Pay Your Mortgage Early, Boost Your 2011 Federal Income Tax Deductions

Posted by Kevin Whatley

Dec 23

Increase your 2011 tax deductionsTime is running out to boost to your 2011 federal tax refund. All you have to do is make your January 2012 mortgage payment while it’s still December.

It’s a simple tax strategy that works because of how mortgage interest is paid, and of how the U.S. tax code is written.

Different from rent which is paid for the month ahead (i.e. “you’re paying January’s rent”), mortgage payments are made only after mortgage interest has accrued (i.e. “you’re paying for money you’ve already borrowed from the bank”).

This is called “paying interest in arrears” and U.S. tax code states that the mortgage interest is tax-deductible in its year paid, subject to limitations.

By making the January 2012 mortgage payment in December 2011, therefore, homeowners who itemize their on their tax returns can apply their January mortgage payment’s interest portion to their 2011′s tax returns.

The alternative is to pay the mortgage on schedule, and wait for April 15, 2013 to claim the credit.

If you choose to pre-pay your mortgage and typically send your payment via USPS, give your check ample time to be delivered to your lender, and processed. Mail your check no later than Saturday, December 24.

For Keller homeowners that pay electronically, the process is simpler. Edit your online bill pay program to have your mortgage payment post no later than Thursday, December 29.

Make note, however. Not all mortgage interest is eligible for tax-deductibility, and not all homeowners throughout the state of Louisiana who pay mortgage interest should itemize said interest on their tax returns.

Before prepaying on your mortgage, ask your tax professional for advice.

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Home Supplies Fall To 7.0 Months Nationwide; Buyer Demand Strong

Posted by Kevin Whatley

Dec 22

Existing Home Supply 2010-2011

Home resales moved to a 10-month high in November, the latest in a series of strong showings from the housing sector.

According to the National Association of REALTORS®, November’s Existing Home Sales rose to a seasonally-adjusted, annualized 4.42 million units nationwide —  a 4 percent climb from October 2011.

An “existing home” is a home that has been previously occupied and cannot be categorized as new construction.

Home buyers and sellers throughout Keller should take note of November’s numbers because — behind the headlines — there’s a series of statistics that foretell higher home prices ahead.

First, the total number of homes for sale nationwide dipped to 2.58 million, an 18% reduction from November 2010 and represents the fewest number of homes for sale since February 2007. 

At the current sales pace, the complete home resale inventory would be sold in 7.0 months.

And, second, the real estate trade group reports that 33% of all homes under contract “failed” for some reason last month.

Contract failures can occur because of mortgage denials in underwriting; home inspection issues; and homes appraising for less than their respective purchase prices.

In other words, despite a reduction in the number of homes for sale, and a rash of failed contracts, Existing Home Sales volume is still on the rise.

Broken-down by buyer-type, here’s to whom home sellers were selling in November :

  • First-time buyers : 35% of home resales, up from 34% in October 2011
  • Repeat buyers : 46% of home resales, down from 48% in October 2011
  • Investor buyers : 19% of home resales, up from 18% in October 2011

Given high demand for home resales and shrinking home supplies, we should expect that home prices will rise through December 2011 and into early-2012, at least. Recent Housing Starts data supports this notion. 

Thankfully, mortgage rates remain low. Low mortgage rates help keep homes affordable.

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Housing Starts Show Strength In Housing

Posted by Kevin Whatley

Dec 21

Housing Starts 2007-2011

The new construction housing market continues to show strength across the country.

According to the U.S. Census Bureau, Single-Family Housing Starts rose to 447,000 units on a seasonally-adjusted, annualized basis in November — a 2 percent increase from October.

A “Housing Start” is defined as breaking ground on new home construction.

November’s figures mark the third straight month of Single-Family Housing Starts gains. The new construction metric is now 15 percent above its all-time low, set in February of this year.

None of this should be a surprise to new home buyers in Bossier City.

Housing data has been trending better since September with sales volumes rising and home inventories falling. Basic economics tells us that home prices should soon rise.

The good news is that low mortgage rates should keep homes affordable.

Since mid-November, the average, conventional 30-year fixed rate mortgage has hovered near 4.000% nationwide with an accompanying 0.7 discount points plus closing costs. 1 discount point equals one percent of your loan size. This is down from near 4.500% six months ago, and the drop has made a big impact on home affordability. 

  • June 2011 : $200,000 mortgage costs $1,013.37 per month
  • December 2011 : $200,000 mortgage costs $954.83 per month

This represents $700 in savings per year. It’s no wonder home builders report the highest buyer foot traffic in 3 years. 

Meanwhile, the market shows little signs of slowing down. Building Permits are on the rise, too.

