For the first time in a year, according to the National PMI Index, the overall risk in 384 metropolitan real estate markets has decreased. The PMI Index is produced quarterly by a private mortgage insurance giant, the PMI Group. It is one of the most accurate forecasters of the housing value movement. It examines local employment, household income, economic growth, demographic changes and other factors to predict where home values are headed in these market areas.
The PMI risk index was among one of the earliest warning us about the housing crash, so its quarterly findings are followed closely by mortgage analysts. According to the latest index released last week, home values are increasing in dozens of major metropolitan markets, causing the average risk rating for the U.S. to drop by 2.6 percent. That’s not huge, but it shows the direction we are headed. But, the index did find risk levels elevated in some areas such in California, Nevada, Arizona and Florida. It also documented a slight worsening of affordability conditions in 81% of metropolitan markets. This is mainly due to the higher home prices and slightly higher mortgage rates last year.
Another key market barometer was released last week with encouraging numbers. The Zillow Index found that the national average of home owner’s negative equity rate dropped to 21.4 percent in the last quarter of 2009. This is down from 23 percent in the second quarter. The federal reserve’s quarterly study, measuring the nation’s finances, also found that after 3 years of decline, American’s are building positive equity in their homes again.
According to the feds, between the 1st quarter of last year and 3rd quarter, home owner’s equity increased by almost 1 trillion. This is believed to be primarily caused by the rise in home values and principle paydowns on mortgages.
Home builders are also reporting an ease in their financial woes. Several major publicly traded builders announced last week that they are seeing higher numbers of orders along with reduced cancellation rates of contracts. In one company, DR Horton, in it’s most recent quarter, orders for new homes were up 45% above the earlier year’s levels and the cancellation rate dropped from 38% to 26%.
Mortgage rates continue to be helpful as well. 30 year fixed rate dropped to 4.9% last week and the 15 year remains at 4.3%. This is according to the Mortgage Bankers Association.
(information in this article is according to the Realty Times)