November Round Up: Rates Remain Near Record Lows

November Round Up: Rates Remain Near Record Lows

We have not seen interest rates remain this low for so very long!  In fact in most of our lifetime!  If you want some information about what is happening in the the mortgage market, please read this information so you can be convinced that NOW is the time to Buy!!  Buy a home and an investment property!

In Freddie Mac’s results of its Primary Mortgage Market Survey®, fixed mortgage rates were virtually unchanged and remaining near their record lows amid growing concerns around the fiscal cliff. The 30-year fixed-rate mortgage has averaged below 4.00 percent all but one week in 2012, while the 15-year fixed-rate mortgage has averaged below 3.00 percent since the last week in May.

  • 30-year fixed-rate mortgage (FRM) averaged 3.32 percent with an average 0.8 point for the week ending November 29, 2012, up from last week when it averaged 3.31 percent. Last year at this time, the 30-year FRM averaged 4.00 percent.
  • 15-year FRM this week averaged 2.64 percent with an average 0.6 point, up from last week when it averaged 2.63 percent. A year ago at this time, the 15-year FRM averaged 3.30 percent.
  • 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.72 percent this week with an average 0.6 point, down from last week when it averaged 2.74 percent. A year ago, the 5-year ARM averaged 2.90 percent. 1-year Treasury-indexed ARM averaged 2.56 percent this week with an average 0.5 point, the same as last week. At this time last year, the 1-year ARM averaged 2.78 percent.

According to Frank Nothaft, vice president and chief economist, Freddie Mac.

“Mortgage rates were virtually unchanged this week amid growing concerns around the fiscal cliff. Although low mortgage rates failed to boost new home sales in October, year-to-date sales are up 20 percent compared with 2011 volumes, and there are growing signs of a turnaround in house prices. The S&P/Case-Shiller® national home price index (seasonally adjusted) rose 5.2 percent over the first three quarters of this year. In addition, all 20 of the city indices (seasonally adjusted) had positive growth over the first 9 months, led by a 17.9 percent increase in Phoenix. More recently, the Federal Reserve’s November 28th regional economic review, known as the Beige Book, noted that 10 of the 12 districts reported the market for single-family homes continued to improve leading into mid-November.”

Time to Buy Your Kid a Condo?

Parents planning to gift real estate to their children should move to do so now, as the lifetime gift-tax exemption will fall to $1 million for individuals and $2 million for couples in the new year from $5.12 million and $10.24 million, respectively.

Even if Congress intervenes before the exemption sunsets, experts still anticipate some kind of reduction of the tax break. Moreover, the maximum tax rate on gifts exceeding the limits will rise to 55 percent on Jan. 1 from 35 percent.

Some parents are passing properties to their children through limited liability companies, which offer a 15 to 20 percent discount on valuations due to a “lack of marketability.” This means outside buyers will balk at buying shares in a family-owned LLC because they would have to negotiate with a group of related members.

Another strategy for gifting a primary residence and avoiding estate taxes is a qualified personal residential trust, which also affords a discount under the “present value factor” since the child will not receive the property for a specified time period; if the parents die before the period is up, estate taxes will be incurred, and if they outlive the period, they will need to relocate or pay rent to the trust.

Homes Are Selling Faster as Inventories Fall

What is the median time a home is on the market nationwide? Just 69 days.

The number of days on the market nationwide has fallen nearly 30 percent from year-ago levels.

Meanwhile, inventory levels are hovering at all-time lows, with the number of homes for-sale down 31.2 percent from a year ago. The inventory is at a 6.4-month supply of homes on the market, as of July data.

“As inventory has tightened, homes have been selling more quickly,” says Lawrence Yun, the National Association of REALTORS®’ chief economist. “A notable shortening of time on market began this spring, and this has created a general balance between home buyers and sellers in much of the country. This equilibrium is supporting sustained price growth, and homes that are correctly priced tend to sell quickly, while those that aren’t often languish on the market.”

For comparison, the time on the market for non-distressed homes peaked at 10 weeks in 2009. During the housing boom between 2004 and 2005, for example, the median selling time was just four weeks.

How Housing May Help Give the Economy a Lift

Lately, the housing market may be the one thing going right for the economy, Reuters reports. Several signs have pointed to a housing market in full recovery mode.

“Higher sales, prices, and building, albeit modest so far, are a welcome boost as other drivers of the economy falter,” Reuters reports.

Unlike the “boom” years, housing has accounted for a small fraction of the gross domestic product — in 2005 it accounted for 6 percent, compared to 2.5 percent in the third quarter of this year. The housing sector “would have to be on steroids to significantly boost GDP growth,” Paul Dales, an economist with Capital Economics, wrote in a recent research note.

Still, several economists are hopeful residential investment could add two- to three-tenths of a percentage point to the GDP next year.

An increase in housing-related jobs also may help give the economy a lift. Housing-related jobs have increased an average of 11,000 a month this year. In 2011, housing-related jobs posted an average monthly decline of 1,000.

By early 2013, housing-related jobs are expected to increase to 30,000 a month as new-home construction rises, says Jim O’Sullivan, chief of U.S. economist at High Frequency Economics.

That could make housing a significant contributor to chipping away at the unemployment rate. Analysts have estimated that the economy needs 150,000 jobs created a month to keep the unemployment rate steady.

Housing may also help lift consumer spending, another important factor that needs to increase to give the economy a jolt. Real estate wealth can help, economists say. As more home owners refinance into record low mortgage rates, more households may in turn then have more to spend.

Written by Realty Times Staff


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