Archive for December, 2009

Home Prices On The Rise, Says The October Home Price Index Report

David Kosmecki | December 30, 2009 in Home Values | Comments (0)


Home Price Index April 2007 to October 2009

More positive signals from housing — home values are still on the rise.

According to the Federal Housing Finance Agency, after posting its first quarterly increase since 2007 this past September, the Home Price Index rose by another 0.6 percent in October.

Prices are up in 4 of the last six months.

But before we take the stats to the proverbial bank, it’s important that we recognize the Home Price Index for its shortcomings.

  1. HPI only accounts for homes with mortgages backed by Fannie Mae or Freddie Mac
  2. HPI only accounts for re-sold homes — newly-built homes are excluded
  3. HPI aggregates national data whereas real estate markets are local phenomena

On a broad scale, the Home Price Index can be useful, but it doesn’t specifically apply to Plymouth or any specific U.S. market.  For that, analysts tend to turn to the Case-Shiller Index, a privately-produced report that assesses home values in 20 cities nationwide.


The good news for home sellers is that Case-Shiller’s most recent report corroborates the government’s conclusion — home values are creeping back.

Home buyers should pay attention. When public and private sector data is in accord, markets tend to go along and, looking back, housing likely bottomed in February 2009.  Since then, home sales are up, home supplies are down, and values have increased in most U.S. markets.  Furthermore, so long as mortgage rates remain low and government stimulus is in place, the trend should continue through at least the first quarter of 2010.

If you’re on the fence about buying a home right now, or wondering about timing, consider your options vis-a-vis today’s market.  Into the new year, homes won’t likely be as cheap to buy, nor to finance.

Moving To A New City? Check The Local Cost Of Living First.

David Kosmecki | December 29, 2009 in Budgeting | Comments (0)


New town, new costs. Try a Cost of Living Calculator.It’s not only the real estate markets that differ from town to town — the Cost of Living does, too.

Insurance costs, tax bills and just plain, day-to-day living will dent a household budget differently depending on where that household is.  It can be a nerve-wracking fact for families moving from Minnesota across state borders.

As an aid for the budget-aware, keeps a Cost of Living Comparison Calculator on its website.  The calculator asks 3 questions: (1) Where do you live now, (2) To where you are moving, and (3) What is your salary.  It then spits out a detailed, 58-item cost comparison list between the two cities.

Some of the key costs compared include:

  • Everyday groceries
  • Energy bills
  • Routine healthcare
  • Home ownership
  • Clothes
  • Sporting goods

The Cost of Living Comparison Calculator is thorough, with data culled from the ACCRA. You’ll be surprised at how granular the list can get. On the ACCRA website, you can buy a similar report for $5.

On the site, the data is free.

What’s Ahead For Mortgage Rates This Week : December 28, 2009

David Kosmecki | December 28, 2009 in Weekly Review | Comments (0)


Vacation weeks can lead to mortgage market volatilityMortgage markets made a 4-day losing streak last week on thin holiday volume and overall economic optimism. It was awful news for rate shoppers in Minnesota because mortgage rates were higher every day last week.

The holiday-shortened week marked the third out of 4 during which rates worsened and last week’s action happened to be especially harsh. Monday’s action was the worst for rates since July, for example. 

Tuesday’s was only slightly less worse.

Today, conforming, 30-year fixed mortgage rates have reached at a 15-week high — well off the lows set in early-December.

Normally, when mortgage markets worsen this badly, this quickly, it’s because of strong economic data, or growing inflationary expectations.  Last week saw neither.

Furthermore, consumer confidence didn’t rise as planned.

And yet — stock markets gained. All 10 sectors improved and they did so at the expense of mortgage bonds.

This week is again holiday-shortened so expect the same low-volume, high-volatility trading as last week.  There’s few data releases save for Tuesday’s Case-Shiller Index. Therefore, watch for momentum trading in either direction.

Markets close early Thursday and re-open Monday, January 4, 2010.  If you need to lock a rate, make sure of your loan officer’s hours.

There’s A Very Good Reason Why The New Home Sales Data Plunged In November

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

New Home Sales Nov 2008-Nov 2009One day after November’s Existing Home Sales report blew away estimates, the Census Bureau’s related New Homes Sales report failed to impress.

A “new home” is a home that is newly-constructed; not bought as a resale.

In a lackluster showing, New Home Sales dropped 11 percent in November, falling to the lowest levels since April. Furthermore, the all-important “months of supply” climbed by a half-month to 7.9.

The press pounced on the figures and if you only read the headlines, you’d think that housing had cratered. Some of the angles were quite bold, even:

  • Weak U.S. Home Sales Show Recovery’s Shakiness (Reuters)
  • New Home Sales Plunge In November (
  • Housing Forecast : Off Life Support, Still In Critical Care (CBS News)

These headlines, although technically accurate, only tell half the story, however. The other half relates to November 30′s role as the original First-Time Home Buyer Tax Credit ending date.

