Wednesday, June 30, 2010

Case-Shiller Shows Home Price Improvement In 90% Of Cities

Case-Shiller Change In Home Values Mar-Apr 2010

Standard & Poors released its Case-Shiller Index Tuesday.  The index is a monthly home valuation report from select cities and among the private sector's most popular home pricing models.

In reviewing the April Case-Shiller Index and its accompanying analysis, it appears that the housing market's rebound is gathering momentum.

In the index's 20 tracked cities:

  • 18 of 20 improved from March to April 2010
  • Versus April 2009, home prices are up nearly 4 percent
  • The two "down" cities from April -- Miami and New York -- are off just 0.5% and 1.0% annually, respectively

Furthermore, as another sign of strength, San Diego, a city in which homeowners have lost a lot of equity since 2007, has now shown 12 straight months of home price improvement.

However, the Case-Shiller Index must be kept in context. It's far from perfect.

For one, the index reports on a 60-day delay; it's only now showing data from the end of April, when the federal homebuyer tax credit was expiring. Home sales have been weak since then it's been reported.

And second, the Case-Shiller Index is limited to just 20 cities nationwide. Therefore, the index doesn't consider every home sale in every American city -- it only considers a select few. Many more U.S. homes are excluded from the Case-Shiller Index than are included.

But, despite its flaws, the Case-Shiller Index remains important with respect to economic analysis. Much like the government’s Home Price Index, Case-Shiller helps to identify broader trends in housing that shape government and monetary policy.

Tuesday, June 29, 2010

The 1 Force That Can Really Change A Mortgage Rate

Inflation and mortgage ratesAll day, every day, conforming and FHA mortgage rates are in flux.  Rates move in response to hundreds of factors which exact varying levels of influence.

Among the biggest influences on mortgage rates is inflation.  When inflation is unexpectedly high, mortgage rates tend to rise quickly. Conversely, when inflation is unexpectedly low, rates tend to fall quickly.

But what is inflation?

By definition, inflation is when a currency loses its value; when what used to cost $1.00 now costs $1.10.

As consumers, we recognize inflation by the items we buy on a daily basis becoming more expensive.  However, it's not that goods are more expensive -- it's that the dollars we're using to buy them have become worth less.

With respect to mortgage rates, this is a big deal because mortgage rates are directly related to the price of a special type of bond called a mortgage-backed bond.

On Wall Street, mortgage-backed bonds are priced, bought, and sold in U.S. dollars so as inflation renders those dollars less valuable, so it does to mortgage-backed bonds as well. It's a chain reaction by which mortgage bonds lose value, leading investors sell them, causing bond prices to fall on the excess supply.

And, because mortgage rates move opposite of bond prices, as inflation takes hold, mortgage rates rise.

Lately, inflation has been exceptionally low. The Federal Reserve acknowledged as much in its last statement to the markets, and available data backs that position.  This, after predictions that inflation would be "runaway" in 2010.

The Cost of Living is up just modestly this year and it's helping mortgage rates stay low. And, so long as it lasts, the cost of owning a home will remain relatively inexpensive.

Monday, June 28, 2010

Look at these amazing loan rates!!

Can you believe these interest rates? After all of the concerns about China and the manipulation of their currency, look at this! There seems to be no investor concern at all!

Conf Rate 1 Point
30 Yr 4.375 Low for the YR
15 Yr 3.875
10 Yr 3.75
7 Yr 3.75
5 Yr 3.375
$417,000 max loan

30 Yr 4.75
15 Yr 4.50
203k 5.00
$417,000 max conf loan

30 yr 4.75%

Conf Jumbo
30 Yr 4.50 WOW
15 Yr 4.125
5 Yr 3.875

OC $729,750
LA $729,750
San Diego $697,500
Riverside $500,000
San Berdo $500,000

FHA Jumbo
30 Yr 4.875
15 Yr 4.50
5 Yr 3.75
Interest rates are great. If there is anything we can do to help you please let me know.

Family Fun in Escondido - Free

Escondido has great summer activities for the family. There are free movies at the Regal Theater Tuesday and Wednesday morning at 10 a.m. Here is their website for the movie list.

