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WOODARD: Potential homebuyers still skittish

Many current prospective homebuyers want and need to purchase a home, but are delaying action to make it happen.

Consumers continue to express concerns about recent weakening economic conditions and high home prices, according to Fannie Mae’s National Housing Survey, a poll of about 1,000 adults’ attitudes on housing.

As such, housing growth likely will remain subdued in 2015, Fannie Mae’s study shows. The share of Americans who say now is a good time to buy has decreased by four percentage points since April, as consumers report that escalating home prices and the state of the economy are keeping some on the sidelines, it was reported by the National Association of Realtors.

“The spring and summer home-buying season has gotten off to a stronger start, reflected in some of the improvement in consumer housing sentiment,” says Doug Duncan, Fannie Mae’s chief economist.

“Nevertheless, consumers continue to express concerns about the recent weakening economic conditions and high home prices. These combine to depress the share of consumers believing it is a good time to buy a home. When we consider both the continued caution of consumers and the positive start to the year, we believe that these results support our expectation that 2015 will be a year of modest growth in housing activity.”

Q: Is it true that large mortgages cost less than smaller ones?

A: Yes, according to a recent study by Zillow mortgage analysts. Compared to borrowers with $400,000 home loans, borrowers with loans of $100,000 pay 10 percent more for every dollar borrowed due to higher interest rates and fees.

Additionally, borrowers with small loan amounts have substantially fewer lenders willing to lend them money, according to the report. More than one-quarter of all homes would have a mortgage of $100,000 or less if 20 percent were put down on the home.

All things being equal, including credit score and loan-to-value ratios, borrowers with small loan amounts were offered more expensive loans compared to borrowers with high loan amounts. The average interest rate offered on a $100,000 home loan in the first quarter of 2015 was 3.95 percent with an APR of 4.06 percent.

The average interest rate offered on a $400,000 home loan during the same period was 3.64 percent with an APR of 3.7 percent. The larger the difference between the interest rate and the APR, the more it costs the homebuyer per dollar borrowed.

Q: Are mortgages still becoming more available?

A: Apparently so. Mortgage credit availability increased in April, according to a report from the Mortgage Bankers Association.

“Mortgage credit availability increased on net in April,” said Mike Fratantoni, MBA’s chief economist. “The increase was driven by new offerings of FHA’s 203K home improvement program, new VA offerings, and new jumbo products. The increase was partially offset by some investors tightening underwriting criteria on conventional cash-out offerings.”

Q: To what extent are home prices increasing?

A: It depends on location. Stronger demand amid lagging inventory levels caused home prices to accelerate in many metro areas during the first quarter of 2015, and the number of areas experiencing double-digit price appreciation doubled compared to last quarter, according to the latest quarterly report by the National Association of Realtors.

The median existing single-family home price increased in 85 percent of measured markets, with 148 out of 174 metropolitan statistical areas showing gains based on closings in the first quarter compared with the first quarter of 2014. Twenty-five areas (14 percent) recorded lower median prices from a year earlier.

The number of rising markets in the first quarter was mostly unchanged compared to the fourth quarter of last year, when price increases were recorded in 85 percent of metro areas. Fifty-one metro areas in the first quarter (29 percent) experienced double-digit increases, a sharp increase from the 24 metro areas in the fourth quarter of 2014. Thirty-seven metro areas (21 percent) experienced double-digit increases in the first quarter of 2014.

 

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