Mortgage rates continue to plummet
From staff and wire reports
Just when you were crowing about locking in at 4.9 percent on your mortgage refinancing, rates continue to fall.
Mortgage lender Fannie Mae said this morning that mortgage rates fell to a new record low for the fourth time in five weeks. But low rates haven’t been enough to lift a struggling housing market.
The average rate for 30-year fixed loans this week was 4.56 percent, down from 4.57 last week. That’s the lowest since Freddie Mac began tracking rates in 1971.
The last time home loan rates were lower was during the 1950s, when most mortgages lasted just 20 or 25 years.
The rate on the 15-year fixed loan dropped to 4.03 percent, down from 4.06 percent last week and the lowest on records dating back to 1991.
Rates have fallen since the spring. Investors worried about the European debt crisis have shifted money into the safety of Treasury bonds. That has forced those yields down. Mortgage rates tend to track yields on Treasury debt.
However, low rates have yet to spark home sales and refinancing activity remains moderate.
Sales of previously occupied homes fell in June and are expected to keep sinking. The National Association of Realtors said Thursday that last month’s sales fell 5.1 percent to a seasonally adjusted annual rate of 5.37 million.
The housing market stalled after federal tax credits for homebuyers expired at the end of April. Home sales have dropped off, homebuilder confidence has waned and consumer sentiment is in the dumps.
It’s unlikely low mortgage rates will bolster housing. Rates have hovered near historic lows for more than a year, so many people have already taken advantage of them to buy or refinance a home.
And many of those who haven’t wouldn’t qualify for a loan. They either owe more than their homes are worth, have shaky credit or have lost their jobs.
To calculate the national average, Freddie Mac collects mortgage rates on Monday through Wednesday of each week from lenders around the country. Rates often fluctuate significantly, even within a given day.
Rates on five-year adjustable-rate mortgages averaged 3.79 percent, down from 3.85 percent a week earlier. Rates on one-year adjustable-rate mortgages fell to an average of 3.70 percent from 3.74 percent.
The rates do not include add-on fees known as points. One point is equal to 1 percent of the total loan amount. The nationwide fee for loans in Freddie Mac’s survey averaged 0.7 a point for 30-year, 15-year and 1-year loans. The average fee for 5-year loans was 0.6 of a point.
Submitted by Steve Rosen on July 22, 2010 - 10:02am. - KC STAR
National Economy | The Big Picture | add new comment
Friday, July 23, 2010
Thursday, June 3, 2010
Pending Home Sales Jump
By JEFF BATER And MEENA THIRUVENGADAM - WSJ
U.S. pending home sales rose in April beyond expectations as buyers signed contracts to collect a government tax credit.
The National Association of Realtors' index for pending sales of used homes increased by 6.0% to 110.9 in April, the industry group said Wednesday. The gain was the third in a row.
Economists surveyed by Dow Jones Newswires had expected pending home sales would climb in April by 5.0%. First-time home-buyers rushed to beat the April 30 deadline for the tax credit.
The incentive was an extension of a subsidy originally enacted in February 2009. Lawrence Yun, NAR's chief economist, said sales this spring seem as strong as those last fall, before the original expiration date.
Developments Blog
* Mortgage Rates Are Low, but So Is Demand
* Realtors Want Tax-Credit Timeline Tweaked
* Home Builders Ask Taxpayers for Help Building
"There were concerns that only a small pool of buyers were left to take advantage of the tax credit extension," he said. "But evidently the tax stimulus, combined with improved consumer confidence and low mortgage interest rates, are contributing to surging sales."
Year-over-year, the index was 22.4% above its level of 90.6 in April 2009.
March pending home sales were revised up, with the index rising 7.1% to 104.6. Originally, NAR said the gauge rose 5.3% to 102.9.
The NAR index is based on pending sales of existing homes, including single-family homes and condominiums. A home sale is pending when the contract has been signed but the transaction hasn't closed. Pending sales typically close within one or two months of signing.
Analysts have expressed fear the housing market will suffer with the end of the government subsidy. But the job market has been improving. The Labor Department is scheduled this week to release employment data for May, and economists surveyed by Dow Jones Newswires are expecting a gain of 515,000 non-farm payroll jobs.
