30-Year Mortgage Rate Falls to Another Record Low

U.S. 30-year and 15-year mortgage rates either tied or reached record lows in the latest week, according to a survey released Thursday by Freddie Mac, the second-largest U.S. mortgage finance company.

While rock-bottom rates offer a glimmer of hope for a housing market struggling to find footing in the aftermath of the expiration of popular home buyer tax credits, their impact on home loan demand has been tepid.

A weak jobs market and flailing economy continue to weigh on consumer confidence.

Interest rates on U.S. 30-year fixed-rate mortgages, the most widely used loan, averaged 4.32 percent for the week ended Sept. 30, down from the previous week's 4.37 percent and matching a record low set earlier in the month, according to the survey.

Rates were also below their year-ago level of 4.94 percent.


Freddie Mac started the survey in April 1971.

Fifteen-year fixed-rate mortgages averaged 3.75 percent, down from 3.82 percent last week, the lowest since Freddie Mac began surveying this loan type in 1991.

"Confidence in the state of the economy fell among consumers and businesses, which led to a decline in long-term bond yields and brought many mortgage rates to record lows this week," Frank Nothaft, Freddie Mac vice president and chief economist, said in a statement.

Mortgage rates are linked to yields on Treasuries and yields on mortgage-backed securities.

US Home Prices Slipped In July And May Stabilize Near Lows

Single-family home prices dipped in July, and are seen stabilizing near the lows without the homebuyer tax credit that ended in April, Standard & Poor's/Case-Shiller home price indexes showed Tuesday.

The S&P/Case Shiller composite index of 20 metropolitan areas declined 0.1 percent in July from June on a seasonally adjusted basis, as expected in a Reuters poll. The dip followed a 0.2 percent June rise, which was revised down from a 0.3 percent increase.

Unadjusted, the 20-city index gained 0.6 percent after June's 1 percent gain. A 0.4 percent rise was expected.

S&P, which publishes the indexes, also said home prices in the 20 cities index rose 3.2 percent from July 2009, a slower annual pace than the 4.2 percent increased in June.

Ten of the cities had annual gains and only Las Vegas set a new low, as the impact of the homebuyer tax credit faded away, S&P said. But the year-over-year growth rates slowed in 16 of the cities and both the 10- and 20-city composite indexes in July from the prior month.

"While we could still see some residual support from the homebuyers' tax credit, which covers purchases closing through September 30th, anyone looking for home prices to return to the lofty 2005-2006 levels might be disappointed," David M. Blitzer, Chairman of the Index Committee at S&P, said in a press release.

"Housing starts, sales and inventory data reported for August do not show signs of a robust market, and foreclosures continue," he said, adding "stable prices seem more likely."

The 20-city index showed home prices remain 27.9 percent below the peaks set in mid-2006.

Jax Most Affordable Real Estate In Fla.

A new ranking says Jacksonville is the most affordable real estate market of all the cities in Florida.

Coldwell Banker put together the list, which is based on average listing prices of four-bedroom, two-bath homes for sale in nearly 300 markets.

The most affordable city in the nation is Detroit, where the average price is $68,000.

Jacksonville ranked 59th, with an average price around $185,000.

Orlando ranked 88th at $202,000, and Tampa ranked 140th at $242,000.

Gainesville was close behind at 145th, with an average price of $247,000.

And the most expensive city in Florida is one of the most expensive in the country.

Key West is in 262nd place out of nearly 300, with an average price of $643,000.

Mortgage Demand Falls Despite Low Loan Rates

U.S. home loan demand fell for a third straight week though fixed mortgage rates slid near all-time lows, with potential buyers still unnerved by the jobs market, Mortgage Bankers Association data showed on Wednesday.

While the housing market is seen unlikely to plunge anew, it lacks traction. Unemployment and underemployment prevent many buyers from making such a big financial commitment.

Loan applications to buy homes and refinance declined last week despite average 30-year mortgage rates dropping 0.03 percentage point to 4.44 percent. At a record low dating back to 1990, the rate fell to 4.43 percent last month.

