Jim Wasserman of the Sacramento Bee writes: A shattered California home building industry received a boost Wednesday when the state Senate voted to extend a popular $10,000 tax credit that fueled thousands of new-home sales last spring and summer.
The Senate voted 35-1 to reauthorize the use of $30 million in credits not awarded during the first program. That should allow the state to give tax credits to about 4,300 more buyers of new unoccupied homes, many of which are in inland areas of California including the Central Valley. Eligible buyers would get a maximum of $3,333 in credits for each of the next three years.
Senate Bill X3 37 goes now to the Assembly, which is expected to consider it next week. It must pass that legislative body and be signed by Gov. Arnold Schwarzenegger to become law. But the Assembly approved an earlier version of the bill by wide margins and the governor has said he favors the buyer tax credit as a stimulus to the economy.
“This tax credit worked so well that in just four months it was gone,” said Sen. Ray Ashburn, R-Bakersfield, author of SB X3 37. “This is a good program that assisted people in buying homes and sharing in the American dream.”
More than 10,600 buyers of new homes were approved for the tax credit before the state Franchise Tax Board stopped taking applications July 2. Many buyers combined it with a federal $8,000 tax credit for first-time homebuyers to claim up to $18,000.
Since July, the FTB has determined that the average state credit will be $7,000, not the full $10,000. That freed up another potential $30 million in credits. According to the bill, buyers who close escrow after the credit is reauthorized will be eligible; but not those who closed escrow on new homes between July 2 and the date the bill goes into effect.
Reaction in the building industry Wednesday was swift.
“We’re very pleased,” said Allison Barnett, legislative advocate for the California Building Industry Association, a builder trade group that sponsored the bill. “The credit has been effective in creating jobs, getting people back to work and getting people back in the sales offices, which is essential for recovery in California.”
Builders contend the tax credit has helped them trim excess inventory, selling thousands of finished, but unsold, homes. Critics, including some economists, have argued the tax credit does little to stimulate the larger economy. And others question subsidizing new-home sales when there is a massive glut of existing homes for sale in California.
Brad Diede, executive vice president of the California Association of Specialty Contractors, said his group lobbied lawmakers statewide to extend the credit. Said Diede, “What we saw was employers putting people back to work after they had to lay them off. It’s stimulating the economy all the way around.”
The FTB said Sacramento, Roseville and Fresno were among top cities where residents received tax credits.
An earlier version of the bill, carried most of this year by Assemblywoman Anna Caballero, D-Salinas, failed to pass before a September legislative deadline. Many thought the bill was dead. But it was folded Wednesday into Ashburn’s SB X3 37 as part of a special session on water policies.
Ashburn carried the original bill last February to allocate $100 million for buyer tax credits. That was passed to win key Republican votes for plans to close a then-$42 billion state budget deficit.
Jim Wasserman writes in today’s Sacramento Bee: Loan modification firms that promise to help struggling borrowers get their mortgages rewritten have been banned immediately from asking for cash upfront.
Attorneys, too, who specialize in loan modifications are no longer allowed to ask consumers for payment before they perform services. The ban expires on Jan. 1, 2013.
The abrupt change in California law comes after Gov. Arnold Schwarzenegger Sunday signed Senate Bill 94, by Sen. Ron Calderon, D-Montebello. As an urgency measure, the bill takes effect immediately.
Calderon, in an interview Monday, called the signing “a very big victory.”
Schwarzenegger’s action follows massive numbers of complaints to the state Department of Real Estate from consumers who said they paid up to $4,000 upfront to firms that often abandoned them.
Schwarzenegger also moved Sunday on a second mortgage front, cracking down on risky lending that fueled the housing boom. He signed Assembly Bill 260, which prevents mortgage brokers from earning lucrative special fees for originating high-risk loans.
The bill limits the size of prepayment penalties and bans more special fees to brokers for making loans with such penalties. When the new law goes into effect Jan. 1, mortgage brokers will have a fiduciary duty to borrowers, meaning they must put borrowers’ financial interests above their own when making loans.