See, different from home resales, when a contract is written on a newly-built home, the home is rarely finished. According to the Census Bureau, just 1 in 4 new homes are sold “move-in ready”. The other 3 of 4 are in various stages of construction when a buyer signs on the dotted line.

Some have yet to break ground, even.

Regardless, it’s at this date of signing that the Census Bureau counts the home as “sold” — not at the actual closing. This is the main driver of the November New Home Sales data dip.

First-time home buyers would have risked up to $8,000 in federal tax credits if they bought a newly-built home and it wasn’t ready for move-in by November 30, 2009. And it wasn’t until November 5 that the credit was officially extended.

Suddenly, first-timers representing more than half of last month’s Existing Home Sales isn’t so shocking. Buying new carried a lot risk.

There’s always more to the story than the headline. Sometimes, you have to dig deeper. Looking back over 10 months, the housing market is on a steady course of improvement. November’s New Home Sales data — although weak — is not terrible.

Despite what the papers might say.

Home Inventories Plummet, Foreshadowing Higher Prices By Spring 2010

David Kosmecki | December 23, 2009 in Uncategorized | Comments (0)

Existing Home Sales Nov 2008-Nov 2009Home resales are soaring.

For the 4th consecutive month, the Existing Home Sales report revealed what today’s buyers and sellers already know — there’s a lot of buyer activity right now.

Existing Home Sales surged 7-plus percent in November, posting its largest number of recorded sales in 33 months. Sales volume is up 44% higher versus last year.

It’s another example of the housing market in recovery.

There were other interesting statistics buried in the November data, too. According to the National Association of Realtors:

  1. 51 percent of home buyers were first-timers
  2. Distressed properties accounted for one-third of all sales
  3. The median home sale price rose slightly

But of all the stats from the November Existing Home Sales report, perhaps the most important one is the one showing home supplies falling to 6.5 months. It’s nearly half of the home supply available last November.

The rapid run-off of inventory throughout 2009 is more than a trend at this point and suggests higher home valuations in 2010. Especially because mortgage rates are low, tax credits are available, and the press is giving housing positive coverage.

You shouldn’t feel rushed to buy, but you probably don’t wait too long, either. The best deals of 2010 may be gone before that Spring Buying Season even starts.

When It’s A Holiday Week, Mortgage Rate Shoppers Should Be Extra Vigilant

David Kosmecki | December 22, 2009 in Uncategorized | Comments (0)

Vacation weeks can lead to mortgage market volatility

Mortgage pricing worsened Monday, driving mortgage rates to their highest levels since October.

The day’s action was drastic, too.

Some banks issued as many as 3 rate sheets Monday — each worse than the preceding and one reason why rates got so bad, so quickly, is because this week marks the beginning of mini-Vacation Season on Wall Street.

Between now and January 4, 2010, be prepared for big swings in pricing from day-to-day. Shopping for a mortgage could be a challenge.

The relationship between vacation days and mortgage rate volatility is rooted in how mortgage rates are “made”.

  1. Conforming mortgage rates are based on the price of mortgage-backed bonds, a security that is sold on Wall Street
  2. Mortgage-backed bonds can’t sell without a bond buyer and a bond seller agreeing to a specific sale price

So, during vacation week, when the total number of market participants are less, there are fewer opportunities for buyers and sellers to meet at a specific price. As a result, bond prices rise and fall with a higher velocity than on a “normal” day. Rallies and momentum plays are exaggerated, too.

Now, mortgage market action like this can work in your favor, or it could work out of your favor. Unfortunately, on Monday, rates moved out of favor.

This rest of this week is stacked with market-moving economic data. The data could be better-than-expected, or worse-than-expected. Either way, markets will react a little more feverishly than normal. Therefore, if you have a chance to lock a favorable rate, consider taking it.

Before long, the rate could be gone.

What’s Ahead For Mortgage Rates This Week : December 21, 2009

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

Fed Funds Rate (Dec 2006 - Dec 2009)Mortgage markets improved last week as pricing followed a roller coaster-like pattern. After touching a 6-week high Tuesday, rates rallied to weekly lows Thursday, and then jumped back higher Friday.

Despite the improvement last week overall, mortgage pricing remains significantly worse from the all-time lows set in late-November.

Oddly, last week’s most prominent mortgage-related story wasn’t the most influential one.

On Wednesday, the Federal Open Market Committee adjourned from a two-day meeting. It voted to leave the Fed Funds Rate unchanged from its current target zone of 0.000-0.250 percent. This wasn’t news, per se — markets expected the “no change” vote.

However, in its accompanying press release, the Fed appeared more rosy in its economic outlook, citing improving labor markets and low levels of inflation. Results like this are a mixed bag for rate shoppers, but is generally welcomed as good news.

Rates were unchanged after the FOMC release.

The bigger story last week comes from Greece.

