Mortgage Market Update Week Ending August 8, 2014

Please enjoy this quick update on what’s happening this week in the housing and financial markets. The U.S. services sector reached its highest level in 8+ years, and factory orders surged in June. Economic growth could lead to increased rates. The economic growth could speed up Fed policy changes. However, growth is balanced with other factors including inflation, which is holding steady. European economic woes and geopolitical events are contributing to downward movement in stocks. Rates are stable near their recent lows. CoreLogic reports home prices up in June for the 28th consecutive month, though rising at a slower pace. Nationally, prices are still 9% below the peak. NAHB found a $1000 increase in national median new home prices will take more than 200,000 potential homebuyers out of the market. Much has been said about student loan debt's negative affect on first time buyers. Remember, it's not the balance that matters; it's the payment amount. Mary decided to trim her household budget wherever possible. Instead of having her dress dry-cleaned, she washed it by hand. Proud of her savings, she boasted to her husband, "Just think, Tom, we are five dollars richer because I washed this dress by hand." "Good," Tom said. "Quick, wash it again!" Rate movements and volatility are based on published, aggregate national averages and measured from the previous to the most recent midweek daily reporting period. These rate trends can differ from our own and are subject to change at any time.

Can You Afford a Home If Mortgage Rates Jump By 1 Percentage Point? Here’s the Answer.

Interest rates are likely to rise steadily into next year, and a full percentage point increase is not out of the question.

The real estate site Zillow did some research to answer the question: Can you afford to wait and buy a home if rates go up by a percentage point?

Zillow applied next year’s forecast home values and a 1 percentage point interest rate increase to the median home price in 35 U.S. metro areas. Zillow then calculated the difference in mortgage payments.  The results for some areas are striking.

Of course, the higher the home prices, the bigger the monthly payment jump. For example, in San Francisco, a percentage point increase means $556 more a month.

“More often than not, buyers do not understand the profound effect of rising interest rates on affordability,” said Erin Lantz, vice president of mortgages at Zillow. “Many buyers associate a 1 percentage point interest rate change with a 1 percent change on a piece of clothing or the price of a car, when in fact they are very different.”

As a rule of thumb,  a 1 percentage point increase in mortgage rates reduces affordability by 10 percent.

See the graphic below for the results:

Don't wait to buy a home and get priced out of the market. We have loan programs for just about every buyer and every need.  

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Mortgage Market Update Week Ending August 1, 2014

Week Ending 8-1-14

Please enjoy this quick update on what’s happening this week in the housing and financial markets.

	The Fed says it will not raise policy rates until a "considerable time" after ending the taper in October. Housing and some labor indicators still cause concern.

	Second quarter GDP surprised with a 4.0% gain, more than making up for the first quarter drop. Rates jumped to their high for the month.

	Consumer confidence is at a 7-year high, possibly inspired by higher employment and low inflation. If the economy improves, rates will likely go up.

	June's pending home sales were healthy but down slightly. The three previous months saw increases. Pending sales are still above normal.

	May's home prices rose over last month and last year. Case-Schiller's survey found a seasonally adjusted decline in prices, possibly impacted by foreclosures.

	Homeownership rates have hit a 19-year low. The resulting rental demand has driven residential rental vacancies to long-term lows too.

I have all the money I'll ever need...if I die by 4 p.m. tomorrow.

Rate movements and volatility are based on published, aggregate national averages and measured from the previous to the most recent midweek daily reporting period. These rate trends can differ from our own and are subject to change at any time.