Home Sales at a 10-Year High, Helped By Low Interest Rates.

October 7, 2016 / Valerie Tucker Ausband, Regional Vice President— Southeast

Home Sales at a Nine-Year High


Low interest rates are prompting people throughout the U.S. to purchase properties, and many current homeowners are refinancing.

On September 22, the 30-year fixed-rate average slid to 3.48 percent, down from 3.86 percent a year earlier, but many industry observers expect rates to rise in the months ahead.

When people refinance, they typically reassess the costs associated with their loans such as private mortgage insurance (PMI). In some cases, these individuals may no longer need PMI, depending on how much equity they've built in their homes.

Home sales reach 2007 levels

In July, new-home sales surged to the highest level since October 2007 as sales of new single-family houses jumped 12.4 percent from June, according to the Commerce Department. The National Association of Realtors (NAR) forecasts that existing home sales will reach 5.38 million this year, up 2.8 percent and the highest level since 2006.

NAR also forecasts median existing-home price growth of 4% in 2016 following a 6.8% increase during 2015.

Sales were something of an anomaly coming into the second quarter of 2016. Lawrence Yun, NAR's chief economist, said the year's low mortgage rates were partly to thank for this activity. In addition, many homeowners realized they had built equity in the last few years, prompting them to either downsize or trade up.

Still, new homebuyers comprise a big part of this year’s home sales surge. "With first-time buyers still struggling to enter the market, repeat buyers using the proceeds from the sale of their previous home as their down payment are making up the bulk of the home purchases right now," said Yun.

Freddie Mac expects mortgage rates to remain low with the 30-year fixed rate, the most popular mortgage product, on pace to average 3.6 percent this year. That would be the lowest annual average in 40 years, surpassing the previous low of 3.66 percent set in 2012.

Interest rates and buyer habits

In its monthly outlook released on September 20, Freddie Mac predicted that this year will be the best year in home sales since 2006. It expects mortgage rates to remain low with the 30-year fixed rate, the most popular mortgage product, on pace to average 3.6 percent this year. That would be the lowest annual average in 40 years, surpassing the previous low of 3.66 percent set in 2012.

Digging deeper into transactions, homebuyers are making smaller down payments now than they were in the past. LendingTree found the average down payment for traditional 30-year fixed mortgages fell from 17.46 percent in the fourth quarter of 2015 to 17.13 percent in the second quarter of 2016, indicating that many home buyers can still benefit from private mortgage insurance to help them get into a home.

Valerie Ausband

Valerie Tucker Ausband is United Guaranty's Regional Vice President for the Southeast. She has more than 20 years of mortgage industry experience. Valerie joined United Guaranty in 1999 as an account executive after having served in a similar role for an Atlanta-based title company. Valerie was named United Guaranty's vice president for national accounts in 2004, and she was promoted to regional vice president in 2006. Ausband, who lives and works in the Atlanta area, is a graduate of the University of Georgia. She has earned the Accredited Mortgage Professional (AMP) designation from the Mortgage Bankers Association. She is active with the Mortgage Bankers Association of Georgia and has held a number of leadership roles in the organization over the years.

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