Archive for April, 2010

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Housing Starts Data Hints That Housing Will Expand Even After The Tax Credit Expires

Tuesday, April 20th, 2010

Housing Starts Apr 2008-Mar 2010After a strong March showing and a surprise upward-revision for February, Housing Starts are, once again, trending better.

It’s yet another signal that the housing market in Texas and nationwide is stabilized.

A Housing Start is a new home on which construction has started and, over the last 6 months, home builders are averaging one half-million starts per month.

This marks the highest 6-month average since 2008 and a reading one-fifth percent better from 12 months ago.  Revisions to prior data have all been higher, too.

Even more interesting, though, is that the number of newly-issued building permits is exploding. Permits were up more than 5 percent last month and have climbed back to the levels of late-2008.

Housing permits are an important data point in housing because permits are precursors to actual housing starts.  According to the Census Bureau, 82% of homes start construction within 60 days of permit-issuance.

Therefore, because March’s housing permits increased, we should expect Housing Starts to continue to rise into the early months of summer.

This, too, reflects well on housing because the federal home buyer tax credit won’t be in existence this summer. The simple fact the homes are being built now shows that housing is likely to expand even after the tax credit expires.

Non-military members must be under contract by April 30, 2010 and closed by June 30, 2010 in order to claim up to $8,000 in federal tax credits.

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What's Ahead For Mortgage Rates This Week : April 19, 2010

Monday, April 19th, 2010

Existing Home Sales Feb 2008-Feb 2010Mortgage markets improved last week for the second week in a row.  And, also for the second week in a row, rates were down on “safe haven” buying — just not for the same safe haven reasons as before.

If you’ll remember, safe haven buying is when investors sense market risk, then move money toward less risky investments.

Well, because the U.S. government backs the bonds of Fannie Mae and Freddie Mac, mortgage bonds tend to fit the “less risky” description and as Iceland’s volcanoes shut down air traffic in Europe, mortgage bonds benefited.

That was early in the week.

Then, on Friday, when the SEC announced fraud charges against Goldman Sachs, a second wave of bond buying began as Wall Street fled the stock market. Mortgage rates fell a second time and the improvement carried through the market’s weekly close.

Conforming and FHA rates are as low as they’ve been since March.

This week, there’s not much data due until Thursday, but even Thursday’s releases won’t make a huge impact on rates.

  1. Initial Jobless Claims : Important vis-a-vis broader employment figures. A strong number could push rates up.
  2. Existing Home Sales : Housing remains a key part of the economy. Strong sales are expected because of the tax credit.
  3. Producer Price Index : A “Cost of Living” index of business. A weak reading is expected because inflation is low.

Then, Friday, New Home Sales is released.

The bigger risk to Austin home buyers this week than data is the reversal of the safe haven buying patterns that have kept mortgage rates down over the past 10 days.  Keep an eye on the markets and your loan officer on speed dial.  Markets can — and do — change quickly.

You’ll want to time your lock accordingly.

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The Mortgage Rate Prediction For The Next 7 Days (April 15, 2010)

Friday, April 16th, 2010

Scratching your head on where rates are headed? Let me help.

Every week, I participate in Bankrate.com’s Mortgage Rate survey and this week’s results may help you time a rate lock and save some money.

Conventional and Conforming Mortgage Rates Only

The Bankrate.com survey is for conventional, conforming mortgages only. It does not apply to FHA mortgages, VA mortgages, USDA mortgages and it’s not specific to Texas mortgage rates only. In addition, unique property types such as non-warrantable condos and condotels may be excluded, so keep that in mind.

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The Predictions

Here’s what the group is predicting:

  • 39% predict mortgage rates will increase
  • 22% predict mortgage rates will decrease
  • 39% predict mortgage rates will remain unchanged

I expect mortgage rates to increase.

My advice not be appropriate for your specific situation and I’m not always right. Ultimately, you may find your time better spent by eating a Philly Cheese Steak and watching Gilligan’s Island re-runs.

Either way, here’s what I told Bankrate.com:

“With lots of market-moving reports on tap the remainder of this week, mortgage rates will see a spike as last week’s gains are now diminishing.”

Ever since the Fed exit on March 31, rates have been extremely volatile, and while rates are still low, there is definitely a lot more room for them to get worse than improve.

Floating vs. Locking – What’s Your Strategy?

The economy is starting to rebound and the Fed has already been talking about increasing the Fed Funds Rate. With this type of talk on the horizon, mortgage bonds are seeing some major swings. Key levels of resistance are pushing mortgage-backed securities back down in tight ranges, and when this happens, usually we see a spike in rates.

If you are looking to purchase or refinance your home, get with a great lender and start on a loan application. This way you’ll be ready to lock in a great rate when ready, willing, and able.

Remember, the longer you sit on the fence, the more it may cost you.

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Is it Worth Looking At Adjustable Rate Mortgages?

