Mortgage rates hit 5 percent:
Mortgage interest rates rose sharply again this week, touching the 5 percent threshold and presenting more bad news for borrowers.
The benchmark 30-year fixed-rate mortgage rose 11 basis points this week, to 5 percent, according to the Bankrate.com national survey of large lenders. A basis point is one-hundredth of 1 percentage point. The mortgages in this week's survey had an average total of 0.4 discount and origination points. One year ago, the mortgage index was 5.13 percent; four weeks ago, it was 4.62 percent.
The benchmark 15-year fixed-rate mortgage rose 11 basis points, to 4.37 percent. The benchmark 5/1 adjustable-rate mortgage rose 10 basis points, to 3.95 percent.
Weekly national mortgage survey
*Results of Bankrate.com's Dec. 15, 2010 weekly national survey of large lenders and the effect on monthly payments for a $165,000 loan:
---------------------------------------------------
30-year fixed 15-year fixed 5-year ARM
This week's rate: 5.00% 4.37% 3.95%
Change from last week: +0.11 +0.11 +0.1
Monthly payment: $885.76 $1,251.30 $782.99
Change from last week: +$11.06 +$9.21 +$9.46
-----------------------------------------------------
This is the highest rate for the 30-year fixed in seven months. On May 12, the 30-year fixed stood at 5.07 percent in Bankrate.com's weekly survey. After that, it fell below 5 percent and stayed there -- until this week. Just six weeks ago, the benchmark 30-year rate was 4.42 percent -- a record low in the 25-year history of the weekly rate survey.
The steep and sudden jump was triggered by signs of an improving U.S. economy, says Peter Ogilvie, president of First Residential Mortgage Corp. in Santa Cruz, Calif.
"We've been getting positive or slightly positive reports that suggest positive movements in the economy, and that will send rates up," he says.
That relationship may seem counterintuitive, but a stronger economy draws investment funds into equities and away from the bond market. Lower demand for bonds means lower prices and, inversely, higher yields -- and interest rates follow the movement of bond yields.
When the dust settled, borrowers faced mortgage rates at least three-eighths to one-half of a percentage point higher than those they may have been quoted last month, Ogilvie says. A rate that's half a point higher on a $200,000 loan adds about $60 to the monthly payment. Bankrate.com's mortgage calculator lets you see what happens to monthly payments when rates change.
Here's a summary of what happened:
•The Federal Reserve held its target federal funds rate unchanged at zero to 0.25 percent Tuesday, but noted in its statement that the "economic recovery is continuing," "consumer spending is increasing at a moderate pace," and "business spending on equipment and software is rising."
•The Fed said it plans to continue buying U.S. Treasuries, a move that has triggered fears of future inflation.
The Fed's words, as well as its actions, have a "significant impact on the market and mortgage rates as bond investors look for any indication of what the Fed's going to do next," says Joe Metzler, a mortgage specialist at Mortgages Unlimited in West St. Paul, Minn.
•President Barack Obama and Congress struck a deal to extend federal income tax breaks for virtually all taxpayers, reduce the payroll tax through 2011, reinstate a smaller estate tax and ease some federal business tax rules. These changes -- and an end to the long uncertainty -- are expected to spur additional spending.
•Retail sales rose 0.8 percent in November, the fifth consecutive monthly increase and better than private-sector expectations of 0.5 percent growth, according to the U.S. Department of Commerce.
•European nations have made strides in the eurozone's debt crisis, a development that prompted investors to leave the security of U.S. Treasuries, causing bond yields and mortgage rates to rise, according to a statement from Freddie Mac.
Metzler says borrowers should focus on current rates and actually take the advice they're offered by experienced mortgage professionals. Both Ogilvie and Metzler report that the rate jump prompted some borrowers to break their holding pattern and finally lock in a higher rate.
Homeowners jumped off the fence nationwide, according to the Mortgage Bankers Association, which reported that refinance applications fell just 0.7 percent last week, despite the rise in mortgage rates.
"If you have a chance to lock now, lock," Ogilvie says. "The chances are, at this point, much better that rates will rise slightly in the near future."
Friday, December 17, 2010
Housing bust? So what? We still want to own
Housing bust? So what? We still want to own
The American Dream is still alive and kicking, including within immigrant and minority communities, according to a survey from mortgage giant Fannie Mae.
The housing crisis hasn't quenched the homeownership thirst, the company found. More than 51% of people said the bust did not change their willingness to buy a home and an additional 27% said it actually made them more likely to do so.
