WOODARD: Mortgage rates expected to trend upward

By: Jim Woodard//January 19, 2016//

WOODARD: Mortgage rates expected to trend upward

By: Jim Woodard//January 19, 2016//

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Many homeowners and prospective buyers have been dreading the day when mortgage rates rise above 4 percent. That dream rate may be long gone.

The 30-year fixed-rate mortgage finished 2015 breaking above the 4 percent mark. It was the first time in five months the rate edged above 4 percent.

“In the final week of 2015, Treasury yields jumped reacting in part to strong consumer confidence in December,” says Sean Becketti, Freddie Mac’s chief economist. “In response, the 30-year mortgage rate rose 5 basis points to 4.01 percent, ending a five-month span below 4 percent.

“After averaging 3.9 percent in the fourth quarter of 2015, we expect the 30-year mortgage rate to average 4.7 percent for the fourth quarter of 2016,” according to a report by the National Association of Realtors.

Freddie Mac reported the following national averages with mortgage rates for the last week of 2015:

*”The 30-year fixed-rate mortgages averaged 4.01 percent, with an average 0.6 point, rising from the previous week’s 3.96 percent average. A year ago, 30-year rates averaged 3.87 percent.

*”The 15-year fixed-rate mortgages averaged 3.24 percent, with an average 0.6 point, increasing from 3.22 percent the previous week. A year ago at this time, 15-year rates averaged 3.15 percent. The 5-year Treasury-indexed hybrid adjustable-rate mortgages averaged 3.08 percent, with an average 0.4 point, up from 3.06 percent the previous week. Last year at this time, 5-year ARMs averaged 3.01 percent.

*”The 1-year ARMs averaged 2.68 percent, with an average 0.2 point, holding the same as last week. A year ago, 1-year ARMs averaged 2.40 percent.”

The good news is that current rates are still at historically low levels. But the trend is now on an upward path.

Q: Where are the really hot housing markets in 2016?

A: On Jan. 12, Zillow released a news report naming the top housing markets this year, according to their research team.

The top three markets are Denver, Seattle and Dallas-Fort Worth.

“To determine which markets would be hot, Zillow looked at home value appreciation, low unemployment rates, and strong income growth. Omaha has the lowest unemployment rate of the ten hottest markets, at just 2.9 percent. Denver saw home values rise 16 percent in 2015, and Zillow is forecasting them to rise another 5 percent in 2016, along with Portland,” it was reported in the release.

Q: Is mortgage availability improving?

A: At this point the availability of mortgage loans is dropping. Here’s a recent report from the Mortgage Bankers Association:

“Mortgage credit availability decreased in December according to the Mortgage Credit Availability Index (MCAI), a report from MBA which analyzes data from Ellie.

“The MCAI decreased 2.4 percent to 124.3 in December. A decline in the MCAI indicates that lending standards are tightening, while increases in the index are indicative of loosening credit. The index was benchmarked to 100 in March 2012.

“Of the four component indices, the Conventional MCAI saw the greatest tightening (down 4.8 percent) over the month followed by the Jumbo MCAI (down 4.2 percent), and the Government MCAI (down 0.6 percent). The Conforming MCAI increased 0.1 percent over the month.”

Q: Why are title insurance costs so high?

A: This is a question that puzzles many people, including me. Considering the advances made in high-tech methods of searching for title defects, the cost of a title insurance policy should be substantially reduced. Instead, it continues to rise.

Incidentally, in one state – Iowa – a state law prohibits the sale of title insurance. They have alternative and cheaper ways of assuring the quality of property titles.

Q:  Are home cash sales increasing?

A: The most recent report of all-cash sales of homes shows a substantial increase. RealtyTrac November home sales data derived from publicly recorded sales deeds shows the share of cash sales jumped to 38.1 percent of U.S. single family home and condo sales during the month.

“That’s up from 29.8 percent in October and up from 30.9 percent a year ago to the highest level since March 2013, when 38.8 percent of all sales were all-cash.”

WOODARD has been writing about real estate news and trends since 1971 and is the resident storyteller at the Ronald Reagan Presidential Library in Simi Valley, Calif.

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