Home Affordability Reaches New High In Q1 2012

May 22, 2012 by

Home Affordability 2005-2012Falling mortgage rates and stagnant home prices are making a positive effect on home affordability nationwide. Never before in recorded history have so many homes been affordable to households earning a moderate annual income.

Last week, the National Association of Home Builders reported the Home Opportunity Index at 77.5 — its highest reading of all-time. The index indicates that more than 3 of every 4 homes sold last quarter were affordable to households earning the national median income of $65,000.

Last quarter marks the 12th straight quarter — dating back to 2009 — in which the index surpassed 70. Prior to this run, the index had never crossed 70 even once.

That said, like most real estate statistics, the Home Affordability Index has a national purview. National data is of little value to homeowners in specific cities , or in specific neighborhoods.

Last quarter, home affordability varied by region.

In the Midwest, for example, affordability was highest. 7 of the top 10 most affordable markets nationwide were spread throughout Ohio, Michigan, Illinois and Indiana. The top two spots, however, went to an East Region town (Cumberland) and a Pacific Northwest Region city (Fairbanks, Alaska), respectively.

The top 5 most affordable cities for home buyers in Q1 2012 were:

  1. Cumberland, MD (99.0%)
  2. Fairbanks, AK (98.9%)
  3. Wheeling, WV (97.0%)
  4. Kokomo, IN (95.8%)
  5. Indianapolis, IN (95.8%)

At #17, the Lakeland/Winter Haven, Florida area was the top-ranked South Region city last quarter.

By contrast, the Northeast Region and Southern California ranked among the least affordable housing markets — again. Led by the New York-White Plains, NY-Wayne, NJ area, 8 of the 10 least affordable areas were in the Mid-Atlantic and California, and for the 16th consecutive quarter the New York metro area was ranked “Least Affordable”.

Just 31.5 percent of homes were affordable to households earning the area median income there, up from 25.2 percent six months ago.

The rankings for all 225 metro areas are available for download on the NAHB website.

Filed Under: Housing Analysis Tagged With: , ,

America’s 10 Richest Counties

May 21, 2012 by

America's Richest CountiesThere are 3,033 counties in the United States. Which 10 are the richest in terms of median household income? Not surprisingly, those near major economic centers rank high.

In a study based on household income estimates from the Census Bureau’s American Community Survey, Loudoun County, Virginia captures the number one spot in America’s Richest Counties.

Loudoun County is a Washington, D.C. suburb and is home to Dulles International Airport, as well as a well-educated workforce.

The complete Top 10 list of America’s Richest Counties :

  1. Loudoun County, Virginia ($115,574)
  2. Falls Church City, Virginia ($114,409)
  3. Fairfax County, Virginia ($105,416)
  4. Los Alamos County, New Mexico ($103,643)
  5. Howard County, Maryland ($103,273)
  6. Hunterdon County, New Jersey ($100,980)
  7. Douglas County, Colorado ($99,198)
  8. Fairfax City, Virginia ($97,900)
  9. Somerset County, New Jersey ($97,440)
  10. Morris County, New Jersey ($96,747)

As a region, it’s estimated that 40% of the Washington, D.C. metro area economy can be attributed to federal spending. This helps explain why Falls Church City, Virginia; Fairfax County, Virginia; and Howard County, Maryland all scored high on the list. It’s also why Los Alamos ranked 4 — the largest employer in Los Alamos is the Los Alamos National Laboratory, one of the largest science and technology institutes in the world.

The New Jersey counties are popular commuter areas for homeowners who work in New York City.

As a home buyer , the wealth of particular area may matter to you, but it won’t be the sole reason you purchase. You may have interest in a quality school district, or a vibrant nightlife, or a a high walkability factor, for example.

For more detailed statistics about the 10 counties at top or other local markets, be sure to ask your real estate agent. 

Filed Under: Rankings Tagged With: , ,

Is More Fed-Led Stimulus On Its Way?

May 18, 2012 by

FOMC minutesThe Federal Open Market Committee released its April 2012 meeting minutes this week, revealing a Federal Reserve in the ready in the event additional monetary stimulus is needed.

The Fed Minutes function much like the minutes from a business meeting; or, condominium association meeting, for example. It’s a detailed review of the conversations and debates between FOMC members, and is typically published 3 weeks after a Federal Reserve meeting.  

The Fed Minutes is a follow-up statement on the FOMC’s more well-known, post-meeting press release. It’s also much more lengthy.