Also, the public library has a great summer reading program for both children and teens. They have activities that go along with the programs. Check out their activities. (children)  (teens)

How To Use A Fire Extinguisher In Your Home

In 2006, in the U.S., a person died in an in-home fire every 2 hours, 42 minutes, on average; someone was injured every 32 minutes. Nearly $7 billion of property damage was caused.

In this 2-minute video from Lowe's, you'll get a basic education on fire extinguishers:

  • How to pick the right fire extinguisher for the right job
  • Where to place fire extinguishers in a home
  • How to use the "PASS" technique on a fire

Keeping your household safe from fire requires preparation, and part of that preparation is keeping fire extinguishers on-hand, and ready for use.  Fire deaths are preventable -- make sure your home is properly equipped.

Friday, June 25, 2010

June Existing Home Sales Report headline

May Shows a Continued Strong Pace for Existing Home Sales- National Association of Realtors (NAR)

Is May’s Home Sales Decline an Alarming Signal of What’s to Come?- headline of an article in Housing Wire

Both of the above headlines appeared this past Wednesday. They seem to be reporting conflicting news as NAR speaks of a ‘continues strong pace’ while Housing Wire showed ‘alarm’ regarding the ‘sales decline’. How can two different news reports say exact opposite things on the same day? The most amazing thing is that both articles were written about the same report – NAR’s Existing Home Sales Report. And, both headlines were correct!

There are nuances in the report and both media sources decided to report on a different nuance. NAR correctly announced that sales were up and they were. This May’s sales were up over 19% from May of last year. Housing Wire showed alarm that sales had dropped and they did. Sales in May were 2.2% lower than they were last month (April).

If you are either buying or selling a home, the headlines can be very confusing. It may seem that the housing market is going up and down at the same time. Let me bring some clarity to reports you will see throughout the summer on the two key issues in real estate.


This one could drive you crazy. NAR will issue two reports each month. One is the Pending Home Sales Report which covers the homes that go into contract the previous month. The other is the Existing Home Sales Report which covers the houses that closed the previous month. The Existing Sales report will deliver great news over the summer as it will be reporting on the homes that are currently closing but went into contract before the tax credit expired (April 30). The Pending Sales Report will report on houses going into contract after the expiration of the tax credit. Those numbers will not be anywhere as strong. Since both will be released each month, it will seem like conflicting news.


This is another item that will lead to confusion over the next few months. First, each pricing report (there are seven major reports) measure different data. Some look at the price per square foot, some look at like houses and others just look at average sales price. Some look at data as recent as one month ago and others look at data that is three months old. Some look at homes only up to certain price points and others look at all price points. Since they are not comparing apples-to-apples, there will be many differences in their reports.

There can even be confusion if they are looking at only one data point. Let me give you an example that is happening right now: average sales price. There are some reports saying that the average price of homes selling is increasing and they are correct. That does not mean however that prices on individual homes are increasing. If more first time homes were purchased in April because of the tax credit, prices would be relatively low because the first time buyer often buys entry level homes in the community. If, in May, more second time buyers were purchasing their move-up home, the average price in that region would increase. That does NOT mean the average price of entry level homes would increase. It just means that the ‘mix of homes’ sold weighed more heavily to the second time (and more expensive) home.

What does this mean to you?

Whether you are buying or selling, I strongly suggest you sit down with a professional who is capable of explaining the headlines and informing you how the news will actually impact your outcome.

Buyers Take The May 2010 New Home Sales Data All The Way To The Bank

New Home Supply May 2009 - May 2010

One month after the federal homebuyer tax credit's official expiration, the New Home Sales report turned in its worst showing ever.

In May 2010, for the first time in 11 months, the inventory of unsold new homes crossed the 8-month marker, posting an 8.5 month supply overall.

Additionally, new homes sales volume fell to 300,000 units nationwide -- a drop of 32% and its lowest level since the Commerce Department started tracking data in 1963.

Now, universally, the press is referring to the May New Home Sales report as "poor".  A closer look, however, shows that may not be the case.

For one, we have to keep New Home Sales in perspective as a percentage of overall home sales. Yes, there were just 300,000 new homes sold in May, but there were also 5.66 million "existing" homes sold.

New Home Sales, therefore, accounted for just 5 percent of the total housing market -- a very small percentage.

