Category Archives: Mortgage Rates

Jumbo loans loom large in luxury housing

Jumbo mortgages are providing the housing market recovery with a boost, according to industry experts. Buyers looking at luxury properties currently can obtain jumbo mortgages with interest rates that are on par with – and sometimes even lower than – conventional loans.

Moreover, the new qualified mortgage regulations (QM) don’t apply to jumbos, which makes them a more flexible option for buyers who want things like interest-only loans or who have a high net worth but complicated finances.

Jumbo mortgages can make sense for financing a home purchase even when buyers have enough cash, we had a client who recently took a jumbo loan rather than paying all cash. “His thought was, with the gains in the stock market, why would I want to pay all cash if I can get 30-year money so low?” she says.

Jumbos are luring more buyers into “move-up” purchases, and this, in turn, is freeing up inventory at the lower end of the market.

A guide to administration’s new mortgage-refi plan

WASHINGTON – Oct. 25, 2011 – Two big questions loom over the Obama administration’s latest bid to help troubled homeowners: Will it work? And who would benefit?

By easing eligibility rules, the administration hopes 1 million more homeowners will qualify for its refinancing program and lower their mortgage payments – twice the number who have already. The program has helped only a fraction of the number the administration had envisioned.

In part, that’s because many homeowners who would like to refinance can’t, because they owe more on their mortgage than their home is worth. But it’s also because banks are under no obligation to refinance a mortgage they hold – a limitation that won’t change under the new plan.

Here are some of the major questions and answers about the administration’s initiative:

Q: What is the program?

A. The Home Affordable Refinance Program, or HARP, was started in 2009. It lets homeowners refinance their mortgages at lower rates. Borrowers can bypass the usual requirement of having at least 20 percent equity in their home. But few people have signed up. Many “underwater” borrowers – those who owe more than their homes are worth – couldn’t qualify under the program. Roughly 22.5 percent of U.S. homeowners, about 11 million, are underwater, according to CoreLogic, a real estate data firm. As of Aug. 31, fewer than 900,000 homeowners, and just 72,000 underwater homeowners, have refinanced through the administration’s program. The administration had estimated that the program would help 4 million to 5 million homeowners.

Q. Why did so few benefit?

A. Mainly because those who’d lost the most in their homes weren’t eligible. Participation was limited to those whose home values were no more than 25 percent below what they owed their lender. That excluded roughly 10 percent of borrowers, CoreLogic says. In some hard-hit areas, borrowers have lost nearly 50 percent of their home’s value. Another problem: Homeowners must pay thousands in closing costs and appraisal fees to refinance. Typically, that adds up to 1 percent of the loan’s value – $2,000 in fees on a $200,000 loan. Sinking home prices also left many fearful that prices had yet to bottom. They didn’t want to throw good money after a depreciating asset. Or their credit scores were too low. Housing Secretary Shaun Donovan acknowledged that the program has “not reached the scale we had hoped.”

Q: What changes is the administration making?

A. Homeowners’ eligibility won’t be affected by how far their home’s value has fallen. And some fees for closing, title insurance and lien processing will be eliminated. So refinancing will be cheaper. The number of homeowners who need an appraisal will be reduced, saving more money. Some fees for those who refinance into a shorter-term mortgage will also be waived. Banks won’t have to buy back the mortgages from Fannie or Freddie, as they previously had to when dealing with some risky loans. That change will free many lenders to offer refinance loans. The program will also be extended 18 months, through 2013.

Q: Who’s eligible?

A. Those whose loans are owned or backed by Fannie Mae or Freddie Mac, which the government took control of three years ago. Fannie and Freddie own or guarantee about half of all U.S. mortgages – nearly 31 million loans. They buy loans from lenders, package them into bonds with a guarantee against default and sell them to investors. To qualify for refinancing, a loan must have been sold to Fannie and Freddie before June 2009. Homeowners can determine whether Fannie or Freddie owns their mortgage by going online: Freddie’s loan tool is at freddiemac.com/mymortgage; Fannie’s is at fanniemae.com/loanlookup. Mortgages that were refinanced over the past 2 1/2 years aren’t eligible. Homeowners must also be current on their mortgage. One late payment within six months, or more than one in the past year, would mean disqualification. Perhaps the biggest limitation on the program: It’s voluntary for lenders. A bank remains free to reject a refinancing even if a homeowner meets all requirements.

