The National Association of Realtors® applauds recent actions by the Federal Reserve and the Treasury making mortgage interest rates more affordable. However, further action is needed to help the thousands of people trying to buy a home or to stem off foreclosure to get a mortgage easily and quickly.
“Our members tell us that families are once again looking to enter the housing market only to find that delays, process and bureaucracy are getting in the way,” said NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth. “The federal government and the mortgage lending industry must address continuing problems that are impeding the delivery of mortgage credit to home buyers and those trying to avoid foreclosure.”
In a letter to the Treasury Department, the Federal Reserve Board and the Federal Housing Finance Agency, and copied to President-elect Barack Obama’s transition team, NAR notes that in addition to lowering interest rates, the federal government must work with mortgage lenders and credit reporting agencies to eliminate processes that are making it difficult to close on a mortgage loan so that the housing market and the nation’s economy can have a robust recovery.
“Now really is a great time to buy a home. Inventory is high, prices are down and mortgage rates are near 50-year lows. We have to unclog the system and let people achieve and hold on to the dream of homeownership,” McMillan said.
NAR is recommending that the Treasury Department provide additional TARP funds for the sole purposes of making additional loans and modifying mortgages to help prevent foreclosures.
“The housing market is clogged with short-sales that take frustratingly too long to clear. Though lax underwriting standards should never return, many lenders’ credit score requirements have become overly stringent. Good people with good credit scores are finding it difficult to qualify for loans despite the historically low mortgage rates,” said McMillan.
NAR is asking mortgage lenders and mortgage insurers to make sure they have not over-corrected their underwriting standards and added unnecessarily strict underwriting standards, such as excessively high credit scores to qualify for a mortgage. In addition, credit reporting bureaus should improve compliance with the Fair Credit Reporting Act, including providing prompt responses to consumers who want to correct errors in their file.
Lastly, NAR is calling on all mortgage lenders, their servicers, Fannie Mae and Freddie Mac, and investors in mortgage assets to implement aggressive policies that result in more loan modifications to prevent as many foreclosures as possible, expedited processes for short-sales, and added liquidity to the nonconforming mortgage market.
“If rates stay low at near 5 percent or lower, home sales could rise nationally by 10 to 15 percent in 2009 and stabilize prices in many parts of the country,” said NAR Chief Economist Lawrence Yun. “That, in turn, will help reduce foreclosure pressures and lower the rate of re-defaults on recently modified distressed loans. Improved loan modification tools are also necessary. Everyone needs to work together so this can become a reality.”
NAR continues to advocate for other measures that would help create long-term stability by ensuring that safe and affordable mortgages are available throughout the nation, including making the higher loan limits passed in the economic stimulus bill earlier this year permanent and extending the temporary $7,500 tax credit for first-time home buyers to all home buyers and eliminating the repayment requirement.
“The work is not yet finished, and NAR is committed to continuing its efforts with policy makers and the new Congress and administration to get the real estate market back on track – the nation’s economy depends on it,” McMillan said.
Monday, December 22, 2008
Friday, December 19, 2008
Fed Action Creates Best Interest Rates in 50 Years, Realtors® Report
The National Association of Realtors® applauds the actions of the Federal Reserve Board in lowering interest rates for home buyers and homeowners who need to refinance. This will significantly impact housing sales, home valuations, and the nation’s overall economy.
The Federal Reserve is purchasing large quantities of agency debt and mortgage-backed securities to provide support to the mortgage and housing markets.
“NAR has been aggressively calling for mortgage rate reductions, and the Fed’s action to slash interest rates, coupled with the actions by the Federal Housing Finance Agency and the Department of the Treasury, has driven down interest rates to make the dream of homeownership once again attainable for thousands of Americans,” said NAR President Charles McMillan.
Mortgage rates, which had averaged 6.3 percent in the third quarter, have recently fallen into the 4 percent range in some parts of the country. “That is the lowest rate in nearly 50 years and will bring buyers back to the market,” McMillan said. “We are pleased that the government heard our message and responded to our call for action.”