In its monthly forecast on the industry, the NAR projected existing-home sales of 5.39 million this year and 5.66 million in 2011. That compares with 5.16 million in 2009.
"The housing market has to get back on its own feet and now appears to be in a good position to return to sustainable levels even without government stimulus, provided the economy continues to add jobs," Mr. Yun said.
Aside from low mortgage rates, historically low prices have helped sales, too. The median price for an existing home is estimated at $174,500 in 2010 and $180,400 in 2011. It was $172,500 in 2009.
By region, pending sales in the Northeast rose 29.5% in April and were 24.5% higher than a year earlier.
The Midwest increased 4.1% in April and were 17.9% higher than a year earlier.
Pending sales in the South fell 0.6% in April but were 31.3% above the level a year earlier.
The West rose 7.5% in April and were 12.0% higher than a year earlier.
U.S. pending home sales rose in April beyond expectations as buyers signed contracts to collect a government tax credit.
The National Association of Realtors' index for pending sales of used homes increased by 6.0% to 110.9 in April, the industry group said Wednesday. The gain was the third in a row.
Economists surveyed by Dow Jones Newswires had expected pending home sales would climb in April by 5.0%. First-time home-buyers rushed to beat the April 30 deadline for the tax credit.
The incentive was an extension of a subsidy originally enacted in February 2009. Lawrence Yun, NAR's chief economist, said sales this spring seem as strong as those last fall, before the original expiration date.
Developments Blog
* Mortgage Rates Are Low, but So Is Demand
* Realtors Want Tax-Credit Timeline Tweaked
* Home Builders Ask Taxpayers for Help Building
"There were concerns that only a small pool of buyers were left to take advantage of the tax credit extension," he said. "But evidently the tax stimulus, combined with improved consumer confidence and low mortgage interest rates, are contributing to surging sales."
Year-over-year, the index was 22.4% above its level of 90.6 in April 2009.
March pending home sales were revised up, with the index rising 7.1% to 104.6. Originally, NAR said the gauge rose 5.3% to 102.9.
The NAR index is based on pending sales of existing homes, including single-family homes and condominiums. A home sale is pending when the contract has been signed but the transaction hasn't closed. Pending sales typically close within one or two months of signing.
Analysts have expressed fear the housing market will suffer with the end of the government subsidy. But the job market has been improving. The Labor Department is scheduled this week to release employment data for May, and economists surveyed by Dow Jones Newswires are expecting a gain of 515,000 non-farm payroll jobs.
In its monthly forecast on the industry, the NAR projected existing-home sales of 5.39 million this year and 5.66 million in 2011. That compares with 5.16 million in 2009.
"The housing market has to get back on its own feet and now appears to be in a good position to return to sustainable levels even without government stimulus, provided the economy continues to add jobs," Mr. Yun said.
Aside from low mortgage rates, historically low prices have helped sales, too. The median price for an existing home is estimated at $174,500 in 2010 and $180,400 in 2011. It was $172,500 in 2009.
By region, pending sales in the Northeast rose 29.5% in April and were 24.5% higher than a year earlier.
The Midwest increased 4.1% in April and were 17.9% higher than a year earlier.
Pending sales in the South fell 0.6% in April but were 31.3% above the level a year earlier.
The West rose 7.5% in April and were 12.0% higher than a year earlier.
Thursday, May 20, 2010
Why are rates dropping? I heard they were going up!
From Phil Winfrey, Plaza Mortgage Consultant
Why are we seeing lower rates when we've been told to watch for increases? After the government ended their mortgage purchases it was thought that we'd see higher rates quickly. The reason they haven't gone up has something to do with "Naked Short Selling". First it was Germany and now other European nations have decided to ban this practice of "seeking to profit from an expected fall in the price of an asset by selling shares you don't own without borrowing or making arrangements to borrow".
Because of this ban, traders and investors feel that these measures are to avoid an even sharper decline in the global stock markets. When markets are uncertain or worried, money seeks a safe haven and that has been the U.S. Bond market. That drives mortgage rates down.
