Housing Starts Surge in May

Mortgage rates have eased somewhat this week as weakness in the stock market has translated into higher demand for bonds. Stock have been hit by a renewed sense of uncertainty as investors wonder if the rally over the last several months has gotten ahead of the economic realities. A stock’s loss is a bond’s gain and the thirty-year fixed mortgage rate now stands at 5.50%. Fifteen year fixed rates are just below 5% at 4.875%. The jumbo market continues to be nearly non-existent with thirty year rates for loans over $417,000 back over 7% with no relief in sight.

More signs the housing market is stabilizing could be found in a report released by the Census Bureau that showed housing starts jumped 17.2% in May to an annualized pace of 532,000 after a revised estimate of 454,000 in April. The data also revealed that new building permits rose by 4% in May. Other news, on the economy as a whole, showed inflation at the wholesale level remains in check with the Producer Price Index rising by a modest .2% last month. Economists had expected a rise of three times that at .6%. Year over year, wholesale prices have fallen by 5% - the largest annual rate of price decline since 1949. 

There is a lot of talk in the media about the fact that financing for real estate is so difficult to obtain these days and it is true that underwriting and credit standards have tightened significantly. Yet most of the difficulties lie in the second home, investor and condo markets. For primary residence purchasers buying single family detached homes, however, times could not be better. Low rates are still with us ( yes 5.50% is low) there is an $8,000 first –time buyer tax credit, home prices are their lowest in years and mortgage programs abound. FHA , Rural Development and VA loans are still extremely attractive options with relaxed down payment, credit, and debt ratio requirements and offer repeat and first-time buyers alike an opportunity to take advantage of the amazing deals to be found right now. I would be happy to explain these programs in detail with anyone interested.