Reports from the Mortgage Bankers Association indicate that applications for financing a new home or a second mortgage rose 5.4% as people jump at the near-record low interest rates. Home sales increased as well with February's numbers 5% higher than January. Inventories of unsold properties fell to a 9.6 month supply in February compared to the high set in April of 11.4. The number of people buying previously owned homes increased over 2% in February, largely due to an increase of almost 15% in the Midwest and almost 11% in the Northeast. The FHFA's home price index is nearly 10% lower than the high set in April 2007. The mountain region of the country, which includes Nevada and Arizona experienced the second largest drop in home values, falling more than 9% from last year. Next was the South Atlantic area, which includes Florida. Prices there dropped 8% from last year. Pennsylvania, New Jersey, and New York all had a drop in home prices of 4%, while the New England area saw its property values fall about 3%.
The average interest rate for a 30-year fixed rate mortgage fell to 4.81% last week from 4.86% the week before. The average rate for the year so far is just over 5% compared to the 6.2% that was the average during the housing boom from 2001-2005. The disparity between 30 year mortgage interest rates and 10 year Treasury yields is now just over 2% compared to 3.12% in December which was the highest since 1986. The difference is still nearly .8% higher than the average last decade. Interest rates on 15-year mortgages are about 1.75% higher than treasury yields, compared to the average 1.5% disparity since 1999. American banks owned $11.4 billion in foreclosed properties at the end of 2008, more than double what they owned at 2007's end, according to reports from the Federal Deposit Insurance Corporation (FDIC). Metro areas of California and Florida were hit hardest by foreclosures in the first quarter of 2009. Large lenders like Fannie Mae, Freddie Mac,and Citigroup Inc. have begun delaying the foreclosure process to allow strapped owners time to try and restructure their loans.
The average price for a home nationally is expected to drop just over 5% this year, considerably less than the decline of 9.2% in 2008. Resales of homes will probably see a modest rise this year of about 1% after dropping almost 14% last year. The real estate industry may be boosted by moves within the banking industry. An official with the Treasury Dept. said yesterday that most banks are flooded with available capital. He also said there were signs that credit sector is loosening up. During the last 6 months, the federal government has given almost $600 billion in assistance to struggling financial institutions under the $700 billion Troubled Asset Relief Program.
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