For the sixth straight week, fixed mortgage rates inched down, reaching new lows for 2011. The 30-year fixed-rate mortgage averaged 4.60 percent this week while the 15-year mortgage averaged 3.78 percent, Freddie Mac reports in its weekly mortgage market survey.
Meanwhile, the National Association of Home Builders reported this week that home affordability reached its highest level in 20 years, making the purchasing power for home buyers even better during this traditionally prime buying season.
Here’s a closer look at mortgage rates:- 30-year, fixed-rate mortgage: Averaging 4.60 percent this week, it was down slightly from last week’s 4.61 percent average. Last year at this time, 30-year rates averaged 4.84 percent. The 30-year fixed rate mortgage hasn’t been under this week’s 4.60 percent average since early December 2010 when it fell to 4.46 percent.
- 15-year, fixed-rate mortgage: Averaging 3.78 percent this week, it also was down from last week’s 3.80 percent average. Last year at this time, the 15-year fixed-rate mortgage averaged 4.21 percent. It has not been under this week’s 3.78 percent average since late November 2010 when it fell to 3.77 percent.
- 5-year adjustable-rate mortgage: Averaging 3.41 percent this week, it was down from last week’s 3.48 percent average. A year ago at this time, the 5-year ARM averaged 3.97 percent.
Homes are more affordable to more families, according to the latest index for the first quarter of 2011 that shows affordability reaching its highest level in more than 20 years.
Nearly 75 percent of all new and existing homes sold in the first quarter of 2011 were affordable to families earning the national median income of $64,400, according to the National Association of Home Builders/Wells Fargo Housing Opportunity Index. The previous high was set in the fourth quarter of 2010 with 73.9 percent.
"With interest rates remaining at historically low levels, today's report indicates that home ownership is within reach of more households than it has been for more than two decades," says Bob Nielsen, chairman of the National Association of Home Builders.
More people bought new homes last month with new-home sales rising 7.3 percent, the Commerce Department reported on Tuesday. It was the second straight month that new-home sales were up.
New-home sales rose to a seasonally adjusted annual rate of 323,000 homes in April, which is its highest level since December.
However, overall sales for the year still remain well below what economists consider a 700,000 healthy pace for the new-home sector.
The new-home market for the last five years has faced declines. It continues to battle against a glut of foreclosures across the country at ultra-low prices that have made competing a challenge.
Builders are keeping inventories low: A record low of 175,000 new homes were available for sale last month.
Meanwhile, the median price of a new home rose more than 2 percent in April, compared to the previous month, to $217,900. New-home prices are more than 30 percent higher than the median price of existing homes.
Source: “New-home Sales Up 7.3 Pct. in April After Sluggish Start to Year,” The Associated Press (May 24, 2011) and “U.S. April New Home Sales at 4-Month High,” Reuters News (May 24, 2011)
Republicans on the House Financial Services Committee have drafted a bill to raise the minimum down payment for Federal Housing Administration-backed loans to 5 percent as well as cut FHA loan limits in many markets. FHA-backed loans are a main source of mortgages for first-time home buyers.
Currently, home owners who take out FHA-backed loans are required to have a minimum down payment of 3.5 percent; the GOP bill seeks to raise that to 5 percent. The GOP says it wants to protect home owners against default and improve FHA’s finances.
The bill has not yet been introduced but remains in draft form. However, the draft legislation is expected to be discussed on Wednesday by the subcommittee.
The draft legislation also calls for lowering FHA loan limits in several areas.
As of now, the maximum size of FHA-backed loans in expensive areas of the country is set to drop to $625,500 from $729,750 as of Oct. 1. In less expensive areas, the limit may drop to $271,050. The GOP draft bill wants to drop the limits even more to 125 percent of a county's median home price, Dow Jones reports.
"While we support reforms to strengthen the program, changes should not be made at consumers' expense by drastically impacting the affordability and availability of mortgage capital," Ron Phipps, the National Association of REALTORS®’ president, said in a statement.
Source: “House Republicans Aim to Raise Money Down for FHA Loans,” Dow Jones International News (May 23, 2011)
Analysts Say Housing Is on the Way Up
Analysts at both Standard & Poor's and Barclays Capital agree that the uptick in home resales last month is a favorable sign of things to come. Because pending home sales — an indicator of future activity — were up in February, S&P believes transaction volume will rise for April.