Whereas the April 25, 2012 press release totaled 444 words, the Fed Minutes spanned 6,618. 

Those extra words are important, too, because the detail offered within the Fed Minutes lends insight into how our nation’s central bank views the U.S. economy, its strengths and weaknesses, and its threats.

From the Fed Minutes, some of the Fed’s comments includes :

  • On employment : Unemployment may remain elevated through 2014
  • On housing : Tight underwriting is “holding down” the housing market
  • On rates : The Fed Funds Rate should remain low until late-2014

There was also substantial talk about Europe and its role in the U.S. economy. Notably, U.S. financial institutions have been actively reducing their European exposure to contain damage in the event of a full-blown economic crisis abroad.

This has had the net effect of lowering mortgage rates. Mortgage bonds often benefit from economic uncertainty.

In addition, because several Fed members acknowledged a willingness to add new stimulus to the U.S. economy, mortgage markets are accounting for the possibility it could happen. It’s unclear whether stimulus would be added after the Fed’s next meeting, or at some point later in the year, or at all.

The FOMC has its next scheduled meeting June 19-20, 2012.

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Single-Family Housing Starts Powers Ahead

May 17, 2012 by

Housing StartsThe new construction housing market continues to improve.

One day after the National Association of Homebuilders reported a 5-year high in homebuilder confidence, the U.S. Census Bureau reports that single-family housing starts rose 2 percent for the second straight month last month.

In April, on a seasonally-adjusted, annualized basis, the government reports 492,000 single-family housing starts. A “housing start” is a home on which ground has broken.

In addition, March’s single-family housing starts were revised higher. What was previously reported as a three percent loss was re-measured and changed to a 0.2% gain.

The April tally marks a six percent increase over the one-year moving average and, along with the March revision, suggests that the springtime housing market may have just been seasonal. 

In March, a number of reports suggested a housing retreat :

Since then, though, low mortgage rates and affordable home prices appear to have sustained the new construction market, which now appears poised for a strong 2012. 

As one mark of proof, active buyers of newly-built homes nationwide are scheduling “model home” showings at the fastest pace since 2007. The burst of foot traffic high has builders upping their sales expectations for the next 6 months.

A scenario like this would normally lead new home prices higher, but the pressure for prices to rise may be offset by the amount of new home supply coming online.

In addition to a rise in Housing Starts, the Census Bureau also reports that, in April, the number of Building Permits for single-family homes rose 2 percent to move to its second-highest level since March 2010 — the month preceding the end of the 2010 federal Home buyer tax credit.

86 percent of homes break ground within one month of permit issuance.

It’s unclear whether housing is on a steady path higher, but there’s a growing body of evidence that suggests the market bottom has already passed.

Filed Under: Housing Analysis Tagged With: , ,

Homebuilder Confidence Moves To 5-Year High

May 16, 2012 by

NAHB HMI Homebuilder Confidence is on the rise once again.

After a brief dip in April, the National Association of Homebuilders reports that the Housing Market Index rose 5 points in May to 29. The increase marks the sharpest climb in homebuilder confidence on a month-to-month basis in 10 years, and raises the index to a 5-year high.

The Housing Market Index is scored from 1-100. Readings above 50 indicate favorable conditions in the single-family new home market overall. Readings below 50 indicate poor conditions.

The HMI has not been above 50 since April 2006.

The Housing Market Index itself is a composite reading as opposed to a straight-up homebuilder survey. The published HMI figure is a compilation of the results of three specific questionnaires sent to NAHB members monthly.

The survey questions are basic :

  1. How are market conditions for the sale of new homes today?
  2. How are market conditions for the sale of new homes in 6 months?
  3. How is prospective buyer foot traffic?

This month, builders are reporting strong improvement across all three surveyed areas. Current home sales are up 5 points; sales expectations for the next six months are up 3 points; and buyer foot traffic is up 5 points to its highest point since 2007.

With mortgage rates low and home prices suppressed, the market for new homes is gaining momentum, a conclusion supported by the New Home Sales report which shows rising sales volume and a shrinking new home inventory nationwide.

The basics of supply-and-demand portend higher new home prices later this year — a potentially bad development for buyers of new homes nationwide. With demand for new homes rising, builders may be less likely to make sale price concessions or to offer “upgrade packages” to buyers of new homes.

If you’re shopping for new construction , therefore, consider moving up your time frame. Home affordability is high today. It may not be tomorrow.

