Friday, October 25, 2013

Mortgage Rates Fall to 4-Month Low

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Mortgage rates have improved over the past week with further declines predicted. The partial government shutdown has led to speculation that the government will continue its bond-buying stimulus program which should keep rates down. Rates are expected to continue to trend down in the coming week so it may be a good time to lock in a rate.

Mortgage Rates Fall to 4-Month Low

Mortgage Rates, Real Estate News  Oct 24, 2013 By: Neal J. Leitereg


Key fixed-mortgage rates fell to their lowest levels in four months this week, with further declines predicted in the short term. 


The federal government’s shutdown and ongoing concerns with the economy’s recovery, particularly the Federal Reserve’s decision to continue its bond-buying stimulus program, were cited as factors in the declines of the key mortgage rates.

The drop in rates comes after the federal government shutdown drew to a close last week. Averages on fixed-rate mortgage previously spiked by more than a percentage point since early May; however, both the 30-year and 15-year fixed-rate loans are now trending at their lowest levels since June 20.

The average rate on a 30-year fixed-rate mortgage saw a 0.15 percentage point decrease over the last week, according to the latest survey by mortgage buyer Freddie Mac. The rate is currently trending at 4.13 percent, down from last week’s 4.28 percent. A year ago, the average on a 30-year fixed mortgage was 3.41 percent.

The average rate on a 15-year fixed loan saw a decrease of 0.09 percentage point, dropping from 3.33 percent to 3.24 percent week over week. Compared to a year ago, the 15-year fixed has gained 0.52 percentage point. It previously peaked in August, hitting a high of 3.6 percent, and has remained above the 3.00 percent mark since early June.

“Mortgage rates slid this week as the partial government shutdown led to market speculation that the Federal Reserve will not alter its bond purchases this year,” Frank E. Nothaft, Freddie Mac vice president and chief economist, said in a statement.

Following a 0.02 percentage point increase a week ago, the average rate on a five-year adjustable-rate mortgage saw a slight drop. Previously at 3.07 percent, the five-year ARM settled at 3.00 percent this week. The one-year ARM also registered a decline, falling 0.03 percentage point from 2.63 percent to 2.60 percent this week.

Sales of existing homes saw a 2 percent decline in September from the previous month, according to October data released by the National Association of Realtors. However, sales of existing homes have increased 11 percent year-over-year. First-time homebuyers represented 28 percent of the real estate purchases while 39 percent of the homes sold in September were on the market for less than a month.

Looking ahead, homebuyers hoping to lock in a lower rate may want to hold off for a week or two. In the latest Mortgage Rate Trend Index, 77 percent of the analysts and loan experts polled believe that mortgage rates will continue to trend downward.

Mortgages have improved greatly over the last week. Bond-market participants now think any tapering by the [Federal Reserve] has been pushed back to well into 2014,” opined WCS Funding Group mortgage banker Michael Becker. “I think the weak employment report of this week only reinforced that sentiment. Because of this, I expect bonds to rally and mortgage rates to improve slightly in the coming week.”




Tuesday, October 22, 2013

3 Hurdles Home Sales are Facing Right Now

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There are several challenges to the housing recovery this month. The 16-day government shutdown's affects on housing market will be revealed in next month's housing report. I'm guessing it will have a negative impact as it has most likely slowed down the pace of closed sales. Less affordability also plays a major factor as mortgage rates are rising too.