Permits for single-family homes rose to their highest levels of year in November and 89 percent of those homes will start construction within 60 days. This means that Single-Family Housing Starts should stay strong through the early part of 2012, and into the spring.

If you’re planning to buy new construction in Texas , therefore, talk to your real estate agent soon and consider moving up your time frame. With mortgage rates low and next year’s buying season approaching, you may find that the best “deals” will come within the next few weeks only.

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Home Builders Experiencing Heavy Foot Traffic And Higher Sales Volume

Posted by Kevin Whatley

Dec 20

Housing Market Index 2010-2011In another good sign for the housing market, today’s home builders believe that the housing market has turned a corner.

For the third straight month, the Housing Market Index — a home builder confidence survey from the National Association of Homebuilders — reported strong monthly gains.

December’s Housing Market Index climbed 2 points to 21 in December after a downward revision to last month’s results. The index is now up seven points since September 2011, and sits at a 19-month high.

When home builder confidence reads 50 or better, it reflects favorable conditions in the single-family new home market. Readings below 50 reflect unfavorable conditions.

The Housing Market Index has not crossed 50 since April 2006.

The HMI itself is actually a composite reading; the result of three related home builder surveys. The National Association of Homebuilders asks its members about their current single-family home sales volume; their projected single-family home sales volume for the next 6 months; and their current buyer “foot traffic”.

The results are compiled into the single Housing Market Index tally.

In December, builder survey responses showed strength across all 3 questions :

  • Current Single-Family Sales : 22 (+2 from November)
  • Projected Single-Family Sales : 26 (+1 from November)
  • Buyer Foot Traffic : 18 (+3 from November)

These results support the recent New Home Sales and Housing Starts data, both of which show an increase in single-family sales, and a decrease in new home housing supply.

When demand rises and supplies fall, home prices climb.

It’s also noteworthy that the Housing Market Index put buyer foot traffic at newly-built homes at its highest level since May 2008. With even more buyers expected to enter the market, new home prices are expected to rise across Keller in 2012 — especially in the face of shrinking home supplies. 

For now, though, with home prices stable and mortgage rates low, buyers can grab “a deal”. 60 days forward, though, may be too late.

The Spring Buying Season unofficially starts February 6, 2012. 

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What’s Ahead For Mortgage Rates This Week : December 19, 2011

Posted by Kevin Whatley

Dec 19

Fed Funds RateMortgage markets improved last week, but by a slight amount only; not enough to move conventional mortgage rates in Louisiana in any significant manner.

Wall Street watched as Eurozone leaders expressed little willingness to increase aid programs within the region, and as the Federal Reserve voted against new economic stimulus for the United States. The Fed Funds Rate remains near 0.000 percent and QE3 was not introduced.

Investors had expected the opposite outcome in both scenarios.

In most weeks, these stories would have led mortgage rates lower. There was, however, a fair amount of data suggesting that the U.S. economy is in recovery, and that tempered any major shifts in markets.

  • Manufacturing data proved to be strong
  • Inflation numbers are heating up
  • Jobless claims continue to drop, week-to-week

In addition, in its last meeting of the year, the Federal Reserve specifically mentioned that the economy has been “expanding moderately”.

These are all good signs for the future of the U.S. economy. Unfortunately, for mortgage rate shoppers and would-be home buyers, it may mean higher mortgage rates ahead.

Since early-November, mortgage rates have idled, moving within a range of less than 2 basis points and centered on 3.99%. According to Freddie Mac, this week’s average 30-year fixed rate mortgage fell to 3.94% which, at first glance, appears to be a “dip”.

To get access to that rate, however, requires more discount points as compared to prior weeks.

This week’s 3.94% with its accompanying 0.8 discount points is the financial equivalent of last week’s 3.99% with its accompanying 0.7 discount points. Going further, last week’s rates are actually less expensive to mortgage applicants for the first 3 years of a loan because the closing costs are so much lower.

So, given global economic conditions and the mortgage bond market’s status as a “safe market”, the failure of mortgage rates to fall suggests that this may be as low as mortgage rates get. It’s time to look at locking in.

This week is a holiday-shortened week. Markets will close early-Friday and volume is expected to be thin. Therefore, expect exaggerated movements in rates. There are 3 releases related to housing (Housing Starts, Existing Home Sales, New Home Sales) and a consumer sentiment release. 

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Mortgage Payments Fall 12% Since February 2011

Posted by Kevin Whatley

Dec 16

Mortgage payments in 2011

As mortgage rates drop, so do housing payments. It’s a good time to consider refinancing your home, or making an offer on a new one. Mortgage payment affordability has never been so high in history.

According to Freddie Mac, the average 30-year fixed rate mortgage rate is now 3.94 percent – an all-time low – with an accompanying 0.8 discount points. This means that in order to get access to the 3.94 percent rate, Shreveport  homeowners and home buyers should expect to pay a loan fee equal to 0.8% of the borrowed amount, plus “normal” closing costs.

