Short-Term Rates Rise As Well

Freddie Mac today released the results of its Primary Mortgage Market Survey® (PMMS®) in which the 30-year fixed-rate mortgage (FRM) averaged 6.46 percent with an average 0.7 point for the week ending October 30, 2008, up from last week when it averaged 6.04 percent. Last year at this time, the 30-year FRM averaged 6.26 percent.

The 15-year FRM this week averaged 6.19 percent with an average 0.7 point, up from last week when it averaged 5.72 percent. A year ago at this time, the 15-year FRM averaged 5.91 percent.

Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 6.36 percent this week, with an average 0.7 point, up from last week when it averaged 6.06 percent. A year ago, the 5-year ARM averaged 5.98 percent.

One-year Treasury-indexed ARMs averaged 5.38 percent this week with an average 0.6 point, up from last week when it averaged 5.23 percent. At this time last year, the 1-year ARM averaged 5.57 percent.

(Average commitment rates should be reported along with average fees and points to reflect the total cost of obtaining the mortgage.)

"Long-term mortgage rates followed long-term Treasury bond yields higher this week, pushing fixed-rate mortgages up to levels of two weeks ago," said Frank Nothaft, Freddie Mac vice president and chief economist. "The Federal Reserve's 0.50 percentage point cut in the discount rate and federal funds target rate on Wednesday was widely anticipated in the financial markets and is likely to keep short-term interest rates low; consequently, initial interest rates on ARMs, which tend to be set relative to other short-term rates, may remain near current levels.

"In other news, house-price declines in many markets have improved housing affordability and stimulated home sales. In September, sales of existing homes rose 5.5 percent while sales of new homes were up 2.7 percent, at a seasonally-adjusted annual rate."

Freddie Mac is a stockholder-owned corporation established by Congress in 1970 to provide liquidity, stability and affordability to the nation's residential mortgage markets. Freddie Mac raises capital on Wall Street and throughout the world's capital markets to finance mortgages for families across America. Over the years, Freddie Mac has made home possible for one in six homebuyers and more than five million renters.

source: Freddiemac, Primary Mortgage Market Survey® (PMMS®), www.freddiemac.com

Sales of new homes recorded an unexpected rise in September as median home prices dropped to the lowest level in four years, the Commerce Department reported Monday.  

Sales of new single-family homes rose by 2.7 percent last month to a seasonally adjusted annual rate of 464,000 homes, Commerce said.

The median selling price for a new home was $218,400 in September down from $221,900 in August while the mean selling price rose to $275,500 from $263,900.

On an annual basis, the decline in median selling price was 9.1 percent compared to last year.

The September sales figure is still 33.1 percent below the level in September 2007 as the country is under pressure of a possible recession. The reading was still the worst in September for new home sales since 1981

Last week, the existing homes sales increase 5.5% from August. This rise in sales of new and existing homes could have brought hope to the industry that the worst housing slump would hit its bottom soon. But even with the increases, experts believe that the sales increases do not signal a bottom for the housing market. Many experts believed that the country has already entered a recession and that many will lose jobs making it more difficult for the country to move forward towards recovery.

New home sales dropped 21.4 percent in the Northeast. In the Midwest, the drop was 5.8 percent. However, sales jumped 22.7 percent in the West, a region of the country which has seen some of the biggest declines in prices, a development which has spurred sales. Sales were up 0.7 percent in the South.

The rise in sales left a total of 394,000 unsold new homes on the market at the end of September. Builders have been sharply cutting back on production, trying to get inventories more in line with sales.

Even with the latest drop in total unsold new homes, the inventory represents a 10.4 months supply at the September sales pace, still a historically high level.

The inventory of unsold existing homes is also remaining near historic highs as the market is marred with a record wave of home foreclosures.

The National Association of Realtors reported that the sales of existing homes increased in September, but prices dropped by 9% from the same period last year. The rise was the largest amount in more than five years in September.