Filed Under: Housing Analysis Tagged With: , ,

How To Seal A Granite Countertop

May 14, 2012 by

Seal granite countertopsAmong homeowners, granite countertops remain a popular kitchen and bathroom finishing choice. Granite boasts a combination of natural beauty and durability that’s unmatched among most commercial options.

But different from many other countertops choices, granite is a natural material; mined from the Earth. It is porous and highly absorbent.

To protect the granite in your home, therefore, and to ensure its quality over time, you’ll want to seal your countertops at least once annually. A proper granite sealing will prevent stains and damage that can ruin your countertops’ appearances.

Sealing your granite countertops is a simple job, but one that requires a little bit elbow grease.

First, you should make sure your granite is actually ready to be re-sealed. To do this, soak a white cotton cloth in water and leave it on the corner of your countertop for a 10 minutes.  Lift the towel and check whether the area under the towel is discolored, or dark. This will indicate that your granite is absorbing liquid and needs sealing.

If the area is not disclored, your granite is already sufficiently sealed.

If your countertops do need to be sealed, here’s how to do it :

  1. With a spray cleaner, wipe down the entire surface and allow to dry
  2. Using a clean white rag, apply granite sealer to the surface uniformly
  3. Allow 30 minutes for the granite to absorb the sealer, or longer
  4. When dry, re-apply a second coat of sealer

Depending on the thickness and quality of your home’s granite, it may need to dry overnight so allow yourself the proper time to finish the job.

Once sealed, use preventative maintenance to keep your granite countertops looking great. Place coasters under beverages, hot plates under dishes and clean up spills immediately.

A well-cared for granite countertop will last for years.

Filed Under: Around The Home Tagged With: , ,

Mortgage Rates Make New All-Time Lows (Again)

May 11, 2012 by

Mortgage rates

Conforming mortgage rates continue to drop.

For the second straight week, the 30-year fixed rate mortgage fell to a new, all-time low nationwide. According to Freddie Mac’s weekly mortgage rate survey, the average 30-year fixed rate mortgage rate dropped 1 basis point to 3.83% this week for borrowers willing to pay 0.7 discount points plus a full set of closing costs.

The 15-year fixed rate mortgage also set a mortgage rate record, registering 3.05% with an accompanying 0.7 discount plus closing costs.

Discount points are a one-time, up-front closing cost, based on loan size. 0.7 discount points is equal to 0.7% of the borrowed amount. A home buyer opening a $200,000 mortgage and paying 0.7 discount points, therefore, would be subject to a one-time $1,400 fee paid at closing.

Borrowers wanting to avoid paying discount points can expect higher mortgage rates than Freddie Mac’s reported national average.

Falling mortgage rates are nothing new. Since peaking in February 2011, mortgage rates of all types have been in steady decline. The 30-year fixed rate mortgage has shed 122 basis points since that date, falling from 5.05%; the 15-year fixed rate mortgage has shed 124 basis points, falling from 4.29%.

Low mortgage rates give today’s home buyers additional purchasing power, stretching home affordability to new heights.

Low rates also help existing homeowners to lower monthly mortgage payments. For example, as compared to mortgage rates just 15 months ago, homeowners refinancing into today’s 30-year fixed rate mortgage stand to save 13.4 percent on their respective mortgage payments. 

A comparison :

  • February 2011 : $539.88 principal + interest per $100,000 borrowed
  • May 2012 : $467.67 principal + interest per $100,000 borrowed

A homeowner with a $300,000 mortgage at February 2011 30-year fixed rate mortgage rates would save $2,600 annually with a refinance to this week’s low rates. Even accounting for discount points and closing costs, the “break-even point” on savings like that comes relatively quickly.

Mortgage rates can’t be predicted so there’s no guarantee of low rates forever. If today’s rates meet your budget, consider locking something in. Speak with your loan officer about your options.

Filed Under: Mortgage Rates Tagged With: , ,

8-Fold Increase In “Improving Markets” Since September

May 10, 2012 by

Improving Markets IndexThe economic recovery continues nationwide, but the recovery’s an uneven one.

Some metropolitan areas are faring very well this year, posting measurable gains in both employment and housing. Other metropolitan areas, by contrast, are struggling.

To help identify those markets in which growth is occurring, the National Association of Homebuilders created the Improving Market Index, a metric analyzing three separate, independently-collected data series “indicative of improving economic health”.

The IMI’s three collected data series are :

  1. Employment Growth (as published by the Bureau of Labor Statistics)
  2. Home Price Growth (as published by Freddie Mac)
  3. Single-Family Housing Growth (as published by the Census Bureau)

A metropolitan area is considered to be “improving” if all three indicators show growth at least six months after the respective area’s most recent trough, or “bottoming out”.

