Low interest rates remain top story in housing market

While many neighborhoods continue to steam along with consistent home sales, the national scene chugs along like a locomotive climbing a steep incline after an engine rebuild.

One of the nation’s foremost economists said it best:

“The housing market continues to grind its way upward, but we don’t expect a breakout performance in 2015 as the fundamentals remain somewhat muted,” said Doug Duncan, Fannie’s chief economist. “We believe that mortgage activity in 2015 will be very similar to 2014.”

Imagine what that climb would be like if 30-year, fixed-rate mortgages ranged from 6.0 to 6.5 percent rather than 4.0 to 4.5 percent?

Consistent interest rates again grabbed honors as the year’s top story, despite the continued scrutiny consumers experience in obtaining credit. Once again, low rates not only allowed first-time buyers to continue a realistic search for homeownership, but the rates also became the solid base for cash-strapped families to tap into home equity.

Another big 2014 housing story was the further decline in young Americans who are putting off home buying because of that high student loan debt and sluggish unemployment. The home ownership rate for the Millennial generation has fallen to its lowest level since the U.S. Census Bureau started tracking home ownership by age in 1982.

Again, imagine the plunge in young buyers with rates at 6.5 percent.

The home ownership rate in 2014 for Americans 35 and under fell to 36.2 percent, dropping from 36.8 percent in 2013. Broken down even further, Americans in the 25-29 age group had the biggest decline in home ownership rates at 33.3 percent, followed by 47.5 percent for the 30-34 age group. The home ownership for all age groups has fallen to 64.8 percent, the lowest level since 1995.

The unemployment rate for those aged 20-24 is 12.4 percent, according to data from the Bureau of the Labor Statistics. The unemployment rate for Americans 25-34 years old is 7 percent, compared to the national average unemployment rate of 6.7 percent.

A third story that hit the 2014 big-time story list was the news that reverse mortgage “trailing spouses,” regardless of age, will be able to stay in the home after the borrowing spouse dies.

Most of surviving spouses who remain in the home after one spouse dies were part of the reverse mortgage agreement when it was first signed. However, many were left out of the document, usually because they were too young to qualify or because including them would have meant a reduced amount. Now, more and more of these trailing spouses who were never vested in the reverse mortgage want to stay in the home without paying off the underlying reverse mortgage.

In fact, a few filed lawsuits that caused enough anxiety that the Department of Housing and Urban Development caved to the controversy.

The nation’s most popular reverse mortgage program – called the Home Equity Conversion Mortgage – has been due and payable upon the death of the last surviving borrower, the sale of the home, failure to reside in the property and the failure to pay required taxes and insurance.

A new, “alternative interpretation” of Federal Housing Administration guidelines will extend the reverse mortgage to any trailing spouse (known as “non-borrowing spouse” by FHA) if the persons were married at the time the reverse mortgage was originated.

As of Aug. 4, 2014, the Home Equity Conversion Mortgage (HECM) will be extended (FHA’s “deferral period” of repayment) if the non-borrowing spouse:

1. Had been the spouse of a HECM borrower at the time of loan closing and has remained the spouse of such HECM borrower for the duration of the HECM borrower’s lifetime;

2. Has been properly disclosed to the lender at origination and specifically named as a non-borrowing spouse in the HECM documents; and

3. Has occupied, and continues to occupy, the property securing the HECM as the principal residence of the non-borrowing spouse.

What’s up for 2015? Hopefully, mortgage interest rates will remain low. Economists have extended their “low-level” predictions into the second quarter, yet they have been known to miss the mark.