According to foreclosure-tracking firm RealtyTrac, monthly foreclosure filings fell 2 percent in May to just under 215,000 filings nationwide. A foreclosure filing is defined as any one of the following: a default notice, a scheduled auction, or a bank repossession.
On an annual basis, foreclosure counts have dropped over 16 consecutive months, dating back to January 2010.
Like all things in real estate, though, foreclosures are local. 6 states accounted for more than half of the country’s foreclosure filings in May. Those six states — California, Michigan, Arizona, Florida, Georgia and Texas — represent just 34% of the U.S. population.
But even on a per household basis, the figures remain disproportionate.
Top 10 Foreclosure States : 1 foreclosure per 357 households, on average
Bottom 10 Foreclosure States : 1 foreclosure per 8,764 households, on average
The nationwide foreclosure rate was 1 foreclosure per 605 households.
As a home buyer , foreclosures matter. Distressed homes account for close to 40% of home resales and that’s because distressed properties often sell at steep discounts; in some markets, up to 20 percent less than a comparable, non-distressed home. Foreclosed homes can be a great “deal”, therefore, but only if you’ve done your homework.
Buying a bank-repossessed home is different from buying from “people”. The contracts and negotiation process are different, and homes are sometimes sold with defects.
If you plan to purchase a foreclosure, therefore, speak with a real estate professional first. With foreclosures, there’s a lot you can learn online, but when it comes time to submit an actual bid, you’ll want an experienced agent on your side.
The jobs market is recovering slower than expected, and so is housing. But neither condition has slowed U.S. consumers.
According to the Census Bureau, Retail Sales rose for the 11th straight month in May. Excluding cars and auto parts, sales receipts climbed to $322 billion last month. It’s an all-time high and another example of the U.S. economy’s resiliency.
Wall Street didn’t expect such results. As a result, mortgage rates worsened Tuesday.
By a lot.
The connection between Retail Sales and mortgage rates can be fairly tight in a recovering economy. Retail Sales accounts for almost half of all U.S. consumer spending, and nearly one-third of the economy overall. The May report, therefore, showed the economy may be on more solid footing than economists expect.
Plus, lately, as the economy goes, so go mortgage rates nationwide.
When the economy has shown signs of life, mortgage rates have increased. When the economy has shown signs of a slowdown, mortgage rates have dropped.
It’s why mortgage markets reacted the way they did Tuesday; May’s Retail Sales data was strong. The resultant surge in conforming mortgage rates — from market open to market close — turned into one of the year’s fiercest, raising average mortgage rates well off their 7-month lows established earlier this week.
At today’s rates, each 0.125 percent change in rates yields a payment difference of $7.50 per $100,000 borrowed. Yesterday, some product rates rose by as much as 0.250 percent. It put a dent in home affordability and household budgets.
With Retail Sales are up 8 percent from last year, therefore, and showing few signs of a slowdown, today may be a prudent date to lock a rate with your lender. As the economy continues to grow, rates are expected to rise.
A mortgage comes with many moving pieces and understanding them is the key getting a great deal. Unfortunately, studies show that few Americans have a firm grasp of how mortgages work — from mortgage types to mortgage fees.
In this back-to-basics interview on NBC’s The Today Show, you’ll learn some mortgage planning basics to help you get smarter with your next home loan — purchase or refinance.
Some of the topics covered include:
The mortgage applicants for whom adjustable-rate mortgages are a better choice than fixed-rate mortgages
Why you should include “How Good Is This Lender?”-type questions in the rate shopping process
What a pre-approval letter is good for, and what it is not good for
There is also one of the most simple explanations of “discount points” ever offered on network television.
The video runs 4-and-a-half minutes. For first-time buyers and experienced ones, it’s worth a watch. You’ll pick up some tips to use on your next mortgage.
It’s a fact: It’s more expensive to live in some cities than others. Beyond just the costs of buying a home, different cities also carry a different Cost of Living. For households relocating across state lines, the change in “life costs” can be jarring.
Depending on where you live, everyday expenses — from groceries to gasoline — make a different-sized dent in a household budget. And now you can see in numbers by how much your expenses might change.
The Cost of Living Comparison calculator is as basic as it is thorough. The calculator asks just 3 questions — (1) Where do you live now, (2) To what city are you moving, and (3) What is your salary — and uses your answers to produce a detailed, 60-item cost comparison between the two towns.
The city-to-city cost comparisons include:
Dry Cleaning Costs
Total Energy Costs
Beauty Salon Costs
Movie Costs
Dentist Visit Costs
The list also features a mortgage rate comparison, and a comparison of local home prices.
The Cost of Living calculator is based on data from the ACCRA. On the ACCRA website, a similar report sells for $5. At Bankrate.com, the information is free.
If you live in a high-cost area, keep an eye on your calendar. Effective October 1, 2011, temporary conforming loan limits will be lowered nationwide. Perhaps by as much as 14 percent.
These limits range up to $729,750 currently.