"I don't think we're going to see massive dips like we did before, but housing can't recover until employment recovers," said Margaret Kelly, chief executive of RE/MAX in Denver.

The housing market has been whip-sawed by a surge in demand before, and a plunge in demand after homebuyer tax credits ended on April 30.

Now the market enters a seasonally slower period, when sales typically slow after the school year begins and the winter approaches.

The industry group's mortgage market index that includes both purchase and refi applications fell 1.4 percent last week, seasonally adjusted, with purchase loan demand down 3.3 percent and refi requests off 0.9 percent.

Overall loan demand has grown over the past year, but refinancing far overshadows home buying, the MBA said. Applications to buy homes sank 38 percent from a year ago while refinancing requests jumped 51 percent.

About 8 of every 10 loans requested are for a refinance rather than a purchase.

The latest housing data depict a market that is scraping along the bottom.

New building rose to a four-month high in August and permits to build also increased, though single-family permits dropped for a fifth straight month.

Home sales reports later this week are seen showing improvement, from deeply depressed levels.

While borrowing costs and home prices are low, lending practices remain restrictive and a record stockpile of unsold foreclosed properties looms over the market.

"Home ownership is still the American Dream," Kelly maintains. "But what will change is the fact that for probably the last 10 years plus, people thought they could get into a home, live in it for three years, sell it and make 100 or 50 percent. That doesn't happen anymore."

As buyers become more realistic about the financial gains in housing, as well as more confident about jobs, sales will pick up, she said.

The Federal Reserve on Tuesday opened the door wider to giving more support to the economy, and reiterated its plan to keep interest rates near zero.

Housing Starts Zoom 10.5% in Surprise Sign of Optimism

U.S. housing starts increased more than expected in August to their highest level in four months and permits for future home construction rose, government data showed on Tuesday, suggesting the embattled housing market was starting to stabilize following the end of a tax credit.

The Commerce Department said housing starts rose 10.5 percent, the largest increase since November, to a seasonally adjusted annual rate of 598,000 units. July's residential construction was revised down to show a 0.4 percent gain, which was previously reported as a 1.7 percent increase.

Analysts polled by Reuters had expected housing starts to rise to a 550,000-unit rate. Compared to August last year, housing starts were up 2.2 percent.

New building permits rebounded 1.8 percent to a 569,000-unit pace last month after an unrevised 4.1 percent drop in July, lifted by a 9.8 percent rise in permits for multi-family units. Analysts had expected a 560,000-unit pace in August.

The housing market has hit a soft patch following the end of a popular homebuyer tax credit in April and a survey on Monday showed sentiment among home builders remained mired at an 18-month low in September.

A combination of high unemployment and an oversupply of homes are also weighing on the sector, which was the main catalyst of the worst recession since the Great Depression.

The downturn ended in June last year, but the economic recovery has since lost momentum, sparking fears in financial markets of a renewed recession.

Residential construction in August was lifted by a 32.2 percent jump in groundbreaking activity in the volatile multi-family segment to an annual rate of 160,000 units.

Single-family starts increased 4.3 percent to a 438,000-unit pace, the highest since June.

Home completions increased 5.6 percent to a 603,000-unit pace, also the highest since June. The inventory of total houses under construction was unchanged at 444,000 units last month, while the total number of units authorized but not yet started fell 3.1 percent to a record low 87,000 units.

Home Price Double Dip Begins

The trouble with many of the "indicators" we report is that some are pretty current and others are severely lagging. Home sales are generally the former and home prices the latter.

That's why, given the combination of the expiration of the home buyer tax credit and the increasing number of loans moving to final foreclosure, we knew that home prices overall would take a hit, but it would take a while.

Well we're here.

Two new reports out today prove the consequences of oversupply of organic inventory (12.5 months on existing homes in July according to the National Association of Realtors) and the shadow inventory of foreclosed properties (estimates vary widely and wildly). CoreLogic's Home Price Index shows home prices "flat" in July as transaction volume continues to decline. "This was the first time in five months that no year-over-year gains were reported," according to the release. In June, prices were up 2.4 percent year over year. In addition, "36 states experienced price declines in July, twice the number in May and the highest number since last November when prices nationally were still declining."

