Demand for FHA mortgages slows
While the demand for FHAmortgages is dropping a bit, the use of mortgage financing is growing overall, according to the Campbell/ InsideMortgage Finance HousingPulse Tracking Survey.
“Conventional mortgages are making a comebackwhile FHAmortgages are not,” said Thomas Popik, research director for Campbell Surveys. “Reasons for the growth in conventional mortgages include lowrates, increased underwriting of high LTV ( loan to value) mortgages by private mortgage insurers, and a price structure including insurance premiums that is cheaper than theFHA alternative.”
FHA- backed transactions made a slight increase inAugust to 25.9 percent from 25.5 percent in July. The percentage is down from January, whenFHAtransactions accounted for 27.3 percent of all home purchase transactions, itwas reported byDSNews.
Overall, mortgageswere used to finance 68.9 percent of home purchase transactions inAugust, an increase from 67.5 percent in July.
According to aHousingPulse release, the trend toward mortgage financing rather than cash transactions is due to a surge in purchases of non- distressed properties.
TheHousingPulse Distressed Property Index showed the share of home purchases for distressed properties decreased to 40.4 percent inAugust, a drop from 42.2 percent in July. The figure forAugust is the lowest level recorded since January 2010.
When investors do buy distressed homes, a large majority of investors ( 77 percent) inAugust said they relied on cash, the report noted.
The Campbell/ Inside Mortgage FinanceHousingPulse Tracking Survey includes about 2,500 real estate agents nationwide.
According to feedback from agents, mortgage availability improved over the summer months.
Are mortgage rates still dropping? Surprisingly, rates are dropping to newhistoric lows. FreddieMac reported on Oct. 4 mortgage rates have lowered to newall- time record lows for the second consecutiveweek on mortgage securities purchases by the FederalReserve and indicators of aweakening economy.
The FederalReserve’s purchase of long- term fixed mortgage securities allowed
Q: A:the 15- year fixed- rate mortgage at 2.69 percent to fall belowthe 5- year ARM’s rate at 2.72 percent. The last time the average 15- year fixedwas lower than the 5- yearARM was theweek ending on Oct. 15, 2009. Are pending home sales still rising? Home sales steadily increased for many months, but inAugust, the rising trend took a break.
After reaching a two- year peak, pending home sales fell inAugust but are at elevated levels compared with a year ago, according to theNational Association ofRealtors.
The PendingHome Sales Index, a forward- looking indicator based on contract signings, declined 2.6 percent to 99.2 inAugust from an upwardly revised 101.9 in July but is 10.7 percent above August 2011when itwas 89.6. The data reflect contracts but not closings. LawrenceYun, NARchief economist, said some volatility can be expected in the monthly readings. “The performance in month- to- month contract signings has been unevenwith ongoing shortages of lower priced inventory inmuch of the country, and across most price ranges in theWest, but activity has remained at notably higher levels this year,” Yun said.
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