Mortgage Rates Trickle Down


Average fixed mortgage rates have dropped slightly from last week's post-Brexit high, according to Freddie Mac's recently released Primary Mortgage Market Survey® (PMMS®).
 
"The 10-year Treasury yield declined after last week's post-Brexit high in anticipation of the Fed's September policy meeting,” says Sean Becketti, chief economist, Freddie Mac. “The 30-year fixed-rate mortgage followed Treasury yields, falling 2 basis points and settling at 3.48 percent. Despite the decrease in rates, the Refinance Index plunged 8 percent to its lowest level since June.”

The 15-year FRM this week averaged 2.76 percent with an average 0.5 point, down from last week when it averaged 2.77 percent. A year ago at this time, the 15-year FRM averaged 3.08 percent. 

The 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.80 percent this week with an average 0.5 point, down from last week when it averaged 2.82 percent. A year ago, the 5-year ARM averaged 2.91 percent.
 
For more information, visit www.freddiemac.com

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Home Purchase Sentiment Index Reaches New High


As the market makes bold moves, Fannie Mae’s Home Purchase Sentiment Index® (HPSI) increased 3.3 points to 86.5 in July, reaching a new all-time survey high and indicating a more positive outlook in the housing market-specific HPSI components. Each of the six HPSI components increased in July. The largest increases were seen in the net share of consumers who expect home prices to go up over the next 12 months, which rose 8 percentage points after a drop in June, and the net share of consumers who expect mortgage interest rates to go down over the next 12 months, which rose 5 percentage points. The Household Income component also rebounded after dropping in June, rising 3 percentage points to 11 percent. Notably, the share of consumers who said they would buy if they were going to move increased to 67 percent, while the share of consumers who said they would rent moved down to 26 percent, equaling an all-time National Housing Survey® low.
 
“The HPSI reached a new survey high in July, but enthusiasm should be tempered because the increase only returns the index to a very gradual upward trend,” says Doug Duncan, senior vice president and chief economist at Fannie Mae. “One interesting potential bright note for housing in the July survey is that younger households may finally be shifting toward buying rather than renting in greater numbers. Whether the shift in sentiment in July toward buying rather than renting on their next move holds up or is a temporary reaction to their view that rents are on the rise and mortgage rates will be lower, we will see. However, we are getting set to release some additional research in early August showing evidence of a broader move by older millennials in the direction of ownership.”
 
Continuing the increase from June, the net share of Americans who say it is a good time to buy a house rose by 1 percentage point to 33 percent. The net percentage of those who say it is a good time to sell a house rose 2 percentage points in July to 20 percent – reaching a new survey high for the second consecutive month. A survey high and low were reached for those who think it is a good time and bad time to sell, respectively.

The net share of Americans who say that home prices will go up recovered from a drop in June, rising 8 percentage points to 41 percent. The net share of those who say mortgage rates will go down over the next twelve months rose 5 percentage points to negative 36 percent, continuing the overall upward trend since the start of 2016.

The net share of Americans who say they are not concerned with losing their job rose 1 percentage point to 69 percent. The net share of Americans who say their household income is significantly higher than it was 12 months ago rose 3 percentage points to 11 percent after June’s sharp decline.
 
For more information, visit www.fanniemae.com

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Mortgage Applications Drop 11 Percent


Mortgage applications decreased 11.2 percent from one week earlier, according to data from the Mortgage Bankers Association's (MBA) Weekly Mortgage Applications Survey for the week ending July 22, 2016.

The Market Composite Index, a measure of mortgage loan application volume, decreased 11.2 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 11 percent compared with the previous week. The Refinance Index decreased 15 percent from the previous week. The seasonally adjusted Purchase Index decreased 3 percent from one week earlier to the lowest level since February 2016. The unadjusted Purchase Index decreased 3 percent compared with the previous week and was 12 percent higher than the same week one year ago.

The refinance share of mortgage activity decreased to 61.1 percent of total applications from 64.2 percent the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 4.7 percent of total applications.

The FHA share of total applications increased to 10.1 percent from 9.9 percent the week prior. The VA share of total applications increased to 11.9 percent from 11.2 percent the week prior. The USDA share of total applications increased to 0.6 percent from 0.5 percent the week prior.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) increased to 3.69 percent from 3.65 percent, with points unchanged at 0.36 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The effective rate increased from last week.