The bill also bans negative amortization loans. Those are loans that grow larger if a borrower makes only a minimum payment that doesn’t even cover interest costs. Thousands of Sacramento-area borrowers and more statewide are struggling with such so-called pay option loans.
The bill’s author, Assemblyman Ted Lieu, D-Torrance, said, “This bans some of the worst practices in the subprime mortgage industry. These are practices that led to the foreclosure crisis that eventually caused a financial crisis that triggered a recession.”
Most of the loans banned by the bill have already been suspended by lenders, which have greatly tightened credit rules.
In the wake of the mess left by such mortgages, loan modification firms have proliferated, many demanding upfront fees. SB 94 aims to stop abuse of borrowers in trouble.
Loan-modification firms have made relentless pitches to borrowers through radio and television ads, postcards and telephone calls. Many desperate people have turned to them, often coughing up a few thousand dollars for help that didn’t come.
“This is a huge problem, and the signing of this (bill) will help,” said Tom Pool, spokesman for the California Department of Real Estate. He said the department has 1,300 complaints on file and has issued 400 cease and desist orders against loan modification firms. The law banning advance fees aplies to firms in California or elsewhere that solicit clients in California.
The new law also specifies that loan modification firms must tell potential clients they can get the same services for free from government-approved nonprofit mortgage counselors. The firms cannot receive payment until they have performed all services promised in a contract with the borrower. Borrowers must pay the loan modification firm for services provided, even if the firm can’t get the loan modified.
Lawmakers passed the ban on upfront fees with a two-thirds vote, backed by a coalition that included the California Association of Realtors, cities hard hit by foreclosures, organized labor and consumer groups.
The ban on advance fees was made temporary in recognition that many firms follow the rules, said Pool. It also recognizes that the loan meltdown will eventually end.
“We didn’t want to put a permanent ban on legitimate business during a temporary crisis,” he said.
Jim Wassrman writes: The annual real estate forecast season opened this week with an estimate that the end of 2009 won’t be much better than the beginning, and capital home builders will sell just 3,400 new houses, condos and town houses this year.
It’s hardly a wonder that home builders say their powerful industry, so long accustomed to getting its way politically and economically, is in a depression, not a recession.
Such a sales number – shockingly low, projected by consultant Hanley Wood Market Intelligence – hasn’t been heard in this region since the 1960s.
Home Front took out the history books to compare: In 1967, with President Lyndon Johnson in the White House, builders in El Dorado, Placer, Sacramento and Yolo counties started 3,544 single-family detached homes, according to the Construction Industry Research Board. It’s likely they sold roughly the same.
This year, considering that 85 percent of sales regionally are single-family homes, they’ll sell about 2,900. Add in the townhouses and condos and you get the 3,400.
“Sacramento can support about 8,500 sales a year,” Hanley Wood’s Sacramento analyst Kathryn Boyce told a gathering of about 75 to 80 area home-building industry reps. “We stole from the future quite a bit from the heyday when we had our special financing. If they had a pulse, we gave them a loan.”
Stimulus aid for high-rise
Here’s some better economic news. Federal stimulus funding is bringing $10 million to restore an empty residential high-rise at Seventh and I streets in downtown Sacramento.
“We were high-fiving each other. It’s not every day you get $10 million in a competitive grant project,” said Nick Chhotu, director of public housing at the Sacramento Housing and Redevelopment Agency. The money is headed to a thorough face-lift for the 12-story Riverview Apartments owned by SHRA. It’s a senior complex built in the late 1970s at 626 I St. The building has been empty for two years.
Plans are to start construction late next year after getting up to $6 million more in federal funds. The building, with 108 rooms for people 62 and older, needs new windows, a new electrical system and new plumbing, a job that will run well into 2011, said Chhotu.
The Public Housing Capital funds are provided through the American Recovery and Reinvestment Act of 2009.
