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Purchase mortgages up slightly

By: 8 January 2011 One Comment

Want a bit of good news from the real estate industry for a change?

According to the national Mortgage Bankers Association, people are starting to come back slowly to the housing market. It’s hard to do “apples to apples” comparisons these days thanks to increased sales activity from April 2008 through April 2010, but the association has reported a trend that is somewhat encouraging – purchase mortgages increased three of the four months prior to November.

Furthermore, the association predicts that purchase originations should increase to $615 billion this year from $473 billion in 2010. While those numbers won’t set any sales records, it’s still refreshing to see a report that is a bit optimistic, guarded or not.

What’s going on in the market to cause the association to project a bit of an increase in sales originations this year? Simply put, prices are still dropping and interest rates remain low – the bang for the buck factor is expected to come into play this year to an extent.

Of course, there are some issues the association is watching. Interest rates, of course, still dominate the national discussion when it comes to the real estate market. Yes, interest rates hit 4.45 percent in September – the first increase in the six months prior to that – and have risen slightly since then. In mid-December, the average rate on a 30-year, fixed interest loan was 4.85 percent. The association predicts that rate will hit 5.5 percent by the end of the year and climb above the 6 percent mark in 2012.

Meanwhile, the association is worried about unemployment. It’s quite true that people who are not employed – or don’t feel secure in their jobs, for that matter – don’t run out and buy houses. The association expects unemployment to remain above 9 percent this year and drop to around 8 percent in 2012.

The association also noted that, as of November, roughly 42 percent of the unemployed have been looking for a job for more than six months and there are also quite a few workers who are discouraged, working temporary jobs or are “marginally attached” to the work force – those workers are expected to re-enter the labor market as the economy improves and that will keep the unemployment rate high.

For the record, the unemployment rate in Arkansas in November was 7.9 percent – down from the national average of 9.8 percent but still up from 7.6 percent in the Natural State in the same month in 2009.

What can we take away from a brief examination of the association’s report? Essentially, we’ll see interest rates creep up but still stay at reasonable levels this year while housing prices will continue to drop a bit. Those factors should drive some more sales activity, but here’s the irony – there’s not been a better time to purchase a home in years, but only those who are working or feel comfortable in their jobs will take advantage of current market conditions.

Here’s hoping the economy gets back on track, people go back to work and more families are able to take advantage of what has become a buyers’ market.

Column written by Ethan C. Nobles and distributed to Arkansas publications on behalf of the Mortgage Bankers Association of Arkansas.

About: Ethan C. Nobles:
Benton resident. Rogue journalist. Recovering attorney. Email =

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