mortgage financing and programs

Archive for November, 2011

Case-Shiller Index : 17 Of 20 U.S. Housing Markets Slipped In September

No Comments

Case-Shiller Index September 2011

Standard & Poor’s released its September 2011 Case-Shiller Index this week. The index tracks home price changes in select cities between months, quarters, and years.

The Case-Shiller Index for September showed drastic devaluations nationwide.

As compared to August, home values fell throughout 17 of the index’s 20 tracked markets, led by Atlanta’s 5.9% drop. On an annual basis, home values have now returned to early-2003 levels.

That said, home buyers and sellers should be cautious when referencing the Case-Shiller Index. The index is a flawed metric and, as such, can lead to improper conclusions about the housing market overall.

The Case-Shiller Index’s first flaw is its most obvious — its limited sample set. 

According to Wikipedia, there are more than 3,100 municipalities nationwide. Yet, the Case-Shiller Index includes data from just 20 of them in its findings. These 20 cities account for fewer than 1% of all U.S. cities, and just a small percentage of the overall U.S. population. 

The “national figures” aren’t really national, in other words.

Even on a city-by-city basis, the Case-Shiller Index gets it wrong.

By lumping disparate neighborhoods into a single, city-wide result, the index ignores the relative strength of one area at the expense of another. In the aforementioned Atlanta, there are areas that fared much better than September’s -5.9% as cited by Case-Shiller. Some areas fared much worse.

A second flaw in the Case-Shiller Index is it’s methodology for measuring changes in home value. The index only considers “repeat sales” of the same home in its findings, and those homes must be single-family, detached property. Condominiums, multi-family homes, and new construction are not included.

In some cities — Chicago, for example — “excluded” property types can account for a large percentage of total monthly sales.

And, third, the Case-Shiller Index is flawed by “age”.

Because Standard & Poor’s publishes on a 60-day delay, the Case-Shiller Index is reporting on a housing that no longer exists. Sales that closed in September are based on contracts written from June-August –a time-frame that’s 6 months aged.

The best use of the Case-Shiller Index is as an analysis tool for economists and policy-makers interested in the long-term trends of U.S. housing. The index does very little good for every day buyers and sellers, unfortunately.

For up-to-date, accurate market data, talk to a real estate professional instead.

New Home Supplies Fall To An 18-Month Low

No Comments

New Home Supply 2009-2011

If you plan to buy of new construction in delaware sometime in 2012, don’t expect today’s low prices. Like everything in housing of late, the market for newly-built homes appears to be stabilizing and, in some markets, improving.

As foreshadowed by this month’s strong Homebuilder Confidence survey, the Census Bureau reports that the number of new homes sold rose to a 6-month high in October, climbing to 307,000 units on a seasonally-adjusted, annualized basis.

A “new home” is a home that is considered new construction. It’s the opposite of an “existing home”.

Home buyers are comparing new construction to home resales and liking what they see. At the current sales pace, the nation’s complete new home inventory would now be depleted in just 6.3 months. This marks the lowest home supply since April 2010 — the last month of the last year’s federal homebuyer tax credit.

By building only to meet new demand, builders are keeping home supplies in check, and home prices stable. They’ve also found a niche market – 80% of homes sold last month sold for less than $300,000.

Split by region, the Census Bureau reports October’s New Home Sales as follows :

  • Northeast Region : +0.0% from September 2011 
  • Midwest Region : +22.2% from September 2011 
  • South Region : -9.5% from September 2011 
  • West Region : -14.9% from September 2011 

Unfortunately, the data may be incorrect.

Although the October New Home Sales report says that sales climbed 1.3 percent last month, the government’s data was published with a ±19.7% margin of error. This means that the actual New Home Sales reading may have been as high as +21.0 percent, or as low as -18.4 percent. Because the range of values includes both positive and negative values, the Census Bureau assigned its October data “zero confidence”.

As home buyers, then, we can’t take our market cues from the published data. Instead, we should look to other metrics including Housing Starts data and the aforementioned homebuilder confidence survey. Each points to strength in the new home market, and foretells higher home prices in 2012.

