Archive for March, 2010

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Case-Shiller Shows Home Price Improvement In A Majority Of Cities Nationwide

Wednesday, March 31st, 2010

Case-Shiller Monthly Change Dec 2009 - Jan 2010

Standard & Poors released its Case-Shiller Index Wednesday. The report shows that, on a seasonally-adjusted basis, between December and January, home prices rose in more than half of the index’s tracked markets.

The strength of this month’s Case-Shiller report, however, should be put in context.

For one, the report is on a 2-month delay; it’s showing data from January, before the start of the Spring Buying Season and before the rush to beat the tax credit. Anecdotally, buyer interest has been strong since, leading to the types of multiple offer situations that drive home prices northward.

In other words, home values may be even higher than what’s reflected in the January Case-Shiller data above.

Furthermore, the Case-Shiller Index measures home values in just 20 cities nationwide and they’re not even the 20 biggest cities. Houston, Philadelphia, San Antonio and San Jose are specifically excluded from the report and each ranks among the country’s 10 most populous areas. I don’t get it either, so don’t ask.

Despite its flaws, though, the Case-Shiller Index remains important. Much like the government’s Home Price Index, the private-sector report helps to finger broad housing trends and housing is still considered a keystone in the U.S. economic recovery – even if it’s two months behind.

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Posted in Case-Shiller Index, Home Values | No Comments »

Get Your FHA Mortgage Application Started — Fees Increase 1/2 Percent Starting Monday, April 5, 2010

Tuesday, March 30th, 2010

FHA closing costs increase by 1/2 percent April 5 2010Starting Monday, April 5, 2010, getting an FHA mortgage in Houston and nationwide will be more expensive for borrowers.

In new guidelines set forth earlier this year, the FHA announced plans to raise additional revenue and reduce the overall risk of its mortgage portfolio.

The changes include the following:

  1. Increase Upfront Mortgage Insurance Premiums from 1.75% to 2.25% for everyone
  2. A plan to reduce seller concessions from 6 percent to 3 percent
  3. An increase in minimum downpayment for FICOs 580 or lower

For your own loan, to avoid being subject to higher loan costs, make sure to have your FHA Case Number assigned prior to Monday, April 5, 2010.  That means you’ll want to give a full mortgage application before the weekend so your lender can register your loan in time for the deadline.

But don’t leave your application to the last minute.

Friday is Good Friday so most banks will be closed. Your true FHA deadline, therefore, is Thursday April 1.

Also worth noting is that the FHA isn’t done with its changes.

In its policy statement, the group also announced its plans to petition Congress to raise monthly mortgage insurance premiums.  The FHA’s formal request, in summary:

  1. Raise monthly premiums by roughly 0.30%, or $25 per $100,000 borrowed per month
  2. Lower upfront mortgage insurance premiums by 1.25%, or $1,250 per $100,000 borrowed at closing

For now, the request is neither approved nor acknowledged by Congress. It’s merely a request. And in the event that Congress does approves it, the FHA reserves the right to change its projections.  Either way, it means higher costs for consumers.

The best plan, therefore, is to get your FHA mortgage into underwriting ahead of the switches because borrowing money will be harder, and more costly.

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Posted in FHA Guidelines, FHA Mortgages | No Comments »

What's Ahead For Mortgage Rates This Week : March 29, 2010

Monday, March 29th, 2010

Non-Farm Payrolls Mar 2008-Feb 2010Mortgage markets tanked last week, raising rates in Texas to their highest levels in a month.

Most of the losses occurred Wednesday in what was the worst 1-day mortgage market performance in over than 6 months. Even Friday’s rally could barely dent the losses. Most of the movement was tied to geopolitical concerns and worries of a ballooning federal debt load.

The best time to lock a conventional or FHA mortgage rate last week was Tuesday morning, but many were still chasing that 4% which waived bye-bye a long time ago. Timing is crucial these days.

This week, markets should remain volatile. There’s a large set of economic data due for release, plus trading volume will thin as the week goes on because markets are closed Friday for Good Friday.

Coincidentally, Friday is also the day that the March jobs report is released.

The non-farm payroll report is expected to show net job growth of 187,000 in March. This is a large number as compared to last month’s net loss of 36,000 job. However, analysts are already dismissing March’s numbers as skewed by both the bad storms of February, and the temporary hiring of Census workers.

