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Homeownership Still The American Dream, Fuels Economy

It's billed as the American Dream and yet for some it's been an all-time American nightmare.

 

Still "the home is central to American life" writes the National Association of Homebuilders in its report titled: Homeownership Works, released earlier this year.

Of course the report aims to show how housing is vital not just to homeowners but to the nation's growth. The publication looks at the contributions that homeownership make to the economy specifically through residential construction, remodeling, rental housing, and various other related aspects of the industry.

The publication shows how homeownership is a vital thread that weaves together a nation. It points to research released earlier this year by Pew Research Center Study, showing that 81% of of adults agree "that buying a home is the best long-term investment a person can make". The sentiment was mirrored by renters (also 81%) who reported they would like to buy a house.

According to the publication, homeownership contributes to household wealth even though many homes have lost significant value in recent years. NAHB reports that "the nation's homeowners have more than $6 trillion in home equity and they still believe in homeownership."

The equity that accumulated in their homes flows into the economy through education, health expenses, home improvements that increase value of the home, and funding retirement.

Some other findings reported in the publication include polling data based on a survey of 2,000 people likely to vote in 2010. The poll was conducted by for NAHB in May by Public Opinion Strategies of Alexandria, Va., and Lake Research Partners of Washington, D.C.

It showed that the majority of voters (71%) oppose proposals to eliminate the mortgage interest deduction. Findings also revealed that 95% of homeowners were glad they purchased a home; and 73% who didn't own a home were hopeful to one day.

Despite the housing crisis, those in this survey viewed retirement savings programs and homeownership as the best investments. And, 80% of those surveyed said they would advise a family member or close friend to buy real estate.

But for a healthy economy to exist, NAHB points out that "rental housing is essential to a well-housed population." The NAHB writes that there are many benefits from the rental housing market, according to the Joint Center for Housing Studies of Harvard University in "America's Rental Housing: Meeting Challenges, Building On Opportunities".

First, moving to rental housing often is less expensive than homeownership. Second, the primary upkeep of the property is the responsibility of the landlord. Third, while landlords often collect first and last months rent, it is still less than a downpayment. However, the majority of people will rent and own at some point in their lives.

Whether you're looking to rent or buy now, most find that their attraction to homeownership creates a sense of belonging and is a an integral part of their lifestyle.

"Americans still see homeownership as a core value and a key building block of being in the middle class and creating strong jobs in their communities. Owning a home isn't just a policy to people. It isn't just a commodity. It is a core value," Celinda Lake, President Lake Research Partners, writes NAHB in its report.

Low Mortgage Rates Remain Stable While Mixed Reports Draw Concern

It has been a volatile week with the stock market rising rapidly on Wednesday after renewed hope for the world economy surfaced. It was reported that major central banks came together to add liquidity to the global financial system in an effort to help the Euro zone crisis. On the other hand, mixed economic reports continue to draw concern which helped keep low mortgage rates stable. Freerateupdate.com's survey of wholesale and direct lenders show that 30 year fixed mortgage rates are at 3.7500%, 15 year fixed mortgage rates are at 3.125% and 5/1 adjustable mortgage rates are at 2.500%. With home prices dropping lower than expected in September according to S&P Case-Shiller Indices, it is a good time for borrowers to purchase an affordable home. Many are already doing this which is evidenced by the National Association of Realtors' report that pending home sales for October increased by 10%. Numerous borrowers are in a good position to become homeowners at this time since they have improved their credit ratings over the past several years. With good credit, borrowers can obtain these low mortgage rates with 0.7 to 1% origination fee. Stable employment and assets for reserves are also necessary in order to receive lender approval.

 

With FHA fixed mortgage rates lower than conforming fixed mortgage rates, many borrowers have chosen popular FHA mortgages. FHA 30 year fixed mortgage rates are at 3.500%, FHA 15 year fixed mortgage rates are at 3.000% and FHA 5/1 adjustable mortgage rates are at 3.000%. FHA mortgages are known for having easier credit qualifying and will accept a down payment of 3.5% with credit scores down to 580. Credit scores between 500 and 580 require a 10% down payment. Other buyer incentives for FHA mortgages include the acceptance of gifts that meet approval and the use of housing grants or loans, all of which assist with making the down payment more affordable. FHA closing costs (APR) are higher because of the upfront mortgage insurance premium and various FHA fees, but FHA allows seller concessions up to 3% to help cover these costs.

Jumbo mortgage rates have been steady and favorably low making financing more affordable for high end borrowers. Jumbo 30 year fixed mortgage rates are at 4.250%, jumbo 15 year fixed mortgage rates 4.375% and jumbo 5/1 adjustable mortgage rates are at 3.250%. In order to receive these low jumbo mortgage rates with 0.7 to 1%, borrowers must have excellent credit. Jumbo mortgages have stricter guidelines because they are not government insured. They are considered private mortgages and are most often held within a lender's portfolio. For this reason, borrowers must have enough assets for reserves which could be as high as 6 to 12 months after the down payment costs. Each lender has their own guidelines and details for jumbo mortgages.

MBS prices, which move mortgage rates in the opposite direction, have had a volatile week as investors felt somewhat confident and turned to stocks. Consumer Confidence came in higher and jobs increased with 120,000 jobs added in November. The unemployment rate is now 8.6%, down from 9%. Mortgage applications fell for the week ending November 25th which may have been due to the Thanksgiving Holiday. Investors are still concerned about what is going on in Europe and what the outcome will be. There is renewed hope as European leaders continue to meet in order to negotiate a substantial agreement prior to the European Summit which is scheduled for December 9th.

FreeRateUpdate.com surveys more than two dozen wholesale and direct lenders’ rate sheets to determine the most accurate mortgage rates available to well qualified consumers at a standard .07 to 1% point origination fee.