Major improvements to home prices and sales have helped improve consumer and builder sentiment. Continually low home loan rates should keep confidence high as well.
Freddie Mac's first Primary Mortgage Market Survey for 2013 reported rates remained near record lows. According to the survey, the average rate for 30-year fixed-rate mortgage fell further the week ending January 3, dropping to 3.34 percent from 3.35 percent. Rates were notably down on an annual basis in 2012 when compared to 2011. When looking at the average from this time last year, the current rates are still significantly lower than 3.91 percent.
Another FRM alternative, the 15-year financing option, also posted declines from the week before. The average rate slipped from 2.65 percent to 2.64 percent, but this is still less than 3.23 percent from this time a year ago. While higher monthly payments may not seem appealing to buyers or those looking to refinance, saving money on interest over time can help achieve other financial goals.
ARMs still increasing, improvements still to come
Adjustable-rate mortgages allow homeowners to pay off their property quickly, though the interest rate paid throughout the duration of the loan is dependent on the state of the market. With housing market factors on the rise, the average rate for 5-year ARMs posted a gain from the previous week, increasing to 2.71 percent from 2.7 percent recorded in the final week of December.
Vice president and chief economist of Freddie Mac Frank Nothaft noted that high affordability offered by low mortgage rates will continue to make homeownership a realistic goal for many Americans in combination with stabilization after the recession.
"Mortgage rates started the year near record lows which should continue to aid the ongoing housing recovery," said Nothaft. "New home sales rose in November to a two-year high and were up 15.3 percent from the previous November. Similarly, pending sales on existing homes increased for the third month in November to the strongest pace since April 2010."
While some consumers may be concerned with the shadow market, a new report from CoreLogic revealed inventory of these soon-to-be foreclosed houses reduced 12.3 percent from October 2011 to October 2012, indicating a more manageable and predictable outcome for the new year.