Mixed signals continue to abound in the US housing market as the National Association of Realtors announced that March pending home sales fell 1% on the same day that the Mortgage Bankers Association announced a 15% jump in mortgage applications and a better than 12% jump in purchase mortgage applications. The increase in mortgage applications highlights the futility of applying a seasonal adjustment to pending home sales, which are influenced by short term cycles of weather and interest rates and short term consumer planning that don’t fit broad seasonal trends. In the case of March sales, buyers had ample reason to put off buying for a couple of months - adding an $1800 tax rebate for a family of four to the down payment fund, a potential tax credit for buying foreclosure properties as early as this summer and temporary turbulence that drove mortgage interest rates up for a few weeks in March and April. Now that those rate problems have resolved themselves with 30-year Fixed Rate Mortgage (FRM) rates below 6% and 15-year FRM rates below 5.5%, buyers are back at the table.
Average Mortgage Rates
30-year FRM: 5.91%, 1.12 points*
15-year FRM: 5.49%, 1.07 points
1-year ARM: 6.77%, 1.35 points
* Points reported by Mortgage Bankers Association in this survey include origination fees as well as traditional discount points. Average rates are based on an 80% LTV loan. This means a loan amount no more than 80% of the property value as determined by the lower of the purchase price or appraised value. Typically this means a 20% down payment, though an 80% loan can also be achieved with a second mortgage carried by the seller or a third party lender for the difference between the actual down payment and 20%.
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Mortgage applications dropped for a second week, according to the Mortgage Bankers Association’s Weekly Mortgage Applications Survey. Fixed rate mortgage (FRM) and Adjustable Rate Mortgage (ARM) rates both dropped slightly and points increased for all loan terms.
1-Year ARM rates remained near 7% and 30-year FRM rates were still above 6%, while 15-year FRM rates dropped to 5.53%, making the 15-year rate even more attractive. For a 100,000 loan, the ARM principal and interest payment would be 655.93 for 30-years, while the 15-year Fixed Rate would have the house paid off in 15-years at 818.68/month. $163 month pays off the loan in half the time and saves $88,772.40 in interest payments - almost as much as the purchase price of the house.
Average Mortgage Rates
30-year FRM: 6.01%, 1.26 points*
15-year FRM: 5.53%, 1.24 points
1-year ARM: 6.86%, 1.40 points
* Points reported by Mortgage Bankers Association in this survey include origination fees as well as traditional discount points. Average rates are based on an 80% LTV loan. This means a loan amount no more than 80% of the property value as determined by the lower of the purchase price or appraised value. Typically this means a 20% down payment, though an 80% loan can also be achieved with a second mortgage carried by the seller or a third party lender for the difference between the actual down payment and 20%.
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The big news in housing this week was the 8.5% drop in new home sales in March 2008, with sales down more than 36% from March 2007. The worse news was a $16,500 (6.8%) drop in new home prices from February. But the news buried a bit deeper and even more troubling is that the inventory of new homes for sale nationally now represents an 11-month supply at the current sales rate.
A couple of points may mitigate the damage. With the individual economic stimulus payments due out starting in May, bills currently in Congress to potentially give home buyers a $7,000-$7,500 tax credit (details still sketchy) and mortgage markets still experiencing difficulties, some buyers may be waiting. Other buyers may be waiting for bargains, after median home prices for new homes rose $28,100 from January to February - sales could rebound at the lower price point in April .
Some buyers may be holding off until the tax credit proposals are firmed up a bit. The version in the House would give a $7,500 tax credit to any first time home buyer for any home purchased; the Senate version would be $7,000, not limited to first time home buyers, but could only be used to purchase a foreclosed home or an unsold new home. Even if neither passes, eliminating the uncertainty could move some buyers off the sidelines.
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15-year and 30-year Fixed Rate Mortgage (FRM) rates rose more than a quarter percent last week, while Adjustable Rate Mortage (ARM) rates remained near 7%, pushing mortgage applications down by 14% from the previous week. Purchase applications fell 6.4%, while refinance applications, which are particularly sensitive to interest rates, fell more than 20%.
Average Mortgage Rates
30-year FRM: 6.04%, 1.04 points*
15-year FRM: 5.60%, 1.06 points
1-year ARM: 6.93%, 1.38 points
* Points reported by Mortgage Bankers Association in this survey include origination fees as well as traditional discount points. Average rates are based on an 80% LTV loan. This means a loan amount no more than 80% of the property value as determined by the lower of the purchase price or appraised value. Typically this means a 20% down payment, though an 80% loan can also be achieved with a second mortgage carried by the seller or a third party lender for the difference between the actual down payment and 20%.
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Existing home sales for all housing types - single family, condo, coop and townhome - fell 2% in March, while single family sales fell 2.7% according to the National Association of Realtors report issued Tuesday. This puts total sales 19.3% below year ago levels and single famliy sales 18.4% below year ago levels, in line with the overall trend the last six months, though the drop for March was larger than many had expected.
The median price for all housing types was down 7.7% from March 2007, to $200,700, while the single family median price was down 8.3% from March 2007 to $198,200 in March 2008. Inventories rose 1% and the supply increased to 9.9 months sales from 9.6 months sales in February.
Regionally sales rose in the Northeast and West and fell in the Midwest and South. Prices were down from last year in every region except the Northeast, where the median price was up 4.6%.
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