NAR has estimated that a one percentage point decrease in mortgage rates will increase home sales by more than 500,000 homes. “To boost the economy, it is critical to stem the rising tide of foreclosures and boost home buyer confidence in the housing market.” McMillan said. “Lower interest rates coupled with increased foreclosure mitigation are the key ingredients to stabilizing the housing market and preserving communities and homeownership.”
NAR continues to call on the federal government to maintain the higher loan limits passed in the economic stimulus bill earlier this year and to expand the $7,500 tax credit for first-time home buyers to all buyers and to eliminate the credit repayment requirement. “Together, all of these actions will stimulate and stabilize the housing market and begin an overall economic recovery,” McMillan said.
The Federal Reserve is purchasing large quantities of agency debt and mortgage-backed securities to provide support to the mortgage and housing markets.
“NAR has been aggressively calling for mortgage rate reductions, and the Fed’s action to slash interest rates, coupled with the actions by the Federal Housing Finance Agency and the Department of the Treasury, has driven down interest rates to make the dream of homeownership once again attainable for thousands of Americans,” said NAR President Charles McMillan.
Mortgage rates, which had averaged 6.3 percent in the third quarter, have recently fallen into the 4 percent range in some parts of the country. “That is the lowest rate in nearly 50 years and will bring buyers back to the market,” McMillan said. “We are pleased that the government heard our message and responded to our call for action.”
NAR has estimated that a one percentage point decrease in mortgage rates will increase home sales by more than 500,000 homes. “To boost the economy, it is critical to stem the rising tide of foreclosures and boost home buyer confidence in the housing market.” McMillan said. “Lower interest rates coupled with increased foreclosure mitigation are the key ingredients to stabilizing the housing market and preserving communities and homeownership.”
NAR continues to call on the federal government to maintain the higher loan limits passed in the economic stimulus bill earlier this year and to expand the $7,500 tax credit for first-time home buyers to all buyers and to eliminate the credit repayment requirement. “Together, all of these actions will stimulate and stabilize the housing market and begin an overall economic recovery,” McMillan said.
Wednesday, December 17, 2008
6 Things to Know About the Fed Rate Cut
By Luke Mullins
The Federal Reserve on Tuesday cut its federal funds target rate by more than three-quarters of a percentage point to a range of between 0 and .25 percent. The decision signals that Fed Chief Ben Bernanke is more concerned with the rapidly deteriorating economy--which has been mired in a recession since December of last year--that the prospect of stoking inflation. "Since the Committee's last meeting, labor market conditions have deteriorated, and the available data indicate that consumer spending, business investment, and industrial production have declined," the rate-setting Federal Open Market Committee said in its statement. "Financial markets remain quite strained and credit conditions tight."
Here's how the Fed's actions affect you:
1. Fixed mortgage rates: Today's rate cut will have little if any impact on 30-year fixed mortgage rates, which are determined by factors that operate largely outside of the Federal Open Market Committee's reach, says Keith Gumbinger of HSH Associates. "Any change in the rate has little to do with long-term mortgage rates," he says. But in its statement the Fed said it could expand a recently announced program to buy up debt and mortgage-backed securities from Fannie Mae and Freddie Mac that has already driven mortgage rates down to a very attractive 5.28 percent, according to HSH Associates. It also reiterated that it was looking at the possibility of buying long-term Treasury bonds. Both of these announcements could work to bring rates even lower.
2. Prime rate loans: The real impact of today's cut will be felt by consumers with loans that are tied to the prime rate, a benchmark rate that typically moves in lock step with the federal funds rate. "The only place where you would see a concrete impact at the consumer level would be things that are directly tied to prime," says Mike Larson, a real estate analyst at Weiss Research. Many home-equity lines of credit and certain credit cards with variable interest rates are tied to prime rate. As such, borrowers with these loans could see their interest rates decline.
3. Home-equity savings: Home-equity loans averaged 5.5 percent in October but dropped to 5.26 percent in November following the Fed's half-point cut. Gumbinger says he expects average rates on home-equity lines of credit to experience similar declines this time around--but not everyone will be able to take advantage of them. That's because many of the interest rates on these loans are already at their minimums, and are contractually prohibited to go any lower. So check the terms of your home-equity loan to see if you are eligible to cash in on the decline.
