Mortgage rates boost housing recovery
SPOTLIGHT ON RESIDENTIAL REAL ESTATE
Prashant Gopal | SFGate | November 15, 2012 | link
U.S. mortgage rates declined to record lows, dropping borrowing costs after applications for refinancing rose for the first time in six weeks.
Mortgage rates at record lows have made refinancing more appealing and have helped the housing market recover by making purchases more affordable.
The rate of seriously delinquent U.S. mortgages, a proxy for the so-called shadow inventory of homes, fell to the lowest level since 2008 as employment improved and recovering housing demand made it easier for homeowners to sell.
The average rate for a 30-year fixed mortgage dropped to an all-time low of 3.34 percent in the week ended Thursday, McLean, Va.-based Freddie Mac said Thursday. The average 15-year rate slipped to 2.65 percent, also a record.
The percentage of home loans that were more than 90 days behind or in the foreclosure process fell to 7.03 percent in the third quarter from 7.31 percent in the previous three months, the Mortgage Bankers Association said Thursday. The rate was 7.89 percent a year earlier.
Delinquent homeowners are catching up on payments or finding alternatives to foreclosure as the economy improves. That’s helping to reduce shadow inventory – typically defined as homes with seriously delinquent mortgages, in foreclosure or held by banks and not for sale – and limiting the prospect that distressed properties will flood the market and depress prices.
“The drop of the shadow inventory is a real positive for the housing market because it reduces concerns that this backlog will be with us,” said Michael Fratantoni, the Mortgage Bankers Association’s vice president of research and economics.
The serious-delinquency rate was the lowest since the fourth quarter of 2008, when it was 6.3 percent. The percentage of loans in the foreclosure process at the end of the third quarter was 4.07 percent, down 20 basis points from June. That was the biggest drop in records dating to 1979, Fratantoni said.
More borrowers were able to make their monthly payments as the unemployment rate dropped to 7.8 percent in September, the lowest since January 2009. The federal Home Affordable Refinance Program is enabling Americans with little home equity to refinance, while delinquent homeowners who want to sell are finding it easier to unload properties as the supply of houses for sale remains tight, Fratantoni said.
In some areas, “inventory levels of properties on the market have gotten to such a point that you’re seeing buyers snap up anything that comes on the market at a rapid rate,” he said.
At the end of September, 2.32 million existing homes were available for sale, 20 percent fewer than a year earlier, according to the National Association of Realtors. That represented a 5.9-month supply, the lowest since March 2006, near the peak of the housing boom.
The decline in inventory is helping to boost home selling prices as buyers compete for properties. U.S. home prices jumped 5 percent in September from a year earlier, the biggest increase since July 2006, data provider CoreLogic Inc. said.
The overall U.S. mortgage delinquency rate – the share of loans at least one month late – fell to 7.4 percent in the third quarter on a seasonally adjusted basis from 7.58 percent in the previous three months, the Mortgage Bankers Association said.
States such as California and Arizona that don’t require court approval for foreclosures are seeing the most rapid improvement in delinquencies, while judicial states such as Florida, New Jersey and New York are falling behind, Fratantoni said. The foreclosure rate for judicial states was 6.6 percent in the third quarter compared with 2.4 percent in nonjudicial states, the largest gap going back to at least 2006, he said.
In Florida, 13 percent of loans are in foreclosure, the highest level in the nation, followed by New Jersey with 8.9 percent, Illinois at 6.8 percent and New York at 6.5 percent. The share of loans in foreclosure was 2.6 percent in California and 2.5 percent in Arizona, more than a percentage point below the U.S. average, he said.