Mixed-use to cut driving
How much do residents of Sacramento’s eastern suburbs and foothills love their cars? Plenty. They lead the region in driving, averaging 75 miles a day. But another forecast on the PowerPoint circuit last week suggests they’ll be driving a lot less by 2035.
The next generation of drivers, in Placer County especially, will live in neighborhoods with a greater mix of uses, said Mike McKeever, chief of the Sacramento Area Council of Governments. He told a gathering of Urban Land Institute-Sacramento members that shopping, home and work will be closer together as cities like Roseville and Rocklin urbanize more.
El Dorado Hills and its environs will have “more jobs in the foothills to balance houses,” McKeever said.
And look, too for still less driving in the Sacramento-West Sacramento core, he said.
Consultant on Net radio
Look who’s talking now on Internet radio. It’s long-time Sacramento-area building industry consultant John Schleimer. He has a new VoiceAmerica Talk Radio Network show, “Housing in America.” The show debuts Monday at 2 p.m. PDT.
Schleimer, owner of Roseville-based Market Perspectives, will launch with a show on the federal government’s Making Home Affordable loan modification program. Guests include a U.S. Treasury Department official and New York Times economics reporter Peter Goodman.
Guests on coming shows, running weekly at the same time, include economist Mark Zandi of Moody’s Economy.com and National Association of Home Builders Chairman Joe Robson. The show streams live on the Internet. Details: Google VoiceAmerica and click on “hosts.”
Jim Wasserman writes that last month, Sacramento County marked the fourth anniversary of its housing boom high with a median sales price of $180,000 – a whopping 53.5 percent less than in August 2005, property researcher MDA DataQuick said Thursday.
The county’s August sales tally of 2,061 new and existing homes likewise fell well short of 3,800 in August 2005.
Now, four years later, these DataQuick numbers reveal the long, hard fall taken by the capital region, a descent defined by billions of dollars in lost home equity, more than 42,000 foreclosures and a marked slowdown in home sales.
A reversal of fortune that began in Sacramento County during the late summer of 2005, then quickly spread to seven other area counties, made Sacramento one of the first big U.S. housing markets to spin out of control. The aftermath still plays out in 2009.
“Everybody says buy a house. It’s the best investment of your life,” said Scott Seacrist, 30, who bought a small home in Sacramento’s Elmhurst neighborhood in March 2006. “If I lived here 20 years, it would be the best investment.”
Seacrist, like thousands of area buyers four years after the boom crested in Sacramento County, owns a home that’s worth less than he paid.
“We love our house,” said the married schoolteacher, noting that “it has a lot of charm.” But a sustained housing downturn that came after moving in has provided its occasional bouts of anxiety.
No wonder, economists say.
“The bubble we saw was a once-in-a-century kind of event,” said Dr. Sanjay Varshney, dean of the College of Business Administration at California State University, Sacramento. “You seldom see all the conditions in place simultaneously that allowed it.”
DataQuick reported another month of uncertainty on the housing front. The researcher counted 3,375 closed escrows in August on new and existing homes in Amador, El Dorado, Nevada, Placer, Sacramento, Sutter, Yolo and Yuba counties. That was down sharply from 3,815 in July and marked a third straight month of lower sales than the same time last year.
There were 3,998 closed escrows in August 2008, DataQuick reported.
The firm noted that sales similarly fell from July in the Bay Area and Southern California. Its analysts attributed the drop to “a thinning inventory of foreclosure properties and financial uncertainty among potential homebuyers.”
For months, first-time buyers in the capital region have expressed increasing frustration at being outbid on a dwindling supply of bank repos.
“In Sacramento County, foreclosure resales were 50.4 percent of sales in August,” said DataQuick analyst Andrew LePage. “That’s the lowest since 43.8 percent in December 2007.”
Would-be buyers are nervous, too, about jobs as capital-area unemployment has reached 11.8 percent. LePage said, “It’s not as if the job market is creating huge demand.”