4. Target vs. effective: When credit markets are functioning normally, Fed rate cuts reduce banks' cost of funding, which allows them to widen profit margins and pass along savings to consumers in the form of lower interest rates. But today's credit conditions have changed all that. Although the Fed's target rate stood at 1 percent before today's cut, such funds were actually being traded in the market at much less than that--just 0.18 percent as of yesterday before the Fed's action. Although the Fed can usually control the effective rate by buying and selling government securities, the credit crisis has eroded its ability to do so. "Any juice that you would get from a funds rate cut in a normally functioning market, you're not really going to get that here," Larson says. "It's not going to lower the banking industry's cost of funds, because the banking industry's cost of funds is already below the target rate anyway." That means that interest rates tied to the federal funds rate won't decline as much as they otherwise would have.
5. Now what? Nariman Behravesh, chief economist at IHS Global Insight, expects rates to go all the way to zero in a matter of weeks. "The Fed has already cut the federal funds rate to 1 percent and is likely to take it all the way to zero by the end of January," Behravesh said in a recent report, issued before today's announcement. "Once the overnight rate is at zero, the Fed may have to engage in 'quantitative easing' [direct purchases of long-term Treasuries]." Even if it doesn't bring rates all the way to zero, the Fed signaled Tuesday that it's not about to push rates higher anytime soon. "The Committee anticipates that weak economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time," the Fed said in the statement.
6. Expect more unexpectedness. With only less than a quarter of a percentage point left to cut, look for the Fed to get even more creative in its efforts to revive the financial markets. New programs to support different corners of the credit market could certainly be introduced in 2009. "The Federal Reserve will continue to consider ways of using its balance sheet to further support credit markets and economic activity," the Fed said in the statement.
The Federal Reserve on Tuesday cut its federal funds target rate by more than three-quarters of a percentage point to a range of between 0 and .25 percent. The decision signals that Fed Chief Ben Bernanke is more concerned with the rapidly deteriorating economy--which has been mired in a recession since December of last year--that the prospect of stoking inflation. "Since the Committee's last meeting, labor market conditions have deteriorated, and the available data indicate that consumer spending, business investment, and industrial production have declined," the rate-setting Federal Open Market Committee said in its statement. "Financial markets remain quite strained and credit conditions tight."
Here's how the Fed's actions affect you:
1. Fixed mortgage rates: Today's rate cut will have little if any impact on 30-year fixed mortgage rates, which are determined by factors that operate largely outside of the Federal Open Market Committee's reach, says Keith Gumbinger of HSH Associates. "Any change in the rate has little to do with long-term mortgage rates," he says. But in its statement the Fed said it could expand a recently announced program to buy up debt and mortgage-backed securities from Fannie Mae and Freddie Mac that has already driven mortgage rates down to a very attractive 5.28 percent, according to HSH Associates. It also reiterated that it was looking at the possibility of buying long-term Treasury bonds. Both of these announcements could work to bring rates even lower.
2. Prime rate loans: The real impact of today's cut will be felt by consumers with loans that are tied to the prime rate, a benchmark rate that typically moves in lock step with the federal funds rate. "The only place where you would see a concrete impact at the consumer level would be things that are directly tied to prime," says Mike Larson, a real estate analyst at Weiss Research. Many home-equity lines of credit and certain credit cards with variable interest rates are tied to prime rate. As such, borrowers with these loans could see their interest rates decline.
3. Home-equity savings: Home-equity loans averaged 5.5 percent in October but dropped to 5.26 percent in November following the Fed's half-point cut. Gumbinger says he expects average rates on home-equity lines of credit to experience similar declines this time around--but not everyone will be able to take advantage of them. That's because many of the interest rates on these loans are already at their minimums, and are contractually prohibited to go any lower. So check the terms of your home-equity loan to see if you are eligible to cash in on the decline.
4. Target vs. effective: When credit markets are functioning normally, Fed rate cuts reduce banks' cost of funding, which allows them to widen profit margins and pass along savings to consumers in the form of lower interest rates. But today's credit conditions have changed all that. Although the Fed's target rate stood at 1 percent before today's cut, such funds were actually being traded in the market at much less than that--just 0.18 percent as of yesterday before the Fed's action. Although the Fed can usually control the effective rate by buying and selling government securities, the credit crisis has eroded its ability to do so. "Any juice that you would get from a funds rate cut in a normally functioning market, you're not really going to get that here," Larson says. "It's not going to lower the banking industry's cost of funds, because the banking industry's cost of funds is already below the target rate anyway." That means that interest rates tied to the federal funds rate won't decline as much as they otherwise would have.