If you’re in the market for new construction, consider writing an offer soon. Home prices remain low and mortgage rates do, too — a combination that keeps home payments low. Next year, that may not be the case.

What’s Ahead For Mortgage Rates This Week : November 28, 2011

No Comments

Non-Farm Payrolls Nov 2009-Oct 2011Mortgage markets worsened slightly last week through a bouncy, holiday-shortened trading week. Markets were closed Thursday for Thanksgiving and re-opened only briefly Friday.

As in past weeks, though, economic, political, and financial news from the Eurozone dictated the direction of U.S. mortgage-backed bonds.

As Greece — and now Italy — have faltered, investors have sought to preserve their respective principal, moving money from unsafe assets to safe ones, a class which includes Fannie Mae- and Freddie Mac-backed mortgage bonds.

This investment pattern is known as “safe haven” buying and it’s why mortgage rates tend to improve when large economies grow unstable. Government mortgage bonds are considered among the safest securities available.

The average 30-year fixed rate mortgage is available for 3.98%, according to Freddie Mac, with borrowers expected to pay an accompanying 0.7 discount points. 1 “discount point” is a loan fee equal to 1 percent of your loan size.

“No-point loans” carry higher rates than the Freddie Mac-published figures, but come with lower closing costs.

This week, there are several reasons to expect mortgage rates to rise throughout pennsylavania.

First, markets are speculating that the IMF will lend Italy 600 billion euro to help avert financial crisis. This move would reverse the safe haven buying that’s characterized the last few weeks of trading, thereby leading mortgage rates higher.

A second reason is that they are early reports that Black Friday shoppers out-spent analyst estimates. Consumer spending is the largest part of the U.S. economy so, if spending is up, the economy should be up, too. 

As before, this would reverse some of the safe haven buying that’s helped keep mortgage rates low.

Lastly, this week is stuffed with new data including Friday’s always-important Non-Farm Payrolls report. Wall Street expects 116,000 net new jobs created in November. If the actual figure is much higher, mortgage rates will rise.

Expect mortgage rates to be volatile this week. Your quoted mortgage rates could vary by as much as a quarter-percent from day-to-day. If you’re nervous about losing a low rate that’s been offered to you, consider locking in.

Conforming Loan Limits Unchanged For 2012

No Comments

Conforming loan limits (1980-2012)

A conforming mortgage is one that, literally, conforms to the mortgage guidelines as set forth by Fannie Mae and Freddie Mac. 

Conforming mortgage guidelines are Fannie’s and Freddie’s eligibility standards; an underwriter’s series of check-boxes to determine whether a given loan should be approved.

Among the many traits of a conforming mortgage is “loan size”.

Each year, the government re-assesses its maximum allowable loan size based on “typical” housing costs nationwide. Loans that fall at, or below, this amount meet conforming mortgage guidelines. Loans in excess of this limit are known as “jumbo” loans.

Between 1980 and 2006, as home values increased, conforming loan limits did, too, rising from $93,750 to $417,000. Since 2006, however, despite falling home prices in many U.S. markets, the conforming loan limit has held steady.  This will remain true for 2012 as well. 

In 2012, for the 7th straight year, the national, single-family conforming mortgage loan limit will remain at $417,000.

The complete 2012 conforming loan limit breakdown, by property type :

  • 1-unit properties : $417,000
  • 2-unit properties : $533,850
  • 3-unit properties : $645,300
  • 4-unit properties : $801,950

However, there are some areas nationally that have earned ”loan limit exceptions” based on the local median sales prices. These areas are known as “high-cost” areas and loan limits within these regions range from $417,001 to a maximum of $625,500.

Some examples of high-cost areas include San Francisco (along with a most of California), New York City, and most of Hawaii and Alaska. Nationally, there are approximately 200 such “high-cost” areas.

Verify your local conforming loan limit and loan limits across pennsylavania via the Fannie Mae website. A complete county-by-county list is published online.

