Michael Minkoff, Author at Shoreline Mortgage

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So far Michael Minkoff has created 502 blog entries.

22 10, 2012

What’s Ahead For Mortgage Rates This Week : October 22, 2012

FOMC meets this week -- mortgage rates get volatile Mortgage markets worsened last week as hope for a European economic rebound and stronger-than-expected U.S. economic data moved investors out of mortgage-backed bonds.

Mortgage rates all of types — conventional, FHA and VA — lost ground last week, harming home affordability reducing purchasing power nationwide.

Rising rates also thwarted would-be refinancing households hoping to time a market bottom.

The increase runs counter to Freddie Mac’s weekly Primary Mortgage Market Survey which showed the average 30-year fixed rate mortgage rate dropping 2 basis points to 3.37% nationwide.

This contradiction occurred because Freddie Mac’s weekly mortgage rate survey is conducted Monday through Wednesday, and because the majority of the surveyed banks reply to Freddie Mac on Tuesday. As a consequence, Freddie Mac failed to capture this week’s mid-week movement that took mortgage bonds to a one-month worst.

Access to Freddie Mac mortgage rates is for “prime” borrowers and requires payment of discount points plus closing costs.

This week, mortgage rates may rise again. There is a lot of news on which for Wall Street to trade, beginning with the week’s biggest story — the Federal Open Market Committee’s 2-day meeting scheduled for Tuesday and Wednesday.

At the FOMC’s last meeting, the Federal Reserve introduced a third round of qualitative easing (QE3), a program through which the Fed will work to keep mortgage rates low until the economy’s recovery is more complete.

The Fed is expected to announce no new stimulus in this, its seventh of eight scheduled meetings for 2012, however, mortgage rates are typically volatile in the hours after the FOMC adjourns.

New housing data is set for release this week, too.

Wednesday, the U.S. Census Bureau will release September’s tally of New Home Sales. Given the recent strength in Housing Starts and rising confidence among the nation’s home builders, New Home Sales may best analyst calls for 385,000 new home sold last month on a seasonally-adjusted, annualized basis.

Strength in housing has recently correlated with rising mortgage rates.

The housing market’s forward-looking Pending Home Sales Index is released Thursday.

19 10, 2012

How To Improve Your FICO Score

The U.S. housing market recovery is underway. New home sales are at a multi-year high, housing starts are at pre-recession levels, and home builders plan for a strong 2013.

Since late-2011, falling mortgage rates have boosted buyer purchasing power. Now, today, in many U.S. markets, the number of active home buyers outnumbers the number of active home sellers. It’s among the reasons why home supplies remain scarce and why home prices are rising.

Roughly 20 percent of today’s home buyers purchase homes with cash. For everyone else, the ability to gain mortgage approval depends on income, assets, and, most importantly, credit scores. Your credit score is a predictor of your future payment performance and lenders pay close attention.

If you plan to buy a home in the next 12 months, spend some time with this The Today Show interview. It’s five minutes of practical credit scoring advice, including separation of credit score myth from credit score fact.

Among the credit scoring tips shared :

How to get your credit checked without harming your credit score
The value of using automatic payments with credit cards
How to use “old” credit cards to boost your credit score

You’ll also learn about utility companies and why you should never be late with payment.

As compared to August 2011, last month’s average, mortgage-financing home buyer’s FICO score improved 9 points to 750. The average “denied” mortgage applicant’s FICO score was 704. Clearly, standards are high. However, credit scoring is a system and, with time, you can improve your rating.

Watch the interview and find ways to make your credit score better. With better credit comes better mortgage rates.

18 10, 2012

Single-Family Housing Starts Rise To 4-Year High

Housing Starts The housing market continues to improve.

According to the U.S. Census Bureau, on a seasonally-adjusted, annualized basis, Single-Family Housing Starts rose to 603,000 last month, an 11 percent increase from the month prior and the highest reading in more than 4 years.

A “housing start” is a home on which construction has started and home builders are breaking ground at rates not seen even during the 2010 federal home buyer tax credit period.

It’s a signal to home buyers that the U.S. housing market may be permanently off its bottom.

At least, the nation’s home builders seem to think so.

Earlier this week, the National Association of Homebuilders reported home builder confidence at a 5-year high and nearly triple the levels of last September.

Buoyed by rising sales volume and the heaviest foot traffic since 2006, builders expect the next 6 months of sales to outpace the current rate. It may spell higher home prices for today’s new construction buyer.

Thankfully, mortgage rates remain low.

