April 27, 2011 from Realty Times
Low Mortgage Rates a Plus for Improving Housing Market
by Ed Ferrara
This past week's released economic data reports came from several housing market areas, all of which showed some improvement over the past month. At the same time, Freerateupdate.com's daily survey of wholesale and direct lenders show that mortgage rates have continued to remain stable and at low levels for the past week.
Conforming 30 year fixed mortgage rates are at 4.750%, 15 year fixed mortgage rates are at 4.000% and 5/1 adjustable mortgage rates are at 3.125%. Conforming mortgage loans require good credit in order to obtain lender approval and the lowest mortgage rates with 0.7 to 1% origination fee. Conforming 30 year and 15 year fixed rate mortgages are the most popular of this group because they offer security with a consistent mortgage payment over the life of the loan.
The trend with borrowers for several years continues to be FHA mortgage loans. FHA 30 year fixed mortgage rates are at 4.500%, FHA 15 year fixed mortgage rates are at 4.250% and FHA 5/1 adjustable mortgage rates are at 3.750%. For borrowers who have a limited amount of available funds, FHA mortgage loans offer a low down payment option, as well as easier credit qualifying. FHA also accepts gifts from several sources that can be used for the down payment. These benefits often override any FHA downsides, such as higher FHA closing costs (APR) due to the upfront mortgage insurance premium and other various FHA fees.
Jumbo mortgage interest rates continue to be consistently low and beneficial for the high end borrower. Jumbo 30 year fixed mortgage rates are at 5.375%, jumbo 15 year mortgage rates are at 5.000% and jumbo 5/1 adjustable mortgage rates are at 3.875%. Borrowers need jumbo mortgage loans for mortgage financing above the conforming loan limit which is $417,000 to $729,000 depending on location. In order to obtain these low jumbo mortgage rates with 0.7 to 1% origination fee, borrowers must have outstanding credit and the ability to meet approval guidelines set by lenders.
MBS prices (also known as mortgage backed securities) are dependent upon market conditions and investor sentiment. Mortgage rates move in the opposite direction of MBS prices. Recent data released showed a very necessary improvement in the sluggish housing market. For the month of March, housing starts saw a jump, existing home sales increased and home mortgages rose. Yesterday, the Census Bureau and Department of Housing and Urban Development reported that new home sales were stronger than expected. Through all of this, MBS prices fluctuated a little in both directions, but never enough to make a change in mortgage.
Copyright © 2011 Realty Times. All Rights Reserved.
Thursday, April 28, 2011
Monday, April 25, 2011
Builder Confidence and Existing-Home Sales
April 25, 2011 from Realty Times
Real Estate Outlook: Builder Confidence and Existing-Home Sales
by Carla Hill
The prevalence of short sales and foreclosures has prompted a new bill to be considered in Congress. According to the National Association of Realtors, this new bill could "improve the process for approving short sales" and "bring relief to distressed home owners who are unable to keep their homes and hope to avoid foreclosure."
The process in place now is said to be time-consuming and inefficient.
Ron Phipps, NAR President, says, "As the leading advocate for home ownership and housing issues, Realtors® want to help more home owners avoid foreclosure by facilitating a short sale when a family is absolutely unable to keep their home; however, that can only happen if lenders and servicers approve short sale offers in a reasonable amount of time. Streamlining short sales transactions will reduce the amount of time it takes to sell the property, improve the likelihood that the transaction will close and reduce the overall number of foreclosures. This benefits sellers, lenders, buyers and the entire community."
And communities need all the help they can get. Builder confidence for newly built, single-family homes fell in March, leaving the Index almost stagnant for the last 6 months. According to the National Association of Home Builders (NAHB), the South was to largely blame, dropping 4 points on the Housing Market Index scale.
"The spring home buying season is getting off to a slow start due to persistent concerns about home values as more foreclosures seem to be hitting the market, increasingly restrictive lending requirements for home buyers and builders, and the slow pace of economic recovery," acknowledged NAHB Chief Economist David Crowe. "While pockets of improving activity are appearing in some markets, the best sales activity appears to be happening in the lower price ranges, where first-time buyers have greater flexibility than repeat buyers who must sell their current home. Consumers who can take advantage of today’s low mortgage rates and very attractive pricing are finding bargains and are buying."
