Mortgage Rates, Affordability and Foreclosures are on the move. Some are rising and others falling. But all are on the leading edge of a recovering real estate and housing market.
It’s hard to believe that the highest interest rate this year for a 30 year fixed loan has been only 3.85 percent. That happened last March 13. The national average for this past week was at 3.71 percent. Some economists are watching these rates because they’ve been on the incline for several weeks in a row.
15 year fixed mortgage rates rose to 2.92 percent up from 2.82 percent the week before. Adjustable Rate Mortgages or “ARM” also saw an increase. A 5/1 ARM averaged nationally at 2.68 percent.
So why are the interest rates going up? Blame it on a very active and productive stock market.
“The Dow Jones industrial average and Standard & Poor’s 500 index are setting new all-time highs, and people are wanting to get in on that, so they’re pulling money out of bonds. Interest rates work inversely to bond prices, so if the price goes down, the yield goes up, which means rates go up,” says Rob McAllister, with West Seattle Mortgage in a Bankrate.com report.
McAllister went on to say that lenders are feeling better about the market and have loosened lending restrictions a bit.
Keep in mind that the Treasury Department through the third Quantitative Easing (QE3) has been funding banks, stabilizing the real estate market and keeping mortgage interest rates low. Trillions of dollars have been pumped into the system. How much more money and for how much longer they will do this is anyone’s guess.
“Since the Federal Reserve can just create dollars out of thin air, it can buy up assets like long-term Treasuries or mortgage-backed securities from commercial banks and other institutions. This pumps money into the U.S. economy and reduces long-term interest rates further. When long-term interest rates go down, investors have more incentive to spend their money now. In theory,” reports Brad Plumer of the Washington Post.
Another indicator of an improving economy and housing market is affordability. The National Association of Home Builders reports the, “nationwide housing affordability held near historic highs in this year’s first quarter. 73.7 percent of new and existing homes sold between the beginning of January and end of March were affordable to families earning the U.S. median income of $64,400.”
Foreclosed Inventory Dropped
The number of people late on their payment rose during the first quarter of this year when compared to the last quarter of 2012. A total of 7.25 percent of all homeowners nationwide were late on at least one payment. Although this is a slight rise from the prior quarter the delinquency rate dropped when compared to first quarter of 2012.
Foreclosure inventory dropped in almost all loan types. Comparing first quarter of 2013 to the same period in 2012 the inventory rate dropped for VA loans, prime fixed loans, prime ARM loans, subprime fixed and subprime ARM loans. Only FHA loans saw an increase in foreclosure rates. Source: Mortgage Bankers Association
Crystal Coast Distress Sales
Distress sales (Foreclosed, REO and short sale) along the Crystal Coast have been a large part of the market for some time. 15 percent of all homes sales during the month of May were distress sales. As high as that might seem it is actually lower than the YTD average. From January 1 through May 31 of this year 23 percent of all homes sold along the Crystal Coast were some type of foreclosures or distress sale. To give all of this a little perspective, distress sales were so uncommon just 5-6 years ago that they weren’t even tracked. That’s right! The number was so low that the Crystal Coast Association of Realtors did not even keep records of them.
Contact Margaret Hitchcock of Hitchcock Realty about properties, real estate, home buying, home selling and property management along the Crystal Coast of North Carolina. She is an experienced Realtor covering Morehead City, Beaufort, Emerald Isle, Atlantic Beach, Swansboro, Newport, Havelock and all of Downeast.
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