Finance News

Data from both the Mortgage Bankers Association (MBA) and Freddie Mac tell us that when it comes to overall mortgage loan activity, home mortgage refinance originations are carrying the day. Currently refinance originations make up nearly 81 percent of all home finance activity.

Though the year is yet complete, projections by the MBA anticipate the year will end with $1.2 trillion in mortgage refinance originations, 28 percent higher than last year. The same projections anticipate that mortgage interest rates will rise over the next two years causing refinance originations to fall off to $760 billion in 2013, and dropping further to $360 billion the following year.

Home purchase originations should finish this year at around $500 billion in originations with an increase to $585 billion in 2013, which would be an increase of 16 percent. The MBA says that the gain in purchase originations next year will be driven by an “increase in owner-occupied sales financed with mortgages as opposed to cash purchases by investors.” This data would be in keeping with the anticipated increase in home sales for next year.

Rates for 30-year fixed-rate mortgages are expected to stay under 4.0 percent through the end of this year, but the MBA states interest rates should rise to 4.1 percent in 2013 and possibly nudging up beyond that.

As rates increase it will become less attractive to refinance a home. The potential for rising mortgage rates, along with the increase in home prices, should also be an added incentive for any potential homebuyer to act now while both rates and prices are incredibly low.

According to Freddie Mac, fixed-rate mortgages were overwhelmingly the loan of choice during the last quarter, with 95 percent of all refinancers choosing a fixed-rate package. Also, nearly one-third of those choosing a fixed-rate loan to refinance their mortgage opted to go with a shorter-term loan than what they had held prior.

Anyone paying attention to the latest economic/political news has heard of the ”off the cliff” scenario. Simply put, future economic and housing growth will be contingent on tax and economic policies put in place by this administration in the near future.

The MBA echoes many sources in the mortgage and housing industry in stating that the country must see a significant drop in the unemployment rate in order to sustain a healthy recovery in the housing market. It takes consumers with good stable jobs to buy homes and all the attendant consumer goods that go with ownership.

Without this sustained growth the housing industry may not be able to be the continued driving force for economic growth in the American economy, as it has been for most of the past sixty years.

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Mixed Message On Markets

Data from the third quarter relative to new and existing homes sales, along with the rise in home prices in a majority of the metro real estate markets, would indicate that the housing market has probably hit bottom and made a positive turn upwards in the right direction.

However, information from RealtyTrac® ( indicates that the overall housing market is still sending some mixed signals as to where the housing market bottom is, and has it yet turned positive.  RealtyTrac is the leading online data source for foreclosure properties and as recently as October released an exclusive report on the overall health of local housing markets nationwide, as compared to four years ago.  The report is titled “Election 2012 Housing Health Check.”

The report, in looking at more than 900 counties nationwide, found that “65 percent of local housing markets nationwide are worse off than four years ago.”  Now it should be understood that the metrics used in the report did not include only those of home sales (new and existing), home prices and mortgage interest rates, those metrics that seem to clearly point to a positive market trend.

According to the report the elements used in assessing the health of the housing market nationwide included looking at five key metrics. These metrics included average home prices, unemployment, foreclosure inventory, foreclosure starts and the share of distressed sales.

Not all counties nationwide had data on all five metrics.  Of the 919 counties that had all metrics in place, 580 (65 percent) showed that the local market was worse off in at least 3 of the 5 metrics than it was four years ago.  Conversely, 315 counties (35 percent) showed that they were better off than they were four years ago, also in at least 3 of the 5 metrics.

Some other key findings in the report appear to support the idea that the market is on a less than a solid foundational rebound.

According to the report, in a majority of the counties nationwide home prices are down from four years ago. In addition unemployment figures, compared to four years ago, are up in more than 90 percent of all counties.

Granted home prices are lower than four years ago, but they are higher than one year ago with prices averaging an increase of 7.6 percent nationally as of the third quarter.

On a positive note the report showed that a little more than half of all counties documented a lower foreclosure inventory and fewer foreclosure starts as compared to four years ago.

Though this data may paint a  ‘glass-half-empty’ scenario, in fact the rise in home sales, both existing and new, plus the rise in home prices nationwide really do point to a better ‘glass-half-full’ picture.

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As Mortgage Rates Keep Falling, More Are Scratching 15-Year Itch

Original Post Date: December 17, 2012

By: Annamaria Andriotis

The 15-year loan, long considered a fringe character in the mortgage scene, is riding a wave of popularity.