"The crisis has not put a dent in the desire to own," said Doug Duncan, Fannie's chief economist, "although it may have changed the reasons that people want to own."
The report, the first close analysis Fannie has taken of consumer attitudes about the rent-or-own decision, found that qualitative reasons -- like having the ability to remodel or to send the kids to a better school -- have overtaken financial considerations as the primary motivators for homeownership.
Some misperceptions about financial benefits may help to keep it high.
"People's attitudes don't always line up with empirical facts," said Duncan.
For example, although trillions of dollars of equity were wiped out by the housing bust and millions of people will lose homes to foreclosure, nearly two-thirds of people surveyed still believe purchasing a house is a safe investment. That could be viewed as a major disconnect.
Buying a home now is a no-brainer:
Also, more than half the public thought buying a home was a good idea financially even if they plan to move out in less than three years. That's actually rarely true because transactional costs like real estate commissions, title insurance costs and mortgage fees take a big cut off the top of selling and purchase prices.
Furthermore, a huge majority, 86% of those surveyed, cite income-tax benefits -- mostly the mortgage interest deduction -- as a big reason to buy. That benefit, however, is very small for most homeowners or even nonexistent.
"Lower-income homeowners, for example, don't itemize," said Duncan, "so there is no tax benefit for them at all."
Broad homeownership hopes:
Fannie found that no matter what their ethnicity or immigration status, Americans generally share similar positive attitudes toward homeownership, even though there are substantial differences among these groups in homeownership rates.
It seems that economic opportunities, not attitudes, account for much of the variation.
Only 44% of African Americans own homes, for instance, compared with 71% of whites, but that disparity starts to vanish among families in stronger financial circumstances. African Americans' homeownership rises to 60% for those earning between $50,000 and $99,000, for example.
The survey findings have implications for Fannie's business model. Non-Hispanic whites are projected to account for just 46% of the population by 2050. Immigration will account for most of the population growth between now and then.
And since, as the report stated, "strong homeownership aspirations exist across races, ethnicities and immigrant groups," Fannie can count on future demand for owner-occupied homes remaining strong, as long as the economy cooperates.
The American Dream is still alive and kicking, including within immigrant and minority communities, according to a survey from mortgage giant Fannie Mae.
The housing crisis hasn't quenched the homeownership thirst, the company found. More than 51% of people said the bust did not change their willingness to buy a home and an additional 27% said it actually made them more likely to do so.
"The crisis has not put a dent in the desire to own," said Doug Duncan, Fannie's chief economist, "although it may have changed the reasons that people want to own."
The report, the first close analysis Fannie has taken of consumer attitudes about the rent-or-own decision, found that qualitative reasons -- like having the ability to remodel or to send the kids to a better school -- have overtaken financial considerations as the primary motivators for homeownership.
Some misperceptions about financial benefits may help to keep it high.
"People's attitudes don't always line up with empirical facts," said Duncan.
For example, although trillions of dollars of equity were wiped out by the housing bust and millions of people will lose homes to foreclosure, nearly two-thirds of people surveyed still believe purchasing a house is a safe investment. That could be viewed as a major disconnect.
Buying a home now is a no-brainer:
Also, more than half the public thought buying a home was a good idea financially even if they plan to move out in less than three years. That's actually rarely true because transactional costs like real estate commissions, title insurance costs and mortgage fees take a big cut off the top of selling and purchase prices.
Furthermore, a huge majority, 86% of those surveyed, cite income-tax benefits -- mostly the mortgage interest deduction -- as a big reason to buy. That benefit, however, is very small for most homeowners or even nonexistent.
"Lower-income homeowners, for example, don't itemize," said Duncan, "so there is no tax benefit for them at all."
Broad homeownership hopes:
Fannie found that no matter what their ethnicity or immigration status, Americans generally share similar positive attitudes toward homeownership, even though there are substantial differences among these groups in homeownership rates.
It seems that economic opportunities, not attitudes, account for much of the variation.
Only 44% of African Americans own homes, for instance, compared with 71% of whites, but that disparity starts to vanish among families in stronger financial circumstances. African Americans' homeownership rises to 60% for those earning between $50,000 and $99,000, for example.
The survey findings have implications for Fannie's business model. Non-Hispanic whites are projected to account for just 46% of the population by 2050. Immigration will account for most of the population growth between now and then.
And since, as the report stated, "strong homeownership aspirations exist across races, ethnicities and immigrant groups," Fannie can count on future demand for owner-occupied homes remaining strong, as long as the economy cooperates.
Subscribe to:
Posts (Atom)