Four years ago, such a bleak scenario seemed improbable to experts at all levels. But it became real as median sales prices peaked at $387,000 in Sacramento County – after doubling in four years – and then rolled backward. The median, a point where half sell for more and half less, has fallen by more than 50 percent in Sacramento, Sutter, Yuba and Amador counties and more than 40 percent in El Dorado, Placer and Yolo counties.
The steepest peak-to-trough mark in Sacramento County came in February, when the median price fell to $160,000, down 58.6 percent.
The smallest decline is 35 percent in Nevada County, where there are fewer new homes and the “lowest percentage of bank-owned homes in the region,” said Linda Kaneko, executive with Paul Law Realty in Grass Valley.
DataQuick records show 2005 highs of $501,000 in Nevada County and $474,000 in Yolo County. Yuba County reached $351,500, while Placer County touched a boom high of $525,000. Sutter County peaked at $339,000. El Dorado County’s high was $531,250. Amador County crested at $425,000.
This story is taken from Sacbee / Business / Real Estate :
Legislation to extend California’s maximum $10,000 new-home buyer tax credit to thousands more buyers has stalled, failing to pass during the Legislature’s weekend rush to adjournment.
Assembly Bill 765, a priority for home builders in the capital region and statewide, was among many pushed aside by bigger final-hour issues, backers said Monday.
“With the prison reform package still being negotiated and water discussions going on, things like that kind of got pushed to the back,” said Willie Armstrong, chief aide to Assemblywoman Anna Caballero, D-Salinas, the bill’s author. “It’s unfortunate.”
The legislation’s status was unclear Monday. Armstrong said it could receive a vote during special sessions being considered later this year.
But that provides little certainty to first-time new-home buyers still hoping to combine a maximum $10,000 state tax credit with a federal $8,000 homebuyer tax credit.
The state tax credit hasn’t been available since July, and the federal tax credit expires Nov. 30.
“We need it,” said Dennis Rogers, an executive with the Roseville-based North State Building Industry Association. “We’ve been pushing on people that a state credit will work. It has worked.”
The program, which proved more popular than expected, moved thousands of buyers off the fence, state home builders contend. But critics call it a taxpayer subsidy to buyers and question its expansion while the state has a glut of unsold existing homes.
Statewide, 10,659 Californians who bought new unoccupied homes between March 1 and July 2 this year will get credits up to $3,333 off their state taxes in each of the next three years. All new-home buyers after that July 2 cutoff date remain ineligible.
Roseville and Sacramento ranked among the top 10 cities for recipients.
The state Franchise Tax Board has mailed letters to recipients, notifying them of their exact credit amounts, said spokeswoman Brenda Voet. The average credit is expected to be about $7,000, leaving about $30 million of the original $100 million allocation unclaimed, according to the tax board.
That estimate prompted the building industry to press for an extension of the tax credit program to at least 4,300 more recipients.
The Caballero bill, which had easily passed the full Assembly and reached the Senate floor, would have enabled a fresh round of new-home buyers to apply for the credit almost immediately, if passed and signed by Gov. Arnold Schwarzenegger.
If passed during a special session and signed, the clock would begin running again, said the tax board. Buyers must apply within one week of closing escrow. “If they pass something, we’re prepared to implement it just as we did before,” Voet said Monday.
Saxramento Bee’s Jim Wasserman writes this:
A popular state tax credit of up to $10,000 that helped sell hundreds of new houses throughout the Sacramento region earlier this year appears to be coming back.
A plan to extend the state tax credit to another 4,285 buyers of new, unoccupied homes in California – possibly as many as 500 in the capital area – is expected to receive a vote in the Legislature by Friday’s end of the session.
The buyer tax credit began March 1 and unexpectedly sold out by July 2 as many first-time California buyers combined the state credit with an $8,000 federal tax credit.