Another reason why the weak New Home Sales data isn't so awful is that, when New Home Sales stall, it actually benefits home buyers.  Excess supply puts a strain on sellers which, in turn, gives buyers a tremendous amount of leverage in negotiation.

When home inventories are high, builders are more apt to appease their customers in hopes of making a sale.  For home buyers, this can result in buying a better product at a lower price.

Especially with builder confidence plummeting.

Since February 2009, housing has shown steady gains. There's been both peaks and valleys across units, inventories, and prices, but overall, the market is improving.  May's New Home Sales data shows how now may an opportune time to "buy new".

Wednesday, June 23, 2010

A Simple Explanation Of The Federal Reserve Statement (June 23, 2010 Edition)

Putting the FOMC statement in plain EnglishToday, in its first meeting in 5 weeks, the Federal Open Market Committee voted 9-to-1 to leave the Fed Funds Rate unchanged. 

The Fed Fund Rate remains within its target range of 0.000-0.250 percent.

In its press release, the FOMC said that, since April, "the economic recovery is proceeding" and that the jobs market "is improving gradually". Business spending "has risen significantly", too, with the exception of commercial real estate.

Today's statement is the 8th straight press release in which the Fed shows optimism for the U.S. economy, dating back to June 2009.  Since that time, the Fed has terminated all of the programs it created to support the economy through the economic crisis.

The recession is widely believed to be over.

And, although the Fed's statement acknowledged economic growth, it did highlight lingering threats, too.

  1. Employers are still reluctant to hire new workers
  2. European debt concerns could spill-over to the U.S.
  3. Bank lending is contracting

Also, as expected, the Fed re-affirmed its plan to hold the Fed Funds Rate near zero percent "for an extended period", citing that "inflation has trended lower" recently.

Mortgage market reaction has been positive thus far. Mortgage rates in are slightly improved post-FOMC.

The FOMC's next scheduled meeting is August 10, 2010.

A Simple Explanation Of The Federal Reserve Statement (June 23, 2010 Edition)

Putting the FOMC statement in plain EnglishToday, in its first meeting in 5 weeks, the Federal Open Market Committee voted 9-to-1 to leave the Fed Funds Rate unchanged. 

The Fed Fund Rate remains within its target range of 0.000-0.250 percent.

In its press release, the FOMC said that, since April, "the economic recovery is proceeding" and that the jobs market "is improving gradually". Business spending "has risen significantly", too, with the exception of commercial real estate.

Today's statement is the 8th straight press release in which the Fed shows optimism for the U.S. economy, dating back to June 2009.  Since that time, the Fed has terminated all of the programs it created to support the economy through the economic crisis.

The recession is widely believed to be over.

And, although the Fed's statement acknowledged economic growth, it did highlight lingering threats, too.

  1. Employers are still reluctant to hire new workers
  2. European debt concerns could spill-over to the U.S.
  3. Bank lending is contracting

Also, as expected, the Fed re-affirmed its plan to hold the Fed Funds Rate near zero percent "for an extended period", citing that "inflation has trended lower" recently.

Mortgage market reaction has been positive thus far. Mortgage rates in are slightly improved post-FOMC.

The FOMC's next scheduled meeting is August 10, 2010.

May 2010 Existing Home Sales Is Better Than The Headline Data Suggests

Existing Home Sales May 2009-May 2010Existing Home Sales dropped in May for the first time in 3 months but still managed to post its second-highest since November 2009, buoyed by the expiring federal tax credit program.

An "existing home" is a home that cannot be considered new construction; a resale of an existing home.  Existing Home Sales fell 2.2 percent in May.

The press is calling the drop in sales "unexpected" and disappointing, but a deeper look at the data shows the news isn't as bad as it first appears.

First, on a regional basis, sales were mostly solid. Only the Northeast region posted a loss. The West even managed a gain.

  • Northeast : -18.3 percent
  • Midwest : 0.0 percent
  • South : +0.5 percent
  • West : +4.9 percent

Second, the supply of homes for sale dropped to 8.3 in May and, because home prices are based on supply and demand, this is a positive for pricing.

By comparison, in 2008, the average existing home inventory was 10.4 months.

