Mortgage Rates and Home Sales Dip as Home Prices Rise
Over the past month, average mortgage rates trended higher as news of stronger growth has sent U.S. Treasury yields higher. The increase in rates has been small and average rates are still just above record lows set in November of 2012. Mortgage rates today on 30 year conventional home loans are averaging 3.61 percent, a slight increase from last week's average 30 year mortgage rate of 3.60 percent.
Record low rates and the highest home affordability in 40 years has finally helped the housing market recover from the worst bust since the depression. The National Association of Realtors reported existing home sales index took a dip in December 2012 but are still well above levels from a year ago as buyers are back in the market snapping up homes.
December's existing home sales, which are completed transactions that include single-family homes, town homes, condominiums and co-ops, declined 1.0 percent to a seasonally adjusted annual rate of 4.94 million. Home sales this December are 12.8 percent higher than last year when sales at 4.38 million.
Lawrence Yun, The NAR's Chief Economist had the following comments about the December report:
Record low mortgage interest rates clearly are helping many home buyers, but tight inventory and restrictive mortgage underwriting standards are limiting sales," he said. "The number of potential buyers who stayed on the sidelines accumulated during the recession, but they started entering the market early last year as their financial ability and confidence steadily grew, along with home prices. Likely job creation and household formation will continue to fuel that growth. Both sales and prices will again be higher in 2013.
Home prices increased in December, which is the tenth consecutive month of year over year home price gains. The national median existing-home price for all housing types was $180,800 in December, 11.5 percent above December 2011. The last time we saw ten consecutive months of an increase in prices was from August 2005 to May 2006 - the end of the housing boom.
Low refinance rates have also created a boom in housing refinancing as homeowners take advantage of the lowest rates in a generation. Freddie Mac recently reported homeowners on average got a refinance rate 1.8 percent lower when refinancing. Another interesting fact in Freddie Mac's report is 84 percent of homeowners refinancing either maintained or reduced their principal balance. This is a reversal from the housing boom era when the home was seen as a piggy bank to take money from when refinancing.
You can watch Lawrence Yun discuss home sales and home prices in this video:
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