Last week, the average 30-year fixed rate mortgage rate was 3.99 percent with an accompanying 0.7 discount points.

Mortgage rates in Texas have been in decline for most of the year. Since peaking in early-February, the average home owner’s principal + interest payment on a 30-year fixed rate mortgage had now dropped by 12.2 percent.

Here is how mortgage payments compare, then and now, not accounting for your individual tax-and-insurance escrow :

  • February 10, 2011 : Payment of $539.88 per $100,000 borrowed
  • December 15, 2011 : Payment of $473.96 per $100,000 borrowed

For existing homeowners, the dramatic drop in payments is reason to reach out to your loan officer. A refinance could save you tens of thousands of dollars over the life of your loan — especially if you chose to refinance your mortgage into a 15-year program.

The 15-year mortgage, says Freddie Mac, is also at an all-time low, registering 3.21 percent with 0.8 discount points, on average.

For home buyers, today’s low rates present an interesting opportunity.

Mortgage rates are the key factor in determining your monthly housing payment so, with average mortgage rates below 4 percent, it’s no wonder home affordability is cresting. However, the housing market is showing signs of recovery. Home supplies are dwindling, buyer demand is rising, and the economy appears to be mending.

Home prices are expected to rise in 2012 and, as they do, they’ll take housing payments with them. The best time to buy a home may be now; before the recovery completes.

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Bank Repossessions Drop To A 44-Month Low

Posted by Kevin Whatley

Dec 15

Foreclosure concentration November 2011Foreclosure activity continues to concentrate over just a few states.

According to foreclosure-tracker RealtyTrac, November’s foreclosure filings fell 3 percent as compared to October, and 14 percent from November 2010.

“Foreclosure filing” is a catch-all term for the various “action steps” throughout the foreclosure process. The grouping comprises default notices, scheduled home auctions, and bank repossessions.

As in most months, though, foreclosure activity remains concentrated by state. More than half of last month’s bank repossessions can be traced to just 6 states.

  1. California : 14.8% of all bank repossessions
  2. Florida : 12.7% of all bank repossessions
  3. Texas : 7.0% of all bank repossessions
  4. Georgia : 6.9% of all bank repossessions
  5. Arizona : 6.7% of all bank repossessions
  6. Michigan : 6.3% of all bank repossessions

Meanwhile, with just 5 repossessions, South Dakota topped the list of states with the fewest bank repossessions in November. The Mount Rushmore State accounted for just 0.009% of REO nationwide in a month in which bank repossessions dropped to a 44-month low point across the United States.

The drop in REO is coming at a tough time for today’s Bossier City home buyers. Distressed properties are in high demand — mostly because they sell at steep discounts.

According to the National Association of REALTORS®, distressed homes accounted for 28 percent of all home sales in October. As fewer bank-owned homes become available, though, there will be fewer “deals” to be had.

Especially as the broader housing market continues to signal its recovery.

If you plan to buy a bank-owned foreclosed property, do your research first. As supplies drop, the price for foreclosed homes throughout Texas relative to non-distressed homes may rise, rendering REO properties less of a relative “value”.

Before you write a contract, therefore, talk with a licensed real estate agent. There’s plenty of foreclosure data available online but, when it’s time to buy, you should have an experienced agent on your side.

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A Simple Explanation Of The Federal Reserve Statement (December 13, 2011 Edition)

Posted by Kevin Whatley

Dec 13

Putting the FOMC statement in plain EnglishTuesday, the Federal Open Market Committee voted to leave the Fed Funds Rate unchanged within its current target range of 0.000-0.250 percent.

The vote was nearly unanimous for the second straight month. Just one FOMC member dissented in the vote, favoring additional policy stimulus beyond what the Federal Reserve currently provides.

In its press release, the Federal Reserve sais that the the U.S. economy is improving, noting that since its November 2011 meeting, the economy has been “expanding moderately”. The Fed also added that domestic growth is occurring despite some “apparent slowing in global growth” — a nod to ongoing uncertainty within the Eurozone.

The Federal Reserve expects a moderate pace of growth over the next few quarters, and believes that the jobs market will continue to improve, but slowly.

Other potential soft spots within the economy include :  

  1. A slowdown in business investment
  2. A “depressed” housing market
  3. Strains in global financial markets

The Federal Reserve added no new policies at its December meeting, and made no changes to existing ones. It re-iterated its plan to leave the Fed Funds Rate within its current range of 0.000-0.250 percent “at least until mid-2013″ and re-affirmed “Operation Twist” — the stimulus program through which the Fed sells Treasury securities with a maturity of 3 years or less, and uses the proceeds to buy mortgage bonds with maturity between 6 and 30 years.

