Archive for August, 2009

What’s Ahead For Mortgage Rates This Week : August 31, 2009

David Kosmecki | August 31, 2009 in Uncategorized | Comments (0)

Mortgage rates will react to the non-farm payrolls report Sept 4 2009Mortgage markets were flat last week overall, although mortgage rates were somewhat volatile from day-to-day.

For rate shoppers, the best pricing was available Monday morning and Friday afternoon — everything in between was slightly elevated.

It’s the second consecutive week in which rates finished unchanged.

There was a string of good news last week about the economy, led by housing. New Home Sales, Existing Home Sales, and the Case-Shiller Index all surprised to the high-side and consumer confidence numbers came in higher-than-expected, too.

In prior weeks, strong data like this would have caused mortgage rates to rise. Last week, however, it didn’t. Mostly because foreign demand for mortgage-backed bonds has remained strong.

This week, there’s only one major data release and its timing may prove to be problematic.

Friday, the Bureau of Labor Statistics releases the August Non-Farm Payrolls report. With housing’s rebound seemingly underway, the jobs report takes on added significance. Joblessness can undermine consumer confidence and spending and cause harm to the recovering U.S. economy.

This is one reason why rate shoppers should be cautious toward the end of the week — the jobs report will move markets. The other reason to be cautious is because Friday is the day before Labor Day and Wall Street will be short-staffed.

Fewer traders means more volatility — if rates start to pop, they’ll really pop.

The New Conforming Mortgage Guidelines, Effective September 1, 2009

David Kosmecki | August 28, 2009 in Uncategorized | Comments (0)

New mortgage guidelines due September 1 2009As a reminder, Fannie Mae is rolling out new lending guidelines Tuesday, September 1, 2009.

Starting next week, being approved for a home loan could be much more difficult.

The new rules mark the first major underwriting update since April of this year. The changes are mostly geared at fraud prevention.

Among the updates:

  1. Stock options are no longer eligible for “reserves”
  2. Relocating families can’t use the “trailing” spouse’s projected income
  3. “Tip” income must be documented and verified
  4. Lenders must call employers to verify employment
  5. Lenders must verify tax transcripts against IRS records

But there are other changes, too. As examples:

  1. Owners and buyers of 2-unit homes are subject to new minimum FICOs with larger downpayment and equity requirements.
  2. Only 70% of stock, bond and mutual values may be used as reserves
  3. Only 60% of retirement assets may be used as reserves

Consider this post to be your advance warning. Not everyone that qualifies for a mortgage on Monday, August 31 will qualify on Tuesday, September 1.

Therefore, if you have a pending need for a mortgage — for either a purchase or a refinance — it’s probably best to talk with a lender as soon as possible. The deadline is based on the date of application — not the date of closing.

Read the complete Fannie Mae announcement online.

Home Supplies Plummet, Putting Pressure On Home Prices To Rise

David Kosmecki | August 27, 2009 in Uncategorized | Comments (0)

New Homes supply July 2009It’s no wonder that builder confidence is soaring — their inventory of homes for sale is depleting at a furious pace.

For the 4th straight month, New Home Sales gained, posting the best numbers since last September’s meltdown and handily beating economist expectations.

The available supply of homes is down to 7.5 months nationwide.

It’s further evidence that the housing market may have bottomed at some point this past spring.

To be sure, the strong housing data is, in part, a reaction to three outside factors:

  1. Low mortgage rates
  2. An expiring government tax credit
  3. Hefty builder incentives

But, buyers are buyers and the clearing out of outstanding inventory provides terrific support for home prices. It also gives them reason to rise.

Coupled with the blowout Existing Home Sales numbers from July, therefore, this months’ New Homes Sale report may be a signal that the Buyers’ Market is ending and the Sellers’ Market is beginning.

If you’re planning to buy a home this year or next, it may be time to get a move on. Wait too long, and prices may be up.

Home Prices Keep Rising, Rising, Rising

David Kosmecki | August 26, 2009 in Uncategorized | Comments (0)

Case-Shiller June 2009

18 of 20 markets tracked by the Case-Shiller Index showed rising home values in June. It’s the 5th consecutive month with strong numbers and the best showing for the benchmark housing index since home values began deflating in 2006.

