coto4sale.com

Is More Fed-Led Stimulus On Its Way?

Bob Phillips — Fri, 18 May 2012 12:45:00 +0000

The Federal Open Market Committee released its April 2012 meeting minutes this week, revealing a Federal Reserve in the ready in the event additional monetary stimulus is needed.

The Fed Minutes function much like the minutes from a business meeting; or, condominium association meeting, for example. It’s a detailed review of the conversations and debates between FOMC members, and is typically published 3 weeks after a Federal Reserve meeting.

The Fed Minutes is a follow-up statement on the FOMC’s more well-known, post-meeting press release. It’s also much more lengthy.

Whereas the April 25, 2012 press release totaled 444 words, the Fed Minutes spanned 6,618.

Those extra words are important, too, because the detail offered within the Fed Minutes lends insight into how our nation’s central bank views the U.S. economy, its strengths and weaknesses, and its threats.

From the Fed Minutes, some of the Fed’s comments includes :

On employment : Unemployment may remain elevated through 2014
On housing : Tight underwriting is “holding down” the housing market
On rates : The Fed Funds Rate should remain low until late-2014

There was also substantial talk about Europe and its role in the U.S. economy. Notably, U.S. financial institutions have been actively reducing their European exposure to contain damage in the event of a full-blown economic crisis abroad.

This has had the net effect of lowering mortgage rates in California. Mortgage bonds often benefit from economic uncertainty.

In addition, because several Fed members acknowledged a willingness to add new stimulus to the U.S. economy, mortgage markets are accounting for the possibility it could happen. It’s unclear whether stimulus would be added after the Fed’s next meeting, or at some point later in the year, or at all.

The FOMC has its next scheduled meeting June 19-20, 2012.

Single-Family Housing Starts Powers Ahead

Bob Phillips — Thu, 17 May 2012 12:45:00 +0000

The new construction housing market continues to improve.

One day after the National Association of Homebuilders reported a 5-year high in homebuilder confidence, the U.S. Census Bureau reports that single-family housing starts rose 2 percent for the second straight month last month.

In April, on a seasonally-adjusted, annualized basis, the government reports 492,000 single-family housing starts. A “housing start” is a home on which ground has broken.

In addition, March’s single-family housing starts were revised higher. What was previously reported as a three percent loss was re-measured and changed to a 0.2% gain.

The April tally marks a six percent increase over the one-year moving average and, along with the March revision, suggests that the springtime housing market may have just been seasonal.

In March, a number of reports suggested a housing retreat :

Existing Home Sales slipped 3%
New Home Sales slipped 7%
Homebuilder Confidence fell 4 points

Since then, though, low mortgage rates and affordable home prices appear to have sustained the new construction market, which now appears poised for a strong 2012.

As one mark of proof, active buyers of newly-built homes in Trabuco Canyon and nationwide are scheduling “model home” showings at the fastest pace since 2007. The burst of foot traffic high has builders upping their sales expectations for the next 6 months.

A scenario like this would normally lead new home prices higher, but the pressure for prices to rise may be offset by the amount of new home supply coming online.

In addition to a rise in Housing Starts, the Census Bureau also reports that, in April, the number of Building Permits for single-family homes rose 2 percent to move to its second-highest level since March 2010 — the month preceding the end of the 2010 federal Home buyer tax credit.

86 percent of homes break ground within one month of permit issuance.

It’s unclear whether housing is on a steady path higher, but there’s a growing body of evidence that suggests the market bottom has already passed.

Homebuilder Confidence Moves To 5-Year High

Bob Phillips — Wed, 16 May 2012 12:45:00 +0000

Homebuilder Confidence is on the rise once again.

After a brief dip in April, the National Association of Homebuilders reports that the Housing Market Index rose 5 points in May to 29. The increase marks the sharpest climb in homebuilder confidence on a month-to-month basis in 10 years, and raises the index to a 5-year high.

