Recent data has shown that there have been improvements made in the housing market over the course of several months. While these improvements have been a positive sign, this market is not where it was during the housing boom and still has a long way to go. Data has shown that 2012 was a better year for most of the housing market as compared to 2011.

Gains recently reported reveal some strong, as well as, some slight advances in housing. Construction Spending, as reported by the Commerce Department, rose 0.6% in September to the highest level in three years. The S&P/Case Shiller Index of property values revealed that for the month of August, home values in 20 cities rose 2% from August of 2011. This increase was the largest in two years and the biggest year to year gain since July 2010. In the most recent third quarter report, the National Association of Realtors (NAR) reported that median single family home prices increased in 120 out of 140 metro areas. The national median price increased 7.6% from a year earlier and represents the strongest year over year increase since the first quarter of 2006. Existing home sales, which includes single family residents and condos, increased 3.2% during the third quarter and were 10.3% higher than the same time 2011. At the same time, 2.32 million existing homes were available for sale at the end of the third quarter which is a 20% drop from the third quarter 2011. According to CoreLogic, a real estate data provider, home prices increased 5% in September as compared to a year ago and was the largest year over year gain since July 2006.

Clearly, the housing market has seen steady improvements this year. Part of this is due to the historically low mortgage rates that have been available for the most of part of the year. Many homeowners who have been able to refinance at these rates have seen a significant amount of savings. The potential for distressed properties has decreased as underwater homeowners have taken advantage of HARP 2.0 which allows them to refinance to lower mortgage rates without the need of an appraisal. This program has helped many borrowers reduce their loan terms or reduce their mortgage payments, both of which offer a result in savings to the homeowner. HARP 2.0 does have guidelines, one of which is that the loan must have been sold to Fannie Mae or Freddie Mac prior to June 1, 2009.

FHA has seen its refinance program surge since offering the FHA streamline refinance with drastically reduced upfront and annual mortgage insurance premiums. This offer is for loans that were endorsed by FHA prior to June 1, 2009. While it does not require an appraisal, it also does not allow for cash out. FHA requires that borrowers have a good mortgage payment history for the most recent 12 months in lieu of credit documentation. Eligible borrowers have jumped on this opportunity to move to a cheaper FHA mortgage with lower rates.

Despite these advances, the housing market remains fragile. Anything that happens can turn this market around for the worse as is evident with Hurricane Sandy. According to the Mortgage Bankers Association, while this storm caused tremendous property damage throughout much of the Northeast, it also had an impact on mortgage activity. Mortgage application volume, both the refinance index and the seasonally adjusted purchase index fell by 5.0% during the week ending November 2nd. This decline does not even include the number of refinances and purchase transactions that fell through due to the storm. The damage will continue to have an impact on home sales and refinances for some time in this region. Homes may have to be inspected for storm damage which, if found, can often exclude them from conventional financing.

Now that elections are over, it is a wait and watch period to see what advances take place with the housing market, as well as other markets, in the coming year. If the Menendez/Boxer bill were to pass, just about everyone would be able to refinance, not just underwater borrowers. This could put more money into the hands of consumers who then usually put it back into the economy which may help improve economic growth.

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 about a 1 point origination fee.

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