In most months, major job growth would be bad for mortgage rates.  This month, that won’t be the case. It will take a figure north of 200,000 to cause rates to rise and the higher the actual number, the more that rates will respond.

Also this week, on Wednesday, the Federal Reserve’s $1.25 trillion program to support mortgage markets sunsets. Fed insiders estimate that the program dropped rates 1 percent since its inception in 2008, so it’s reasonable to expect that mortgage rates will rise after its end.

For all “rate-gamblers” out there, listen to me when I tell you that it’s time to cash in.

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Posted in Mortgage Backed Securities, Mortgage Rates, Weekly Review | No Comments »

Home Price Index Shows Home Values Lower Broadly, But Not Specifically

Friday, March 26th, 2010

Home Price Index April 2007 to January 2010

Home values fell again in January, according to the Federal Home Finance Agency’s Home Price Index and home values were reported down 0.6 percent, on average.

I say “on average” because the Home Price Index is a national report and it really doesn’t capture the essence of a local market , or even a city market like Dallas.

The most specific that the monthly Home Price Index (HPI) gets is regional and January’s report shows that:

  • Values in the Mountain states rose 2.0%
  • Values in the Pacific states were flat
  • Values in the East North Central states fell 1.8%

It’s hardly helpful for home buyers entering the market, or home sellers trying to properly price a home to sell to look at this report and judge home values based on what it pops out.  To give you an even better idea of it’s accuracy, it’s on a 2-month delay, so all its data fails to reflect the current market conditions…especially in your neck of the woods.

Versus January — the period from which HPI data is collected — mortgage rates are lower, buyer activity is up, and the federal home buyer tax credit is closer to expiring.  These each can have an impact on its report.

Ultimately, national real estate data like the Home Price Index is best suited for lenders and policy-makers, and not the individual like you and me.  National data helps to identify trends that shape formal policy, but it doesn’t help you, specifically.

Since peaking in April 2007, the Home Price Index is off 13.2 percent, so remember that if you’re buying a new home or thinking of selling yours. Get with an experienced local real estate professional because they are always your best bet in terms of figuring this stuff out.

Also, here’s the FHFA’s website in case you’d like to check it out.

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Posted in Home Price Index, Home Values | No Comments »

The Average Household Will Get $2,800 In Tax Refunds. Will You?

Thursday, March 25th, 2010

April 15 is Tax Day and the IRS estimates that the average U.S. household will receive a $2,800 tax refund this year.  If you’re among the Americans expecting a refund, this 4-minute piece from NBC’s The Today Show may be helpful. It’s a talk about how to receive a refund and what to do with it.

Some of the key points discussed include:

  1. Why state-issued tax refunds may be delayed this year
  2. How wage-earning people can claim their “Making Work Pay” tax credit of up to $800
  3. How to direct a tax refund to a 529 college savings plan for an even bigger tax refund

There’s also some sensible pointers on using tax refunds to pay down credit card debt, and to fund retirement plans, among other purposes.

If you haven’t started your tax planning yet, try to avoid leaving it for the last weekend.  Not only will your tax preparer have more time for you now, but you’ll leave yourself more time to track down important statements and receipts that can boost your federal and state tax deductions.

Taxes are due in 21 days, so get going!

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Posted in Household Finances | No Comments »

Existing Home Sales Flatten And Point To A Much Better Spring

Wednesday, March 24th, 2010

Existing Home Sales Feb 2008-Feb 2010As expected, Existing Home Sales fell in February, slipping 30,000 units versus January’s numbers. It’s the 4th straight month in which Existing Home Sales were lower, month-over-month.

In case you didn’t know, an “existing” home is one that is previously owned and lived-in (i.e. not new construction).

In November 2009, Existing Home Sales peaked just as the First-Time Home Buyer Tax Credit was set to expire. Right after, according to the National Association of Realtors®, monthly sales plunged 17 percent in December, then another 7 percent in January.

Comparatively, February’s dip is a modest 0.6 percent and is more in line with the pre-tax-credit Existing Home Sales trend.  The real estate market is rediscovering its normal.

But “normal” may not last for long – and that’s a good thing.

When the federal home buyer’s tax program was extended last year, the new rules stated that home buyers must be under contract for their new, respective homes on, or before, April 30, 2010 in order to claim up to $8,000 in federal money.  That deadline is approaching and many markets — Houston included — are experiencing a surge in buyer traffic as April 30 nears.

