PARAMOUNT MORTGAGE - LENDER'S BLOG

Majority of Americans Believe Home Prices Have Bottomed

WASHINGTON, D.C. - Fannie Mae's latest national housing survey, released Thursday, finds that most Americans believe the housing market has reached bottom, but buyers remain cautious.

"These findings indicate a return to a more balanced and realistic approach toward housing," stated Doug Duncan, Vice President and Chief Economist with Fannie Mae. "Our survey shows that consumers see a mixed outlook for housing and homeownership."

Overview of Key Findings:

Home Prices - 78% of respondents are optimistic that prices will not decline. 47% believe prices will hold steady, while 31% think they will go up.

Rental Prices - 39% think rental prices will increase. 46% said they will stay the same.

Buyers' Market - 70% say yes, this is the time to buy. On the flip side, 83% say it is a bad time to sell a house.

Home as an Investment - 67% continue to believe that buying a home is a safe investment, although this is down 16 percentage points since 2003. Respondents ranked housing second behind putting money into a savings or money market account.

Getting a Loan - 54% think it would be difficult to get a home loan today. 19% cited their low income. 16% said poor credit would be a factor. 18% said they would lack sufficient down payment money and 15% said job security was an obstacle.

Type of Loan - 78% said they prefer a traditional, fixed-rate mortgage with predictable payments over a floating-rate loan.

The survey was conducted from June 12, 2010 through July 14, 2010. Link: Survey

FHA Raises Mortgage Insurance Premiums

On October 4, 2010, significant changes will be enacted for FHA's single family housing mortgage insurance programs.

The Housing and Urban Development (HUD) Secretary has been provided by law the flexibility to increase mortgage insurance premiums in order to return the Mutual Mortgage Insurance fund back to congressionally mandated levels.

An FHA borrower's monthly Mortgage Insurance (MI) will increase to .90% (up from .55%) for a mortgage with a Loan-to-Value (LTV) greater than 95%. The monthly MI will be slightly less for borrowers with a larger down payment; .85% (up from .50%) with an LTV of 95% or less. FHA's upfront mortgage insurance premium (UFMIP) will be reduced to 1.0% (down from 2.25%).

For an FHA borrower with a 30-year fixed mortgage and only the minimum down payment on a $150,000 home purchase at the current rate of 4.25%, he or she will see a monthly increase of $33.32.

That monthly increase in payment is equivalent to paying $6,750 more for the house.

FHA borrowers who can beat the October 4 deadline will have the current lower MI and more buying power for a new home purchase. Contact your Paramount Mortgage Banker for more information.