Morgan Stanley Sees Home Prices Declining in 2011

What will U.S. home prices do in 2011? It’s a common question, as we wrap up yet another painful year for housing. Property values have fallen considerably since the crisis began in 2008. And a recent prediction suggests they may have further to fall.

It’s good news for home buyers, and bad news for homeowners. Financial services firm Morgan Stanley expects home prices to decline by as much as 11 percent through 2011 and into 2012. Many had hoped the market would hit ‘bottom’ next year. But that may not be in the cards after all, if Morgan Stanley’s predictions are accurate.

To what do their financial analysts attribute this gloomy forecast? Supply and demand, of course. They feel that rising inventory and weak demand will push the current housing-market slump all the way into 2012. This jives with the consensus reached in our housing predict-o-meter, which shows that 2011 could be a lot like 2010.

Translation: Home prices will likely continue to decline in many parts of the U.S. next year, and possibly into 2012.

The Morgan Stanley analysts, led by Oliver Chang, said that tightened lending standards will continue to hamper home sales next year. “We see the trough occurring in 2012 instead of our previous call of 2011,” Chang told Bloomberg news, during a phone interview recently.

Indeed, it is harder to qualify for a home loan today than it was before the housing collapse. During the boom, nearly anyone with a steady paycheck could qualify for a mortgage. But things have changed dramatically since then. Today, risk-averse mortgage lenders require higher credit scores, more documentation proof of income, and lower debt levels. This shrinks the pool of qualified home buyers, weakening the demand side of the housing equation.

Also restricting demand is the fear of falling prices. For decades, we operated under the assumption that home values would always go up. This was viewed as an unshakeable truth. Now we know better. Just look at California, Florida and Arizona, the states hit hardest by the housing crash. Real estate values plummeted in those markets, and are falling still. This puts hear in the hearts of would-be home buyers. It’s a legitimate concern. Who wants to spend hundreds of thousands of dollars on an asset, only to see it depreciate from day one?

We have problems on the supply side as well. Millions of foreclosure properties flooded the market after the crash. There is not nearly enough demand to absorb them all. It’s the kind of situation that is measured in years, not months. What’s worse, these distressed properties are often sold for less than market value. This puts downward pressure on property values across the board, even for non-distressed homes.

Of course, none of this comes as news to the folks at Morgan Stanley. They are intimately familiar with the many woes of housing. It’s what led to their bleak predictions for next year.

Some markets will take longer to recover than others. We are seeing this even now, as the level of depreciation lessens in some markets and worsens in others. Speaking broadly, however, I would not expect to see a national rebound in home prices until mid 2012, at the earliest.

Morgan Stanley is a financial services firm that was founded in 1935. They offer a variety of investment banking, securities and wealth management services. They are headquartered in New York and serve clients worldwide.

Freddie Mac Offers a Glimpse of the Mortgage Market in 2011

Editor’s note: This article contains outdated information pertaining to mortgage rates. For the most recent information available, be sure to visit our forecast page.

Ask 20 different economists to predict mortgage trends in 2011, and you’ll get 20 different predictions. (And don’t forget to take your No-Doz pills first.) But there are a handful of economists who are in a position to give fairly accurate predictions. One of them works for Freddie Mac, the newly-government-owned purchaser of home mortgage loans. Here’s a 2011 mortgage outlook from Frank Nothaft, the chief economist at Freddie Mac.

Frank NothaftParaphrasing: Mortgage rates will remain relatively low during 2011. Some rate increases can be expected between now and then. The average rate for a 30-year fixed mortgage will probably stay below 5 percent throughout the year, while the 5/1 hybrid ARM will probably stay below 4 percent.

Translation: 2011 will probably be a lot like 2010, as far as mortgage rates go. Mr. Nothaft’s forecast for 2011 closely matches the consensus we have posted on our housing market predict-o-meter.

What We Might See in 2011

What else will change in 2011? Disclosing the fact that we have no crystal ball in our office, here’s our view:

The job market will slowly improve through 2011, though the national unemployment rate will likely remain over 9 percent. This will increase the demand for housing in many cities across America. But a full recovery of the housing market probably won’t take place until 2012. Home prices will continue to decline in many areas, at least for the first half of the year.