As compared to last year, today’s buyers have extended purchasing power. Assuming a 20 percent downpayment and a conforming home loan :

September 2011 : A $1,000 mortgage payment afforded a purchase price of $202,000
September 2012 : A $1,000 mortgage payment afforded a purchase price of $226,000

That’s an 11.9% increase in purchasing power increase over just twelve months. When combined with today’s rising rents throughout many U.S. markets, demand for new construction homes remains high and builders have taken notice. Buyers should, too.

With mortgage rates low, low downpayment programs available and home prices poised to rise, it’s an opportune time to be a home buyer. Housing has been trending better since late-2011 and will likely carry that momentum forward into 2013.

If you’ve been shopping new construction, remember that as mortgage rates and home prices rise, home affordability drops.

17 10, 2012

Home Builder Confidence Moves To 6-Year High

NAHB Housing Market Index As home prices rise, so does home builder confidence.

Tuesday, the National Association of Homebuilders reported its monthly Housing Market Index (HMI) at 41, a one-tick improvement from September and the highest HMI value since June 2006 — a span of 77 months.

The Housing Market Index is a homebuilder confidence indicator. When it reads 50 or better, the HMI suggests favorable conditions for home builders nationwide. Readings below 50 suggest unfavorable conditions for builders.

The HMI has not crossed 50 since April 2006 but the index has been making a run since last year, nearly tripling since the 14 reading of last year’s September.

In addition, builder confidence has climbed for six straight months.

For buyers of new construction, the Housing Market Index may help to set market expectations for the rest of 2012, and into early-2013. This is because the NAHB Housing Market Index is constructed as a composite survey, measuring builder sentiment in three specific areas — current home sales, future home sales, and buyer foot traffic.

What’s good for builders, though, may not be good for buyers.

When builders expect business to improve, they may be less willing to make concessions on price or product, holding home prices high and removing seasonal sales incentives.

This month, home builders are seeing strength in each of the three surveyed areas :

Current Single-Family Sales : 42 (Unchanged from September)
Projected Single-Family Sales : 51 (Unchanged from September)
Buyer Foot Traffic : 35 (+5 from September)

All three values are at multi-year highs but it’s the level of foot traffic that may concern today’s home buyers. Builders report foot traffic through model units to be at the highest rate since mid-last decade. This, combined with a shrinking supply of homes for sale, has contributed to a rise in new home sale prices and suggests even higher home prices in 2013.

Like most of the U.S. housing market, new construction appears to have bottomed in October 2011. One year later, the market looks stronger.

16 10, 2012

Buyers Win 6.6 Percent Increase In Purchasing Power

Purchasing Power 2010-2012

Mortgage rates continue to troll near all-time lows, boosting the purchasing power of home buyers statewide.

According to Freddie Mac’s most recent Primary Mortgage Market survey, the average 30-year fixed rate mortgage is now 3.39 percent nationwide, just three ticks off an all-time low. At the start of last quarter, 30-year fixed rate mortgage rates averaged 3.62 percent.

One year ago, they averaged 4.12%.

When mortgage rates are falling, they present home buyers with interesting options. Because of lower rates, buyers can choose to tighten their household budgets, buying an ideal home but paying less to own it each month. Or, for buyers who shop for homes by “monthly payment”, falling mortgage rates put more homes with affordability’s reach.

As a real-life example, for a buyer whose monthly principal + interest mortgage payment is limited to $1,000 per month, and whom opts for a 30-year fixed rate mortgage, as compared to January of this year, the maximum property purchase price has climbed 6.6%, or $14,000 in list price.

Consider this comparison:

January 2012 : A payment of $1,000 afforded a maximum loan size of $211,756
October 2012 : A payment of $1,000 affords a maximum loan size of $225,771

The 6.6 percent increase in affordability outpaces this year’s rise in home prices and is one reason why the U.S. housing market is improving. Slowly and steadily, the U.S. economy is improving and “good deals” in housing are becoming harder to find. In addition, because homeownership is now less expensive than renting in many U.S. cities, home demand among buyers continues to rise.

For today’s home buyer, market conditions appear ripe. Mortgage rates are near all-time lows, low-downpayment mortgage program remain plentiful, and home values have been rising since late-2011. Within 6 months, rates may be up and homes prices, too. Purchasing power would decline, decreasing home affordability nationwide.

The best “deals” in housing, therefore, may be the ones you find today.

15 10, 2012

What’s Ahead For Mortgage Rates This Week : October 15, 2012

Freddie Mac mortgage rates Mortgage markets improved slightly last week. With a dearth of new U.S. economic data due for release, investors turned their collective attention to the Europe, China, and the Middle East.

U.S. mortgage rates fell slightly in the holiday-shortened week.