Q: Will it work?

A. For those who can qualify, the savings could be significant. If, for example, a homeowner with a $200,000 mortgage at 6 percent can refinance down to 4.5 percent, the savings would be $3,000 a year. But the benefit to the economy will likely be limited. Even homeowners who are eligible and who choose to refinance through the government program could opt to sock away their savings or pay down debt rather than spend it.

Q: How many homeowners will be eligible or will choose to participate?

A: Not entirely clear. The government estimates that up to 1 million more people could qualify. Moody’s Analytics says the figure could be as high as 1.6 million. Both figures are a fraction of the 11 million or more homeowners who are underwater, according to CoreLogic, a real estate data research firm.

Q: Who will benefit most?

A: Underwater homeowners in the hard-hit states of Arizona, California, Florida and Nevada could be greatly helped. Many are stuck with high mortgage rates after they were approved for mortgages with little or no money as a downpayment and few requirements. The average annual savings for a U.S. household would be $2,500, officials say.

Q: When will it start?

A: Fannie and Freddie will issue the full details of the plan lenders and servicers on Nov. 15, officials say. The revamped program could be in place for some lenders as early as Dec. 1.
Copyright © 2011 The Associated Press, Derek Kravitz, AP real estate writer. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Home buyers: Don’t ignore the mortgage market

While many home-buying hopefuls are racing to the bank to close their deals before the $8,000 tax credit disappears, not every potential home-buyer thinks the best deals are out there yet.

But the money one might save by looking for a better home price could pale in comparison to the huge cost of waiting if the mortgage market doesn’t hold steady, and most mortgage brokers & banks expect a rise in rates later this year.

“Rates are almost at an all-time low,” said John Fenech at Sunbelt Lending with Coldwell Banker in St. Petersburg. “We’re still at about 5% for a 30-year-fixed loan (for someone with good credit and a good job).”

John says even a 0.5% change in interest rates means a $56/mo. difference for someone looking at a $180,000 30-year fixed-rate home loan. That translates to $672 a year. And $20,160 over the course of a 30-year loan.

With inventory shrinking and supply at the 6 month mark a place we haven’t see in Pinellas County in 4 years buyer are starting to feel pressure they haven’t experienced in years. This translates to good news for sellers, and after the losses they have seen in the past 3 years it’s the light at the end of the tunnel for many.

If you were looking for a sign that right now maybe the best time to buy, “it is”. Here is your sign! Don’t put off buying the home a home.

Economy and our industry

From John Fenech Sunbelt Lending

Some of you have asked me about the potential for rising rates. Here is something I read this week that reinforced my thoughts on the government’s continued help in this area:

Ask The Expert

Last year was a very challenging year. Many of my prospects, including previous customers who are homeowners, could not qualify for a new loan. Now I am hearing that rates will be going up after the Fed stops purchasing loans. I am actually scared that I will not make it. I need some advice but also encouragement. John from California

John, here is the good news. The industry, though rapidly changing, will be around for a long time. If anything this deep recession taught us is how important the real estate industry is to this country. At the beginning of the “sub-prime” crisis we had our government telling us that the economy was strong enough to withstand the issue. They were wrong. Real estate led us into this recession and it must lead us out. I expect the government to do whatever it can, from tax credit to foreclosure help, to right the ship. However, that does not mean that there will not be pain. There has been a lot of pain and there will be a lot more. We are on our way to recovery though.

John Fenech
Sunbelt Lending Services
Regional Loan Manager
Ph: 800-858-5674 or 727-827-1818
Fax: 856-917-2610

FHA 90 no filling rule change!

