4 signs that housing is off to a good start in 2012by Tim Manni
Out with the old, in with the new. The start of a new year always seems to bring along aspirations of improvement. Whether that’s losing weight or refinancing your mortgage, new year’s resolutions are often short lived and quickly forgotten.
While your new and improved diet may not be lasting as long as you had hoped, optimism surrounding a better year in the mortgage and real estate markets is holding strong (at least for now).
Here are four examples that show how housing is off to a strong start in 2012:
1. Mortgage rates: We begin the year at record lows
Whether you’re shopping for mortgage rates for a purchase or refinance, as far as rates are concerned, it doesn’t get any better than this. Once again, mortgage rates have achieved new record lows.
According to HSH.com’s latest mortgage rate report, the “Weekly Mortgage Rate Radar,” rates on the most popular types of mortgages moved downward, closing the Wednesday-to-Tuesday wraparound weekly survey at record lows. The average rate for conforming 30-year fixed-rate mortgages fell by 4 basis points (0.04 percent) to 4.03 percent, while conforming 5/1 hybrid ARM rates decreased by 6 basis points, to an average of 2.96 percent.
“We’ve been holding near record lows for a number of weeks, so it took only a little downward blip to get us to new record levels,” said Keith Gumbinger, vice president of HSH.com. “Potential borrowers who were waiting to get through the busy holiday season before getting refinances or purchases started have been rewarded for their patience.”
2. Mortgage applications pick up
Speaking of potential borrowers waiting out the holiday season, the Mortgage Bankers Association reported this morning that mortgage applications rose 4.5 percent for the week ending January 6. The industry group said that the January increase comes after a significant slide in applications at the end of December.
While low rates and increased activity is a healthy sign for the embattled housing sector, these improvements could come at a cost.
“Should these [mortgage] rates attract enough borrowers, the increased demand might cause rates to firm up a little in coming weeks,” said Gumbinger.
What’s the solution? Act now, explains Gumbinger, “there’s little point in waiting to get a refinance started.”
3. Housing-related stocks are performing well
Is the stock market betting that housing has bottomed and poised for an uptick? One financial writer seems to think so.
Igor Greenwald, Senior Editor for MoneyShow.com, wrote last week that stocks geared toward the housing and home improvement sectors are translating into a turn for the better.
“The iShares Dow Jones US Home Construction ETF (ITB) combining homebuilders, home-improvement chains, and some of the remodeling plays is up by 33% in three months, vs. a 14% gain for the Dow Industrials,” wrote Greenwald recently.
“But even that doesn’t do the move justice. Housing plays, a sliver of the U.S. stock market by capitalization, are demonstrating some of the very best momentum around.”
4. Freddie Mac is providing needed relief
Two recent moves by Freddie Mac should help homeowners in need. First, Freddie announced that there will no longer be a minimum credit score requirement for borrowers with at least 20 percent equity who refinance through their current servicer.
While announced back in October, this change went into effect last Thursday. The old rules stated that borrowers must have a minimum score of 620.
On Tuesday we reported that Freddie Mac introduced a new mortgage forbearance option for unemployed homeowners. It states that servicers “must” assist borrowers experiencing a financial hardship due to unemployment.
“Previously, Freddie Mac had asked lenders to consider unemployment relief,” wrote HSH.com blogger Peter Miller. “This represents a big change, given that the new program is now a must.”
Before the change, Freddie Mac had allowed their servicers to grant up to three months of mortgage forbearance without their approval. With Freddie’s permission, the no-payment relief period could be extended to six months.
Freddie’s improved plan allows mortgage servicers to approve forbearance periods for Freddie borrowers for six months without prior Freddie approval, and a period of up to a year with Freddie’s approval.
Want to learn about what’s in store for housing and real estate in 2012? Be sure to read HSH.com’s 2012 outlook.