|**Secondary Market Report** | **June 1998**
|--------------------------- | -------------



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Secondary Market Prices and Yields
and Interest Rates for Home Loans
June 1, 1998



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`News Release
HUD No. 98-262                                                   FOR RELEASE:
L. Richard Keyser (202) 755-7500 x137                            July 2, 1998
www.hud.gov/fha/comp/rpts/fharpts.html.`



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 June 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 7.07 percent.

FHA secondary market yields were down in all regions. Changes in secondary market yields on the most frequently quoted Section 203(b) contract rate ranged from a decrease of 20 basis points in the North Central region to a decrease of 32 basis points in the Middle Atlantic and Southeast.

In the FHA primary mortgage market, the average FHA effective rate for all reported primary market quotes was 7.25 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 38 basis points and an effective interest rate of 7.05 percent.

Average basis points for the 7.00 percent primary rate were: 125 basis points in the Northeast; zero basis points in the Middle Atlantic; 17 basis points in the Southeast; 16 basis points in the North Central; zero basis points in the Southwest; and 75 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 7.11 percent in new home loans, and down 9 basis points to 7.12 percent in existing home loans.

The proportion of HUD offices reporting an adequate supply of construction funds on June 1 was 95 percent for FHA and 95 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 June 1 was: 66 percent for low-priced homes; 69 percent for moderate-priced homes; and 64 percent for high-priced homes.

On June 1, the proportion of HUD Field Offices reporting a stable trend in builders' unsold inventory of new homes was 76 percent, while 24 percent noted a declining trend and zero 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 85 percent, a declining trend 12 percent, and an advancing trend 3 percent.

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Date of next release: July 24, 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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Date Last Modified: 07/02/98**