Barclays, meanwhile, says March's 3.7 percent gain in existing-home sales merely reinforces its position that the housing market actually hit bottom in late 2010.
Source: “Monday Morning Cup of Coffee,” Housing Wire, Jon Prior (04/25/11)
Apartment bargains once dominated the housing market, but those bargains have slowly faded away. As vacancies decrease and rents rise, renters are finding fewer deals.
Analysts expect vacancies to decrease even more and rents to continue to rise through 2013, as the economy continues to improve.
Rental activity recorded its best start for the year since 1999, according to Reis Inc. Vacancy rates have fallen to mid-2008 levels and rents have increased for the past five quarters, now averaging $991 per month nationwide.
Renters are finding the fewest deals along the coasts, such as New York, Washington, D.C., Boston, Los Angeles, San Francisco, Seattle, and San Jose, Calif. These cities are experiencing low vacancy rates. Also, a boost in these cities’ economies is sending rents higher. New York City alone has seen double rent increases compared to the national average and has the lowest vacancy rate in the nation.
The best rental deals can be found in Las Vegas, Tucson, Ariz., Phoenix, and several cities in Florida--all cities where unemployment and foreclosures remain high. According to Reis, Las Vegas was the only city to see rents fall last year.
However, analysts say that bargains across the country are getting fewer, and renters should expect to see an increase in rents over the next three years.
View the Top 6 Cities Where Buying Is Better Than Renting.
Source: “Rental Market Swings Back in Favor of Landlords,” MSNBC.com (April 12, 2011)
Foreclosures continue to flood real estate markets across the country, and buyers are looking to cash in on what they view as some of the best real estate deals. But experts say that while some foreclosures are a great purchase, buyers need to be cautious before jumping in to make sure they really are getting a bargain.
Dan Steward, president of Pillar to Post Professional Home Inspections, advises buyers considering a foreclosure to avoid the following:
1. Don’t judge a house by looks alone. A $2 million mansion may look fabulous but have mold hiding beneath the walls or need numerous, costly repairs. A fixer upper, on the other hand, may look rundown but have excellent bones and can be repaired at a reasonable cost. A home inspection prior to purchasing a property can help buyers determine if they might be getting in over their head, Steward says. He cautions buyers to not just rely on previous inspections, however, since vacant homes can deteriorate rapidly.
2. Don’t focus on price alone. Buyers may focus on the ultra-low price so much that they forget to factor in other qualities, such as the home's school district, view, location, and crime rate. Steward cautions buyers to not assume that financial problems of the previous owner are the main reason for every foreclosure.
3. Don’t be tempted to “flip.” Purchasing a home at bargain price, updating it, and then trying to sell it for a lot more may seem tempting, but Steward warns buyers to be cautious. Unless the buyers are pros at house flipping, they’ll likely run into several novice mistakes in trying to make fast money on flipping a foreclosure. Steward recommends buyers consult a real estate professional, home inspector, and contractors before considering a flip.
4. Don’t go over budget. Foreclosures often require some fixes so buyers need to make sure they have the money to afford needed repairs. Steward recommends that buyers have at least half of the money in cash for needed repairs. He says that buyers will want to avoid taking more loans than needed, particularly private loans, because the interest on them will slowly chip away at their initial foreclosure bargain.
Source: “What to Watch Out for When Buying a Foreclosure: Help Your Clients Know Which to Buy ... and Which to Walk By,” RISMedia (April 7, 2011)
The 30-year fixed-rate mortgage continued to rise slightly for the third straight week, but still remains low by historical standards, reports Freddie Mac in its weekly mortgage market survey. The 30-year rate averaged 4.87 percent this week, but continues to be well-below its average of 5.21 percent a year ago.
The 15-year fixed-rate mortgage this week averaged 4.1 percent, up slightly from last week’s 4.09 percent.
The 5-year adjustable-rate mortgage also is inching up slightly, averaging 3.72 percent this week from 3.7 percent last week.
Overall, "mortgage rates were little changed after an encouraging employment report from the Bureau of Labor Statistics,” says Frank Nothaft, the chief economist at Freddie Mac. The improved job picture could soon provide a boost to housing. The unemployment rate fell for the fifth consecutive month in March to 8.8 percent--the lowest rate in two years, Nothaft notes.
