Freddie Mac’s new Multi-Indicator Market Index measures the stability of the nation’s housing market based on home purchase applications, payment-to-income ratios, proportion of on-time mortgage payments, and the local employment picture. Based on these components, the Index determines how each market is trending and whether it’s becoming more or less stable. Overall, the housing market is in better shape than it has been at any point since the beginning of the Great Recession. Since June 2009, for example, home sales are up 13 percent, housing starts are up 55 percent, serious delinquencies are down 32 percent, and the unemployment rate has fallen from 9.5 percent to 6.7 percent. Still, there is room for improvement. Len Kiefer, Freddie Mac’s deputy chief economist, said – in many markets – a better employment picture, along with some income growth, makes it possible for people considering buying a home to stay within reasonable payment-to-income ratios. But, according to Kiefer, some high-cost markets are starting to feel an affordability pinch. Of the 50 states included in the Index, 25 plus the District of Columbia are improving based on three-month trends. Among the 50 metropolitan areas included, 35 are improving. Freddie Mac expects more markets to move closer to their long-term stable range as we enter the spring home buying season. More here.
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According to Freddie Mac’s U.S. Economic and Housing Market Outlook for March, home sales will continue to increase this year, despite higher mortgage rates and home prices. The forecast – which projects a 3 percent rise in sales for 2014 – is based on a belief that the job market and wage growth will both continue to improve. Frank Nothaft, Freddie Mac’s vice president and chief economist, said with more jobs, wage growth should continue to accelerate, giving Americans the income to buy homes and help sustain the emerging purchase market. Despite an unemployment rate that is still stubbornly high, Nothaft believes improvement in economic growth will help boost both construction and manufacturing employment, which are the sectors of the economy that have been slowest to recover. In fact, there are 1.5 million fewer construction jobs than there were in December 2007. Freddie Mac’s outlook also calls for moderate price increases and an almost 20 percent increase in new home construction this year. More here.
Freddie Mac’s quarterly refinance analysis for the fourth quarter of 2013 shows borrowers continuing to take advantage of historically low mortgage rates to reduce their monthly mortgage payment and shorten their loan terms. According to the report, borrowers who refinanced in 2013 will save on net approximately $21 billion in interest over the next year. Frank Nothaft, Freddie Mac’s vice president and chief economist, said the refinance boom began to wind down as the pool of potential borrowers declined and mortgage rates increased during the second half of the year. According to Nothaft, the refinance share of total mortgage activity will fall further this year, as refinance demand drops and the emerging purchase market consumes a bigger piece of the pie. Also in the report, the average interest rate reduction in the fourth quarter was about 1.5 percentage points. On a $200,000 loan, that’s a $3,000 savings over the next 12 months. More here.
Freddie Mac’s U.S. Economic and Housing Market Outlook for January finds four of the key housing indicators moving in the right direction to begin the year. The unemployment rate, though still high at 6.7 percent, is vastly improved and should continue its gradual path to a more consistent and historically normal level. Mortgage delinquencies have also shown great improvement, having been nearly cut in half since their peak. Finally, both affordability levels and home sales continue to trend in the right direction, with the average mortgage payment remaining very affordable in most markets – suggesting there’s still room for more recovery in home prices. Frank Nothaft, Freddie Mac’s chief economist, said the housing recovery continues on a steady pace. According to Nothaft, home prices should rise about 5 percent this year, while home sales – along with other key indicators – will continue to trend in the right direction. More here.
Next year will mark the first in more than a decade that the mortgage market is dominated by purchase, rather than refinance activity, according to Freddie Mac’s most recent U.S. Economic and Housing Market Outlook. The outlook, released monthly, forecasts upcoming economic and housing market conditions based on current trends and data. Frank Nothaft, Freddie Mac’s vice president and chief economist, said refinance activity – as a share of total mortgage demand – will drop below 50 percent in 2014, marking a major transition in the housing finance industry and the first time since 2000 that purchase loans outpace refinancing demand. Nothaft also believes that home-sales gains and price growth will begin to moderate to more sustainable levels in the next year. Still, the forecast calls for a 5 to 6 percent increase in both sales and prices in 2014. The report also expects affordability conditions to remain strong, with mortgage rates expected to rise gradually throughout the year. More here.
Despite a recent wave of negative economic news, the housing market is expected to continue to improve next year, according to Freddie Mac’s October Economic and Housing Market Outlook. The government shutdown, debt ceiling debate, and slowing economy have affected the housing recovery as we head into the fourth quarter, but the market should endure the economic shock. Frank Nothaft, Freddie Mac’s vice president and chief economist, said the housing recovery keeps chugging along despite a constant barrage of disruptions to the broader economy. Nothaft believes, though housing may briefly slow down as the year comes to an end, the recovery should continue to absorb the economic shocks in stride and improve next year. More here.
The 30-year fixed-rate home loan has been the most popular choice for borrowers for many years. In fact, when 15-year rates fell to an historic 2.5 percent last year, the 30-year term still accounted for 85 percent of all home-purchase loans. During the first half of this year, nearly 90 percent of homebuyers chose it. According to Freddie Mac’s chief economist, Frank Nothaft, there are three reasons for the continued popularity of 30-year fixed-rate mortgages. First among those is the fact that it is more affordable. Because the term is longer, the monthly payment is lower than it would be on a shorter-term mortgage. They are also more stable because the rate is locked in and not subject to the ups and downs of the market. Finally, Nothaft says flexibility is a feature of 30-year loans that makes them popular with buyers and borrowers. In short, 30-year loans continue to be the most popular mortgage product for American homebuyers because they are the most affordable and manageable, helping middle-class and first-time buyers enjoy the benefits of homeownership. More here.