In her semi-annual testimony to the Senate Banking Committee, Federal Reserve Chair Janet Yellen expressed uncertainty about the labor and housing markets and indicated that any increase in interest rates would be indicated well in advance of a rate change.  Based on Ms. Yellen’s statement, industry analysts predicted that the earliest that the Federal Reserve would increase interest rates would be June.  It is important to note that although the interest rate policy implemented by the Federal Reserve is one of the most important factors that determines mortgage rates, it is not the only factor.  Mortgage rates are influenced by multiple factors including broader housing, economic and geopolitical conditions.

What it Means for Mortgage Borrowers

The Federal Reserve Chair’s testimony did not have a significant impact on current mortgage rates.  Most industry analysts had predicted that June would be the earliest that the Federal Reserve would possibly raise interest rates so Ms. Yellen’s testimony did not come as a surprise to the market.  Although mortgage rates have crept up over the past several weeks, they remain relatively low and now continues to be a good time to buy a home or refinance.  Ms.  Yellen’s testimony did signal that the Federal Reserve is inclined to raise interest rates some time this year, potentially as early as June, which means that mortgage rates are likely to increase over the course of 2015.  It is impossible to predict interest rates and the Federal Reserve remains concerned about the relatively unsteady labor and housing markets but it would not surprise the FREEandCLEAR Mortgage Expert to see interest rates increase over the second half of 2015.  Now may be a good time to pull the trigger if you are thinking about buying a home or refinancing and use the INTEREST RATES feature on FREEandCLEAR to monitor mortgage rates for lenders in your area.

The FREEandCLEAR Mortgage Expert

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According to a recent report from the U.S. Census Bureau, the rate of homeownership hit a 20 year low of 64.5%  in 2014.  The Census Bureau defines the homeownership rate as the percentage of households that own the house in which they live.  The home ownership rate peaked at 69.0% in 2004 and has been declining over the past ten years.  1994 was the last year that the home ownership rate was as low as 64.5% meaning that 2014 officially erases two decades of home ownership growth in the U.S.

There are many factors that have contributed to the decline in home ownership in the U.S. such as the housing market collapse, economic recession, employment uncertainty and tighter lending standards including higher down payment requirements.  Additionally, FREEandCLEAR believes that the increased complexity of the home buying and mortgage processes has made getting a mortgage and purchasing a home more difficult for more people.  Many people believe that buying a home is out of reach and lack the tools and resources to successfully manage the mortgage process.  The rate of home purchasers that are first time home buyers also continues to decline, a sign that more people are deciding to rent longer instead of buying.

The decline in the home ownership rate and housing market participation by first-time home buyers is one of the reasons we developed FREEandCLEAR.  Our goal is to empower people with high-quality, easy-to-use tools and resources that enable them to understand and better manage a mortgage process that can be overwhelming and confusing.  With the right knowledge, informed borrowers can make better decisions and save money when they get a mortgage.  FREEandCLEAR offers a detailed first-time home buyer cheat sheet, mortgage process guide and mortgage topic instructional videos to guide people through the mortgage process step-by-step.  Although getting a mortgage and buying a home remains a challenging process, borrowers can use FREEandCLEAR to take control of the mortgage process and buy their dream homes.

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 February 2015 showed that existing home sales in January decreased 4.9% on a month-over-month basis to an annualized 4.82 million units (so if you take the home sales figure for January and multiplied it by twelve), which came in below industry analyst expectations.  Poor weather across much of the country may have negatively impacted existing home sales as every region reported a decline in sales.  Both single family and multi-family properties experienced a drop-off with single family existing home sales declining 5.1% and multi-family property sales declining 3.5%.  The drop in existing home sales led to a jump in available inventory to 4.7 months of supply available on the market as compared to 4.4 months of supply in December 2014.  The median existing home sales price declined 4.1% to $199,600 as compared to $209,500 in December.  Low interest rates and flat-to-declining home prices failed to lure buyers into the market.  (Source: Bloomberg)

What it Means for Mortgage Borrowers

With home buyers remaining cautious, the housing market got off to a sluggish start in 2015. The disappointing existing home sales report shows that issues such as tighter lending standards, down payment requirements and the lack of affordable housing inventory continue to deter buyers from entering the market in force.  On the positive side, an increase in housing inventory and a decline in the median existing home sales price create positive conditions for prospective home buyers.  Additionally, although mortgage rates have crept up over the past couple of weeks, interest rates remain low which is another positive for home buyers.  A relatively flat housing market is actually good for buyers and more housing inventory means more options for buyers.  If you are thinking about buying a home over the next six-to-twelve months get prepared by reviewing our comprehensive mortgage process guide and keep track of interest rates and fees for mortgage lenders in your area using our INTEREST RATES feature.