The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,000) increased to 3.67 percent from 3.66 percent, with points unchanged at 0.32 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.

The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased to 3.56 percent from 3.53 percent, with points increasing to 0.35 from 0.30 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.

The average contract interest rate for 15-year fixed-rate mortgages increased to 2.94 percent from 2.90 percent, with points increasing to 0.32 from 0.31 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.

The average contract interest rate for 5/1 ARMs increased to 2.96 percent from 2.86 percent, with points increasing to 0.30 from 0.29 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.

For more information, visit www.mba.org

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Mortgage Volume Rises in Q1 2016


Total mortgage volume increased in Q1 2016 when compared to opening quarters in previous years, according to Equifax Inc.'s May 2016 National Consumer Credit Trends Report.

Total new accounts and year-over-year increases for the first quarter of 2016 include:

  • Home equity installment loans: 182,400, an increase of 23.5 percent and an eight-year high for an opening quarter;
  • First mortgages: 1.86 million, an increase of 10.3 percent; and
  • Home equity lines of credit (HELOC): 314,400, an increase of 10.2 percent.

Similarly, the latest data shows that lending to borrowers with subprime credit scores (consumers with an Equifax Risk Score™ of 620 or below) – as a share of total lending – has remained consistent for the third consecutive year. New first mortgage accounts to subprime borrowers during Q1 of 2015-2016 have increased on a consistent basis alongside that of prime lending, with approximately 95 percent accounting for prime loans and 5 percent accounting for subprime loans.

“The first quarter of 2016 was a strong one for mortgage lending and underwriting practices appear to have maintained their rigour over the last three years,” says Amy Crews Cutts, chief economist for Equifax. “We anticipate that the second quarter of 2016 will maintain this trend. And later this year, the much-anticipated addition of trended credit data to the mortgage underwriting process will help to strengthen the marketplace further by helping to statistically separate lower risk borrowers from those presenting higher risk.”

First Mortgages

The total dollar amount of first mortgage originations in Q1 2016 is $450.5 billion, a year-over-year increase of 12.3 percent, realizing the highest amount for a first quarter total since 2013. The total balance of new mortgages originated for borrowers with subprime credit scores in that same time was $16.2 billion, a year-over-year increase of 38.7 percent.

Home Equity Installment Loans

The total balance of new loans originated for borrowers with subprime credit scores in Q1 2016 was $454.9 million, an increase of 28 percent; in that same time, the total origination balance on all loans was $5.87 billion, an increase of 14.1 percent.

The average loan amount on new subprime home equity instalment loans increased 9.6 percent from Q1 2015-2016, while in that same time the average loan amount on all home equity instalment loans increased 1.7 percent.

Home Equity Lines of Credit (HELOC)

The total credit limits of new loans originated in Q1 2016 was $35.2 billion, a year-over-year increase of 14 percent and an eight-year high. Total originations and credit limits represent an eight-year high for an opening quarter. The total credit limits on new subprime loans in Q1 2016 was $169.6 million, an increase of 10.7 percent over Q1 2015.

For more information, visit www.equifax.com.

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Foreclosed Homes Boomerang in Value


Homes that were foreclosed during the housing crisis have gained almost twice as much value as other homes, according to a new Zillow® analysis. But the original owners of those homes have not benefited from that recovery.

Since low-end homes were much more likely to be foreclosed, the new analysis shows how the housing crisis worsened the gap between rich and poor in the U.S.

During the run-up to the housing bubble, many low-income earners bought homes, and the homeownership rate rose from about 65 percent in the mid-1990s to almost 70 percent in 2006. When home values crashed in 2007, millions of homeowners had to walk away – abandoning their initial investment and missing the opportunity to gain equity as home values recovered.

