Posted by Rosemarie Litoff on August 17, 2009 under Uncategorized | 
Mortgage markets improved last week on weaker-than-expected data and a neither-good-nor-bad statement from the Federal Reserve.
Mortgage rates regained most of their lost ground after touching a 6-week high the week prior. Conforming mortgage rates were down last week.
News of the Federal Reserve’s announcement made headlines last Wednesday, but it was the less-reported stories that helped shape markets and improve home affordability.
For one, Consumer Confidence unexpectedly fell. This is a key gauge for economists and for Wall Street because, in theory, a confident consumer is more likely to buy goods and services — a key element in any economic recovery.
Other recovery-slowing news included:
To be fair, there were a handful of good-for-the-economy stories last week, too, but markets dwelled more on the negative ones. While the stock market’s 4-week winning streak was ending, investor cash was moving to mortgage bonds, causing rates to fall.
This week, there isn’t much data with which traders can play so expect mortgage rates to trade on emotion and momentum instead. This is good for rate shoppers when mortgage rates are falling, but if they start to rise, last week’s gains could be wiped out in the span of an afternoon.
It’s happened twice like that already since Memorial Day.
If you’re not locked in to a mortgage rate yet, keep a watchful eye on the markets and your loan officer on speed dial. Remember — every 1/8 percent rate hike adds nearly $100 per $100,000 borrowed annually.
Posted by Rosemarie Litoff on August 14, 2009 under Uncategorized |
Foreclosure-tracker RealtyTrac reports that the number of foreclosures nationwide rose 7 percent on a month-to-month basis last month.
However, 3 states dominated the foreclosure list, tallying more foreclosures between them than the rest of the country combined.
- California : 30.0 percent
- Florida : 15.7 percent
- Arizona : 5.4 percent
On a per-household basis, the states ranked 2, 3 and 4. Only Nevada’s foreclosure rate was higher.
Now, we point out these statistics for two reasons.
The first is to remind you that foreclosures can be highly local. For all of the foreclosure-related stories that run in the papers and on TV, defaults make a much larger impact on home values in some areas versus others.
And, second — foreclosures can represent a terrific buying opportunity. Not every foreclosed home is in pristine condition, but there is a plethora of affordable housing out there, suitable for first-time buyer, move-up buyers and investors, too.
Furthermore, as banks get better at disposing of foreclosed homes, the process of buying one isn’t as challenging as it was, say, 12 months ago.
As part of its research, RealtyTrac.com 
catalogues a lot of foreclosed homes and lists them online. However, you may find it better to start your search with a local real estate agent that knows the foreclosure market.
So long as buying foreclosures is a high-touch process — and it is a high-touch process — you may want to have a human face and agent to guide you through it.
The complete RealtyTrac report is available online.
Posted by Rosemarie Litoff on August 12, 2009 under Uncategorized |
The Federal Open Market Committee voted to leave the Fed Funds Rate within its target range of 0.000-0.250 percent.
It also reiterated plans to support the mortgage market to the tune of $1.5 trillion.
In its press release, the FOMC noted that the U.S. economy is “leveling off” and that financial markets continue to improve.
The change in verbiage is the rosiest from the Fed since the start of the recession and it may signal that the downturn’s end is near.
That said, the Fed highlighted lingering economic soft spots that could still impact a recovery through the end of 2009 and into 2010.
- Ongoing job losses
- Reduced “housing wealth”
- Tight credit conditions
Furthermore, rising energy costs remain a threat to inflation.
Also in its statement, the Fed confirmed its plan to hold the Fed Funds Rate near zero percent “for an extended period” and to honor its $1.25 trillion commitment to the mortgage bond market.
Market reaction to the Fed’s press release is muted. With no real change in message and a basic confirmation of what most investors already knew, Wall Street sees no reason to panic. Mortgage rates are unchanged.
The FOMC’s next scheduled meeting is September 22-23, 2009.
Posted by Rosemarie Litoff on under Uncategorized |
As the unofficial end of summer, Labor Day weekend is popular vacation time for American families.
And this year, with home sales on the rise and mortgage rates relatively low, early-September figures to be a popular closing date, too.
These points may appear unrelated, but there is an important connection between them.
Like workers in every other industry, employees of the mortgage, title, and real estate industries are just as likely to be taking time off on and around Labor Day.
For buyers with pending contracts, therefore, the closer that early-September closing date gets, the fewer industry folks that will be working to help close on your new house.
The same goes for households in the middle of a refinance.