“Temporary loan limits” were enacted as part of the government’s 2008 economic stimulus package. At the time, the financial sector was entering its crisis and private mortgage lending had all but disappeared. Financing was scarce for both homeowners and home buyers for whom loan sizes exceeded Fannie Mae and Freddie Mac’s national $417,000 limit — even for those with excellent credit and income.
The issue was exacerbated in places like New York City where local home prices routinely topped $1 million. Buyers unable or unwilling to bring a substantial downpayment to closing (i.e. $600,000 or more) found themselves without financing.
The February 2008 package addressed this issue, using a math formula to change loan limits nationwide. The government assigned to each U.S. metropolitan area a temporary, new loan size limit equal to 25% greater than its respective median home sale price, not to fall below $417,000, and not to exceed $729,750.
Then, later that same year, the Housing and Recovery Act made “high-cost areas” permanent, but with a reduced 15% increase to median home prices, and loan sizes not to exceed $625,500.
These new limits take effect October 1, 2011 — one day after the temporary limits expire.
If you live in a high-cost area, therefore, take note. Mortgage rates may be low, but the amount of loan for which you qualify may be less than you expect, and you may find yourself ineligible.
Whether you’re planning a refinance or a purchase, keep an eye on the calendar.
Hurt by foul weather and a soft market, the Pending Home Sales Index plunged 12 percent in April.
The monthly index is published by the National Association of REALTORS® and measures the number of homes on which new contracts have been written.
It’s the association’s lone “forward-looking” report; meant to predict future, closed home sales. 80% of homes under contract close within 2 months.
Therefore, if the April Pending Home Sales Index is accurate, we should expect home sales to decline through June and July.
On a regional basis, “pending homes” varied. The Northeast Region posted growth. None others did.
Northeast Region: +1.7% from March
Midwest Region : -10.4% from March
South Region : -17.2% from March
West Region : -8.9% from March
But even regional data remains too broad to be useful to everyday buyers and sellers. Housing is local and that means that each block, of each street, in each city has its own market and economy. Grouping 9 states into a single “region” is neither helpful nor relevant.
That said, we can’t ignore the data in its entirety.
Housing is believed to be a key component in the nation’s economic recovery. Fewer home sales will retard growth, and slower growth leads mortgage rates down.
Home Affordability hit record-highs last quarter, and should do the same in this one. Homes now sell at discounts to prior prices and mortgage financing is cheap. Buyers tend to be drawn to favorable markets such as this, and that will pressure home prices higher.
If you’re in the market for a home today, conditions look good. Talk to your real estate agent to gauge your options.
Mortgage markets improved last week, carried by the same stories that have led markets better since April. Worries of a Eurozone sovereign debt default mounted, and the U.S. economy’s revival showed itself to be slower than originally anticipated.
In Greece, the nation readied itself for its second bailout in two years. The austerity measures of last year have not worked as planned. There are concerns that a default would lead to contagion, delivering the Euro region into an economic tailspin.
These fears spurred a flight-to-quality in bond circles to the benefit of U.S. mortgage rate shoppers.
In addition, last week’s U.S. jobs data fell short of expectations, giving another boost to mortgage markets.
Each of these data points underscores the fragile nature of the U.S. recovery, and the weaker-than-expected readings helped mortgage rates improve.
It’s the sixth week of 7 that mortgage rates have improved, setting the stage for a new wave of refinances.
This week, there is very little new data on which for mortgage bonds to trade. Therefore, expect the stories from recent weeks to continue to dominate headlines. If Greece’s austerity and/or bailout plan is met with investor optimism, mortgage rates should rise. If the plan falls flat, mortgage rates should fall.
There will also be chatter about the U.S. debt ceiling, another potentially negative force on mortgage rates.
If you’re floating a mortgage rate right now, consider locking in. There’s a lot more room for rates to rise than to fall.
The March Case-Shiller Index was released this week and it corroborates the findings of the government’s most recent Home Price Index — home values are slipping nationwide.
According to the Case-Shiller Index’s publisher, Standard & Poors, home values fell in March from the year prior.
The March report was among the worst Case-Shiller Index readings in 3 years. On a monthly basis, 18 of 20 tracked markets worsened. Only Seattle and Washington, D.C. showed improvement, rising 0.1% and 1.1%, respectively.
On an annual basis, price degradation was even worse.
Washington, D.C. is the only tracked market to post higher home values for March 2011 as compared to March 2010. The national index has now dropped to mid-2002 levels.
As a buyer in today’s market, though, you can’t take the Case-Shiller Index at face value. It’s methodology is far too flawed to be the “final word” in home prices.
The first big Case-Shiller Index flaw is its relatively small sample size. S&P positions the Case-Shiller Index as a national index but its data comes from just 20 cities total. And they’re not the 20 most populous cities, either. Notably missing from the Case-Shiller Index list are Houston (#4), Philadelphia (#5), San Antonio (#7) and San Jose (#10).
Minneapolis (#48) and Tampa (#55) are included, by contrast.
