Existing Home Sales
Existing home sales slowed in January. According to Lawrence Yun, NAR chief economist, this is mainly due to the lack of urgency with the extension and expansion of the first-time buyer tax credit in November. January sales of 5.05 million remain 12 percent above the 4.53 million-unit level last year.
Median Home Price
Existing-home price was $164,700 in January, 3.4 percent below December and unchanged from January 2009. Distressed homes, which accounted for 38 percent of sales last month, continue to skew prices downward as they typically are discounted in comparison with traditional homes.
Inventory
The supply of homes continued to shrink, falling 0.5 percent to 3.27 million, representing a 7.8-month supply at the current sales pace. Compared to a year ago, there are now 10 percent fewer homes on the market. This is the lowest level of competing homes on the market since March 2006.
Mortgage Rates
Mortgage rates edged above the 5 percent threshold during the week of February 25, but remained near historically low levels. As the Federal Reserve mortgage-backed securities purchase program is scheduled to run out at the end of March, the Fed has held the door open to extending it if the economy weakens.
Affordability
Affordability remains at record levels, supported by the lowest mortgage rates in decades, low home prices, as well as the first-time buyer tax credit. So far this year, the home price-to-income ratio has fallen well below the historical average of 25 percent. The ratio now stands at 14.1 percent.
Sources: National Association of Realtors, Freddie Mac
Dream. Discover. Learn. Live Well.
Thursday, March 11, 2010
Thursday, January 7, 2010
Good Credit Score Not Good Enough Anymore
With historically low rates, many homeowners are watching closely for the right time to refinance their mortgages. Those with good credit may well recall being showered with praise by a mortgage broker during the initial purchase for that solid credit score.
That was then. This is now.
A few years ago, a score of 620 or higher was good enough. That increased to 680 in early 2008. Then it jumped to 720 in April last year and 740 in August, says Rodney Anderson, senior managing partner of Plano, Texas-based Rodney Anderson Lending Services.
In the past, any score of 700 or higher would get a double thumbs-up from credit experts. Now, rate adjustments begin kicking in at 740, with every 20-point drop adding another adjustment.
In other words, many people who were taking pride in their credit habits either must pay significantly higher or try to make quick changes to nudge their scores upward. "What used to be great is now only good," says mortgage broker Todd Huettner, president of Denver-based Huettner Capital. Refinancing that would have worked a year ago might well not make sense, he adds.
"I have clients all the time who literally wind up with a score of 739, 719, 699, 679 ... and it costs them money to either fix it or pay for it," Huettner says.
One of Huettner's clients, who always had a score of about 740, went to do a refinance and found her current score at 719. "The reason was, she put a new washer and dryer on a store credit card," he says. Many store cards are actually revolving credit, and your limit may well be equal or about equal to the purchase you're trying to make that day.
Take the application that Stamford, Conn.-based Luxury Mortgage Corp. got recently.
Interested in lowering the rate on an existing mortgage, the borrower could verify substantial income, assets and personal credit history, says chief executive David Adamo. But the borrower's credit score had taken a hit after co-signing an auto loan for his son that had not been paid timely.
"As a result, the borrower, who otherwise met every other criterion, was unable to refinance the loan at a rate that made economic sense," Adamo says.
Another wrinkle in today's market: Even those with FICO scores of 740 or higher are penalized for buying in a geographic market on the downswing. "This adjustment affects all borrowers, regardless of score, if in a declining market," says mortgage broker Jim Heidelberg, president of Heidelberg Capital Corp. in Tampa, Fla.
In many cases, the added costs of rate adjustments are "enough to make a refinance that would otherwise make sense have no benefit to the borrower," Huettner says.
The road to new scoring
How did we get to this new reality?
The nation's two largest mortgage lenders, Fannie Mae and Freddie Mac, suffered major losses in the market last year and then redefined risk, announcing price adjustments for borrowers with FICO scores below 720, says Sean Cragg, vice president of sales for Ann Arbor, Mich.-based Gold Star Mortgage Financial Group.
And, in case you were wondering, "these fees have nothing to do with your mortgage company or its various products and cannot be negotiated away," Cragg says.
