Lenders are set to implement revised lending standards that should make it easier for borrowers to obtain mortgages.  The new standards, agreed to by lenders and industry regulators in October, reduce borrower credit requirements and could also streamline the amount of time it takes to process and close a mortgage.  The new standards relax borrower credit requirements which should make it easier for home buyers with lower credit scores or minor credit issue to obtain mortgages.  For example, a lender may be more willing to provide a mortgage to a borrower with a credit score as low as 620, the minimum score for most mortgage programs according to federal regulations, whereas in the past the lender may have required a minimum credit score of 660.  Additionally, minor credit issues that do not impact the borrower’s ability to repay the mortgage, such as a one-time late payment, will become a less significant part of the mortgage process and require less time and effort for the borrower to address.  It is important to highlight that banks have discretion over how they respond to and apply the new mortgage standards so not all banks will change or relax their lending requirements.  Most industry analysts, however, expect the relaxed regulations to be a positive for mortgage borrowers, especially for individuals with less than perfect credit profiles.

What it Means for Mortgage Borrowers

The clarified and relaxed lending standards should benefit borrowers looking to buy a home or refinance their mortgages.  FREEandCLEAR provides an in-depth discussion of how your credit score impacts your ability to get a mortgage and understanding your credit profile is one of the first steps in the mortgage process.  Additionally, because the lending standards are relatively new and may vary by lender, borrowers should make sure they understand a lender’s borrower qualification and credit score requirements before they select a lender.  Borrowers can use the INTEREST RATES function on FREEandCLEAR to review a list of lenders in their area to understand how the new lending requirements apply to them.

The FREEandCLEAR Mortgage Expert

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In our effort to cover important trends that affect the mortgage market, FREEandCLEAR keeps a close eye on new home sales, which is the number of newly constructed housing units that are sold in a month.  The new home sales figure is reported separately from the existing home sales figure, which is the number of previously constructed homes that are sold in a month.  The new home sales market is smaller than the existing home sales market but it is still an important indicator for the real estate and mortgage markets.  In addition to reporting the number of housing units sold, the new home sales report also includes information on the supply of units for sale as wells as the median and average new home sales price.

The new home sales report, issued on a monthly basis, includes statistics for the prior month.  The report for November 2014 showed that new home sales in October increased slightly to an annualized 458,000 units as compared to the revised 455,000 units figure for for September.  The October figure came in below estimates as analysts had projected approximately 465,000 annualized units.  The most notable figure in the November new home sales report was the October median home sales price, which increased 16.5% to a record $305,000 as compared to a median home price of $259,000 in September, which reflected a 9.7% month-over-month decrease as compared to August.  The number of new homes available for sale, known as supply, increased slightly from 210,000 units in September to 212,000 units in October.  Although the units sold figure failed to meet expectations, the significant increase in median sales price significantly exceeded expectations. (Source: Bloomberg)

What it Means for Mortgage Borrowers

Sluggish new home sales combined with improving but relatively flat existing home sales suggests that the real estate market while stable, is struggling to gain significant momentum.  The increase in the median new home sales price in October could be a cause for concern as rising prices may prevent potential home buyers from entering the market although the new home sales report is typically very volatile so it is important to not draw major conclusions from any single month.  Additionally, the most recent reports on existing home sales and housing price indices suggest that home prices remain relatively flat.  Low interest rates also remain a positive factor for the real estate and mortgage markets.  Use the INTEREST RATES feature on FREEandCLEAR to monitor rates for lenders in your area and check out our Mortgage Process Guide as your first step to buying a new home.

The FREEandCLEAR Mortgage Expert

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The National Association of Realtors pending home sales index tracks the number of existing homes that went into contract to be sold.  When a home seller and buyer agree to the price and terms of a home sale, they sign a contract that outlines the transaction details and the property is said to be “under contract.”  The home sale process is typically completed four-to-six weeks after the property goes under contract so the pending homes sales index is a leading indicator, or predictor, for the real estate market.  An increase in the index reflects an increase in existing home sales while a decrease in the index reflects a decrease in existing home sales.  It is important to point out that the index tracks existing home sales as opposed to new home sales, or homes that are recently constructed that have not been lived in previously.  When people purchase a home they typically get a mortgage so the index also forecasts future activity in the mortgage market. The pending home sales index is released on a monthly basis and provides figures for the prior month.

The pending home sales index report for November 2014 showed that pending home sales in October decreased 1.1% on a month-over-month basis (as compared to September 2014).  The small decrease in the index reverses the small increase in the index reported in the October report.  The existing home sales market does not seem to be able to gain momentum despite lower interest rates and stabilizing housing prices.  The pending homes sales report for November came in below estimates as analysts were hoping to see continued improvement following October’s positive report.  (Source: Bloomberg)

What it Means for Mortgage Borrowers

The trajectory of the housing market remains relatively stable as we close 2014 and look toward 2015.  The decline in pending home sales for October suggests that buyers continue to be somewhat reluctant to enter the real estate market and this appears to be especially true for first-time home buyers.  Attractive interest rates, however, should eventually pull prospective home buyers into the market.  First-time home buyers should review our First-Time Home Buyer Cheat Sheet to prepare for the mortgage process and use our Mortgage Qualification Calculator to determine what size mortgage they can afford before they shop for a home.

