Today's buyers have extended purchasing power, too -- a homeowner can purchase approximately 10% more home as compared to the start of last year with an identical monthly payment.¬†
But can low interest rates last through the end of 2015 and into 2016?¬†Consumers say no.
According to a monthly survey conducted by government-backed Fannie Mae, 96% of U.S. consumers think¬†mortgage rates have bottomed out and are the best they'll ever be.
By 2016, consumers say, interest rates will be worse.
Mortgage rates have been steadfastly low. Since falling below 4% in November of last year, average 30-year rates remained in the 3s through the first week of June -- a span of 8 months.
15-year rates have been mostly in the 2s and, as interest rates have dropped, refinance volume has climbed.¬†There were conventional mortgage refinance loans last quarter than during any time in the last six quarters.
Since one year ago, FHA mortgage rates have averaged roughly 0.25 percentage points below comparable Fannie Mae- and Freddie Mac-backed loans; and, VA and USDA mortgage rates have been approximately 0.375 percentage points lower.
Low rates for FHA, VA, and USDA loans make it simpler to refinance such loans, as their respective streamline refinance programs require minimum monthly savings.
When mortgage rates are low, it's easier to meet such requirements.
According to¬†Fannie Mae's monthly National Housing Survey, though, a survey of 1,000 households homeowner- and renter-households, mortgage rates may not be low much longer.
Fannie Mae asks survey participants: "Do you expect mortgage rates to go up, go down, or stay the same in the next 12 months?" Only 4% believe rates will drop.¬†
That said, consumers are often¬†wrong about this stuff -- really wrong, really.
For example, last year, 96% of consumers said mortgage rates had reached a bottom and would move higher over the next 12 months. Since that point, rates have been down as much as an entire percentage point; and a mini-refinance boom has begun.
The year before, consumers will similarly wrong.
Long-term, the 30-year mortgage rate averages near 8.25%. Today, it's less than half of that average. ¬†
The May¬†Fannie Mae survey also shows U.S. consumers bullish on housing with 66% of those surveyed saying¬†now is "a good time to buy a home".
It's not tough to see¬†why.¬†
As compared to two years ago, in many U.S. cities, home values are up more than 10¬†percentage points and the housing market's steady recovery has been a national news story since late-2012.
The hardest-hit cities of last decade's downturn have led this decade's rebound.
Phoenix, Arizona; San Francisco, California; and Los Angeles are three notable markets in which single-family home values have climbed by more than thirty¬†percent from lows.
Condos in these markets¬†have fared even better and there's hardly a housing metric which doesn't¬†show solid annual growth.
With mortgage rates low, purchasing power is stretched and home affordability is high.
Plus, today's active buyers have access to a multitude of low- and no-downpayment mortgage loans¬†to help them with financing, including¬†the 100% USDA mortgage and the the no-money-down VA loan.
There's also the 3.5%-down FHA loan and¬†Conventional 97 program from Fannie Mae which requires a downpayment of just three percent.
Furthermore, more purchase home loans are getting approved than during any period since 2011, according to Ellie Mae.
Buyers not only have access to low-downpayment programs, but they're having an easier time getting to closing.
Based on Fannie Mae data, U.S. consumers do a terrible job of predicting the future of mortgage interest rates. The constant belief that rates "can't possibly go lower" has been proved false over and again since 2009.
Can industry insiders do any better, though?
The Mortgage Reports hosts a weekly mortgage rate prediction game called The Mortgage Rate Game.
Each week, players forecast whether mortgage rates will rise, fall, or remain unchanged.¬†Their forecasts can be helpful to home buyers wanting to know in what mortgage rates will go in the future. They're also helpful to homeowners wondering whether now is a good time to refinance.
The Mortgage Rate Game is free to play and everyone's welcome. Our top players tend to be mortgage industry insiders, but real estate agents and non-industry consumers have performed well, too.
On average, game players have a 65% success rate.
Sign up for The Mortgage Rate Game¬†now.
Mortgage rates have climbed since the start of May, but remain low as compared to most of 2014; and, as compared to history. It's an excellent time to consider a refinance or the purchase of a new home
Get a complimentary¬†mortgage rate quote now. 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.
Barry L. Systems Analyst
The Mortgage Reports is an excellent resource. I depend on the Mortgage Reports for the most up-to-date information regarding shifts in government policy and mortgage rate information in general.
Elaine A. Marketing
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2016 Conforming, FHA, & VA Loan Limits
Mortgage loan limits for every U.S. county, as published by Fannie Mae & Freddie Mac, the Federal Housing Administration (FHA), and the Department of Veterans Affairs (VA)