Princeton Capital Blog

August Round Up: Rates Remain Low

September 3rd, 2014

August Round Up: Rates Remain Low

In Freddie Mac’s results of its Primary Mortgage Market Survey, average fixed mortgage rates stayed largely unchanged amid mixed news on the housing front heading into the Labor Day weekend.

 

  • 30-year fixed-rate mortgage (FRM) averaged 4.10 percent with an average 0.5 point for the week ending August 28, 2014, unchanged from last week. A year ago at this time, the 30-year FRM averaged 4.51 percent. 
  • 15-year FRM this week averaged 3.25 percent with an average 0.6 point, up from last week when it averaged 3.23 percent. A year ago at this time, the 15-year FRM averaged 3.54 percent. 
  • 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.97 percent this week with an average 0.5 point, up from last week when it averaged 2.95 percent. A year ago, the 5-year ARM averaged 3.24 percent.

1-year Treasury-indexed ARM averaged 2.39 percent this week with an average 0.5 point, up from last week when it averaged 2.38 percent. At this time last year, the 1-year ARM averaged 2.64 percent. 

 

According to Fank Nothaft, vice president and chief economist, Freddie Mac.

“Mortgage rates were little changed following mixed housing news. Existing home sales rose for the fourth consecutive month to an annualized pace of 5.15 million, the highest of the year. On the other hand, new home sales fell for the third consecutive month to an annualized rate of 412,000 units. Also, the S&P/Case-Shiller national home price index confirmed the slowing in national house-price appreciation that has occurred in other metrics, with the seasonally-adjusted national index down 0.1 percent in June but on a year-over-year basis up a solid 6.2 percent.”

Days to Close a Loan Drops to New Low

Both closing times and credit requirements are dropping, according to the latest report from Ellie Mae. The mortgage industry services provider states in its Origination Insight Report that the average number of days to close a loan has dropped to 37 in July, compared to 41 days in June. Ellie Mae notes that’s the the lowest average they’ve seen since they began tracking. On average, it took 38 days to close a FHA loan, 36 days to close a conventional loan, and 38 days to close a VA loan in the month of July.

The report also notes that the average FICO score fell one point to 727 in July, reversing a four-month trend of increases. Researchers also noted another “sign of easing” is that 32 percent of closed loans had an average FICO score under 700 last month, compared to only 25 percent one year ago.

Meanwhile, the purchase market climbed in July, as the share of closed purchase loans hit 67 percent, up 2 percent from June – and the highest percentage since Ellie Mae began tracking the data in 2011. Refinanced loans took up the remaining 32 percent of closed loans.

Millennials Will Move to the ‘Burbs for Good Schools

The next generation of home buyers say they will move to the suburbs if it means they can find quality schools there, according to a newly released survey by realtor.com®.

In fact, millennials — the generation born between 1980 and 2000 — are less likely than other generations to compromise on school districts when in house-hunting mode, the survey revealed. Fifty-two percent of millennials said school districts are a deal-breaker in their home search, compared to 31 percent of all buyers, the survey found.

“Local schools are clearly more important to specific population segments—such as today’s millennials, who either have or are planning to have children,” says Jonathan Smoke, realtor.com®‘s chief economist. “High-ranking schools can have a positive impact on home values over time as new families pay a premium for access to better schools.”

New-Home Sizes Show Signs of Leveling Off

Following two years of increasing home sizes, the median size of new-homes appears to be leveling off as entry-level buyers return to the market drawn to more modest homes, The Wall Street Journal reports.

The median size of homes that builders started construction on in the second quarter was 2,478 square feet, holding the same as the previous quarter. It remains near the record high of 2,491 square feet, which was reached in the third quarter of 2013, the Commerce Department reports.

The median size of new homes began to increase in 2012 as move-up and luxury buyers began a drive to purchase larger homes. Also, buyers were showing preferences for more bedrooms (at least three), larger garages, basements, and wide-open living spaces like great rooms, according to a 2012 survey of new-home buyers conducted by the National Association of Home Builders.

While move-up and luxury buyers mostly drove the demand to bigger homes, entry-level and first-time buyers, who tend to buy smaller homes, have been notably absent from the market due to tight mortgage underwriting standards and low wage growth, The Wall Street Journal reports.

However, homebuilders are reporting a slight uptick in entry-level buyers heading back into the market. Homebuilders such as D.R. Horton Inc., KB Home, PulteGroup Inc., and Century Communities Inc. have all reported a slight increase in entry-level buyers re-emerging. For example, Pulte reports that sales of its entry-level Centex homes, priced at average of $202,000, rose by 26 percent in the second quarter compared to a year earlier.

“The expectation will be, whenever we see an increase in first-time buyers, that will put downward pressure on the trend” of new-home sizes, says Robert Dietz, an economist with the home builders group. “Then it will be a question of whether we’ll see some actual decreases in the median as the market mix [of buyers] changes over the next two years.”

Written by Realty Times Staff

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