With less than 4 weeks until Labor Day, you can take steps today to prepare for other people’s time off. Here’s a few of them:
- Notify your lender of any planned vacation time between now and your scheduled closing.
- Purchase a homeowners insurance policy and prepay the first year, effective your closing date. Send proof of payment to your lender.
- Have Power of Attorney forms lender-approved and signed by all parties, if applicable.
- Deposit gift monies and/or retirement fund withdrawals into an acceptable bank account, if applicable.
- Schedule your final walk-through far enough in advance to resolve any issues that may arise
- Have your funds ready for closing at least 1 day early.
And, perhaps most important, fulfill your mortgage lender’s requests for additional supporting documentation within 24 hours of notice. This includes requests for updated paystubs, bank statements, and tax returns.
The best reason to handle these tasks in advance is that, by the time Labor Day is around the corner, basic mortgage approval tasks will already take longer to complete — from clearing conditions to sending a wire. Reduced staff means slower response times.
Stay ahead of the curve and help save yourself from potential headaches down the road. And, if possible, avoid closing on the Friday before Labor Day and the Tuesday after.
On these days, staffs are the most lean of all.
Posted by Rosemarie Litoff on August 11, 2009 under Uncategorized |
The Federal Open Market Committee kicks off a two-day meeting this morning.
It’s one of 8 scheduled meetings the FOMC holds annually.
The FOMC purpose is to discuss the nation’s economic health and, as appropriate, makes new policy that either stimulates or retards economic growth.
The FOMC’s most well-known tool for reaching this goal is the Fed Funds Rate, currently stationed in a highly-stimulative range of 0.000 to 0.250 percent.
Recent data suggests that the economy is recovering, but as of this morning, Wall Street expects the FOMC to leave the Fed Funds Rate as-is, in its current range.
However, it’s not what the Fed does at its adjournment that should matter to today’s rate shoppers and home buyers — it’s what the Fed says.
At 2:15 PM Wednesday, the Federal Reserve will issue a statement about the U.S. economy with the policy-making body’s outlook for the rest of 2009 and 2010. If the FOMC’s overall message is one of economic strengthening, expect stock markets to rally and mortgage markets to sink on the news.
This would push mortgage rates higher.
On the other hand, if the FOMC alludes to weakness in labor markets and capital investment, it should help buoy rates lower.
The Federal Reserve does not control mortgage rates, but it can definitely exert an influence. For this reason, floating a mortgage rate into Fed’s official announcement is risky. Moreover, given the recent momentum in mortgage rates and in the markets, it seems more likely that rates could go up versus come down.
The Fed’s press release hits the wires at 2:15 PM ET Wednesday. If you’re the cautious type, consider locking your mortgage rate prior to its release.
Posted by Rosemarie Litoff on August 10, 2009 under Uncategorized |
To say that the mortgage markets took a beating last week would be an understatement.
After better-than-expected consumer spending, housing and employment data, stock markets rallied and mortgage markets suffered.
Mortgage rates unwound completely their gains of the last six weeks and now rest near the loftiest levels from June.
Headed into Monday’s market activity, mortgage rate momentum is moving away from home buyers and would-be refinance.
This week, there isn’t much data to reverse the tide but there is a Federal Open Market Committee meeting.
The FOMC is the policy-setting group of the Federal Reserve and, each time the FOMC meets, markets can get volatile. This is because of the Fed’s power to speed up or slow down economic growth via the Fed Funds Rate.
When the Fed Funds Rate is rising, the economy is generally expanding at too fast of a pace for the Fed’s comfort and when the Fed Funds Rate is falling, the economy is generally slowing.
Today, the Fed Funds Rate is as low as it’s even been — resting in a “target range” of 0.000-0.250 percent. The Fed isn’t expected to change that.
However, just because the Fed Funds Rate won’t be changing doesn’t mean that mortgage rates won’t be changing. Depending on what the FOMC says in its post-meeting press release, mortgage rates could rise or fall — maybe even by a lot.
If the Fed shows concern for inflation, rates should jump; worry of a recession retread would draw rates down.
The FOMC adjourns from its 2-day meeting Wednesday at 2:15 PM so consider locking prior the official announcement.
Posted by Rosemarie Litoff on August 7, 2009 under Uncategorized |
This morning’s jobs report is doing a number on mortgage rates, putting another dent in home affordability nationwide.
Despite the slightly flat Unemployment Rate, the government’s July Non-Farm Payrolls report reinforced the notion that the recession may be ending soon, if it hasn’t already.
Just 247,000 jobs were lost last month — much fewer than analysts had expected.
