With the plummet in housing values and incredibly high foreclosures rates, a person may start to wonder if home ownership is even a priority anymore. Is the American dream of home ownership a foregone conclusion? According to a recent study done by Fannie Mae, Americans are still hungry to buy housing. Their survey results indicated that 51% of people said the bust did not change their willingness to buy and an additional 27% said it made it actually more likely to do so. I guess Americans at their core are still optimistic that things will turn around.
The unemployment rate fell to 9% in January. This is down from 9.8% in November. This is the biggest two month decline since 1958. Is this a sign that the economy is really recovering or another false hope? I guess only time will tell for now, but the positive momentum in the job market has put upward pressure on mortgages rates here in the Twin Cities.
What does the Fed think of this statistic? Here is a comment from Ben Bernanke ““With output growth likely to be moderate for a while and with employers reportedly still reluctant to add to their payrolls, it will be several years before the unemployment rate has returned to a more normal level,”
Today for a 30 year fixed conventional mortgage rates will average 5% depending upon your credit score, down payment and other important factors. Investment properties rates are based in a simillar way and average 5.75% today.
I personally have a cautiously optimistic outlook for 2011. Any comeback will stem from signs of a stronger economy. If your still in the hunt for a new home or investment property, there are a lots of opportunities. As a mortgage banker, I see incredible buys come across my desk every month. If you are in need of a quick mortgage quote or in the market to find that perfect investment opportunity, call me at 651-485-3710 or shoot me an email at rbonahoom@houseloan.com
Consumers keep spending, the economy keeps growing.
Mortgage rates are easing lower this morning on just-released, slightly worse-than-expected Retail Sales data from December 2010.
Excluding motor vehicles and auto parts, December’s sales receipts were $1.5 billion higher from November. Analysts had expected a number north of $2 billion.
Despite falling short of estimates, however, December’s reading is the highest in Retail Sales history, surpassing the previous record set in July 2008, set during the recession. In addition, December’s strong numbers helped 2010′s year-over-year numbers go positive for the first time in 3 years.
Although the data is a mixed bag for Wall Street, home affordability in St Paul is improving today.
The link between Retail Sales and home affordability may not be up-front obvious, but in a post-recession economy like ours, it’s often tight. Retail Sales is another name for “consumer spending” and consumer spending makes up more that 70% of the U.S. economy.
As spending grows, the economy tends to, too.
Investors recognize this and start chasing “risk”. It becomes a boost for the stock market, but those gains are made at the expense of “safe” asset classes which include mortgage-backed bonds. Mortgage-backed bonds are the basis for conforming and FHA mortgage rates so, as bond markets sell off, asset prices fall and rates move up.
Thankfully, rate shoppers will avoid that scenario today — at least for today. December’s Retail Sales results are a factor in the bond market’s early-day improvement. Conforming and FHA mortgage rates across the state of Minnesota should be lower today.
Despite the good news, if you’re shopping for a mortgage, consider locking your rate as soon as possible. Mortgage rates are coming off a 2-week rally and look poised to reverse appear — especially with a full docket of data due for next week. As mortgage rates rise, purchasing power falls.
According to foreclosure-tracking firm RealtyTrac, the number of foreclosure filings nationwide dropped for the second straight month in December. After falling 21 percent in November, filings were down by an additional 2 percent in December.
“Foreclosure filing” is a catch-all term, comprising default notices, scheduled auctions, and bank repossessions.
Like most months, a small number of states dominated December’s national foreclosure figures. 6 states accounted for more than 50 percent of all bank repossessions.
California : 17% of all repossessions
Florida : 11% of all repossessions
Arizona : 6% of all repossessions
Michigan : 6% of all repossessions
Texas : 6% of all repossessions
Nevada : 4% of all repossessions
December’s foreclosure filings fell to its lowest levels since June 2008, but we can’t read into the report too much just yet. Foreclosure volume continue to be dampened by lawsuits and moratoriums related to controversy surrounding the so-called robo-signers.
Foreclosure activity may have lessened in December anyway, but we can’t know for certain.
Distressed properties are in high demand among home buyers, accounting for one-third of all home sales; typically sold at a steep, 15 percent discount as compared to non-distressed properties.
Buying foreclosures can be a terrific “deal”.
That said, buying a foreclosed home is different from buying a non-foreclosed home. Specifically, because you’re buying from a bank and not a person, contracts may vary from what’s “customary” and negotiations may be drawn-out.
It’s one reason why buyers in Minneapolis – first-timers and investors alike — should talk with a real estate agent before writing an offer for a foreclosed property. You can learn a lot from the internet, but when it comes time to actually purchase a home, you’ll want an experienced professional on your side.
