Borrowing costs got even cheaper for home buyers and refinancers last week, as mortgage rates continued to descend.
The 30-year fixed-rate mortgage averaged 3.66 percent last week, the lowest weekly average since May 23, 2013, Freddie Mac reports in its weekly mortgage market survey. What’s more, the 15-year fixed-rate mortgage dropped below 3 percent, also for the first time since May 2013.
Several experts at a conference in Miami a couple weeks ago called into question economist Robert Shiller’s recent comments that the housing market was starting to look “a little bubbly.” Shiller, who co-developed the S&P/Case-Shiller Composite 10 Home Price Index, has said he’s concerned some markets across the country may be over-correcting and starting to resemble a housing bubble.
However, a group of housing experts disagreed during the ABS East 2013 conference. Price appreciation is slowing, says Mark Fleming, CoreLogic’s chief economist. Fleming says that the rapid growth in appreciation in previous months was a correction after an overshoot in prices falling during the housing crisis.
“We are certainly not in a housing bubble,” added Laurie Goodman, who heads the Urban Institute.
Even if interest rates continue to move higher, the housing market would still be OK, say Goodman and Fleming. Goodman says that even with a 6 percent interest rate, affordability would remain at 2000-2003 levels.
As the costs of mortgages get bigger, could the size of homes buyers purchase get smaller?
According to financial Web site The Motley Fool, interest rates and home size are closely tied together. “As interest rates fell in the late 1970s, home sizes grew,” Motley Fool reports. “As rates rocketed in the early 1980s, home sizes contracted. After reaching a peak in the 1980s, mortgage rates have fallen precipitously, and homes have grown in almost every single year since.”
Have you been watching mortgage rates rise the past few months and wonder what that means for the housing market? So have a lot of other people!
Find out when mortgage rates are likely to bite and what other factors are influencing the current market nationwide.
The recent rise in mortgage rates has made buying a house a little more expensive: the increase in the 30-year fixed rate over the past month from 3.4% to 3.9% (Freddie Mac) raised the monthly payment on a $200,000 mortgage by $56, or 6%. However, because mortgage rates are still near long-term lows, and because prices fell so much after the housing bubble burst and remain low relative to rents even after recent price increases, buying is still much cheaper than renting. That means that the recent jump in rates doesn’t change the rent-versus-buy math much.
Rates are likely to keep rising, but how far must rates rise before buying a home starts to look expensive relative to renting?
Rising interest rates, rising prices and rising consumer confidence are creating a “positive cyclone of home sales activity,” according to members of the Northwest Multiple Listing Service earlier this month. A robust job market around the Greater Seattle area is also spurring sales.
Member-brokers reported 9,565 pending sales during July for an increase of more than 13.6 percent from a year ago – the highest year-over-year gain since January. Last month’s mutually accepted offers across 21 counties also marked a slight improvement on June’s total of 9,484 pending sales.
Rising mortgage rates aren’t the only problem house hunters are facing. Closing costs for loan origination and other fees have increased 6 percent in the past year, according to a survey by Bankrate.com.
Borrowers with stellar credit who are making a 20 percent down payment are still forking over an average of $2,402 in closing costs on a $200,000 loan.
Mortgage rates have climbed by more than a percentage point since late April.
If history is any indication, the recent spike in mortgage rates is going to have little to no impact on home prices, according to a new report from Fannie Mae.
After looking at mortgage rates going back to 1990, Fannie Mae’s researchers came to the surprising conclusion that while rising rates were likely to hurt the number of home sales, they had virtually no impact on home prices.
Though a recent surge in interest rates may dissuade some consumers from buying homes, the development also could have a silver lining for the real estate market: making mortgages available to more people.
With the recent spike in interest rates, refinances have plummeted. In the last week of May, shortly after Fed officials hinted that the Fed may scale back its stimulus program later this year, refinance applications dropped to their lowest level since November 2011, the Mortgage Bankers Association (MBA) reported.
With the average rate on a 30-year fixed-rate mortgage continuing to push higher, they have trended lower since then.
That’s chipping away at banks’ profits. JPMorgan and Wells Fargo recently reported that their earnings from refinances have dropped significantly in recent months.
Home prices and mortgage interest rates are rising, and people looking to buy a home for the first time are feeling the pressure.
In this installment of MSN’s Buying Advice, agents, a housing analyst and an economist share what to expect this year, and the latest housing statistics are also included.
Managing The Real Estate Details 