Statewide, Roseville ranked eighth among cities where new house buyers received the state credit. Sacramento ranked ninth, the state Franchise Tax Board reported.
“It was used very extensively,” said Dennis Rogers, a government affairs executive with the Roseville-based North State Building Industry Association. He and others in Sacramento’s struggling building industry said the credit helped prod buyers off the fence before it ended in July.
“We’ve definitely seen a lot of interest from homebuyers coming into the sales environment because of the program,” said Pulte Homes spokeswoman Jacque Petroulakis. Pulte is the capital region’s largest home builder.
The original tax credit also helped area builders clear an excess inventory of homes finished or nearly finished, but not yet sold.
Builders and buyers now in the sales process hope to see the bill pass the Legislature this week and be signed by Gov. Arnold Schwarzenegger.
That’s considered likely by many close to the legislation. The governor was a force behind the original tax credit, calling it a job generator for the construction industry and larger California economy.
Statewide, 10,659 California buyers got the homebuyer credits, which allowed tax breaks of up to $3,333 per year for three years, the Franchise Tax Board reported Aug. 31. Buyers are expected to be notified by Friday about the amount of credit allocated or denied.
The tax agency stopped taking applications July 2, assuming that it had reached the program’s $100 million limit. Original expectations were that most people could claim the entire $10,000. Then a newer FTB sample of taxpayers approved for the credit based on “their 2007 income tax liabilities, and incorporating 2009 tax law changes” showed most people won’t owe enough state taxes to claim an entire $10,000 credit over three years.
“It’s estimated that most people will get about $7,000,” said FTB spokeswoman Brenda Voet. She said those who qualify for the entire $10,000 will still receive it.
The new FTB liability estimates means an estimated $30 million in credits could go unclaimed under provisions of the original tax credit bill passed in February.
Assembly Bill 765, by Assemblywoman Anna Caballero, D-Salinas, reauthorizes the tax credit under the new estimates. New credits would be available upon the bill’s signing and run through March 1, 2010. Builders must apply on behalf of buyers within one week of closing escrow.
The new bill, however, won’t help capital-area buyers who closed escrow after the FTB’s July 2 deadline. They’ll be ineligible for the tax break because they closed escrow during a time when the law, if it passes, was not in effect.
My favorite writer from the Sacramento Bee, Jim Wasserman, writes this today:
Hats are off today to Sacramento’s Michael Choe, 43, a supervising engineer with the state Department of Toxic Substances Control. This week he earned his second appearance in Time magazine since 2005 – for making good calls in this crazed real estate market.
Choe sold high in 2004.
He rented for four years.
He bought low in 2008.
As the housing crash continues, Choe’s is the ultimate wish-we-had-done-that tale.
In September 2004, as the market soared (the median price was 25.6 percent higher than the same time a year earlier in Sacramento County) Choe sold his house in Natomas.
“The (price) acceleration was increasing and that really scared me,” he said this week. “I thought this is something that is going to end badly.”
He sold the house he had bought in 2001 for $192,500 – for $369,00. He warned others he knew to do the same. He commented on blog sites then springing up that foresaw a massive housing bubble.
“There were very few people who did something about it,” he said. “I put my money where my mouth was. I sold the home, and I took a risk by selling it. People were telling me I was crazy, that it would double in two or three years. I said, ‘It’s going to come back to 2000 levels soon.’ ”
Time magazine found Choe on the blog sites and profiled him in June 2005 (the median sales price in Sacramento County was then 22 percent higher than the same time a year earlier). The magazine’s cover that week showed a cartoon man hugging his house and the title: “Home $weet Home, Why we’re going gaga over real estate.”
Time noted that Choe had sold and moved into a rental. It asked: “Is he serious? Choose to rent when owning seems a sure way to riches?”
The rest is history. Choe, his wife and two sons rented in El Dorado Hills as what scared him out of Natomas in 2004 came to pass. Then, a year ago, he jumped back in. Choe paid $281,000 for a bank repo in Sacramento that sold in July 2006 for $437,500.