All mortgage bankers, brokers and credit unions must comply with the higher interest rates and delivery changes in all traditional mortgages, says Heidelberg. Only entities intending to hold the mortgages in their own portfolios can follow their own guidelines.
Worse news may be on the horizon. "There are many factors, including proposed legislation and regulation, that continue to change the mortgage lending landscape," says David Chung, managing director of Towson, Md.-based CreditXpert Inc., which provides credit analysis services to consumers. "In the near term, it is more likely that this benchmark will continue to rise than fall."
Surprise, surprise
Joe and Jane Homeowner have likely heard of the new credit restrictions. But the actual cost to them is often a surprise when they sit down with a broker.
"Often, lenders will quote rates that include the adjustments, without calling attention to them in order to avoid a negative reaction from their customer," says James Guthrie, a partner in New Home Finance in Suwanee, Ga.
Less surprising are other factors that go into securing financing for a new or existing mortgage.
Paola Kielblock, national products manager for Sun Prairie, Wis.-based Fairway Independent Mortgage Corp., clarifies today's requirements:
• Good credit.• Stable job, with a minimum of two years of employment.• Reserves after closing, including a minimum of two to six months of mortgage principal, interest, taxes and insurance.• Down payment from the borrower's own funds.• Low debt-to-income ratio. The required ratio varies between banks but is generally less than 40 percent, according to many in the industry.•
Good loan-to-value percentage. It also varies, but it's often cited as less than 80 percent.
Having equity in your home is a major factor in getting approved for a refinance and in finding the best rate, says Cameron Findlay, chief economist for LendingTree.com. The more equity in the home, the less risk there is to the lender if the home is repossessed.
Taking action on your score
What can a homeowner who wants to refinance do with a good FICO score that's not good enough?
"Virtually everyone can raise their scores by at least 10 (points) to 20 points, sometimes significantly more in 30 days," Anderson says. Here's what to do.
1. Find out what might have gone wrong. Applicants should know their credit score, understand what it means to their loan rates and ask their loan officers to use credit analysis on their behalf, says Chung. Credit analysis tools are a simple way to identify key score influencers by scrutinizing the information contained in each of an individual's three credit reports to look for inconsistencies, errors and omissions that may artificially depress the score.
2. Correct any inaccuracies. Although consumers can improve scores on their own, Kielblock notes that credit agencies offer services to mortgage brokers to help consumers raise their credit scores if something is reported inaccurately and there is proof of a discrepancy.
3. Decrease the percentage of available credit used. This can be done by paying down balances or increasing credit limits, says Guthrie. Ideally, this means keeping balances as close to zero as possible, and definitely below 30 percent of the available credit limit, experts say.
"We've seen people increase their scores by as much as 90 points or more, simply by paying off the right cards," Anderson says.
4. Move things around. If one income can be used to qualify for the loan, transfer accounts to "park" the debt in the other party's name, Guthrie says.
5. Get a rapid rescore. It's the only way to find out fast if an attempt to improve a score was successful. It's done through your lender and a rescoring company. The process takes about a week, but it can get the loan process back on track. The downside is it costs a few hundred dollars. The credit bureau Experian has seen an increase in rapid rescoring requests, says spokeswoman Cynthia Baker. "While we haven't done a direct cause-and-effect analysis, anecdotally, the volume does appear to have increased as interest rates have dropped in March," she says.
Aside from working toward a better score, there are two additional options. One is paying points to buy down the interest rate. "This is only a good idea if the borrower will then live in the house beyond the break-even point, meaning the time where the money they've paid in points is made up for by way of less expensive monthly payments," says Findlay.
The other option: shopping around. Some lenders, such as Palo Alto, Calif.-based Addison Avenue Federal Credit Union, have loans, known as "portfolio" loans, that aren't subject to blanket rules on credit scores because the lender intends to keep them rather than sell the loans in the secondary market.
Michelle Edwards, national mortgage sales director, reports that for these loans, her company increases the cost of a mortgage only for consumers whose credit scores are below 680. One customer looking to refinance avoided a pricing adjustment because of compensating factors such as loan-to-value ratio, assets and length of employment.
In a perfect world, anyone contemplating a refinance or a new mortgage anytime within the next year or so would start working on getting the ideal credit score now.