Friday, April 16th, 2010

Comparing the 30-year fixed to the 5-year ARM Apr 2009-Apr 2010

Each week, government-led Freddie Mac publishes a weekly mortgage rate survey based on data from 125 banks across the country.  According to this week’s results, the relative rate of a 5-year ARM in Texas is extremely low versus its 30-year fixed-rate cousin.

Consider this comparison:

  • In April 2009, the two products ran neck-and-neck with respect to rates
  • In April 2010, the two products are split by 0.99 percent

On a $200,000 home loan, that’s a difference of $117 per month to a mortgage payment.

Adjustable-rate mortgages aren’t suitable for everyone, but they can be a terrific fit given your individual circumstance.  For example, any one of the following scenarios could warrant a 5-year ARM:

  1. Buying a home with an intent to sell within 5 years
  2. Currently financed with a 30-year fixed mortgage with plans to sell within 5 years
  3. Interested in low payments and comfortable with longer-term interest rate and payment uncertainty

Additionally, homeowners with existing ARMs may want to refinance into a brand-new ARM, if only to extend the initial change date on the current note.

Before opting an ARM or a fixed, speak with your loan officer about how adjustable-rate mortgages work, and what longer-term risks may exist.  The savings may be tempting, but there’s more to consider than just the payment.

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How To Buy Bank-Owned Homes In A Period Of Rising Inventory

Thursday, April 15th, 2010

Foreclosures concentrate on 4 statesForeclosure filings rose close to 20 percent nationwide last month versus February, according to foreclosure-tracking firm RealtyTrac.com, and for the 13th straight month, total filings topped 300,000.

In addition to that wacky number, bank repossessions reached an all-time, quarterly record as well. Through the first three months of 2010, banks reclaimed more than 257,000 homes.

Nonetheless, 4 states dominated foreclosure activity nationwide.

California, Florida, Arizona and Georgia accounted for more than half of all bank repossessions AND together, the 4 states represent just 23 percent of the overall U.S. population. Talk about an un-even distribution.

The RealtyTrac report revealed some other interesting statistics, too.

  • Foreclosure activity was up in 40 out of 50 states last month
  • Bank repossessions rose 9 percent versus the same quarter last year
  • For the 13th straight quarter, Nevada topped the state foreclosure rate

Regardless of where you’re buying, foreclosures and REO’s are making a huge impact on the resale market right now.

About 1 in every 3 homes are  distressed.

There’s excellent value in foreclosures out there if you know where to look, but keep these points in mind:

  1. Buying bank-owned homes can take 120 days to close or more. Be flexible.
  2. Foreclosures aren’t always listed for sale publicly. Some inventory is privately-held.
  3. Bank-owned homes are often sold “as is”. There may be defects that render the homes mortgage-ineligible. Get with a loan officer than understands the FHA 203(k) loan.

The REO market can be different from the traditional “existing home” market so if you’re interested in buying an REO, be sure to talk with an experienced real estate agent first, and then get with a great loan officer to find out your options.

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Why You Shouldn't Schedule Your Closing For May 28, 2010

Wednesday, April 14th, 2010

3-day weekends can make closings toughThe federal home buyer tax credit expires April 30 and the deadline is sparking a home sale surge. It figures to burden real estate, mortgage and title offices nationwide over the next 60 days so plan your closing date accordingly.

Especially because the last Friday in May is the Friday before Memorial Day.

Now, if the connection between the tax credit and Memorial Day is not immediately clear, think of your own office on a 3-day weekend’s Friday. Some of your colleagues take a half-day at work, others take the entire day off.

Office-wide, productivity drops.

The same is true in the real estate space. Offices are short-handed ahead of a holiday so, if you’re under contract for a home and plan to close in May, consider a closing date other than Friday May 28, 2010.

And meanwhile, with 6 weeks until Memorial Day, here’s some steps you can take today prepare for other people’s time off later.

  1. Notify your lender of your planned vacation time between now and your scheduled closing
  2. Purchase a homeowners insurance policy and prepay the first year. Send proof of payment to your lender.
  3. Have Power of Attorney forms lender-approved and signed by all parties in advance, if applicable
  4. Deposit gift monies and/or retirement fund withdrawals into an acceptable bank account, if applicable
  5. Schedule your final walk-through as far in advance as is realistic so there’s time to make “fixes”, if needed
  6. Have your closing funds ready at least 1 day in advance

The tax credit’s expiration is around the corner and as it gets closer, real estate-related businesses are taking on more work. Basic title and mortgage tasks are taking longer to complete and that should persist for a while.

Get ahead of the curve and beat your contract dates handily. Use the checklist above and be responsive to your lender’s requests.

And, if at all possible, avoid closing on the Friday before Memorial Day and even the Tuesday after — it’s when office staffs are at their smallest.

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Home Renovations That Increase Your Resale Value (2010 Edition)

Tuesday, April 13th, 2010

Not all home improvement projects are created equalNot all home improvements are created equal. Especially if you’re looking for “resale value” back from your work.

An article from the Wall Street Journal lays it out cleanly. Function beats flash these days so be wary of where you spend.

