What’s Ahead For Mortgage Rates This Week : September 10, 2012

September 10, 2012 by

FOMC meets this weekMortgage markets worsened slightly in last week’s holiday-shortened week. As expected, Wall Street took its cues from Europe and from the U.S. jobs market, and mortgage rates moved across a wide range.

Home buyers and would-be refinancing households were greeted with wildly varying mortgage rates, depending on which day they loan-shopped.

According to Freddie Mac’s weekly mortgage rate survey, 30-year fixed rate mortgage rates averaged 3.55% nationwide last week, with an accompanying 0.7 discount points.

That is, until Thursday’s meeting of the European Central Bank. 

The ECB is similar to the Federal Reserve in that, among its primary functions, it provides liquidity to banking systems in times of crisis. Thursday, the European Central Bank intervened with force.

To aid Spain and Italy, the third- and fourth-largest Eurozone economies, the European Central Board launched a bond-buying program meant to reduce speculation that the two nations — and the Euro itself — would fail.

The move calmed investors and sparked a broad equities market rally.

U.S. mortgage rates did not fare so well, however, climbing as much as 0.25% and leaving that “Freddie Mac mortgage rate” in the dust. If you tried to lock a loan Thursday, you may have been greeted with a rate nearing 4.000 percent.

Fortunately, those rising rates were short-lived.

Friday morning, the U.S. Bureau of Labor Statistics released its August Non-Farm Payrolls report and mortgage rates dropped. Far fewer jobs were created in the U.S. than was expected. 96,000 net new jobs were made in July. Wall Street had expected 130,000. This increases the likelihood of new Fed-led stimulus — perhaps as soon as this week.

The Federal Open Market Committee meets for the 6th of eight times this year later this week; a 2-day get-together scheduled for September 12-13. The Fed may announce a new round of market stimulus. If it does, mortgage rates should fall. If it doesn’t, mortgage rates may rise.

Other news affecting potential housing payments this week includes the release of key inflation data Thursday and Friday, and Friday’s Retail Sales data.

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Coming Next Week : New, Mandatory Loan Fees For All Conforming Mortgages

September 7, 2012 by

New g-fees threaten low mortgage ratesBeginning as soon as next week, new, mandatory mortgage fees will push mortgage rates higher nationwide. Fannie Mae and Freddie Mac are raising their respective “guarantee fees”.

Guarantee fees are fees that mortgage-backed securities providers charge to lenders for mortgage-related services including the bundling, selling and reporting of mortgage-backed bonds. 

Guarantee fees are also used to insure providers against credit-related losses.

As announced by the Federal Housing Finance Agency, effective for all conforming loans delivered to Fannie Mae or Freddie Mac, beginning November 1, 2012, guarantee fees will be raised by an average of 10 basis points per loan.

Conforming mortgages already average close to 30 basis points in guarantee fee per loan.

This is the second time this year that the FHFA has raised guarantee fees, with the most recent increase translating into an approximate 50-basis point worsening in consumer mortgage pricing. That today’s home buyers and refinancing households will soon pay higher loan closing costs as a result.

To use a real-life example, Freddie Mac reported that the average 30-year fixed rate mortgage was 3.55% nationwide this week for borrowers willing to pay an accompanying 0.7 discount points. 

Once the new g-fee is implemented, the discount points change : 

  • Prior to guarantee fee increase : 3.55% with 0.7 discount points
  • Post guarantee fee increase : 3.55% with 1.2 discount points

Post-increase, in other words, an identical Freddie Mac loan requires an extra half-point to get to closing, or $500 in additional closing costs per $100,000 borrowed.

These fees will soon appear on rate sheets, if they haven’t already.

Lenders know that it can take up to 60 days to lock a loan, approve it, fund it, then package it for delivery. Loans locked today, therefore, will likely be delivered to Fannie Mae or Freddie Mac after the November 1, 2012 deadline. As a result, mortgage pricing will soon include the effects of the g-fees.

Perhaps as soon as this morning.

Filed Under: The Economy Tagged With: , ,

Case-Shiller Index Shows Huge Home Price Gain

September 6, 2012 by

Case-Shiller Index June 2012

Home prices continue to rise nationwide. 

According to the Standard & Poor’s Case-Shiller Index, home prices rose 6.9% between the first and second quarter of 2012, the largest quarter-to-quarter gain since the home-value tracker’s 1987 inception and another signal that the housing market is in recovery.

The private-sector metric’s results are similar to what the government’s Home Price Index showed for June, too — values rising quickly. In addition, for the second straight month, each of the Case-Shiller Index’s 20 tracked markets showed month-to-month improvement.

