Posted by Rosemarie Litoff on February 12, 2009 under Uncategorized | 
With Congress reaching agreement on a $789 billion stimulus package for Americans and the President expected to sign it into law, the clock may be ticking for this year’s home buyers and homeowners.
The package contains two benefits related to housing.
The first provision is fairly well-known. It gives first-time home buyers an $8,000 tax credit provided they purchase a home between January 1, 2009 and August 31, 2009.
This is a true tax credit.
To reduce misuse and abuse, however, the $8,000 credit is contingent on home buyers holding property for at least 3 years. If the home is sold in fewer than 3 years, the tax credit must be repaid to the government. It’s also worth noting that the date range applies closings and not sales agreements.
Closings must occur within these 8 months to be eligible.
A second noteworthy feature in the package is that the stimulus package gives existing homeowners incentive to “green” their homes. With available tax credits for energy-efficient windows and doors, furnaces and insulation, homeowners can claim larger tax deductions based on home improvement, up to $1,500.
But, just because the government provides housing-related tax benefits doesn’t mean you should just act on them blindly. Tax liability is a highly individual item and you may be ineligible for any number of reasons. Be sure to discuss your plans with a qualified accountant before committing to a plan.
Posted by Rosemarie Litoff on February 11, 2009 under Uncategorized |
His speech was much anticipated, but it was what Treasury Secretary Tim Geithner didn’t say Tuesday that caused mortgage markets to improve.
Mostly it was because of “safe-haven” buying.
Safe-haven buying is when investors move cash to the safest investments possible for fear of losing their money elsewhere.
This existence of the pattern is evident in looking at yesterday’s Dow Jones Index timeline. Stock markets were down some in the morning. Then, at 11:00 AM ET, in the moments immediately following the public release of Geither’s speech as text, stock market plunged by about 2 percent.
As the speech was delivered live, markets fell by 1 percent more.
It’s not that Geithner’s speech was a bad one, per se. It’s just that Wall Street was looking for a detailed plan that included remedies for banking, housing, and the economy overall. What it got instead was an outline for a plan and a frank discussion about the complexity of the economy.
Stock markets had been bid up last week in anticipation of a bailout. Yesterday’s action was the subsequent sell-off because economic uncertainty continues to linger.
It all ended up being good news for mortgage rate shoppers, though. When the dollars fled the stocks, they made their way towards safer, less-risky investments like mortgage bonds. And, because mortgage-backed bonds set the “going rate” for conforming mortgages nationwide, the added demand yesterday caused mortgage rates to fall.
For now, rates remain near the bargain levels set in early-January. As the Treasury clarifies its plan in the coming weeks, however, rates will be susceptible to big change.
Posted by Rosemarie Litoff on February 10, 2009 under Uncategorized |
Friday, Fannie Mae rolled-back one of its least popular mortgage guidelines updates of the last 12 months.
Effective March 1, 2009, real estate investors can once again own and finance up to 10 individual properties. The restriction reversal does come with new minimum requirements, however.
Homeowners buying a 5th, 6th, 7th, 8th, 9th or 10th home must meet the following standards, as set forth by Fannie Mae:
- 720 credit score
- 25% downpayment for a 1-unit (30% for a 2-4 unit)
- No mortgage delinquencies in the last 12 months
- 6 months of reserves for each investment property
In other words, Fannie Mae is re-opening the lending spigot for real estate investors with good credit, a sizeable downpayment and ample reserves.
According to Fannie Mae, the change rationale is that experienced investors can “play a key role in the housing recovery”. Until now, foreclosure auctions have gone at less than full speed because investors unable to pay cash have been halted by the existing 4-property Fannie Mae limit.
Going forward, expect a more expedient foreclosure liquidation nationwide which should, in turn, provide further support for the housing market.
And lastly, not to be forgotten, homeowners with more than 4 properties can finally participate in the ongoing conforming mortgage Refi Boom. Until now, they’ve been stymied by the 4-property restriction, too.