5. Now what? Nariman Behravesh, chief economist at IHS Global Insight, expects rates to go all the way to zero in a matter of weeks. "The Fed has already cut the federal funds rate to 1 percent and is likely to take it all the way to zero by the end of January," Behravesh said in a recent report, issued before today's announcement. "Once the overnight rate is at zero, the Fed may have to engage in 'quantitative easing' [direct purchases of long-term Treasuries]." Even if it doesn't bring rates all the way to zero, the Fed signaled Tuesday that it's not about to push rates higher anytime soon. "The Committee anticipates that weak economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time," the Fed said in the statement.
6. Expect more unexpectedness. With only less than a quarter of a percentage point left to cut, look for the Fed to get even more creative in its efforts to revive the financial markets. New programs to support different corners of the credit market could certainly be introduced in 2009. "The Federal Reserve will continue to consider ways of using its balance sheet to further support credit markets and economic activity," the Fed said in the statement.
Tuesday, December 16, 2008
Realtors® Push for 4.5 Percent Interest Rate Buy-Down
Washington, December 15, 2008
A federal mortgage interest buy-down program would help spark the housing market, the National Association of Realtors® said in a letter sent today to James B. Lockhart, chairman of the Oversight Board of the Federal Housing Finance Agency. NAR seeks a 4.5 percent mortgage interest rate buy-down program financed through the U.S. Treasury Department’s Troubled Asset Relief Program.
In the letter to FHFA, NAR shared three potential implementation procedures for a federal buy-down plan:
* TARP would fund the payment of points at the individual level.
* The Federal Home Loan Banks would raise funds by selling below-market-rate bonds to the Treasury Department for them to make the 4.5 percent interest rates available to lenders.
* Fannie Mae and Freddie Mac would purchase mortgages at the 4.5 percent interest rate but pay lenders the market rate.
“The buy-down program would complement other initiatives and help stabilize, stimulate and revitalize the housing market,” said NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth. “We must address the foreclosure crisis and increase housing demand. Lower interest rates and foreclosure mitigation are two sides of the same coin. Together they represent the key ingredients to stabilizing the housing market and preserving communities and homeownership.”
NAR has calculated that a 1 percentage-point decrease in mortgage rates would result in an additional 500,000 home sales.
In addition to suggesting that TARP assets be used to buy-down mortgage interest rates, NAR has recommended other principles that would help create long-term stability by ensuring that safe and affordable mortgages are available throughout the nation:
* The higher loan limits passed in the economic stimulus bill earlier this year should be made permanent.
* The federal government should ensure sufficient capital to support mortgage lending in every type of market.
* The temporary $7,500 tax credit for first-time home buyers should be extended to all home buyers and the repayment requirement eliminated.
A federal mortgage interest buy-down program would help spark the housing market, the National Association of Realtors® said in a letter sent today to James B. Lockhart, chairman of the Oversight Board of the Federal Housing Finance Agency. NAR seeks a 4.5 percent mortgage interest rate buy-down program financed through the U.S. Treasury Department’s Troubled Asset Relief Program.
In the letter to FHFA, NAR shared three potential implementation procedures for a federal buy-down plan:
* TARP would fund the payment of points at the individual level.
* The Federal Home Loan Banks would raise funds by selling below-market-rate bonds to the Treasury Department for them to make the 4.5 percent interest rates available to lenders.
* Fannie Mae and Freddie Mac would purchase mortgages at the 4.5 percent interest rate but pay lenders the market rate.
“The buy-down program would complement other initiatives and help stabilize, stimulate and revitalize the housing market,” said NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth. “We must address the foreclosure crisis and increase housing demand. Lower interest rates and foreclosure mitigation are two sides of the same coin. Together they represent the key ingredients to stabilizing the housing market and preserving communities and homeownership.”
NAR has calculated that a 1 percentage-point decrease in mortgage rates would result in an additional 500,000 home sales.
