NAR – the National Association of Realtors – recently put together a report that should spread some cheer on faces of everyone who is planning on purchasing a home. Actually, it also should quicken the heartbeat in the mortgage loan industry and among real estate agents. And the home building sector, too. And, for that matter, help stabilize the entire economy.
According to NAR, the national median income in the first quarter stood at $61,000, fair enough. So, if a mortgage applicant wanted to buy a property mirroring the national median price, the income to get the home loan approved would be $32,900 with a 10% down payment. Or $29,300 with a 20% down payment. All this is based on a solid credit rating, a 4% interest rate apparently on a 30-year mortgage, 25% front end ratio of principal and interest and it is a single-family home in a metropolitan area.
The above scenario certainly looks very encouraging for the housing market. Scores of mortgage applicants would qualify at least on income. The actual Freddie Mac’s weekly PMMS – primary mortgage market survey – produced last week a rate of 3.83% fixed for a 30-year deal. That simply is attractive, even better than in NAR’s sample.
Yet, home buyers are hardly overrunning mortgage loan shops dotting the landscape to fill applications and ask relevant questions. True, some regions in the country are doing better than others but overall the real estate market remains in a state of not knowing exactly where to go.
Home buying prospects know that. They like to see some more stability across the board, where prices settle down to form a foundation that holds. Again, values are cautiously rising in some areas where business is picking up and mortgage applications show promising upward trend. In other regions the situation is still in a flux. The famous shadow inventory continues to draw headlines especially in states like Nevada and Florida that raise a red flag about real estate prices.
Then there is the economy. It is slowly improving, but consumers are still wary about making major commitments like purchasing a home with a mortgage loan that could possibly sink them should there be further disruptions. They of course were badly spooked by the near financial market meltdown of a few years ago and are still recovering from that bizarre event. They are looking for more stability.
And then comes JP Morgan Chase galloping onto the scene, quickly reviving worries about the supposedly improving health of the banking sector. It – a major mortgage player - announced last week the loss of over $2 billion on fancy trades hedging the bank’s financial risks. The damage is likely much higher than that in dollar terms. Even its CEO couldn’t explain how it happened, and that’s what really is scary. It’ll take weeks, if not months, to figure out what went wrong. Frankly, they may never find out because this side of the business is rather complex. Setbacks like this gnaw away consumer confidence in the economy.
Regardless, for the brave, 3.83% mortgage money right now might be worth going for it.