Posted by Rosemarie Litoff on February 9, 2009 under Uncategorized |
Despite a weakening employment outlook for Americans, the economy flashed signs of a rebirth last week. It wasn’t enough to reverse the recent mortgage rate trend, however.
For the fourth week in a row, mortgage rates increased, if only slightly.
The biggest story of last week was the revelation that 2.5 million jobs have been lost since Labor Day. Strangely, this data may lead to two boosts toward a market recovery in the days ahead.
- Monday, the Senate is expected to vote on an $820 billion stimulus package
- Tuesday, Treasury Secretary Geithner is expected to outline a bank recovery program
Both of these events figure to be heavily influenced by the number of out-of-work Americans and the pressure to restore confidence in the U.S. economy. We learned last week that Americans have moved from spenders to savers, after all, and in the absence of consumer spending, an economy is hard-pressed to expand.
In other words, rising unemployment is putting pressure on Capitol Hill and Wall Street thinks the final government plan will be good for business.
This is one reason why the stock market added 2 percent Friday just hours after the worst jobs report in 34 years. Traders are ever-hopeful. What it means for mortgage rates is a little less clear.
Never mind the data released this week, mortgage rates will be most influenced by news out of Washington. In addition to the Stimulus Package vote and Geithner’s plan for the U.S. banks, Fed Chairman Ben Bernanke will testify Tuesday in front of the House Financial Services Committee.
In all, there’s a lot for mortgage bond traders in which to sink their teeth this week and most of it is concentrated on Monday and Tuesday. Expect high levels of volatility and rapid changes in rates.
Unfortunately, we can’t know if rates will be moving up or down so if you see a rate that fits your budget, consider locking it in with your loan officer. If rates rise, they’re expected to rise quickly.
Posted by Rosemarie Litoff on February 6, 2009 under Uncategorized |
Employment figures released this morning show that the economy has now shed 3.6 million jobs since December 2007, included close to half that in the last 3 months alone. The Unemployment Rate is now 7.6%.
But jobs aren’t fading in every housing market equally.
As reported by Ajilon Professional Staffing, there are still areas around the country in which unemployment rates are low and job outlooks are strong.
Led by Madison, WI, Ajilon calls them “10 Cities For Job Growth in 2009” and they are:
- Madison, WI
- Washington, D.C.
- Boston, MA
- Richmond, VA
- Milwaukee, WI
- Pittsburgh, PA
- Baltimore, MD
- Seattle, WA
- Houston, TX
- Dallas, TX
There’s no common denominator uniting the list — cities are buffered by industries as varied as healthcare, energy, and technology. However, it’s worth noting that — in each of these 10 towns — housing markets seem to be performing above-average versus the rest of the nation.
Clearly, there’s a link between jobs and housing.
Posted by Rosemarie Litoff on February 5, 2009 under Uncategorized |
Comparing July’s conforming mortgage rates to today’s average rates, there’s a 1.5 percent difference in favor of homeowners.
Rate drops like that make big differences in a household budget. Look at these before-and-after payments, based on rates from the chart:
$150,000 mortgage ($144 savings/month)
- July 2008: $958 monthly
- February 2009: $814 monthly
$250,000 mortgage ($240 savings/month)
- July 2008: $1,597 monthly
- February 2009: $1,357 monthly
$350,000 mortgage ($335 savings/month)
- July 2008: $2,235 monthly
- February 2009: $1,900 monthly
Of course, the other side of the story is that while mortgage rates fell in late-2008, the mandatory lender fees that accompanied them rose. That lessened some of the benefits of getting lower rates, but certainly not all of them.
According to recent housing data, buyers are back writing contracts and listed homes are selling quickly. Considering how mortgage rates have led monthly payments lower, maybe it shouldn’t be much of a surprise.
Posted by Rosemarie Litoff on February 4, 2009 under Uncategorized |
A real estate trade group reported Tuesday that Pending Home Sales ticked higher in December 2008. A “pending home sale” is a home under contract to sell, but not yet closed.
The group positions Pending Home Sales report as a predictor of future activity, suggesting that home sales will spike 60 days hence.
This is good news for the economy.