More Sales, Less Inventory : Home Prices Headed Higher?

No Comments

Existing Home Supply -- Oct 2011 - Oct 2011 The housing market continues to signal that a broad rebound is underway. In October, despite sparse home inventory, the number of properties sold increased 1.4% nationwide.

According to data from the National Association of REALTORS®, on a seasonally-adjusted, annualized basis, October Existing Home Sales gained 70,000 units as compared to September, registering 4.97 million existing homes sold overall.

An “existing home” is a home that has been previously occupied and, as compared to prior months, the stock of homes for sale is depleted. 

Just 3.3 million homes were listed for sale last month. This represents a 2 percent drop from September and marks the sparsest home resale inventory of 2011.

The current home supply would last 8.0 months at today’s sales pace — the fastest rate since January 2010. 

The real estate trade group’s report contained other noteworthy statistics, too :

  1. 34 percent of all sales were made to first-time buyers
  2. 29 percent of all sales were made with cash
  3. 28 percent of all sales were for foreclosed homes, or short sales

It also said that one-third of transactions “failed” as a result of homes not appraising for the purchase price; failure to achieve a mortgage approval; and, insurmountable home inspection issues.

This 33% failure rate is huge as compared to September 2011 (18%) and October 2010 (8%). It underscores the importance of getting pre-qualified to purchase, and of selecting a home “in good condition”.

For today’s home buyer, October’s Existing Home Sales may be a “buy signal”. Supplies are falling and sales are increasing. Elementary economics says home prices should begin rising, if they haven’t already.

Remember : The data we’re seeing is already 30 days old. Today’s market may be markedly improved already.

The good news is that mortgage rates remain low. Freddie Mac reports that the average 30-year fixed rate mortgage rate is 4.000% with 0.7 discount points, making homes as affordable as they’ve been in history.

With rising home values, you may end up paying more to purchase your new home, but at least you’ll pay less to finance it.

Housing Starts Rising; New Construction Turns The Corner?

No Comments

Housing Starts (2009-2011)Another day, another signal that the market for newly-built homes is improving.

Single-Family Housing Starts rose to a seasonally-adjusted, annualized 430,000 units in October – a 4 percent increase from September and the highest reading in 3 months.

A “Housing Start” is a home on which ground has been broken.

The increase in surprised Wall Street analysts, although it shouldn’t have.  

Earlier this week, the National Association of Homebuilders showed that Homebuilder Confidence is at its highest point since May 2010, the effect of better market conditions and more sold units. Rising housing starts amid a lift in builder confidence is to be expected — the two metrics have moved with loose correlation since mid-2000.

However, as with everything in real estate, Single-Family Housing Starts volume varied by location. The nation’s 4 regions posted wide-ranging results :

  • Northeast Region : + 10.0% from September
  • Midwest Region : -4.1% from September
  • South Region : +11.3% from September
  • West Region : -10.2% from September

Buyers of new construction can infer two key points from last month’s data.

First, with more homes will being built, home supply should rise, thereby softening pressure on rising home prices. This should help keep homes affordable.

However, the second point is that, with builder confidence rising, buyers are less likely to win price concessions and “free upgrades” in negotiations.

The last 6 weeks of 2011 may be your optimal time to buy new construction. Home prices remain affordable and mortgage rates are rock-bottom. In addition, because there are typically fewer active home buyers during the holidays, you’ll be more likely to locate one of the few remaining new construction “deals”.

Talk to your real estate agent about local trends and new construction. 

Homebuilders Getting Optimistic; Higher Home Prices Ahead?

No Comments

Housing Market Index 2009-2011Homebuilder confidence continues to rise.

Just two months after falling to a multi-month low, the Housing Market Index surged again in November, climbing another three points to 21. It’s the second straight month that the HMI posted a 3-point gain, catapulting the index to an 18-month.

The Housing Market Index is monthly report from the National Association of Homebuilders. It’s meant to measure confidence among the nation’s homebuilders, scored on a scale of 1-100.