The good news for builders? Nationwide housing starts rose by 7.2 percent in March, according to the U.S. Commerce Department. Bob Nielsen, chairman of the National Association of Home Builders (NAHB), says, "While the overall rate of new-home production remains quite low and is still being weighed down by significant uncertainties among both home builders and buyers, this latest report is encouraging. It means that some builders are cautiously beginning to re-stock their extremely thin inventories of new homes in anticipation of gradual improvement in consumer demand as the economy slowly inches toward recovery."
All regions except the Northeast experienced gains in March. The West led the way with a 37.1 percent gain. The Midwest and South gained 6.9 and 6.3 percent, respectively.
And the sale of existing-homes rose in March, as well. This continues the uneven recovery we've been experiencing.
Lawrence Yun, NAR chief economist, expects this improving sales pattern to continue. "Existing-home sales have risen in six of the past eight months, so we’re clearly on a recovery path," he said. "With rising jobs and excellent affordability conditions, we project moderate improvements into 2012, but not every month will show a gain – primarily because some buyers are finding it too difficult to obtain a mortgage. For those fortunate enough to qualify for financing, monthly mortgage payments as a percent of income have been at record lows."
And single-family home sales rose 4.0 percent to a seasonally adjusted annual rate of 4.45 million in March from 4.28 million in February, but are 6.5 percent below the 4.76 million level in March 2010. The median existing single-family home price was $160,500 in March, down 5.3 percent from a year ago. Median prices were down in all regions, ranging from 3.0 to 11.2 percent below year ago levels.
Regionally, existing-home sales rose 3.9 percent in the Northeast, but are 12.1 percent below March 2010. The Midwest saw just a 1.0 percent gain and is still 13.1 percent below year ago levels. The West dropped a marginal 0.8 percent and the South actually rose 8.2 percent.
Buyers are expected to return to the market, though. NAR President, Ron Phipps, reports, "As buyers gain more financial security, the advantages of home ownership become more obvious."
Copyright © 2011 Realty Times. All Rights Reserved.
Real Estate Outlook: Builder Confidence and Existing-Home Sales
by Carla Hill
The prevalence of short sales and foreclosures has prompted a new bill to be considered in Congress. According to the National Association of Realtors, this new bill could "improve the process for approving short sales" and "bring relief to distressed home owners who are unable to keep their homes and hope to avoid foreclosure."
The process in place now is said to be time-consuming and inefficient.
Ron Phipps, NAR President, says, "As the leading advocate for home ownership and housing issues, Realtors® want to help more home owners avoid foreclosure by facilitating a short sale when a family is absolutely unable to keep their home; however, that can only happen if lenders and servicers approve short sale offers in a reasonable amount of time. Streamlining short sales transactions will reduce the amount of time it takes to sell the property, improve the likelihood that the transaction will close and reduce the overall number of foreclosures. This benefits sellers, lenders, buyers and the entire community."
And communities need all the help they can get. Builder confidence for newly built, single-family homes fell in March, leaving the Index almost stagnant for the last 6 months. According to the National Association of Home Builders (NAHB), the South was to largely blame, dropping 4 points on the Housing Market Index scale.
"The spring home buying season is getting off to a slow start due to persistent concerns about home values as more foreclosures seem to be hitting the market, increasingly restrictive lending requirements for home buyers and builders, and the slow pace of economic recovery," acknowledged NAHB Chief Economist David Crowe. "While pockets of improving activity are appearing in some markets, the best sales activity appears to be happening in the lower price ranges, where first-time buyers have greater flexibility than repeat buyers who must sell their current home. Consumers who can take advantage of today’s low mortgage rates and very attractive pricing are finding bargains and are buying."
The good news for builders? Nationwide housing starts rose by 7.2 percent in March, according to the U.S. Commerce Department. Bob Nielsen, chairman of the National Association of Home Builders (NAHB), says, "While the overall rate of new-home production remains quite low and is still being weighed down by significant uncertainties among both home builders and buyers, this latest report is encouraging. It means that some builders are cautiously beginning to re-stock their extremely thin inventories of new homes in anticipation of gradual improvement in consumer demand as the economy slowly inches toward recovery."
