The New York Times
With interest rates at historically low levels, many borrowers are finding value with a reliable fixed-rate mortgage. However, borrowers who think they could be relocating in the near future, or need to shore up savings, might want to consider what some regard as the next best thing: An adjustable-rate mortgage that offers several years at a fixed interest rate.
Making sense of the story
- Hybrid adjustable-rate mortgages, or ARMs, originated in the jumbo-loan marketplace at the end of the 1980s. They fell out of favor – along with the riskier ARMs that offered extremely low teaser rates and interest-only components – after the subprime mortgage market collapsed.
- Some adjustable-rate mortgages have an interest rate that changed every year, but a hybrid – also known as a delayed first-adjustment ARM – has a fixed interest rate for a period of time. Most loan officers refer to a hybrid by the period during which the rate is fixed. A 5/1 loan, for example, has a fixed rate for five years, then adjusts annually for the remainder of the term; a 7/1 loan adjusts after seven years.
- ARMs account for only a small segment of the overall mortgage nowadays, financing just slightly more than 10 percent of home purchases. However, market share for hybrid loans is expected to increase to 14 percent this year, according to an annual survey released last month by Freddie Mac. The 5/1 hybrid was the most popular adjustable-rate loan product in the market, according to the survey. The least popular was a 3/3 ARM, which adjusts once every three years.
- A common reason for choosing a hybrid ARM is projected length of homeownership. It’s a nice option for buyers who don’t expect to stay in their home for longer than three to five years.
- Rates on hybrid ARMs are also attractive. As of last week, the average rate on a 5/1 loan was 2.81 percent, compared with 3.88 percent for a 30-year fixed-rate loan, according to Freddie Mac.
- Borrowers should be aware though that with rates starting at rock-bottom levels, there’s generally only one direction for them to go. And even though there are caps on the rate change amount, the jump could be as much as six percentage points.
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http://www.nytimes.com/2012/02/19/realestate/mortgages-a-fixed-rate-alternative.html
On a statewide basis, the National Association of Home Builders/Wells Fargo Housing Market Index (HOI) found that a family earning the median income could have afforded 66.2 percent of the new and existing homes that were sold during the fourth quarter, up from 63.5 percent in the third quarter. It was the highest statewide affordability level recorded since the California-specific HOI began in 2007, with the previous high being set in the first quarter of 2011 at a level of 64.6 percent. In contrast, the lowest statewide level was recorded with the inaugural state index in the first quarter of 2007 with an affordability reading of 11.2 percent.
The San Francisco, San Mateo, and Marin County metro area was California’s least affordable metro area for the 13th consecutive quarter with 37.1 percent of the homes sold being affordable to a family earning the median income, up from 32.9 percent in the third quarter. Orange County was California’s second-least affordable market at 47.4 percent, followed by Los Angeles County, 48.3 percent, as the state’s third-least affordable market.
Sutter and Yuba counties were California’s most affordable metro area with 92.5 percent affordability, up from 89.3 percent in the third quarter. Stanislaus County was the state’s second-most affordable market with 91.5 percent affordability, followed by Merced County with 91.2 percent affordability.
http://www.cbia.org/go/newsroom/press-releases/statee28099s-housing-affordability-climbs-to-new-heights-in-fourth-quarter-cbia-announces/
The Wall Street Journal
The Federal Housing Administration will exhaust its reserves over the coming year, according to budget projections released Monday, which would require a Treasury infusion for the first time in its 78-year history.
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http://online.wsj.com/article/SB10001424052970204795304577221222265037002.html?mod=WSJ_RealEstate_LeftTopNews
Calif. median home price: December 2011: $285,920 (Source: C.A.R.)
Calif. highest median home price by region/county December 2011: Marin: $693,880 (Source: C.A.R.)
Calif. lowest median home price by region/county December 2011: Madera: $106,000 (Source: C.A.R.)
Calif. Pending Home Sales Index: December 2011: 91.6, an increase from the revised 82.5 recorded in December 2010
Calif. Traditional Housing Affordability Index: Fourth quarter 2011: 55 percent (Source: C.A.R.)
Mortgage rates: Week ending 2/9/2012 30-yr. fixed: 3.87% fees/points: 0.8% 15-yr. fixed: 3.16 fees/points: 0.7% 1-yr. adjustable: 2.78% Fees/points: 0.6% (Source: Freddie Mac)
The Los Angeles Times
On Monday, lawmakers pressed the regulator of Fannie Mae and Freddie Mac to write-down the principal on mortgages of underwater homes.
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http://www.latimes.com/business/money/la-fi-mo-principal-writedowns-20120206,0,6192746.story?track=rss