June would have marked three straight months if not for Detroit’s value-setback in April.

The top performing markets in June, as tracked by the Case-Shiller Index were :

  1. Detroit, Michigan : 6.0 percent gain
  2. Minneapolis, Minnesota : 4.8 percent gain
  3. Chicago, Illinois : 4.6 percent gain

However, it should be noted that the Case-Shiller Index pulls from a limited sample set. It does not include condominiums or multi-unit homes in its findings, nor does it account for new construction. These exclusions make a material impact on the results of both Minneapolis and Chicago, as examples. Both cities feature a large concentration of condos.

Overall, though, the June data looks sound. Said a spokesman for the Case-Shiller Index, “The market may have finally turned around.”

Furthermore, home buyers nationwide can corroborate what the Case-Shiller Index has uncovered. Falling home inventory and rising home demand have helped to move home prices higher in many U.S. markets.

Low mortgage rates make new homes affordable and rising rents are turning the Rent vs Buy equation on its head. In July, according to the National Association of REALTORS®, first-time home buyers accounted for 34% of all home resales.  This trend is expected to continue into 2013.

As compared to one year ago, today’s home buyers have 8% more purchasing power and, with rising home prices, they’re going to need it.

Filed Under: Housing Analysis Tagged With: , ,

Making Coupon-Free Savings At The Supermarket

September 5, 2012 by

The average family puts 10-15 percent of its monthly spending toward food, according to the Bureau of Labor Statistics and Department of Agriculture, with most of that food purchased at a supermarket.

The amount spent on food is less than the typical amount spent on housing each month but what makes food costs different from housing expenses is food costs are not “fixed”.

How much you spend on food each month is up to you and, using savvy shopping tactics plus coupons, you can lower your monthly food spend. Saving money on food leaves money for other purposes including savings, clothing and transportation.

In this 4-minute piece from NBC’s The Today Show, you’ll learn several easy-to-implement methods which can reduce your supermarket bills, as well a few “common sense” tactics you may have overlooked.

Among the topics covered in the video :

  • The importance of shopping with a list, and of avoiding “the inner aisles”
  • The value of generic brands, which are often near-copies of “brand name” products
  • Why you should buy toiletries at a drugstore instead of at a supermarket
  • Using “per unit” prices to compare different-sized packaging of the same product
  • Buying fruit that’s in-season versus fruit that’s out-of-season

Another shared money-saving tip is to shop at grocery store without children. It can be fun for the family to shop together, as noted in the interview, but bringing children to the supermarket is a sure-fire way to raise your grocery bill.

Recent inflation data shows that the typical cost of food is rising nationwide. With these tips, perhaps you can lower your bill.

Filed Under: Personal Finance Tagged With: , ,

What’s Ahead For Mortgage Rates This Week : September 4, 2012

September 4, 2012 by

Jobs Report In FocusMortgage markets improved last week for the second consecutive week.

With no news coming from Europe, Wall Street was focused U.S. economic data and Federal Reserve Chairman Ben Bernanke’s planned public speech from the Fed’s annual retreat in Jackson Hole, Wyoming.

Rate shoppers and home buyers caught a break.

The housing market was shown to be improving last week, as was the average household income nationwide — two events which would have typically moved  mortgage rates higher. But, because the Fed Chairman used his speech to signal that new economic stimulus may be imminent, mortgage rates dropped.

The Fed is expected to launch a bond-buying program that would create new demand for mortgage-backed bonds. Mortgage-backed bonds are the basis for most U.S. mortgage rates and the new-found demand would result in lower rates nationwide. 

According to Freddie Mac’s weekly mortgage rate survey, the 30-year fixed rate mortgage rate fell to 3.59% last week for borrowers willing to pay 0.6 discount points plus a full set of closing costs, where 0.6 discount points is a one-time closing cost equal to 0.6 percent of your loan size.

Conventional mortgage rates open this week at a 4-week best. Threats to low rates remain, however.

A European Central Bank meeting is scheduled for Thursday and the release of the August Non-Farm Payrolls report is due Friday. Both events could have negative repercussions on mortgage rates. 

For example, the ECB is expected to announce new aid measures for some its struggling member nations, including Greece, Spain and Italy. If the aid package “ends” the sovereign debt issues which have plagued the European Union since 2010, equity markets would rally on the news at the expense of bond markets. This would drive U.S. mortgage rates higher as investors dump their bond holdings.

Similarly, if the August jobs report is deemed “strong”, it would lower the likelihood of new Fed-led stimulus. This, too, would lead mortgage rates higher — perhaps by a lot.

Economists expect to see that 130,000 net new jobs created last month. The jobs report will be released Friday at 8:30 AM ET.