Here are some key points from the report, which can be found at Zillow Research:

  • The rich-poor divide is growing in the U.S. In 2000, high-income households made an average of six times as much income as the lowest third of households. In 2015, the top third made nearly seven times as much as the lowest third.
  • During the run-up to the housing bubble, many low-income earners bought homes, and the homeownership rate rose from about 65 percent in the mid-1990s to almost 70 percent in 2006.
  • Of all foreclosed homes, 46.7 percent were among the least expensive third of homes. Only 16.6 percent were among the most expensive third.
  • Foreclosed homes gained value faster than other homes, and in many markets, are more valuable now than they've ever been. Since the lowest point in the housing bust, the average U.S. home has risen 22 percent in value, while the average foreclosed home has risen 39 percent in value.
  • In many cases, investors bought foreclosed homes and converted them into rental properties, benefiting from the recovery as home values bounced back. The percentage of single-family homes being rented out has risen from 13 to 19 percent over the past decade.

"Income inequality is an important topic in the U.S. right now, because the gap between the richest and poorest Americans is growing," says Zillow Chief Economist Dr. Svenja Gudell. "Many lower-income Americans lost their homes during the foreclosure crisis, forcing them to pay ever-increasing rents and locking them out of the benefits of the housing market recovery."
 
For more information, visit www.zillow.com

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Buying a Home for the First Time? What You Should Know About Warranties


Home service contracts, or home warranties, are an important consideration in the home-buying process, especially for new homeowners.

“Homes are a major financial investment, and repairs and replacements on appliances and major systems can cost anywhere from $700 to more than $3,500,” explains Tim Meenan, CEO and executive director of the Service Contract Industry Council (SCIC). “While new homeowners face numerous expenses, a home service contract can guard against these unexpected pricey repairs and replacements.”

Generally, a home service contract covers repair or replacement costs of major systems or appliances that fail within the contract period—often one year. This may include coverage of the home’s electrical system, HVAC unit and plumbing system. Typically, the contract can be renewed annually. Most contracts come with a nominal service fee, paid at the time of the incident.

Aside from monetary coverage, the home service contract provider will refer the buyer to a vetted contractor who can perform repair or replacement work—a boon to buyers new to an area.

Most homeowners with home service contracts call upon the contract provider two times or more each year.

The SCIC strongly recommends first-time homebuyers negotiate a home service contract before committing to a home. If you’re new to home-buying, discuss your options with your real estate professional—he or she can offer counsel for your circumstances.

The peace of mind, Meenan says, is worth it.

Source: Service Contract Industry Council (SCIC)
 

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Gated Community Homes Demand Higher Prices


To see gated community homes in NW Tucson, give us a call at (520) 665-3535.

Homes in gated communities command significantly higher prices – almost $30,000 on average – but these neighborhoods’ additional amenities can also reduce sale prices because they bring maintenance costs that outweigh the benefits of the amenities, according to recent research published by the American Real Estate Society (ARES).

“This study provides clear evidence that homes in gated communities sell at a premium relative to comparable homes in non-gated communities,” said ARES Publication Director Ken Johnson, Ph.D., real estate economist at Florida Atlantic University’s College of Business and co-developer of the Beracha, Hardin and Johnson Buy vs. Rent Index.

Johnson refers to a study published by ARES in the Journal of Real Estate Research, conducted by professor Evgeny L. Radetskiy, Ph.D., of La Salle University and professors Ronald W. Spahr, Ph.D., and Mark A. Sunderman, Ph.D., of the University of Memphis.

The study examined a sample of 11 gated communities and a sample of matched non-gated properties, using a data set of housing sales in Shelby County, Tennessee. The researchers found that residential properties in gated communities command a noticeable price premium of approximately $30,000, most likely resulting from actual or perceived benefits associated with additional privacy, homeowner associations’ tighter controls on maintenance, home design and the added assurances against crime and other undesirable activities.

However, the study also found the presence of additional amenities – clubhouses, community swimming pools, tennis courts, etc. – within gated communities reduces sale prices by approximately $19,500. Sunderman explains that “additional maintenance costs associated with these amenities often outweigh their benefits, and it appears that while a gate has value, additional neighborhood amenities do not always provide additional value.”

So, what does all this mean to buyers and sellers? “The long-held belief that gates add value is supported by the data, as long as the impact of the amenities is properly factored in,” Johnson says. “This should set buyers’ minds to rest as to whether or not they are actually receiving a boost in value when they purchase inside a gated community.”

Sunderman adds: “From the perspective of both the buyer and the seller, this information should help each to better price property. A good understanding of what adds value and what does not should help create increased marketability of gated homes.”

For more information, visit www.fau.edu.

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