Housing inventory will be the primary cause for these declines — foreclosure inventory in particular. More people will be buying homes, when compared to 2010. Refinance loans will drop considerably. Oh, and we haven’t heard the last of the robo-signing drama.

What It Means to Home Buyers

Are you planning to buy a home in 2011? Here’s how all of this may affect you. If you have steady income and a good credit score, 2011 might be a great time to buy a home. You’ll have plenty of buying power, in terms of home prices and mortgage rates. Sellers who have been on the market for a while should welcome an offer from a qualified buyer, even if it’s below their asking price. This puts the negotiation process in your favor, so long as you make a reasonable offer based on recent sales.

Just keep an eye on your local housing market. Start keeping tabs on what home prices are doing in your area, and what they are expected to do over the next few years. You don’t want to purchase a home in a steadily declining market. If you do that, you’ll likely end up with negative equity inside of a year. But if your real estate market is bouncing along the bottom, so to speak, you might want to jump in while the rates are still low. The key is to make an informed decision, based on plenty of localized research.

Disclaimer: The mortgage rate forecasts in this article should not be taken as gospel. They are an educated guess, based on current conditions in the economy.

Home Value Killers of 2011: Inventory and Unemployment

2011The current consensus seems to be that home values in most parts of the U.S. will decline, as we head into 2011. This should come as little surprise, when you consider the current level of housing inventory and unemployment.

But we may find ourselves surprised by the full scope of the price erosion. Once hailed as the “year of recovery” for the housing market, 2011 could be very similar to 2010.

Housing Inventory = Downward Pressure on Home Values

According to the S&P/Case-Shiller home-price index, home values nationwide fell 0.7 percent from August to September of this year. There was also a quarterly decline in values from the second to third quarters of 2010. That’s not to say there weren’t pockets of positivity, as in Washington D.C. where prices actually rose during the same period. But nationally speaking, the current trend is downward.

The foreclosure freeze will prolong the high inventory of homes, and probably add to it as well. If the listing of new homes continues to outpace the purchase of those homes, the inventory will rise in the coming months. Absent a major spike in home-buying activity, this will drive prices down in most areas. Supply and Demand 101.

Unemployment: Other Half of the Double-Whammy

The latest unemployment figures (as of December 2010) were unchanged over the previous month, still hovering at 9.6 percent. Some states, such as California, have more than 12 percent unemployment. This will continue to be a drag on the housing market in 2011.

Thankfully, though, we are starting to see some positive trends in the employment world. The unemployment rate in Virginia has fallen steadily over the last few months, and now sits at 6.8 percent. There are other cities and states with similar scenarios. So we will certainly see some job growth in 2011. But it will be a trickle.

What This Means for Homeowners

If you’re not planning to sell or refinance your home in the near future, this doesn’t affect you very much. Sure, your home values might drop a bit more over the next year or so. But they’ll trend upward again — eventually.

If you do plan to sell your house in 2011, you need to be realistic about how you price it. If you bought your home more than three years ago, there’s a good chance your home value has dropped since then. If you live in California, Arizona, Florida, Nevada or Detroit … well, I don’t need to tell you, do I?

The point is, you need to find out what your home is worth in the current market, and price it accordingly. It doesn’t matter what you paid for the home. It doesn’t matter how much you owe on your mortgage. Buyers and their agents will use recent sales data to evaluate your asking price. If you’ve overpriced the home out of desperation or wishful thinking, they’ll know. And they won’t give you the time of day.

What It Means for Home Buyers

If you can qualify for a mortgage loan, 2011 looks like another great year to buy a home. While home values might continue to drop in some areas, they probably don’t have far to fall. Karl Case, retired economics professor and co-creator of the S&P/Case-Shiller Index, recently said: “If I were betting even odds, I’d bet that we don’t have much further decline, but that we bounce along the bottom.”

So even if home values drop a bit after you buy, they’ll start upward again … and probably sooner rather than later. Additionally, mortgage rates will likely stay below 5 percent for most of 2011. So you have a combination of low home prices, a low cost of borrowing, and plenty of inventory. It’s a pretty good scenario for qualified home buyers.

FHA Loans Took 40 Percent of Market Share in 2010

On Tuesday, the Department of Housing and Urban Development (HUD) released its annual report on FHA issues to Congress. Among other things, the report stated that FHA loans accounted for nearly 40 percent of all purchase mortgages, for the period of November 2009 – November 2010.

