Rates may spark housing records
By Janice Chamberlain -- Furniture Today, October 10, 2004
McLean, Va. — Spurred by low interest rates, 2003 was another record year for the mortgage business, according to Freddie Mac. In the first nine months of 2004, mortgage interest rates have remained low but are slightly more volatile than in 2003. And housing starts and total home sales could set records this year, the agency said.
Frank Nothaft, Freddie Mac's chief economist, said, "Our forecast is for the 30-year fixed-rate mortgage rate to remain below 6% for the rest of this year. The adjustable-rate mortgage share of lending, which averaged 39% of conventional home-purchase loans over the summer, will likely be smaller in the final quarter of this year given the low level of fixed rates.
"Low mortgage rates continue to keep the housing market vibrant. Mortgage Bankers Assn. figures show that applications for home purchases and refinancings — both of which had fallen off somewhat — have rebounded to the higher levels experienced earlier in the year," he said.
Freddie Mac, the U.S. Congress-chartered corporation that buys mortgages from lenders and repackages them into investor-purchased securities, said the average rate for a 30-year fixed-rate mortgage was 5.87% for the first nine months of 2004, up from 5.79% for the same period in 2003.
The 2004 rates were paired with between 0.5 points and 0.7 points, while the 2003 rates were coupled with points in a range of 0.5 to 0.8.
The high point for 30-year fixed-rate mortgages was 1981's 16.63%. The June 2003 rate of 5.23% is the all-time low since Freddie Mac began its weekly survey. The 1981 rate was coupled with 2.1 points; the June 2003 rate required 0.6 points.
The low point so far in 2004 is 5.38%, reported March 18, combined with 0.7 points.
The lowest monthly average rate in the first nine months of 2004 was March's 5.46%, with February's 5.64% coming in second. September's average monthly rate was 5.75%.
Freddie Mac also reports that 15-year fixed-rate mortgage rates and 1-year adjustable-rate mortgage rates have dropped in recent weeks. The latest weekly rate, for Sept. 30, for a 15-year fixed mortgage is 5.12%, compared with 5.10% the previous week, and 5.21% at the end of August. The current weekly 1-year adjustable rate is 3.97%, measured against 4.00% for the week ended Sept. 23.
The Sept. 30 15-year rate included 0.6 points; the Sept. 23 comparable rate was matched with 0.7 points. The Sept. 30 1-year adjustable rate was combined with 0.6 points, and the comparable points for the prior week were 0.7 points.
Nothaft said he expects house price growth, as measured by the Conventional Mortgage Home Price Index, to come in at 8.9% for 2004. Strong demand for housing, along with low mortgage rates and low inventories of homes for sale — currently at a little over four months supply — will keep housing prices growing robustly and boost housing equity for homeowners, he said.
Housing starts hit a 25-year peak of 1.85 million units in 2003, and Freddie Mac expects about the same level in 2004. But for the first nine months of the year, the annualized rate for housing starts is 1.95 million units, and continued low interest rates could spur construction activity to a new high in 2004.
Freddie Mac, formally known as the Federal Home Mortgage Corp., estimates that total home sales likely will set a record again this year, coming in at 7.27 million units, a 1% gain over 2003.
Nothaft noted the new millennium has proven to be very homeowner friendly. "In the last four years we've set records in housing starts, housing sales, low mortgage rates, refinancing volumes and total mortgage originations," he said.
Over the next decade, Freddie Mac estimates 50 million families will take on new mortgages. Since the stockholder-owned corporation was chartered in 1970, Freddie Mac has financed homes for nearly 30 million families, equal to one of every six homes.
Since April 1971, Freddie Mac has surveyed lenders across the nation weekly to determine the average 30-year fixed-rate mortgage rate. In 1984, 1-year ARMs were added, and the 15-year fixed-rate mortgage was included beginning in 1991.
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