3 Hurdles Home Sales are Facing Right Now

Daily Real Estate News | Tuesday, October 22, 2013 

Existing-home sales are hitting a snag because of several constraints that the housing market is grappling with, according to the National Association of REALTORS®' latest housing report. NAR officials note several challenges for the housing recovery:
  1. Less Affordability: “Affordability has fallen to a five-year low as home-price increases easily outpaced income growth,” says Lawrence Yun, NAR’s chief economist. “Expected rising mortgage interest rates will further lower affordability in upcoming months.” Interest rates for 30-year fixed-rate mortgages increased to 4.49 percent in September from 4.46 percent in August, according to Freddie Mac. Rates are at the highest level since July 2011. Just a year ago, 30-year rates averaged 3.47 percent.
  2. Government shutdown: The effects that the 16-day federal government shutdown had on the housing market will likely be revealed in next month’s housing report, NAR says. “Just one impact of the recent government shutdown — delays in tax transcripts needed for approval of mortgage loans — put a monkey wrench in the transaction process and could negatively impact sales closings in next month’s report,” says NAR 2013 President Gary Thomas. 
  3. Rising flood insurance premiums: Higher flood insurance rates went into effect Oct. 1 and could impact future sales in flood zones, NAR reports. The Biggert-Waters Act gradually removes and reduces federal subsidies for flood insurance on more than a million homes nationwide. It has caused premiums for flood insurance to skyrocket in some areas. “REALTORS® report that approximately 10 percent of transactions in September were located in flood zones, and that nearly one out of 10 of those transactions were delayed or canceled due to concerns over rising insurance rates," NAR's report says.
—By Melissa Dittmann Tracey



Thursday, October 17, 2013

How Will Retiring Boomers Affect The Real Estate Market?

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Hmmm.... baby boomers with families were a driving force for the demand of large single family housing in suburbia between 1990 and 2010. Now with the aging population depending on when they decide to retire and downsize their homes this will affect demand for these homes. The housing preferences of 25 to 35 yr olds are radically different than their parents. Also, younger generation are having fewer kids than their parents as birth rates decrease. This may translate to less demand for large homes with increasing demand for condos and multi-family housing. The effects are something to think about.

How Will Retiring Boomers Affect The Real Estate Market?

Friday, October 11, 2013

Where Can the Middle Class Buy a Home?

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Guess unless you want to move to Ohio where homes are within reach for the middle-class we will have to accept the high prices of the west coast. The most unaffordable is not New York City as many may have thought but rather in California's  San Francisco, Los Angeles county and Orange County. Six of the seven least affordable places in the country all land in California. Affordability is better in the Midwest and South. No surprise there.

Where Can the Middle Class Buy a Home?

Real estate news and analysis from The Wall Street Journal 

 Conor Dougherty October 10, 2013, 12:01 AM


San Francisco is the least affordable place to be a middle-class home buyer, Trulia says.

If you’re in the middle class and want to buy a home here’s a piece of advice: Move to Ohio (if you’re not already there).

Some 86% of homes in the Akron, Ohio area are within reach of middle-class buyers in the area, the highest share in the nation, according to a report from Trulia, the real estate listings site. The next two cities on the list, with 85% of homes affordable to middle class, are Dayton and Toledo, respectively.

For those of you in the coastal elite who are reading this post for the perverse pleasure of finding out just how unaffordable your city is, you might be surprised to hear that New York isn’t No. 1. San Francisco is the least affordable place to be a middle-class buyer, with only 14% of homes within reach of those making the median San Francisco household income of $78,840, according to Trulia.*

However, we were slightly surprised by the next two most unaffordable places, Orange County and Los Angeles, respectively. New York was the fourth least affordable place to be middle class. After that were San Diego and San Jose and Ventura County.

For those keeping score, that means six of the seven least affordable places in the country are in California.

That said, for all the doom and gloom that’s been piled on the middle class of late, they are still able to buy a home in the lion’s share of U.S. metro areas. Among the 100 largest metro areas, in 87 at least half of the homes were within reach of those making the area’s median household income, according to Trulia. Most of the most affordable places were in the Midwest and South.




Tuesday, October 8, 2013

Realtors group expects more homes to go on market, moderating prices

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The volume of California homes are predicted to increase next year as inventory should increase as with the dramatic price gains this year it has helped bring back home equity for homeowners. That means many homeowners no longer owe more on their mortgages than their home is worth. Therefore, more sellers will be able to put their homes on the market. This should further help to cool down prices. Overall, home prices will still rise even with higher mortgage rates in our future. Since 2012, median home prices have risen in the past year by 28%. Next year the median is forecast to rise another 6% as there is such a strong demand for homeownership.

