Thursday, November 17, 2016

By John Voket Good news is on the rise for prospective homebuyers who are worried about a possible spike in borrowing rates.

Economists from the Urban Institute and CoreLogic suggest that current housing conditions may be here to stay. Interest rates are not expected to exceed 5 percent, and will likely remain below 4 percent throughout the next year.

While home sales are expected to continue rising, homeowners' inclination to hold onto their homes may place constraints on that growth.

Analysis presented at the Annual Symposium on Housing Finance also predicts some changing demographic trends. Millennials will begin entering the housing market as they approach 31 years old, the average age for first-time homebuyers, providing a large demographic tailwind.

Also, the symposium noted that over the next ten years, three-fourths of new households are projected to be headed by minorities and by 2025, Hispanics will be responsible for 40 percent of market growth.

More on the topic of mortgage trending came out of Freddie Mac in late October, when the agency released its Primary Mortgage Market Survey® (PMMS®), showing average fixed mortgage rates slipping from a recent spike.  

The survey also sees 30-year fixed-rate mortgages easing back to their summertime range below 3.5 percent. According to Freddie Mac:

- 30-year fixed-rate mortgage (FRM) averaged 3.47 percent with an average 0.6 point for the week ending October 27, down 5 basis points from 3.52 percent last week. A year ago at this time, the 30-year FRM averaged 3.76 percent.

- 15-year FRM the week ending October 27 averaged 2.78 percent with an average 0.5 point, down slightly from last week when they averaged 2.79 percent. A year ago at this time, the 15-year FRM averaged 2.98 percent.

- 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.84 with an average 0.4 point, down slightly from last week when it averaged 2.85 percent. A year ago, the 5-year ARM averaged 2.89 percent.

If they keep up - or down as it were - these trends bode well for keeping the housing market teeming with qualified buyers, which in turn could drive purchase prices up in certain scenarios.

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