Morning Briefing: Interest rates concern, consumers don’t consider mortgage rates low

by Steve Randall14 Dec 2016
Interest rates concern, consumers don’t consider mortgage rates low
The Fed will announce its interest rate decision Wednesday and it is almost certain to increase the rate to 0.75 per cent, up 25 basis points.

There is likely to also be a steer on how future rate rises will fall, and this is of concern to homeowners and buyers, especially young Americans hoping to become first-time buyers.

Berkshire Hathaway HomeServices’ latest sentiment survey reveals that overall, homebuyers are optimistic with 66 per cent of current homeowners and 63 per cent of prospective buyers confident in the market. This rises to 74 per cent for millennials.

However, 76 per cent of homeowners and 79 per cent of prospective buyers say they are concerned about interest rates and 44 per cent of owners and 70 per cent of buyers would be worried if mortgage rates went up.

“People feel good about real estate because housing is doing well in many markets across America,” said Gino Blefari, CEO of Berkshire Hathaway HomeServices. “Although the idea of a rate hike can grab headlines and initially create some unease, it’s important to remember rate increases are often the mark of an improving, healthy U.S. economy. That is the case today.”

Although mortgage rates are currently near historic lows, consumers do not see that. The survey shows that rates are considered low by less than half of current owners and just 17 per cent of prospective buyers.
 
New home mortgage apps up 12 per cent from last year
Mortgage applications for the purchase of new homes was 12 per cent higher in November compared to a year earlier.

Data from the Mortgage Bankers’ Association shows a dip of 3 per cent fro October but the overall trend is up, driven by the stronger economy and job growth.

"Despite the fact that overall home prices have increased at a greater than 5 per cent annualized rate, the growth in average loan size for new homes has slowed, increasing 3 per cent in November to $329,400 from a year ago and up just 1 per cent since January." 

Conventional loans made up the largest share of applications (67.3 per cent) while FHA’s made up 18.3 per cent, VA’s 13.8 per cent and RHS/USDA loans 0.7 per cent.
 
Foreclosures down 31.5 per cent
The US foreclosure inventory was down 31.5 per cent in October compared to a year earlier while the number of completed foreclosures fell by a quarter.

CoreLogic data shows that there were 30,000 completed foreclosures in the month with the inventory at the end of October at 382,000 or 0.8 per cent of all homes with a mortgage.

“Housing and labor markets improved over the past year, setting the stage for further declines in foreclosure rates across much of the nation,” said Anand Nallathambi, president and CEO of CoreLogic. “Home values posted an annual gain of 5.8 per cent through September in the CoreLogic Home Price Index, and payroll employment rose 2.4 million for the year through October.”

Serious delinquencies (90 days or more) fell to their lowest level since August 2007.

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