Thanks to low interest rates, many borrowers are opting for the deal that allows them to pay off their mortgages in half as much time as the traditional 30-year mortgage.

Nearly 16% of the fixed-rate mortgages that lenders sold to Freddie Mac during the third quarter were 15-year loans, up from almost 10% a year prior, according to the agency’s data. (That data doesn’t include refinancings.) And 15-year mortgages accounted for nearly a third of refinanced loans during the first seven months of this year, according to the latest data by CoreLogic. The figure has been climbing since 2007, when they made up just 8.5% of refinancings.

The 30-year mortgage became the standard in lending because its lower monthly payments made real estate affordable to more Americans. While the 30-year remains king, the gap between the two loans’ popularity is shrinking. “The 15-year loan has gone from really being almost a non-issue item to a new trend,” says Stu Feldstein, president at SMR Research, which tracks mortgage data.

The key to the shift is lower interest rates, which makes it easier for borrowers to manage payments on 15-year loans—and still pay off their notes in half the time. Fixed rates on 15-year mortgages average 2.81%, down from 3.36% a year ago and 5.85% in mid-December 2007, according to mortgage-information website

The 15-year loans are also a lot cheaper than 30-year fixed-rate mortgages, which average 3.44%. That 0.63-percentage-point spread is wide compared with historical figures. Before the housing crisis, 15-year fixed-rate mortgages were typically just 0.25 to 0.35 percentage points cheaper than their 30-year counterparts, according to

Homeowners who are refinancing stand to gain the most from the spread between the two loans. In the past, refinancing from a 30-year into a 15-year mortgage usually meant ending up with a bigger monthly payment in exchange for a slightly lower rate. But in today’s market, the much lower rate allows some borrowers—particularly those who have been paying down a 30-year mortgage for several years—to make this switch without seeing an increase in that payment.

For instance, a couple who signed up for a 30-year $300,000 mortgage in January 2004 with a 5.75% fixed rate would have a roughly $1,751 monthly payment. By refinancing the remaining balance of about $255,828 into a 15-year fixed rate loan at 2.81%, the new monthly payment would be slightly lower at almost $1,744.

Longer term, the benefits add up even more. By reducing the repayment period, the couple would save just over $127,300 in interest over the life of the loan. In addition, they are building equity into their home faster than borrowers with longer-term mortgages. That means they could be more likely to get approved for home-equity loans and borrow a larger amount against their home.

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Price Rise Shows a Better Balanced U.S. Housing Market

Original Post Date: November 27, 2012

By: Kathleen Madigan

The best evidence that the U.S. housing sector is recovering is the recent gains in home prices.

Tuesday brought two reports on home values. The third-quarter S&P/Case-Shiller nationwide home price index was up 3.6% from its year-ago level, its second year-over-year gain.

The Federal Housing Finance Agency uses different price methodology but came to the same basic conclusion: its third-quarter U.S. price index for purchased homes increased 4.0% from a year ago.

The uptrend in prices shows supply and demand are in better balance in both new and existing home markets. Of course, new home construction feeds more into gross domestic product but demand for both types of housing is good for consumer confidence and leads to future home-related purchases such as appliances, textiles and landscaping services.

Rising home values also filter through positively into other economic data.

Home equity remains one of the main components of household wealth, and the rise in home prices is making homeowners feel richer while also offsetting the recent decline in stock values.

(Of course, for a sustainable economic housing outlook, homeowners cannot fall into the credit trap seen during the boom: Homes are not ATMs to be tapped to finance purchases like vacations and cosmetic surgery. Luckily, more stringent bank-lending standards make that prospect less of a threat.)

Another benefit of rising prices: fewer forced sales that could retrigger an oversupply of properties on the market. Economists at IHS Global Insight cite CoreLogic data showing the recent rise in home values means about 1 million fewer homeowners are underwater with their mortgages.

News that home prices are no longer falling are also drawing out more potential buyers–as are record-low mortgage rates engineered by the Federal Reserve. The Conference Board’s November consumer survey found 6.9% of respondents plan to buy a home in the next six months. While monthly results can be volatile, the percentage has been moving up since the spring.

The latest news reinforce prospects for a virtuous economic cycle that will keep the recovery in place (absent the U.S. falling over the fiscal cliff): To the extent buyers purchase new homes, construction will lift economic activity. Better growth generates jobs making for happier consumers more willing to spend and buy homes.

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