October 22, 2017

FHA Mortgage Rates Hit All Time Lows As Home Sales Increase

Due to the ongoing financial crisis and flight to safety, investors piled into US government bonds again today, driving interest rates to levels not seen in 50 years.  The 10 year US treasury note, which is the benchmark for mortgage pricing, actually slipped below 2% today before selling off and closing at 2.08%.

Ironically, lower rates are associated with a weak economy producing a mixed blessing for some homeowners.  You may see mortgage rates drop to all time lows, but because the rates dropped due to a very poor economy, you may wind up losing your job.  The 30 year fixed FHA mortgage rate was available to borrowers today at 4% with some lenders offering rates as low as 3.75% with additional buydown costs.  The FHA fixed rate 15 year mortgage stood at 3.625% and the five year ARM was offered at 3.25%.

The combination of unbelievably low mortgage rates and declining home prices seems to be encouraged home buyers.

According to the latest report out from the National Association of Realtors, existing home sales jumped 21% over July of last year.  On a month to month basis, existing home sales for July declined by 3.5% to 4.67 million homes on an annualized basis, down from 4.84 million in June.

Difficulties in actually getting a prospective home buyer to the final approval stage still persist.  According to the National Association of Realtors (NAR), 16% of contracts experience delays due to low appraisals and mortgage application turn downs.  The NAR blames this situation on stricter guidelines for home appraisals and tougher underwriting guidelines used by mortgage lenders.  Potentially unqualified buyers who represent a mortgage default risk to lenders, are being turned away due to credit issues or lack of income.

Other good news for qualified buyers is that the median price for existing homes dropped by 4.4% from last year, thereby making the purchase more affordable.  Many homes are also being sold at deep discounts due to the fact that they are bank owned property that was foreclosed or property being sold under short sales contracts in which the bank takes a loss on what is due from the current owner.

Other interesting data from the NAR was that 32% of sales are from first time homebuyers and almost 30% of sales are all cash purchases done by investors.

The largest sales drop by region for the month was in the West which saw a decline of 12.6% while the value of homes in the West plunged by 7.1% from last year.

For qualified FHA borrowers, this is a buyers market with ultra low interest rates and homes being sold at discounted prices.