Home buyers continue to have a reason to buy now and that's a real gift for all. Who knows how long it will last. Long term rates are in the 4's and 5/1 ARM's are in the mid 3's! With mortgage applications down 27% last week to a 13 year low we need the gift of low rates to continue! Let your buyers know that going naked in Europe has been banned and they need to buy a house! They'll know what you mean.
Let me know if you'd like to see what this looks like in an estimate or if a financing flyer would be helpful for your open house. Thank you for your support!
Why are we seeing lower rates when we've been told to watch for increases? After the government ended their mortgage purchases it was thought that we'd see higher rates quickly. The reason they haven't gone up has something to do with "Naked Short Selling". First it was Germany and now other European nations have decided to ban this practice of "seeking to profit from an expected fall in the price of an asset by selling shares you don't own without borrowing or making arrangements to borrow".
Because of this ban, traders and investors feel that these measures are to avoid an even sharper decline in the global stock markets. When markets are uncertain or worried, money seeks a safe haven and that has been the U.S. Bond market. That drives mortgage rates down.
Home buyers continue to have a reason to buy now and that's a real gift for all. Who knows how long it will last. Long term rates are in the 4's and 5/1 ARM's are in the mid 3's! With mortgage applications down 27% last week to a 13 year low we need the gift of low rates to continue! Let your buyers know that going naked in Europe has been banned and they need to buy a house! They'll know what you mean.
Let me know if you'd like to see what this looks like in an estimate or if a financing flyer would be helpful for your open house. Thank you for your support!
Tuesday, May 18, 2010
Investors, Now Is The Time!
So you have recouped some of your losses in the stock market, things are beginning to look up, but is there somewhere else you should put your cash? Perhaps getting into the rental market isn't a bad choice! Investing in Real Estate can be a great cash cow for retirement.
While prices of homes have dropped significantly since the high, rental rates have not seen near the decrease of the last few years. There are many homes available which are basically ready for tenants and at a great price. This is a great opportunity because not only will you be collecting monthly rent, but also likely gaining as the property regains its value over the next few years.
Another option, if you are looking to purchase a home for yourself. There are a lot of incentives available to homeowners, well why not extend those incentives by purchasing a duplex, triplex or quadruplex which as long as you live in one of the units may qualify you for some or all of these incentives (tax breaks, better loan rates, etc).
Don't want to deal with tenants, repairs, etc, but still want to benefit from owning rental property? I manage properties for clients who want the income stream of a rental home, but don't want to deal with the 12am calls for a furnace repair.
There are lots of option out there, and great opportunities. We can also finance many of the purchases at very competitive rates. In unstable markets, cash flow is king, and that's exactly what rental properties provide!
While prices of homes have dropped significantly since the high, rental rates have not seen near the decrease of the last few years. There are many homes available which are basically ready for tenants and at a great price. This is a great opportunity because not only will you be collecting monthly rent, but also likely gaining as the property regains its value over the next few years.
Another option, if you are looking to purchase a home for yourself. There are a lot of incentives available to homeowners, well why not extend those incentives by purchasing a duplex, triplex or quadruplex which as long as you live in one of the units may qualify you for some or all of these incentives (tax breaks, better loan rates, etc).
Don't want to deal with tenants, repairs, etc, but still want to benefit from owning rental property? I manage properties for clients who want the income stream of a rental home, but don't want to deal with the 12am calls for a furnace repair.
There are lots of option out there, and great opportunities. We can also finance many of the purchases at very competitive rates. In unstable markets, cash flow is king, and that's exactly what rental properties provide!
Thursday, May 6, 2010
Should I Rent Or Buy?
One of the most common questions we face on a daily basis is customers asking if they should rent or buy. On the surface it may seem cut and dry to many, but it's really quite a complicated question-and one that should be explored.
The first question you should ask yourself. How long do I plan on living in my home? If your answer to this is 3 years or more, likely buying will be better for you. If you answered less than 3 years, are you willing to rent the home after you move out? If so, buying may still be a better idea.