All regions except the Northeast experienced gains in March. The West led the way with a 37.1 percent gain. The Midwest and South gained 6.9 and 6.3 percent, respectively.
And the sale of existing-homes rose in March, as well. This continues the uneven recovery we've been experiencing.
Lawrence Yun, NAR chief economist, expects this improving sales pattern to continue. "Existing-home sales have risen in six of the past eight months, so we’re clearly on a recovery path," he said. "With rising jobs and excellent affordability conditions, we project moderate improvements into 2012, but not every month will show a gain – primarily because some buyers are finding it too difficult to obtain a mortgage. For those fortunate enough to qualify for financing, monthly mortgage payments as a percent of income have been at record lows."
And single-family home sales rose 4.0 percent to a seasonally adjusted annual rate of 4.45 million in March from 4.28 million in February, but are 6.5 percent below the 4.76 million level in March 2010. The median existing single-family home price was $160,500 in March, down 5.3 percent from a year ago. Median prices were down in all regions, ranging from 3.0 to 11.2 percent below year ago levels.
Regionally, existing-home sales rose 3.9 percent in the Northeast, but are 12.1 percent below March 2010. The Midwest saw just a 1.0 percent gain and is still 13.1 percent below year ago levels. The West dropped a marginal 0.8 percent and the South actually rose 8.2 percent.
Buyers are expected to return to the market, though. NAR President, Ron Phipps, reports, "As buyers gain more financial security, the advantages of home ownership become more obvious."
Copyright © 2011 Realty Times. All Rights Reserved.
Saturday, April 9, 2011
The Numbers on Buying a House
April 7, 2011 from Realty Times
The Numbers on Buying a House by Carla Hill
It can be a tricky question. How much home can you really afford? From employment status, to savings, downpayment, and even spending habits, there are a myriad of factors that come into play.
Here is a list of items to consider before settling on a budget.
1. Monthly Payment: Conventional wisdom tells us that your mortgage payment should be no more than 28 of your gross monthly income. This means that if you make $50,000 a year, the maximum amount you would safely want to pay each month is $1,166. How do you figure this for you own salary? Take ___ (salary) x .28 = total dollar amount for year. Then divide the total dollar amount by 12 (months in the year) and there you have it!
The National Association of Realtors also gives this simple equation for renters to use to figure out how much they can afford. Multiply your rent by 1.32 and that will equal your affordable mortgage payment.
2. Job Security: Have you just switched jobs? Is your company experiencing layoffs? In times of economic uncertainty, you may find it best to stay put. This is why many economic analysts keep saying that a housing recovery is dependent on a jobs recovery. When jobs return, so will the buyers.
3. Savings: The state of American savings is scary. According to Visual Economics.com, the average family has $117,951 worth of debt and only $3,800 in savings.
And a quarter of Americans have no savings at all! Half have nothing saved for retirement. Talk about crossing your fingers that social security will hold out for a while.
New grads are encountering an even scarier situation. The average college graduate has well over $20,000 in student loans to repay, and according to the New York Times, "Paying back student loans is likely to be especially difficult for recent graduates ... because the unemployment rate for college graduates ages 20 to 24 was 8.7 percent in 2009 — the highest annual rate on record and a substantial rise from 5.8 percent in 2008."
How does your debt-to-income ratio stack up? The Federal Reserve thinks debt adding up to more than 40% of your gross income could indicate financial distress.
The U.S. savings rate has risen steadily since the recession hit. It is now at 5.8 percent (American Express Spending & Saving Tracker). Hopefully, this rate will continue to be a trend.
4. Emergency Fund: Before you even begin to think about buying a house or moving, you must have an 8-month emergency fund in the bank. This means you need to add up your living expenses for a month. Include all the necessities and things that must be paid (rent or mortgage, car payments, insurance, food, gas money, electric, phone, tuition, day care, etc). Then multiply this number by 8. You must have this in case you or your spouse loses your job, gets sicks, or some other disaster hits your family.
5. Downpayment: This is savings in addition to your 8-month emergency fund. And a downpayment should be at least 20 percent of your purchase amount.
