Home Prices and Inventory Rise; Mortgage Rates Back to Stable

by Ed Ferrara

The most recent report from the National Association of Realtors shows that the national median existing home price for the month of June increased 13.5% from June of 2012. This also was the 16th straight month of year-over-year price increases. At the end of June, total housing inventory also rose 1.9% and represents a 5.2 month supply which is still 7.6% lower than a year ago. Mortgage rates are once again stable after Federal Reserve Chairman Ben Bernanke testified at the House Financial Services hearing last week. With unemployment still high, he stated that monetary policy will remain “highly accommodative”.

According to the most recent survey of wholesale and direct lenders performed by FreeRateUpdate.com,  current conforming 30 year fixed mortgage rates are as low as 3.750% (APR 3.990%), 15 year fixed mortgage interest rates are as low as 2.750% (APR 3.313%) and 5/1 adjustable mortgage rates are as low as 2.375% (APR 2.651%). It is a requirement that borrowers have good credit in order to obtain low rates offered. According to the National Association of Realtors, existing home sales fell 1.2% in June, but were still 15.2% higher than June of 2012.

With mortgage rates down again, purchases should continue to increase, even if at a slow pace. The Mortgage Bankers Association reported that refinance applications were down for the week of July 12th. The refinance share of mortgage activity dropped to 63%, the lowest level since April of 2011. Applications for HARP loans also decreased to 34% from 35% a week ago. HARP refinances, which are for borrowers who have loans that were sold to Fannie Mae or Freddie Mac prior to June 1, 2009, have picked up recently as more homeowners are taking advantage of this easy way to move to a better mortgage. HARP will remain available until the end of 2015.

Current FHA 30 year fixed mortgage rates are as low as 3.625% (APR 4.098%), FHA 15 year fixed rates are as low as 3.375% (APR 3.925%) and FHA 5/1 adjustable mortgage rates are as low as 2.625% (APR 2.956%). While FHA loans continue to be popular with first time homeowners, many borrowers are concerned about the higher mortgage insurance fees. In addition, the annual MIP can no longer be canceled when the loan to value has reached 78%.

In addition, FHA closing costs (APR) are high because of the upfront mortgage insurance premium and other FHA fees. However, borrowers can use seller concessions up to 6% to reduce these costs. Despite these negatives, FHA offers many benefits. With an FHA loan, borrowers can refinance through the FHA streamline refinance which does not require any documentation or an appraisal. It still remains one of the easiest refinances available. Until the end of 2013, the FHA streamline with no cash out is being offered with reduced upfront and annual mortgage insurance premiums for borrowers who have loans that were endorsed prior to June 1, 2009.

Jumbo 30 year fixed mortgage rates are as low as 4.125% (APR 4.441%), jumbo 15 year fixed rates are as low as 3.000% (APR 3.518%) and jumbo 5/1 adjustable mortgage rates are as low as 2.750% (APR 2.909%). Borrowers must have excellent credit in order to receive low jumbo rates offered by lenders. In addition, strong qualifications for employment, income and assets are also necessary. While these loans are stricter, they also have very competitive rates and guidelines which are set by the lender. This makes it necessary for borrowers to shop around for the deal that will be suitable to their needs.

MBS prices (mortgage backed securities) affect mortgage rates which move in the opposite direction. After Bernanke’s comments last week, MBS prices rose which led mortgage rates down to a mortgage stable environment. Unemployment claims were down to 334,000 for the week ending July 13th, according to the U.S. Department of Labor. This number is 48,000 lower than the same week a year ago.

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