In May, there are exactly 100 U.S. markets that qualify for the NAHB’s Improving Market Index, down from 101 last month but higher by more than 800% from the reading in September 2011, the index’s inaugural release.

17 areas were added to the Improving Market Index list this month including Phoenix, Arizona; Ann Arbor, Michigan; and Bend, Oregon. 18 areas were removed from the May IMI.

83 metropolitan areas remained from April.

There is little actionable information in the Improving Markets Index but the report does a good job of highlighting how “real estate markets” can’t be summarized on a national level and remain relevant to everyday home buyers and sellers nationwide. For example, Fort Collins, Colorado is listed as an Improving Market. However, Greeley, Colorado — located just 30 miles away — was just downgraded from the same list. 

Home values and economies vary by region, by state, by city, by neighborhood, and even by street.

The complete Improving Markets Index can be viewed at the NAHB website but for the best read of what’s happening in your neighborhood, talk to a local real estate agent.

Filed Under: Housing Analysis Tagged With: , ,

With LIBOR Low, Don’t Rush To Refinance Your ARM

May 9, 2012 by

Pending ARM Adjustment

Is your mortgage scheduled to adjust this season? You may want to let it. This year’s ARM-holding homeowners are finding out that an adjusting mortgage may be the simplest way to get access to today’s low mortgage rates — without paying the closing costs.

Currently, conventional adjustable-rate mortgages are adjusting to near 3.00 percent.

If your home is financed via an adjustable-rate mortgage, you’re likely cognizant of your loan’s life-cycle. At first, your ARM’s initial mortgage rate is agreed upon between you and your lender, a rate that both parties agree will remain in place from anywhere from one to 10 years, with periods of five and seven years being most common.

Then, after the initial “teaser rate” expires, the mortgage’s mortgage rate adjusts according to a pre-determined formula — one that’s also agreed upon at closing. The loan is then subject to an identical mortgage rate adjustment every 12 months thereafter until the loan is paid in full.

The most common conforming mortgage adjustment formula is to add 2.25 percent to the then-current 12-month LIBOR rate.

Today’s 12-month LIBOR is 1.05% so, as a real-life example, an adjustable-rate mortgage that’s leaving its teaser rate period this week would adjust to 3.30%.

If you’re a homeowner who took a 7-year ARM in 2005, or a 5-year ARM in 2007, your newly-adjusted mortgage rate should be roughly 2 percent lower than your initial teaser rate. On a $250,000 mortgage, a 2 percent mortgage rate reduction yields $298 in monthly savings.

Therefore, if you have an adjustable-rate mortgage that’s due to reset, don’t rush to refinance it. For at least one more year, you can benefit from low mortgage rates and low payments.

As for next year’s adjustment, however, that’s anyone’s guess.

Filed Under: Mortgage Rates Tagged With: , ,

Reverse Mortgages : Pros And Cons

May 8, 2012 by

Despite several big-name banks pulling the product from their respective home loan offerings, reverse mortgages remain a popular mortgage choice among homeowners aged 62 or over.

A reverse mortgage is exactly what it sounds like — a mortgage in reverse. Rather than borrow a fixed amount of money then pay that loan balance down to zero as with a “forward” mortgage, a reverse mortgage starts at a given loan balance and works its way up as scheduled payments are added to the existing loan balance.

This 4-minute piece from NBC’s The Today Show highlights a few pros and cons of reverse mortgages, and the reasons why you may want to consider one, including :

  • No mortgage payments are ever due on your home
  • There is no credit check required for a reverse mortgage
  • There is no income requirement to qualify for a reverse mortgage

There are some basic qualification standards for the reverse mortgage program including a requirement that all borrowers on title must be 62 years of age or older; and that the subject property be a primary residence. Loan fees can also be higher than with a conventional-type mortgage.

If you meet the qualification standards, though, with a reverse mortgage, you have flexibility in how your home equity is distributed to you. You can receive a lump-sum payment, elect for monthly installments over time, create a line of credit, or a combination of all three. 

Like all mortgages, reverse mortgages are complex instruments. That’s one reason why all reverse mortgage borrowers are required to attend counseling — the government wants you to be certain that you understand the nuances of the reverse mortgage program.

Your lender will want you to understand the program, too.

Filed Under: Mortgage Guidelines Tagged With: , ,