However, despite the Pending Home Sales report’s correlation to the actual number of homes sold in the future, that connection may not be the report’s best use. This is because of what Pending Homes Sales doesn’t measure.
Specifically not included in Pending Homes Sales are:
- Sales of new construction homes
- Sales of For Sale By Owner properties
- 80 percent of non-surveyed MLS transactions
And, lastly, it should be noted that Pending Home Sales tracks contracts — not closings — and until a home is sold and closed, nothing has really happened in the economy. That’s especially relevant in a market like this in which finding financing isn’t always so easy.
Pending Home Sales still has its place, though, because it’s a terrific look at the current buy-side demand for homes. Clearly, low mortgage rates and falling home prices are making an impact and this is why the December’s Pending Home Sales report is so important. It’s the third housing report this month that shows the demand for homes rising while the supply of homes falls.
The other two reports:
- The number of “used” homes sold monthly is rising
- The number of new homes being built are falling
This is good news for home sellers and for the economy. If housing is expected to lead the U.S. out of recession, the seeds for that recovery may have already been planted.
Posted by Rosemarie Litoff on February 3, 2009 under Uncategorized |
If the unfreezing of credit is paramount to an economic rebound, the first signs of a thaw may be here.
Monday, the Federal Reserve released its quarterly survey of 84 member banks. In it, the Fed says that fewer than half of its responding banks tightened “prime” mortgage guidelines over the last 3 months.
This is good news for active home buyers and other Americans in want of a new mortgage.
“Prime” is a vague term with respect to home loans, but it usually refers to mortgage applicants who can document:
- Equity or downpayment in a home
- Credit scores over 740
- Excessive income versus debt
In looking at the Fed’s survey, we can infer that because less than 50% of banks made credit less available, more than 50% did not. Borrowing may not be easier for prime borrowers, in other words, but it’s not harder, either. Count this as a small victory for the housing market.
All of this said, however, guidelines remain restrictive.
In the 12-month period beginning late-2007, banks continuously clamped down on low credit scores, low downpayments, and high debt-to-income levels. In addition, Fannie Mae added new fees based specific loan traits and second mortgages practically vanished from the marketplace.
The cumulative outcome of these actions precludes many Americans from participating in the current Refi Boom. However, if the trend reported by the Fed continues, lending may open up a bit later this year, providing a boost to housing and to the economy.
Experts believe that the tightening of credit helped create this recession. The loosening of credit, therefore, may be the way out.
Posted by Rosemarie Litoff on February 2, 2009 under Uncategorized |
Consumer confidence reached an all-time low and 100,000 Americans were issued layoff notices last week, each playing a role in the mortgage market’s relative worsening.
For the third consecutive week, mortgage rates rose and average loan fees increased, too.
Amid all of the negative economic news, however, there were two bright spots worth identifying and discussing. They show that country may be closer to economic recovery than expected.
First, the supply of “used” homes for sale fell from 11 months to 9 months nationwide. This suggests that homebuyers are re-entering the housing market in force, a signal that home prices are nearing equilibrium.
And, second, the nation’s GDP — a measurement of the country’s complete economic footprint — didn’t fall by nearly as much as what the experts had predicted. A positive surprise like this makes us wonder about what else the Doomsday Economists may be wrong.
We won’t have to wonder long.
With this week comes copious amounts of data, legislation and rhetoric to influence mortgage rates. Some of the news-bites that mortgage markets will digest this week include:
- The Personal Consumption Expenditures Index report. PCE is a preferred inflation measurement and inflation is the enemy of mortgage rates. A high reading will pressure mortgage rates up.
- Retail stores report on same-store sales.
- The Pending Home Sales report. This notes the number of “homes under contract” and is a good gauge for buyer interest and the general health of housing.
- 20% of the S&P 500 firms will report earnings.
- Congress is expected to vote on the Stimulus package.
The biggest impact on rates, however, could come on Friday with the release of January’s jobs report. Employment data is always market-mover and with the press giving so much attention to layoffs lately, expect Wall Street to be extra jittery it.
Markets expect the economy to have lost a half-million jobs last month.