The Existing Home Sales data doesn’t reflect this new demand, nor the number of new contracts written. It only accounts for home closings and, in February, closings were down.

For today’s buyers, the market looks favorable. The federal tax credit is in place, mortgage rates stubbornly stick near all-time lows, and home prices are staying in check which are giving people great opportunities to buy.

In my opinion, Existing Home Sales should go up through March and April, pressuring home prices higher, so you should consider acting sooner than later.

By the time the press reports the gains, the best deals in the city may already be gone.

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The Best And Worst Real Estate Markets For 2010

Tuesday, March 23rd, 2010

Real estate is localCNNMoney.com recently published its 2010 forecast and projections for home prices in the country’s largest metro markets.

Listed as “Top 25″ and also comprehensively by state, CNNMoney.com’s home price forecasts puts Santa Rosa, California at the top of 2010′s home appreciation list and Hanford, California at its bottom.

The 10 cities projected for highest home appreciation in 2010 are:

  1. Santa Rosa, CA : +6.0%
  2. Cheyenne, WY : +4.7%
  3. Kennewick, WA : +4.6%
  4. Merced, CA : +4.4%
  5. Bremerton, WA : +4.2%
  6. Fairbanks, AK : +4.2%
  7. Corvallis, OR : +4.1%
  8. Tacoma, WA : +3.9%
  9. Anchorage, AK : +3.8%
  10. Bend, OR : +3.3%

The Pacific Northwest is the region most heavily-represented among price gainers. The Southeast and Middle Atlantic are most represented on the under-perform list.

However, just because a city’s homes are expected to appreciate (or depreciate) in 2010, that doesn’t mean that every home within its limits will follow suit.

Real estate cannot be grouped on a city level like CNNMoney.com tries to.

There will always be areas in demand within city limits in which prices rise, just as there will be out-of-demand areas in which prices fall. Real estate data can’t be grouped by city or even by ZIP code, really.

Real estate in Texas is more local than that.

When I say “real estate is local”,  it means that every street in every town has a distinct set of traits that drives its home values. Homes that are one block closer to the train; or, homes that are facing north; or, homes that are made of brick. Each of these characteristics can affect a home’s desirability which, in turn, can affects its sales price.

National surveys can’t capture “essence” like this. They only report on the aggregate.

For local real estate data, look to established, publicly available websites and to active, local real estate agents.  Both will have data and insight that can help you.  National surveys often make for good headlines, but do little to help home-buyers find good value.

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The Deal on Mortgage Rates This Week | March 22, 2010

Monday, March 22nd, 2010

Fed Funds Rate (Feb 2007 - March 2010)Last week mortgage markets closed unchanged (meaning no increase or decrease in rates), but that’s not to say mortgage rates were calm. Monday through Wednesday, rates improved steadily before a swift, late-week sell-off flushed all the gains down the toilet.

Mortgage rates have been very low for a very long time, against the expectations of most market experts, and consumer’s “comfort level” with these rates are at an all time high.

Ask Uncle Jimmy what he paid on his mortgage back in ’85 – I bet it’s not in the single digits.

The quick reversal that took place on Thursday-Friday is signaling that the markets are preparing for change.

One key story from last week was the Federal Open Market Committee’s scheduled Tuesday meeting. Upon adjournment, the Fed voted 9-1 to hold the Fed Funds rate in its current target range near 0.000% and reiterated its plan to keep rates low for “an extended period of time”.

Kansas Fed President Thomas Hoenig was the lone dissenting vote. (Boo to you Tommy Boy)

For rate shoppers in Texas , take note.

The Fed specifically mentioned that the its $1.25 trillion mortgage buyback program will end, as planned, March 31, 2010 (ya, this is in 9 days).  This could force rates higher over the next two weeks because, according to the Fed, the existence of a buyback program forced rates lower by 1 percentage point in 2009 and it’s expected that the markets will give back some of that 1 percent, leading to higher mortgage rates for conventional and FHA borrowers.

This week, in addition to the buyback program’s looming end-date, there’s several other potential influences on mortgage rates:

  1. The Existing Home Sales data for February is released Tuesday, along with the Home Price Index
  2. The New Home Sales data for February is released Wednesday
  3. Consumer Confidence data hits Friday

Strength in any — or all three — of these reports should put pressure on mortgage rates to rise.

