Lower Mortgage Rates & Lower FHA Insurance
Could Spur Housing Market Rebound

Housing Market Rebound

Good news for the local housing market continues as mortgage rates are down nearly 1 percent from this time last year, and FHA Mortgage Insurance rates will drop a half-percent by the end of the month.

With the average interest rate hovering at 3.66 percent, many would-be homebuyers are taking the plunge into homeownership, already. They’re not waiting for the warmer weather of Spring. Applications for mortgages rose 49% last week, refinancing applications more than doubled and new-mortgage applications soared by 24 percent, according to a recent report from the National Association of Realtors (NAR).

Why such a dramatic surge in mortgages?
It could have something to do with the average monthly mortgage payment on a U.S. home dropping by $50 due to lower interest rates.

Now, $50 per month may not sound like much to the average person. But, that’s an annual savings of $600. With gasoline prices below $2 in West Virginia, the monthly mortgage savings could result in 2 fill-ups for the average car.

That’s big.

If gasoline prices remain, the average family could witness an annual savings of more than $750 in fuel, alone. Combine lower gas prices with lower mortgage payments and you’re looking at an annual savings of $1,350.

That’s huge.

FHA: Double Savings

Many borrowers will enjoy even more savings with the help of the FHA. They will soon pay ½-percent less on their FHA Mortgage Insurance, and that leads to a savings of more than $900 annually.

President Obama announced the good news last week. He said rates will go drop from 1.35 percent to 0.85 percent by the end of January. The change will bring $75 in monthly savings to the average FHA mortgage insurance payment.

This all comes after the Federal Housing Administration worked with the president to lower the rates, making homeownership more accessible to lower and middle class Americans.

The National Association of Realtors (NAR) estimates the reduction in FHA premiums has the potential to bring 90,000 to 140,000 additional home purchases this year.

The Perfect Recipe

Realtors and lenders should prepare for a buyer surge.
The ingredients are here. The signs are here. The numbers back them up.

If business is slow now, it could just be the calm before the perfect storm.

Remember, lower FHA Insurance rates and lower mortgage rates are not the only fuels fanning this fire. —Link to previous blog——All these ingredients seem to be working together to create a recipe for a Real Estate surge this Spring.

Are you ready?

By: Charles Boggs, Jr.
Boggs & Associates, Inc.