June 19, 2007

Mortgage Rates Continue Upward Spiral

"Meanwhile, Freddie Mac released a new purchase-transaction only version of its Conventional Mortgage Home Price Index this week which showed a sharp deceleration in house-price appreciation in the first quarter of 2007. As house prices grow less quickly and household incomes rise, the housing market will likely recover from its current slump, but perhaps not before the end of this year."

Rate increases for fixed-rate products were even more pronounced in the results of the Weekly Mortgage Applications Survey for the week ending June 8 released by the Mortgage Banker's Association.

The average contract interest rate for 30-year FRMs was up 26 basis points to 6.61 percent from a week earlier while points, including the origination fee, were down from 1.5 to 1.44. The 15-year FRM increased to 6.28 from 6.13 percent with points increasing to 1.39 from 1.2.

Mortgage News Daily

How low can housing go? Buyers hope a lot

Modest annual declines have been seen in cities such as San Diego, Boston, Las Vegas, Phoenix and Honolulu, according to first-quarter data on existing single-family homes compiled by the National Association of Realtors. Meanwhile, price gains of just 1.4 percent or less were reported in New York, Chicago and Washington, D.C.

Those numbers have left many people trying to “time” the market to take advantage of the slump. But experts said that can be risky because there is little consensus on how long the current doldrums might last. In addition, the market forces that helped drive the housing boom — affordable financing and the alluring prospect of escalating home values — are no longer a given. Potential price breaks could be wiped out if interest rates rise any higher.

“In general, it is very difficult to time the market,” said Raphael Bostic, associate director of the University of Southern California’s Lusk Center for Real Estate. “The real problem with that is you don’t know when the floor is until after it’s passed. If the floor is right now, you missed it,” he said.


Cities See Home Prices Spike; More Foreclosures in Phoenix
By Lauren Baier Kim

Investors helped to drive up property values in Phoenix during the housing boom, and have been a big factor behind the drop in home prices, says an article by The Arizona Republic. Phoenix is expected to see more than 18,000 notices of trustee sales this year -- a step before foreclosure -- the most filed since the 1980s real-estate crash, the newspaper sales. Of all homes that fall into foreclosure in the city, at least 25% are owned by investors, the Republic says. The newspaper goes on to note that the rising foreclosure rate is having a deleterious effect on local neighborhoods, with an increasing number of home vacancies and rentals driving property values down.

Tough days for real-estate agents

Selling homes seemed glamorous during the housing boom, but not so much now that the housing market has slowed, says USA Today. Many agents -- 25% of whom earned their real-estate licenses within the past two years -- are finding they have to work harder for paychecks that aren't so large, the newspaper says. In 2006, Realtors with two years' experience earned a median salary of $15,300 before taxes -- after subtracting taxes, marketing costs and association fees, the median take-home pay was $9,400, the paper says. Many new agents take home just half of their commission, typically sharing 50% with a buyer's broker and paying out-of-pocket for marketing costs, the USA Today says. An agent who earns a 6% commission on the sale of a $220,500 home ($13,230) may only take home $3,308 after splitting the commission with a buyer's broker, the paper says.

Rising values in Denver

Denver home prices are expected to appreciate by as much as 10% next year, according to an article by the Rocky Mountain News. That's in contrast to U.S. home prices, which may drop 1.3% this year, with home sales falling 4.6% on average, the News says. "The Rocky Mountain region is one part of the country that I'm most optimistic about," the newspaper quotes Lawrence Yun, chief economist of the National Association of Realtors, as saying. With a relatively high inventory -- there were 29,110 unsold homes in the Denver area in May, a 4.6% decline from May 2006 -- the metro area isn't a boom market, but is expected to outperform the U.S. market as a whole in 2007 and 2008, the News says.

Sales Spike in Seattle

Somebody better tell Seattle there's a housing slowdown going on -- in May, home sales in Seattle rose 21% from May 2006, the largest yearly increase in more than two years, according to the Seattle Post-Intelligencer. There are signs that the market is slowing, however, as the city's inventory of homes for sale increased 60% from May 2006, as condos in newly completed buildings like the Cosmopolitan and 2200 hit the market, the Post-Intelligencer says.

The median price dropped slightly last month -- down 1.2% from April to $425,000, but was up 2.4% from May 2006, the newspaper says. Yet while inventory went up in May to a 2.5-month supply, it still beats the national average of 5.4 months, the Post-Intelligencer says.


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