And, lastly, in May, first-time home buyers represented 46 percent of all buyers. The number was likely buoyed by the tax credit program but that doesn't damper the fact that first-time buyers provide a support floor for the housing market. 

First-time buyers enable "existing owners" to move-up to bigger homes, which, in turn, trickles up to the mid-size and jumbo markets.

Analysts expected more from May's numbers and that may explain why the reaction to the data is generally negative.  However, in many cities, home resales did just fine.

Tuesday, June 22, 2010

Making A Mortgage Rate Strategy Ahead Of The Fed's Meeting This Week

Fed Funds Rate June 2007-June 2010The Federal Open Market Committee begins a 2-day meeting today, its fourth scheduled meeting of the year, and fifth overall.

The FOMC is the monetary policy-setting part of the government and its primary tool for that purpose is the Fed Funds Rate

The Fed Funds Rate is the dictated rate at which banks borrow money from each other and, since December 16, 2008, the Federal Reserve has voted to keep the benchmark rate within a target range of 0.000-0.250 percent.

This is the lowest Fed Funds Rate in history. A rate near zero-point-zero percent renders borrowing by business and consumers cheap which, in turn, promotes investment and growth.

There's no expectation for the Fed to change the Fed Funds Rate after it adjourns tomorrow, but that doesn't mean consumers should expect mortgage rates to remain unchanged, too.

To the contrary, mortgage rates tend to be volatile when the FOMC is meeting.  This is because the FOMC issues a press release after each meeting and in that press release, it comments on the economy's unique threats, strengths and weaknesses.

When the FOMC speaks, Wall Street listens. 

The words of the Chairman Ben Bernanke's press release will be dissected and analyzed.  A single mention of higher-than-expected inflation levels, or better-than-expected growth, and traders will rush to dump their bond positions in favor of equities. 

This has a negative effect on mortgage rates.

Conversely, if the Fed is dour on the economy, mortgage rates may fall.

We can’t know for sure what the Fed will say or do tomorrow afternoon so if you're floating a mortgage rate and wondering whether to lock, the safe choice is to lock prior to 2:15 PM ET Wednesday.

Monday, June 21, 2010

The Largest Historic Homes In The United States

The Biltmore Estate in Asheville, NCIn 2009, the median size of new homes started was roughly 2,100 square feet. This figure was down from 2,200 square feet between 2005-2007 which, itself, was down from 2,350 in 2004.

Homes are getting smaller across the United States.

But, as compared to the nation's largest homes, the shrinking is laughable. The Biltmore Estate, built in 1895 by George Washington Vanderbilt II, measures 175,000 square feet -- 83 times the size of a typical home today.

The Biltmore Estate in Asheville, North Carolina is the largest home in the country and, meanwhile, another Vanderbilt-built property built in 1895 checks in at number two. The Breakers, in Newport, Rhode Island, measures 165,000 square feet and cost $150 million to build in today's dollars, adjusted for inflation.

Both homes are open to the public.

The next three largest U.S. estates in terms of square footage are:

Hearst Castle, arguably the most famous "large home" in the country, measures 60,645 square feet and ranks 7th.

See the complete list of Largest Historic Homes In The United States, including their build date and architecture style, on Wikipedia.

Friday, June 18, 2010

The Home Buyer Tax Credit Extension Has Not Been Passed Into Law (Yet)

Tax credit was not extended -- yetAs its June 30, 2010 closing deadline approaches, the federal home buyer tax credit is back in the news.

Unfortunately, the headlines are misleading.

Contrary to what you may have read (or heard), the federal home buyer tax credit has not been extended past June 30, 2010. At least not yet. And here's why there's confusion.

Look at these headlines from earlier this week:

  • Senate Extends Date On Home-Buying Tax Credit (Philadelphia Inquirer)
  • U.S. Senate Approves Extension Of Home Buyer Tax Credit (NASDAQ)
  • Senate Approves Home Tax Credit Extension (Reuters)

Now, nothing above is factually incorrect, but each neglects a key piece of the country's law-making process -- it takes more than the Senate to pass a law. For a bill to become a law, it must pass the Senate and the House of Representatives and then it must be ratified by the President.

To date, we've only cleared just one of those 3 steps.

