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Housing Market Lookback



Let’s recap the biggest mortgage & housing news over the past three months.

News about the housing industry changes constantly, and while you may not need to keep up with every detail, it’s important to know what’s going on and how it impacts your ability to buy or sell a home. To better understand the current news, you should be familiar with major milestones that have occurred in the recent past.

NOVEMBER:

Post-Election Aftermath and Loan Limit Increase

Leading up to November, mortgage interest rates had been hovering around 3.5 – 3.875% for most of the year but jumped overnight following the presidential election. They continued to climb into December, with the 30-year fixed mortgage rate averaging 4.32% the week ending December 29, 2016. While these rates were still much lower than the 30-year fixed rate 10 years earlier (6.24% in November 2006), the number of homeowners who could have benefited from a refinance prior to the election was nearly cut in half.

Still, November did bring good news for potential homeowners. For the first time since the housing crisis in 2006, the Federal Housing Finance Agency (FHFA) increased maximum conforming loan limits from $417,000 to $424,100 for 2017. The increase was a good move considering the steady increase in home values, making the possibility of homeownership attainable for more people across the country.

DECEMBER:

Fed Funds Rate Goes Up

In mid-December, the U.S. Federal Reserve raised the Fed Funds Rate by 25 basis points, bumping it to between 0.50% and 0.75%. The Fed Funds Rate is the rate at which banks can borrow money from each other overnight to maintain their reserve requirement (the amount of cash they must have on hand or in reserve each night). This rate is used to control the U.S. economy and is arguably the most important interest rate in the world. It not only affects all other interest rates, including mortgage rates, credit cards, and student loans, but also has a trickle-down effect that impacts the world economy. The December increase was only the second increase in the past decade, but the Fed said they anticipate three more rate hikes over the course of 2017.

JANUARY:

FHA MIP Cuts Suspended; 2016 Existing Home Sales Best in a Decade

In early January, the Federal Housing Administration (FHA) announced its plans to reduce mortgage insurance premiums (MIP) by 25 basis points. The cut was expected to save homeowners an average of $500 a year and expand affordability for millions of people across the country.However, the plan was halted when President Trump suspended the MIP reduction indefinitely.

Looking back at 2016, it was a good year for the housing market overall. Data released in January revealed existing home sales for 2016 were the best since the recession, with a total of 5.45 million units sold. In addition, housing starts were 5% higher than in 2015, making it the best year since 2007. Despite the lower sales and declining inventory seen in December, 2016 ended on a positive note.


Source: Origination Insight Report by Ellie Mae®, December 2016