The Housing Market Index is scored from 1-100. Readings above 50 indicate favorable conditions in the single-family new home market overall. Readings below 50 indicate poor conditions.

The HMI has not been above 50 since April 2006.

The Housing Market Index itself is a composite reading as opposed to a straight-up homebuilder survey. The published HMI figure is a compilation of the results of three specific questionnaires sent to NAHB members monthly.

The survey questions are basic :

How are market conditions for the sale of new homes today?
How are market conditions for the sale of new homes in 6 months?
How is prospective buyer foot traffic?

This month, builders are reporting strong improvement across all three surveyed areas. Current home sales are up 5 points; sales expectations for the next six months are up 3 points; and buyer foot traffic is up 5 points to its highest point since 2007.

With mortgage rates low and home prices suppressed, the market for new homes is gaining momentum, a conclusion supported by the New Home Sales report which shows rising sales volume and a shrinking new home inventory nationwide.

The basics of supply-and-demand portend higher new home prices later this year — a potentially bad development for buyers of new homes in California and nationwide. With demand for new homes rising, builders may be less likely to make sale price concessions or to offer “upgrade packages” to buyers of new homes.

If you’re shopping for new construction in or around Trabuco Canyon , therefore, consider moving up your time frame. Home affordability is high today. It may not be tomorrow.

Home Affordability Getting A Springtime Boost From Greece

Bob Phillips — Tue, 15 May 2012 12:45:00 +0000

Home affordability is receiving a boost from across the Atlantic Ocean this spring.

For the third time in as many years, a weakening Eurozone is pushing May mortgage rates to new lows throughout California and nationwide.

The story centers in Greece and begins in 2010.

2 years ago, it was uncovered that successive Greece governments had purposefully misreported the nation-state’s economic statistics in order to meet European Union standards. The fraudulent data had permitted Greek governments to spend beyond their means while hiding deficits from EU auditors.

The realization that Greece was heavy in debt with little means to repay its creditors resulted in a massive bailout from the IMF and the rest of the Eurozone nations. The terms for Greece said that, in order to receive its €110 billion aid package, Greece would be required to enact strict spending controls.

This is known as “austerity” and the deal was met with outrage by the Greek public. There’s been general social unrest ever since and, on May 6 of this year, Greece held a special “early election” to elect all 300 members to its legislature.

No party won majority in the elections.

7 different groups garnered seats in the parliament last week with anti-austerity groups faring well. It’s spurred concern that Greece will end its bid for fiscal restraint, and that Greece may choose to leave the 17-nation Eurozone.

The uncertainty surrounding Greece is helping U.S. mortgage rates to make new lows. As concerns mount for the future of Greece — and the Eurozone, in general — global investors seek safer markets for their money.

The U.S. mortgage-backed bond market is one such market.

With the implied backing of the U.S. government, mortgage-backed bonds are viewed as nearly risk-less and investors clamor for safety of principal during uncertain times. The boost in demand drives bond prices up and bond yields down, resulting in lower mortgage rates for home buyers and refinancing households of Trabuco Canyon.

So long as Greece struggles to form its government and flirts with a sovereign debt default, mortgage rates should continue to face downward pressure. U.S. rates may not fall week after week, but analysts expect any rise in rates to be muted.

What’s Ahead For Mortgage Rates This Week : May 14, 2012

Bob Phillips — Mon, 14 May 2012 12:45:00 +0000

Mortgage markets worsened slightly last week as positive U.S. economic news overshadowed growing concerns for the Eurozone’s future. Political and economic issues continue to weigh on Greece and Spain, and it’s still unknown how France’s new President will change that nation’s fiscal direction.

Conforming mortgage rates in California edged higher on the week overall.

Last week was light on economic data, but the figures released suggest an improving U.S. economy.

For example, the Bureau of Labor Statistics reported 3.7 million job openings nationwide this past March, marking the highest amount since July 2008. Voluntary separations (i.e. “quit jobs”) increased, too — also at levels not seen since 2008.

