WASHINGTON – April 30, 2012 – What can homebuyers expect to face this selling season? An improving housing market has made it a different picture in many areas compared to recent years, housing experts say. Bankrate.com notes the following trends:

1. Fierce competition.

Housing affordability is at a record high due to falling home values and mortgage rates near record lows. More buyers are jumping off the sidelines. At the same time, investors are snapping up bargain prices, often in all-cash deals, and competing with traditional homebuyers.  Add in a sinking inventory of homes for sale, and the competition is getting fiercer.

“Rents are going up, and as long as there are properties at the level where investors can get positive cash flow, they will continue to invest,” says Jed Smith, managing director of quantitative research for the National Association of Realtors®. Smith adds that first-time homebuyers, in particular, may find increased competition from investors in trying to snag some of the best deals on the market.

2. More renters show desire to become homeowners.

Recent surveys show that buying a home now is more affordable than renting. As such, more renters are finding homeownership more enticing.

The signs are already starting to show: About 59.5 percent of tenants recently surveyed by Kingsley Associates say they intend to renew their leases this year, which is the lowest rate since early 2009.

3. Mortgages may be a little pricier.
Fannie Mae, Freddie Mac and the Federal Housing Administration recently raised their loan fees, which means homebuyers can expect to pay a little more for their mortgage this spring.

“Those who don’t have credit scores in the high 600s to low 700s may be forced to go the FHA route,” says Ed Conarchy, a mortgage planner at Cherry Creek Mortgage in Gurnee, Ill. “And they will be stuck with the higher fees.”

Buyers with smaller downpayments can expect to pay more for FHA mortgage insurance premiums, which have risen to 1.75 percent of the loan total. Bankrate.com cites an example illustrating the higher fees: A borrower who takes out a $200,000 FHA loan will likely have to pay about $3,500 for mortgage insurance upfront. Prior to the increase taking effect, borrowers would pay about $2,000 for that same loan amount.

Borrowers with higher mortgages can expect higher fees too. The FHA announced that in June it would increase its annual insurance for mortgages more than $625,500. “A borrower who lives in a high-cost area and takes out the maximum $729,750 (which is the FHA limit for high-cost areas) will pay $912 each month in mortgage insurance alone,” Bankrate.com reports.

Source: “5 Mortgage and Housing Trends in Spring 2012,” Bankrate.com (April 21, 2012)

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