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What’s Ahead For Mortgage Rates This Week : May 16, 2011

Published by in Mortgage Rates on May 16th, 2011 | No Comments »

Greece default concernsMortgage markets worsened overall last week for the first time in 5 weeks.

Better-than-anticipated economic data plus dwindling concerns for Greece’s sovereign debt combined to a spark a bond sell-off. Conforming mortgage rates moved higher in Texas as a result.

Rate shoppers were hit especially hard last Tuesday.

At Monday’s close, conventional fixed- and adjustable-rate mortgages were posting their lowest levels of 2011, but by Tuesday’s market close, rates had climbed as much as 0.250 percent across the board. In some cases, more.

The spike highlights how quickly mortgage rates can change in a recovering economy, and why “floating” a rate can be costly.

This week, mortgage rates figure to be equally volatile. There’s a large set of market-changing data planned for release, and several Fed members have planned public appearances, including a 9:00 AM ET, Monday morning kickoff from Fed Chairman Bernanke.

  • Monday : Bernanke speech; Homebuilder Confidence Survey
  • Tuesday : Housing Starts; Building Permits
  • Wednesday : FOMC Minutes
  • Thursday : Existing Home Sales

In addition, Thursday brings a second rate shopper-risk.

The Initial Jobless Claims will be released at 8:30 AM ET and it will be closely watched by Wall Street. Initial claims are sharply higher since the end of April and investors believe the jobs market is key in a sustained economic recovery. If the data shows that initial claims receded, mortgage rates are expected to rise in response.

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Rising Retail Sales Threaten Low Mortgage Rates

Published by in The Economy on May 13th, 2011 | No Comments »

Retail Sales May 2009-April 2011Another day, another piece of evidence that the U.S. economy is expanding.

Thursday, the Census Bureau released the April Retail Sales report. Excluding cars and auto parts, retail receipts rose for the 10th straight month and, at $321 billion, reached an all-time high.

Retail sales account for roughly half of consumer spending, and roughly one-third of the economy overall.

For home buyers and rate shoppers in Shreveport , the sales figures have positive and negative implications.

On the positive side, more retail sales suggests more confidence in the U.S. economy. This can spark a growth cycle that benefits the country, on the whole.

  1. Consumers spend more money
  2. Businesses sell more product
  3. Businesses expand payroll to meet new product demand
  4. Governments collect more taxes; fund more projects
  5. Consumers gain more confidence and the cycle repeats

Furthermore, rising employment rates help to support higher levels of home sales which, in turn, can lead to higher home prices in Louisiana.

This is why Retail Sales data is so important to Wall Street and economists. It can hold clues to the future of the U.S. economy.

On the negative side, however, rising Retail Sales figures can harm home affordability. In addition to the aforementioned pressure on home prices, a strengthening economy can lead to higher mortgage rates. The weak economy of 2009-2010 is a major reason why mortgage rates were so low for so long.

As the economy improves, therefore, it follows that rates should reverse.

Each 1/8 percent increase to mortgage rates raises a mortgage payment $8 per $100,000 borrowed.

Retail Sales are up 7 percent from a year ago.

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Foreclosure Filings Fall To 40-Month Low

Published by in Housing Analysis on May 12th, 2011 | No Comments »

Foreclosures concentrate in 5 states in April 2011Foreclosure activity continues to drop nationwide.

Based on data from foreclosure-tracking firm RealtyTrac, foreclosure filings nationwide fell below 220,000 in April 2011, a 9 percent decrease from March.

A “foreclosure filing” is defined as any foreclosure-related action including Notice of Default, Scheduled Auction, or Bank Repossession.

April marks the seventh straight month in which foreclosure filings have dropped and total filings are down more than one-third year-over-year.

One reason why filings are down is that banks are letting more time pass between delinquency and foreclosure, exploring alternative courses of actions such as short sales and loan modifications. It now takes, on average, 400 days from an initial default notice to bank repossession.

That’s more than double the 151-day average of early-2007.

Another reason may be that job growth is returning to the U.S. and job creation is associated with fewer home loan defaults.

Regardless, in the states in which foreclosures are occurring, bank repossessions are concentrating among just a few. 