The Ups and Downs of FHA Market Share

In 2005, the FHA’s market share of purchase loans was closer to 5 percent (when measured by households served). So they are clearly insuring more loans today than just a few years ago. But if we go back even further, we can find a similar pattern. In 1993, FHA’s slice of the purchase-loan mortgage market was around 15 percent.

So what’s really going on here?

For the most part, the FHA’s market share has followed the alternating trends of relaxed and restricted lending. Whenever financial side-doors open up for people with bad credit and no money down, FHA’s market share goes down. When those doors close again, FHA loans become more popular.

This is what we saw in the late 1990s and early 2000s. Remember, this was the period when all of those “exotic” mortgage loans came into use — most of which are now extinct. The stated-income loan, the subprime mortgage, etc. “So long FHA. We don’t need you anymore. There’s a new game in town.”

But now that most of those high-risk (and low intelligence) mortgage products are gone, it’s a love affair with FHA loans once again.

By this time next year, FHA loans could easily account for more than 50 percent of all purchase mortgages. Our consumer research is already pointing toward this kind of usage spike. Time will tell.

FHA Loans 2.0 – They Aren’t “Easy” Anymore

Of course, even the FHA has limits to what it will do, in terms of lending. Over the last few years, the government agency suffered huge financial losses resulting from defaults and foreclosures. The so-called “seller-financed down payment assistance” mortgages cost the FHA more than $6 billion dollars in claims.

So the organization’s leaders took a step back to review their mortgage-insurance criteria. As a result of this review, there have been a number of changes to the FHA loan program. Borrowers today will need larger down payments (3.5 – 10 percent) and higher credit scores.

The FHA is also taking steps to restore its capital reserves. During the housing-market crash, those reserves fell below the 2-percent mark that is required by congress. They are restoring capital largely by requiring higher mortgage-insurance premiums over the term of the loan.

Related stories:

FHA logoAbout the FHA: The Federal Housing Administration (FHA) is part of the federal government, under the Department of Housing and Urban Development (HUD). This agency insures mortgage loans made by FHA-approved lenders in the primary mortgage market. They insure loans against default, which increases the lender’s willingness to lend. Since its inception in 1934, the FHA has been the largest insurer or mortgage loans. Learn more

FHA Lenders Increase Credit Score Requirements for FHA Loans

There have been more credit-related changes to FHA loans in the last year than the previous ten years combined. And here comes another: Bank of America and Wells Fargo recently raised their FICO credit-score requirements for some FHA loans from 620 to 640. Going forward, borrowers with credit scores below 640 may not qualify for FHA loans.

This story was originally reported by Jody Shenn and John Gittelsohn on Bloomberg.com.

We have previously written about the new credit-score guidelines set forth by the Department of Housing Urban Development (HUD) in 2010. That was when HUD established the minimum credit score for FHA loans at 500, with 580 being the cutoff for the 3.5% down-payment program. But those numbers are largely meaningless, because most FHA-approved lenders will not approve a borrower with a credit score below 620. At least, that used to be the rule of thumb.

Recent developments show that lenders are raising the bar once again. Bank of America and Wells Fargo are the two largest mortgage lenders in the United States. Combined, these lenders account for the majority of home loans being made today. They both recently increased their credit score minimums for FHA loans from 620 to 640.

FHA logoAbout the FHA: The Federal Housing Administration (FHA) does not actually make loans to consumers. Rather, they insure the loans made by primary lenders such as BOA and Wells Fargo. Thus, FHA home loans are also referred to as government-insured loans.

The lenders who make these loans are referred to as FHA-approved lenders.

The FHA has established some basic guidelines for mortgage underwriting. But the lenders impose their own (often more stringent) guidelines on top of the FHA’s minimum requirements. This latest credit-score development is an example of how mortgage lenders can be more strict than the FHA when making FHA home loans.

These changes will affect a rising number of home buyers. Ever since the housing market collapsed in 2008, the FHA’s market share has increased considerably. Today, about one-fifth of all mortgage loans are made through the FHA loan program. A 2010 home-buyer survey conducted by the Home Buying Institute suggests that FHA usage may increase even more in the future.

Benchmark Rate to Average 4.4 Percent, Says MBA

Editor’s note: This is an outdated article. For the most recent mortgage forecasts available, please see this page.