Concerns for the country’s debt burden have been in play for weeks, but last week, Standard & Poor’s officially downgraded Greece’s debt rating. The move triggered concerns regarding broader Eurozone debt, especially considering the recent issues in Dubai.

U.S. mortgage markets benefitted from Greece’s troubles as “safe haven” attracted investors, driving down rates Thursday afternoon.

Debt concerns should remain in focus this week. Furthermore, there’s a bevy of domestic data that could swing rates in either direction, too. Most notably, watch for Tuesday’s housing data, Wednesday’s inflation data, and Thursday’s consumer confidence data. Each can be a powerful influence on rates.

There will be less volume on Wall Street because of Christmas and less volume tends to spur mortgage rate volatility. Be wary of swings in either direction.

Markets close early Thursday and will be closed Friday.

Housing Starts Jump; Home Sellers Lament.

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

Housing Starts Dec 2007-Nov 2009Housing Starts jumped last month as builders got back to business. It’s a telling sign for the economy, but bad news for next season’s sellers.

With more homes coming online, home prices may be slow to rise nationwide.

A “Housing Start” is a privately-owned home on which construction has started. In November, starts rose by nearly 9 percent while remaining within the same tight range we’ve seen since June.

More interesting that Housing Starts, though, is the accompanying data for Housing Permits. After a 5-month plateau, Housing Permits finally broke through, posting its largest number in 12 months.

This, too, bodes poorly for sellers.

Housing permits are precursors to housing starts so because the number of permits are higher today, we expect that the number of starts will be higher just a few months from now.

According to the Census Bureau, 82% of homes start construction within 60 days of permit-issuance.

More permits means more starts which, in turn, leads to a larger home inventory. And when home supplies grow faster than the home demand, prices fall.

Throughout the early part of 2010, low mortgage rates and federal tax credits should help hold demand high but if builders flood the market with new, quality product, sellers may find that they’ve lost some of their leverage.

For home buyers, the rise in starts is welcomed.

A Simple Explanation Of The Federal Reserve Statement (December 16, 2009 Edition)

David Kosmecki | December 16, 2009 in Uncategorized | Comments (0)

Explaining the FOMC press release December 16, 2009The Federal Open Market Committee voted to leave the Fed Funds Rate within its target range of 0.000-0.250 percent.

In its press release, the FOMC noted that the U.S. economy “has continued to pick up”, that the jobs markets is getting better, and that housing market has shown “some signs of improvement” lately.

It’s the fourth straight statement in which the Fed speaks optimistically about the U.S. economy — a signal that the worst of the recession is likely behind us.

The economy isn’t without threats, however, and the Fed identified several, including:

  1. Tight credit conditions for consumers
  2. Reluctancy of businesses to hire new workers
  3. Lower overall housing wealth

The message’s overall tone remained positive, however and inflation appears to be held in check.

Also in its statement, the Fed confirmed its plan to hold the Fed Funds Rate near zero percent “for an extended period” and to honor its $1.25 trillion commitment to the mortgage bond market. That plan — due to expire at the end of March 2010 — should be noted by today’s homebuyers. Fed insiders estimate that the program suppressed rates by 1 percent through 2009.

Mortgage market reaction to the Fed press release is negative. Mortgage rates are rising this afternoon.

The FOMC’s next scheduled meeting is January 26-27, 2010.

Fannie Mae Gets Tough(er) On Borrowers. Again.

David Kosmecki | in Uncategorized | Comments (0)

Being approved for a mortgage is getting tougherFannie Mae raised the bar for mortgage applicants this past weekend. Getting approved for a home loan just got harder.

In its official announcement, Fannie Mae says the updates minimize long-term lending risks. If that’s the case, this won’t be the last guideline change Fannie Mae makes — especially with loans defaulting at an above-normal clip.

The immediate changes are major. The first pertains to credit scores.

Effective December 13, 2009, the bulk of Fannie Mae’s loans require a 620 credit score minimum. There are very few exceptions.

A second relates to loans with private mortgage insurance.

Homeowners whose loan-to-value exceeds 80 percent now have a choice:

  1. Pay higher mortgage insurance premiums month-after-month
  2. Pay a one-time fee paid at closing to compensate for higher risk

Both options result in higher consumer loan costs.

A third change concerns maximum debt-to-income ratio. Fannie Mae will no longer approve loans with debt ratios exceeding 45 percent except with very strong assets and very high credit scores.

In no case whatsoever may debt-to-income exceed 50 percent.

There are other changes, too, including the elimination of seldom-used mortgage products and additional risk-based fees for “expanded level” mortgage approvals. These updates affect just a small part of the population.

So, home prices are rebounding, mortgage rates are low, and — for 5 more months at least — there’s a federal tax credit for qualified buyers. You don’t have to buy a home now, but with mortgage guidelines sure to tighten in 2010, now may be a better time than later.

The best “deal” won’t matter if you can’t get qualified on your mortgage.