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January 3rd, 2013

It’s winter, but spring already looks promising



WinterIt’s only Jan. 3, but the wheels are already in motion for a busy spring homebuying season. Mortgage rates, home prices and home sales are currently in line to offer buyers some great deals, refinancers low rates and home sellers the opportunity to turn a profit.

Mortgage rates

Whether you’re buying or refinancing, low mortgage rates matter a great deal. If you’re buying, lower interest rates increase your purchasing power. If you’re refinancing, low and/or falling rates offer greater opportunities to save on your monthly payment.

Rates on the most popular types of mortgages declined slightly for week ending Jan. 1, according to HSH.com’s Weekly Mortgage Rates Radar. The average rate for conforming 30-year fixed-rate mortgages fell by three basis points (0.03 percent) to 3.49 percent. Conforming 5/1 Hybrid ARM rates decreased by five basis points, closing the Wednesday-to-Tuesday wraparound weekly survey at an average of 2.68 percent.

Just before 2012 came to a close, the Federal Reserve provided some additional guidelines as to when interest rates would eventually rise. Don’t worry, it won’t be for a while. The Fed removed hard dates concerning the expiration of their programs designed to keep rates low. Instead, the Fed has replaced end dates with market-based guidelines.

The Fed will hold their programs and interest-rate targets in place as long as the unemployment rate remains above 6.5 percent.

Home sales and home prices

There are several different housing market indicators that any consumers can follow to get a sense of where the market is and where it’s headed. You certainly don’t need to be an analyst to understand the meaning the NAR’s Pending Home Sale Index and their existing-home sales report.

As loan officer Dan Green puts it, “the Pending Home Sales Index is a forward-looking housing market indicator. Unlike the Existing Home Sales report, for example; or the FHFA’s Home Price Index which both report on how the housing market performed during some period in the past, the Pending Home Sales Index uses current contract data to predict what may happen in housing’s future.”

According to the NAR’s numbers, the Pending Home Sales Index was up nearly 2 percent in November from the month prior, and up nearly 10 percent from one year ago at that same time. Even better, the index is currently at its highest level since just before the homebuyer tax credit expired in mid-2010.

“Even with market frictions related to the mortgage process, home contract activity continues to improve,” said Lawrence Yun, NAR chief economist, in the pending-sales release. “Home sales are recovering now based solely on fundamental demand and favorable affordability conditions.”

Bottom line is this: if home sales can continue to improve amongst limited inventory, the competition for for-sale homes will only heat up, driving home prices upward.

It’s nice to start the year off on an optimistic note.

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About the HSH Blog

HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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