Voluntary separations may hint at labor market improvement because employees rarely leave a steady-paying job without the prospect of a new job ahead. Furthermore, the four-week moving average of first-time unemployment claims fell for the first time in a month.

The jobs market is one of two key sectors expected to lead the economy forward this year.

The other is housing and, this week, there will be two key housing reports for Wall Street to review. The first is Tuesday’s homebuilder confidence survey from the National Association of Homebuilders. The second is Wednesday’s Housing Starts data for April.

Mortgage rates may also be affected by the Tuesday release of the Retail Sales report and Consumer Price Index report; and, by the Federal Reserve’s Wednesday release of the FOMC Minutes from its last meeting.

For home buyers and mortgage rate shoppers, mortgage rates remain at all-time lows. According to Freddie Mac, the average 30-year fixed rate mortgage rate nationwide is 3.83% for borrowers willing to pay 0.7 discount points and a full set of closing costs — the lowest rate-and-fee combination in Freddie Mac’s recorded history.

However, low mortgage rates may not last much longer — especially if the Eurozone can reverse course on its ailing economies.

Mortgage rates remain volatile and sensitive to changes in market conditions. If today’s mortgage rates fit your budget, consider locking in.

Is This Market ‘Bottom’ a True One That Will Stick?

Bob Phillips — Fri, 11 May 2012 15:06:08 +0000

From Friday’s DSNews.com, written by Esther Cho:

“During a CoreLogic economic webinar Thursday, the company’s chief economist, Mark Fleming, Ph.D., was asked if the housing market has hit bottom and will it stick, as reports seem to be speculating.

Apparently, the market in recent years was thought to have hit bottom twice before.

Fleming noted that this happened in 2010 when prices peaked and year-over-year growth rate was positive. This was also a time when the home buyer tax credit was available. House prices stabilized, but the problem with that, Fleming explained, is that when the tax credit expired, demand disappeared and prices continued to fall again.

We again saw some stabilization in the beginning of 2011, Fleming said, but the economy fell off the rail with the European debt crises, the Japanese earthquakes, and our own debt ceiling debate.

Then, Fleming said, consumer confidence crashed, everyone stopped wanting to buy, demand went down, and prices declined again.

As for whether or not this time it truly is bottom, that partly depends on unpredictable events.

“The longer we go now without any major shock, the more strength this recovery will have and the more it will be able to sustain without significant detrimental impact any shocks that might come,” Fleming said. “So time then is one of our most helpful forces at the moment.”

While uncertainty seems to surround whether or not the market has truly hit bottom, one trend does appear to be more stable.

With recent reports of declining delinquencies, Fleming said he expects to continue to see fewer delinquencies and foreclosure starts in coming years. This is partly due to the performance of loans originated between 2009 and 2011, which Fleming explained are benefiting from tighter underwriting standards compared to earlier loans.

Recently, CoreLogic reported delinquencies were down, with the share of borrowers nationally that were more than 90 days late on their mortgage payment, including homes in foreclosure and REO assets, dropping to 7 percent in March 2012 from 7.5 percent a year ago.

As for foreclosure inventory, Fleming pointed out that a migration has taken place where the concentration of states posting higher foreclosure rates moved from the West coast to eastern and southeastern states, such as New Jersey, New York, and Florida.

During the webinar, Fleming also provided some clarification on house price indexes and explained that indexes reporting year-over-year prices showing negative numbers amid positive home sales reports might have to do with what was happening a year ago, and said sometimes negative numbers are negative because of a really good spring season a year ago.” ( End of DSNews.com article.)

Link: http://www.dsnews.com/articles/index/is-this-bottom-true-one-that-will-stick-2012-05-03 )

Locally, in South Orange County, our most recent lowest point, for our median price, was back in January of 2009, just before the tax credits entered the scene. Local prices DID go up back then, only to slowly drift back, over the year and a half after the credits expired, but have never fallen completely back to that January 2009 low.