And there's the rub.

Prices have been recovering since last Fall, largely thanks to the artificial stimulus of the $8000/$6500 home buyer tax credit. But prices were also benefiting from a slight bump in confidence in the housing market, fed by an apparent drop in the foreclosure numbers. In reality, the foreclosure numbers were dropping only because banks and states were delaying the process, as they tried to cram as many borrowers as possible into what we now know is a largely unsuccessful government-backed mortgage modification program.


"Sellers on the market today have cut $29 billion off their collective home equity."

Trulia.com
August Report
Now home buyer confidence is back in the dumps, which is clear from another report out today showing that for the 3rd straight month the percentage of home sellers on the market who have slashed their asking prices at least once has gone up. Twenty-six percent of sellers on the market in August, according to Trulia.com, had lowered their expectations, and hence their prices. Sellers on the market today have cut $29 billion off their collective home equity.

We spoke to two sellers in Northern Virginia, Stephanie and Gabriel Mikulasek, who have dropped their asking price by $21,000. "We thought it was the value of the house that we could probably get, if the market would pick up a little bit, and people were a little positive," Gabriel told us. "What we found out is that the market is pretty slow; people are very hesitant to make bids, so we decided to make it a little more attractive and lessen it, and see how it goes."

They say today's buyers are only looking for great deals, so if you price the home at its actual value, nobody's interested. You have to go below.

Some of you responding on the blog yesterday said that your markets are just fine, even seeing competition in offers again; I'm sure this is true in many local areas. The trouble is that those areas are in the vast minority. Unless we see a marked, widespread increase in home sales over the next several months, prices will go from flat to down once again.

Home Ownership: Do You Really Need Skin in the Game?

Earlier this week the Federal Housing Authority implemented a new program called the Short Refi, which I discussed on the Realty Check.

It's a plan designed to give borrowers still current on their mortgages equity back in their homes, thereby reducing the chance that they will default intentionally.

It requires lenders to forgive principal, a minimum 10 percent, in return for a refi to an FHA insured loan.

Borrowers must have their primary loans reduced to 97.75 percent of the value of their homes.

At around the same time this program went into effect, the New York Times did a piece on a small program Fannie Mae is implementing through state housing finance agencies, which have been crippled by the recession. It's called Affordable Advantage, and it allows first-time home buyers in four states (Massachusetts, Minnesota, Idaho and Wisconsin) to get essentially no-money-down loans that are then sold to Fannie Mae. It requires $1000.00 down, but the couple profiled in the piece received a grant, and ended up paying just 67 cents for a $115,000 home.

The Fannie Mae program requires a minimum credit score of 680 (720 in Massachusetts) and the buyer must live in the home. All loans are 30-year fixed. The arguments for the program are persuasive: It wasn't the no-money-down loans themselves that fueled the housing crash, it was the poor underwriting. These loans are very strictly underwritten. Adjustable rate loans were the primary drivers of default, while these loans are fixed.

But what about borrowers having some skin in the game?

The government is trying to stem the tide of mortgage walkaways by creating programs that force lenders to give borrowers back home equity — and despite the small credit hit to the borrower, that's free equity. The Fannie Mae program, while helpful in getting new buyers into homes and easing some inventory, seems contradictory in its fundamental premise. The buyers in the Affordable Advantage program have no skin in the game from the start, and no guarantee that the home won't lose value over the next year.

Proponents argue that the state agencies funding the loans initially are working very closely with the borrowers, counseling them and doing all they can to keep them out of foreclosure. Yes, the program is quite small right now, but I'm guessing it will grow.

So how can the government (and yes, Fannie Mae's majority owner is the U.S. of A. Fannie Mae has not yet joined the FHA Short Refi program, but the FHA Commissioner told the Realty Check earlier this week that they were considering it.) on the one hand push lenders to give money back to borrowers, while on the other hand put brand new borrowers into a zero and potentially negative equity position all over again?