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Mortgage Rates to Benefit from Stabilized Home Prices, Jumbo Mortgage Rates in Particular
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The median home price rose in May.
The 30 year fixed mortgage rate is hanging tough at 5% and in some cases being advertised below that.
New data released in the past 24 hours suggests that the nation's housing market is stabilizing. This wasn't supposed to happen so fast. The median US home price increased slightly in May for the first time in over 10 months.
Southern California in particular is showing promising signs of life. In June the median home price in LA, Orange, and San Diego Counties, some of the hardest hit by foreclosure rose significantly. Orange County's median home price was up to $320,000 in June from $300,000 in May. Less than half of all Los Angeles home sales were on foreclosed properties. Keep in mind a large percentage of the nation's foreclosures are right here in California.
What does this great news mean for mortgage lending? Mortgage rates?
Many people forget the basics when it comes to the housing market and mortgage lending. What takes most of the risk out of mortgage debt is the fact the debt is backed by a home. When the home isn't a stable collateral for the loan it only makes sense it's harder to get approved and higher interest rates are dealt to cover the higher risk.
With a stabilization, or if you're skeptical a slowdown in home price declines mortgage lending can finally stabilize as well. Credit will begin to flow more freely as the risk involved reduces. If good news in housing continues look for even lower mortgage rates especially lower jumbo mortgage rates and a loosening in the credit markets as it's only natural as loans become much safer investments for banks.
Don't expect any of this to happen right away. Most are skeptical with reason that a new wave of foreclosure could put out the fire in the housing market. Either way, these signs of housing stabilization are great for mortgage rates, lending, housing, and the economy as a whole. Today the DOW broke 9,000 for the first time since January.
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