This is a great change, in the past FHA required a home be owned for at least 91 days before a buyer using FHA financing could write an offer. This prevented good buyer getting the home they wanted if they needed to use FHA financing to buy a home.

Example: An investor purchased a home at a foreclosure sale at 20% below market value, after closing on the property the investor put the home on the market, at market value to make a profit. Only buyers who were paying cash or using conventional financing could buy the home right away. This prevented FHA buyers being able to bid on the home unless the investor held the property for 91 days before accepting an FHA offer. With the new changes a FHA buyers will be able to make an offer right away.

There are some other conditions like: The investor can’t mark up the property more than 20% unless they had work done to the home and provide receipts. For more info check out http://www.hud.gov/offices/hsg/fhahistory.cfm

Lifelines dry up for mortgage lending

Jan. 25, 2010 – For more than a year, the government pulled out the stops to revive homebuying by driving down mortgage rates.

Now, whether the housing market is ready or not, the government is pulling out.

The wind-down of federal support for mortgage rates, set to end in two months, is a momentous test of whether the Obama administration and the Federal Reserve have succeeded in jump-starting the housing market and ensuring it can hold its own. The stakes for the economy are massive: If the market again falls into a tailspin, homeowners could face another wave of trouble, and it would deal a body blow to President Obama’s efforts to get the economy on track.

Keeping the mortgage rates at historic lows, which required a commitment of more than $1 trillion, was viewed within the administration as a central plank of the economic strategy last year, senior officials said. Though the policy did not attract as much attention as rescue efforts to bail out banks, it helped revitalize homebuying in some parts of the country and put money in the pockets of millions of homeowners who were able to refinance into lower monthly payments, the officials added.

“We did what we thought was necessary to stabilize the market, but we don’t think the government should continue special efforts forever,” said Michael S. Barr, an assistant secretary at the Treasury Department. “As you bring stability, private participants come back in. We do expect this now that the market has stabilized. I’m not going to say there will be no effect on rates, but we do think you are seeing market signs and market signals that there should be an orderly transition.”

A few federal officials and many industry advocates disagree, saying the government is exiting too soon. They offer dire warnings of higher rates and a slowdown in home sales. Fed leaders say they will end a marquee program supporting the mortgage markets in March. Obama’s economic team, led by Treasury Secretary Timothy F. Geithner, has decided not to replace it and has been shutting down its own related initiatives.

Over the past year, these programs have enabled prospective homebuyers to get cheap loans, helping those buying and selling property as well as those eager to refinance existing mortgages. If the end of the initiative drives up interest rates, say from 5 percent to 5.5 percent, homeowners could be deterred from refinancing, industry officials say. A sharper increase in rates could make homes too expensive for many buyers, forcing them from the market and causing the recent pickup in home sales to stall.

“Mortgage rates are the lifeblood of the housing market, and we have cautioned the Fed about the sudden stoppage of this program,” said Lawrence Yun, chief economist of the National Association of Realtors.

But senior government officials said it could be hard to reverse course without damaging the credibility of the Fed and the administration. If the government loses the trust of the financial markets, preparing them for policy changes could be tougher, possibly resulting in economic disruptions. The officials said they also worry that the mortgage market is becoming overly dependent on federal support, inserting the government too deeply into private enterprise.

Only a new crisis would be able to persuade the administration and the Fed to change their minds, officials said.

“This is a worthy experiment to see if they can begin exiting after providing an unprecedented amount of money to one sector of the economy,” said Mark Zandi, chief economist at Moody’s Economy.com. “It’s a close call, though. I can see why they are debating it.”

The Fed’s policymaking body sets a key interest rate at periodic meetings, which in turn influences rates for all kinds of loans. But mortgage rates also are shaped by the health of the market financing these loans.

Banks typically create giant pools of home loans and turn them into securities that can be traded on the open market. When the system is working, many investors buy these mortgage-backed securities, providing a stream of money for lenders so they can make loans at relatively cheap rates. But the trading of these securities seized up when the financial crisis struck and panicked investors. Government officials feared that the mortgage market would collapse.