The FREEandCLEAR Mortgage Expert

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At FREEandCLEAR, we follow the Mortgage Bankers’ Association (MBA) mortgage applications index which measures both purchase and refinance applications for mortgage lenders across the country.  An increase in the MBA applications index reflects an increase in mortgage applications while a decrease in the index reflects a decline in mortgage applications.  For the week ended November 21st, the composite mortgage application index, which includes both home purchase mortgages and refinancings, decreased 4.3% driven by declines in both purchase and refinance applications.

For the week ended November 21st, the purchase application index declined 10.0% as compared to the prior week, which was up 12.0%.  The refinance application index declined 4.0% after increasing a modest 1% in the prior week.  The composite index, which includes both purchase and refinance mortgage applications, decreased 4.3% as compared to the prior week, which was up 4.9%.  Because it was the week before the Thanksgiving holiday, the decline in mortgage application activity was not unexpected and it is challenging to draw meaningful conclusions from the report.  Interest rates remained attractive with the average interest rate for conforming loans decreasing to 4.15%, as compared to 4.18% for the prior week.  (Source: Bloomberg)

What it Means for Mortgage Borrowers

It is not unsurprising for application activity to decline the week before a holiday but the trend for the past month as compared to the prior year has been negative.  With interest rates remaining low it will be interesting to see if mortgage application activity picks up in December.  This is typically a slow time of year for purchase activity but existing home owners may want to refinance to lock in low interest rates before the end of the year.  Use the INTEREST RATES feature on FREEandCLEAR to view rates for lenders in your area and then use our Refinance Calculator or Mortgage Qualification Calculator to assess if now is a good time for you to refinance your mortgage or buy a home.

The FREEandCLEAR Mortgage Expert

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There are two primary measures of housing prices that we track at FREEandCLEAR: the Federal Housing Finance Agency (FHFA) House Price Index, which uses certain nationwide mortgage activity to track home prices and the S&P / Case-Shiller Home Price Index, which tracks home prices in 20 U.S. metropolitan markets.  Both indices are reported on a monthly basis and include information for the month that is two months prior to the reporting date.

The FHFA House Price Index for November 2014 showed that September housing prices were flat as compared to August and increased 4.3% on a year-over-year basis (so as compared to September 2013).  The FHFA House Price Index for September came in below analyst projections for a 0.4% increase on a month-over-month basis and the annual change was less than the 4.7% annual increase in August.  The S&P / Case-Shiller Home Price Index for November 2014 showed that housing prices increased 0.3% in September as compared to August and increased 4.9% on a year-over-year basis, although this represented the smallest year-over-year increase in almost two years.  The S&P / Case-Shiller Home Price Index figures met analyst expectations with the monthly figure improving and the annual figure declining.  Although the indices showed mixed results, both figures show that nationwide housing prices continue to cool off.  It is important to highlight that these indices reflect the trend in nationwide housing prices and housing prices for a specific region or city can vary significantly.  The latest reports for these indices reinforce the idea that housing prices are stabilizing. (Source: Bloomberg)

What it Means for Mortgage Borrowers

The latest figures from the FHFA Housing Price Index and S&P / Case-Shiller Home Price Index suggest that the housing market is becoming more favorable for buyers.  Rising home prices makes home ownership less affordable, especially for first-time home buyers, so flattening prices is a welcome sign. Cooling housing prices are combining with lower interest rates to create more appealing real estate market conditions for home buyers as we head into 2015.  If you are thinking about buying a home, use the FREEandCLEAR Mortgage Selector to determine the mortgage size and program that are right for you and use the INTEREST RATES feature to compare interest rates for lenders in your city.

The FREEandCLEAR Mortgage Expert

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In our effort to cover important trends that affect the mortgage market, FREEandCLEAR keeps a close eye on existing home sales, which is the number of previously constructed housing units that are sold in a month.  The existing home sales figure is reported separately from the new home sales figure, which is the number of newly constructed homes that are sold in a month.  An increase in existing home sales reflects improvement in the housing market while a decrease in existing home sales reflects a weakening of the housing market.  In addition to reporting the number of housing units sold, the existing home sales report also includes information on the supply of units for sale as wells as the median and average existing home sales price.