He was too early, he concedes. Said Choe, “I’m still pessimistic about the housing market. I told my family we’re buying now, but I know it’s going down further. I’m going to lose money on this deal. It has gone down. But I made enough money on the sale of my original house that I can absorb any more losses.”
The real story was that his son was ready to start school. Otherwise he would have waited two more years to buy.
“I wanted to get him in a good school district. I wanted to be stable in that way.”
This week Time magazine revisited with Choe, recalling his 2004 decision and his 2005 interview. “Exceedingly smart move,” said the magazine.
Time noted his decision to buy, and asked, “Is this smart move No. 2? In other words: Is it really time to buy?”
What does Choe think now?
“My prediction,” he said, “is when it hits bottom it will stay flat. I would say a good five to 10 years. I’ve been looking at Japan, too. They stayed flat more than 10 years. There’s no way that things are going to bounce right back. This was, in my opinion, a once-in-a-lifetime experience.”
That’s Choe’s call. Anyone can be wrong or right. But the state engineer has been right so far. (He also yanked his money out of the stock market with the Dow at 13,000). That gives him satisfaction. For posterity, Choe is on the record in a national magazine as having called it correctly.
“I can tell my kids that your dad predicted the housing crash and nobody believed him at that time,” he said. “They believed I was a lunatic. It turned out I did make the right call.”
Interest rates ease again
News is improving on the interest-rate front. Rates for benchmark 30-year fixed-rate mortgages are headed back toward 5 percent as inflation remains in check, Freddie Mac reported Thursday. The federal mortgage giant said interest rates nationally averaged 5.08 percent this week, down from 5.14 percent last week.
The new average is the lowest since the week of May 28, when U.S. rates averaged 4.91 percent. Mortgages rates have remained below 5 percent for 12 weeks this year, mostly in March, April and May.
Nava’s Fraud Prevention Measure Passed by State Senate
Legislation Will Stop Loan Modification Scams
Assemblymember Pedro Nava (D-Santa Barbara), Chair of the Assembly Banking & Finance Committee, announced that his legislation to crackdown on loan foreclosure rip-offs was approved by the State Senate today on a 21 to 16 vote.
“California families face a barrage of solicitations making promises to modify their home loans while collecting advance fees for little or no result,” said Nava. “My legislation will end these scams and ban the collection of advance fees.”
AB 764 (Nava), the Homeowner Fraud Prevention Act, will ban the collection of all advance fees for modifying a loan. This will ensure that homeowners receive a modification before paying. Violations will be subject to a fine of $20,000 for an individual and $60,000 for a corporation and up to one year in county jail. AB 764 will also ban false and misleading advertising by individuals and companies that offer loan modification services.
Norma Garcia of the Consumer’s Union said, “Californians desperately need the protections of AB 764. According to recent figures, there are over 92,000 foreclosure properties in California which represents 1 in every 144 households. AB 764 will protect these homeowners from becoming easy prey to those who divert the homeowners away from legitimate sources of free help and charge them thousands of dollars in advance fees for promises that can’t be delivered.”
“When a family faces the loss of their home, they are desperate for help, making them easy targets for those who seek to profit from their misfortune. AB 764 will protect our members and all Californians from unscrupulous foreclosure consultants and help them find real help to try to prevent foreclosures,” said Caitlin Vega of the California Labor Federation.
AB 764 is supported by several consumer and labor organizations including the California Public Interest Research Group, the California Reinvestment Coalition, AARP, Center for Responsible Lending and the California Labor Federation.
“I am honored to be partnering with consumer advocates and labor groups to bring about much needed consumer protections and reforms,” Said Nava.
AP Real Estate writer, Alan Zibel had this to say:
Sales of new homes surged 9.6 percent in July, another sign the housing market is climbing back from the historic bottom it reached early this year. Driven by falling prices, the fourth-straight monthly increase was greater than expected.