Mortgage bonds are mostly unchanged since the Fed’s announcement, giving mortgage rates in Keller little reason to rise or fall.

Mortgage rates remain near all-time lows and, for homeowners willing to pay points + closing costs, 30-year fixed rate mortgages can be locked at less than 4 percent. If you’re thinking of buying or refinancing a home, it’s a good time to lock a mortgage rate.

The FOMC’s next meeting will be its first scheduled meeting of the new year. The meeting is slated for January 24-25, 2012.

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America’s Best Places To Raise A Family, Listed By State

Posted by Kevin Whatley

Dec 13

Great Places To Raise A FamilyBusinessWeek recently released its 2011 America’s Best Place to Raise a Family rankings. College-town Blacksburg, Virginia took top honors, breaking a 2-year win streak for the Chicago, Illinois region.

In 2009, suburban Mount Prospect, Illinois placed first. Last year, it was Tinley Park, Illinois.

The BusinessWeek report employs data from real estate information firm Onboard Informatics to make its rankings, compiling data across categories such as education, crime, and jobs plus access to parks and affordable homes. All selections are limited by population; all selections are home to 50,000 residents or fewer. Median incomes are within 20 percent — plus or minus — of the state’s median income levels.

BusinessWeek names one winner in each state. The winners in the 10 most populous states and their nearest “big city” are listed below

  1. California : East San Gabriel (Los Angeles)
  2. Texas : Wells Branch (Austin)
  3. New York : Hampton Manor (Albany)
  4. Florida : Niceville (Fort Walton Beach)
  5. Illinois : Morton Grove (Chicago)
  6. Pennsylvania : Cecil-Bishop (Pittsburgh)
  7. Ohio : St. Henry (Dayton)
  8. Michigan : Spring Arbor (Jackson)
  9. Georgia : Hoschton (Atlanta)
  10. North Carolina : Tryon (Spartanburg, SC)

The winners in all 50 states can be found on the BusinessWeek website.

Rankings like the BusinessWeek America’s Best Place to Raise a Family can be useful for home buyers in Bossier City , but like everything in real estate, statistics do not apply to every home equally. Even within the “best towns”, there are areas in which school systems are better, crime figures are lower, and amenities are more plentiful.

Therefore, before you make the decision to buy a home, talk with a real estate agent who has local market knowledge. It’s the most effective means to get data that matters to you.

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What’s Ahead For Mortgage Rates This Week : December 12, 2011

Posted by Kevin Whatley

Dec 12

Federal Reserve meets this weekMortgage markets were mostly unchanged for the 6th consecutive week last week as Wall Street’s uncertainty regarding the future of U.S. and global economies remain.

Mortgage bonds made gains made through the early part of the week, which caused mortgage rates in Louisiana to drop Monday through Wednesday afternoon. Those gains were erased, however, as 23 of 27 Euro leaders reached agreement on fiscal coordination and budget planning, sparking optimism for the future of the Eurozone, in general.

Mortgage rates rose Thursday and Friday.

This week, the momentum may continue. The main story we’ll be watching is the Federal Open Market Committee’s Tuesday meeting — its 8th scheduled meeting of the year and its last until 2012. 

When the Fed meets, mortgage rates are often volatile.

At its meeting, the FOMC is expected to vote the Fed Funds Rate unchanged within its current range near zero percent. However, it won’t be the Fed’s vote on the Fed Funds Rate that changes markets. Wall Street is keyed in to two other elements, instead.

The first element is the verbiage of the FOMC’s press release to markets. Issued upon adjournment, the FOMC’s press release identifies strengths and weaknesses in the U.S. economy, and offers an outlook for the future plus potential threats. The “tone” of the press release can change how mortgage bonds trade.

If the Fed describes an economy in recovery with few threat to growth, mortgage rates are likely to rise post-FOMC. By contrast, if the Fed says the economy has slowed, mortgage rates should fall.

The second element on which Wall Street is focused is the likelihood of new, Fed-led economic stimulus. Should the Federal Reserve modify existing support programs, or introduce new ones, mortgage rates are sure to shift. Unfortunately, we can’t know in which direction — it will depend on the size of the program and its expected impact on the U.S. economy.

The Fed adjourns Tuesday at 2:15 PM ET.

Beyond the Fed, there is other rate-moving news, too, including Tuesday’s Retail Sales report, Thursday’s Producer Price Index, and Friday’s Consumer Price Index. Each has the capacity to change mortgage rates throughout Keller so if you’re floating a mortgage rate, it may be a good time to lock one in. 

Freddie Mac reports the average 30-year fixed rate mortgage at 3.99% with 0.7 discount points, plus closing costs.

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