A second Case-Shiller flaw is how it measures a change in home price. Because the index throws out all sales except for “repeat sales” of the same home, the Case-Shiller Index fails to capture the “complete” U.S. market. It also specifically excludes condominiums and multi-family homes.
In some cities — such as Chicago — homes of these types can represent a large percentage of the market.
And, lastly, a third Case-Shiller Index flaw is that it’s on a 2-month delay. It’s June and we’re only now getting home data from March. Today’s market is similar — but not the same — to what buyers and sellers faced in March. The Case-Shiller Index is far less useful than real-time data of a city or neighborhood.
The Case-Shiller Index is more useful to economists and policy-makers than to everyday buyers and sellers. For better real estate data for your particular neighborhood, ask your real estate agent for help.
A real estate agent can tell you which homes have sold in the last 7 days, and at what prices. The Case-Shiller Index cannot.
Tomorrow morning, at 8:30 AM ET, the Bureau of Labor Statistics releases its Non-Farm Payrolls report for May. If you’re floating a mortgage rate right now — or are in the process of shopping for a loan — consider locking your rate sooner rather than later.
The Non-Farm Payrolls report can be a major market mover, causing large fluctuations in both conforming and FHA mortgage rates. It’s because of the report’s insight into the U.S. economy.
More commonly called “the jobs report”, Non-Farm Payrolls is issued monthly. Sector-by-sector, it details the U.S. workforce and unemployment rates.
Jobs momentum has been strong. Through 7 consecutive months, the economy has added jobs, the government reports. Nearly 1 million new jobs have been created during that time. These are strong figures for a country that lost 7 million jobs in 2008 and 2009 combined.
However, Wednesday, a weaker-than-expected “preview” figure from payroll company ADP has Wall Street wondering whether this month is the month that the winning streak ends.
May’s ADP data fell so far short of expectations that investors have had to re-assess their job growth predictions. Earlier this week, the consensus was that 185,000 new jobs were created in May. Today, those estimates are much lower.
The change is leading mortgage rates lower, too.
The connection between jobs and mortgage rates is somewhat straight-forward. Job growth influences mortgage rates because jobs matter to the economy. As job growth slows, so does the economic growth, and that puts downward pressure on mortgage rates.
The opposite is true, too. Strong job growth tends to lead mortgage rates higher.
So, with job growth estimates revising lower, Wall Street has adjusted its “bets” and that’s benefiting rate shoppers. Should the actual jobs figures not be so bad, though, expect a quick and sharp reversal; and much higher mortgage rates for everyone.
Another quarter, another sign that mortgage lending may be easing nationwide.
The Federal Reserve’s quarterly survey of senior loan officers revealed that an overwhelmingly majority of U.S. banks have stopped tightening mortgage requirements for “prime borrowers”.
A prime borrower is one with a well-documented credit history, high credit scores, and a low debt-to-income ratio.
Of the 53 responding “big banks”, 49 reported that mortgage guidelines were “basically unchanged” last quarter. Of the remaining four banks, two said mortgage guidelines had “eased somewhat”, and the remaining banks said guidelines “tightened somewhat”.
It’s the second straight quarter in which fewer than 5 percent of banks tightened guidelines, and the first quarter in nearly 5 years in which the number of banks that loosened guidelines equaled the number of banks tightening them.
The easing in mortgage lending is a positive development for the housing market; and for buyers nationwide. Looser lending standards means that more buyers will be approved for home loans, and that should spur home sales forward across the region.
However, don’t confuse “looser standards” with “irresponsible standards”. It’s much more difficult to get financing today as compared to 2006. Delinquencies and defaults have altered how a bank reviews a loan application.
Today, underwriters are more conservative with respect to household income, total assets and overall credit scores. Even as compared to just 6 months ago:
Minimum credit score requirements are higher
Downpayment/equity requirements are larger
Maximum allowable debt-to-income ratios are lower
If you can get approved, though, your reward is that mortgage rates are especially low. Since early-April, both conforming and FHA mortgage rates have been on a downward trajectory, and pricing is near a 6-month low.
Home affordability is at an all-time high, too.
Looser guidelines and lower rates should help fuel home demand through the summer months. If you’re in the market to buy, your timing appears to be excellent.
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The jobs market is recovering slower than expected, and so is housing. But neither condition has slowed U.S. consumers.
It’s a fact: It’s more expensive to live in some cities than others. Beyond just the costs of buying a home, different cities also carry a different Cost of Living. For households relocating across state lines, the change in “life costs” can be jarring.
If you live in a high-cost area, keep an eye on your calendar. Effective October 1, 2011, temporary conforming loan limits will be lowered nationwide. Perhaps by as much as 14 percent.
Mortgage markets improved last week, carried by the same stories that have led markets better since April. Worries of a Eurozone sovereign debt default mounted, and the U.S. economy’s revival showed itself to be slower than originally anticipated.
Another quarter, another sign that mortgage lending may be easing nationwide.