But despite the improving job picture and low interest rates, the tightening of credit standards continue to keep some buyers out. KB Home this week reported a 32 percent drop in new home orders for the December through February quarter. Lennar Corp. said that its new homes also have fallen 12 percent in that same time period.
Source: “Mortgage Rates Change Little Amid Positive Employment Report,” Freddie Mac (April 7, 2011) and “Rate on 30-Year Mortgage Still Below 5 Percent But Housing Market Remains in Doldrums,” The Associated Press (April 7, 2011)
Living downtown is becoming increasingly appealing to college-educated 20- and 30-somethings.
In two-thirds of the country's 51 largest cities, the college-educated population in the past decade has grown twice as fast within 3 miles of urban centers when compared to the rest of the metro area, the USA Today reports. That is a jump of 26 percent, on average, compared with 13 percent in other parts.
Young adults with higher education, in particular, seem to be showing a preference for urban living. Young adults with a four-year degree are about 94 percent more likely to live near urban neighborhoods than less-educated young professionals. (In 2000, that number was about 61 percent.)
Even floundering downtowns are attracting more young people. For example, Detroit, which has faced a 25 percent drop in its population since 2000, has added 59 percent (or 2,000) young and educated residents during that time, according to Impresa Inc., an economic consulting firm.
Looking to keep the young vibe going strong, Detroit even has recently launched a campaign — ”15 by 15” — to bring 15,000 young, educated professionals to live in the downtown by 2015. To do that, they are offering cash incentives: A $25,000 forgivable loan to buy a home in downtown and stay there for at least five years or $3,500 on a two-year lease.
In Cleveland — another hard-hit metro area that has lost 17 percent of its population — young professionals are also re-emerging. Cleveland has increased its number of college-educated professionals between ages 25 to 34 who live downtown by 49 percent (or 1,300).
"Clearly, the next generation of Americans is looking for different kinds of lifestyles — walkable, art, culture, entertainment," Carol Coletta, who heads CEOs for Cities, told USA Today.
Source: “Young and Educated Show Preference for Urban Living; Even Shrinking Cities See More Moving Downtown,” USA Today (April 1, 2011)
More banks are investing thousands of dollars to fix up foreclosures in trying to spur sales and appeal to a broader buying pool. Banks have inherited plenty of foreclosed homes that have everything from water damage, mold, broken windows, and missing plumbing fixtures.
But while banks used to be hesitant to invest much money in fixing up these homes, more real estate pros say that banks are heeding their suggestions for repairs and seeing the benefits of how a little investment can make these properties more sellable. As such, they are paying for new paint and carpet, refinishing damaged floors, replacing old windows, and repairing leaky roofs.
They hope to extend the foreclosed homes’ appeal past traditional investors and professional rehabbers. For example, home buyer would have trouble securing a mortgage on homes that lenders deem “uninhabitable” because of needed repairs.
The banks interest in fixing up these properties also can help the overall real estate market because the foreclosed properties can sell at a higher price.
Real estate agents say they are making more suggestions to banks on how to spruce up the properties. First, they identify the target customer for a property. For example, if the home will likely appeal to owner-occupant, agents may recommend fixes such as paint to $25,000 kitchen remodel.
Source: “Banks Fixing Up Foreclosures to Spur Sales; Strategy Aims to Give Them Broader Appeal, Reduce Big Inventory,” The Chicago Tribune (March 13, 2011)
Buyers have a long list of what they want when home shopping, but one of their biggest desires: A good deal.
"And no matter where a seller prices their property, they're looking to negotiate," says Patricia Szot, president of the MetroTex Association of REALTORS®.
But that’s not all they want. Bankrate.com recently asked real estate professionals to chime in on the top desires of their buyers when home shopping. Here are four things that made the list of top home buyer preferences:
1. Homes that are in good condition. "There's not a lot of flexibility in that," says Ron Phipps, president of the National Association of REALTORS®. Many buyers now take the attitude: "I'd rather spend the money getting into the house" and not have to spend more money later, Phipps says. One of the major reasons is that "buyers have limited amounts of cash," he adds. "Even if they want to do a fixer-upper, they don't have the money to do it."