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 February 2015 showed sluggish results for January 2015 after a relatively neutral report for December.  The January figures showed that housing starts declined 5.3% to approximately 1,065,000 annualized units while permits declined 0.7% to 1,053,000.  Both housing starts and permits failed to meet analyst expectations as the new home construction market got off to a slow start in 2015.  The relatively disappointing housing starts figure was driven down by the single family segment which declined 6.7% as compared to the prior month.  On a brighter note, multi-family housing starts increased 7.5% after increasing 5.6% in December.  The single family segment of the housing market is larger than the multifamily segment so the decline in that component of the housing market drags down the overall index.  Although single family housing starts were up in December 2014, that segment of the market has lagged the multi-family segment for the past several months. (Source: Bloomberg)

What it Means for Mortgage Borrowers

The overall housing market is off to a mixed start in 2015 and cannot really seem to gain significant momentum.  The February housing starts report reinforces two points about the real estate market.  First, home builders seem to be shifting their focus to multi-family properties.  Second, builders remain cautious about creating excessive supply in light of inconsistent demand from prospective buyers, especially first-time home buyers.  Although interest rates have edged up, they remain relatively low which is a positive for both home builders and buyers.  The housing starts report tends to fluctuate significantly on a monthly basis due to factors such as weather and we will monitor future reports to see if housing starts can break out of the current sluggish trend.  The housing starts figure is relevant for mortgage borrowers because it is a sign of future housing supply.  Although the February housing starts report was relatively disappointing, continued low interest rates means now is a good time to start the mortgage and home search processes.  Use our Mortgage Qualification Calculator to determine what size mortgage you can afford and our INTEREST RATES feature review interest rates and fees for lenders in your area.

The FREEandCLEAR Mortgage Expert

www.freeandclear.com

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.

Mortgage application activity continued to decline in February.  For the week ending February 13th, the composite mortgage application index, which includes both home purchase mortgages and refinancings, decreased 13.2% which followed a 9.0% decrease for the week ended February 7th.  Home purchase mortgage applications were down 7.0%, matching the decline for the prior week. Refinancing applications declined a relatively large 16.2% following a 10.0%, decline in the prior week.  After a great start to 2015 that saw a tremendous boost in application activity, the mortgage market appears to have hit a wall in February .  Interest rates continued to slowly creep up with the average interest rate for conforming loans (mortgage amount less than $417,000) increasing to 3.93% as compared to 3.84% for the prior week.  (Source: Bloomberg)

What it Means for Mortgage Borrowers

February continues to be a cool month for the mortgage market as application activity has declined for both home purchase mortgages and refinancings.  After the mad rush to refinance to start 2015, although somewhat small, the gradual increase in interest rates seems to have tempered refinancing activity.  Additionally, the latest report, and particularly the decline in purchase applications, suggests that the home sales market has yet to really take off in 2015. Cooling housing and mortgage markets create opportunities for home buyers because there is less demand for available housing inventory and mortgage financing.  Although the supply of homes for sale remains relatively low in certain markets now may be a good time for prospective home buyers to start the home search process.  Use our Mortgage Selector Calculator to determine what size mortgage you can afford and the mortgage program that is right for you. Although interest rates have moved up, they remain relatively low.  Use the INTEREST RATES feature on FREEandCLEAR to monitor interest rates and fees for lenders in your area.

The FREEandCLEAR Mortgage Expert

www.freeandclear.com

The National Association of Home Builders Housing Market Index is one of the key housing market statistics that we track at FREEandCLEAR.  The Housing Market Index incorporates factors such as current and expected new home sales and interest level from potential new home buyers.  It is important to highlight that the index focuses on new home sales, so homes built by builders that have never been lived in before, as opposed to existing home sales, which represents a larger portion of the overall housing market.