This means that the federal home buyer tax credit has not been formally extended. As of now, it's still in discussion.  Ultimately, though, if the extension does pass, it's expected to extend the closing date deadline for home buyers beyond the original June 30, 2010 date into September 2010.

Homeowners must still have been in contract as of April 30, 2010 to claim up to $8,000 in federal tax credits.

Thursday, June 17, 2010

Good News For Sellers : Housing Starts Fall To 1-Year Low In May 2010

Housing starts June 2008 - May 2010Single-family housing starts plummeted to a one-year low in May, just 30 days after soaring to a 20-month high.  It's no wonder home builders are confused.

Against a revised April figure, Housing Starts fell 97,000 units in May, a figure representing almost one-fifth of the total market size.

It's the worst showing for Housing Starts since May 2009, a surprise to builders and economists alike.

Furthermore, single-family Building Permits plunged in May, too -- down 10 percent from April. A permit is a certification from local government that authorizes home construction.

Housing permits are a precursor to Housing Starts with 82% of homes starting construction within 60 days of permit-issuance. Fewer permits, therefore, directly reduces the number of new homes coming to market in the coming months.

For home buyers , this should create a sense of urgency.

Home prices are based on supply and demand and supply appears to be falling about the same time that economists predict a surge in home demand.  It could spell rising home prices and a complete loss of negotiation power with home sellers.

For now, though, home affordability remains high with properties cheap and mortgage rates near all-time lows. If you plan to buy a home later this year, the May 2010 Housing Starts data may be a reason to move up your timeframe a bit.

Wednesday, June 16, 2010

Loan Application Alert : Conforming, Interest Only Mortgages Guidelines Change Next Week

Fannie Mae changes the interest only guidelinesIf you plan to finance your home with a conforming interest only mortgage, get your loan application submitted no later than this Friday, June 18. 

Starting next week, Fannie Mae is clamping down on the popular loan product.

An "interest only" mortgage is exactly what its name implies -- a mortgage for which the monthly payments consist entirely of interest with no principal reduction. Because there's no amortization, payments are less costly on a month-to-month basis.

For example, assuming principal + interest payments at 5 percent, a $250,000 mortgage carries a monthly payment of $1,342.  The payment on a comparable interest only mortgage, however, drops to $1,042.

That's a payment difference of $300 and the size of the cost savings, not surprisingly, is the biggest reason why Fannie Mae is making its changes.

In its official announcement, Fannie Mae says it wants the give the interest only option to "borrowers who are in a position to choose it as a financial management tool" rather than allowing homeowners use it as an affordability tool for their budgets.

Going forward, there are new minimum standards for interest only home loans.

  • Applicants must have a 720 credit score or better
  • Applicants must have at least 24 months of reserves
  • The property type may not be a 2-unit, 3-unit or 4-unit
  • The property must be a primary residence, or vacation home

Furthermore, only purchase and rate-and-term refinances are eligible.  Cash out refinances are prohibited.

Interest only home loans aren't for everyone, but if you plan to finance with a Fannie Mae mortgage and interest only is your preference, get your loan application submitted as soon as possible. Starting Monday, approvals will be tougher to come by.

Tuesday, June 15, 2010

Shopping And Paying Bills Online? Here's Methods To Protect Your Online Financial Identity

In May 2010, Retail Sales at non-store retailers -- a category that includes Amazon and eBay -- topped $29 billion, up 16 percent from May 2009. Clearly, Americans are doing an increasing amount of shopping online.  And we're paying our bills online, too.

But how well are we protecting our identities?

In this 5-minute piece from NBC's The Today Show, you'll learn the basics of online fraud and methods to minimize the likelihood of identity theft.  Furthermore, the tips go beyond the basic "choose a challenging password".  For example, you'll hear about:

  • Why you shouldn't pay bills from a coffee shop
  • Who might be hiding behind an unprotected public wifi network
  • The dangers of storing credit card numbers with an online retailer

And, although, at one point, the interviewee goes over the top with respect to spyware and anti-phishing prevention, the point being made is a good one -- you can't be too careful with your online financials and common sense goes a long way.

Monday, June 14, 2010

Change Your Air Filters Monthly (But Don't Go Cheap)

3M Filtrete for HVAC units

As the mercury rises into the summer months, don't forget to change your home's air filters regularly.  It not only extends the life of your HVAC unit, but can help keep your energy costs down, too.

