After months of the news media reporting that the first mortgage and refinance markets were a bust; home sales start doing what they’ve historically done so well--start creeping up.
Existing home sales made decent gains in January, which is the third straight increase compared to previous months. House prices continue to drop with the median home price falling 3% (an average of $158,000) and rates held steady, hovering around 4.95% for a 30-year fixed mortgage and 4.15% for a 15 year-fixed mortgage.
The National Association of Realtors (NAR) reports that home sales were up 5.3% in January 2011 versus home sales a year ago. Overall January’s home sales were up from the previous month by 2.7%. In fact, this was the first time in seven months that home sales were higher than the year prior.
Lawrence Yun, NAR's chief economist says that economy is fueling this uptick. "The up trend in home sales is consistent with improvements in the economy and jobs."
Yun adds that low mortgage rates and a large home inventory will keep the housing market vital.
Cash Sales Are Strong in 2011
Stringent mortgage lending requirements have continued to plague buyers, although many mortgage brokers have loosened reins considerably in recent months.
Because some buyers are still skittish about whether to pursue a mortgage, all-cash purchases have risen. Yun explains, "Buyers have been constrained by unnecessarily tight credit. As a result, there are abnormally high levels of all-cash purchases, along with rising investor activity."
All-cash sales rose 32% (up from 26% the prior year) with investors playing a large hand in the gain--23% versus 17% from a year ago.
NAR adds that the majority of all-cash purchases were invested in distressed properties. NAR president Ron Phipps says that this move had a significant impact on the overall median property price.
The Mortgage Market Continues to be Ripe
Although all-cash sales have increased, buyers continue to re-enter the mortgage market. The buyer to seller ratio continues to be unbalanced with inventory remaining higher than the number of buyers on the market.
Sellers are still desperate to unload their property and buyers are banking on it. Low bids coupled with low mortgage rates continue to keep the housing market ground fertile.
Mortgage loan applications are on the rise with reduced rates boosting refinances. The Mortgage Bankers Association reported that recent index of loan applications improved 13% in mid-February and the refinance index rose 18%.
Pursuing a first mortgage or mortgage refinance venture does not have to be difficult for most buyers.
Five tips to help you obtain a mortgage loan:
- Know your budget and have a clear view of what you can afford. Use mortgage calculators to determine whether it makes smart financial sense to refinance.
- Assess your down payment situation. The higher the down payment, the lower the risk you are to mortgage brokers. While some mortgage companies will accept a 5% to 10% down payment, you may need to purchase mortgage insurance, which will add to your overall payment. A hearty, 20% down payment continues to be industry gold.
- Review your credit report to ensure your score reflects your financial activity and behavior. Buyers often find errors in their credit report, which have a negative impact on the overall score. Correct any errors before applying for a mortgage loan so you can furnish the best score possible.
- Shop mortgage brokers before making a decision. Some mortgage companies offer lower rates but higher fees, whereas others may waive or lower fees if you use ACH to make mortgage payments, for example.
- Don’t chase the market. Some buyers are still taking a “wait and see” approach to the market, thinking that prices and rates will hit rock bottom. If you are ready to purchase a home or want to refinance, now is the time to act. It’s impossible to time the market.