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Mortgage Rates Drop For The First Time In 4 Weeks

August 31, 2012 by

Freddie Mac mortgage rates

After 4 weeks of rising costs, mortgage rates finally recede.

According to Freddie Mac’s weekly Primary Mortgage Market Survey, the average 30-year fixed rate mortgage rate dropped 7 basis points to 3.59% this week. Depending on where you live, however, you may find that your offered mortgage rates varies. Freddie Mac’s “published rate” is a national average based on a survey of more 125 banks.

The rates you receive as an individual vary by bank, and vary by region.  

Mortgage applicants in the North Central Region were most likely to get the lowest rates of all applicants nationwide last week. By contrast, applicants in the Southeast Region were most likely to get the highest rates.

Average mortgage rates in the five U.S. regions, as tracked by Freddie Mac :

  • Northeast Region : 3.59 percent for a 30-year fixed rate mortgage
  • West Region : 3.58 percent for a 30-year fixed rate mortgage
  • Southeast Region : 3.64 percent for a 30-year fixed rate mortgage
  • North Central Region : 3.57 percent for a 30-year fixed rate mortgage
  • Southwest Region : 3.61 percent for a 30-year fixed rate mortgage

Across all 5 regions, mortgage rates were quoted with an accompanying 0.6 discount points, on average, plus a full set of closing costs. 1 discount point is equal to one percent of your loan size. Closing costs vary by county.

One year ago, the 30-year fixed rate mortgage rate averaged 4.22%. Today, it averages 3.59%. This 63 basis point difference yields a $36 monthly savings per $100,000 borrowed. 

On a $250,000 mortgage, that’s $1,080 in savings per year.

If watched mortgage rates rise through August and felt as if you missed the market bottom, consider this week your second chance. The 30-year fixed rate mortgage does remains above its all-time low of 3.49 percent, but this week’s drop in rates in encouraging. It’s the biggest one-week drop in rates in more than 3 months.

Talk to your loan officer about how today’s mortgage rates can work for your budget. 

Filed Under: Mortgage Rates Tagged With: , ,

Pending Home Sales Index Makes New High For 2012

August 30, 2012 by

Pending Home Sales Index

In July, the third time this year, the Pending Home Sales Index crossed its benchmark value of 100, moving to 101.7. 

A “pending home sale” is a home under contract to sell, but not yet sold. Data for the index is collected by the National Association of REALTORS® and published monthly.

The rise in July’s Pending Home Sales Index reading is important for two reasons — both of which highlight a U.S. housing market in recovery. Buyer and sellers across the country would do well to pay attention.

First, the Pending Home Sales Index is at its highest point since April 2010, the last month of that year’s federal home buyer tax credit.

From this, we can infer that the rate at which homes are selling nationwide is approaching the same “stimulated” levels that the tax credit afforded two-plus years ago. The difference is that today there are no buyer tax incentives.

The Pending Home Sales Index readings have climbed steadily since the tax credit’s expiration, too :

  • July 2010 : 78.4 reading
  • July 2011 : 90.5 reading
  • July 2012 : 101.7 reading

Second, because the Pending Home Sales Index is a relative index; and, because it was assigned a value of 100 when it was launched by the real estate trade group in 2001, when the PHSI reads higher than 100, it tells us that homes are going under contract at a faster pace than they did during the index’s first year.

2001 was a strong year for the U.S. housing market. 2012 is on path to be a stronger one.

80% of homes go to closing within two months of contract so, based on the July 2012 Pending Home Sales Index, we should expect for the Existing Home Sales report to rise through the rest of summer and into fall. Home supplies may drop and home prices may rise.

The housing market has expanded slowly and steadily dating to October 2011. Based on last month’s PHSI, that momentum will continue. 

Filed Under: Housing Analysis Tagged With: , ,

New Home Sales Reach Multi-Year High

August 29, 2012 by

New Home Sales 2010-2012The market for newly-built homes remains strong.

As reported by the U.S. Department of Commerce, 372,000 new homes were sold in July on a seasonally-adjusted, annualized basis. A “new home” is a home that can be considered new construction.

July’s New Home Sales report highlights what today’s buyers of new construction and the nation’s home builders have witnessed for themselves already — that the market for newly-built homes is improving nationwide.

The number of new homes sold in July on a seasonally-adjusted, annualized basis matches the tally from May 2012, and is the highest reading since April 2010, the last month of that year’s federal home buyer tax credit.

