30-year mortgage rates are still averaging a rock-bottom 4%. The applications to purchase homes rose after Thanksgiving to the highest level in four months.
With Freddie Mac’s weekly report on home lender offerings released Thursday it showed the typical rate for a 30-yearloan at 3.99%, the sixth straight week at or slightly below 4%. Last year at this time, the 30-year fixed loan averaged 4.61%.
Fifteen-year fixed-rate home loans, a popular option for people refinancing homes, averaged 3.27%, down from last week’s 3.3%. A year ago, the 15-year loan averaged 3.96% according to Freddie Mac.
The typical mortgage rate for larger “jumbo” loans are running about a third of a percentage point higher, according toanother report this week from the Mortgage Bankers Assn. Jumbo loans are priced higher because lenders can’t sell them to Freddie Mac and Fannie Mae These other big government-sponsored mortgage buyer.
Offering a bit of hope for housing at a time when foreclosures are drawing angry protests and government investigations, the mortgage bankers said applications for loans to buy houses reached the highest level since early August.
Refinances still made up about three-quarters of all applications for home loans, however.
A closely watched survey reported Tuesday that U.S. single-family home prices declined in September. This report highlight’s the fragility of a market as it struggles to get back on its feet.
As reported by The S&P/Case Shiller composite index, 20 metropolitan areas fell 0.6 percent from August on a seasonally adjusted basis.
Prices in August were also revised to show a decline of 0.3 percent after originally being reported as unchanged.
The broader trend here is that it appears that home prices over the last few months continue to get weaker.
This ties in with the current consumer attitude that has gotten a lot of more negative, particularly when it comes to making a long-term commitment, such as buying a home.
The index has leveled off in recent months and analysts are hoping the market is at least stabilizing.
Also over the last year home prices in most cities drifted lower, but the plunging collapse of prices seen in 2007-2009 appears to be behind us. Any chance for a sustained recovery will probably need a stronger economy.
The report also pointed out that third quarter prices were down 1.2 percent from the previous quarter on a seasonally adjusted basis and were down 3.9 percent from the third quarter a year ago.
Compared to a year ago, price declines in the 20 cities continued to improve in September and were down 3.6 percent after a year over year decline of 3.8 percent the month before.
Could the besieged housing market have even further to fall before home prices really hit rock bottom?
A new report by Fiserv, a financial analytics company, states that home values are expected to fall another 3.6% by next June, pushing them to a new low of 35% below the peak reached in early 2006 and marking a triple dip in prices.
There are several factors working against the housing market in the upcoming months, including an increase in foreclosure activity and sustained high unemployment.
If home values meet Fiserv’s expectations, it would make it the third trough for home prices since the housing bubble burst. The first post-bubble bottom was hit in 2009, when prices fell to 31% below peak. While the First Time Home Buyer Credit helped raise prices by mid-2010, prices fell again once the credit expired.
During the second dip, which was reached last winter, prices were down about 33%. We did have a mild rally that was artificially spurred as banks slowed the processing of foreclosures following the robo-signing scandal, which found that loan servicers were rapidly signing foreclosures without properly vetting them.
With the scandal mostly resolved the lenders are speeding more cases through the foreclosure pipeline and back onto the market, weighing on home prices even further.
Earlier this month, RealtyTrac reported the first quarterly increase in foreclosure filings in three quarters. Even more discouraging: new default notices were up 14%. There is also a shadow inventory of homes that will be hitting the market when the banks release them for sale. This may also put pressure on the market and prices.
The proposed legislation would amend the tax code to allow homeowners who have 401(k) retirement plans to pull out money to save their houses from foreclosure without the usual tax penalties.
Their are hundreds of thousands of homeowners facing imminent foreclosure and estimates of 2 million or more in the wings.
The Obama administration has been exploring options which includes a new refinancing program expected this unveiled this month. But new a concept has surfaced on Capitol Hill that might offer modest help with no revenue cost to the government. It would mean amending the tax code to allow homeowners who have 401(k) retirement plans to pull out money to save their houses from foreclosure without the usual tax penalties.
It would work like this: Under current rules, anyone making what’s known as a “hardship” early withdrawal of funds from their 401(k) must pay the IRS a 10% penalty on top of ordinary income taxes. A bill introduced Oct. 5 would waive the penalty if the purpose of the distribution is to make loan payments to avoid loss of a primary home to foreclosure.
The bill would allow owners to pull out up to $50,000. The money could be used in a lump sum to pay down the delinquent mortgage balance or to fill shortfalls caused by reductions of household income. It could also be used as part of loan modification agreements with lenders designed to avert a foreclosure. No matter how the money is used to resolve the mortgage delinquency, it would need to be spent within 120 days of receipt and could not exceed 50% of the funds in the retirement account.
Home owners would still be subject to income taxes on the amounts they withdraw.
Titled the HOME Act, short for Hardship Outlays to protect Mortgagee Equity Act, the proposal sheds light on the potential foreclosure-avoidance resources and its drawbacks that are connected with tapping employee retirement accounts. Most, but not all, 401(k) plans allow loans to participants, including for housing-related purposes. Retirement advisors generally recommend taking a loan from a plan because the money withdrawn is not taxed or penalized. Borrowers are required to pay interest on the loan, but in effect they are paying it to themselves to offset any earnings lost on the balances taken out.