The Fed and the Treasury stepped into the breach, becoming the only major buyers of these mortgage-related securities, and they kept the mortgage market flush with cash. The Treasury spent about $220 billion, and the Fed pledged $1.25 trillion, the single largest foray the central bank has made into the markets since the onset of the crisis. In essence, the Fed has been printing money and funneling it to people looking to buy a house or refinance an existing mortgage.

At the same time, the federal government stood behind mortgage-finance companies Fannie Mae and Freddie Mac by taking them over and pledging to cover their losses. That helped the firms lower borrowing costs, since lenders know they can’t fail, and the companies passed on their savings to mortgage borrowers in the form of low rates.

Combined, these federal efforts helped push down the rates ordinary Americans pay for a mortgage. The 30-year fixed-rate mortgage declined from 6.04 percent in November 2008, according to Freddie Mac data, and hit an all-time low of 4.71 percent about a year later.

Refinancings surged, while homebuying perked up. Existing-home sales climbed nearly 10 percent in September, their highest level in more than two years.

The policy was the government’s most effective salve for the ailing housing market at a time when other initiatives, such as the administration’s attempts to modify the mortgages of struggling homeowners, produced far more disappointing results.

Now the government wants to end its support for low rates and has been striving to persuade others to buy mortgage securities.

The success of this approach hinges on the willingness of private investors, from China to big Wall Street funds, to buy large amounts of the mortgage securities and fill the void left by the government.

On Christmas Eve, Treasury officials announced a move that would cover losses suffered by investors who buy these securities from Fannie Mae and Freddie Mac, which together now back about half of the nation’s $12 trillion mortgage market. The goal was simple, officials said. They wanted private investors to be reassured that mortgage securities are safe to buy.

As the economy showed signs of recovery at the end of last year, the administration and the Fed decided to end their support.

The Treasury stopped buying mortgage securities in December. The Fed said it would taper off purchases gradually, ending them by March 31.

Obama’s economic team could have raised the limits on how much mortgage securities Fannie and Freddie can buy, allowing those firms to replace the Fed’s purchasing program. But Barr said the administration thinks the mortgage business will stand on its own without such special assistance, similar to the way the nation’s biggest banks weaned themselves off federal bailout funds by raising private capital.

“The basic goal is to implement a gradual process where the government’s role in the economy goes down,” Barr said. “It has to be consistent with the basic goal of stability, but it is appropriate.”

Administration and Fed officials expressed confidence that rates will rise only modestly – perhaps a quarter of a percentage point. They attribute their optimism to the lengthy notice they have given the market. The markets already should have anticipated the government’s exit by adjusting interest rates higher. Yet mortgage rates have been falling slightly the past few weeks.

The optimism at the White House and the Fed, however, is not shared across the government. A few senior policymakers at the central bank view the economic recovery as still too fragile, suggesting that purchases perhaps should expand further. These dissenters also warn that mortgage rates could shoot up, perhaps to 6 percent or higher, because private investors buying securities would demand a greater rate of return than the Fed. To reach it, lenders may have to raise rates for consumers.

“Presumably, there is pent-up demand from the private sector, but the question is: At what rate are they going to be interested?” said Eric S. Rosengren, the president of the Federal Reserve Bank of Boston, who has indicated that he supports expanding the Fed’s mortgage securities purchase program.

There also could be unintended consequences to the government’s pull-out. Last year, big investors such as Pimco sold their mortgage-backed securities to the government and used that money to buy bonds and stocks. That extra cash, which propped up stock prices, could drain away after federal support ends.

Real estate and mortgage finance officials said the timing of the government’s exit seems especially ill-conceived, since the Fed’s support would end just a month before a homebuyer tax credit program, which the real estate industry has credited with jump-starting home sales.