On Tuesday, the Mortgage Bankers Association (MBA) released its forecast for 2011 home-loan rates and other housing trends. They feel the benchmark 30-year fixed mortgage rate will average 4.4 percent for the remainder of 2010. For 2011, the MBA predicts that the benchmark rate will slowly but steadily increase to around 5.1 percent.

Various factors are driving our rate forecast,” said Jay Brinkmann, MBA’s Chief Economist and SVP for Research and Economics. “Absent some blockbuster post-election announcement from the [Federal Reserve] on November 3rd, we do not expect to see a further decline in rates.”

The MBA also expects to see a modest rise in home sales in 2011, along with a corresponding rise in home purchase loans.

If their rate predictions come true, it means that mortgage financing will be more affordable this year than next. But how much more affordable? Let’s look at some pricing scenarios to see how the percentages play out when applied to an actual loan amount.

Mortgage Pricing Scenarios

At the time of publication, the average rate for a 30-year fixed mortgage was 4.23 percent (up from 4.19 percent two weeks ago). The MBA is forecasting that rates will rise to 5.1 percent by the end of 2011. At first glance, these numbers don’t mean much. Sure, 4.4 percent is lower than 5.1 percent. But how does that translate into actual dollars? Here’s an example of how much money a home buyer could save by getting the lower of these two rates.

  • A 30-year fixed-rate mortgage in the amount of $250,000 at 4.4 percent interest will have a monthly payment of $1,251 (excluding insurance and taxes). Total interest paid over the full term of the loan = $200,684.
  • A 30-year mortgage for the same amount with a rate of 5.1 percent will have a monthly payment of $1,357 (excluding insurance and taxes). Total interest paid over the full term of the loan = $238,654.

In the second scenario, I would pay an additional $106 a month toward my mortgage payment. The higher interest rate would account for this increase. But look at the total amount of interest paid over the life of the loan. That’s where the true difference becomes apparent. In the second scenario, I would pay an additional $38,000 worth of interest. I could put my kid through college for that amount of money.

What does all of this mean? It means that if the MBA’s predictions are accurate, mortgage loans are going to be more expensive in 2011. It means that you could save money by buying (or refinancing) a home sooner, rather than later.

We are tracking these and other housing market predictions for your convenience.

Disclaimer:We make no assertions or guarantees about the forward-looking statements made by the MBA. We have provided this information for educational purposes only. There are many variables that could render their predictions inaccurate. No one can predict the mortgage market with 100% accuracy. Additionally, the rate you receive on a home loan will vary from the average rate, based on your credentials as a borrower (credit score, down payment, debt level, etc.).

Bank-Owned Homes in Henderson, Nevada – A Buyer’s Paradise?

The housing crisis has dropped home values all over the country, yielding some attractive deals for home buyers. But nowhere have prices fallen farther than in the so-called sand states: Arizona, Florida, California and Nevada. Take Henderson, Nevada for example. Here’s a place where you can buy a bank-owned home that was formerly worth a million dollars for less than $500,000.

At the time this article was published, there were nearly 2,200 bank-owned homes in Henderson, Nevada. Most of these homes are priced well below the peak values we saw five years ago. For anyone planning to buy a home in the Las Vegas metro area, they represent an excellent investment opportunity.

As part of the Las Vegas Metropolitan area, Henderson was also one of the cities hardest hit by the foreclosure crisis. That, combined with soaring unemployment, is what accounts for the high number of bank owned homes in Henderson, Nevada.

What’s a Bank-Owned Home, Anyway?

If you’re not familiar with bank-owned homes, here’s a quick primer. There are three basic stages of the foreclosure process. The first stage is referred to as pre-foreclosure. This is when the homeowner has defaulted on a mortgage loan, but the lender has not yet foreclosed on the property. When you buy a pre-foreclosure home (through a short sale, perhaps), your offer must be accepted by both the homeowner and the lender.

After the lender foreclose on the home, they usually try to sell it through an auction. This is the second stage in the foreclosure process. Buying a home at an auction is a good way to save money, but it’s also better left to the experienced investors. If you are not familiar with the auction process, you could end up paying too much for a home that needs a lot of work.

Then we have the bank-owned homes. If the home does not sell at an auction, it will go back on the market as a bank-owned home. Sometimes the lender will skip the auction process altogether, if they feel it’s not warranted. In either case, that property is now designated as a bank-owned home (also referred to as REO, or real estate owned).