When analyzing the rent vs. buy decision a big factor that is often overlooked is the massive tax incentive in place to encourage buying. Let's say you purchase a home which has a payment of $1000/month. This is broken out into principal, interest, taxes and insurance. In most cases, insurance and taxes will amount to about $200 of this payment, leaving 800 to principal and interest. All of the interest you pay is tax deductible! In the early years of a mortgage the vast majority of your payment is interest (probably something like $750 in our example is interest!). So...you pay 1000/month, and of that $750 is deductible. But wait...remember that you paid $100/month in taxes..that's likely deductible too! So of your $1000 you get to deduct $850 from your taxes.
Now let's take the rental side. You are going to rent a place for $1000/month. How much of this is deductible? $0. That's right, zippo!
So assuming you're in the 25% tax bracket, in one year, you'll end up get about 2.5 months of payments FREE! (Via the tax deduction) If you buy vs. rent. This amount will adjust year after year as the amount of principal vs. interest you pay changes, but you'll still be saving money. Not to mention that you own the property, so you get to participate in any increase in value...not true with renting.
This is an ultra simplified version of this, and you should always consult your tax professional before making any decisions as your case may be different, but...the fact is often you'll save money on your taxes.
Not to mention when you own...no one can tell you not to hang a picture on the wall, or plant in your garden, what colors to paint, etc....Think about it....
The first question you should ask yourself. How long do I plan on living in my home? If your answer to this is 3 years or more, likely buying will be better for you. If you answered less than 3 years, are you willing to rent the home after you move out? If so, buying may still be a better idea.
When analyzing the rent vs. buy decision a big factor that is often overlooked is the massive tax incentive in place to encourage buying. Let's say you purchase a home which has a payment of $1000/month. This is broken out into principal, interest, taxes and insurance. In most cases, insurance and taxes will amount to about $200 of this payment, leaving 800 to principal and interest. All of the interest you pay is tax deductible! In the early years of a mortgage the vast majority of your payment is interest (probably something like $750 in our example is interest!). So...you pay 1000/month, and of that $750 is deductible. But wait...remember that you paid $100/month in taxes..that's likely deductible too! So of your $1000 you get to deduct $850 from your taxes.
Now let's take the rental side. You are going to rent a place for $1000/month. How much of this is deductible? $0. That's right, zippo!
So assuming you're in the 25% tax bracket, in one year, you'll end up get about 2.5 months of payments FREE! (Via the tax deduction) If you buy vs. rent. This amount will adjust year after year as the amount of principal vs. interest you pay changes, but you'll still be saving money. Not to mention that you own the property, so you get to participate in any increase in value...not true with renting.
This is an ultra simplified version of this, and you should always consult your tax professional before making any decisions as your case may be different, but...the fact is often you'll save money on your taxes.
Not to mention when you own...no one can tell you not to hang a picture on the wall, or plant in your garden, what colors to paint, etc....Think about it....
Sunday, April 25, 2010
Are ARMs always bad?
Lately, a lot of press has talked about Adjustable Rate Mortgages (ARMs). Many in the finance industry have hailed these as as major reason for the collapse of the mortgage industry, and ultimately the economy. But is an ARM always a bad choice? Are there "good" ARMs and "bad" ARMS? Let's explore.
In a traditional mortgage, your interest rate is fixed at a certain percentage (right now probably in the 5s is a good estimate) for the life of the loan. That means for 30 years (perhaps 15) you are going to pay at a rate of 5% on the outstanding balance.
In an ARM, your rate is fixed for a period of time, and then after that period it is allowed to adjust. In the case of the "bad" ARMs they adjusted after a relatively short period, and had no caps. Additionally, lenders would qualify individuals based on the "teaser rate" (the low introductory rate), and have no thought as to the borrowers ability to pay should the rates rise. And rise they did...
Ok, that's the ARMs that were likely not good for many folks. However, there is an ARM out there that can be GREAT for a lot of folks. It is a Government Insured FHA 5/1 Loan. If rates on a fixed mortgage are at 5% right now, then let's say on the FHA ARM they are 3.75%. This means that for the first 5 years of your loan your interest rate is only 3.75%. Then after that the interest rate can only rise by 1%/year and only 5% over the life of the loan. So you'd be in year 7 before you'd even START paying at a higher rate than the fixed loan, not to mention the first 7 years were less expensive! AND THAT'S WORST CASE! There is a good chance it could stay well below that 5% for a long long time.