Given the importance of the housing market, some industry officials doubt whether the government will follow through with its pledge to exit the mortgage market in March. Fannie and Freddie officials say that the companies together can buy about $300 billion of mortgage securities by the end of the year before they hit their federally mandated limits. Though it appears reluctant to do so, the administration could use that buying power to cushion the blow after the Fed’s program ends, the industry officials said.

“I believe they do want to end it in March, but it’s like all New Year’s resolutions,” said Mark Vitner, a senior economist at Wells Fargo Securities. “The Fed’s New Year resolution is to go on a diet, go to the gym, give up drinking and clean the garage. They might be able to do one of those things, but to do all four is tricky. They have to drain all the liquidity they added to the financial market so we don’t see a resurgence in inflation, but do it in a way so that the economy does not slip into recession.”

Mortgage rates end the year above 5 percent

Mortgage rates rose for the fourth straight week, ending the year above 5 percent.

The average fixed rate on a 30-year mortgage was 5.14 percent last week, up from 5.05 percent one week earlier, Freddie Mac said Thursday.

Mortgage rates are closely tied to yields on long-term government debt. The average fixed rate on 30-year mortgages has steadily risen since hitting a record low of 4.71 percent the week of Dec. 3.

The Federal Reserve is pouring $1.25 trillion into mortgage-backed securities to keep rates low this year. The program, aimed at making home buying more affordable, is set to end next spring.

Still, qualifying for a loan is hard because lenders have severely tightened requirements. The best rates are available to those with good credit and a 20 percent down payment.

Freddie Mac collects mortgage rates on Monday through Wednesday of each week from lenders across the country. Rates often fluctuate significantly, even within a given day.

The average rate on a 15-year fixed mortgage rose to 4.54 percent from 4.45 percent last week.

Rates on five-year, adjustable-rate mortgages averaged 4.44 percent, up from 4.40 percent last week. However, rates on one-year, adjustable-rate mortgages fell to 4.33 percent from 4.38 percent.

The rates do not include add-on fees known as points. The nationwide fee for loans in Freddie Mac’s survey averaged 0.7 point for 30-year loans. The fee averaged 0.7 point for 15-year and 0.6 point for five-year loans and for one-year mortgages.

Rates on 30-year loans fall below 5 percent

WASHINGTON – Nov. 6, 2009 – Rates for 30-year home loans dipped below 5 percent this week after rising for three straight weeks.

The average rate fell to 4.98 percent from 5.03 percent a week earlier, mortgage company Freddie Mac said Thursday.

Rates had hovered below 5 percent for nearly a month until inching upward two weeks ago. They hit a record low of 4.78 percent in the spring, but are still attractive for people looking to buy a home or refinance.

The Federal Reserve has pumped $1.25 trillion into mortgage-backed securities in an effort to lower rates on mortgages and loosen credit. Rates on 30-year mortgages traditionally track yields on long-term government debt.

That, plus a federal tax credit of up to $8,000 for first-time homebuyers, has helped boost the ailing housing market.

The number of signed contracts to buy previously occupied homes rose for the eighth month in a row in September, while residential construction spending jumped by 3.9 percent, the largest gain in more than six years, data this week showed.

Still, lenders are cautious and standards remain tight, so the best rates are available only to borrowers with solid credit and a 20 percent downpayment.

Freddie Mac collects mortgage rates on Monday through Wednesday of each week from lenders around the country. Rates often fluctuate significantly, even within a given day, frequently in line with long-term Treasury bonds.

The average rate on a 15-year fixed-rate mortgage declined to 4.40 percent from 4.46 percent recorded last week, according to Freddie Mac.

Rates on five-year, adjustable-rate mortgages averaged 4.35 percent, down from last week’s 4.42 percent. Rates on one-year, adjustable-rate mortgages decreased to 4.47 percent from 4.57 percent.

The rates do not include add-on fees known as points. The nationwide fee for loans in Freddie Mac’s survey averaged 0.7 points for 30-year loans. The fee averaged 0.6 points for 15-year, five-year and one-year loans.

