Thirty-year mortgages down again
Question: Joyce, with the Feds increasing interest rates, has there been a corresponding increase in real estate mortgage rates?Answer: Interestingly, mortgage rates fell for the fifth consecutive week, according to Freddie Macs weekly mortgage survey.The 30-year fixed-rate mortgage averaged 5.75 percent for the week ended today, down from last week when it averaged 5.78 percent, Freddie Mac reported. The average for the 15-year fixed-rate mortgage this week is 5.31 percent, down from last week when it averaged 5.33 percent. Points on both the 30- and 15-year mortgages averaged 0.6.The five-year, Treasury-indexed, hybrid adjustable-rate mortgage averaged 5.16 percent this week, with an average 0.6 point, down from 5.2 last week. The one-year Treasury-indexed adjustable-rate mortgage averaged 4.22 percent this week, with an average 0.7 point, up very slightly from last week when it averaged 4.21 percent.Long-term mortgage rates, which dropped again for the fifth consecutive week, remain low enough to keep refinancing activity a viable option for many, said Frank Nothaft, vice president and chief economist. Not only can homeowners take some equity out of their home, many may also be able to lower their mortgage rate at the same time.With some economic indicators showing signs that the economy is experiencing a soft spot at the moment, low mortgage rates will ensure that housing activity will continue to flourish throughout the spring buying seasonQuestion: Joyce, we have been advised to look into an adjustable rate mortgage for the purchase of a new home. It this a popular way to finance?Answer: Adjustable-rate mortgages, known as ARMs, and interest-only products accounted for a full 63 percent of U.S. mortgage originations in the second half of 2004, according to the Mortgage Bankers Associations Single-Family Mortgage Activity Survey released Wednesday.The survey covers mortgage activity during the third and fourth quarters of 2004. It represents about half of the mortgages originated last year.Consumers shift to ARMs when long-term rates rise and when the spread between long- and short-term rates widens. This happens at the end of every refinance boom, so its not a surprise that ARM share has risen over the last year, said Doug Duncan, MBAs chief economist and senior vice president. Duncan said this interest cycle is unusual because the increase in ARMs has occurred with a much smaller increase in rates than in past cycles. He said one reason for this is that appreciation in house prices leading up to this ARM cycle was much stronger than in previous ones. This created affordability constraints that led a number of buyers to seek lower payments with ARMs.Question: Joyce, what is the projection for the real estate market across the nation?Answer: Home sales are expected to soften to a better balance this year, with price gains slowing but remaining above historic norms, according to the National Association of Realtors.Sales of existing-homes, including single-family and condo, should ease 2.4 percent to a total of 6.62 million this year, second only to 6.78 million in 2004. New-home sales are forecast at 1.14 million in 2005, also the second highest, 5.0 percent less than the record of 1.20 million last year. Housing starts are expected to rise 1.4 percent to 1.98 million units in 2005, the highest level of housing construction since 1978.David Lereah, NARs chief economist, says the supply of homes remains tight. The simple fact is we still have more buyers than sellers in most of the country, he says. This supply-demand imbalance is continuing to put pressure on home prices, but we should get closer to equilibrium by the end of the year.The national median existing-home price for all housing types is seen to grow 6.3 percent in 2005 to $196,900. The median new-home price is projected to increase 5.6 percent this year to $232,800. In a balanced market, home prices typically rise at the rate of inflation, as measured by the Consumer Price Index, plus 1 to 2 percentage points.With pressure from higher oil prices, Lereah forecasts the CPI to rise 3.0 percent this year. Relative to inflation, home prices will continue to experience above average returns in 2005, Lereah says.Lereah expects the 30-year fixed-rate mortgage to rise gradually to 6.8 percent in the fourth quarter; for all of 2005, the rate should average 6.3 percent.NAR President Al Mansell, CEO of Coldwell Banker Residential Brokerage in Salt Lake City, says even with an expected rise, mortgage interest rates remain historically affordable. Aside from the last two years, we have to go back to the mid-1960s to find an interest-rate environment as favorable as expected this year, he says. Combined with the expansion of mortgage instruments designed for first-time buyers, we have an open window for people seeking the American dream of home ownership.Call JOYCE NENNINGER at (970) 468-6800 or (800) 262-8442 for answers to your real estate questions. Or e-mail Joyce@SummitRealEstate.com or you can visit her website at http://www.SummitRealEstate.com. She has lived in Summit County for more than 20 years. Joyce is the broker/owner of Summit Real Estate The Nenninger Team at the Dillon Ridge Marketplace. Her longtime residency and years of real estate experience can help you make the most of any buying or selling situation. She is a Certified Residential Specialist (CRS), the highest designation awarded to a Realtor in the residential sales field. She ranks in the top 4 percent of Realtors nationally.Summit County Colorado Real Estate
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