When homebuilder confidence reads 50 or better, it reflects favorable conditions for homebuilders. Readings below 50 reflect unfavorable conditions.

The Housing Market Index has not read north of 50 since April 2006.

As an index, the HMI is actually a composite reading; the result of three separate surveys sent to homebuilders each month. The National Association of Homebuilders asks it members about current single-family home sales volume; projected single-family home sales volume over the next 6 months; and current “foot traffic”.

In November, builder responses were stronger in all 3 categories :

  • Current Single-Family Sales : 20 (+3 from October)
  • Projected Single-Family Sales : 25 (+1 from October)
  • Buyer Foot Traffic : 15 (+1 from October)

And, beyond the headline data, there is an important, noteworthy item in this month’s Housing Market Index.

In November, “Current Single Family Sales” climbed 3 points for the second straight month, and is now at the highest point since May 2010 — the month after last year’s home buyer tax credit expired. And, this increase in sales volume is occurring as new home construction is falling, thereby reducing home inventory nationwide.

That’s an important point for home buyers.

With more new home sales and fewer new home listings, prices are likely to increase into 2012. Especially with home builders predicting higher sales levels over the next 6 months, and seeing higher levels of buyer foot traffic through their properties today.

For now, though, home prices are stable and mortgage rates are low. This creates low-cost homeownership throughout delaware , and helps new home construction remain affordable.

If you’re in the market for new home construction, the next 60 days may prove to be your best time to get “a deal”.

Government Releases Additional HARP Guidance For Underwater Homeowners

No Comments

Making Home Affordabie

Tuesday, Fannie Mae and Freddie Mac unveiled lender instructions for the government’s revamped HARP program, kick-starting a potential refinance frenzy across new jersey and nationwide.

HARP stands for Home Affordable Refinance Program. The updated program is meant to give “underwater homeowners” an opportunity to refinance at today’s low mortgage rates.

In the two-plus years since its launch, HARP’s first iteration helped fewer than 900,000 homeowners. HARP II, by contrast, is expected to reach millions.

Lenders begin taking HARP II loan applications December 1, 2011.

To apply for HARP, applicants must first meet 4 basic criteria :

  1. The existing mortgage must be guaranteed by Fannie Mae or by Freddie Mac
  2. The existing mortgage must have been securitized by Fannie Mae or Freddie Mac prior to June 1, 2009
  3. The mortgage payment history must be perfect going back 6 months
  4. The mortgage payment history may not include more than one 30-day late payment going back 12 months 

If the above criteria are met, HARP applicants will like what they see.

For HARP applicants, loan-level pricing adjustments are waived in full for loans with terms of 20 years or fewer; and maxed at 0.75 for loans with terms in excess of 20 years.

This will result in dramatically lower mortgages rates for HARP applicants — especially those with credit scores below 740. Some applicants will find HARP mortgage rates lower than for a “traditional” conventional mortgage.

In addition, HARP applicants are exempted from the standard waiting period following a bankruptcy or foreclosure, which is 4 years and 7 years, respectively.

These two items are inclusionary and should help HARP reach a broader U.S. audience.

HARP contains exclusionary policies, too.

  1. The “unlimited LTV” feature only applies to fixed rate loans or 30 years or fewer. ARMs are capped at 105% loan-to-value.
  2. Applicants must be “requalified” if the proposed mortgage payment exceeds the current payment by 20%.
  3. Applicants must benefit from either a lower payment, or a “more stable” product to qualify

And, of course, HARP can only be used once. 

Fannie Mae and Freddie Mac will adopt slight variations of the same HARP guidelines so make sure to check with your loan officer for the complete list of HARP eligibility requirements.

Foreclosure Filings Climbing; 4 States Account For Half Of Nationwide Activity

No Comments

Foreclosures per capita October 2011

Foreclosed homes are a hot market throughout delaware — and supplies are ramping up.

According to foreclosure-tracking firm RealtyTrac, October’s foreclosure filings rose 7 percent to 231,000 filings nationwide.