In the report, the NAR stated that the sales of existing homes increased in September by 5.5 percent from August to September to a seasonally adjusted annual rate of 5.18 million units from August reading of 4.91 million units. This is the largest month-to-month increase since July 2003.

But even with the improvement in sales figures, prices declines are prevalent. The median sales price has dropped 9 percent compared to the figures a year earlier to $191,600.

Though the figures have improved, the worst is still to come as many analysts predict. Evidence of consumer confidence going down, unemployment rising and a recession being felt hinder the recovery of housing market.

Also, the September sales covers the contracts signed in July or August where the credit has not included the tightened credit terms. Sales for October and November may show the effects of the credit freeze.

Compared to a year before, September 2007 sales were characterized by a sudden dip in sales as a result of the then emerging credit problems.  Experts mentioned that the sales of foreclosed properties also contributed to the increase in sales.

"Compared to a fairly small share of foreclosures or short sales a year ago, distressed sales are currently 35% to 40% of transactions," said Lawrence Yun, NAR’s chief economist. "These are pulling the median price down because many are being sold at discounted prices."

The report also showed some positive regarding inventory as the excess supply of homes on the market fell in September. Realtors estimated the inventory went down to a 9.9 month supply from a 10.6-month supply in August. There are now only 4.3 million homes available for sale.

But that number could rise back above 11 months if sales begin to sink again and foreclosures continue to escalate.

So it's more likely that the worst is yet to come.

Freddie Mac’s results of its latest Primary Mortgage Market Survey® (PMMS®) for the week ending October 23, 2008 showed that the 30-year fixed-rate mortgage fell sharply this week, plunging to its lowest level in five weeks. The 30-year, fixed-rate mortgages averaged 6.04 percent this week with an average 0.6 point down from last week when it averaged 6.04 percent down from 6.46 percent last week. The decline made the 30-year rates down to the lowest level since they stood at 5.78 percent the week of Sept. 18. Last year at this time, the 30-year FRM averaged 6.33 percent.

Rates on 30-year mortgages was at 6.63 percent in late July, the highest for this year and then plunged to a seven-month low of 5.78 percent the week of Sept. 18.

According to the Freddie Mac survey, rates on other types of mortgages were mixed this week.

Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 6.06 percent this week, with an average 0.6 point, down from last week when it averaged 6.14 percent. Last year at this time, the 5-year ARM averaged 6.03 percent.

One-year Treasury-indexed ARMs averaged 5.23 percent this week with an average 0.5 point, up from last week when it averaged 5.16 percent. Same time last year, the 1-year ARM averaged 5.66 percent.

"Long-term mortgage rates fell this week amid news of tame inflation and a weaker housing market," said Frank Nothaft, Freddie Mac vice president and chief economist. "Consumer prices were unchanged in September and core prices, which exclude food and energy products, rose by only 0.1 percentage point, all below the market consensus. On a year-over-year basis growth in core consumer prices remained at a 2.5 percent clip.

"New construction on one-family homes fell 12 percent in September to an annual rate of 544,000 homes, the lowest since February 1982. One-unit housing starts are now 70 percent below its peak set in January 2006, according to the Department of Commerce. Meanwhile, homebuilder confidence reached an all-time record low in October since the National Association of Homebuilders first began polling in January 1985."

Source: FreddieMac's Weekly Primary Mortgage Market Survey® (PMMS®), www.freddiemac.com

MDA Dataquick, a real estate tracking firm released a report showing that home sales in California jumped 65 percent in September compared to sales in September 2007.

Homebuyers grabbed the opportunity to buy sharply discounted foreclosed homes and other properties.

The increased supply of more affordable homes helped drive the California median home price down to $283,000, a drop of about 34 percent from $430,000 in September last year. Of the 40,317 homes sold last month, foreclosure resales accounted for 51 percent of pre-owned home sales. That's up about 6 percent from August sales.