The combination of civil protests, economic slowdowns, and growing political tensions caused investors to dump risky assets in favor of the relative safety provided by the U.S. mortgage bond market.

According to Freddie Mac, the average conforming 30-year fixed rate mortgage is now 3.39% nationwide for borrowers willing to pay 0.7 discount points plus a full set of closing costs. 0.7 discount points is a one-time closing cost equal to 0.7 percent of the borrowed loan size.

As an illustration, a bank’s charge of 0.7 discount points on a $100,000 mortgage would cost $700 to the borrower.

Freddie Mac also reported the average conforming 15-year fixed-rate mortgage rate at 2.70% nationwide with an accompanying 0.6 discount points plus closing costs. Loans with zero discount points carry a higher mortgage rate average.

This week, data returns to Wall Street as a series of housing reports are slated for release, in addition to inflationary reports such Tuesday’s Consumer Price Index (CPI).

The week begins with Retail Sales, released at 8:30 AM ET Monday. On a strong figure, mortgage rates are expected to climb. This is because Retail Sales data is closely tied to consumer spending and consumer spending accounts for more than two-thirds of the U.S. economy.

A growing economy tends to pull mortgage rates higher.

Tuesday’s CPI may do the same.

Inflation erodes the value of a mortgage bond so when inflation pressures grow, demand for mortgage bonds fall which, in turn, causes mortgage rates to rise. If CPI is higher-than-expected, mortgage rates will likely rise.

Then, there’s a flurry of housing data. The Housing Market Index (Tuesday), Housing Starts (Wednesday) and Existing Home Sales (Friday) all hit this week. Strength in housing may lead mortgage rates higher, harming home affordability for today’s home buyers.

At today’s mortgage rates, every 1/8% increase raises monthly mortgage payments roughly $7 per $100,000 borrowed.

12 10, 2012

Florida Takes Top Foreclosure Slot For September 2012

Foreclosures : September 2012

Foreclosure volume continues to slip.

According to foreclosure-tracking firm RealtyTrac, in September, the number of foreclosure filings nationwide fell 7 percent from the month prior, and fell 16 percent from September 2011.

RealtyTrac defines a “foreclosure filing” as any of the following foreclosure-related events : (1) A default notice on a home; (2) A scheduled auction for a home; or, (3) A bank repossession of a home.

September’s 180,427 foreclosure filings mark the lowest monthly total in more than 5 years. It’s a signal that the U.S. housing market is in recovery, while also reflecting the success with which banks and homeowners have found alternatives to the foreclosure process, including the short sale.

Based on data from the National Association of REALTORS®, short sales now account for 45 percent of “distressed” home sales nationwide/ As recently as April, the percentage of short sales was just 39 percent.

Other noteworthy statistics from the September 2012 foreclosure report include :

Default Notices fell 12% between August and September 2012
In Q3 2012, quarterly foreclosure filings fell for the 9th straight quarter
The average time to foreclose on a home rose to 382 days nationwide, the highest since early-2007

In addition, in September, Florida posted the top foreclosure rate nationwide for the first time since April 2005.

Foreclosure starts moved higher in the Sunshine State for the 11th straight month and bank repossessions are now up 23 percent as compared to September 2011. 1 in every 318 Florida homes received some form of foreclosure filing last month.

The national average was 1 in 730.

Whether you’re a first-time home buyer or an experienced one, homes in various stages of foreclosure have allure. They tend to be sold cheaply as compared to non-distressed properties, for example. However, buyers should look beyond just the “list price”. Foreclosed homes are often sold as-is which means that homes may be defective and uninhabitable.

This would render the home un-lendable, too, for buyers using bank financing.

If you plan to buy a foreclosed property , therefore, be sure to engage an experienced real estate professional. The internet can teach about “how to buy a home”, but when it comes to writing contracts and inspecting homes for defects, you’ll want to have an experienced agent on your side.

11 10, 2012

Tips To Close Your Home Loan Faster, With Fewer Hassles

With mortgage rates at all-time lows, purchase and refinance activity is climbing.

Home sales are at their highest levels since May 2010 as home buyers take advantage of favorable economic conditions. Home prices are low, household income is rising, and rents are up in many U.S. cities.

Low rates have stoked mortgage refinance applications , too.

Last week, with 30-year fixed rate mortgage rates slipping to 3.36% nationwide, on average, more U.S. homeowners were in search of a refinance than during any one-week period since April 2009.

With loan volume high, banks are nearing their respective capacities for underwriting and approving home loans. As a mortgage applicant, therefore, you’ll want to make sure that you’re taking whatever steps necessary to ensure that your home loan closes on-time, and without hassle.

You most important responsibility? Be responsive to your lender.