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TWO POINTS

The $8,000 first-time homebuyer tax credit has received a lot of attention lately, but it has also overshadowed another big reason to buy a home now: record-low interest rates. In May, 30-year mortgage rates of 5 percent were widely available. That’s down from January’s already-low 5.8 percent, and two percentage points less than in August 2008. How important is two points? On a $200,000 home, a buyer could save $257 per month ($3,084 per year) by buying now rather than last August. On a $200,000, 30-year fixed rate mortgage, the monthly payment difference is:
• 7 percent: $1,330 monthly (rates in August 2008)
• 6 percent: $1,199 monthly (rates in December 2008)
• 5 percent: $1,073 monthly (rates in May 2009)

Federal program to help first-time buyers use tax credit for downpayment

WASHINGTON – May 13, 2009 – First-time homebuyers will soon have another option if they want to use their $8,000 tax credit toward a downpayment. On the tails of a Florida-created program that Gov. Charlie Crist is expected to sign into law, the federal government announced its own downpayment assistance program at the National Association of Realtors® Midyear Legislative Meetings & Trade Expo taking place this week in Washington, D.C.

While the tax credit applies to “first-time homebuyers,” the term is misleading. In general, anyone who hasn’t owned a home for the past three years is considered a first-timer under the program. Shaun Donovan, secretary of the U.S. Department of Housing and Urban Development (HUD), hopes to have additional details available within a few days, though it’s still unclear how soon homebuyers can apply for the credit.

Donovan said that the Federal Housing Administration (FHA) would allow its lenders to credit homeowners up to $8,000. He made the announcement to several thousand Realtors yesterday at a special daylong session called, The Real Estate Summit: Advancing the U.S. Economy.

“We all want to enable FHA consumers to access the homebuyer tax credit funds when they close on their home loans, so that the cash can be used as a downpayment,” Donovan said. According to Donovan, FHA approved lenders will be permitted to “monetize” the tax credit by using short-term bridge loans. Donovan also said that more will be done, and the Obama administration plans to further stabilize the housing market.

“I do think we have some early signs that the market overall is stabilizing,” said Donovan. “Since January, we’ve seen both home sales moving up and down around a relatively stable number, and we are seeing the first signs that the rapid decline in home prices is starting to abate.”

Housing aid gaining steam in stimulus bill

WASHINGTON – Feb. 3, 2009 – Homebuyers could see lower mortgage rates and get tax credits as part of a sweeping economic stimulus package being considered on Capitol Hill.

Lawmakers are heeding the pleas of two powerful and well-heeled interest groups: real estate agents and homebuilders. Those industries have lobbied hard in recent weeks for more expansive assistance for their flailing members.

The Senate took up a $900 billion version of the stimulus legislation on Monday after an $819 billion version passed the House last week without a single Republican vote.

Any government aid for the housing sector should be temporary and apply to all buyers to help boost sales of expensive homes as well as low-priced ones, said Wachovia Corp. economist Mark Vitner.

“Nobody wants to buy a home before prices have bottomed out,” Vitner said. “Unfortunately if everybody has the same idea, prices are going to keep falling.”

With median sales prices back to levels last seen in mid-2003 and rates on 30-year mortgages hovering around 5 percent, homes have become far more affordable in most of the country. But some economists say they still have farther to fall, particularly in former bubble markets like California and the Northeast.

Plus, some question the amount of money going toward relatively wealthy homebuyers, instead of renters or those who can’t qualify for a mortgage.

“I’m amazed,” said Dean Baker, an economist and co-director of the liberal Center for Economic Policy Research in Washington. “We’re giving people way more money – just because they bought a home – than if they’re unemployed.”

Meanwhile, Senate Minority Leader Mitch McConnell, R-Ky., told reporters Monday that Republicans would offer a plan to have the government step in to reduce mortgage rates to around 4 percent, which could shore up home prices and lower housing payments for millions of Americans.

“A stimulus bill must fix the main problem first, and that’s housing,” McConnell said. “That’s how all of this began. We think you ought to go right at housing first.”

