As interest rates have climbed since last May, mortgage applications have dropped steadily and the damage is concentrated in refinancing activity. The
This Is What Worries Those In Baton Rouge Housing Industry: Increasing Mortgage Rates Crush Refinance Activity, Are Home Sales Next? Permanent MI For FHA Loans, Sky High Flood Insurance Premiums, FNMA Changes In 2014
I see 4 MAJOR trends hurting the potential for home sales and appraisal orders.
1.) Increasing mortgage rates have cooled the market. If they continue upward, then this will not be good. Look at what increasing rates have done to refinance applications here: http://www.housingviews.com/2013/09/16/mortgage-refinance-activity-drops/
2.) FHA Permanent Mortgage Insurance after July 2013. I’ve already seen my FHA order volume decline. Who in their right mind wants permanent MI for the life of the loan?
3.) FEMA Flood Insurance rates last week dropped a bomb on the local housing industry, see below. For a $140,000, that adds $3358/year or $280/month. This means fewer home sales in my market and in many markets across the US. See attached. A significant percentage of GBR is located in flood zones requiring high premiums.
Here’s a question Sellers, RE Agents and Appraisers will be dealing with say in Old Jefferson Subdivision where 3/4s of the subdivision is in flood zone: If sellers now have $3400/year to $4,500/year flood insurance premiums and new buyers in there will have to pay these premiums, then buyers will be looking at discounted sales prices because of having to pay an extra $280/month to $350/month for flood insurance. How much discount will sellers have to give in order to get a buyer AND how much will this hurt sellers? After all, we have Katrina buyers that paid very high prices, that my still be underwater on their purchase prices in 2005-2007 and if they have to sell at a discount, will they have a to short sale?
4.) It’s about to get harder to buy a home in 2014 – FNMA Freddie reducing limit from $417,000 max loan amount.
Image Source Is Mortgage Bankers Association
See on www.housingviews.com