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You probably missed the double dose of good news from housing markets today as Wall Street and Washington continued with their barrage of apocalyptic news. The Mortgage Bankers Association reported that new mortgage applications for home purchases rose more than 3% last week as mortgage rates fell, while the National Association of Realtors reported that Pending Home Sales rose 7% in August and were nearly 9% above the August 2007 level. Now the weak credit markets have to support qualified buyers with actual closed mortgages and consumer confidence has to hold up in the face of declining investments and dour predictions.

Both 15-year and 30-year Fixed Rate Mortgage (FRM) rates dropped, while 1-year Adjustable Rate Mortage (ARM) rates were unchanged at 6.6% though points increased slightly.

Average Mortgage Rates

30-year FRM: 5.99%, 1.09 points*
15-year FRM: 5.71%, 1.16 points
1-year ARM: 6.6%, 0.37 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 Increase Slightly In Latest MBA Weekly Survey

WASHINGTON, D.C. (October 8, 2008) — The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the week ending October 3, 2008.  The Market Composite Index, a measure of mortgage loan application volume, was 465.5, an increase of 2.2 percent on a seasonally adjusted basis from 455.4 one week earlier.  On an unadjusted basis, the Index increased 2.2 percent compared with the previous week and was down 28.6 percent compared with the same week one year earlier.
The Refinance Index increased 0.9 percent to 1345.8 from the previous week and the seasonally adjusted Purchase Index increased 3.2 percent to 314.5 from one week earlier.  The Conventional Purchase Index increased 0.7 percent while the Government Purchase Index (largely FHA) increased 9.9 percent.
 
The four week moving average for the seasonally adjusted Market Index is down 1.4 percent.  The four week moving average for the seasonally adjusted Purchase Index is down 4.1 percent, while this average is up 1.8 percent for the Refinance Index.
The refinance share of mortgage activity decreased to 43.4 percent of total applications from 44.0 percent the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 2.3 percent from 2.5 percent of total applications from the previous week.
The average contract interest rate for 30-year fixed-rate mortgages decreased to 5.99 percent from 6.07 percent, with points decreasing to 1.09 from 1.12 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.
The average contract interest rate for 15-year fixed-rate mortgages decreased to 5.71 percent from 5.82 percent, with points increasing to 1.16 from 1.11 (including the origination fee) for 80 percent LTV loans.
The average contract interest rate for one-year ARMs remained unchanged at 6.60 percent, with points increasing to 0.37 from 0.33 (including the origination fee) for 80 percent LTV loans.

Pending Home Sales up Strongly
WASHINGTON, October 08, 2008
Pending home sales activity surged as buyers took advantage of low home prices and affordable interest rates, according to the National Association of Realtors®.
The Pending Home Sales Index,1 a forward-looking indicator based on contracts signed in August, jumped 7.4 percent to 93.4 from an upwardly revised reading of 87.0 in July, and is 8.8 percent higher than August 2007 when it stood at 85.8. The index is at the highest level since June 2007 when it stood at 101.4.
Lawrence Yun, NAR chief economist, said home buyers were responding to improved affordability. “What we’re seeing is the momentum of people taking advantage of low home prices, with pending home sales up strongly in California, Nevada, Arizona, Florida, Rhode Island and the Washington, D.C., region,” he said. “It’s unclear how much contract activity may be impacted by the credit disruptions on Wall Street, but we’re hopeful most of the increase will translate into closed existing-home sales.”
The PHSI in the West surged 18.4 percent to 109.5 in August and remains 37.8 percent above a year ago. In the Northeast the index jumped 8.4 percent to 79.8 and is 2.0 percent higher than August 2007. The index in the Midwest rose 3.6 percent to 84.5 in August and is 6.6 percent above a year ago. In the South, the index increased 2.3 percent to 96.0 but is 2.1 percent below August 2007.
Yun notes the unusual timing of contract activity in August. “Home buyers in July were hampered by overly stringent lending criteria in the months before the government takeover of Fannie and Freddie,” he said. “August shows some unleashing of pent-up demand before the credit crisis accelerated in September.”
He cautioned that the sampling size for pending home sales is smaller than the track on existing-home sales, so there is more volatility in the forward-looking series. “We need to see just how much of this gain holds up,” Yun said.
NAR President Richard F. Gaylord, a broker with RE/MAX Real Estate Specialists in Long Beach, Calif., said despite all the turmoil in world financial markets, home mortgages are available. “Mortgages have been harder to find, and availability and terms vary depending on credit score and location, but Realtors® can help buyers find reputable lenders while helping them navigate the transaction process,” he said. “The recently enacted economic stimulus package should help housing by gradually freeing the flow of credit.”
Yun now expects growth in the U.S. gross domestic product (GDP) to contract for two consecutive quarters, in the fourth quarter of this year and the first quarter of 2009, before expanding in latter part of 2009 as the housing market begins a steady improvement.
Looking at middle-ground assumptions, existing-home sales are forecast at 5.04 million this year and 5.41 million in 2009. Following national declines of 5 to 8 percent in 2008, home prices are projected to increase 2 to 3 percent next year.
New-home sales should total around 503,000 this year and 471,000 in 2009. Housing starts, including multifamily units, are likely to fall 28.2 percent to 973,000 units this year, and come in around 843,000 in 2009 as builders continue to clear the accumulation in inventory.
The 30-year fixed-rate mortgage will probably average 6.1 percent in the fourth quarter and rise gradually to 6.6 percent by the end of 2009. NAR’s housing affordability index is expected to average 18 percentage points higher this year than in 2007.
The unemployment rate is projected to average 6.4 percent in the fourth quarter and then average 6.6 percent in 2009. Inflation, as measured by the Consumer Price Index, is estimated at 4.0 percent for 2008 and 2.0 percent next year. Inflation-adjusted disposable personal income is forecast to grow 1.7 percent this year and 1.0 percent in 2009.