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At the Halfway Point – Midyear Mortgage Update

August 4, 2014
From Loan Officer John Hendley

From Loan Officer John Hendley

1. Mortgage rates haven’t risen as predicted and may not this year.  It was expected that with the easing of Federal Reserve purchases of mortgage-backed securities and U.S. Treasuries as well as the housing recovery that interest rates would rise in 2014. However, the 30-year fixed rate mortgage is actually lower than at the same time last year, dancing around 4.25% last week.  The Fed Chairman has said the federal funds rate, a key impact in borrowing, will not be increased for quite a while, so rates are likely to remain steady for the rest of the year

2. Housing prices are rising, but more slowly.  After an explosion of prices in many parts of the country that even led to bidding wars, home price gains have settled a bit in 2014 while continuing to rise. According to the Standard & Poor/Case-Sheller index, which reported it’s latest numbers as of May, home prices rose 9.3% compared to the previous year, but were down from April’s year-over-year increase of 10.8%.  Contracts in June were down, and more properties have come on the market, expanding inventory, which could further cool rising prices. Overall, home prices have risen 27.3% since March 2012 when the market hit it’s lowest point.

3. Fannie Mae and Freddie Mac reform? Not likely this year. When the housing collapse occurred, there was plenty of blame to go around, but Fannie and Freddie, the monolith agencies that purchase many of the mortgages originated in the U.S., were on the top of many people’s lists. Reform was discussed, but a recent bill has stalled in Congress and probably will remain there during this election year. The balance that’s difficult to achieve is how to shore up the strength of the country’s financial system while also making affordable homeownership accessible to more people. It’s predicted that reform may have to wait until 2015, if then.

Watch for more mid-year updates next week, in which predictions made at the beginning of the year are evaluated and updated with the latest news for the rest of 2014.

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