Low Mortgage Rates and Low Home Inventory Cause Biggest Home Price Gains Since 2006
mortgage rates and a low inventory of homes available for sale, the housing market is continuing its strong comeback from the biggest bust since the Great Depression. The S&P/Case-Shiller Home Price Indices for the 20-City Composite showed average home prices increased 8.1% in the 12 months ending in January 2013. This is the largest year over year gain since the height of the housing bubble back in 2006.
The increase in home prices varied in different cities. The largest increase was in Phoenix, AZ, with a gain of 23.2 percent. The smallest gain year over year was in New York, where the average price increase was only 0.6 percent. The lowest current mortgage rates in a generation along with an economy that is finally gaining traction is bringing buyers back into the market.
Home prices are projected to continue to move higher in the coming years but current prices are still down around 30 percent from the peak of June/July of 2006. CoreLogic predicts home prices will increase 6 percent in 2013 after increasing 7.5 percent in 2012. New home starts are also increasing as home builders are optimistic again about the future.
The Federal Reserve is continuing to do its part to help the housing market recover by suppressing mortgage rates. The Federal Reserve has been buying long term Treasuries and mortgage-backed securities to drive mortgage rates down. Many analysts believed the Fed would slow or stop their purchases since the economy and housing is gaining momentum.
In the March Federal Open Market Committee (FOMC) meeting, the committee decided to continue purchasing $40 billion a month in mortgage backed securities and $45 billion a month in long term Treasuries. Mortgage refinance rates are projected to increase from current levels but the Fed's actions will keep a lid on the increase in rates.
Mortgage rates today on 30 year conforming loans are averaging 3.70 percent, up from the prior week's average 30 year mortgage rate of 3.66 percent. 30 year mortgage interest rates will probably remain in a range of 3.50 percent to 4.00 percent in 2013. There are lenders quoting 30 year conforming refinance rates today well below the average of 3.70 percent.
The lowest 30 year refinance rates in our database of lender rates are at 3.25 percent with 2 mortgage discount points. The lowest 30 year conforming refinancing rates without points are around 3.50 percent. These advertised rates are for borrowers who have a credit score of 680 or higher.
Banking & Finance InformationPersonal Finance