Our local real estate market is currently experiencing VERY low housing inventories, coupled with a surplus of buyers, which has resulted in prices not only firming up, but actually nudging up, as well. Now is a great time to be a seller, and I expect that to continue through the summer.

Mortgage Rates Make New All-Time Lows (Again)

Bob Phillips — Fri, 11 May 2012 12:45:00 +0000

Conforming mortgage rates continue to drop.

For the second straight week, the 30-year fixed rate mortgage fell to a new, all-time low nationwide. According to Freddie Mac’s weekly mortgage rate survey, the average 30-year fixed rate mortgage rate dropped 1 basis point to 3.83% this week for borrowers willing to pay 0.7 discount points plus a full set of closing costs.

The 15-year fixed rate mortgage also set a mortgage rate record, registering 3.05% with an accompanying 0.7 discount plus closing costs.

Discount points are a one-time, up-front closing cost, based on loan size. 0.7 discount points is equal to 0.7% of the borrowed amount. A home buyer in Rancho Santa Margarita opening a $200,000 mortgage and paying 0.7 discount points, therefore, would be subject to a one-time $1,400 fee paid at closing.

Borrowers wanting to avoid paying discount points can expect higher mortgage rates than Freddie Mac’s reported national average.

Falling mortgage rates are nothing new throughout California. Since peaking in February 2011, mortgage rates of all types have been in steady decline. The 30-year fixed rate mortgage has shed 122 basis points since that date, falling from 5.05%; the 15-year fixed rate mortgage has shed 124 basis points, falling from 4.29%.

Low mortgage rates give today’s home buyers additional purchasing power, stretching home affordability to new heights.

Low rates also help existing homeowners to lower monthly mortgage payments. For example, as compared to mortgage rates just 15 months ago, homeowners refinancing into today’s 30-year fixed rate mortgage stand to save 13.4 percent on their respective mortgage payments.

A comparison :

February 2011 : $539.88 principal + interest per $100,000 borrowed
May 2012 : $467.67 principal + interest per $100,000 borrowed

A homeowner with a $300,000 mortgage at February 2011 30-year fixed rate mortgage rates would save $2,600 annually with a refinance to this week’s low rates. Even accounting for discount points and closing costs, the “break-even point” on savings like that comes relatively quickly.

Mortgage rates can’t be predicted so there’s no guarantee of low rates forever. If today’s rates meet your budget, consider locking something in. Speak with your loan officer about your options.

8-Fold Increase In “Improving Markets” Since September

Bob Phillips — Thu, 10 May 2012 12:45:00 +0000

The economic recovery continues nationwide, but the recovery’s an uneven one.

Some metropolitan areas are faring very well this year, posting measurable gains in both employment and housing. Other metropolitan areas, by contrast, are struggling.

To help identify those markets in which growth is occurring, the National Association of Homebuilders created the Improving Market Index, a metric analyzing three separate, independently-collected data series “indicative of improving economic health”.

The IMI’s three collected data series are :

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

A metropolitan area is considered to be “improving” if all three indicators show growth at least six months after the respective area’s most recent trough, or “bottoming out”.

In May, there are exactly 100 U.S. markets that qualify for the NAHB’s Improving Market Index, down from 101 last month but higher by more than 800% from the reading in September 2011, the index’s inaugural release.

17 areas were added to the Improving Market Index list this month including Phoenix, Arizona; Ann Arbor, Michigan; and Bend, Oregon. 18 areas were removed from the May IMI.

83 metropolitan areas remained from April.

There is little actionable information in the Improving Markets Index but the report does a good job of highlighting how “real estate markets” can’t be summarized on a national level and remain relevant to everyday home buyers and sellers across California and nationwide. For example, Fort Collins, Colorado is listed as an Improving Market. However, Greeley, Colorado — located just 30 miles away — was just downgraded from the same list.

Home values and economies vary by region, by state, by city, by neighborhood, and even by street.

The complete Improving Markets Index can be viewed at the NAHB website but for the best read of what’s happening in your neighborhood, talk to a local real estate agent.

