Last week mortgage rates rose to over 4% for the first time since March 2012! The average rate for a 30 year fixed rate mortgage is 4.46%. This rise in interest rates will most likely send more buyers out into the market to get a home before rates climb even higher making the homes for sale shortage even greater. On the other hand for some buyers, they may need to adjust the price of homes they are looking at since they are becoming more expensive with higher interest rates.
The number of refinancing applications was down another 5% last week – a plunge of 40% since just back in May! For many homeowners, a refinance just is no longer worth it if rates are 4% or more.
Once again we have a new mortgage rate record! Mortgage rates continued to decline last week with 30 year fixed rate mortgages hitting a record low of 3.34%, down from 3.4% the previous week and 4% a year ago. The 15 year fixed rate mortgage is at 2.65% down from 3.31% a year ago. Higher consumer confidence, which is thought to be at the highest level since 2007, and lower wholesale prices are said to be the reason for the new record lows.
The Housing Affordability Index says, yes, buyers can still afford homes. The index actually shows that even though home prices have increased, homes were actually more affordable to families in August 2012 than they were in August 2011!
How can this be? Pretty simple – prices are up but interest rates are down around 1% and incomes are up. The Housing Affordability Index uses price, income and mortgage rate to calculate the affordability using nationwide median figures. At 185.0, the Housing Affordability Index shows that the median income family earns 85% more than the income needed to qualify to purchase the typical home that was sold in August. Regionally, home affordability is improved over one year ago in every area except the West, where the more than 15% year-over-year price gain offset more moderate income gains and the benefit of lower mortgage rates. Still, even in the West, the median income family earns at least 40% more than is needed to qualify to purchase the median priced existing home.