HUD RELEASES APRIL SURVEY OF SECONDARY MARKET PRICES AND YIELDS AND INTEREST RATES FOR HOME LOANS

WASHINGTON - The U.S. Department of Housing and Urban Development 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 April 1, 1998, 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 7.00 percent. Typical prices for 7.00 percent contract interest rate loans produced a national average secondary market yield of 7.09 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 most frequently quoted Section 203(b) contract rate ranged from an increase of 10 basis points in the Southeast region to remaining constant in the Northeast.

In the FHA primary mortgage market, the average FHA effective rate for all reported primary market quotes was 7.32 percent. Lenders reported that the most frequent rate being quoted to potential FHA homebuyers for 60 days or more "lock-in" commitments was 7.00 percent with an average of 75 basis points and an effective interest rate of 7.10 percent. Average points for the 7.00 percent primary rate were, 2 points in the Northeast, 1 point in the Southeast, 88 basis points in the North Central, zero points in the Southwest, and 52 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 6 basis points to 7.16 percent in new home loans, and down 5 basis points to 7.17 percent in existing home loans.

The proportion of HUD offices reporting an adequate supply of construction funds on April 1, was 96 percent for FHA and 96 percent for conventional financings.

For the trend of builders' plans, in the latest survey the majority of builders remained in the stable building plan category for each home price class. The proportion on April 1, was 68 percent for low-priced homes, 76 percent for moderate-priced homes, and 76 percent for high-priced homes.

On April 1, the proportion of HUD Field Offices reporting a stable trend in builders' unsold inventory of new homes was 78 percent, while 20 percent noted a declining trend and 2 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 87 percent, a declining trend 7 percent, and an advancing trend 6 percent.

Date of next release: May 26, 1998