midwest, 12.7 percent in the South and by 1.6 percent in the West.

Why the big jump in activity? The number one reason, according to Dr. Lawrence Yun, chief economist for the National Association of Realtors, was that first time buyers rushed to wrap up deals before the scheduled November 30th original expiration date of the $8,000 federal tax credit.

That program has now been extended through next June 30th.

Another factor: The near record-breaking affordability of housing - as measured by the prices of homes in local markets around the U.S. compared with household incomes and monthly payments at current mortgage interest rates.

The affordability equation is now at its most favorable point for buyers since 1970. Interest rates for 30-year fixed loans have been hovering around five percent for weeks - and recently dropped below that into the upper four percent range. A year ago, by comparison, the average 30-year rate was 6.2 percent.

House prices meanwhile have remained well below where they were a year ago - down by 7 percent to a median price of about $173,000. In the southwestern states, Florida and the suburbs of Washington D.C., low prices - especially for entry-level houses - are triggering multiple-bid situations - something that hasn't been seen since the heady days of the housing boom in 2004 and 2005.

This article was published in Realty Times
Written by: Realty Times Staff

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