It's something to think about if you feel you'll be moving (as the average American does) in the next 4-8 years. If you plan on living in this house until it's paid off stick to the fixed rate. But if not, at least have a mortgage professional explain to you the benefits of such a loan. But, be sure to look at the worst case scenarios and make certain that should that happen you and your family are willing to handle the additional cost.
As always give me a shout with any questions or comments.
In a traditional mortgage, your interest rate is fixed at a certain percentage (right now probably in the 5s is a good estimate) for the life of the loan. That means for 30 years (perhaps 15) you are going to pay at a rate of 5% on the outstanding balance.
In an ARM, your rate is fixed for a period of time, and then after that period it is allowed to adjust. In the case of the "bad" ARMs they adjusted after a relatively short period, and had no caps. Additionally, lenders would qualify individuals based on the "teaser rate" (the low introductory rate), and have no thought as to the borrowers ability to pay should the rates rise. And rise they did...
Ok, that's the ARMs that were likely not good for many folks. However, there is an ARM out there that can be GREAT for a lot of folks. It is a Government Insured FHA 5/1 Loan. If rates on a fixed mortgage are at 5% right now, then let's say on the FHA ARM they are 3.75%. This means that for the first 5 years of your loan your interest rate is only 3.75%. Then after that the interest rate can only rise by 1%/year and only 5% over the life of the loan. So you'd be in year 7 before you'd even START paying at a higher rate than the fixed loan, not to mention the first 7 years were less expensive! AND THAT'S WORST CASE! There is a good chance it could stay well below that 5% for a long long time.
It's something to think about if you feel you'll be moving (as the average American does) in the next 4-8 years. If you plan on living in this house until it's paid off stick to the fixed rate. But if not, at least have a mortgage professional explain to you the benefits of such a loan. But, be sure to look at the worst case scenarios and make certain that should that happen you and your family are willing to handle the additional cost.
As always give me a shout with any questions or comments.
Friday, April 23, 2010
Are Foreclosures A Smart Buy?
With all the talk these days about foreclosures, I think it's pertinent we delve into the ins and outs. First, I want to separate foreclosures from short-sales.
In a short sale, the person still owns their home, and is involved in the transaction--however, they have notified the bank (or other lien-holder) that they are no longer able to pay the mortgage. The reason it is called a short-sale is that the value of the home is "short" of what they owe. For example Mr. and Mrs. Smith own a home and are no longer able to pay their mortgage. The home in this market is worth 90k, but they paid 110 3 years ago, and owe 100k still. The bank is allowing them to sell the home for 90k and will 'write-off' the rest of the loan. This is often a quicker and much less expensive alternative for the bank and is why they entertain the idea. Short-sales typically sell for less than a traditional sale, but more than a foreclosure. Purchasing one can be a long and arduous process because the bank has to approve the transaction, as well as the owner. This can get even more fun if there is more than one lien-holder. Short-sales are very much worth looking at, and can be a great deal. However, the buyer must understand that their time-frame is not of importance to the bank. Things will happen as they happen and can be extended significantly from a traditional sale.
In a foreclosure, the bank has actually taken possession of the property. Without going into too much detail (and the process varies between KS and MO) the bank becomes involved with the courts--explaining their mortgagee isn't paying anymore. The bank then often becomes owner of the property. Foreclosures can be sold at well below market value, however, they can also need a lot of work. Often before leaving, former owners trash the place and cause extensive damage. Additionally, these properties can sit empty for an extended period of time. All offers and contracts go through the bank (or their agent) and can take some time to be approved or countered. Also, do not expect to receive a seller's disclosure in this case, as banks will NEVER issue one.
So....are these two types of properties worth looking into? YES! You can get a great deal on a great property, often in a great neighborhood. There are even special loans from FHA which help you fix many of the problems (ask about FHA 203(k)). The main thing to remember when looking at both foreclosures and short sales is that you must be willing to look past some blemishes and also be willing to close later than expected.
As always email me with any questions or comments about any of your real estate or finance concerns. I'll be happy to help where I can.