In addition to suggesting that TARP assets be used to buy-down mortgage interest rates, NAR has recommended other principles that would help create long-term stability by ensuring that safe and affordable mortgages are available throughout the nation:
* The higher loan limits passed in the economic stimulus bill earlier this year should be made permanent.
* The federal government should ensure sufficient capital to support mortgage lending in every type of market.
* The temporary $7,500 tax credit for first-time home buyers should be extended to all home buyers and the repayment requirement eliminated.
Monday, December 15, 2008
Interest Rate Drop Good Sign, But Government Must Continue to Help Families
For more information, contact:
Lucien Salvant 202/383-1176 lsalvant@realtors.org
The National Association of Realtors® is urging the federal government to proceed rapidly to drive down mortgage interest rates and move ahead with housing stimulus action to drive up consumer confidence.
“We are very encouraged that mortgage interest rates are moving in the right direction. However, we will continue to press ahead because rates are not coming down fast enough to impact the housing market,” said NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas. “Many homeowners are struggling to get out of underwater mortgages and many potential buyers are sitting on the fence waiting for still better rates before they act.”
“We implore the Treasury, the Federal Reserve, the incoming Obama administration and Congress to get together and use all available resources, including the Troubled Assets Recovery Program, to quickly put a rate buy-down in place. This will really assist American families facing difficult economic times in the coming holiday season,” said McMillan.
“Housing has always led our economy out of downturns, and lower interest rates coupled with foreclosure mitigation are key ingredients to stabilize the housing markets and preserve homes and communities,” McMillan said.
NAR data show that a 1 percentage point decrease in mortgages interest rates—whether the decrease is brought about by a buy-down or through government purchase of mortgage-backed securities—increases home sales by a half-million. “Without better rates for home buyers, inventory will continue to remain high and home prices can overshoot downward causing consumer spending to fall further and leading to a broader contraction in credit availability. Without home price stabilization, foreclosures will continue to rise sharply and many of the remodified loans will re-default,” said Lawrence Yun, NAR chief economist.
A 4-Point Housing Stimulus Plan put forward by NAR earlier this year urged the government to buy up mortgage-backed securities from banks; the Federal Reserve has announced it is moving ahead with plans to do that. NAR also proposed an interest rate reduction, and the Treasury Department is considering such an action.
Additionally, NAR has asked Congress to make the higher loan limits passed in the economic stimulus bill earlier this year be made permanent. NAR has also been pushing for the $7,500 tax credit for first time homebuyers be extended to all homebuyers and that the repay feature be eliminated.
Lucien Salvant 202/383-1176 lsalvant@realtors.org
The National Association of Realtors® is urging the federal government to proceed rapidly to drive down mortgage interest rates and move ahead with housing stimulus action to drive up consumer confidence.
“We are very encouraged that mortgage interest rates are moving in the right direction. However, we will continue to press ahead because rates are not coming down fast enough to impact the housing market,” said NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas. “Many homeowners are struggling to get out of underwater mortgages and many potential buyers are sitting on the fence waiting for still better rates before they act.”
“We implore the Treasury, the Federal Reserve, the incoming Obama administration and Congress to get together and use all available resources, including the Troubled Assets Recovery Program, to quickly put a rate buy-down in place. This will really assist American families facing difficult economic times in the coming holiday season,” said McMillan.
“Housing has always led our economy out of downturns, and lower interest rates coupled with foreclosure mitigation are key ingredients to stabilize the housing markets and preserve homes and communities,” McMillan said.
NAR data show that a 1 percentage point decrease in mortgages interest rates—whether the decrease is brought about by a buy-down or through government purchase of mortgage-backed securities—increases home sales by a half-million. “Without better rates for home buyers, inventory will continue to remain high and home prices can overshoot downward causing consumer spending to fall further and leading to a broader contraction in credit availability. Without home price stabilization, foreclosures will continue to rise sharply and many of the remodified loans will re-default,” said Lawrence Yun, NAR chief economist.
A 4-Point Housing Stimulus Plan put forward by NAR earlier this year urged the government to buy up mortgage-backed securities from banks; the Federal Reserve has announced it is moving ahead with plans to do that. NAR also proposed an interest rate reduction, and the Treasury Department is considering such an action.