For some homeowners, electing to take an adjustable rate mortgage over a fixed rate one can be matter of budgeting. ARMs tend to carry lower mortgage rates and, therefore, lower monthly mortgage payment as compared to a comparable fixed rate loan.
Relative to fixed rate mortgages, current ARM pricing is excellent. Freddie Mac’s weekly Primary Mortgage Market Survey puts the 5-year ARM mortgage rate lower than the 30-year fixed rate mortgage rate by 1.02 percent.
On a $250,000 home loan, a 1.02 differential yields a payment savings of $149 per month.
ARMs are not for everyone, of course. Over time their rates can change and that can frighten people. An ARM can finish its respective 30-year lifespan with a mortgage rate as much as 6 percentage points higher from where it started. Some homeowners won’t like this.
Other homeowners, however, won’t mind it. For this group, the ARM can be a terrific fit. Especially with the huge, relative discount in today’s pricing.
A few scenarios that should warrant consideration of a 5-year ARM include homeowners that are:
Buying a new home with the intent to sell within 5 years
Currently financed with a 30-year fixed mortgage with plans to sell within 5 years
Interested in low payments; comfortable with longer-term rate and payment uncertainty
In addition, homeowners with existing ARMs due for adjustment may want to refinance into a new ARM, if only to push the first adjustment date farther into the future.
Before choosing to go with an ARM, speak with your loan officer about how adjustable rate mortgages work, and their near- and long-term risks. Payment savings may be tempting, but with an ARM, payments are permanent.
Credit card debt, left unchecked, can pile up quickly. Especially for debtors making minimum payments.
According to the Federal Reserve, a credit card balance of $5,000 at 23.99 percent APR won’t pay off for 16,127 years. That’s one reason why it’s important to manage your credit card rates, and renegotiate them whenever possible.
In this 4-minute piece from NBC’s The Today Show, you’ll learn the tested tactics that can cut a credit card rate, and get monthly payments to a more manageable range. And it’s do-it-yourself — no debt management firms required.
Some of the tips in the video include:
Compare your current rate to the rate offered to new customers. Ask the lender for “new customer rate” if it’s lower.
If your credit score has improved since application, ask for an interest rate more reflective of your current credit score.
Be nice to the customer service representative. Kindness helps.
Managing debt is an important part of household budgeting so if you’re finding your credit card payments and/or rates too high for your liking, try following the instructions as described in the video. And, above all else, be persistent. The credit card companies won’t likely approve your first request.
Mortgage markets gained last week as a combination of safe-haven buying and an improving economic outlook attracted new buyers. Demand for mortgage-backed bonds outweighed supply and conforming and FHA mortgage rates edged lower.
Last week marked the second straight week that mortgage rates fell in and around Minnesota. Rates had risen over the previous 7 weeks.
According to Freddie Mac’s weekly mortgage rate survey, the national average rate for a 30-year fixed rate mortgage is 4.77 percent with an accompanying 0.8 points required.
This week, with no new data due for release, look for last week’s two biggest stories — jobs and debt — to carry forward. The first such story relates to jobs.
Friday, the Bureau of Labor Statistics released its monthly Non-Farm Payrolls report. Consensus estimates were for 150,000 net new jobs created December, with “whisper numbers” pegging the number as high as 250,000. Mortgage rates increased on the chance that the rumors were right.
It turned out, they were not.
Accounting for revisions to past months’ data, December’s jobs data was in-line with expectations, resulting in a mortgage rate retreat that lasted all day Friday. That momentum should carry forward into the early part of this week.
The second story is tied to safe-haven buying.
The U.S. mortgage market benefited from growing concerns within the Eurozone that Portugal could default on its debt. The story emerged three weeks ago when Portugal’s debt was downgraded. It picked up steam last week after a weak debt offering. It’s a similar beginning to what transpired in Greece last spring.
Mindful of their respective risk, worldwide investors chose to shift risk toward safer asset classes which includes, of couse, mortgage-backed bonds. This week, those risks will remain and the flight to quality assets should continue. Mortgage rates will benefit.
Given the likelihood that mortgage rates will fall this week, it may be tempting to let your mortgage rate float. That strategy could prove foolish.
Mortgage rates fell to historic lows in 2010 and sprung higher at the first possible opportunity. Rates remain at ultra-low levels and have lots of room to rise. This week, consider buying on the dip. It may be the last chance you get.
On the first Friday of each month, the Bureau of Labor Statistics releases its Non-Farm Payrolls report.
More commonly called “the jobs report”, the government’s data include raw employment figures and the Unemployment Rate.