Not all air filters are created alike, however. Don't go cheap.

Your local hardware store carries a variety of air filters ranging in price from less than a dollar to $20 or more per filter. They're all purported to do the same job, but after watching this 1-minute video, you'll see why cheaper isn't necessarily better.

Airborne particles are smaller than most mesh filters. Pleated filters are recommended instead.


Most high-quality air filters start around $11 and can be purchased in bulk from Amazon at discounts of up to 20 percent.  3M's Filtrete line of products is a popular, well-selling brand and can last up to 3 months.

If your home has shedding pets or is dust-prone, consider changing them monthly.

Friday, June 11, 2010

Make Summer Memories!

School's Out and that means Summer's Here!  What to do? Struggling to come up with a summer's worth of activies?  From Day 1 to Day 77 of vacation, we've got you covered.  To check out the great ideas from LDS Living Magazine, just click on the picture to the right and you will have your best summer ever!  Go out and make a memory

FHA Mortgage Insurance Premiums Approved To Triple In Cost

FHA mortgage insurance premiums approved to triple Starting sometime later this year, the monthly cost to carry an FHA-insured mortgage is expected to rise.

In a near-unanimous vote, the House of Representatives gave the FHA power to raise the monthly mortgage insurance premiums it charges to its borrowers.

Currently, monthly mortgage insurance premiums are 0.55% of the unpaid loan balance, divided by 12.  The recently approved Federal Housing Administration Reform Act provides for an increase in monthly premium of up to 1.55 percent, among other details of the bill.

Despite the ability to charge 1.55 percent, FHA officials say an increase to 0.90 percent would be sufficient to self-insure its loans.

In everyday terms, assuming a $200,000 mortgage, the math to a homeowner looks as follows:

  • Current Premium (0.55%) : $91.67 monthly mortgage insurance premium
  • Expected Increase (0.90%) : $150.00 monthly mortgage insurance premium
  • Maximum Increase (1.55%) : $258.33 monthly mortgage insurance premium

A increase in monthly mortgage insurance premiums will reduce home affordability and strain household budgets. 

The news isn't all terrible, however.

Because higher monthly insurance premiums are expected to pad the FHA coffers sufficiently, the FHA has said it plans to reduce its upfront mortgage insurance premium paid at closing from 2.25 percent down to 1.000 percent. 

On the same $200,000 mortgage, a move like that would reduces closing costs by $2,500.

The bill awaits companion legislation in Senate and final approval into law, but considering the House's lopsided vote Thursday, it could happen rather quickly.  If you're planning to buy or refinance a home using an FHA mortgage, you may find that waiting to take the next step could be a costly one, long-term.

The FHA insured close to a quarter of all mortgages made in the first three months of 2010.

Thursday, June 10, 2010

Bank Reposessions Reach Record Levels For The Second Straight Month

Foreclosure concentration, by state (May 2010)

According to foreclosure-tracking firm, bank repossessions reached record levels for the second straight month in May, topping 93,000 properties nationwide.

As compared to May 2009, all 50 states now show an increase in annual REO activity.

Data like that won't surprise today's active home buyers.  Foreclosed homes are prevalent, available and accounted for one-third of all home resales made in April

Furthermore, total foreclosure actions -- the sum of REO, default notices, and foreclosure auctions in May -- topped 300,000 for the 15th straight month.

Foreclosures remain a huge influence on the housing market.

However, two interesting trends emerged in the data:

  1. 9 of the top 10 metro areas for foreclosure posted annual activity decreases
  2. Each of the top 4 states for Foreclosures per Household posted annual activity decreases

We can infer, therefore, that foreclosure activity may be in permanent decline in the areas hardest hit through 2007, 2008, and 2009.  In 2010, the data shows, foreclosures are waning.

This is reason for optimism -- especially as FHA delinquencies slow nationwide. As fewer homeowners go delinquent, the pace of foreclosures will slow further and that should help boost home values on every block in the country.

If you've been considered bank-owned homes for your own purchase, give a look at the RealtyTrac foreclosure report.  It's provides insight on a state-by-state level, and in the nation's largest metropolitan areas. 