Now, if it seems strange to be talking economic recovery while Americans are still losing jobs — 5.7 million in the last 12 months, in fact — remember that we have to take the data in context.
Job loss doesn’t lead to economic growth, per se, but analysts tend to treat employment data as a lagging indicator. Business is often slow to hire and slow to fire, so the jobs report rarely reflects the “right now”.
A terrific real-world example of jobs data as a lagging indicator is that the peak of recent job loss — January 2009 — occurred 4 months after the peak of the financial crisis in September 2008.
The same pattern was present during the Recession of 2001.
Government data shows that job loss peaked during the recession in October 2001, 1 month before the recession’s official end. Meanwhile, job losses continued nationwide for the next year and didn’t turn net positive until October 2002 — nearly 12 months into the recession’s subsequent recovery.
This is what we mean by lagging indicator and it’s why investors are cheering today’s jobs data. Strength in today’s report may be signaling the end of the recession.
Unfortunately for today’s rate shoppers, it pushing mortgage rates higher. As stock markets soar, bond markets sink.
Posted by Rosemarie Litoff on August 6, 2009 under Uncategorized |
At least one thing is back to normal in the mortgage markets — it’s no longer cheaper to go with a fixed rate mortgage than an ARM.
As reported by Freddie Mac, a conforming 5-year ARM is priced a half-percent lower than a comparable 30-year fixed.
Earlier this year, the pricing was reversed.
It’s uncommon for fixed rate mortgages to be cheaper than comparable ARMs because, with fixed rate mortgages, lenders commit to a particular interest rate over long period of time. There is a lot of risk that comes with doing that.
By contrast, an adjustable rate mortgage is designed so that after a certain number of years, the mortgage rate changes to reflect the current market conditions.
In theory, ARMs are less risky for lenders than are fixed rate mortgages and, therefore, we would expect them to have lower mortgage rates. That wasn’t the case for the 6 months ending in early-May, however. When fixed rate mortgages were scraping the 4.500 percent marker in January, 5-year ARMs weren’t struggling to stay sub-5.
The same goes for late-April’s mortgage rate dip.
Historically, there’s been a trade-off between ARMs and fixed rate mortgages.
- ARMs give lower mortgage rates with less predictability
- FRMs give higher mortgage rates with more predictability
Earlier this year, market conditions rendered fixed rate loans the best of both worlds — lower rates and predictability. Today, we’re back to “normal”.
No matter how long you plan to live in your home, talk to your loan officer about your adjustable rate options, if only to know your options. Given today’s interest rate disparity and how it can affect your monthly mortgage obligation, you may find the unpredictable nature of an ARM to be acceptable risk.
Posted by Rosemarie Litoff on August 5, 2009 under Uncategorized |
The number of homes under contract to sell rose in June for the fifth straight month.
It’s the Pending Home Sales Index’s longest winning streak since 2003 and another piece of evidence that the housing market may be rebounding.
Separately, the data is interesting. All together, it paints the portrait of a recovery.
That said, we can’t forget that the Pending Home Sales Index is somewhat unique versus other real estate reports. Whereas data on existing and new home sales measures closed transactions, the Pending Home Sales Index only measures intent to buy.
Just because a home goes under contract, in other words, doesn’t mean that it actually will sell.
Purchase transactions can fall apart for a multitude of reasons including, but not limited to, buyer-seller disputes, failed home inspections, and an inability to secure mortgage financing. The Pending Home Sales Index doesn’t account for these types of issues.
In general, though, as the number of homes under contract increases, Existing Home Sales increase, too — usually on a 2-month lag. Home sale data should remain strong through early-Fall, at least.
For active home buyers, be conscious of the fact that that more home sales plus falling home supplies leads to higher home values. If you’re looking for a bargain, the longer you wait, the less likely you may be to find it.
Posted by Rosemarie Litoff on August 4, 2009 under Uncategorized |
Where does the money go?
If you’re like most U.S. consumers, more than half of it goes to housing and transportation costs.
According to the government’s most recent Consumer Expenditure Survey, spending patterns are little changed from years prior.
More money is spent on entertainment and less money is spent on dining out. Beyond that, the figures are somewhat static.
Meanwhile, using on the survey’s industry-by-industry breakdown, we can see how monthly housing payments and daily commuting costs impact a household’s budget.
For the budget-conscious, going out less often and bargain-shopping can help pad the bottom line, but not as much as living in a less expensive home or moving closer to work.
Even a refinance into lower rates can make a difference.