When asked for paperwork and/or supporting documentation, providing a 24-hour turnaround can keep your loan “top of mind” with your underwriter. This is important because underwriters are people and, sometimes, people “forget”. The fewer times that an underwriter has to “relearn” your file and its nuances, the better your chances for a speedy approval.

A secondary benefit to being responsive to your lender is that you’ll be less likely to miss your rate lock deadline which, too often, is a costly proposition for a borrower. Even if the mortgage market has improved since your original lock date, your lender may assess rate-lock extension fees equal to up to one-half percent of your loan size.

Other tips to ensure an on-time closing include :

Disclose everything upfront. Your lender will find out anyway, so don’t under-disclose important facts.
Be accessible. Your lender will often want to contact you by phone or email. Don’t lose days playing “phone tag”.
When required, schedule your appraisal for as soon as possible. It’s easy to lose days to this part of the process.

And, lastly, don’t challenge an underwriter’s request for “more paperwork”. Lenders want to see as little paper as possible. They don’t ask for information that’s not required to approve your loan.

Mortgage volume is expected to remain high through the end of 2012 and into 2013. Follow these steps to help close your loan on time, and with few headaches.

10 10, 2012

103 Metro Areas On The “Improving” U.S. Markets List

NAHB Improving Market Index

It’s not just the housing market that’s improving nationwide — it’s the economy overall.

The number of U.S. metropolitan areas showing “measurable and sustained growth” climbed to 103 this month. The data is measured by the Improving Markets Index, a monthly metric from the National Association of Homebuilders.

The Improving Market Index is meant to identify which U.S. markets are experiencing broad economic growth — not just growth in terms of housing.

The index’s conclusions are based on three data series — each collected separately; each from a different division of the U.S. government; and, each tied to specific local economic conditions.

Those three data series are :

Employment Statistics (from the Bureau of Labor Statistics)
Home Price Growth (from Freddie Mac)
Single-Family Housing Growth (from the Census Bureau)

After collating the data, the National Association of Homebuilders evaluates the reports as a group for each specific major metropolitan area.

A metropolitan area can be cited as “improving” only if the following two conditions are met. One, all three data series show expansion and/or growth as compared to 30 days prior; and, two, none of the data series have “bottomed” within the last six months.

As a result of its methodology, the Improving Market Index specifically passes over short-term growth bursts in a market, isolating for areas with long-term, sustainable growth instead.

Furthermore, “improving” cities may be more apt to outperform other U.S. cities in the months and years ahead, rendering them ideal for relocating buyers in search of long-term employment and income opportunities, as well as real estate investors in want of healthy, stable markets.

33 states are represented in the October Improving Market Index, plus the District of Columbia. 11 new areas were added to the list as compared to September and just 7 dropped off.

The newly-added areas include State College, Pennsylvania and Raleigh, North Carolina. Cities falling off the list for October include Lakeland, Florida.

The complete Improving Markets Index is available for download at the NAHB website.

9 10, 2012

What’s Ahead For Mortgage Rates This Week : October 9, 2012

Rates rising on economy Mortgage markets worsened last week for the first time in a month as the U.S. economy showed signs of improvement, and the Eurozone stepped closer to launching its $500 billion euro rescue fund.

Conforming mortgage rates rose last week on the whole — even though Freddie Mac’s Primary Mortgage Market Survey proclaimed that they fell.

This occurred because Freddie Mac’s weekly mortgage rate survey is conducted between Monday and Tuesday each week and, last week, mortgage rates were lower when the week began. Through Wednesday, Thursday and Friday, however, they rose.

According to the Freddie Mac survey, the average 30-year fixed rate mortgage slipped to 3.36 percent nationwide last week, while the 15-year fixed rate mortgage fell to 2.69 percent. Both rates required 0.6 discount points and both marked all-time lows.

As this week begins, to gain access to the same 3.36% and 2.69% mortgage rates from last week, mortgage applicants should expect to pay more closing costs and/or higher discount points.

Improving U.S. employment data is partially to blame.

Friday morning, the Bureau of Labor Statistics released its September Non-Farm Payrolls report. More commonly called “the jobs report”, the monthly issuance details changes in U.S. employment by sector and reports on the national Unemployment Rate.

In September, accounting for upward revisions to data from July and August, 200,000 net new jobs were created — far exceeding Wall Street’s estimates for 120,000 net new jobs created. Furthermore, the Unemployment Rate unexpectedly dropped to 7.8%.

Jobs are considered a keystone in the U.S. economic recovery. As a result, when the jobs numbers hit Friday, mortgage rates worsened, building on momentum built earlier in the week as Greece moved steps closer to accepting aid from the Eurozone.