Some would argue it’s a sign that housing has finally bottomed out. Even Case-Shiller representatives acknowledge that home prices are “on an upswing”.

Despite the Case-Shiller Index’s popularity with economists and the press, though, it’s falls short of being a perfect housing indicator. As examples:

  1. Its data is reported with a 2-month lag
  2. Its sample set includes just 20 U.S. cities
  3. Real estate isn’t a “national” market — it’s local

Nevertheless, flaws aside, Case-Shiller is still important. It helps identify broader trends in housing and many people believe the housing is the keystone of the economy right now.

This is why June’s Case-Shiller Index gives cause for hope. The nascent housing recovery has a long road ahead but June’s Case-Shiller data shows that we’re heading in the right direction.

The Long-Term Trendline For Existing Home Sales Points To A Housing Recovery

David Kosmecki | August 25, 2009 in Uncategorized | Comments (0)

Existing Home Sales July 2009The housing market continues to surprise. Last week, the latest good news came in the form of the monthly Existing Home Sales report.

An “existing home” is a home sold by an existing owner as opposed to a developer. It’s non-new construction property.

The data on Existing Home Sales was noteworthy for its trends:

  1. Sales volume rose over four straight months for the first time in 5 years
  2. Sales volume rose year-to-year for the first time in 4 years
  3. Median home prices fell for the first time since April

Furthermore, first-time home buyers and buyers of “distressed” homes accounted for nearly one-third of the market activity each.

But, before we declare a bottom in housing, it’s important that we remember the First Rule of Real Estate — All Real Estate Is Local.

The Existing Home Sales report is not neighborhood-specific. It lumps cities like San Diego and Saint Paul into a giant sample set and fails to account for regional differences in real estate, let alone neighborhood ones.

This is the primary reason why on-the-ground real estate agents are better sources for a market pulse versus a report from a national trade group. The national group can’t know the happenings of every street and every home in a market.

That said, however, the national data isn’t completely useless.

Looking at the long-term patterns in the Existing Home Sales report, we can infer that ample supplies, low mortgage rates and tax credits are spurring home sales in a lot of U.S. markets.

Eventually, this will lead home prices higher.

What’s Ahead For Mortgage Rates This Week : August 24, 2009

David Kosmecki | August 24, 2009 in Uncategorized | Comments (0)

Mortgage rates are riding a roller coasterMortgage markets finished the week unchanged last week but don’t let that make you think the markets were flat. It was a bumpy five days and rates were volatile.

Friday was the worst day of the week by far.

An all-day deterioration, sparked by better-than-expected housing data, caused mortgage rates to tack on a quarter-percent by the noon hour and markets never recovered.

Rates closed out at their worst levels of the week and the unfavorable momentum figures to carry into this week’s trading, too.

There are two major reasons why rates could rise higher this week:

  1. Fed Chairman Bernanke said Friday that the near-term growth prospects “appear good”. Comments like this draw money from bond issues to the stock market — a move that’s bad for rates.
  2. Crude oil hit a 10-month high, a potentially inflationary development. Inflation often leads mortgage rates higher.

Furthermore, rate shoppers should take note that this week will feature the release of two key housing reports — the Case-Shiller Index (Tuesday) and the New Homes Sales report (Wednesday). Both have handily beat expectations in recent months and should that trend continues, mortgage rates would likely rise because of renewed economic optimism.

What’s good for the economy, lately, has tended to be bad for rates.

Whether you’re shopping for a new home or looking to refinance an existing one, be wary of the ever-changing mortgage market. Rates move quickly and without warning. However, they tend to rise faster than they fall.

If you know you will need a rate lock this week or next, consider locking in at the first sign of trouble. Once rates spike, they likely won’t be so quick to fall.

How To Keep Burglars From Knowing You’re On Vacation

David Kosmecki | August 21, 2009 in Uncategorized | Comments (0)

There’s some common sense ways to protect your home from burglary — keep the doors locked, the windows shut, and the alarm system on, for example.

But drawing from a series of interviews with ex-convicts, NBC’s The Today Show reveals there are ways by which a vacationing homeowner can unwittingly make his home a theft target. Awareness is the key to prevention.

