Mortgage rates remained at or near historical lows over the past week with benchmark thirty-year, fixed-rate at 4.75% with no pints and the fifteen-year, fixed-rate at 4.25%.Rates on FHA, VA and Rural Development loans are also all under 5.00%. Rate shave been held at bay by the usual suspects – European debt concerns, weak employment numbers and stick market volatility. The longer-term prognosis doesn’t see interest higher interest rates coming for some time. A research paper released by the San Francisco Federal Reserve on Tuesday argues that interest rates will remain low until 2012 thanks to high unemployment and low inflation.
Also on Tuesday, the National Association of Home Builders released their monthly builder confidence index which registered a surprise decline in June. The index came in at 17 after an unrevised reading of 22 in May. The sharp decline in builder confidence was attributed in part to the expiration of the first-time homebuyer’s tax credit but still came in well below the 22 reading most analysts were expecting. Yet the NAHB also noted that a shortage of housing could result if we see a turnaround in the jobs market that could, in turn, unleash a flood of pent-up demand for homes that builders may not be able to satisfy. To that end, the NAHB is supporting current legislation in Congress that would make $15 billion in loan guarantees available for private builders to meet such demand if it were to arise.
Lastly, it appears that more revisions to FHA are in the pipeline. Though a proposal to raise the minimum down payment requirement to 5% appears to now be dead, what is not dead is a proposal to raise the monthly mortgage insurance premium, or MIP, to 1% annually or higher in attempt to shore up FHA’s dwindling reserves. I will give a thorough update on all changes to the FHA program once they are finalized.