But what if that didn't happen? Try not to let your emotions drive how you feel about your interest rate. A mortgage is a financial decision that should be driven by economics, "not the pursuit of the world's lowest rate because having it would make you feel good," Heidelberg says.
He also says some consumers wait six months for a slightly better rate when a refinance could save $500 a month means missing $3,000 in savings. As Heidelberg says,
"This is foolish."
Written by Melissa Ezerick. Copyrighted, Bankrate.com. All rights reserved.
That was then. This is now.
A few years ago, a score of 620 or higher was good enough. That increased to 680 in early 2008. Then it jumped to 720 in April last year and 740 in August, says Rodney Anderson, senior managing partner of Plano, Texas-based Rodney Anderson Lending Services.
In the past, any score of 700 or higher would get a double thumbs-up from credit experts. Now, rate adjustments begin kicking in at 740, with every 20-point drop adding another adjustment.
In other words, many people who were taking pride in their credit habits either must pay significantly higher or try to make quick changes to nudge their scores upward. "What used to be great is now only good," says mortgage broker Todd Huettner, president of Denver-based Huettner Capital. Refinancing that would have worked a year ago might well not make sense, he adds.
"I have clients all the time who literally wind up with a score of 739, 719, 699, 679 ... and it costs them money to either fix it or pay for it," Huettner says.
One of Huettner's clients, who always had a score of about 740, went to do a refinance and found her current score at 719. "The reason was, she put a new washer and dryer on a store credit card," he says. Many store cards are actually revolving credit, and your limit may well be equal or about equal to the purchase you're trying to make that day.
Take the application that Stamford, Conn.-based Luxury Mortgage Corp. got recently.
Interested in lowering the rate on an existing mortgage, the borrower could verify substantial income, assets and personal credit history, says chief executive David Adamo. But the borrower's credit score had taken a hit after co-signing an auto loan for his son that had not been paid timely.
"As a result, the borrower, who otherwise met every other criterion, was unable to refinance the loan at a rate that made economic sense," Adamo says.
Another wrinkle in today's market: Even those with FICO scores of 740 or higher are penalized for buying in a geographic market on the downswing. "This adjustment affects all borrowers, regardless of score, if in a declining market," says mortgage broker Jim Heidelberg, president of Heidelberg Capital Corp. in Tampa, Fla.
In many cases, the added costs of rate adjustments are "enough to make a refinance that would otherwise make sense have no benefit to the borrower," Huettner says.
The road to new scoring
How did we get to this new reality?
The nation's two largest mortgage lenders, Fannie Mae and Freddie Mac, suffered major losses in the market last year and then redefined risk, announcing price adjustments for borrowers with FICO scores below 720, says Sean Cragg, vice president of sales for Ann Arbor, Mich.-based Gold Star Mortgage Financial Group.
And, in case you were wondering, "these fees have nothing to do with your mortgage company or its various products and cannot be negotiated away," Cragg says.
All mortgage bankers, brokers and credit unions must comply with the higher interest rates and delivery changes in all traditional mortgages, says Heidelberg. Only entities intending to hold the mortgages in their own portfolios can follow their own guidelines.
Worse news may be on the horizon. "There are many factors, including proposed legislation and regulation, that continue to change the mortgage lending landscape," says David Chung, managing director of Towson, Md.-based CreditXpert Inc., which provides credit analysis services to consumers. "In the near term, it is more likely that this benchmark will continue to rise than fall."
Surprise, surprise
Joe and Jane Homeowner have likely heard of the new credit restrictions. But the actual cost to them is often a surprise when they sit down with a broker.
"Often, lenders will quote rates that include the adjustments, without calling attention to them in order to avoid a negative reaction from their customer," says James Guthrie, a partner in New Home Finance in Suwanee, Ga.
Less surprising are other factors that go into securing financing for a new or existing mortgage.
Paola Kielblock, national products manager for Sun Prairie, Wis.-based Fairway Independent Mortgage Corp., clarifies today's requirements:
• Good credit.• Stable job, with a minimum of two years of employment.• Reserves after closing, including a minimum of two to six months of mortgage principal, interest, taxes and insurance.• Down payment from the borrower's own funds.• Low debt-to-income ratio. The required ratio varies between banks but is generally less than 40 percent, according to many in the industry.•
Good loan-to-value percentage. It also varies, but it's often cited as less than 80 percent.