2. A bargain with incentives. Buyers are looking for a good deal, even when considering bank-owned properties, says Joan Pratt, real estate broker with RE/MAX Professionals in Castle Pines, Colo. "They want the short sales and the foreclosures and they want them to look like they're owner-occupied," she says. "They don't want to paint. They don't want to put carpet in. They don't want to clean."
And they aren’t only asking for a low price but they also want incentives to buy too. As such, sellers are offering everything from gift cards for new furniture to paint to financial assistance at closing.
3. Outdoor living areas. Homes with screen porches, outdoor kitchens, two-way fireplaces are becoming increasingly competitive in the marketplace as more buyers say they want more outdoor living space.
4. Open kitchens. "The wall between the kitchen and the family room is evaporating," Phipps says. "The kitchen is becoming part of the gathering space.”
Selective First-Time Buyers Can Miss Deals
Finding a "move-in ready" home was important to 87 percent of 300 first-time buyers recently polled by Coldwell Banker Real Estate. Some agents say first-timers are being more selective; and some are turning away from well-priced homes because they do not have granite countertops, they need a new carpet, or they have wall colors not to their liking.
Zillow says higher down payments and stricter underwriting standards mean today's buyers want to ensure their homes need few and inexpensive improvements.
Agents believe HGTV and other cable channels have made buyers more knowledgeable about home design, but some worry that such programming also has given buyers unrealistic expectations.
"You can't have the big yard, the top-line updates and all that in a starter home," says Cindy Westfall of Lake Oswego, Ore.-based Prudential NW Properties. "You've got to compromise somewhere or else you'll never buy anything."
Source: "Picky First-Time Buyers May Lose Out on Great Deals," Washington Post (March 5, 2011)
For-sale-by-owners are rare nowadays. In fact, the number of FSBOs dropped to record lows over the past year.
Unrepresented sellers make up just 11 percent of the market, down from 13 percent in 2009, according to the 2010 National Association of REALTORS® Profile of Home Buyers and Sellers.
With today’s more complex transactions--such as with short sales and foreclosures and frequent changes in mortgage lending--more sellers are finding comfort in the help of real estate professionals to guide them through the process.
FSBOs once were lured to try to sell themselves because they thought they could save on commission fees, but now sellers are realizing that if they don’t use an agent, it’ll likely cost them more in the long run, experts say.
"Selling by owner does not guarantee the seller will put 5 [percent] to 6 percent more in his or her pocket in trade for doing all the work and taking on potentially costly liabilities,” Margaret Woda, associate broker with Long & Foster in Crofton, Md., told The Washington Times. “On the contrary, prospective FSBO buyers have their eyes on that 5 percent to 6 percent as well. It's more likely the buyer will win this negotiation in a buyer's market with a huge price reduction--probably even larger than the saved commission."
Some FSBO sellers also often make the mistake of listing their home at a higher price than the market warrants. But even if they do find a buyer for that price, unless it’s a cash purchase, the home has to be appraised and many deals can then fall apart.
Source: “Fewer Sellers Going Do-it-Yourself Route,” The Washington Times (Feb. 11, 2011)
The 30-year conforming mortgage, a popular choice among borrowers, has been on the rise the last few weeks and inched above 5 percent last week for the first time in a year. Experts predict it will go even higher in the coming weeks too.
The 30-year fixed-rate mortgage most recently stands at 5.1 percent, compared to 4.2 percent from last October. That rise equates to about $50 extra in monthly payments for 30-year mortgage rate borrowers who have a median priced home of $170,000 with a 20 percent down payment.
While the rising rate could be significant for home owners, mortgage rates could rise even further--another point or two--without hampering the overall affordability of homes, says Paul Dales of Capital Economics in Toronto.
"Relatively low house prices mean that affordability remains very high by historical standards," Dales says.
The increase in rates mean buying a median house will consume 14 percent of the median income, which is still nearly half of the 25 percent median income Americans once sank into their homes during the housing bubble.
Experts say the continued weak job picture, skyrocketing foreclosures, and tighter lending standards are much more of a concern than the rising interest rates.
Source: “Don’t Sweat Rising Mortgage Rates,” CNNMoney.com (Feb. 15, 2011)
For the sixth straight week, fixed mortgage rates inched down, reaching new lows for 2011. The 30-year fixed-rate mortgage averaged 4.60 percent this week while the 15-year mortgage averaged 3.78 percent, Freddie Mac reports in its weekly mortgage market survey. 
