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Monthly Archives: January 2014

Why do rates continue to fall?

For months, real estate industry analysts have been anticipating a major jump in interest on fixed-rate mortgages going into 2014. However, as recent data has shown, interest rates have remained flat throughout January and have actually sunken slightly week over week despite the expectations of experts.

There are a number of reasons attributed to this phenomenon, most of which are related to announcements from the Federal Reserve and President Barack Obama regarding the potential future of current economic stimulus programs.

Federal Reserve Takes Center Stage... Again

The Federal Reserve has taken initiative on tapering.  In other words, it's no longer talking about tapering, it's doing it.

On Wednesday, the Fed announced it would reduce its monthly purchases of U.S. Treasury notes and bonds and mortgage-backed securities (MBS) by $10 billion to $65 billion each month.  As it now stands, the Fed will buy $35-billion worth of Treasury notes and bonds and $30-billion worth of MBS. Up until December, it was buying these securities at the rate of $85 billion each month.

Interest rates dip for yet another week

Most analysts had anticipated that interest on fixed-rate home loans would continue to trend upward going into 2014, but if the first weeks of the year are any indicator, it would seem that activity this year may actually reflect the downward momentum experienced throughout much of 2012 and 2013.

According to real estate group Zillow, interest on the 30-year, fixed-rate home loan - considered by most in the industry to be the benchmark mortgage offering - dropped again this week following two weeks of sinking. In the week ending Tuesday, January 28, the rate was recorded at 4.18 percent, down five points from the 4.23 percent recorded seven days prior.

First-time buyers taking a back seat

Since the National Association of Realtors (NAR) began tracking home sales and buyer demographics back in 2008, the number of homeowners closing on new properties for the first time has averaged roughly 40 percent of all total purchases. However, the most recent data from the industry group has indicated that the number of new homeowners hitting the market of late is starting to dwindle, as the latest information compiled for December 2013 showed only 27 percent of sales nationally went to first-time buyers.

An analysis of this information conducted by CNBC indicates that there are a number of factors for this dip in new blood on the market, many of which are ironically some of the same indicators that real estate is on the rebound, by and large, across the country.

Housing market now defined by luxury

The Great Recession had a massive and lasting impact on many different sectors of the national economy, not least of which was the housing market, which saw not only the dynamics and demographics of those entering shift markedly but also a nationwide drop in equity that essentially choked any and all new activity.

However, thanks to initiatives to increase buyer traffic from President Barack Obama and his administration, as well as bond-buying measures spurred by the Federal Reserve, homeownership has actually become more affordable over the past 12 months despite coast-to-coast rises in average property values.

A look at the nation's top turnaround markets

Even though the latest data from the National Association of Home Builders (NAHB) indicates that new home construction hit a lull in December 2013, that doesn't mean that the housing market is losing any of the momentum it had gained over the past 12 months. In fact, the National Association of Realtors' (NAR) latest National Housing Trend Report shows that the median age of residential inventory fell 5.1 percent in 2013 compared to 2012, which indicates that buyers are purchasing homes at a breakneck pace and in many areas, only recently constructed properties are what is available.

The report also highlighted the "Top 10 Turnaround Towns," which indicates the cities where the amount of time a home remains on the market before a buyer closes is shortest. In many cases, it seems that the fastest turnaround is taking place in locales that had previously been ravaged by the Great Recession and had been hit hardest by the burst of the housing bubble.

The benefits of (and qualifications for) an FHA-backed loan

Loans backed by the Federal Housing Administration (FHA) have been the saving grace for many homeowners over the past several years who have had trouble grappling with the unpredictability of the recent economic recovery. Essentially, individuals who choose to finance their mortgage through this government agency are basically guaranteed the insurance of coverage should their monthly payments get out of hand in order to avoid default. However, in order to get one of these loan packages, a household has to meet several qualifications to guarantee that the FHA isn't taking on agreements that pose a great risk.

For starters, the benefits of having an FHA-backed mortgage include a lower down payment upon closing, requiring a minimum of 3.5 percent as opposed to the traditional 5 percent that non-insured backers usually abide by. As well, interest rates are generally much lower with a government-guaranteed loan, meaning monthly payments are generally easier to manage for the average FHA-insured household.

New home construction down in December 2013

New home construction appears to have stalled across the entire country during December, as the latest housing starts report from the Department of Commerce shows a steep 9.8 percent drop from the figures reported in November.

Roughly 667,000 single-family units, which makes up the largest segment of starts, went under construction over December, which was down 7 percent from the month before. However, this figure is still the second-highest total number of single-family starts all year, right behind November. Multifamily starts, on the flip side, fell a dismal 14.9 percent for the month.

Mortgage applications jump on rate news

According to the latest data from the Mortgage Bankers Association (MBA), an industry group that tracks more than three quarters of all home loan activity taking place across the country, applications for new mortgages surged over the past week.

The number of individuals who applied for a loan to purchase a new property or to refinance their existing mortgage jumped roughly 12 percent on news that the average interest on fixed-rate loans dipped more than 16 percentage points from last Monday to January 13. Previously, rates were anchored at roughly 4.39 percent, while the latest data from analytics group Zillow showed that this Monday a loan could be acquired at only 4.23 percent interest.

Mortgage rates drop markedly over past week

For much of the past year, mortgage rates have been steadily, although modestly, on the rise, after bottoming out at record lows below 4 percent in 2013. However, according to the latest data reported by Zillow Mortgage Marketplace, last week saw a big drop in the average interest on fixed-rate loans.

According to the data, the rate hovered around 4.39 percent for much of the week before a significant dip on Friday to 4.29 percent.