Mortgage rates fall - applications up

From a recent real estate news feed comes this good news…If new mortgage applications are a reliable gauge of forthcoming home purchases, looks like things are looking up. Last week the Mortgage Bankers Association's national survey registered a record 37 percent jump in applications for new conventional loans to buy houses, and a 39 percent increase for home purchases using FHA mortgages.

What’s the reason for the sudden surge? A half point drop in 30 year fixed mortgage interest rates to 5.47 percent -- which was down from 6 percent the previous week -- and to just 5.13 percent for fifteen year loans. The rate drop happened almost overnight, after the Federal Reserve announced plans to pump up the housing sector by buying $100 billion worth of bonds issued by Fannie Mae and Freddie Mac. The Fed also said it plans to buy about half a trillion dollars of mortgage-backed securities issued by Fannie, Freddie and Ginnie Mae beginning this month. Ginnie backs the FHA side of the market, just as Fannie and Freddie do on the conventional side.

Although lenders report their phones were jammed with applications from people who want to refinance, the big surprise was the huge jump in applications from consumers who plan to buy houses. With prices down in the majority of markets, more and more people are finding that the equation now works: Fixed rates in the mid-fives combined with pricing at 2003 and 2004 levels make a compelling case that this is an excellent time to buy - provided you've got a down payment and reasonable credit.

One additional bright spot to report: Unsold inventory -- the backlog of houses that weighs down local markets -- dropped by a full point and is now down 4 and a half percent nationally for the year. Locally, in the little market that I track on a weekly basis (Milford, Highland, Commerce, White Lake and West Bloomfield), the inventory has dropped even more, down 19% since June of this year and 21% from the year’s high in March. Median list and sale prices have dropped too. Hopefully these lower rates will reverse the trend of homes staying on the market longer. See all of my local statistics at http://www.themilfordteam.com/.

To see how these new rates might impact your ability to buy a new home here in Michigan or to refinance your current home, call Agnes Miesch of John Adams Mortgage at (248)684-1065 (ask for Agnes and tell her that Norm sent you). She can tell you how much you’ll need for a down payment (which changes for and FHA loan as of January 1, 2009) under various programs and what you can afford. Then, call me and I’ll help you find the perfect new home.