The benefit of buying a bank-owned home is that you’re only dealing with the lender. The homeowner has been removed from the equation altogether. Price-wise, these homes typically fall in between regular listings and auctions. They are usually cheaper than the former but more expensive than the latter. In other words,buying a bank-owned home in Henderson, Nevada (or anywhere else) is a way to pay less than market value. But you won’t get as good a deal as you would through an auction or a pre-foreclosure sale. Granted, there are exceptions to every rule. But this is generally how it works in the foreclosure world.

Bank Owned

How much cheaper are they? It has a lot to do with how long the home has been on the market. “You can buy foreclosures for as cheap as 30% or 40% below market,” said John T. Reed, editor of Real Estate Investor’s Monthly. “But most foreclosures sell for 5% below market.”

For the novice home buyer, most experts recommend buying a bank-owned home over an auction or pre-foreclosure property. According to an article on Bankrate.com: “Bank-owned properties offer the safest deal for inexperienced foreclosure buyers … There’s no risk. There are no taxes, no liens, no tenants to evict.”

A Lot of House for the Money

I look at foreclosure data day in and day out, as part of my job. But the numbers don’t always tell the full story. So I went on to Realtor.com, Trulia.com, and several other real estate websites to see what you could get for the money in Henderson, Nevada. While there are plenty of good deals to be found, some of the best deals were the bank-owned homes in Henderson.

Consider the following example. I found one bank-owned property for less than $500,000 that probably would’ve been worth $1.5 million at the height of housing boom. The tax assessment was significantly lower than the listing price, so you could probably make an offer for less and still get the bank’s attention. This home had five bedrooms and four bathrooms, with a combined total of 4,000 square feet. It had a custom-built swimming pool, and is sat on nearly an acre. Granted, there aren’t that many home buyers in Henderson, Nevada now. But for the few who are qualified to get a mortgage loan, it’s like being a kid in a candy store.

The Bottom Line

There are plenty of bank-owned homes available in Henderson, Nevada. Buyers can generally get these homes for less than their true market value. You might not get them as cheap as you would through an auction, but the process is typically safer. When the property is owned by the bank, you can be reasonably sure that the title is clear (robo-signing aside). You can also get title insurance to protect your investment. And you’ll have the opportunity to do a home inspection when buying a bank-owned home, which is not always possible when buying at an auction.

Survey: Americans Feel the Government Hasn’t Done Enough Foreclosure Prevention

A recent survey by the Home Buying Institute revealed how Americans feel about the federal government’s efforts to reduce foreclosures. The majority of respondents felt that the government had not done enough to reduce foreclosures. Perhaps most surprising was the large number of people who said the government should never have gotten involved.

Consumer Survey

Survey Details: We conducted this survey on the Home Buying Institute website. Responses were collected over a one-month period, between September 23 and October 23, 2010. The survey was presented to a mix of home buyers and homeowners, many of whom were in the market for a mortgage loan (for either purchase or refinancing purposes).

Of those who responded:

  • 43.8 percent said the government has not done enough to reduce foreclosures.
  • 25.7 percent said the government has done enough.
  • 22.9 percent said the government never should’ve gotten involved to begin with.
  • And 7.6 percent felt that the government has done too much.

“This was a survey without an agenda,” said Brandon Cornett, publisher of the Home Buying Institute. “We did not suggest that it was the government’s role to reduce foreclosure rates. We merely posed the question and allowed people to respond.”

Most surprising was the fact that nearly a quarter of respondents thought the government shouldn’t have gotten involved at all. “That was certainly a surprise,” said Cornett. “Normally you hear people complaining that the government doesn’t help enough. I didn’t expect so many people to say they should have stayed out [of the foreclosure mess] altogether.”

About the Home Buying Institute

The Home Buying Institute has been educating home buyers and homeowners since 2006. In 2010, the company began conducting online surveys to learn more about its audience. You can view the most recent surveys here.

Image Use: You are free to use the bar-graph image above on your own website or blog. A link back to this story would be appreciated. If you have questions about this survey, please email us.

How Will a Foreclosure Freeze Affect the Housing Market?