Having equity in your home is a major factor in getting approved for a refinance and in finding the best rate, says Cameron Findlay, chief economist for LendingTree.com. The more equity in the home, the less risk there is to the lender if the home is repossessed.
Taking action on your score
What can a homeowner who wants to refinance do with a good FICO score that's not good enough?
"Virtually everyone can raise their scores by at least 10 (points) to 20 points, sometimes significantly more in 30 days," Anderson says. Here's what to do.
1. Find out what might have gone wrong. Applicants should know their credit score, understand what it means to their loan rates and ask their loan officers to use credit analysis on their behalf, says Chung. Credit analysis tools are a simple way to identify key score influencers by scrutinizing the information contained in each of an individual's three credit reports to look for inconsistencies, errors and omissions that may artificially depress the score.
2. Correct any inaccuracies. Although consumers can improve scores on their own, Kielblock notes that credit agencies offer services to mortgage brokers to help consumers raise their credit scores if something is reported inaccurately and there is proof of a discrepancy.
3. Decrease the percentage of available credit used. This can be done by paying down balances or increasing credit limits, says Guthrie. Ideally, this means keeping balances as close to zero as possible, and definitely below 30 percent of the available credit limit, experts say.
"We've seen people increase their scores by as much as 90 points or more, simply by paying off the right cards," Anderson says.
4. Move things around. If one income can be used to qualify for the loan, transfer accounts to "park" the debt in the other party's name, Guthrie says.
5. Get a rapid rescore. It's the only way to find out fast if an attempt to improve a score was successful. It's done through your lender and a rescoring company. The process takes about a week, but it can get the loan process back on track. The downside is it costs a few hundred dollars. The credit bureau Experian has seen an increase in rapid rescoring requests, says spokeswoman Cynthia Baker. "While we haven't done a direct cause-and-effect analysis, anecdotally, the volume does appear to have increased as interest rates have dropped in March," she says.
Aside from working toward a better score, there are two additional options. One is paying points to buy down the interest rate. "This is only a good idea if the borrower will then live in the house beyond the break-even point, meaning the time where the money they've paid in points is made up for by way of less expensive monthly payments," says Findlay.
The other option: shopping around. Some lenders, such as Palo Alto, Calif.-based Addison Avenue Federal Credit Union, have loans, known as "portfolio" loans, that aren't subject to blanket rules on credit scores because the lender intends to keep them rather than sell the loans in the secondary market.
Michelle Edwards, national mortgage sales director, reports that for these loans, her company increases the cost of a mortgage only for consumers whose credit scores are below 680. One customer looking to refinance avoided a pricing adjustment because of compensating factors such as loan-to-value ratio, assets and length of employment.
In a perfect world, anyone contemplating a refinance or a new mortgage anytime within the next year or so would start working on getting the ideal credit score now.
But what if that didn't happen? Try not to let your emotions drive how you feel about your interest rate. A mortgage is a financial decision that should be driven by economics, "not the pursuit of the world's lowest rate because having it would make you feel good," Heidelberg says.
He also says some consumers wait six months for a slightly better rate when a refinance could save $500 a month means missing $3,000 in savings. As Heidelberg says,
"This is foolish."
Written by Melissa Ezerick. Copyrighted, Bankrate.com. All rights reserved.
Tuesday, December 1, 2009
Wealthy Investors Are Eyeing Real Estate
The wealthier the investor, the more money they plan to put in real estate compared to the amount they have earmarked for stocks and bonds, according to Barclays Plc global survey. Investors believe real estate will yield better returns.Twice as many people with more than $800,000 to invest plan to increase their investment in commercial and residential property compared to those who plan to reduce it, Barclay’s study reported.Overall, investment in real estate among wealthy individuals is set to rise to 30 percent of the average portfolio from 28 percent now, according to the survey. That excludes properties used as a principal residence.