Then, to complement your research, talk to your real estate about the foreclosure market and what opportunities may exist.   Competition for bank-owned homes can be fierce at times, but there's plenty of "deals" out there.

You just have to know where to look.

Wednesday, June 9, 2010

Conforming Loan Costs Are Rising, Says Freddie Mac

Mortgage discount points are risingMortgage rates may be dropping, but mortgage costs are not.

According to Freddie Mac, the average required discount points on a conforming mortgage rate are higher by 0.1 percent since early-May.

A "discount point" is prepaid mortgage interest; an up-front fee paid by a borrower in exchange for a lower mortgage rate. In most cases, discount points are tax-deductible.

Tax-deductible or not, though, rising costs are rising costs and Freddie Mac glosses over it.  In its weekly press release, the government group offers mortgage rate comparisons to weeks prior, but doesn't do the same for required points.

The press fails to mention discount points entirely.

An increase of 1/10 percent in discount points costs homebuyers and refinancing households an extra $100 per $100,000 borrowed.

The hike reminds us that there's more to a mortgage than just its rate -- costs matter, too.  And if you've only been watching the headlines, you would have missed how costs are rising.

Tuesday, June 8, 2010

Fannie Mae's Loan Quality Initiative : Repulling Your Credit Just Before Closing

Fannie Mae adds credit repullsA new loan quality initiative from Fannie Mae is making it harder for home buyers and refinancing homeowners everywhere to close on a mortgage.

Beginning June 1, 2010, with all new applications, Fannie Mae wants lenders to verify that borrowers have not taken on new debt during the underwriting phase of the mortgage. 

If new debts are found, the mortgage is subject to a re-underwrite and a possible turndown.

For Fannie Mae, the goal is to reduce the number of loans that go bad because of new, non-disclosed debt. Lenders have the freedom to verify in whatever manner they wish, but in most cases, the verification process will amount to a credit re-pull made just prior to closing.

The underwriters will be looking for 3 things in particular -- even after your loan is approved.

First, your updated credit report will show your current credit card bills and minimum monthly payments.  Those numbers will replace your original numbers made at the time of application.  If the debts exceed a certain threshold, your loan will be denied.

Second, underwriters will be looking at your updated credit score. If your FICO has dropped below minimum lending standards, your loan will be denied. Or, you may be subject to a new loan-level pricing adjustment. 

Loan level pricing adjustments are mandatory loan fee based on your credit score.

And, lastly, underwriters will be looking at your credit report's Credit Inquiry section. The goal is to see if you've been applying for credit elsewhere. Underwriters can use this information at their discretion.

Fannie Mae's Loan Quality Initiative is just one more way that the government-backed group is trying to improve its loan pools. Unfortunately, it'll mean more turndowns for mortgage applicants.

Therefore, take extra care of your credit between the time of application and the time of closing. Don't buy new cars, don't buy new appliances, and -- most definitely -- don't open new credit cards.  Be extra safe with your credit because a mortgage application that's supposedly cleared-to-close can be revoked at the eleventh hour.

When in doubt, talk to your loan officer about what may or may not trigger the Loan Quality Initiative.  Your loan approval is at stake.

Friday, June 4, 2010

May 2010 Jobs Report Gives A Temporary Boost To Home Affordability

Unemployment Rate 2007-2010On the first Friday of each month, the Bureau of Labor Statistics releases its Non-Farm Payrolls data from the month prior. 

The release is more commonly called "the jobs report" -- a major factor in mortgage rates and monthly payments.

Especially now.

With the recession officially over and growth returning to the U.S. economy, the recovery's next frontier is jobs. As job growth increases, home affordability should take a hit.  Here's why:

  1. As the number of working Americans increases, so should total consumer spending
  2. As consumer spending increases, so should a return to risk-taking on Wall Street
  3. As risk-taking returns to Wall Street, bond markets should start to lose

Mortgage rates, therefore, should rise.

Furthermore, as the jobs market stabilizes and recovers, renters should be more apt to buy their first home, and homeowners should be apt to up-size.  More home buyers means more competition for homes and higher home prices typically follow.

Job growth can be trickle-up for housing.

