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| **Secondary MarketReport** | **January1998**
Secondary Market Prices andYieldsand Interest Rates forHome Loans  January 1, 1998****HUD No. 98-07                                FOR RELEASE:Marilyn J. Ballotta (202) 755-7500 x153      January 23, 1998
     The U.S. Department of Housing and Urban Development (HUD) todayreleased the results of its latest survey of market conditions forfixed rate, long-term, level payment home loans as well as interestrates for home construction funds.  The January 1, 1998, survey foundthat the most frequently quoted contract rate for HUD/FHA Section203(b) mortgages being sold in the secondary market for immediatedelivery was 7.00 percent.  Typical prices for 7.00 percent contractinterest rate loans produced a national average secondary marketyield of 7.17 percent.   
     The findings are obtained from a survey of home loan marketconditions conducted by officials in 70 HUD Field Offices. Information is obtained from over 240 lending institutions andbuilders located in major metropolitan areas across the country.   
      FHA secondary market yields were down in most regions.  Changesin secondary market yields on the most frequently quoted Section203(b) contract rate ranged from an increase of 17 basis points inthe Middle Atlantic region to a decrease of 51 basis points in theSouthwest region.                                                    
     In the FHA primary mortgage market, the average FHA effectiverate for all reported primary market quotes was 7.36 percent.  Lenders reported that the most frequent rate being quoted topotential FHA homebuyers for 60 days or more "lock-in" commitmentswas 7.00 percent with an average of 56 basis points and an effectiveinterest rate of 7.07 percent.  Average points for the 7.00 percentprimary rate were, 1.63 points in the Northeast, 2.75 points in theMiddle Atlantic, 5 basis points in the Southeast, 81 basis points inthe North Central, 40 basis points in the Southwest, and 50 basispoints in the West.
     The national average contract rates for commitments onconventional loans for new and existing homes in the primary mortgagemarket went down 13 basis points to 7.25 percent in new home loans,and down 16 basis points to 7.23 percent in existing home loans. 
     The proportion of HUD offices reporting an adequate supply ofconstruction funds on January 1, was 98 percent for FHA and 98percent for conventional financings.
     For the trend of builders' plans, the percentage of buildersplanning to expand construction activity for all prices homes was 18percent on January 1, up 9 percent from one year ago.  In the latestsurvey, the majority of builders remained in the stable building plancategory for each home price class.  The proportion on January 1, was79 percent for low-priced homes, 72 percent for  moderate-pricedhomes, 72 percent for high-priced homes, and 79 percent for allhomes.
     On January 1, the proportion of HUD Field Offices reporting astable trend in builders' unsold inventory of new homes was 80percent, while 16 percent noted a declining trend and 4 percent anadvancing situation.  An advancing trend is indicative of a growinginventory of homes, meaning either over-production and/or slower newhome sales.  Conversely, a declining inventory of new homes indicatessomewhat of a sellers' market, where demand would be relativelystronger than supply. One year ago the proportion of officesreporting a stationary trend was 87 percent, a declining trend 4percent, and an advancing trend 9 percent.       #    #    #    #    #
Date of next release:  February 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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