I previously wrote that the current foreclosure freeze was being blown out of proportion. But could there be more to the story? After delving deeper into the morass, I’ve revised my position.

Here’s what I think. The foreclosure freeze itself will mostly have a short-term effect on our housing market. It will initially reduce the inventory of foreclosure homes. But when the banks start rolling at full speed again, it will increase the inventory and therefore depress home values. It’s what lies beneath that has people more concerned, and it could have a broader impact on the housing market.

The foreclosure freeze is only a symptom. The rubber-stamped paperwork and convoluted transfer of mortgage notes is the disease. And the disease could have a serious impact on our housing market. Or, it could become water under the bridge in no time at all. It all depends on how it’s handled. And this is exactly why so many people are divided on how the foreclosure freeze (and underlying mess) will affect the housing market as a whole.

To give you a broader sense of what’s going on, I’ve created an ongoing list of foreclosure freeze analysis and predictions. I call it the Predict-o-Meter:

The Foreclosure Freeze Predict-o-Meter

Here’s how it works. I set up some Google Alerts to tell me whenever somebody online is talking about the foreclosure freeze and the housing market. Blog posts, news stories, press releases, random bits and pieces of online commentary — it all comes to my inbox courtesy of Google’s web-crawling technology. And then it winds up on this page.

Note: This is an organic story that is still unfolding. This page will be updated continuously.

  • freddie macFreddie Mac released its third-quarter financial report at the beginning of November. Among other things, CEO Charles Haldeman said the recent foreclosure freeze would push housing recovery further down the road. “[T]he housing market remains fragile and has recently come under renewed pressure from slowing economic growth, weaker employment and foreclosure uncertainties,” he said. “We believe that it will be a considerable time until the housing market has a sustained recovery.” November 3, 2010, Freddie Mac
  • Wall Street JournalOn the Wall Street Journal website, Ruth Simon mentioned that “Some experts predict that the only way out of the [foreclosure robo-signing] debacle is a huge settlement in which home-loan servicers modify the terms of billions of dollars of mortgages.” Of course, this kind of settlement would be a serious financial blow to the banks. And that would hamper their ability to make new loans to home buyers. October 23, 2010, Wall Street Journal
  • ReutersA Reuters article recently quoted an economist named Patrick Newport from IHS Global Insights. He pointed out that the fear caused by the foreclosure freeze has negative implications for both the housing market and the broader economy. To quote the article: “Fewer sales to investors means fewer sales altogether, which will further elevate supply. That, in turn, will keep a lid on home prices, making consumers feel poorer.” October 22, 2010, Reuters
  • Washington PostBrady Dennis of the Washington Post points to the “moral hazard” associated with the foreclosure freeze. He said there are no statistics to show how many homeowners are using the foreclosure moratorium to skip out on making their payments. But some “economists warn that this practice could become more common if a national [mandatory] freeze is put in place, as some lawmakers are trying to do.” –October 20, 2010, Washington Post
  • Wall Street Journal“A national foreclosure moratorium will exacerbate the housing-market crisis,” said Barbara Novick, “by increasing uncertainty and preventing supply and demand from reaching equilibrium.” Her Wall Street Journal article points out that a backlog of foreclosures will prevent the housing market from righting itself, dragging home prices even lower. October 18, 2010, Wall Street Journal
  • HUDShaun Donovan, secretary of the Department of Housing and Urban Development (HUD), mentioned the damage a foreclosure freeze could do to our housing market. He made the following comments in an article on the Huffington Post. “We’ve seen real progress in the housing market … With vacant and abandoned homes more than three times as destructive to the values of neighboring homes as occupied homes that are just beginning the foreclosure process, a blanket moratorium would only slow down that progress.” –October 17, Huffington Post

We will bring you more news about the foreclosure freeze and housing market as the situation unfolds.

Charlotte Real Estate and Mortgage Update – Q4 2010

Welcome to the Charlotte real estate and mortgage update, for the fourth quarter of 2010. Are you planning to buy a home in Charlotte, North Carolina soon? Perhaps you want to refinance your mortgage loan? Either way, you’ll find this guide helpful. We will talk about Charlotte mortgage trends, the local real estate scene, foreclosure stats and more.

couple walkingDisclaimer: This guide to Charlotte real estate was published on October 19, 2010. As a result, the mortgage rates and housing statistics may have changed by the time you read this report. For the most recent information, you can contact a real estate agent in the Charlotte area. In fact, we recommend that you do so if you’re planning to buy a home.