Additionally, NAR has asked Congress to make the higher loan limits passed in the economic stimulus bill earlier this year be made permanent. NAR has also been pushing for the $7,500 tax credit for first time homebuyers be extended to all homebuyers and that the repay feature be eliminated.
Friday, December 12, 2008
Mortgage rates hit 4 1/2 year low
By Larissa Padden CNNMoney.com contributor
New York (CNNMoney.com) -- Mortgage rates fell again this week, following the government's efforts to assist the troubled housing market.
Government sponsored mortgage lender Freddie Mac said Thursday that fixed rates on 30-year mortgages averaged 5.47% for the week ending Dec. 11. That's down from 5.53% last week and well below 6.11%, which is where the rate stood at this time last year.
Mortgage rates began to fall after November 25th, when the administration announced that it would pump another $800 billion into the credit markets to unfreeze consumer and mortgage lending.
Specifically, mortgage rates responded to the Federal Reserve's announcement that it would purchase up to $500 billion in mortgage backed securities backed by Fannie Mae, Freddie Mac and Ginnie Mae. It will also buy another $100 billion in direct debt issued by those firms.
Rates dipped to 5.77% on a 30-year, fixed rate loan the day after the government's announcement, down from the previous Monday's 6.06% average, according to Keith Gumbinger, vice president of HSH Associates. And the downward trend has persisted.
"What we're seeing is a slight continued decline influenced by the Federal Reserve's announcement to buy half a trillion in mortgage backed securities," Gumbinger said. "And this continued minor downdraft is also due to the poor economic climate."
The 30-year rate has not been this low since March 25th, 2004 when it averaged 5.40%.
"Following the release of the November employment report, which showed the largest monthly decline in jobs since December 1974, bond yields fell slightly this week allowing fixed-rate mortgage rates room to ease back a little further," said Frank Nothaft, Freddie Mac vice president and chief economist, in a release on Thursday.
The 15-year fixed rate mortgage this week averaged 5.20%, which is down from 5.33% last week. A year ago at this time, a 15-year fixed rate loan averaged 5.78%.
The 15-year rate has not been this low since February 7, 2008, when it averaged 5.15%.
Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 5.82% this week, up from last week when it averaged 5.77%. At this time a year ago, the 5-year ARM averaged 5.89%.
And the one-year Treasury-indexed ARM averaged 5.09% this week, up from last week when it averaged 5.02%. Last year, the 1-year ARM averaged 5.50 percent.
"The housing market still hangs in the balance," Nothaft said in a release. "On a year-over-year basis, after rising in both August and September, pending existing home sales fell 1.0% in October, based on figures from the National Association of Realtors. Meanwhile, conventional mortgage applications for home purchases over the week ending December 5th were up 2.0% from four weeks prior, but were still 51% below the same period last year, according to the Mortgage Bankers Association."
First Published: December 11, 2008: 11:33 AM ET
New York (CNNMoney.com) -- Mortgage rates fell again this week, following the government's efforts to assist the troubled housing market.
Government sponsored mortgage lender Freddie Mac said Thursday that fixed rates on 30-year mortgages averaged 5.47% for the week ending Dec. 11. That's down from 5.53% last week and well below 6.11%, which is where the rate stood at this time last year.
Mortgage rates began to fall after November 25th, when the administration announced that it would pump another $800 billion into the credit markets to unfreeze consumer and mortgage lending.
Specifically, mortgage rates responded to the Federal Reserve's announcement that it would purchase up to $500 billion in mortgage backed securities backed by Fannie Mae, Freddie Mac and Ginnie Mae. It will also buy another $100 billion in direct debt issued by those firms.
Rates dipped to 5.77% on a 30-year, fixed rate loan the day after the government's announcement, down from the previous Monday's 6.06% average, according to Keith Gumbinger, vice president of HSH Associates. And the downward trend has persisted.
"What we're seeing is a slight continued decline influenced by the Federal Reserve's announcement to buy half a trillion in mortgage backed securities," Gumbinger said. "And this continued minor downdraft is also due to the poor economic climate."
The 30-year rate has not been this low since March 25th, 2004 when it averaged 5.40%.