Environmental upgrades such as home insulation and energy-efficient steel entry doors are recovering a much greater percentage of their cost these days than major remodels including kitchens or bathrooms.  This is especially true for homes that are already “over-improved” relative to the neighborhood.

Upgrading the biggest and best homes on the block can be a losing proposition.

The article’s findings include data from groups such as the National Association of Home Builders, Remodeling Magazine, and Consumer Reports.  It lists the following home improvements among its top “paybacks”:

  • Steel entry door replacement : 129% cost recovery
  • Wood deck addition : 81% cost recovery
  • Vinyl-replacement window : 77% cost recovery

Energy-efficiency projects also recoup costs monthly in the form of lower heating and cooling bills.

Remodeling Magazine says a larger number of homeowners will remodel their homes in 2010 with less emphasis on upgrading kitchens and bathrooms, and more emphasis on adding new rooms.  From an appraisal perspective, this is a terrific way to increase your home’s value — especially if your home’s bed/bath count lags your neighbors.

Before starting a home improvement project, regardless of whether your goal is increase resale value, talk with a real estate agent about other homes in the area and how they’re built. At worst, you’ll gather some ideas you can work into your plan. At best, you’ll keep yourself from over-improving.

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What's Ahead For Mortgage Rates This Week : April 12, 2010

Monday, April 12th, 2010

Greece default concerns are lowering mortgage ratesMortgage markets improved last week, but not enough to move 30 year or 15 year fixed rates too much.

Against a sparse economic calendar, Wall Street turned its attention to geopolitics in Greece and the Eurozone.  It didn’t like what it saw. Safe haven buying buoyed mortgage bond markets last week as pricing recaptured two-thirds of its monumental losses from the week prior.

Despite last week’s surge, however, conforming and FHA mortgage rates remain near their worst levels of the year and appear poised to increase throughout the summer months.

The U.S. economy is improving. From last week:

Furthermore, continuing jobless claims were down again.

Good news for the economy is generally bad news for mortgage rates. Last week, that wasn’t the case because of Wall Street’s want for “safe” assets right now.  This includes mortgage bonds and is helping to keep consumer rates low. When the safe haven buying eases, rates should climb.

Meanwhile, this week, the calendar is back-heavy.

There’s no real data until Wednesday’s Consumer Price Index, and then there’s a flurry of new releases through Friday’s market close including Retail Sales, Consumer Confidence and Housing Starts.

Strength in these issues should push mortgage rates back up.

If you’re floating or shopping a loan right now, be wary of market volatility. Rates have been jumpy since April 1 and mortgage rates are changing quickly. This week, locking in before Wednesday may be your safest, near-term rate locking strategy.

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It's Time To Re-Approve Your Pre-Approval

Friday, April 9th, 2010

Get re-approved for your mortgageAs the federal home buyer tax credit nears its April 30 end-date, there’s a lot of would-be home buyers in Texas still working to get under contract.

A piece of advice for all of you: If your pre-qualification and/or pre-approval letter is more than 8 weeks old, it would probably be a good idea to have your lender “re-pre-approve” you.  Mortgage guidelines have been in flux and your original lender letter may now be invalid.

For example, over the past half-dozen months, the majority of mortgage lenders have reduced their risk tolerance with respect to:

  • Maximum debt-to-income ratios
  • Minimum allowable credit scores
  • Calculation of “assets in reserve”

For buyers of condominiums and co-ops, even the subject property itself is coming under tougher scrutiny.

Today’s mortgage applicants need to be a complete package. It takes more than just good income and credit to get approved anymore and today’s buyers should revisit their qualifications. What passed underwriting in January may not pass in May, so get on the ball!

Being pro-active brings other advantages, too. If a mortgage re-pre-approval does unearth an issue, it’ll be easier for every party to the transaction to address and correct it up-front versus trying to clean up a mess once a home’s already under contract.

Talk to your real estate agent and your loan officer (me!) about your pre-qualification/pre-approval letter before you bid on a home. This will make life SO much easier!

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Don't Leave Tax Credits On The Table (And How To Get Them Back If You Already Filed)

Thursday, April 8th, 2010

Taxes are due April 15 and if you’re among the millions of Americans who wait until the last week to file, here’s a video interview that could help you reduce your federal tax liability.

Originally broadcast by NBC’s The Today Show, the 4-minute piece reviews various tax credits and deductions, plus some recent tax law changes.  A few of the topics covered include:

  • Tax filers receiving larger “personal exemptions” in 2009 versus 2008
  • Unemployment income recipients being required pay taxes beyond the first $2,400 received
  • The “first time” home buyer credit being extended to non-first time home buyers for up to $6,500

The interview also talks about how taking a parent, child or other family member into your home may change your tax filing status and reduce your tax liability.

Even if you’ve filed your taxes already, watch the video above. You may find that you missed a potential deduction. If that’s the case, consider filing an amended return with the IRS to recapture the credits you left on the table.  Most times, the benefits of re-filing will outweigh the costs of doing it.

Be sure to talk with your tax professional for personal tax advice.

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