Realtors group expects more homes to go on market, moderating prices 

Home inventory 

The California Assn. of Realtors predicts that more homes will go on sale next year as more homeowners find they are no longer "underwater" on their mortgages. (Reed Saxon / Associated Press)

Thursday, October 3, 2013

Tighter mortgage rules will soon squeeze these groups even more

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New rules take effect  on January, 10, 2014 for mortgage loans and refinancing which will limit people to overall household borrowing at no more than 43 percent of their income. Also, even tighter rules on documentation will be required. Mortgages are already eight times harder to get than years prior to the housing collapse. It may be a good idea to get that loan for a home now before the end of the year. The hardest hit most likely to young adults and baby boomers because of their low income even if they have high credit scores. Meanwhile, for those who can afford it half of all housing sales are made with cash compared with only 20 percent before the collapse.

Tighter mortgage rules will soon squeeze these groups even more

Five years after the housing collapse, the new Consumer Financial Protection Bureau is closing the barn door on the loose lending that caused the crisis. But as homebuyers struggle to get financing for new homes, some critics fear the door could be permanently nailed shut for many people seeking affordable housing.

The new lending rules will limit people from taking out a mortgage or refinancing an existing one that puts their overall household borrowing at more than 43 percent of their income. That new debt cap also includes a wide swath of common forms of debt that count toward the total, including student loans, most fees and points related a home purchase, and property taxes. It also tightens rules on documentation, and lenders who improvise to give customers easier terms will be open to consumer lawsuits if the loans go bad.

"It will tighten things further. The largest constraint is the 43 percent threshold," says Sam Khater, senior economist at housing data provider CoreLogic. "It will hit more refinances than purchases because a lot of them use a high debt-to-income ratio. It will also hurt home borrowers in distressed environments."

Mortgage lenders say the rules could make loans especially elusive for some classes of borrowers, even those with strong credit scores. Baby boomers entering retirement and young adults will feel a disproportionate impact because of their lower income levels. (Related on Why Even Rich People Are Having Trouble Getting Mortgages.)

Based on interviews with mortgage lenders, real estate trade groups and market research firms, these groups are most likely to find borrowing more difficult when the rules take effect Jan. 10, 2014:

• First-time homebuyers, especially those who are carrying college loans that count toward the debt limit.

• Those who lost jobs in the recession or have had career disruptions in the past five years. Verification of job history and employment standing are key requirements at a time when unemployment has been historically high.

• People who live in either high-priced housing markets or places hit hard by the housing collapse.

The most populous U.S. state is among those most at risk: California, hit hard by foreclosures, still has some of the costliest U.S. real estate. Jumbo loan caps under federal housing guidelines have been reduced from over $700,000 to just above $400,000. In California, the average median home price was $352,000, up nearly 30 percent in a year, according the San Diego housing research firm DataQuick.

• Small businesses or independent contractors whose incomes fluctuate, or people who have chosen to shift into lower-paying jobs. This is one of the fastest-growing workplace populations. Recently divorced or widowed people could also face added scrutiny even if they are qualified to borrow.

• Retirees with adequate savings to finance home purchases or refinance. Lack of current income makes borrowing more difficult.

• Homeowners who wish to refinance but have lost some or all of their equity in the real estate bust.

• Those who live in regions hit by Hurricane Sandy, which have experienced sharp increases in flood insurance. Second-home and rental-property buyers are already having trouble getting financing in many areas. Newly designated Quality Mortgages will encourage lenders to seek more kinds of mortgage and homeowner coverage.

All told, private research firms say that from 10 percent to 50 percent of borrowers who now qualify will lose out. The CFPB, which authored the new rules, concedes that more borrowers will be rejected. But the consumer agency says the people who fail to reach Qualified Mortgage, or "QM" status, tend to be either "very marginally qualified" low-income borrowers or wealthier ones with private lending alternatives, and the exclusions amount to less than 10 percent of those currently eligible.