5 states accounted for half of the country’s April REO:

  • California : 19.8 percent
  • Arizona : 9.5 percent
  • Michigan : 7.5 percent
  • Florida : 6.7 percent
  • Texas : 5.6 percent

Collectively, these 5 states represent just 32 percent of the nation’s population.

On the other end of the chart, Vermont accounted for a measly 0.007% of April’s foreclosure filings.

If you’re a first-time home buyer considering foreclosed homes in Bossier City , or a seasoned investor adding to your portfolio, the good news is that foreclosures are selling at steep, 20 percent discounts relative to non-distressed homes. Just make you know what you’re buying. Foreclosure purchases carry different risks and follow different procedures than “traditional” sales.

Rely on a seasoned real estate agent to navigate the deal.

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Conforming ARMs From 2004-2006 Are Adjusting To 3 Percent

Published by in Mortgage Guidelines on May 11th, 2011 | No Comments »

Pending ARM Adjustment Spring/Summer 2011

When a mortgage applicants chooses an adjustable-rate mortgage over a fixed-rate one, he accepts a risk that — at some point in the future — the mortgage’s interest rate will rise. Lately, though, that hasn’t been the outcome.

Since mid-2010, conforming mortgages have adjusted below their initial “teaser” rate consistently, giving homeowners in Louisiana and nationwide reason to ride their respective adjustable-rate mortgages out.

For example, this month, conforming 7-year and 5-year ARMs are adjusting near 3.011 percent based on the most common loan terms of 2004-2006. It’s because of how adjustable-rate mortgages are structured.

Adjustable-rate mortgages follow a defined lifecycle. First, the ARM’s mortgage rate is pegged; held fixed for a set number of years. This period ranges from one year to 10 years; periods of five and seven years are most common.

When the initial fixed-rate period ends, the mortgage rate then adjusts based on a pre-set formula. The formula is established by contract in the mortgage closing paperwork, and is commonly defined as:

(Adjusted Mortgage Rate) = (2.250 percent) + (Current 1-Year LIBOR)

Next, every 12 months, based on the same formula as above, the ARM adjusts again until 30 years have passed and the loan is paid is full.

It’s important to recognize that in the above equation, LIBOR is a variable so as LIBOR goes, so goes your adjusted mortgage rate. And because LIBOR is ultra-low right now, adjusted mortgage rates are ultra-low, too. LIBOR is expected to stay this way until the global economy has recovered more fully. Analysts predict a higher LIBOR by mid-2012.

So, if you have an adjustable-rate mortgage that’s due to reset this season, don’t rush to refinance. For at least one more year, you can benefit from low rates and low payments.  As for the next adjustment, though, that’s anyone’s guess.

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What To Fix Before You List

Published by in Around The Home on May 10th, 2011 | No Comments »

Fixes before you listWith housing prices down across the country, there are a lot of homeowners in Bossier City barely breaking even on their respective home sales. Some are even losing money.

You may find yourself in that position, too; wanting to sell, but worried about bringing cash to your own closing.

It creates an interesting dilemma. You want your home to “show nicely” relative to comparable properties, but you don’t want to invest big dollars that may never be recouped into upgrades or renovations. So what do you do?

The answer is simple. Do the bare minimum.

From an advice piece in the Wall Street Journal, we learn of 10 basic home improvement projects that will help your home have better showings. The advice requires almost no technical skills, and the projects be tackled in a weekend.

The theme? Handled your home’s delayed maintenance.

  1. Repair or remove screen doors with holes and tears
  2. Pressure wash windows, sidewalks, and siding
  3. Paint your front door and polish the doorknob
  4. Pull weeds, seed bare spots, and lay down mulch
  5. Touch up holes, dings and cracks in paint
  6. Clean grout and re-caulk sinks, bathtubs and showers
  7. Buy new cabinet hardware
  8. Fix leaky faucets and toilets
  9. Spray lubricant on squeaky doors
  10. Get clutter into storage and out of the way

Now, you’ll notice that none of these projects can be considered “major”. By contrast, each is minor; they’re the items you’d add to your to-do list for work on “another day”. However, they’re extremely important for a home that’s about to be listed.

Here’s why. A prospective buyer doesn’t notice that the above repairs were made. He only notices if they weren’t made. When a buyer sees ripped screens or chipped paint in your home, it makes him wonder what else hasn’t been cared for. This is the why you should also hire an exterminator prior to selling your home. If a buyer spots a trail of ants in your home, it’s unlikely you’ll get an offer.

