January Home Sales Decline in U.S.- Mortgage Rates Up
Mortgage Rates Up, January Home Sales Down Feb 27, 2006 - Linknet Finance News - January home sales in the U.S. fell to the lowest level in a year, and the number of properties for sale was at its highest ever. This is consistent with predictions that residential real estate sales in 2006 may slow down after five record years.== Mortgage Training - Make money in real estate as a mortgage loan officer == The sales reduction was greater than expected. Overall sales were down 5% to an annual rate of 1.233 million from a revised 1.298 million in December. Figures were from the Commerce Department in Washington. The number of new homes for sale rose to 528,000 in January, the most ever, from December's 515,000. But resale homes make up about 85% of the total market. Gradually rising mortgage rates and inflated home prices will slow sales in 2006, and may contribute to a slowing of the economy in the second half. But a favorable outlook for jobs and incomes will keep sales from falling too far, analysts said. With the rise in mortgage rates and home prices the affordability of homes fell to the lowest level in more than 14 years in the last quarter of 2005. It is expected to decline even further in 2006 as both rates and prices are expected to continue rising. 30-year fixed mortgage average rates rose to 6.15 percent in January from 5.71 percent a year earlier. Rates reached 6.26% last week after a continued gradual rise in February. Mortgage Strategies Changing as Market Tightens Just a few months ago the interest-only adjustable rate mortgage (ARM) was all the rage. But that has changed as the U.S. residential real estate market has gone soft. Now as rates start to inch upwards and prices start to edge downwards, the good old 30 year fixed interest rate mortgage is looking pretty good. The interest-only ARM which was so popular in 2005 permitted the buyer to make low monthly payments for the first few years of the loan. Payments did not even try to touch the principal of the loan -- which in many cases was stretched to the limit by rapidly increased home prices and easy credit. The ARM looks good as long as values are appreciating. But when they stagnate or even start to slide downwards home owners making interest-only payments are likely to find in five years time they have no equity. The equity was supposed to come from increasing prices. Even worse, the "Option ARM" allows buyers to opt for one of four payments each month -- a "minimum" payment, an interest-only payment, a payment based upon a 30-year repayment schedule and one based upon a 15-year repayment schedule. That "minimum" payment often doesn't even cover the interest amount and the difference is just tacked onto the principal. After making a minimum payment, the outstanding balance on the loan will actually increase. Hawaii Legislation Cracking Down on Mortgage Brokers Proposed legislation in the Hawaii State Senate is trying to tighten up the rules for mortgage brokers. With the real estate boom of the last few years the number of brokers has more than doubled to more than 5,000 in the state. Many of these are sales agents who solicit business on behalf of brokers. The proposed legislation would require brokers and mortgage solicitors to be tested and would hold brokers responsible for the conduct of their solicitors and loan originators. It would require home mortgage brokers to pass a test to get their license, continue their education and pay for audits of their records. The bill also would increase to ,000, from ,000, the bond required for mortgage brokers to operate. Brokers are opposed to the legislation, saying legislators are going after a problem that doesn't exist. But legislators are concerned about commission sales people preying on borrowers with little regard for their ability to properly qualify for home loans. A recent case involving Ameriquest found that the company was using deceptive and high-pressure tactics to sell mortgages. Ameriquest agreed to pay $ 325 million nationwide to settle. That included 3,000 residents of Hawaii. Get Commercial Real Estate Financing without using banks.
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