"Some of the stringent guidelines are going to mean that some very qualified borrowers will be turned down. I do fault [the CFPB] for that," says Jordan Roth, senior branch manager of GFI Mortgage Bankers, a New York-area housing lending firm. "The landscape is being reshaped. But you will still search around and find a lender if your loan makes sense."

Critics point out that the new lending rules are being introduced into a home finance market that is barely functioning as it is. Loan originations have dropped to an annual rate of about $500 billion a year from $1.5 trillion before the housing collapse, according to industry data. (Related on Should You Worry About More Bad Housing Numbers?)

Mortgages are already eight times as difficult to get now than they were in the years prior to the housing collapse, the Mortgage Bankers Association says. The MBA estimates that loan originations will drop 10 percent this year, even before the new rules take effect in 2014.

How, then, is the housing market recovering? Half of all housing sales are made with cash, according to a new Goldman Sachs report, compared with just 20 percent before the housing collapse. Those are not necessarily wealthy people who can afford to buy homes without financing help. Some cash deals result from foreclosure eliminations.

Federal agencies now hold the tab for 90 percent of outstanding home loans, in large part because the government's role expanded under the federal bank bailout. But the government-sponsored entities like Fannie Mae and Freddie Mac are gradually reducing loan purchases, hoping the private sector eventually picks up the slack. The new rules also add restrictions such as fee caps and paperwork for lenders, and some may be discouraged from re-entering a market with new costs and legal risks.

The CFPB says it will monitor the housing market to see if credit has been restricted too much by the new rules. Both congressional critics and Federal Reserve members say they will do the same, since the Washington policymakers are worried about putting more stress on a fragile housing market so critical to the overall economy.

"It could turn lending into a cut-and-dried question about income," says Charles Dawson, a housing finance policy specialist for the National Association of Realtors. "But there are a lot of other things underwriters can consider in what makes a good loan."

The CFPB acknowledges that "there many instances in which consumers can afford a debt-to-income loan above 43 percent." Moreover, it says banks "initially" may be reluctant to lend because of uncertainty over how to implement the rules. But it argues that it is carrying out its Dodd-Frank legal mandate by providing "bright lines for creditors who wish to make qualified loans."

The new credit restrictions aimed at cleaning up debt problems come at a time when consumers are doing a better job than ever in repaying their debt, according to S&P/Experian. Its monthly consumer credit measure shows overall debt defaults at or near all-time lows in a "healthy" credit environment. (Related on 50 Smart Money Moves to Make Now.)

In a vastly changed landscape, banks are skimpy and consumers frugal. That leads some critics to ask if the consumer agency is "still fighting the last war." They fear the "bright lines" that the consumer agency is using to guide risk-averse lenders may be too harsh for the consumers the agency is supposed to help. The result could be more expensive, harder-to-arrange loans for consumers, or outright rejections for qualified borrowers. With interest rates rising, the uncertainty is compounded for borrowers and lenders. In such an environment, default could leap, and that could threaten a repeat of the last crisis.

"The pendulum has swung from way too crazy to too conservative now," says CoreLogic's Khater. "That's human nature. The rules are aimed at protecting consumers from hurting themselves. Now that there is a hard-and-fast rule being used in place of traditional underwriting standards, ironically, the market will not be deciding [who is creditworthy]. No one knows what the impact will be."

Wednesday, October 2, 2013

Four Ways Government Shutdown Impacts New Mortgages

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Record low falling mortgage rates but due to government shutdown hard to access those loans as limited services to IRS and Social Security Services and Federal Housing Authority to obtain records required for processing loans.

Four Ways Government Shutdown Impacts New Mortgages

Real Estate News Oct 2, 2013  By: Brian O'Connell 

Mortgage rates are sliding as October gets rolling, but will rates – and the entire mortgage market – be sidelined by the U.S. federal government shutdown?