You don’t need to spend big bucks to get your home ready for sale, but you may to use apply elbow grease. The good news is that time spent up-front can be worth it in the end. Homes that show better tend to sell faster, and at higher prices.

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What’s Ahead For Mortgage Rates This Week : May 9, 2011

Published by in Mortgage Rates on May 9th, 2011 | No Comments »

Non-Farm PayrollsMortgage markets improved last week on a bevy of economic and geopolitical news. Conforming mortgage rates in Keller improved, falling to their lowest levels of 2011.

It’s a welcome development for home buyers and rate shoppers nationwide. Mortgage rates were expected to rise throughout most of this year.

There were four big stories that contributed to falling rates last week.

The first was the news that Osama bin Laden was killed. The news was announced over the weekend, and by the time markets opened Monday morning, the price of oil was already falling. Falling oil prices reduce inflationary pressures on the economy and because inflation contributes to rising mortgage rates, the absence of inflation helps them to fall.

This news carried markets to Thursday morning. That’s when the Department of Labor announced that Initial Jobless Claims had suddenly and unexpectedly surged to an 8-month high. Last week’s report featured the biggest one-week jump in claims in more than 2 years.

This, too, pushed mortgage rates lower, casting doubt on the strength of the U.S. economic recovery.

Then, Friday morning, those doubts were cast aside. When the government released its Non-Farm Payrolls report for April, it showed job creation topping 200,000 for the third straight month. We would have expected mortgage rates to rise on news like this, but they didn’t.

Rates fell instead — mostly because the strength of the U.S. jobs report rendered mortgage-backed bonds more attractive to global investors.

The last story, though, is the one worth watching long-term.

Late-Friday, in response to its growing debt issues, it was reported that Greece may withdraw from the Eurozone. An outcome such as this is unlikely, however, the possibility was enough to spark a flight-to-quality that benefited U.S. mortgage rates. Conforming and FHA rates ended Friday lower, reaching their best levels since December.

This week, there isn’t much economic news set for release so the above stories will continue to influence markets and rates. Geopolitics can change quickly, though, so if you’re floating a mortgage rate and waiting for the bottom, don’t wait too long. Markets can reverse in a snap.

If you see a rate you like, the safest move is to lock it.

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Foreclosures And Short Sales Distorting “Home Price Trackers”

Published by in Housing Analysis on May 6th, 2011 | No Comments »

HPI Monthly Changes From April 2007 Peak

In an echo of February’s Case-Shiller Index report, the government’s own home price-tracker — the Home Price Index — showed home values slipping between January and February 2011.

The Federal Home Finance Agency data had home values down 1.6 percent nationwide in February, on average, marking the fourth straight month in which prices fell. 

Furthermore, all 9 regions posted losses from the month prior:

  • Mountain Region : -3.7% from January
  • East South Central : -0.6% from January
  • South Atlantic : -0.9% from January
  • New England : -2.0% from January

Before you draw conclusions, however, note that the data at which we’re looking has several major flaws to it.

First, it’s old. We’re now in the first week of May and the FHFA’s most recent release only covers through February, a time period ending roughly 60 days ago. That’s a long delay and today’s purchase market in Keller looks much different from the one of February. 

Just ask a real estate agent and they’ll tell you — purchase activity is rising.

Second, the FHFA Home Price Index reports on home value changes between consecutive Fannie Mae or Freddie Mac-securitized transactions only. This might be creating an overweight of “distressed properties” in the index which, in turn, drags down valuations.

Distressed homes account for 40% of all home resales and typically sell at 20 percent discounts.

And, lastly, although the Home Price Index is a national report, real estate as a market is decidedly not national. To the contrary, it’s extremely local. As an individual, you don’t buy, sell or own homes in all 50 states. You buy them in a specific state, and a specific neighborhood. 

The national data is useless to you in that respect.

We can’t discount the Home Price Index data entirely, but should remember that it paints a clearer picture of where housing has been versus where housing is going. As a home buyer or homeowner, it’s the future of home values that matters more.

