Positive Mortgage Market Factors Emerging

November 17, 2007

Things are looking up for consumers who are looking for a mortgage loan to either finance the purchase of a home or refinance an existing loan. Recent developments in the mortgage industry will make home loans more affordable and accessible for many consumers in coming months, according to a report from the National Association of Realtors. This should help release some of the current pent-up demand by early next year, the report predicted.

"Conforming loans (those under $417,000) are abundantly available today at historically favorable mortgage rates," said Lawrence Yun, NAR’s senior economist. "Pricing has steadily improved on jumbo mortgages (over $417,000) since the August credit crunch, and FHA loans are replacing subprime mortgages." He noted that it’s important to place the current housing market in proper perspective. This year will probably be the fifth highest year on record for existing-home sales.

"Although sales are off from the unsustainable peak of 2005, there is a historically high level of home sales taking place this year. A lot of people are, in fact, buying homes. One out of 16 American households is buying a home this year. The speculative excesses have been removed from the market and home sales are returning to fundamentally healthy levels, while prices remain near record highs, reflecting favorable mortgage rates," Yun said.

Existing-home sales are expected to total 5.78 million this year, then rise to 6.12 million next year. New-home sales are forecast at 804,000 this year and 752,000 next year, NAR projects. "A cutback in housing construction is a positive sign for the market because it will help lower inventory and firm up home prices," Yun said.

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