For the record, 30-year fixed mortgage rates fell to 4.32% for the week of September 26, 2013, down from 4.50% on September 19, according to data from Freddie Mac.

Under normal conditions, home buyers would be leaping off the fence to grab lower mortgage rates, but with the shutdown, there’s enough uncertainty in the air to keep mortgage consumers on the sideline until Uncle Sam is open for business again.

Some of that uncertainty over the mortgage market and the government stoppage is linked to facts on the ground, and some is closer to fiction.

“Watching the markets, mortgage rates did waver a little but we didn’t see massive movement some expected,” says David Hall, President of Shore Mortgage, a Troy, Mich.-based mortgage services provider. “This shutdown does come at an especially bad time as new home sales and home construction are building back up. More uncertainty is not what we need.”

With that uncertainty as a backdrop, let’s clear the air and point to four ways the shutdown really does impact the mortgage market:

1) Lower rates may be due to the shutdown – By and large, mortgage rates move with the direction of the economy. If banks and mortgage lenders think the economy is slowing – as it likely will under a prolonged shutdown – they will lower rates to attract more business.

In fact, rates remain fairly unscathed at this point, although there is an upward bias,” says Bob Van Gilder, a mortgage broker at Finance One Mortgage. “There may be some bumps in the road as the I.R.S. and the Social Security Administration have limited services, which will affect the mortgage process. But if you are being offered a rate that is attractive to you take it. You can’t lose by being able to sleep at night.”

2) FHA loans will be affected – If you’re a consumer waiting on a Federal Housing Authority (FHA) loan, you could be out of luck for now. In fact, approved mortgages will certainly be slowed while the FHA is shut down, even as it provides other services to the public.
The reason is this. With any FHA loan, mortgage services firms have to order a FHA case number, prior to an appraisal on the home. With the FHA’s lights out, those case numbers can’t be processed. Expect that process to take longer with fewer hands on deck.

3) I.R.S. documents out of reach – Another consequence of the U.S. government shutdown is the inability of mortgage firms to verify a borrower’s income via his or her U.S. tax returns. By law, any mortgage loan approval is subject to the review by the mortgage lender of at least one year’s worth of federal tax returns, and must be verified by the I.R.S. through a 4506 Transcript. With I.R.S. staffers at home, that process is stalled as tax agency workers would be unable to verify tax return documents.
Some industry experts say the damage here may be minimal, depending on the size of the lender.

“One of the biggest impacts to the mortgage market is that the ability to obtain a 4506 and Social Security Number Verification has been halted,” says Jason Auerbach, an LPO manager at New York city-based First Choice Bank/Lending. “The 4506 IRS Transcript is verification from the IRS that the income documentation, specifically tax returns, provided by a client match with what they filed.” Auerbach adds that the 4506 mandate does not impact lenders who are selling loans directly to Fannie Mae so many of the large lenders will see little disruption. However, smaller lenders who sell adjustable rate mortgages to investors may have to halt that lending,” he says.

4) A weaker U.S. housing market – The U.S. Housing and Urban Development, which runs the Federal Housing Authority, only has 337 out of 8,709 managers and staffers on the job this week. The longer that HUD is blacked out, the more potential problems for the U.S. housing market.

“If the shutdown lasts and our commitment authority runs out, we do expect that potential homeowners will be impacted, as well as home sellers and the entire housing market. We could also see a decline in home sales during an extended shutdown period, reversing the trend toward a strengthening market that we’ve been experiencing,” HUD said in a recent report, entitled HUD 2013 Contingency Plan for Possible Lapse in Appropriations released last week (find it at , under “Featured News.”

HUD does report that essential services, like HUD homeless assistance grants, housing services for veterans and housing for disabled people and AIDs patients will continue running.

The birds-eye view?

The mortgage market should largely remain up and running during the government shutdown, and homebuyers may even get a bonus, if mortgage rates keep falling while government agencies are shuttered.

By no means it is a perfect scenario, but for homebuyer, sellers, and real estate professionals, it’s certainly a survivable one.