In general, since 2010, weakness in the Eurozone has helped push U.S. mortgage rates lower. As Europe regains its footing, therefore, domestic mortgage rates are expected to rise.

This week, in a holiday-shortened week, there will be little new data to move mortgage rates. The Federal Reserve’s Beige Book is released Wednesday and some key inflation data is due for Friday release. Beyond that, mortgage rates will continue to take cues from the Eurozone.

Mortgage rates remain near all-time lows.

5 10, 2012

Fed Minutes Detail QE3 Discussion; Mortgage Rates Down

Fed Minutes September 2012 The minutes from the Federal Reserve’s September Federal Open Market Committee meeting were released Thursday.

The Fed Minutes detail the discussions and debates which shaped the central banker’s launch of its third round of qualitative easing since 2008. The minutes also give Wall Street insight into future monetary policy.

At 6,987 words, the Fed Minutes provides a level of detail that was unavailable via the FOMC’s post-meeting press release, a documen that, by contrast, ran 562 words.

Despite its large word count, there was very little that was new or surprising in the Fed Minutes, though. This is because, since the Fed’s last meeting, Federal Reserve Chairman Ben Bernanke has publicly clarified and re-iterated the Fed’s positions on employment, housing and inflation.

The minutes provide a strong backdrop to his comments, however.

For example, with respect to the jobs market, Fed members deemed employment “disappointing”, noting that growth in payrolls has been slower in 2012 as compared to 2011, and that the expansion rate of today’s job market is too slow to make significant progress against the national unemployment rate.

The Fed Minutes also included the following notes :

On housing : Further improvement is occurring, albeit from a “depressed level”
On inflation : Risks appear “tilted to the downside”, but energy costs pose risks
On Europe : A “slight improvement”, but still a risk to global economic activity

Of greatest interest to home buyers and rate-shopping refinancers, though, was the Fed’s discussion of its QE3 program. The program was introduced to help suppress mortgage rates nationwide which, the Fed believes, will make “broader financial conditions” more accommodative.

The Fed plans to purchase $40 billion in mortgage-backed bonds monthly for a “considerable” period of time after the U.S. economy has already shown signs of full recovery and, since the launch of QE3, 30-year fixed rate mortgage rates are down 19 basis points to 3.36% nationwide, on average.

The next Federal Open Market Committee meeting is scheduled for October 23-24, 2012.

4 10, 2012

With Tomorrow’s Job Report Due, Mortgage Rates May Finally Rise

Estimated Non-Farm Payrolls September 2012

It’s a dangerous time for home buyers to be without a locked mortgage rate.

Friday morning, at 8:30 AM ET, the government releases its Non-Farm Payrolls report for September. More well-known as “the jobs report”, Non-Farm Payrolls data has the power to move mortgage rates up or down.

Unfortunately, ahead of the release, we can’t know which.

Last year, job growth more than doubled between August and September. If this year shows that same growth, mortgage rates are expected to rocket higher.

The connection between rising jobs and rising rates is a chain reaction-type link, and is often quite tight.

Jobs are a growth engine for the U.S. economy and mortgage rates are “made” based on future expectations for the U.S. economy. In general, when the economy is improving, it draws Wall Street into “risky” investments and away from “safe” ones.

Meanwhile, mortgage-backed bonds — especially those from Fannie Mae and Freddie Mac — are considered to be among the safest investment assets available. Therefore, as the size of the U.S. workforce swells, and economic projections increase, Wall Street tends to divest itself of its mortgage bond holdings which, in turn, increases the supply of mortgage-backed bonds for sale.

With more supply, all things equal, mortgage bond prices fall and this causes mortgage rates to rise.

This is why the September jobs report is important to today’s home buyers and mortgage rate shoppers. A better-than-expected tally will result in higher mortgage rates.

In August 2012, the government reported 96,000 net new jobs created — a sharp decrease from the month prior and a figure just shy of the metric’s six-month moving average. The Unemployment Rate fell one-tenth of one percent in August to 8.1%.

For September, economists expect to see 120,000 net new jobs created, and no change in the national Unemployment Rate.

3 10, 2012

How To Help Your Home Appraise At Its Fair Market Value

Home values are rising in many U.S. markets. The S&P/Case-Shiller Index has home values up 1.2 percent as compared to last year, and the government’s Home Price Index shows an increase of 3.7 percent.

This has been partially evidenced by rising median home sales prices nationwide. Versus last year, the median sale price of a new construction home has climbed 17 percent, and the median sale price of an existing home sale is higher by 10 percent.

For home sellers, an improving market means the chance to net more proceeds from a home sale. Or does it?