As cited in the video, when vacationing:

  • Have neighbors pick up mail and newspapers daily
  • If it snows, have somebody drive tire tracks on your driveway
  • Don’t announce your vacation on social media networks
  • If you don’t have a safe, consider moving valuables to a child’s room

You can’t protect a home 100 percent from burglary, but you can at least make it “not the easiest target” on the street. Use your common sense, and follow the steps outlined in the video.

It’s what the burglars don’t want you to know.

To Use The $8,000 First-Time Home Buyer Tax Credit Program, There’s Now Just 6 Weeks To Find A Home

David Kosmecki | August 20, 2009 in Uncategorized | Comments (0)

8000 First Time Homebuyer Tax CreditIf you plan to use the First-Time Home Buyer Tax Credit program, time is running out. The program expires November 30, 2009 and closing on a home can take up to 60 days.

That leaves you 6 weeks from today to find a home and go under contract.

The First-Time Homebuyer Tax Credit program was passed as part of the 2009 economic stimulus plan. It credits up to $8,000 in tax payments to qualified buyers.

The qualification criteria are as follows:

  • Buyer may not have owned a “main home” in the past 36 months
  • The home may not be purchased from a parent, spouse, or child
  • Adjusted gross income for the household must be below $95,000 for single tax filers and $170,000 for joint tax filers

Furthermore, not everyone who’s qualified will get the full $8,000. The credit can’t exceed 10 percent of a home’s purchase price, for example, and households with income approaching program limits get lesser benefits, too.

Meanwhile, an interesting note about the First-Time Home Buyer Tax Credit is that it’s a true tax credit and not a deduction. &nbsp. A person or couple claiming the $8,000 credit whose “normal” tax
liability is $5,000 would get back $5,000 or whatever had been withheld for
federal income taxes plus an additional $3,000 from the US Treasury when
their tax return is processed by the IRS.

Review the program’s criteria at your leisure, but don’t wait until October to start looking for homes. If you can’t close by November 30, 2009 for any reason whatsoever, you won’t qualify for the tax credit.

Better to be ahead of the deadline than chasing it.

If Builders Are Building, It’s Got To Be A Good Sign

David Kosmecki | August 19, 2009 in Uncategorized | Comments (0)

Housing Starts July 2007-2009

Single-family Housing Starts rose for the 4th straight month in July, another sign that the battered housing market may be making its comeback.

“Housing starts” are new homes on which construction has recently started.

Not surprising, in a related story, homebuilder confidence moved to a 12-month high.

Ironically, an increase in newly-built homes could actually slow a nationwide housing rebound because values are driven by supply and demand. More in-the-pipeline supply means that buyer demand has to stay strong or else prices will eventually fall.

So far this year, though, demand has kept pace.

Over the past 6 months, the combination of low mortgage rates, aggressive home valuations, and federal and state tax credits has kept buyer activity up and home values on the rise.

Is Mortgage Underwriting Getting More Friendly?

David Kosmecki | August 18, 2009 in Uncategorized | Comments (0)

Federal Reserve Senior Lending Survey Q3 2009It looks like banks are less scared of mortgage loans these days.

In its quarterly survey to member banks, the Federal Reserve asked senior bank loan officers whether “prime” residential mortgage guidelines had tightened in the last 3 months.

Just one-fifth of banks said guidelines tightened last quarter, a dramatically lower figure versus last quarter — a signal that mortgage underwriting may get less restrictive in the months ahead.

It is worth noting, however, that not a single responding bank said its guidelines had eased. For now, getting through underwriting is still much tougher than it was 2 years ago.

Some of the changes today’s borrowers face include:

  • Higher minimum FICOs
  • Larger required downpayments and equity ownership
  • Higher income levels versus monthly debts
  • Larger reserve requirements

Furthermore, second mortgages are scarce when loan-to-values exceed 80 percent.

The underwriting changes of the last 24 months preclude many Americans from getting access to today’s low rates if the Fed’s reported trend continues, that could reverse before the end of the year.

Some analysts claim that credit tightening started the U.S. recession. Credit loosening, therefore, could help end it.