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Michael WellsTuesday
(202) 755-7470 x121August 22, 1996


August 1, 1996

The U. S. Department of Housing and Urban Development (HUD) today released the results of its latest survey of market conditions for fixed rate, long-term, level payment home loans as well as interest rates for home construction funds. The August 1, 1996, survey found that the most frequently quoted contract rate for HUD/FHA Section 203(b) mortgages being sold in the secondary market for immediate delivery was 8.50 percent. Typical prices for 8.50 percent contract interest rate loans produced a national average secondary market yield of 8.56 percent.

The findings are obtained from a survey of home loan market conditions conducted by officials in 70 HUD Field Offices. Information is obtained from over 240 lending institutions and builders located in major metropolitan areas across the country.

FHA secondary market yields were up in most regions. Changes in secondary market yields on the typical Section 203(b) contract rate ranged from an increase of 8 basis points in the Middle Atlantic region to remaining constant in the West.

The proportion of HUD Field Offices indicating that funds were generally adequate (relative to current demand) for financing Section 203(b) home mortgages was 100 percent on August 1, 1996.

In the FHA primary mortgage market, the average FHA effective rate for all reported primary market quotes was 8.44 percent. Lenders also reported that the dominant national FHA rate being quoted to potential homebuyers for 60 days or more "lock-in" commitments was 8.50 percent with an average of 27 basis points and an effective interest rate of 8.54 percent. Average basis points for the 8.50 percent primary rate were 42 basis points in the Middle Atlantic, zero basis points for the Southeast, 47 basis points for the North Central, 40 basis points in the Southwest, and zero basis points in the West.

The national average contract rates for commitments on conventional loans for new and existing homes in the primary mortgage market went down 9 basis points.

The proportion of HUD offices reporting an adequate supply of construction funds on August 1, was 90 percent for FHA and 91 percent for conventional financings.

For the trend of builders' plans, the percentage of builders planning to expand construction activity for all prices homes was 18 percent on August 1. One year ago 15 percent of the builders planned to increase construction. In the latest survey, the majority of builders remained in the stationary building plan category for each home price class. The proportion on August 1 ranged from 79 percent for low-priced and high-priced homes to 82 percent for moderate- priced homes and all homes.

On August 1, the proportion of HUD Field Offices reporting a stable trend in builders' unsold inventory of new homes was 85 percent, while 9 percent noted a declining trend and 6 percent an advancing situation. An advancing trend is indicative of a growing inventory of homes, meaning either over-production and/or slower new home sales. Conversely, a declining inventory of new homes indicates somewhat of a sellers' market, where demand would be relatively stronger than supply. One year ago the proportion of offices reporting a stationary trend was 81 percent, a declining trend 14 percent, and an advancing trend 5 percent.

Date of next release: September 24, 1996

Net Prices and Average Yields for HUD-Insured
New Home Mortgages (Section 203) Immediate Delivery
Transactions 30-Year Maturity - Minimum Downpayment

Average Price Average Yield 1/ Average Price Average Yield 1/
Northeast * * * *
Middle Atlantic 98.69 8.69% 99.25 8.61%
Southeast 99.75 8.54% 99.83 8.52%
North Central 99.60 8.56% 99.88 8.52%
Southwest 99.80 8.53% 99.91 8.51%
West 99.47 8.58% 99.42 8.58%
United States 99.57 8.56% 99.64 8.55%

1/-Gross yield to investors, without allowance for servicing costs based on prepayment of the mortgage based on prepayment of the mortgage at the end of 12 years.

*--Insufficient secondary market activity reported.

United States

Price Yield Mtg. Rate
1984 High/Low 97.60/95.00 15.00/12.90 14.00/13.00
1985 High/Low 98.30/95.50 13.43/11.28 13.00/10.50
1986 High/Low 99.40/96.22 10.78/9.26 10.50/9.50
1987 High/Low 98.54/95.42 11.22/8.79 10.50/8.50
1988 High/Low 99.49/96.99 10.84/9.86 10.50/9.50
1989 High/Low 99.65/97.01 11.16/9.61 11.00/9.50
1990 High/Low 99.25/97.94 10.75/9.71 10.50/9.50
1991 High/Low 99.57/98.53 9.71/8.69 9.50/8.50
1992 High/Low 99.60/97.54 8.85/8.06 8.50/8.00
1993 High/Low 99.95/99.13 8.12/7.02 8.00/7.00
1994 High/Low 99.88/98.44 9.53/7.05 9.50/7.00
1995 High/Low 99.97/99.18 9.54/7.51 9.50/7.50

Data as of: Aug 1, 1996     HFEP:08-22-96

Content Archived: January 20, 2009

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