"Following the release of the November employment report, which showed the largest monthly decline in jobs since December 1974, bond yields fell slightly this week allowing fixed-rate mortgage rates room to ease back a little further," said Frank Nothaft, Freddie Mac vice president and chief economist, in a release on Thursday.
The 15-year fixed rate mortgage this week averaged 5.20%, which is down from 5.33% last week. A year ago at this time, a 15-year fixed rate loan averaged 5.78%.
The 15-year rate has not been this low since February 7, 2008, when it averaged 5.15%.
Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 5.82% this week, up from last week when it averaged 5.77%. At this time a year ago, the 5-year ARM averaged 5.89%.
And the one-year Treasury-indexed ARM averaged 5.09% this week, up from last week when it averaged 5.02%. Last year, the 1-year ARM averaged 5.50 percent.
"The housing market still hangs in the balance," Nothaft said in a release. "On a year-over-year basis, after rising in both August and September, pending existing home sales fell 1.0% in October, based on figures from the National Association of Realtors. Meanwhile, conventional mortgage applications for home purchases over the week ending December 5th were up 2.0% from four weeks prior, but were still 51% below the same period last year, according to the Mortgage Bankers Association."
First Published: December 11, 2008: 11:33 AM ET
Thursday, December 11, 2008
Buying Opportunities In Nation's Rural Housing Markets
by Broderick Perkins
Forget the credit squeeze, get out of town, enjoy the fresh air, buy a home in the country.
If you've been unable to buy a metropolitan area home, take a look at rural America's neighborhoods. The commute to work could be a real trip, but it's also an opportunity to take the glass-half-full approach, slow down and work at home.
Either way, your dream home may await in a quiet pastoral setting, far from the din of city life, but a lot closer to the money to finance it.
Homebuyers who purchased homes underwritten by the USDA Rural Development Housing and Community Facilities Programs are doing far better these days than the rest of the nation when it comes to keeping a roof over head.
And that market condition is freeing up more loan money for homes in bucolic settings.
Dust Bowl in reverse
The USDA program this year posted the lowest foreclosure rates in the past 40 years, an average of 3.53 percent, down from 3.93 percent five years ago, according to an Agri Pulse interview with Russ Davis, administrator of the USDA housing program.
Meanwhile, with millions of homeowners struggling with mortgages larger than the value of their homes, national foreclosure rates this year have skyrocketed, at times, nearly double what they were a year ago. Even with foreclosure rates leveling off, the year-over-year rate of increase nationwide remained up 25 percent in October, according to RealtyTrac.
A difference between the two markets is also reflected in the rate of homeownership. While the rate is about 67 percent in metropolitan areas, non metro areas enjoy homeownership rates averaging around 75 percent, higher in the South and Midwest, according to the Hoover Institution.
Rural homeownership is surviving because of sound lending practices and isolation -- both geographical and financial -- from the boom-bust markets.
USDA makes loans directly out of its service centers, working with 2,000 local banks and mortgage lenders to guarantee the value of the loan in case of default, enabling those institutions to sell the mortgages and not hold as much capital against each one.
To help prevent default, the loans mandate credit and homeownership counseling and, as a result, the end rate of foreclosures is actually smaller than reported. USDA loans' built-in counseling and financial relief for homeowners facing financial difficulties removes many homeowners from the foreclosure rolls.
Housing the old fashioned way
Underwriting also recognizes unique rural America characteristics -- seasonal work, shift work, changing income and migration patterns -- thanks to long-term market evaluation efforts. The out-migration that has occurred since WWII may be in for a change, given today's yen for a simpler life and a piece of owner-occupied housing pie. The trend hasn't gone unnoticed by USDA underwriters.
That saner, detailed approach to underwriting -- rather than the assembly line loans-for-all policy that failed the national housing market -- sheltered the rural housing market from "bubble" conditions that caused skyrocketing home values and the eventual crash.
The result has been more mortgage money to lend, not less. The federal ag agency's loan volume tripled in the last year, increasing from about 35,000 to 100,000 in guarantees, according to Agri Pulse's report.
Credit unions pulled off a similar coup with sound underwriting policies.