Source: Bloomberg, Peter Woodifield (11/30/2009)
Source: Bloomberg, Peter Woodifield (11/30/2009)
Monday, November 9, 2009
First Time Home Buyer Credit Extended and Expanded
Last week, after the Senate gave its final and fully supportive approval on the homebuyer tax credit extension, the House of Representatives voted overwhelmingly to pass the legislation, sending the tax credit to President Obama who's final sign-off on Friday made it official.
The $8,000 first-time homebuyer tax credit, which was slated to expire Nov. 30, 2009, will be extended for contracts signed before May 1, 2010 that close before July 1, 2010. First-time buyers, who are in the process of closing now, no longer have to worry about qualifying for the $8,000 tax credit if they do end up closing after the Nov. 30 deadline. The new legislation also increases the income limit for couples with income up to $225,000, a nearly $55,000 increase above the current level.
Buyers who already own a home are also now eligible for a tax credit and the purchase of a home. The $6,500 maximum credit will be available to existing homeowners who have lived in their current residence for five of the prior eight years. The legislation does set forth several provision including, limiting eligibility for existing homeowners to homes worth $800,000 or less, as well as making both credits available only for primary residences, not second homes or investment properties. The legislation will take effect November 7, 2009 and is not retroactive.
The original first-time homebuyer tax credit jump-started the housing market, driving home sales to the highest level in more than two yeas. The National Association REALTORS® reported sales jumped 9.4 percent to a seasonally adjusted annual rate of 5.57 million units in September and are 9.2 percent higher than the 5.10 million-unit pace in September 2008.
The $8,000 first-time homebuyer tax credit, which was slated to expire Nov. 30, 2009, will be extended for contracts signed before May 1, 2010 that close before July 1, 2010. First-time buyers, who are in the process of closing now, no longer have to worry about qualifying for the $8,000 tax credit if they do end up closing after the Nov. 30 deadline. The new legislation also increases the income limit for couples with income up to $225,000, a nearly $55,000 increase above the current level.
Buyers who already own a home are also now eligible for a tax credit and the purchase of a home. The $6,500 maximum credit will be available to existing homeowners who have lived in their current residence for five of the prior eight years. The legislation does set forth several provision including, limiting eligibility for existing homeowners to homes worth $800,000 or less, as well as making both credits available only for primary residences, not second homes or investment properties. The legislation will take effect November 7, 2009 and is not retroactive.
The original first-time homebuyer tax credit jump-started the housing market, driving home sales to the highest level in more than two yeas. The National Association REALTORS® reported sales jumped 9.4 percent to a seasonally adjusted annual rate of 5.57 million units in September and are 9.2 percent higher than the 5.10 million-unit pace in September 2008.
Tuesday, November 3, 2009
Extension and Expansion of the First-time Home Buyer Tax Credit???
Congress is currently working on legislation to extend the first-time homebuyer tax credit. In order to be eligible for the current credit, prospective buyers need to purchase and close on a home by Nov. 30. Under the proposed bill, the deadline is expected to be extended into 2010. The details of the extension are currently being worked on and a vote is expected as early as this week -- some say that a vote may occur today. Therefore, you may have some breathing room with your closing if you already purchased a home and are trying to beat the Nov 30 deadline. If you are a prospective first-time homebuyer who missed the opportunity to take advantage of the current credit, you may have a second chance.
In addition to the extension, Congress is said to be working on a bill to expand the current tax credit to prospective homebuyers who already own a home. Under this proposal, existing homeowners who purchase a home after this bill is enacted may receive a tax credit of as much as $6,500 dollars. This would apply to prospective purchasers who have owned a home for 5 of the last 8 years.
Although we will not know the exact details of these proposed bills until Congress completes their work, we do know that they need to act quickly if they expect to extent the current credit before it expires. Stay tuned...
In addition to the extension, Congress is said to be working on a bill to expand the current tax credit to prospective homebuyers who already own a home. Under this proposal, existing homeowners who purchase a home after this bill is enacted may receive a tax credit of as much as $6,500 dollars. This would apply to prospective purchasers who have owned a home for 5 of the last 8 years.
Although we will not know the exact details of these proposed bills until Congress completes their work, we do know that they need to act quickly if they expect to extent the current credit before it expires. Stay tuned...
