As the housing market continues to work through the excess supply overhang, a result from the glut of foreclosed properties which is keeping home prices below their long-term trend growth, economists anticipate mortgage rates at or above 6% by the end of 2012 and expect buying activity to continue its upward momentum.
Supporting this view is the rising concern about inflationary pressures sparked by political unrest in the Middle East. While surging gas and food prices could prove transitory and pose no major threats, these price increases may weigh down consumer spending, which accounts for two thirds of the economy. While, the Federal Reserve is committed to making necessary policy changes to address such risks. Meanwhile, core price gains, excluding food and fuel, were modest in April, offering some relief to consumers.
As the economy improves, stimulus efforts by the government and the Fed is expected to gradually wind down, which typically spurs rising interest rates to keep inflation in check. Meanwhile, buyers continue to benefit from historically favorable buying conditions and sellers are encouraged by increased market stability.
Housing affordability continued at record levels in April. The relationship between mortgage rates, home prices, and family income is the most favorable on record for buying. The home price-to-income ratio continues to remain well below the historical standard. Stabilizing home prices and rising interest rates are expected to reverse the recent affordability trend.
Following in the footsteps of its counterpart Fannie Mae, Freddie Mac is offering a summer sales promotion for buyers who purchase a home from its inventory of foreclosures or HomeSteps properties. Since banks typically sell foreclosures “as-is” without incentives, warranties, or repairs, this incentive could help buyers view a HomePath property more like a traditional sale, and less like a distressed property, during their search process.
For offers received by July 31 that close by September 30, Freddie Mac is offering:
3.5% in closing costs to buyers
$1,200 bonus to buyer agents
This is on top of the incentives already being offered:
A two year HomeProtect Home Warranty
Up to 30% savings on new appliances
Note that this program comes with a few eligibility requirements, which includes the home must be a single-family, owner-occupied, financed dwelling used solely for residential purposes.
Sources: National Association of Realtors, HousingWire
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