USDA's guaranteed housing loans are limited, but you don't have to grow corn or raise chickens to enjoy green acres.
The loans are for:
* People living in rural areas where the population is less than 20,000.
* People with incomes under 115 percent of household median income for the area. In most areas, the upper income limit for borrowers will be $60,000 to $70,000 per year.
* People buying homes, not refinancing or taking out equity loans.
USDA Programs include no-money down loans (imagine that), home improvement and rehabilitation loans and grants, construction loans, loans for minorities and true to the work-ethic of rural life, sweat-equity loans that require buyers to help build their own homes.
Get in before the word gets out.
* USDA Rural Development Housing & Community Facilities Program.
* USDA Real Estate For Sale.
* More on USDA Rural Development information.
Forget the credit squeeze, get out of town, enjoy the fresh air, buy a home in the country.
If you've been unable to buy a metropolitan area home, take a look at rural America's neighborhoods. The commute to work could be a real trip, but it's also an opportunity to take the glass-half-full approach, slow down and work at home.
Either way, your dream home may await in a quiet pastoral setting, far from the din of city life, but a lot closer to the money to finance it.
Homebuyers who purchased homes underwritten by the USDA Rural Development Housing and Community Facilities Programs are doing far better these days than the rest of the nation when it comes to keeping a roof over head.
And that market condition is freeing up more loan money for homes in bucolic settings.
Dust Bowl in reverse
The USDA program this year posted the lowest foreclosure rates in the past 40 years, an average of 3.53 percent, down from 3.93 percent five years ago, according to an Agri Pulse interview with Russ Davis, administrator of the USDA housing program.
Meanwhile, with millions of homeowners struggling with mortgages larger than the value of their homes, national foreclosure rates this year have skyrocketed, at times, nearly double what they were a year ago. Even with foreclosure rates leveling off, the year-over-year rate of increase nationwide remained up 25 percent in October, according to RealtyTrac.
A difference between the two markets is also reflected in the rate of homeownership. While the rate is about 67 percent in metropolitan areas, non metro areas enjoy homeownership rates averaging around 75 percent, higher in the South and Midwest, according to the Hoover Institution.
Rural homeownership is surviving because of sound lending practices and isolation -- both geographical and financial -- from the boom-bust markets.
USDA makes loans directly out of its service centers, working with 2,000 local banks and mortgage lenders to guarantee the value of the loan in case of default, enabling those institutions to sell the mortgages and not hold as much capital against each one.
To help prevent default, the loans mandate credit and homeownership counseling and, as a result, the end rate of foreclosures is actually smaller than reported. USDA loans' built-in counseling and financial relief for homeowners facing financial difficulties removes many homeowners from the foreclosure rolls.
Housing the old fashioned way
Underwriting also recognizes unique rural America characteristics -- seasonal work, shift work, changing income and migration patterns -- thanks to long-term market evaluation efforts. The out-migration that has occurred since WWII may be in for a change, given today's yen for a simpler life and a piece of owner-occupied housing pie. The trend hasn't gone unnoticed by USDA underwriters.
That saner, detailed approach to underwriting -- rather than the assembly line loans-for-all policy that failed the national housing market -- sheltered the rural housing market from "bubble" conditions that caused skyrocketing home values and the eventual crash.
The result has been more mortgage money to lend, not less. The federal ag agency's loan volume tripled in the last year, increasing from about 35,000 to 100,000 in guarantees, according to Agri Pulse's report.
Credit unions pulled off a similar coup with sound underwriting policies.
USDA's guaranteed housing loans are limited, but you don't have to grow corn or raise chickens to enjoy green acres.
The loans are for:
* People living in rural areas where the population is less than 20,000.
* People with incomes under 115 percent of household median income for the area. In most areas, the upper income limit for borrowers will be $60,000 to $70,000 per year.
* People buying homes, not refinancing or taking out equity loans.
USDA Programs include no-money down loans (imagine that), home improvement and rehabilitation loans and grants, construction loans, loans for minorities and true to the work-ethic of rural life, sweat-equity loans that require buyers to help build their own homes.
Get in before the word gets out.
* USDA Rural Development Housing & Community Facilities Program.
* USDA Real Estate For Sale.
* More on USDA Rural Development information.
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