But there’s one wildcard this week and that’s the aforementioned Kansas Fed President Hoenig’s scheduled speech Wednesday morning. Typically, Fed members stay on message when making public appearances, but Hoenig is expected to talk about why rates should be higher, and what the Fed needs to do to prepare the economy for late-2010 and beyond.

His words could lead Wall Street to rethink its position on the mortgage bond market and that could cause rates to spike Wednesday afternoon. Either way, have an itchy trigger finger this week if you’re looking to enter into a sales contract or are looking to refinance.

Mortgage rates remain volatile and are still relatively low. If you’re unsure of whether now is a good time to lock in, consider that there’s a lot more room for rates to rise than to fall right now – especially with momentum shifting for the worse.

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Posted in Mortgage Rate Prediction, Mortgage Rates, Weekly Review | No Comments »

Where are Mortgage Rates Headed? Watch For Inflation

Friday, March 19th, 2010

Inflation is bad for mortgage ratesThese days, homes are more affordable than ever as the housing market emerges from a slow winter season and mortgage rates are still near 5 percent.

Soft housing and low rates are an excellent combination for home buyers but whereas home values rise with a gradual pace, mortgage rates can change in an instant.  It’s something worth watching, and also, something you need to hire a professional mortgage consultant to keep an eye out on as well.

Remember that each 0.25% increase to conventional or FHA rates adds approximately $16 per month for each $100,000 borrowed. Nothing to sneeze at, but something to be aware of.

If you’re trying to gauge whether rates will be rising or falling, I’m sorry to say, but there isn’t just one factor to look at.

One keyword to listen for is “inflation”, though. Mortgage rates are highly responsive to inflation, and this topic can swing your mortgage rate in the blink of an eye.

By definition, inflation is when a currency loses its value; when what used to cost $2.00 now costs $2.15. As consumers, we perceive inflation as goods becoming more expensive.  However, it’s not that goods are more expensive, per se – it’s that the dollars used to buy them are worth less.

This is a big deal to mortgage rates because mortgage bonds are denominated, bought, and sold in U.S. dollars.  As the dollar loses value to inflation, therefore, so does the value of every mortgage bond in existence. When bonds lose their value, investors don’t want them and bond prices fall and that causes Mortgage rates to go one way – UP!

Bond Prices down, rates up – very simple.

In today’s market, the relationship between inflation and mortgage rates is helping home buyers. The Cost of Living made its smallest annual gain in 6 years last month and the Fed has repeatedly said that inflation will stay low for some time. This combination is driving investors to buy mortgage bonds which, in turn, is suppressing rates and keeping them lower for the time being.

Please remember that this is not going to last forever, and you REALLY need to cash in while you can – the timing to buy a home in Texas may be as good as it gets, so try to get with a great Realtor and your Texas loan officer to get started.

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Single-Family Housing Starts Hold Steady For Last 8 Months

Thursday, March 18th, 2010

Housing Starts Mar 2008-Feb 2010Single-family Housing Starts idled last month, dropping just 3,000 units from the month prior, or 0.2%.

According to the Commerce Department’s report, February marked the 8th straight month in which Housing Starts straddled the half-million marker, dating back to June 2009.

This is a different slant on the Housing Starts story as told by the press.

Most publications are reporting that Housing Starts fell 5.9 percent in February. Technically, this is true.  Housing Starts did fall 5.9 percent last month, however, the Housing Starts data is made up of three parts:

  1. Single-Family Housing Starts
  2. 2-4 Unit Housing Starts
  3. “Apartment Building” Housing Starts (i.e. 5 or more units)

The press tends to lump all 3 together but that’s not relevant for everyday homeowners and buyers.

2-4 unit homes, and apartments and condos are a different housing class as compared to single-family homes and are notoriously volatile, too.  Single-family starts are more steady and better reflect the country’s housing stock.

Single-family housing starts are up 32 percent over the last 12 months.

Meanwhile, the pace of new buyers has not kept up with the pace of new housing stock. Therefore, because home prices are based on supply-and-demand, the price for a newly-built home was down, on average, 7 percent nationwide in January.

You’d think this is impossible with all the incentives out there (rates, tax credit, prices). Every client that I come across can’t get into a house FAST ENOUGH and every home has multiple offers on it.

With the federal home buyer tax credit expiring soon, home buyers in San Antonio will likely create new demand for homes. And with Housing Starts holding steady near 500,000, that should push prices higher through the spring months which is GREAT for folks selling their home.

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Posted in Housing Starts | No Comments »

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