In this 3-minute piece from NBC’s The Today Show, we hear about the home appraisal process and how it may be limiting the number of home sales nationwide, plus the prices at which homes are selling.

The interview includes several key insights into the home appraisal process :

In a rising housing market, a home’s appraised home value may be lower than its “true” market value
Short sales and foreclosures can make a negative impact on a home’s appraised value
Consolidation in the appraisal industry has lowered product quality and may be harming valuations

One key take-away from the video is that home owners should provide their home appraisers with as much relevant information as possible — especially information which may not be publicly-available. This includes records of recent “all-cash” sales of comparable homes which were never formally listed for sale.

One in three purchase agreements are canceled because of appraisal issues, according to the interview. Take steps to make sure yours is not among them.

2 10, 2012

Case-Shiller index Shows Home Values Rising Nationwide, Too

Case-Shiller Index annual change July 2012

There have been no shortage of “housing market” stories lately. After sinking through much of late-last decade, home values slowly stabilized into mid-2011. By October 2011, values appeared to have bottomed.

Today, nearly five-and-one-half years after the April 2007 housing market peak, home prices are finally showing their ability to rebound. Over the past 12 months, a bevy of housing market data highlights broad-based market growth.

For example, as compared to August 2011, Existing Home Sales are up 9.3 percent nationally; New Home Sales are up 27.7 percent nationally; and home inventories have slipped to multi-year lows throughout the country.

Furthermore, multiple home value trackers show home prices rising both regionally and nationwide.

Last week, the government’s Federal Housing Finance Agency released its Home Price Index (HPI) — a metric which tracks how home values change between sequential property sales. HPI showed home values up 3.7% nationally.

Another home valuation tracker — the S&P Case-Shiller Index — has shown home values to be rising, too.

As compared to one year ago, the private-sector metric puts home prices higher by 1.2 percent via its 20-city composite. 20 cities remains a small subset of the broader U.S. population, but, in looking for a trend, it’s clear that the trend is a positive one.

Some of the Case-Shiller Index highlights from its most recent report :

All 20 tracked cities showed home price gains between June 2012 and July 2012
The previously hard-hit city of Phoenix now leads the nation with a 16.6% annual gain
Versus their respective lows, San Francisco and Detroit are up 20.4% and 19.7%

In addition, on a 12-month basis, only four cities are showing negative home value growth — Atlanta, Chicago, Las Vegas, and New York City.

The Case-Shiller Index is a national index, though, and specifically does not report on valuation changes in specific U.S. cities and their neighborhoods. For local real estate data, make sure to speak with a local real estate agent instead.

1 10, 2012

What’s Ahead For Mortgage Rates This Week : October 1, 2012

Jobs report threatens low mortgage rates Mortgage rates dropped to another all-time low last week as concerns for global economic growth helped U.S. home buyers and refinancing households nationwide.

U.S. mortgage rates responded to non-U.S. events and, for rate shoppers and home buyers , home affordability improved.

Early in the week, with Greece and Spain debating new austerity measures, and with citizen protests rampant, a flight-to-quality helped to boost demand for U.S. mortgage bonds. So did rumors of a weakening Chinese economy.

“Flight-to-quality” is a trading term for when investors shun investment risk in favor of safer, more high-quality portfolio assets. Typically, this involves selling stocks and buying bonds, including mortgage-backed ones.

When demand for mortgage-backed bonds rise, mortgage rates tend to fall.

Demand for bonds is also receiving a boost from the Federal Reserve’s latest market stimulus program — QE3.

“QE3” is a shorthand term for the Fed’s third qualitative easing, a program by which the nation’s central banker buys mortgage-backed securities on the open market in hopes of driving mortgage rates down.

So far, it’s been working. Since the Federal Reserve announced QE3 in mid-September, conforming mortgage rates have been on steady decline.

According to Freddie Mac, the average 30-year fixed rate mortgage rate slipped to 3.40% nationwide last week with an accompanying 0.6 discount points plus closing costs. The average 15-year fixed rate mortgage rate moved to 2.73%, also with 0.6 discount points and closing costs. Both rates are at all-time lows.

This week, mortgage rates have a lot of data on which to trade, and may be poised to bounce higher.

In addition to the release of manufacturing, construction and retail sales reports, the Bureau of Labor Statistics will post its September Non-Farm Payrolls report Friday. More commonly called the “jobs report”, the monthly release takes on added significance now that the Federal Reserve has said that its open-ended QE3 program will be linked to the U.S. jobs economy.

Wall Street expects to see 120,000 net new jobs created in September. If the actual reading exceeds this figure, mortgage rates should rise.

