Tag Archives: Fixed rate mortgage

May 2014 U.S. Economic and Housing Market Outlook

May 21, 2014 jd

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MCLEAN, VA–(Marketwired – May 19, 2014) – Freddie Mac (OTCQB: FMCC) released today its U.S. Economic and Housing Market Outlook for May, showing that regular supply and demand forces continue to produce unexpected results as the housing recovery readies to shift into a higher gear during the spring home buying season. The complete May 2014 U.S. Economic and Housing Market Outlook and forecast table are available here.

Outlook Highlights

Projecting new home construction to increase by 18 percent, and house price appreciation moderating to an annual growth of 5 percent in 2014.
Maintaining new and existing home sales at 5.5 million for 2014, the same as for 2013, as the inventory of homes available for sale remains low in many markets.
Single-family originations are expected to drop about 35 percent in 2014 relative to 2013, based on the large decline in refinance volume. Refinance is expected to represent about 40 percent of this year’s originations, down from about 60 percent in 2013.
While net household formation continues to increase, the overall level remains lower than what would be expected; stronger job and income growth are necessary to support additional household formation.
Expect the 30-year fixed-rate mortgage to gradually rise higher, ending the year around 4.6 percent. We expect fixed rates to rise gradually during the second half of the year in part as a result of the Federal Reserve’s “tapering” of net MBS acquisitions.

Quote
Attributed to Frank Nothaft, Freddie Mac vice president and chief economist.

“The housing recovery is struggling to shift into a higher gear, and obviously there are various imbalances holding this back from happening, but at the heart of the matter it comes down to jobs. Housing needs stronger, and just as important, sustained levels of job creation to get the housing engine firing on all cylinders. April’s jobs numbers were encouraging, and nothing will solve the supply and demand factors faster than keeping employment growth going. Until we see this happening, we’re revising our forecast lower in several areas on an annualized basis. While we still see an improving trajectory for the housing market, we’re pushing it out a few months from our earlier forecast because we expect GDP growth to pick up in the final three quarters of the year from what was clearly a dismal first quarter reading.”

Freddie Mac was established by Congress in 1970 to provide liquidity, stability and affordability to the nation’s residential mortgage markets. Freddie Mac supports communities across the nation by providing mortgage capital to lenders. Today Freddie Mac is making home possible for one in four home borrowers and is one of the largest sources of financing for multifamily housing. Additional information is available at FreddieMac.com, Twitter @FreddieMac and Freddie Mac’s blogFreddieMac.com/blog.

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Real Estate

4 Keys to Real Estate Recovery

January 17, 2014 jd

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In order to have a fully recovered housing market and economic recovery, economists point to the need for four positive indicators:

1. A healthy job market with low stable unemployment;

2. Mortgage delinquencies that have returned to historical averages;

3. Home prices consistent with an affordable mortgage payment–to–income ratio; and

4. Home sales that are in the range of historical norms.

So, is the housing market inching closer?

Freddie Mac’s U.S. Economic and Housing Market Outlook for January takes a look at how the housing market is performing among these four indicators. Economists note that the unemployment rate — while inching down — still remains high at 6.7 percent. Meanwhile, mortgage delinquencies have fallen to 5.88 percent — nearly half of their peak rate but still higher than the national average of about 2 percent, Freddie notes.

Home prices still have some room to grow without outpacing income growth, economists say.

“From 1999–2006, mortgage payments on a hypothetical 30-year fixed-rate mortgage would have increased by 50 percent more than income growth,” Freddie Mac notes in the report. “Currently, payment-to-income ratios are only 60 percent of the level we had in 1999, suggesting room for continued housing growth.”

Finally, home sales have risen over the past two years but remain below levels from a nearly a decade ago. Home sales, historically, average a rate of about 6 percent of the housing stock every year. They dropped to 4 percent during the housing crisis. Economists are predicting a 5.7 percent pace in 2014.

“As we start 2014, the housing recovery continues its steady pace,” Frank Nothaft, Freddie Mac’s chief economist. “House-price gains will likely moderate from last year’s pace but rise about 5 percent in national indexes. Home sales, as well as other key indicators, continue to trend in the right direction, although in some markets we are seeing the sales recovery strengthen while many others remain weak.”

Source: Freddie Mac and “Are We There Yet? Freddie Mac Says Recovery Has a Ways to Go,” Mortgage News Daily (Jan. 16, 2014)

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Real Estate

Housing Affordability Declines as Interest Rates Go UP

December 20, 2013 jd

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The majority of housing markets remain affordable to the average family, but rising mortgage rates and rising housing prices are causing more families to have to stretch financially, according to Freddie Mac’s U.S. Economic and Housing Market Outlook for December.

“Rising mortgage rates and rising housing prices over the past six months are making it more challenging for the typical family to purchase a home without stretching beyond their means, especially in the Northeast and along the Pacific Coast,” says Frank Nothaft, Freddie Mac’s chief economist. “Like most, we expect mortgage rates to rise over the coming year, so it’s critical we start to see more job gains and income growth in the coming year. This will help to keep payment-to-income ratios in balance — an important factor not only for first-time buyers but for sustaining homeownership levels among existing owners.”

