2012-09-26ml-implode.com

Lately, the housing market has been the only bright spot in the economic recovery that has been slow, modest and questionable. While there are a decent number of reports showing improvements in this sector of the market, sustaining this growth is yet to be seen as the winter months approach. However, recent reports again show that home prices are on the rise while mortgage rates continue at record lows.

According to the Federal Housing Finance Agency (FHFA) report, July home prices increased 0.2% on a seasonally adjusted basis from June (after revising June's number down from 0.7% to 0.6%). This July House Price Index (HPI) was 3.7% above July of 2011. Overall home prices are 16.4% lower than the peak reached in April, 2007, but approximately the same as the price level of June, 2004.

The S&P/Case-Shiller Home Price Indices also showed an increase for the month of July with the 10- and 20- city composites. The 10-city composite index increased 1.5% above June numbers and the 20- city composite rose 1.6%. This was the fourth straight month that home prices increased for the composites according to this report.

This is good news for consumers, both homeowners and home buyers. Existing homeowners are gaining equity in their homes with these consistent increases which will allow many of them to obtain a traditional mortgage refinance if they are not eligible for HARP or the FHA streamline refinance. HARP is available for those homeowners who have loans that were sold to Fannie Mae or Freddie Mac prior to June 1, 2009. The FHA streamline refinance (no cash out) with reduced fees is available for existing FHA loans that were endorsed prior to June 1, 2009. Since not all mortgages fall into these categories, many of today's existing borrowers have been unable to take advantage of the historic mortgage rates that have been available this year. As home equity continues to increase, homeowners will be in a better position to obtain a regular mortgage refinance.

While rising home prices may not seem like an opportunity for consumers who are interested in purchasing a home, it is actually a confirmation that the bottom of the housing market has already hit in most areas. Many potential home buyers did not make a home purchase due to the fear that the housing market would continue to decline and they, too, would be underwater. Now that home prices are rising, these home buyers could feel more secure with finally making a home purchase. Home prices are still well below the peak hit during the housing boom and mortgage rates are at the lowest in history. Current conforming 30 year fixed mortgage rates are at 3.375% (0.7 to 1% origination fee) and FHA 30 year fixed mortgage rates are at 3.125%. Both of these mortgage types are the most commonly used loans for home purchases.

Even the high end sector of the housing market has been seeing benefits with the current housing turnaround. According to the National Association of Realtors, home sales for $1 million-plus properties increased 19% in July. The jumbo loan share of new mortgage origination rose to 9.4% during the second quarter of 2012 and is the highest on record in five years, according to Inside Mortgage Finance. In addition, jumbo loans equaled $38 billion during the second quarter 2012.

The reports so far for this year have been promising. Single family housing starts are above last year, existing home sales have been increasing, inventory is down and foreclosure activity is slowly decreasing. Housing is an important part of a consumer's life and any positive news is going to bring on optimism. This was evident in the current Consumer Confidence Index released by the Conference Board which showed an increase to 70.3, up from 61.3 in August, and at the highest level since February. Whether these feelings will last is yet to be seen and will depend on the overall status of the economy.

FreeRateUpdate.com surveys more than two dozen wholesale and direct lenders' rate sheets to determine the most accurate mortgage rates available to well qualified consumers at a standard 0.7 to 1% point origination fee.


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