28 09, 2012

Pending Home Sales Index Continues To Show Strength

Pending Home Sales Index 2009-2012

Nationwide, homes continue to sell briskly.

According to the National Association of REALTORS®, the Pending Home Sales Index read 99.2 for August — the fourth straight month in which the index hovered near its benchmark value of 100.

A “pending home” is a home that is under contract to sell, but has not yet closed. The index measures with fair accuracy the future strength of the U.S. housing market.

For today’s home buyers, the August Pending Home Sales Index is relevant for several reasons.

First, the index remains near its highest point since April 2010, the last month of that year’s federal home buyer tax credit. This implies that the current housing market is performing nearly as well as the “stimulated” market of two years ago — except without the accompanying federal stimulus.

The housing market is standing on its own, in other words.

Second, the Pending Home Sales Index suggests that today’s housing market is among the strongest of the last decade. We can make this inference because the Pending Home Sales Index is a relative index, benchmarked to the value of “100” which represents the housing market as it behaved in 2001.

2001 was strong year in housing. With today’s Pending Home Sales Index remaining near 100, it tells us that 2012 is similarly strong.

And, third, the Pending Home Sales Index is relevant because it’s a forward-looking housing metric — one of the few that are regularly published. As compared to the Case-Shiller Index or Existing Home Sales report which both report on how housing fared in the past, the Pending Home Sales Index projects 30-60 days to the future.

Based on August data, therefore, we can expect for home sales volume to remain high as 2012 comes to a close.

If you’re currently shopping for a home, you’ve likely noticed a change in the market. Multiple-offer situations are more common and sellers are regaining negotiation leverage. The longer you wait to buy, therefore, the more you may pay for a home.

Read the complete Pending Home Sales Report on the NAR website.

27 09, 2012

New Home Supply Remains Firmly In “Seller’s Market” Territory

New Home Supply chart The market for new construction homes remains strong nationwide.

According to the U.S. Census Bureau, the number of new homes sold slipped 0.3 percent in August 2012 to a seasonally-adjusted, annualized 373,000 units sold — just 1,000 units less than July 2012 and the second-highest reading since April 2010.

April 2010 was the last month of that year’s tax credit which granted home buyers up to $8,000 off of their federal tax bill.

As compared to one year ago, sales of new homes are higher by 28%.

Furthermore, during the same time frame, the median sale price of a new home moved higher by 17 percent. The rising prices, in part, are the result of a shrinking national new home inventory.

When August ended, there were just 141,000 homes for sale nationwide — a 12% drop from the year prior. This suggests that home builders have stopped building without buyers; that some lessons were learned in last decade’s homebuilding frenzy.

At today’s pace of home sales, the entire stock of new homes nationwide would sell out in 4.5 months. As a comparison point, in January 2009, the new home supply reached 12.1 months.

With home supply below 6.0 months, analysts say, it signifies a “seller’s market” and home supplies have not been north of 6.0 months since October 2011. And, based on recent homebuilder confidence surveys, supply doesn’t appear headed back over 6.0 months anytime soon.

Builders nationwide report that prospective buyer foot traffic is at its highest point in 6 years. Low mortgage rates and affordable housing choices have held demand for new homes strong. Rising rents contribute, too.

For today’s home buyers of new construction, then, shrinking supply amid rising demand portends higher home prices into 2013 and beyond. If you’re a buyer of new construction, therefore, think about moving up your time frame.

The best deals left in housing may be the ones you grab while the calendar still reads 2012. By January, low prices may be gone, and low rates may be, too.

26 09, 2012

Home Price Index Shows Values Rising 3.7% From One Year Ago

Home Price Index from peak to present Tuesday, the Federal Home Finance Agency’s Home Price Index (HPI) showed home values rising 0.2% on a seasonally-adjusted basis between June and July 2012, and moving +3.7% on an annual basis.

Home values have not dropped month-to-month since January of this year — a span of 6 months.

For today’s home buyers and sellers , though, it’s important to recognize on what the HPI is actually reporting.

Or, stated differently, on what the HPI is not reporting. The Home Price Index is based on home price changes of some homes, of certain “types”, with specific mortgage financing only.

As such, it excludes a lot of home sales from its results which skews the final product. We don’t know if home values are really up 0.2% this month — we only know that’s true for the home that the HPI chooses to track.

As an example of how certain homes are excluded, because the HPI is published by the Federal Housing Finance Agency and because the FHFA gets its access to home price data from Fannie Mae and Freddie Mac, it’s upon data these two entities upon which the Home Price Index is built.

Home price data from the Federal Housing Administration (FHA), from local credit unions, and from all-cash sales, for example, are excluded from the HPI because the FHFA has no awareness that the transaction ever happened.

