Numbers Count: Weekly mortgage data highlights

Karen Mayfield
Posted by Karen Mayfield
Mortgage Banking

Numbers do count to us as bankers and to prospective homebuyers, sellers, and real estate professionals. Here’s my take on the key numbers on the housing market this week.

The numbers: supply & demand

Man and woman sitting at desk, looking down at a calculator.New home construction is expected to increase by 18% this year, and house price appreciation should moderate to an annual growth of 5% in 2014, according to the latest U.S. Economic and Housing Market Outlook released May 19 by Freddie Mac. The report forecasts a gradual rise in mortgage rates in the second half of the year, with the 30-year fixed-rate mortgage to end the year around 4.6%.

What counts: Slower price appreciation and the relative stability in interest rates this year should be welcome news for buyers who had to cope with double-digit price appreciation and a jump in mortgage rates in 2013. Although many markets remain competitive due to low inventory, buyers shouldn’t feel as much pressure to make offers to avoid future rate and price increases. Meanwhile, the projected 18% increase in home construction costs may not help homebuyers much in the near term, but should over time help create more balance between supply and demand.

The numbers: rising rates & falling sales

The San Francisco Federal Reserve concludes that the rise in mortgage interest rates that began last spring was the main culprit in the slowdown in existing home sales that began in the second half of 2013. At the same time, the research released May 19 finds that investors buying to convert single-family homes to rentals may be retreating from distressed markets as housing valuations rise.

What counts: If interest rates are discouraging you from buying a home, I have three tips:

1) Calculate what you can afford based on current rates and how much you have to put down. Keep in mind an online calculator only gives you a rough idea of what you can afford since rates, which averaged 4.33% last week on a 30-year fixed-rate mortgage, fluctuate from day to day.

2) You may want to consider an adjustable rate mortgage (ARM), which provides a lower initial rate to help you afford a larger mortgage. Last week, for example, the average rate on a 5/1 ARM was 3.14% compared to 4.33% for a 30-year fixed rate mortgage, according to the Mortgage Bankers Association. (Remember that ARMs can adjust higher at each adjustment period, resulting in higher mortgage interest payments.)

3) Consider increasing your down payment. Coming up with a down payment is frequently a challenge, but some borrowers have access to extra cash in a bank or brokerage account, or in a retirement fund. Others may be able to receive a gift from a relative. I recommend talking to your tax and/or investment professionals as well as your lender about the pros and cons of these or other options for possibly increasing your down payment.


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