A “foreclosure filing” is any one of the following foreclosure-related events : A default notice on a home; a scheduled auction for a home; or, a bank repossession of a home. Because of this definition, a single home can account for up to 3 foreclosure filings — one from each category. 

Because of this, we may glean more relevant insight into the foreclosure market by separating RealtyTrac’s foreclosure report into “event types”.

  • Default Notices : Up 10% from September 2011; Down 31% from October 2010.
  • Scheduled Auctions : Up 8% from September 2011; Down 38% from October 2010.
  • Bank Repossessions : Up 4% from September 2011; Down 27% from October 2010.

These breakdowns suggest that, although improved as compared to last year, the foreclosure market is growing. At least, it’s growing in some parts of the country. We can’t forget that — like everything real estate — foreclosures are a local phenomenon. 

In October, just 4 states accounted for more than half of the country’s foreclosure filings. Those four states — California, Florida, Michigan and Illinois — represent just 26% of the U.S. population.

Even on a per household basis, the figures remain disproportionate :

  • Top 10 Foreclosure States : 1 foreclosure per 341 households, on average
  • Bottom 10 Foreclosure States : 1 foreclosure per 7,434 households, on average

The nationwide foreclosure rate was 1 foreclosure per 563 households.

As a home buyer, foreclosures are worth watching. They account for 18% of home resales nationwide and, in some markets, can be bought at steep discounts versus a comparable “non-distressed” home. That is part of their appeal, in fact.

But just because foreclosed properties can be a “deal”, it doesn’t mean you should rush to buy one. Buying a foreclosed home from a bank is different from buying a non-foreclosed home from a “person”. The contracts and negotiation process are different, and foreclosed homes are sometimes sold as-is.

“As-is” means “this home may have defects”.

Therefore, if you plan to buy a foreclosed home, talk with a real estate professional first. You can learn a lot about the housing market online, but with respect to writing an offer on a property, you’ll want an experienced agent on your side.

What’s Ahead For Mortgage Rates This Week : November 14, 2011

No Comments

Italy influencing U.S. mortgage ratesAmid a dearth of new U.S. economic data, Eurozone developments led mortgage markets down in last week’s holiday-shortened trading week. Mortgage rates across pennsylavania worsened slightly, increasing week-over-week for the first time in a month.

Freddie Mac reports the average 30-year fixed rate mortgage at 3.99% with an accompanying 0.7 discount points. Discount points are loan fees, and 1 discount point is equal to 1 percent of your loan size.

Greece has dominated mortgage market headlines since February. As the nation-state aims to reign in its national spending, it has also adopted harsh austerity measures. The combination is meant to prevent future debt defaults, but global investors remain concerned that problems in Greece may spill over into other Eurozone nations.

As those concerns have grown, U.S. mortgage markets have benefited. This is because U.S. mortgage markets are backed by the U.S. government, and investors treat the U.S. mortgage market as “safe” compared to other security-types.

Safe investments are in high demand during uncertain times, often improving in price. This pattern is known as Safe Haven Buying and it’s one reason why mortgage rates tend to fall when the economy is sagging. Mortgage rates move opposite of mortgage bond prices.

This week, U.S. economic data returns, but markets will still be watching the Eurozone. Sunday, Italy changed leadership, in part, to restore market confidence in its ability to get its debt load under control. 

Expect developments in Italy to sway U.S. mortgage rates this week. In addition, rates will respond to a rash of economic data and Fed speakers :

  • Tuesday : Producer Price Index, Retail Sales, 5 Fed speakers
  • Wednesday : Consumer Price Index, Housing Price Index, 2 Fed speakers
  • Thursday : Housing Starts, Jobless Claims, 1 Fed speaker

Mortgage rates remain near all-time lows, with not much room to drop. If you’re shopping for a mortgage rates, therefore, consider locking in. As Greece and Italy show signs of moving forward, expect Safe Haven Buying to recede, and mortgage rates to rise.

Switch to our mobile site