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Today’s Mortgage Market & Lending Environment

It’s no secret that housing is one of the most troubled sectors in today’s economy. Much of the nation is still reeling from the housing bust, and no one could blame homeowners for being wary of the marketplace. However, it’s important to remember that you cannot always take the word of journalists or government officials at face value. The gloomiest stories will always get priority airtime, while signs of improvement get buried (if discussed at all.) In truth, the mortgage market and lending environment are beginning to turn around!

Here are some positive indicators:

Home Prices Beginning to Rise


A major symptom of the recession since 2008 has been stagnant or falling home prices in many regions of the country. Understandably, this has spooked homeowners into staying put and delaying their plans to sell. Others have undoubtedly sold out of obligation (such as a pressing job change) and received far less than they had hoped for their homes. Fortunately, the tide appears to be turning.

A July 2010 report from the Federal Housing Finance Agency showed a 0.5% increase in home prices for its national Home Price Index over the period of April to May. Of the nine major census divisions, seven showed increases. The only two divisions to show declines were east North Central (consisting of Wisconsin, Michigan, Illinois, Ohio and Indiana) and East South Central (which includes Alabama, Tennessee, Kentucky and Mississippi.) While this is still 12.3% below the Index’s April 2007 peak, it represents significant growth from the years since.

Refinancing Activity Up


Homeowners are also warming up to the idea of refinancing their mortgages. According to an August 25 release from the Mortgage Bankers Association (which keeps the Market Composite Index to measure mortgage loan application volume) mortgage applications in general are up 4.9% “on a seasonally adjusted basis from a week earlier.” Its Refinance Index actually rose 5.7% from the week prior “and is at its highest level since May 2009.”

Michael Fratantoni, MBA’s Vice President of Research and Economics, was quoted as saying “the volume of refi applications last week was up 26% over their level four weeks ago.” This, Fratantoni continued, represented “a new 15 month high for the Refinance Index.” In fact, he said, given that rates are currently so low (an average of 4.55% for 30 year, fixed-rate mortgages), “many borrowers who refinanced in the past two years may well have an incentive to refinance again.”

Earlier this month, the interest rates hit yet another record low for 30-year fixed mortgages with 4.53% interest rate. In fact, this is the lowest rate has reported in it’s 25 year history.

Hot & Cold Real Estate Regions


In its Home Hunter Report for the second quarter of 2010, ZIP Realty identified some specific regions where home prices have increased (and decreased) the most. Among the hottest:

  • California is still the state where the most homes are selling for above the seller’s asking price and fetching offers from multiple buyers.
  • Within California, Berkley is the hottest region of all. There, homes are presently selling for (on average) nearly 8% more than seller asking prices – in other words, an extra $45,000 over the median home price in that area.
  • Forest Park, Georgia, Chicago, Illinois and Las Vegas and Nevada also made the list

The coldest markets include:

  • Florida, which, as a state, includes the country’s highest number of ZIP codes where homes sell for the most beneath asking price
  • Winchester, Connecticut, which ZIP Realty pegs as the nation’s “coldest” ZIP code because homes there sell (on average) almost 30% beneath listing price – in other words, an average savings of over $200,000 based on median home prices in that area

While the hottest markets are limited to only a handful of states, the good news is that the coldest market’s identified during Q2 2009 are showing positive signs of some recovery.

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One response to “Today’s Mortgage Market & Lending Environment”

  1. I agree, the market is improving for lending. Buyers just need to work with a professional who knows how to think like an underwriter to avoid problems while in escrow. it also helps to work with a lender who can broker out to other lenders for niches they can’t do.

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