Look at it this way. If your monthly expenses are $2,000 a month and you want to buy a $100,000 house, you'll need a bare minimum of $36,000 in the bank to truly afford this move. That doesn't include cash needed for closing costs, repairs, moving expenses, and renovation.
6. Lifestyle and Extraneous Factors: Everyone has different wants and needs. You may be fine spending a little more for the house of your dreams in exchange for taking fewer vacations. Others abhor the statement, "house rich, cash poor," and instead would rather have funds for shopping, dining out, and travel. And don't forget about extraneous factors, such as aging parents, car repairs and maintenance. Things may come out of nowhere!
Buying a house is a fulfilling experience, but it comes with a lot of financial responsibility that shouldn't be taken lightly. Be sure to mull these items over when considering a buy.
Copyright © 2011 Realty Times. All Rights Reserved.
The Numbers on Buying a House by Carla Hill
It can be a tricky question. How much home can you really afford? From employment status, to savings, downpayment, and even spending habits, there are a myriad of factors that come into play.
Here is a list of items to consider before settling on a budget.
1. Monthly Payment: Conventional wisdom tells us that your mortgage payment should be no more than 28 of your gross monthly income. This means that if you make $50,000 a year, the maximum amount you would safely want to pay each month is $1,166. How do you figure this for you own salary? Take ___ (salary) x .28 = total dollar amount for year. Then divide the total dollar amount by 12 (months in the year) and there you have it!
The National Association of Realtors also gives this simple equation for renters to use to figure out how much they can afford. Multiply your rent by 1.32 and that will equal your affordable mortgage payment.
2. Job Security: Have you just switched jobs? Is your company experiencing layoffs? In times of economic uncertainty, you may find it best to stay put. This is why many economic analysts keep saying that a housing recovery is dependent on a jobs recovery. When jobs return, so will the buyers.
3. Savings: The state of American savings is scary. According to Visual Economics.com, the average family has $117,951 worth of debt and only $3,800 in savings.
And a quarter of Americans have no savings at all! Half have nothing saved for retirement. Talk about crossing your fingers that social security will hold out for a while.
New grads are encountering an even scarier situation. The average college graduate has well over $20,000 in student loans to repay, and according to the New York Times, "Paying back student loans is likely to be especially difficult for recent graduates ... because the unemployment rate for college graduates ages 20 to 24 was 8.7 percent in 2009 — the highest annual rate on record and a substantial rise from 5.8 percent in 2008."
How does your debt-to-income ratio stack up? The Federal Reserve thinks debt adding up to more than 40% of your gross income could indicate financial distress.
The U.S. savings rate has risen steadily since the recession hit. It is now at 5.8 percent (American Express Spending & Saving Tracker). Hopefully, this rate will continue to be a trend.
4. Emergency Fund: Before you even begin to think about buying a house or moving, you must have an 8-month emergency fund in the bank. This means you need to add up your living expenses for a month. Include all the necessities and things that must be paid (rent or mortgage, car payments, insurance, food, gas money, electric, phone, tuition, day care, etc). Then multiply this number by 8. You must have this in case you or your spouse loses your job, gets sicks, or some other disaster hits your family.
5. Downpayment: This is savings in addition to your 8-month emergency fund. And a downpayment should be at least 20 percent of your purchase amount.
Look at it this way. If your monthly expenses are $2,000 a month and you want to buy a $100,000 house, you'll need a bare minimum of $36,000 in the bank to truly afford this move. That doesn't include cash needed for closing costs, repairs, moving expenses, and renovation.
6. Lifestyle and Extraneous Factors: Everyone has different wants and needs. You may be fine spending a little more for the house of your dreams in exchange for taking fewer vacations. Others abhor the statement, "house rich, cash poor," and instead would rather have funds for shopping, dining out, and travel. And don't forget about extraneous factors, such as aging parents, car repairs and maintenance. Things may come out of nowhere!
Buying a house is a fulfilling experience, but it comes with a lot of financial responsibility that shouldn't be taken lightly. Be sure to mull these items over when considering a buy.
Copyright © 2011 Realty Times. All Rights Reserved.
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