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Looking back on 2011

By: 7 January 2012 One Comment

In hindsight, it’s clear that 2011 was decidedly mixed in terms of housing markets around the nation.

Freddie Mac – the government sponsored lending giant – projected that lenders would write $1.8 trillion in home loans last year. The group revised that estimate downward to $1 trillion partway through the year and lenders ultimately wrote $1.3 trillion in home loans in 2011.

That’s down 23.53 percent from $1.7 trillion in 2010 and down 60.61 percent from $3.3 trillion when housing markets peaked in 2005. Furthermore, the better-than-expected results had a lot to do with refinancing.

The end of December marked the ninth consecutive week in which the average interest rate on a 30-year mortgage was below 4 percent and homeowners responded in kind. The national Mortgage Bankers Association reports that four in five mortgage applications in December were for refinancing, while Freddie Mac reports that two-thirds of the applications it received last year were for purchases.

The 2011 results make a lot of sense when one considers that the economy is still in recovery. Unemployment rates remain a concern, thus keeping more than a few potential buyers out of the market – people looking for work or worried about keeping their jobs typically aren’t in a hurry to purchases houses. In troubled economic times, it also makes sense that homeowners are looking to refinance and take advantage of historically low interest rates.

What’s the good news in all of this? Bear in mind that mortgage rates peaked in 1981 and 1982 at around 16 percent, but consumers don’t have that problem and won’t in fact have to worry about rising interest rates for some time. Freddie Mac’s economists predict that interest rates will remain low, averaging 4.5 percent by the end of 2012 and hitting 5.4 percent next year.

Of course, low interest rates don’t mean much if consumer confidence is low. New York-based the Conference Board reported its Consumer Confidence Index rose to 64.5 percent, up from 55.2 in November. The proportion of consumers expecting business conditions to improve increased to 16.7 percent in December from 13.7 percent the previous month, while those anticipating more jobs in the months ahead increased to 13.3 percent from 12.4 percent.

If consumer confidence does continue to improve and unemployment decreases, it’s reasonable to expect other sectors of the economy to benefit. Consumer confidence, after all, is a major indicator of whether people will purchase everything from homes to cars to virtually anything else, after all.

The data shows us that economic conditions in general – and the housing market in particular – are still in recovery. Freddie Mac is anticipating some gains in 2012 and projects that home prices will still decline throughout the year.

For consumers in a position to purchase a home, they’ll be able to take advantage of low interest rates and dropping prices. Those homeowners looking to lower their monthly mortgage payments can take advantage of low rates.

In sum, 2011 was a year in which housing markets continued to recover. How long that recovery will take is anyone’s guess, but at least things might be headed in the right direction this year.

Home Sweet Home is written by Ethan C. Nobles and is sent weekly to publications throughout the Natural State on behalf of the Mortgage Bankers Association of Arkansas.

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

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