Tuesday, September 22, 2009
Mortgage Talk with Lanice Self, W.R. Starkey Mortgage
This is La Nice Self with your weekly update for September 21st.........
The past week had some good news:
* Retail sales were up-showing the consumer is starting to buy again.
* The produces price index went up-allaying fears of DE-flat ion which is VERY bad in recession.
*The core CP came in low-showing inflation is in check which is good for interest rates.
*Housing starts and building permits were up- showing that the new home market is starting to expand vs.. contact.
*And finally, jobless claims fell - showing that job losses are slowing.
All of this underscores Mr. Bernanke's claim that "the recession is very likely over". But before you decide to celebrate, remember that it will take several years to get us back to a vibrant economy. The thing is that we are headed in the right direction.
On the first time home buyer front, there is legislation proposed in the Senate that would extend the tax credit into next year and possibly raise it and/or raise the income limits for qualifying buyers.
But.....proposed is a long way from reality. Best to tell your 1st time home buyers that there is no guarantee for an extension and so they should buy now.
This week rates ranged between 4.875% and 5.00% . depending on credit and points.
30 year fixed rate is 4.875 with 1 origination
15 year fixed rate is 4.50 with 1 origination
30 year fixed FHA is 5.125 with 1 origination
Thursday, August 27, 2009
US Housing Market Seeing Growing Light at The End of The Tunnel
The end of the meltdown may be in sight, but the long road to recovery will likely be a long one. The last 24 months have been a rough ride for the US housing market. Thankfully, federal regulation and fiscal policy have been effective in easing the impact of the great recession. And now many experts are citing encouraging signs that are driven by the summer seasonality of the housing market but may also point to stability. Take existing home sales, for example, which have increased for the fifth consecutive month. Also on the rise are home prices, an all-important indicator of stability. In today’s battered market, rising home prices translate to a more balanced supply and demand picture.
By all indications, the market still represents opportunity. The $8,000 first-time buyer tax credit is set to expire at the end of November, but remains a powerful incentive. While first-time buyers are active, more repeat buyers are also taking advantage of favorable mortgage rates and better prices. These two broad groups of buyers are absorbing excess inventory. Mortgage rates, which now sit between 5-5.5% range, are slightly above the record low of 4.78%. Thus they are still very favorable and represent an historic opportunity for qualified potential buyers. The housing affordability index also remains very strong, as prices are adjusted to levels not seen since the mid-2000s.
By all indications, the market still represents opportunity. The $8,000 first-time buyer tax credit is set to expire at the end of November, but remains a powerful incentive. While first-time buyers are active, more repeat buyers are also taking advantage of favorable mortgage rates and better prices. These two broad groups of buyers are absorbing excess inventory. Mortgage rates, which now sit between 5-5.5% range, are slightly above the record low of 4.78%. Thus they are still very favorable and represent an historic opportunity for qualified potential buyers. The housing affordability index also remains very strong, as prices are adjusted to levels not seen since the mid-2000s.
The overall U.S. economic scene looks a bit brighter as GDP figures came in better than expected for the second quarter. The economy declined at a pace of just 1% over the past quarter, a great improvement from the first quarter’s decline of 6.4%. Economists point to this a potentially strong signal that the longest recession since World War II is finally beginning to wind down. Looking forward, the GDP is expected to return to positive territory in the third quarter and increase further in the fourth quarter.
An increasing trend is American consumers’ movement toward real savings. Last month alone, the U.S. savings rate hit 4.6%, a marked change from the negative to 0% savings rate for the entire decade. Economists consider a savings rate of 5% beneficial for the long-term viability of the economy and housing market. With increased savings, lower consumer spending could result in a slower recovery, but might lay the foundation for sustainable growth in the future. With limited prospects of new job growth, unemployment will continue to remain in focus as the best indicator of broader recovery.
June marked the five-month streak of increase in existing home sales. The $8,000 tax credit continued to be a huge boon to first-time buyers, who accounted for 29% of all transactions in June, unchanged from May. Repeat buyers, who often sell their current house to first-time buyers, continue to capitalize on historically high affordability conditions.
See more at http://www.youtube.com/watch?v=6O-UFD5q-HI
-courtesy of This Month In Real Estate, by Keller Williams Research
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