The South Region continues to account for the majority of new construction sales, posting a 48% market share in July. South Region sales were up 9.1 percent as compared to one year ago. The other 3 regions posted higher sales volume as well :

  • South Region : +9.1% from July 2011
  • Northeast Region : +30.4% from July 2011
  • Midwest Region : +21.7% from July 2011
  • West Region : +63.8% from July 2011

Also noteworthy is that the increase in new home sales is coming at a time when new home supplies are slipping.

At the end of July 2012, there were just 142,000 new homes for sale nationwide. This is the smallest new home housing stock in at least 7 years, and a signal that buyers are buying homes faster than builders can build them. At the current pace of sales, the national supply of new homes would sell out in 4.6 months.

Because economists believe that a 6.0-month supply represents a market in balance, the current new home market is decidedly a “sellers market”. Buyers should expect higher new home prices ahead.

Dating back to October 2011, the housing market has shown slow, steady growth. Home prices have moved higher and so has builder confidence. If you’re in the market for new construction consider going into contract soon. The longer you wait to buy, the more you may be asked to pay.

Filed Under: Housing Analysis Tagged With: , ,

Government : Home Prices Up 3.0% In Last 12 Months Nationwide

August 28, 2012 by

Home Price Index, monthly since April 2007

The housing market recovery appears to be sustainable.

According to the Federal Housing Finance Agency’s Home Price Index, home prices rose by a seasonally-adjusted 0.7 percent between May and June 2012. The index is now up 3.0% over the past 12 months, and made its biggest quarterly gain since 2005 last quarter.

The FHFA’s Home Price Index measures home price changes through successive home sales for homes whose mortgages are backed by Fannie Mae or Freddie Mac, and for which the property type is categorized as a “single-family residence”. 

Condominiums, multi-unit homes and homes with jumbo mortgages, for example, are excluded from the Home Price Index, as are all-cash home sales.

June’s HPI gives buyers and seller reason to cheer, but it’s important to remember that the Home Price Index — like so many other home valuation trackers — has a severe, built-in flaw. The HPI uses aged data. It’s nearly September, yet we’re talking numbers from June.

Data that’s two months old has limited meaning in today’s housing market. It’s reflective of the housing market as it looked in the past.

And, even then, to categorize the HPI as “two months old” may be a stretch. Because it often takes 45-60 days to close on a home sale, the home sale prices as reported by the July Home Price Index are the result of purchase contracts written from as far back as February 2012.

Buyers and sellers in search of real-time home price data, in other words, won’t get it from the FHFA.

The Home Price Index is a useful housing market gauge for law-makers and economists. It highlights long-term trends in housing which can assist in allocating resources to a particular policy or project. For home buyers and sellers , however, it’s decidedly less useful. Real-time data is what’s most important.

For that, talk to a real estate professional.

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Carmel, Indiana Rated Top Mid-Sized U.S. City For 2012

August 27, 2012 by

Top Places To Live 2012 EditionCNNMoney has released its Best Places To Live 2012 list.

The annual survey is based on data from Onboard Informatics. Using Quality of Life factors such as education, crime and “town spirit”, and focusing on towns with between 50,000 and 300,000 residents, this year’s survey ranks the country’s best mid-sozed cities.

To be eligible for ranking, towns mus have a median household income greater than 85 percent, and less than 200 percent, of the state median income; must not be a categorized as a “retirement community” or a town with “major job loss”; and must be racially-diverse.

From a list of 744 eligible towns nationwide, Carmel, Indiana ranked first.

The complete Top 10 Best Places to Live as cited by CNNMoney, and average local home listing price as of July 2012 follows :

  1. Carmel, Indiana ($304,340 average listing price)
  2. McKinney, Texas ($245,917 average listing price)
  3. Eden Prairie, Minnesota ($413,566 average listing price)
  4. Newton, Massachusetts ($850,117 average listing price)
  5. Redmond, Washington ($518,982 average listing price)
  6. Irvine, California ($904,753 average listing price)
  7. Reston, Virginia ($467,934 average listing price)
  8. Columbia, Maryland ($406,943 average listing price)
  9. Overland Park, Kansas ($278,204 average listing price)
  10. Chapel Hill, NC ($376,660 average listing price)

In addition to ranking its Top 10 Best Places To Live, CNNMoney also offers a host of data on the top-ranked 100 cities at its website. See whether your hometown ranks, and what the data says about your town.

As you review the rankings, however, remember that while lists like these can be helpful to a home buyer , all “Best Place To Live”-like surveys are subjective. A bottom-ranked town may have no less appeal to you as an individual than a top-ranked one.

Every city has something to offer to its residents.

Therefore, before making a decision to buy a home, make sure to connect with a real estate agent with local market knowledge. That’s the best, most reliable way to make sure you’re getting the data on the market that matters most to you.

Filed Under: Rankings Tagged With: , ,