Charlotte Mortgage Rates

At the time of publication, the average home loan rates in Charlotte, North Carolina were as follows. These rates were compiled and averaged from a variety of local lending websites.

  • 30-year fixed – 4.29%
  • 15-year fixed – 3.81%
  • 5/1 ARM loan – 3.15%
  • 1-year ARM loan – 3.05%

When comparing these numbers to the average rates reported by Freddie Mac for the same period, you might notice something interesting. The rates for fixed-rate mortgages in Charlotte were slightly above the national average. While the rates for adjustable mortgages were slightly below the national average. This could be a reflection of the local demand for fixed versus adjustable loans, or it could just be a fluke.

As you compare Charlotte mortgage rates and lenders, you must also remember that the rate you get is driven primarily by your individual qualifications as a borrower. If your credit score and debt-ratios are better than the average borrower, then you’ll probably qualify for a better rate. And, of course, the opposite is true.

Some are predicting that benchmark mortgage rates will remain below 5% through the end of 2011. But there’s a good chance they will inch upward between now and then, as markets stabilize and activity increases. What does this mean to Charlotte home buyers and homeowners? It means that if you’re in the market for a mortgage loan, you might want to move forward sooner rather than later.

Defaults, Foreclosures and Bank-Owned Homes

Charlotte was not affected by the nationwide housing bust as much as, say, Las Vegas or San Diego. But there are still quite a few foreclosure properties on the market. At the time of publication, we found the following data on Charlotte foreclosure homes. Data was provided by RealtyTrac.com:

  • Pre-foreclosure homes * – 67
  • Auctions – 2,497
  • Bank owned homes – 3,849

* Pre-foreclosure means the homeowner is delinquent on the mortgage, but the lender has not foreclosed on the home yet.

There are relatively few pre-foreclosure homes in Charlotte, when compared to the bank-owned properties. This is usually a sign of a stabilizing market — not that Charlotte experienced much of a housing bust to begin with. Based on these numbers, we predict that the foreclosure inventory in Charlotte will decline steadily in the coming months.

Home Prices And Pricing Trends

According to data reported by Trulia.com, the average listing price of Charlotte homes for sale is between $135,000 and $165,000. The average sales price is lower, falling between $111,000 and $136,000.This suggests that many homeowners are listing their homes above market value, and/or they are being negotiated downward. Neither scenario is surprising in this kind of real estate market.

According to Zillow.com, Charlotte home prices have decreased by 4.5%, between August 2010 and September 2010. This was the most recent data available for pricing trends.

A recent HomeGain survey found that most Charlotte real estate agents and homeowners have a negative view on home prices. The majority of both groups felt that home prices will stay flat or decrease in the coming months. Only ten percent of agents felt that prices would rise over the next few months. This is noteworthy for home buyers. If you are planning to buy a home in Charlotte soon, you should keep a close eye on the market. You might be buying your way into a depreciating property.

FHA Loans Popular in Charlotte

FHA home loans are up in the Charlotte area, and elsewhere in the country. Over the last few years, the FHA’s market share has increased to around 30% of all mortgage activity. This number may increase even more in the near future. We recently conducted a survey to find out how many home buyers were planning to use an FHA loan. More than 80% said they wanted to use an FHA loan, mostly for the lower down-payment.

If you plan to use this government-insured mortgage program, you’ll need to find an FHA lender in the Charlotte area. The Department of Housing and Urban Development (HUD) website has a list of these lenders. Select North Carolina for state, and Charlotte for city, and then run a search. You’ll then be given a list of FHA-approved lenders in the Charlotte area.

Closing Comments

To close out this Charlotte real estate and mortgage guide, we present you with the following comments:

  • “Chief executive Wes Sturges said the Charlotte economy appears to be stabilizing, but real estate values continue to experience some deterioration.” –The Charlotte Observer
  • “Looking at our overall housing market at a regional level … you will see that while we have our issues, Charlotte is not drastically sliding price wise.” –Charlotte Property Hunters

We hope you have found our Charlotte mortgage and housing update helpful. If you would like to learn more about the home buying process, you can get started on our main website. It offers thousands of articles on mortgages, home buying, house hunting, and other topics discussed in this report.