For February 2015, the Housing Market Index came in at 55 as compared to 55 in January 2015.  Any figure above 50 is considered strong and February represents the 8th consecutive month with the index above 50.  The January figure came in slightly below industry analyst expectations.   The present new home sales and future home sales components of the index remained relatively flat at 61 and 60 respectively.  The third component of the index, home buyer traffic, came in at a disappointing 39, down from 44 in January and continuing a negative trend line for the past six months.  Although the February figure was positive, the lack of home buyer traffic is a concerning indicator for future new home sales and reflects the long-term under-participation of first-time home buyers in the home purchase market. (Source: Bloomberg)

What it Means for Mortgage Borrowers

Based on the first two months of the year, home builders are optimistic about the new home sales market in 2015 and beyond.  Low interest rates and softening borrowing requirements should be positive drivers for the new home sales market.  For both new and existing home sales to really take off, however, first-time home buyers, and especially younger buyers, will have to enter the market in numbers.  Down payment and lending requirements as well as uncertainty about the real estate market and broader economy continue to keep first-time buyers on the sidelines.  Prospective home buyers should review relaxed lending requirements and learn about low or no down payment mortgage programs on FREEandCLEAR.  Additionally, check out our Mortgage Expert Insights section which offers money and time-saving tips to home buyers of all experience levels.

The FREEandCLEAR Mortgage Expert

www.freeandclear.com

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.

Mortgage application activity continues to cool off and experienced a meaningful decline in the first first week of February.  For the week ending February 6th, the composite mortgage application index, which includes both home purchase mortgages and refinancings, decreased 9.0% as compared to a 1.3% increase for the week ended January 30th.  Home purchase mortgage applications were down 7.0%, falling for the fourth straight week. Refinancing applications declined 10.0%, reversing course as compared to the 3.0% increase in the prior week.  After a roaring start to 2015, the mortgage market has pulled back significantly with application activity comparable to 2014.  Interest rates remain low but edged up on the week with the average interest rate for conforming loans (mortgage amount less than $417,000) increasing slightly to 3.84% as compared to 3.79% for the prior week.  (Source: Bloomberg)

What it Means for Mortgage Borrowers

We continue to see a return to normalcy in the mortgage market.  After a mad refinancing rush to kick off 2015, refinancing applications continue to stabilize and purchase applications continue their lackluster performance.  The stabilizing of the mortgage market is good for borrowers as lenders will be more aggressive in pursuing prospective customers and potentially more willing to negotiate better terms for borrowers.  Interest rates continue to be attractive and now is a great time for borrowers to consider refinancing their mortgage.  If you are thinking about buying a home in the next six-to-twelve months now is a great time to establish relationships with multiple lenders to see what size mortgage you can afford and to compare interest rates and fees.  Use the INTEREST RATES function on FREEandCLEAR to contact lenders in your area about refinancing or obtaining a home purchase mortgage.

The FREEandCLEAR Mortgage Expert

www.freeandclear.com

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.

Mortgage application activity seems to be settling down after jumping through the roof the first half of January.  For the week ending January 30, the composite mortgage application index, which includes both home purchase mortgages and refinancings, increased a modest 1.3% as compared to a 3.2% decrease for the week ended January 23rd.  Boosted by continued low interest rates, refinancings increased 3.0% as compared to the 5.0% decrease last week. Despite low mortgage rates purchase applications cannot seem to pick up any sustained momentum as the purchase index declined 2.0% as compared to the 0.1% decline for the prior week.  The flat-to-down performance for the application index reflects a return to normalcy for the mortgage market after the huge spike in activity to begin 2015.  Interest rates continue to be attractive as the average interest rate for conforming loans (mortgage amount less than $417,000) decreased slightly to 3.79% as compared to 3.83% for the prior week.  (Source: Bloomberg)

What it Means for Mortgage Borrowers

A cooling off of the mortgage market is actually a positive for borrowers as lenders were likely overwhelmed with new business to start the year.  With the mortgage market calming down and interest rates remaining low, now is a good time for borrowers to contact lenders about getting a mortgage to buy a home or possibly refinancing their existing mortgages. FREEandCLEAR recommends that borrowers contact at least four lenders when shopping for a mortgage.  Use the INTEREST RATES function on FREEandCLEAR to find the mortgage with the lowest interest rate and fees and check out our Mortgage Qualification Calculator to determine what size mortgage you can afford and our Mortgage Refinance Calculator to determine how much money you can save by refinancing.

The FREEandCLEAR Mortgage Expert

www.freeandclear.com