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| **Secondary MarketReport** | **February1998**
Secondary Market Prices andYieldsand Interest Rates forHome Loans  February 1, 1998****HUD No. 98-96                                FOR RELEASE:L. Richard Keyser (202) 755-7500 x137        February 24, 1998
     The U.S. Department of Housing and Urban Development (HUD) today released the results of its latest survey of market condi-tions for fixed rate, long-term, level payment home loans as well as interest rates for home construction funds.  The February 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 7.08 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.  
      Regional FHA secondary market yields were mixed.  Changes in secondary market yields on the most frequently quoted Section 203(b) contract rate ranged from a decrease of 70 basis points in the Middle Atlantic region to an increase of 5 basis points in the Southwest region.                                                    
     In the FHA primary mortgage market, the average FHA effective rate for all reported primary market quotes was 7.27 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 40 basis points and an effective interest rate of 7.05 percent.  Average points for the 7.00 percent primary rate were, 2 points in the Northeast, 2.75 points in the Middle Atlantic, 23 basis points in the Southeast, 25 basis points in the North Central, zero basis points in the Southwest, and 39 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 to 7.16 percent in new home loans, and down 6 basis points to 7.17 percent in existing home loans. 
     The proportion of HUD offices reporting an adequate supply of construction funds on February 1, was 98 percent for FHA and 97 percent for conventional financings.
     For the trend of builders' plans, the percentage of builders planning to expand construction activity for all priced homes was 20 percent on February 1, up 6 percent from one year ago.  In the latest survey, the majority of builders remained in the stable building plan category for each home price class.  The proportion on February 1, was 75 percent for low-priced homes, 73 percent for moderate-priced homes, 75 percent for high-priced homes, and 80 percent for all homes.
     On February 1, the proportion of HUD Field Offices reporting a stable trend in builders' unsold inventory of new homes was 80 percent, while 15 percent noted a declining trend and 5 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 88 percent, a declining trend 11 percent, and an advancing trend 1 percent.                  #    #    #    #    #
Date of next release:  March 23, 1998                 
     The entire news release and all tables are now available on the Web: http://www.hud.gov/fha/comp/rpts/fharpts.html.    
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