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Job Growth Returning To “Normal” Levels — A Bad Sign For Mortgage Rates

Published by in The Economy on May 5th, 2011 | No Comments »

Job Growth (2000-2011)

Be prepared for Friday morning. Mortgage rates and home affordability could worsen quickly. At 8:30 AM ET, the Bureau of Labor Statistics releases its April Non-Farm Payrolls report and momentum has been strong.

The monthly jobs report is a market-mover and analysts expect that 196,000 new jobs were added last month. If those expectations are exceeded — by even a little — Wall Street would take it mean “economic strength” and the stock market would be boosted.

Too bad for rate shoppers, though; a move like that would also lead to higher mortgage rates throughout Louisiana. This is because, coming out of a recession, reports of economic strength tend to push mortgage rates up. We’ve seen it happen multiple times in the last 8 months.

Since losing more than 7 million jobs between 2008 and 2009, employers have added 1.3 million jobs back to the economy. And we’re learning that there’s plans for fewer job cuts in the future. It’s clear that the jobs market is improving and this is why tomorrow’s Non-Farm Payrolls report is so important.

A “weak economy” helped keep mortgage rates low for a very long time. A strengthening economy will reverse that tide.

So, consider your personal risk tolerance today, in advance of tomorrow’s Non-Farm Payrolls report. If the thought of rising mortgage rates makes you nervous, call your loan officer and lock in a rate today. Once tomorrow’s data is released, after all, the market might look changed.

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How To Screen For A Good Home Contractor

Published by in Around The Home on May 4th, 2011 | No Comments »

Home remodeling projects are expected to top $130 blllion this quarter, their highest total since Q1 2008. A likely catalyst is that the average cost of a home improvement project is falling fast.

With the economy loosening up and contractor costs on a downswing, some in Shreveport homeowners are choosing to put money back into their respective homes, and making home improvements. If you’re among them, you’ll want to make sure you’ve properly screened your contractor. 

In this 4-minute piece from NBC’s The Today Show, you’ll learn tips for picking a good home contractor. The advice is mostly common sense, and worth heeding. For example:

  • Only select registered/licensed, and insured contractors for work in your home
  • Don’t automatically select the lowest bid; you may want to discard it instead
  • Communication skills matter. You must be able to express your wants, and have that message understood.

And lastly, if this is your first time working with a particular contractor, be sure to ask for references and follow-through on them, too. Sometimes, past customers can tell you more about a contractor than you can learn yourself.

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Geopolitics Have Mortgage Rates Poised To Change

Published by in Mortgage Rates on May 3rd, 2011 | No Comments »

Geopolitics make mortgage rates moveAmong the most challenging aspects of shopping for a mortgage is how rates change constantly. It’s hard to pin them down.

For example, in 2011, mortgage rates have expired every 3-and-a-half hours, on average. That’s fast.

There’s two main catalysts for changing mortgage rates.

The first can be grouped as ”scheduled events”; the planned release of market data which includes the Existing Home Sales report, or a scheduled government statement such as when the Federal Open Market Committee meets. When the outcomes of these event-types either exceed, or fall short, of Wall Street’s expectations, mortgage markets react.

Home buyers and rate shoppers in Keller realize this as higher (or lower) mortgage rates.

Then there’s the other type of catalyst — the “unscheduled event”.

Unscheduled events take many forms and are often called “surprise developments”. The Federal Reserve’s plan to inject $750 billion into mortgage markets in 2009 was one such surprise. Most geopolitical events fall into this category, too. 

Unscheduled events are often unsettling to Wall Street because investors don’t have specific contingency plans for them like they would if, say, this month’s jobs report comes back exceedingly strong. For example, investors didn’t expect North Korea to fire missiles over Japan in 2008, nor did they expect a volcano to erupt in Iceland last spring.

When unscheduled, unexpected events occur, the market’s first — and natural — reaction is to scramble to make sense of it. Mortgage rates get jostled as a result and can take days to settle back to normal.

We’re experiencing an “unexpected event” right now.

In response to Sunday’s evening’s presidential address, markets are now upended. The dollar is strengthening, oil prices are falling, and stock markets are rising. Each of these items are altering mortgage rates across Texas. 

Even today, markets remain unsettled.

Therefore, if you’re shopping for a mortgage rate, keep one eye on the news and the other on the rate-lock trigger. During periods of unexpected activity, mortgage rates can change quickly so be ready to shop, and be ready to lock.

Mortgage markets wait for no one.

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