The Commerce Department said Wednesday that sales rose to a seasonally adjusted annual rate of 433,000 from an upwardly revised June rate of 395,000. Sales are now up more than 30 percent from the bottom in January, but are still off nearly 70 percent from the frenzied peak four years ago.
The median sales price of $210,100, however, was down slightly from $210,400 in June and was off 11.5 percent from year-ago levels. Prices are still up from March’s low of $205,100.
Last month’s sales pace was the strongest since September and exceeded the forecasts of economists surveyed by Thomson Reuters, who expected a pace of 390,000 units.
In a kind of Cash for Clunkers effect, homebuyers are rushing to take advantage of a federal tax credit that covers 10 percent of the home price, or up to $8,000, for first-time owners. Home sales must be completed by the end of November for buyers to qualify.
Builders and real estate agents are pressing Congress for that credit to be extended. If it isn’t, sales could reverse their upward trend.
Some builders are already seeing sales dip.
At A.F. Sterling Homes in Tucson, Ariz., sales dipped in July because the builder said it couldn’t guarantee the homes could be finished in time to qualify, said Randy Agron the company’s vice president,
“The real estate market is really a fragile thing,” he said. “It’s not the right time to take (the tax credit) away.”
But still, the economy is healthier now, so sales are unlikely to fall back to the lows of last winter, even if the credit is discontinued, said Wells Fargo economist Adam York,
“People don’t have the sense of panic and dread,” about their futures, he said.
As sales rise, that’s likely to make builders more confident about getting going on new projects, and that’s likely to eventually lead to more jobs in the construction industry, which has been hurt badly by the recession.
“These are crucial elements of a sustainable recovery,” David Resler, chief economist at Nomura Securities, wrote in a research note.
Each new home built creates, on average, the equivalent of three jobs lasting one year and generates about $90,000 in taxes paid to local and federal authorities, according to the National Association of Home Builders.
There were 271,000 new homes for sale at the end of July, down more than 3 percent from May. At the current sales pace, that represents 7.5 months of supply — the lowest since April 2007. The decline means builders have scaled back construction to the point where supply and demand are coming into balance.
According to the Associated Press yesterday, rates for 30-year home loans edged up last week, but remain close to record lows reached over the spring.
The average rate for a 30-year fixed mortgage was 5.14 percent, up from 5.12 percent a week earlier, mortgage company Freddie Mac said Thursday. Rates, while above the record low of 4.78 percent hit in the spring, are still at attractive levels for people looking to buy a home or refinance.
“Long-term mortgage rates were barely changed (last) week, remaining historically low, which is helping to sustain a high level of affordability in the home-purchase market,” Frank Nothaft, Freddie Mac’s chief economist, said in a statement.
To revive the economy, the Federal Reserve has spent more than $600 billion out of a promised $1.25 trillion in mortgage-backed securities, which has driven down rates on home loans. It has also left a key interest rate near zero.
Now that the economy is on the mend, Fed policymakers must decide how and when to withdraw that support. Some analysts think it could take four or five years for the Fed to pull back entirely and shrink a balance sheet that is now about $2 trillion, more than double what it was when the financial crisis struck.
Despite government efforts to prop up the mortgage market, qualifying for a loan is still tough. Lenders have tightened their standards dramatically over the past year, so the best rates are available to those with solid credit.
Freddie Mac collects mortgage rates Monday through Wednesday of each week from lenders around the country. Rates often fluctuate significantly, even within a given day.
The average rate on a 15-year fixed-rate mortgage rose to 4.58 percent, from 4.56 percent the previous week, according to Freddie Mac.
Rates on five-year adjustable-rate mortgages averaged 4.67 percent. Rates on one-year adjustable-rate mortgages were unchanged at 4.69 percent.
The rates do not include points. The nationwide fee for all loans in Freddie Mac’s survey averaged 0.7 point for 30-year and 15-year loans, and 0.6 point for five-year and one-year loans.