The jobs report hit the wires at 8:30 AM ET today. It’s making big waves in the mortgage market and may help home affordability for buyers in Minneapolis this weekend, and would-be refinancers across Wisconsin.
For this month, and for the rest of 2011, employment data will figure big in mortgage markets.
7 million jobs were lost in 2008 and 2009. Fewer than one million jobs were recovered in 2010. For the economy to fully recover, analysts believe that jobs growth is paramount.
Consider how job creation influences the economy:
More jobs means more income and more spending
More spending means more business growth
More business growth means more job creation
It’s a self-reinforcing cycle and, as business grows, the economy expands, pushing stock markets higher. This tends to lead mortgage rates higher, too, because bonds can lose their appeal when stock markets gain.
According to the government, 103,000 jobs were created in December, and October’s and November’s figures were revised higher by a net 50,000 jobs for a total of 153,000 new jobs created. Economists expected a net gain of 135,000.
The Unemployment rate fell to 9.4, its lowest level since mid-2009.
Wall Street is voting with its dollars right now. Mortgage bonds are improving, pointing to slightly lower mortgage rates today.
The December jobs report was “average”, and home affordability is improving.
Starting April 1, 2011, loan-level pricing adjustments are increasing. Most conforming mortgage applicants will face higher loan costs.
Loan-level pricing adjustments are mandatory closing costs. They’re assigned by Fannie Mae and Freddie Mac, and based on a loan’s specific risk to Wall Street investors.
First constructed in April 2009, loan-level pricing adjustment are a means to help Fannie Mae and Freddie Mac compensate for “riskier loans” by bolstering their respective balance sheets.
Since the initial roll-out, Fannie and Freddie have amended adjustments five times. The pending April adjustment will be the 6th revision in two years.
No class of conforming borrower is exempt from LLPAs. Each loan delivered to Fannie Mae is subject to a quarter-percent “Adverse Market Delivery Charge”. That cost is often absorbed by the lender.
The remaining adjustments are grouped by category:
Structure : Loans with subordinate financing may carry bigger adjustments
Equity : Loans will less than 25% equity carry bigger adjustments
LLPAs are cumulative. A borrower that triggers 4 different categories of risk must pay the costs associated with all four traits.
Loan-level pricing adjustments can be expensive — as much as 3 percent of your loan size in dollar terms. As an applicant, you can opt to pay these costs as a one-time cash payment at closing, or you can to pay them over time in the form of a higher mortgage rate.
The loan-level pricing adjustment schedule is public. You can research your personal scenario at the Fannie Mae website. However, you may find the charts confusing. Especially with respect to which route makes the most sense for you — paying the adjustments as cash, or paying them “in your mortgage rate”.
The Federal Reserve released its December 14 meeting minutes Tuesday afternoon. There wasn’t much there to disturb mortgage markets, thankfully.
The “Fed Minutes” is an official recap of the most recent meeting of the Federal Open Market Committee. It’s published 8 times annually, 3 weeks after the FOMC adjourns.
The Fed Minutes is similar to the meeting minutes released after a corporate conference or condo association gathering in that they provide additional details about the conversation and debate that occurred between meeting attendees.
The Fed Minutes are a lengthy companion to the Federal Reserve’s brief, more well-known, post-meeting press release. But, whereas the press release is measured in paragraphs, the minutes are measured in pages.
Here is some of what the Fed discussed last month:
On inflation : Core inflation levels “trend lower”; disinflation risks are low.
On housing : The market is still “quite depressed”; demand is “very weak”.
On stimulus : The Fed will stick to its $600 billion support plan
In response, conforming mortgage rates in Minnesota are unchanged today.
The no-change in rates is welcome news for this month’s home buyers and other people wanting to get a jump on the “Spring Buying Season”. Mortgage rates have been trending higher since November, erasing 7 months of gains in 7 weeks, and rapidly approaching the psychologically-important 5 percent figure.
Currently, Freddie Mac reports the average 30-year fixed mortgage rate as 4.86%.
As compared to November, mortgage rates are higher. As compared to history, however, mortgage rates remain low. If you are still floating a rate, or have otherwise not locked, your opportunity may be ending. Once the economy moves to higher gear, mortgage rates will be among the first of the casualties.
Consumers keep spending, the economy keeps growing.
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Mortgage markets gained last week as a combination of safe-haven buying and an improving economic outlook attracted new buyers. Demand for mortgage-backed bonds outweighed supply and conforming and FHA mortgage rates edged lower.
On the first Friday of each month, the Bureau of Labor Statistics releases its Non-Farm Payrolls report.
Starting April 1, 2011, loan-level pricing adjustments are increasing. Most conforming mortgage applicants will face 
The Federal Reserve released its 