B of A to Offer Principal Writedowns to 200,000 Delinquent Borrowers

Bob Phillips — Wed, 09 May 2012 13:20:51 +0000

From this morning’s DSNews.com, written by Carrie Bay:

“Bank of America began mailing out more than 200,000 letters this week targeting borrowers thought to be eligible for principal-reducing modifications under terms of the recent settlement the company and four other servicers reached with the federal government and 49 state attorneys general.

To be eligible, a homeowner must owe more on the mortgage than the property is worth today and must have been at least 60 days behind on payments on January 31, 2012.

In addition, the homeowner’s monthly housing costs must be more than 25 percent of gross household income, and the loan must be owned and serviced by Bank of America or serviced for another investor that has authorized the bank to grant principal writedowns.

Officials at Bank of America estimate average monthly savings of 30 percent for customers who qualify for the program.

The North Carolina-based lender said Tuesday that it has already extended about 5,000 trial modification offers involving principal reductions since March, with a potential total of more than $700 million in forgiven mortgage debt. Homeowners are required to make at least three timely trial payments before the modification can be made permanent.

“Building on home retention and payment assistance programs already in place, we are meeting our obligation to deliver this additional relief to our customers following the completion of the recent global mortgage settlement,” said Ron Sturzenegger, Bank of America’s executive over legacy asset servicing.

“To the extent principal reduction and other modification tools help us turn mortgages headed for possible foreclosure into long-term performing loans, it will be positive for homeowners, mortgage investors, and communities,” Sturzenegger added.

The first letters of Bank of America’s mail blitz should start landing in mailboxes this week with the majority of the 200,000-plus identified candidates receiving notice by the third quarter of this year.

Bank of America has committed to slashing $11 billion in mortgage debt for struggling homeowners as part of the settlement agreement reached. But with BofA expecting an average principal reduction of $150,000 for each borrower, crude estimates put the tab potentially as high as $28 billion to $30 billion if a large majority of those targeted respond to the company’s outreach efforts and satisfy the qualifying criteria.” ( End of article.)

If YOU are having difficulty making the payments on a Bank of America mortgage, it would be prudent to open any mail you receive from them – it just might be good news – especially if you’re hoping to stay in your home.

With LIBOR Low, Don’t Rush To Refinance Your ARM

Bob Phillips — Wed, 09 May 2012 12:45:00 +0000

Is your mortgage scheduled to adjust this season? You may want to let it. This year’s ARM-holding homeowners in California are finding out that an adjusting mortgage may be the simplest way to get access to today’s low mortgage rates — without paying the closing costs.

Currently, conventional adjustable-rate mortgages are adjusting to near 3.00 percent.

If your home is financed via an adjustable-rate mortgage, you’re likely cognizant of your loan’s life-cycle. At first, your ARM’s initial mortgage rate is agreed upon between you and your lender, a rate that both parties agree will remain in place from anywhere from one to 10 years, with periods of five and seven years being most common.

Then, after the initial “teaser rate” expires, the mortgage’s mortgage rate adjusts according to a pre-determined formula — one that’s also agreed upon at closing. The loan is then subject to an identical mortgage rate adjustment every 12 months thereafter until the loan is paid in full.

The most common conforming mortgage adjustment formula is to add 2.25 percent to the then-current 12-month LIBOR rate.

Today’s 12-month LIBOR is 1.05% so, as a real-life example, an adjustable-rate mortgage that’s leaving its teaser rate period this week would adjust to 3.30%.

If you’re a homeowner who took a 7-year ARM in 2005, or a 5-year ARM in 2007, your newly-adjusted mortgage rate should be roughly 2 percent lower than your initial teaser rate. On a $250,000 mortgage, a 2 percent mortgage rate reduction yields $298 in monthly savings.

Therefore, if you have an adjustable-rate mortgage that’s due to reset, don’t rush to refinance it. For at least one more year, you can benefit from low mortgage rates and low payments.

As for next year’s adjustment, however, that’s anyone’s guess.