In 2006, this may not have been a big deal; the FHA insured just 4 percent of the housing market at the time. Today, however, the FHA is estimated to insure more than 20% of new home purchases. Furthermore, in August, more than 1 in 4 sales were made with cash.

None of these home sales were included in the HPI.

Furthermore, the Home Price Index excludes certain home types from its findings.

Home sales of condominiums, cooperatives, multi-unit homes and planned unit developments (PUD) are not used in the calculation of the HPI. In some cities, including Chicago and New York City, these property types represent a large percentage of the overall market. The HPI ignores them.

Like other home-value trackers, the Home Price Index can well highlight the housing market’s broader, national trends but for specific home price data about a specific home or a ZIP code, it’s better to talk with a real estate agent with local market knowledge.

Since peaking in April 2007, the Home Price Index is off 16.4 percent.

25 09, 2012

Existing Home Sales Leap To 2-Year High

Existing Home Sales By Price Tier, August 2012

The home resale market put forth another strong data set last week. Home sales prices are higher nationwide and sales volume has moved to a 2-year high.

According to the National Association of REALTORS®, 4.82 million “existing homes” sold on a seasonally-adjusted, annualized basis in August, representing a near 8 percent improvement from the month prior and a nine percent jump from August 2011.

An existing home is a home which has been previously occupied.

Home sales were unevenly split across price tiers, with more than half of all homes selling for less than $250,000. This suggests that the first-time home buyers and real estate investors continue to be active in today’s market as a foundation for growth is built.

According to the Existing Home Sales data :

First-time buyers accounted for 31% of all home sales
Real estate investors accounted for 18% of all home sales
Other, repeat buyers accounted for 51% of all home sales

Also noteworthy is that “distressed homes” accounted for the smallest percentage of overall home sales since the real estate trade group starting tracking such data.

In August, homes in various stages of foreclosures accounted for 12% of all sales and sold at an average discount of 19 percent below market value. Short sale homes accounted for 10% of all sales and sold at an average discount of 13 percent below market value.

Of all the data in the August Existing Home Sales report, though, perhaps most relevant to today’s buyers is the shrinking national housing supply.

At August’s end, there were 2.47 million homes listed for sale nationwide, a three percent increase from the month prior. However, because the pool of available home buyers is increasing more rapidly than the number of homes for sale, housing supplies fell 0.3 months to 6.1 months.

This means that at the current pace of sales, the entire housing supply would be sold by March 2013.

For today’s home buyers, home affordability appears poised to worsen. Mortgage rates and home prices remain low today, but market conditions like these rarely last long. Talk to your real estate agent about what options you have ahead of you. 2012 is coming to a close.

By 2013, the housing recovery may be fully underway.

24 09, 2012

What’s Ahead For Mortgage Rates This Week : September 24, 2012

Existing Home Sales Mortgage markets improved for the second consecutive week last week as demand for U.S. mortgage-backed bonds remained high. A series of economic reports showed strength in housing and a stability in jobs.

Wall Street looked past it, however, to send mortgage rates to their lowest levels in history.

One week into the Federal Reserve’s newest bond-buying program, the stimulus appears to be working.

According to Freddie Mac, the average 30-year fixed rate mortgage rate slipped to 3.49% last week for borrowers willing to pay an accompanying 0.6 discount points at the time of closing. Discount points are a one-time closing costs where 1 discount point is equal to one percent of your loan size.

3.49% marks a new all-time low for the 30-year fixed rate mortgage.

The 15-year fixed rate mortgage rate fell to a new all-time low last week, too, dropping to 2.77% with the same accompanying 0.6 discount points.

Mortgage rates fell despite strong housing data.

Housing Starts rose 5.5% to a 2-year high
Existing Home Sales rose 7.8% to a 2-year high
Building Permits rose 0.2%

Notably, according to the National Association of REALTORS®, the national existing home supply slipped to 6.1 months last month — very close to the 6.0-month marker which separates a “buyer’s market” from a “seller’s market”.

If supplies continue lower, home prices may rise more quickly than expected into 2013. Median home sale prices are already 9.5% higher as compared to one year ago.

This week, more housing data is set for release including the home value-tracking Case-Shiller Index and FHFA Home Price Index. Both are expected to show rising home prices as compared to the last recorded month, and one year ago. In addition, the National Association of REALTORS® releases its Pending Home Sales Index.

Lastly, and likely most important to mortgage rates and home affordability , the government releases its Personal Consumption Expenditures (PCE) report Friday. PCE is the Federal Reserve’s preferred inflation gauge. An unexpected increase is expected to move mortgage rates higher.

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