U.S. home sales crossed five million units on a seasonally-adjusted, annualized basis for the fifth consecutive month in October. After a slow start to the year, the housing market is gaining momentum through late-2014 and into 2015.
Falling mortgage rates may be helping to boost home sales nationwide.
30-year mortgage rates reached the low-4 percents in May, and have since dropped into the high-3s. Rates and APR for FHA loans, VA loans, and USDA "rural housing" loans are even lower. Many banks now quote rates at, or below, 3.50%.
Low mortgage rates are a boon to today's home buyers.
Low rates help to keep U.S. homes affordable, and can extend a buyer's purchasing power. When rates are low, for example, a buyer can look at homes with an extra bedroom or bathroom; or in a different, more desirable school district.
Meanwhile, as interest rates drop, home values are rising. Many of last decade's "underwater homeowners" now have positive home equity. Positive home equity has enable so-called "move-up" buyers at all price points -- especially within the jumbo and luxury housing markets.
The luxury housing market is growing faster than all housing at all other price points.
The National Association of REALTORS® recently released its October 2014 Existing Home Sales report. The real estate trade group reports 5.26 million homes sold last month on a seasonally-adjusted, annualized basis, a 2 percent increase over the month prior.
On an annual basis, home resales are higher, too -- a reversal from recent months. Prior to October, home sales had dropped as compared to the year prior for 11 straight months.
October's home sales represent a 3% annual increase.
The results of the October Existing Home Sales report met analyst expectations, mostly. This is because, in addition to publishing the monthly Existing Home Sales report, the National Association of REALTORS® publishes a monthly report called the Pending Home Sales Index.
The Pending Home Sales Index measures the number of U.S. homes which are under contract, but not yet closed. History has shown that 80% of homes under contract close within 60 days. This results in a very high correlation between the Pending Home Sales Index and the Existing Home Sales report.
The most recent Pending Home Sales Index data projected September's Existing Home Sales between 5.05-5.15 million home sold on an annualized basis. The actual Existing Home Sales reading topped that range by a few hundred thousand.
The September Existing Home Sales Report also showed the following :
In addition, the median home sales price is up from last year, climbing 6 percent to $208,300. This figure is buoyed by homes sold for more than $500,000, which now account for 11% of all homes sold.
Homes sold for more than $500,000 are typically financed with "jumbo" mortgages which, today, can be secured with just a 10% downpayment.
Today's home buyers are fortunate. Not only are mortgage rates are low but banks are making mortgage approvals easier to secure.
According to mortgage origination software provider Ellie Mae, lenders approved 66% of purchase loan applications in October. This is a 9-tick improvement from last year and marks the highest percentage of closed purchase applications since Ellie Mae began tracking such data.
Furthermore, the average representative FICO score on an approved mortgage is now 726, which is twelve points lower as compared to last year's average.
It's clear that lenders are approving more loans and, for buyers of luxury properties, the news gets even better -- banks are competing hard for jumbo mortgage business.
A jumbo mortgage loans is typically defined by its high-dollar amount. Jumbo loans typically exceeds the local "loan limit" for a government-backed loan.
Government-backed loan limits vary by loan type. Conforming mortgage loan limits differ, for example, differ from the loan limits of an FHA loan. The 2014 mortgage loan limits for a conventional mortgage ranges from $417,000 - $625,500 whereas FHA loan limits range from $271,500 - $625,500.
However, you aren't required to have a "big loan" in order to use jumbo financing. There are scenarios in which loans below jumbo loan limits can go "the jumbo route" and price better than a non-jumbo home loan.
This is because, as the economy improves, banks are seeking out their "the ideal banking customer"; the one with which they can build lasting, deep relationships. Offering low rates via a jumbo loan is one way to do it.
Jumbo mortgage rates now troll near 18-month lows. Therefore, when applying for your next home loan, ask the lender for its jumbo rates and whether you're eligible.
It's always good to ask.
The 2014 housing market will finish strong and the 2015 housing market is expected to carry that activity forward. Housing fundamentals appear sound and forward momentum is gaining. Mortgage rates are steadfastly low, too.
Compare today's mortgage rates. Rates are available online at no cost, with no social security number required to get started, and with no obligation to proceed.
The information contained on The Mortgage Reports website is for informational purposes only and is not an advertisement for products offered by Full Beaker. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its officers, parent, or affiliates.
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2015 Conforming & FHA Loan Limits
Mortgage loan limits for every U.S. county,
as published by Fannie Mae & Freddie Mac, and the FHA.