The existing home sales report, issued on a monthly basis, includes statistics for the prior month.  The report for November 2014 showed that existing home sales in October increased 1.5% on a month-over-month basis and increased 2.5% on a year-over-year basis to an annualized 5.26 million units (so if you take the home sales figure for September and multiplied it by twelve), which exceeded expectations.  Sales of condominiums increased 3.3% to 630,000 units while sales of single-family homes increased 1.3% to 4.63 million units.  The number of existing homes available for sale, known as supply, decreased by 8,000 units, or 2.6%, to 2.22 million units.  The median existing home sales price decreased approximately 1.0% to $208,300 from $209,700.  For the fourth consecutive month, first-time home buyers represented 29% of all home buyers, consistent with our recent blog post about the decline in first-time home buyers over the past several years.  The October existing home sales figure came in above market expectations for the second consecutive month due to due to moderating housing prices and relatively low interest rates pulling buyers into the real estate market. (Source: Bloomberg, National Association of Realtors)

What it Means for Mortgage Borrowers

The uptick in existing home sales for the second straight month is an encouraging sign for the mortgage and real estate markets.  Although the increase in existing home sales is not very large, the latest figure signals that the housing and mortgage sectors are gradually heading in the right direction.  Consistently low participation by first-time home buyers, however, continues to hold the market back. More first-time home buyers will need to enter the market to truly jumpstart home sales.  First-time home buyers should check out FREEandCLEAR’s Mortgage Expert Insights to review money and time-saving mortgage tips and advice from a true mortgage expert with over 40 years of industry experience.

The FREEandCLEAR Mortgage Expert

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At FREEandCLEAR, we follow the Mortgage Bankers’ Association (MBA) mortgage applications index which measures both purchase and refinance applications for mortgage lenders across the country.  An increase in the MBA applications index reflects an increase in mortgage applications while a decrease in the index reflects a decline in mortgage applications.  For the week ended November 14th, the composite mortgage application index, which includes both home purchase mortgages and refinancings, increased 4.9% driven by strong growth in purchase applications.

For the week ended November 14th, the purchase application index increased a robust 12.0% as compared to the prior week, which was up 1.0%.  The refinance application index increased a modest 1% although the result reversed a negative trend as the refinance index was down 11.0% for the prior week.  The composite index, which includes both purchase and refinance mortgage applications, increased 4.9% as compared to the prior week, which was down 0.9%.  The boost in home purchase mortgage applications was a welcome sign following the deceleration in purchase application activity for the prior week.  Interest rates remained relatively steady with the average interest rate for conforming loans decreasing very slightly to 4.18%, as compared to 4.19% for the prior week.  (Source: Bloomberg)

What it Means for Mortgage Borrowers

Low interest rates seem to be slowly pulling home buyers into the real estate market.  Although the purchase application index showed positive momentum for the week ended November 14th, purchase mortgage application activity for 2014 is down as compared to 2013.  That means mortgage lenders should still be aggressively pursuing new mortgage business.  Steady interest rates and active lenders means that it remains a good time for borrowers to purchase a home or refinance their existing mortgage.  Check out our Mortgage Qualification Calculator to determine what size mortgage you can afford and our Refinance Calculator to assess if you should refinance your mortgage.  You can also use our INTEREST RATES feature to keep track of interest rates and fees for lenders in your area.

The FREEandCLEAR Mortgage Expert

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A key report that reflects the strength of the housing market is the monthly Housing Starts report released jointly by the U.S. Census Bureau, U.S. Department of Commerce and U.S. Department of Housing & Urban Development.  The Housing Starts report includes two pieces of data: starts and permits.  A housing start is counted when construction begins on a new single or multifamily property.  A permit is counted when a permit is issued by a local government to a property owner or builder to begin construction on a new single or multifamily property. Because construction typically begins soon after a new permit is issued, housing starts and permits are typically highly correlated.

The Housing Starts report issued in November 2014 showed that housing starts declined while permits increased in October after both figures rebounded in September.  The housing starts figures tend to fluctuate on a monthly basis so although the October figures came in slightly below analyst expectations the results were not totally unexpected.  The report showed that housing starts declined 2.8% in October to approximately 1,009,00 units while permits grew for the second consecutive month, increasing 4.8% to 1,008,000.  The decrease in housing starts was driven by a 15.4% decline in the multifamily segment while single family housing starts showed an increase of 4.2% for the second month in a row.  Multifamily permits increased 10.0% in October while single family permits rose by a more modest 1.4%.  The single family segment is larger than the multifamily segment.  The Housing Starts report continues to fluctuate on a monthly basis as the October figures compare to a 6.3% increase in starts and a 1.5% increase in permits in September. (Source: Bloomberg)

What it Means for Mortgage Borrowers

Housing starts continue to fluctuate from month to month but positive figures for both single family housing starts and permits could mean that home buyers have more single family new home inventory available in the future.  Additional housing supply helps to alleviate pricing pressure and could mean that there are more affordable options for home buyers, at least in the new home market.  If you are thinking about buying a home, use the FREEandCLEAR Mortgage Selector to determine the mortgage size and program that are right for you.  Prospective home buyers can also use the INTEREST RATES feature on FREEandCLEAR to review interest rates and fees for lenders in their area.

The FREEandCLEAR Mortgage Expert

www.freeandclear.com