According to Freddie Mac’s report, more than 70 percent of the nation’s housing stock remained affordable to the typical family in the third quarter at a 4.4 percent interest rate for a 30-year fixed-rate mortgage. However, that percentage decreases to about 63 percent at a 5 percent mortgage rate; 55 percent at a 6 percent interest rate; and 35 percent at a 7 percent interest rate.

Source: Freddie Mac

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Housing Set to Boost Economy in 2014

Real Estate

Mortgage Rates Continue to Rise

July 14, 2013 jd

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Freddie Mac today released the results of its Primary Mortgage Market Survey(R) (PMMS^®), showing average fixed mortgage rates continuing to trend higher for the week on more market speculation that the Federal Reserve will reduce future bond purchases following June’s strong employment report.

News Facts

30-year fixed-rate mortgage (FRM) averaged 4.51 percent with an average 0.8 point for the week ending July 11, 2013, up from last week when it averaged 4.29 percent. Last year at this time, the 30-year FRM averaged 3.56 percent.
15-year FRM this week averaged 3.53 percent with an average 0.8 point, up from last week when it averaged 3.39 percent. A year ago at this time, the 15-year FRM averaged 2.86 percent.
5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.26 percent this week with an average 0.7 point, up from last week when it averaged 3.10 percent. A year ago, the 5-year ARM averaged 2.74 percent.
1-year Treasury-indexed ARM averaged 2.66 percent this week with an average 0.5 point, unchanged from last week. At this time last year, the 1-year ARM averaged 2.69 percent.

Average commitment rates should be reported along with average fees and points to reflect the total upfront cost of obtaining the mortgage. Visit the following links for the Regional and National Mortgage Rate Details and Definitions. Borrowers may still pay closing costs which are not included in the survey.

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Real Estate

When an Adjustable-rate Mortgage Makes Sense

September 7, 2012 jd

Photo credit Cleveland Seniors www.http://www.clevelandseniors.com/forever/headlines.htm — Photo credit Cleveland Seniors www.http://www.clevelandseniors.com/

When the housing market began declining, many people claimed that adjustable-rate mortgages (ARMs) were the cause. However, recently they’ve been making a comeback, especially among affluent borrowers

An ARM offers an introductory period in which the borrower pays a lower interest rate than with a fixed loan; after that, the rate can fluctuate up or down.

With rates near historic lows, the safety of locking in a fixed-rate appeals to many borrowers. But these borrowers are paying a premium for that security. The spread between rates on 30-year fixed-rate mortgages and the most-popular ARMs now stand at about one percentage point, more than double the difference just five years ago.
That means that homeowners who are planning to either move or pay off their mortgage over the next few years can save big with an ARM.
Borrowers can determine if an ARM is the right loan option for them by looking at their financial situation and the terms of the ARM. ARMs carry risks in periods of rising interest rates, but can be cheaper over a longer term if interest rates decline. An ARM may be a good option to consider for borrowers who plan to own the home for only a few years, expect an increase in future earnings, or the prevailing interest rate for a fixed-rate mortgage is too high.
Before deciding to apply for an ARM, borrowers should consider if their income is likely to rise enough to cover higher mortgage payments if interest rates increase; whether they will be taking on other sizable debts such as car loans or school tuition in the near future; how long they plan to own the home; and whether their mortgage payments can increase even if interest rates generally do not increase.

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Real Estate

Taking Advantage of Low Mortgage Rates

June 22, 2012 jd

English: Mortgage debt — Mortgage debt (Photo credit: Wikipedia)

Mortgage rates continue to set new record lows, leaving many home buyers and re-financers wondering how low rates can go and how to capture the best rates now.

Many economists are forecasting that mortgage rates will rise again later this year as the American economy gradually improves and as more global investors turn to the U.S. as a safe haven for money.
The average rate on a 30-year fixed-rate mortgage averaged 3.71 percent the week of June 14.
The rate had averaged 3.9 percent three months earlier and 4.5 percent a year earlier.
According to one economist, rates could possibly fall further, perhaps as much as a quarter of a percentage point, but it is more likely that they would start a “slow drift” upward.
Those planning to refinance or buy a home in the next two or three months might want to consider locking in a mortgage rate now.
Borrowers with rate locks, with a built-in deadline, often receive priority treatment from lenders, because the borrower is telling the lender that he or she is serious about closing soon.
Lock-in costs and policies vary widely, and are based partly on the time frame the borrower wants covered. Most borrowers will need a 60- to 90-day lock.
If interest rates continue to fall during the lock period, borrowers can ask the lender to rewrite the rate lock at an additional cost, or obtain a “float-down” provision in the original agreement. A lock with a float-down agreement allows the borrower to change the rate, often only once, before closing on the mortgage. This option is generally more expensive than a standard lock.

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