Today, however, the jobs data was not so strong. According to the government, 431,000 jobs were created in May, but of those new jobs, 95.4% represented temporary staffing for the 2010 Census.  The number of private-sector jobs created fell well short of expectations and Wall Street is voting with its dollars right now.  Mortgage bonds are gaining so, therefore, rates are falling.

The May 2010 jobs report may not reflect well on the economy, but home affordability around the country is improving because of it.

Thursday, June 3, 2010

Pending Home Sales Data Shows Great Deals On Homes Are Getting Harder To Find

Pending Home Sales Oct 2008 to April 2010The Pending Home Sales Index shot higher in April as low mortgage rates and a soon-to-expire federal tax credit spurred home buying across the county.

A "pending home sale" is a home that's under contract to sell but not yet closed.

Region-by-region, April's pending home sales varied versus March's data:

  • Northeast Region: +29.5%
  • Midwest Region : +4.1%
  • South Region : -0.6% (after a +15.9% posting in March)
  • West Region : +7.5%

On an annual basis, the Pending Home Sales Index is higher by 22 percent.

April marks the third straight month that pending home sales are up and today's buyers should take note. This is because, according to the National Association of Realtors®, 80% of homes under contract close within 60 days.

In other words, May and June's existing home sales data should be similarly strong, causing the real estate market to gently shift in favor of sellers.  In fact, already, we're seeing home resales touch multi-year highs while new home supplies fall to multi-year lows.

All of it tends to push home prices higher while simultaneously reducing buyer negotiation leverage. That, coupled with the high probability of higher mortgage rates ahead, means that finding "deals" will get tougher for the average home buyer.

In looking at the housing market data, it appears that the best month in which to have bought a home this year was February.  The next best time may be right now. 

Talk to your real estate agent if you're planning to buy a home this year.  It may be sensible to move up your time frame a few months.

Wednesday, June 2, 2010

Consumer Confidence Hints At Higher Home Prices And Higher Mortgage Rates, Too

Consumer Confidence Index May 2008-May 2010The Consumer Confidence Index is rising, a potentially double-edged sword for Americans, in general.

According to The Conference Board, economic confidence is as high as it's been since August 2007 -- 4 months before the start of the recession.  Americans are optimistic again.

Confidence matters to the economy because as confidence increases, in theory, consumer spending follows.  Consumer spending accounts for 70 percent of the U.S. economy.

It's why Wall Street is responsive to confidence data.

When consumer confidence is rising, households start to make big-ticket purchases they may have otherwise put off indefinitely.  Maybe it's a replacing old appliances; or, trading in an old automobiles; or, splurging on a vacation.

Rising confidence can also spur real estate sales.

When confidence is rising, a growing family that chose to "make do" in their 3-bedroom, 1.5-bathroom starter home may opt to move-up to a 4-bedroom, 3-bath instead at a slightly higher monthly carrying cost.  And there are families in every city in every state making those same decisions.

As a result, the housing market gets a boost -- especially in the mid-to-upper price ranges. Values rise on higher demand for homes.

The downside is that growing confidence tends to push conforming and FHA mortgage rates up.  This is because an expanding economy draws investment dollars away from bonds and into stocks -- including mortgage bonds. 

The reduced demand for mortgage-backed bonds leads bond prices to fall and mortgage rates to rise.  Sometimes by a little, sometimes by lot.

So, if you're buying a home or thinking of a refinance, rising confidence in the economy may be a signal to act sooner rather than later.  Talk to your real estate agent and/or your loan officer about next steps and get your plan in place.

Tuesday, June 1, 2010

What's Happening in San Diego - June 2010

The new June Calendar of Events is up and ready.  Find some fun things to do this month.  Click on the June icon on the sidebar.

How To Replace Your New Home's Deadbolt Locks

After moving into a new home , you should immediately replace its deadbolt locks.  It's not just the home's former residents that have the key, after all, but so might a relative, a friend, a neighbor, a dog-walker, and others.

You may call a locksmith for the job, but you can save some money if you can do-it-yourself. 

In this detailed, 2-minute video, you'll learn how to remove and replace a deadbolt lock using nothing but a Phillips screwdriver and a deadbolt from a hardware store.  It's a simple project that requires little mechanical skill.

And one that can make your new home more safe.