Sen. Charles Schumer, D-N.Y on Sunday told “Face the Nation” on CBS that Democrats would support a GOP-backed idea to double a home buyers’ tax credit from $7,500 to $15,000 and make it available to all buyers instead of those purchasing their first home. He also said the Obama administration is considering ways for the government to lower mortgage rates.

“There seems to be real bipartisan support for a stronger housing focus,” said Mary Trupo, a spokeswoman for the National Association of Realtors, which has rallied its members to push for more aid to the hobbled market.

The Realtors group spent more than $17 million on lobbying last year, with more than $6.5 million coming in the final three months, according to disclosure forms.

The building industry, which has been devastated by the housing bust, has been pushing a package of subsidies that would bring mortgage rates to just under 3 percent for the first half of this year. The National Association of Home Builders – which spent more than $4.5 million lobbying last year – favors a tax credit of up to $22,000 for home purchases.

Media shouldn’t say buyers need 20 percent downpayments

WASHINGTON – Jan. 6, 2009 – Don’t believe everything you read, says NAR.

There is some misinformation in the media lately about the required size of a downpayment for a mortgage in today’s market, and the blog world is abuzz with misperceptions. Not all so-called experts are knowledgeable in this area, and some experts are being misunderstood.

The facts:

1. An individual may be required to put down 20 percent based on that person’s financial situation – but that is not an across-the-board requirement for all borrowers.
 
2. A borrower who puts down less than 20 percent is required to obtain mortgage insurance.
 
3. Even in a declining market, a borrower is required to make at least a 5 or 10 percent downpayment.
 
4. FHA requires a 3.5 percent downpayment by borrowers, so long as they meet a 31 percent housing cost-to-income ratio. In other words, anyone who stays within their budget and who can afford a 3.5 percent downpayment (even with family help) can become a homeowner.

FHA market share has grown roughly tenfold in the past year to an estimated 30 percent of new mortgage originations.

Real Estate Outlook: Housing in Recovery

With all the turbulence and losses in stocks and bad economic news in the headlines lately, you can easily lose perspective on what’s really going on in the real estate sector.

For example, new mortgage applications increased last week by 12 percent, according to the Mortgage Bankers Association. Applications from people looking to buy houses with FHA loans were up by 15.3 percent, while applications from purchasers seeking conventional mortgages rose by six and a half percent.

How could that be, with all the grim economic news? Well, remember that there is a huge pent-up demand simmering away out there for housing — especially from first-time buyers who want to scoop up low-priced deals.

When fixed interest rates drop — and last week they were down by a quarter of a percentage point — those buyers start doing the math and getting into the market with offers.

Fixed thirty year rates fell from six and a half percent to 6.24 percent during the week. Fifteen year rates broke below six percent to 5.9 percent, down from 6.14 percent.

Another piece of positive news you may not have noticed: Pending home sales were higher than year-earlier levels for the second straight month — 1.6 percent higher than September 2007 .

Although pending sales contracts were down slightly for the month, in the western states they wee up by 3.7 percent, and now stand at an extraordinary 39.7 percent higher than they were at the same time in 2007.

At the National Association of Realtors’ convention in Orlando, chief economist Lawrence Yun, warned the delegates not to expect a housing recovery overnight, certainly not with unemployment on the rise. But he projected a slow, steady, multi-year upward trend, with 5.02 million total sales this year, 5.3 million for 2009, and 5.6 million for 2010.

Already sales are up significantly in major markets in many parts of the U.S. Yun specifically mentioned the west coast of Florida, the Phoenix area, Virginia, Long Island New York, Kansas City, Minnesota and Idaho.

So here’s the key point to keep in mind as you try to make sense of the headlines: The stock market is NOT the housing market. It’s on a whole different set of tracks. And it’s been in a highly volatile state for more than a month.

Housing, on the other hand, has already endured its painful correction for two and a half years … is now pretty much stabilized … and is slowing moving toward its cyclical recovery.