In a short sale, the person still owns their home, and is involved in the transaction--however, they have notified the bank (or other lien-holder) that they are no longer able to pay the mortgage. The reason it is called a short-sale is that the value of the home is "short" of what they owe. For example Mr. and Mrs. Smith own a home and are no longer able to pay their mortgage. The home in this market is worth 90k, but they paid 110 3 years ago, and owe 100k still. The bank is allowing them to sell the home for 90k and will 'write-off' the rest of the loan. This is often a quicker and much less expensive alternative for the bank and is why they entertain the idea. Short-sales typically sell for less than a traditional sale, but more than a foreclosure. Purchasing one can be a long and arduous process because the bank has to approve the transaction, as well as the owner. This can get even more fun if there is more than one lien-holder. Short-sales are very much worth looking at, and can be a great deal. However, the buyer must understand that their time-frame is not of importance to the bank. Things will happen as they happen and can be extended significantly from a traditional sale.
In a foreclosure, the bank has actually taken possession of the property. Without going into too much detail (and the process varies between KS and MO) the bank becomes involved with the courts--explaining their mortgagee isn't paying anymore. The bank then often becomes owner of the property. Foreclosures can be sold at well below market value, however, they can also need a lot of work. Often before leaving, former owners trash the place and cause extensive damage. Additionally, these properties can sit empty for an extended period of time. All offers and contracts go through the bank (or their agent) and can take some time to be approved or countered. Also, do not expect to receive a seller's disclosure in this case, as banks will NEVER issue one.
So....are these two types of properties worth looking into? YES! You can get a great deal on a great property, often in a great neighborhood. There are even special loans from FHA which help you fix many of the problems (ask about FHA 203(k)). The main thing to remember when looking at both foreclosures and short sales is that you must be willing to look past some blemishes and also be willing to close later than expected.
As always email me with any questions or comments about any of your real estate or finance concerns. I'll be happy to help where I can.
Thursday, April 22, 2010
First Time Home Buyers - Time is Running Out
As we all have heard the first time home-buyer credit is going to be kaput soon. (No the rumors of it being extended again have no validity, sadly. The Nation Association of Realtors has told us this is all but out of the question). So what does this mean for you?
Buyers - NOW IS THE TIME TO GET OUT THERE! With just 8 short days left to write a contract, there is still time to find your perfect house and qualify for the credit. Contracts must be written by the end of the month, and we will need to close by the end of June. Check out bkeith.reeceandnichols.com to search for a great home! Think about it, 8,000 is equal to a years payments in many cases. With current rates and programs, it doesn't take much more than a job, a smaller down payment than you might expect (3.5% in some cases), and the will to own instead of rent. Think about it.....
Sellers - Don't worry! If your home hasn't sold yet, this isn't the end of the world. There is still a lot of activity which I believe will occur in the coming days. Additionally, the pace of the market is picking up, and Kansas City is no where near the bottom. Many are afraid the market is going to drop off after the credit expires, I believe this is hogwash! There are too many people out there who are looking for homes, and too much publicity about the advantages to home ownership.
As always feel free to email me with any questions or comments about your Real Estate needs.
Stay Classey Kansas City.....
Buyers - NOW IS THE TIME TO GET OUT THERE! With just 8 short days left to write a contract, there is still time to find your perfect house and qualify for the credit. Contracts must be written by the end of the month, and we will need to close by the end of June. Check out bkeith.reeceandnichols.com to search for a great home! Think about it, 8,000 is equal to a years payments in many cases. With current rates and programs, it doesn't take much more than a job, a smaller down payment than you might expect (3.5% in some cases), and the will to own instead of rent. Think about it.....
Sellers - Don't worry! If your home hasn't sold yet, this isn't the end of the world. There is still a lot of activity which I believe will occur in the coming days. Additionally, the pace of the market is picking up, and Kansas City is no where near the bottom. Many are afraid the market is going to drop off after the credit expires, I believe this is hogwash! There are too many people out there who are looking for homes, and too much publicity about the advantages to home ownership.
As always feel free to email me with any questions or comments about your Real Estate needs.
Stay Classey Kansas City.....
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