Selective Homes Blog

May 17th, 2012 11:26 AM
Fixed-rate mortgages hit new all-time lows for the third-straight week as the 30-year FRM submerged below 3.80% following declining long-term Treasury bond yields.

The Freddie Mac survey showed the 30-year FRM averaged 3.79% for the week ending Thursday — the lowest rate ever recorded — inching down from the prior week's record average of 3.83%. Last year at this time, the 30-year FRM averaged 4.61%.

The 15-year FRM, a popular refinancing choice, averaged 3.04%, slightly falling from last week‘s record that averaged 3.05%. A year ago, the average rate for a 15-year FRM was 3.80%.

Five-year, Treasury-indexed hybrid adjustable-rate mortgages averaged 2.83%, up from 2.81% the prior week and down from 3.48% a year earlier.

And one-year, Treasury-indexed ARMs averaged 2.78%, up from last week’s average of 2.73% and down from 3.15% last year.

“The European debt crisis overshadowed improving economic indicators for the U.S. and allowed Treasury bond yields and fixed mortgage rates to ease for another week,” said Frank Nothaft, Freddie Mac chief economist.

As an example, Nothaft noted that industrial production rose 1.1% in April — the largest gain since December 2010 — and consumer sentiment in May rose to its highest reading since January 2008, according to the University of Michigan.

“The economy added just 115,000 jobs in April, below the market consensus forecast and less than in March. And although the unemployment rate declined, it reflected fewer people actively seeking jobs, “Nothaft said.

Home loan analytics firm Bankrate, which surveys large banks, reported the 30-year FRM slipped to 3.97% from 4.02%, while the 15-year FRM remained at 3.2%. The 5/1 ARM fell to 3.0% from 3.1%.
Posted by IT Admin on May 17th, 2012 11:26 AMPost a Comment (0)

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April 25th, 2012 5:19 PM
The zero interest rate policy of the Federal Open Market Committee is not going away any time soon.

The Fed voted to keep rates at or near zero for the next financial quarter, adding the subdued outlook for inflation over the medium run is "likely to warrant exceptionally low levels for the federal funds rate at least through late 2014."

The Fed is maintaining its existing policies of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction.
Posted by IT Admin on April 25th, 2012 5:19 PMPost a Comment (0)

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U.S. home values edged up 0.5% from February to March, making it the largest monthly increase in six years, real estate data firm Zillow ($34.18 -0.5%) said in its latest home value index.
The data arrived the same week as Standard & Poor's/Case-Shiller national indices report.

The S&P Case-Shiller note, which measures real estate data further out, said home values in nine metro areas reached record lows. S&P reported that its 10-city composite index experienced an annual home-price decline of 3.6% in February, while the 20-city composite index declined 3.5% from a year earlier.

Zillow, which evaluates home prices in 30 markets using its value index, reported that nineteen markets have either reached a bottom in home prices or are expected to hit bottom by year's end.

Optimism is spreading over markets like Phoenix and Miami-Ft. Lauderdale, with Zillow estimating home price increases of 6.5% and 5.6%, respectively, in the two cities over the next year or so.

Nationally, home prices are expected to remain flat over the next 12 months, with values reaching a bottom in late 2012 and falling approximately 0.4% from the first quarter of 2012 to the first period of 2013, Zillow said.

Metro areas like Chicago and Atlanta, on the other hand, are expected to see home price declines in the 3.8-to-4.1% range over the next 12 months.

"For people who have been waiting to time their home purchase close to market bottom, it’s time to start shopping," said Zillow chief economist Dr. Stan Humphries. “When the bottom will hit will vary by market, and it’s nearly impossible to time a purchase exactly right. But home prices are not the only part of the equation. Buyers also should take into account the possibility that rising mortgage rates could offset any further home value declines that may occur."
Posted by IT Admin on April 25th, 2012 5:16 PMPost a Comment (0)

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The nation's average 30-year fixed-rate mortgage rate dipped back below 4% on weaker housing economic indicators.

The Freddie Mac survey showed the 30-year, FRM averaged 3.99% for the week ending Thursday, down from the prior week's average of 4.08%. Last year at this time, the 30-year FRM averaged 4.86%.

The decline in rates doesn't do much to bolster Freddie Mac Chief Economist Frank Nothaft's predition on Wednesday. He said he expects the 30-year FRM to increase to 4.5% throughout the year, citing various economic indicators such as housing starts and new home sales.

The 15-year, fixed-rate home loan, a popular refinancing choice, averaged 3.23%, down from last week when it averaged 3.30%. A year ago, the average rate for a 15-year FRM was 4.09%.

Five-year, Treasury-indexed hybrid adjustable-rate mortgages averaged 2.90%, down from 2.96% the prior week and down from 3.62% a year earlier.

And one-year, Treasury-indexed ARMs averaged 2.78%, growing from last week when it averaged 2.84% and down from 3.26% last year.

After saying Wednesday that the housing market is beginning to shake off the Depression-like shackles that have plagued it for years, Nothaft referenced weaker housing economic indicators in explaining the rate slide.

"The S&P/Case Shiller 20-City composite home price index slid in January to its lowest reading since December 2002,” Nothaft said. “In addition, new home sales declined 0.5% in February, below the market consensus of an increase, and pending existing home sales also declined for the month.”

Home loan analytics firm Bankrate, which surveys large banks, reported the 30-year FRM fell to 4.23% from 4.30%, while the 15-year FRM fell to 3.44% from 3.48%. The 5/1 ARM inched down to 3.14% from 3.15%.

 

Posted by IT Admin on March 29th, 2012 4:38 PMPost a Comment (0)

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Investment and vacation home sales surged in 2011 as more investors jumped into the market with cash in hand to acquire distressed and affordable properties, the National Association of Realtors said.

The combined share of investment and vacation home sales last year reached its highest level since 2005, NAR said. The association's study shows investment-home sales growing 64.5% to 1.23 million in 2011, compared to 749,000 in 2010.

Vacation-home sales also jumped 7% to 502,000 last year, compared to 469,000 in 2010. In all, vacation purchases represented 11% of all transactions in 2011, compared to 10% in 2010.

Investment sales made up 27% of 2011 transactions, compared to 17% in 2010. Lawrence Yun, chief economist for NAR, said investors have been popping up in the market with cash in hand to acquire homes as prices sink to affordable levels along with low interest rates. 

"During the past year, investors have been swooping into the market to take advantage of bargain home prices," he said. "Rising rental income easily beat cash sitting in banks as an added inducement. In addition, 41% of investment buyers purchased more than one property."

NAR notes that 49% of investment buyers paid cash last year, while 42% of vacation-homebuyers did the same.

About half of the investment homes acquired were distressed homes, compared to 39% of vacation homes. 

 

Posted by IT Admin on March 29th, 2012 4:36 PMPost a Comment (0)

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Beginning April 1, potential borrowers with ongoing credit disputes totaling more than $1,000 will not be able to get a mortgage insured by the Federal Housing Administration.

The rule marks a significant belt-tightening at the FHA whereas the adminstration earlier held no such requirement that disputed credit accounts needed to be paid off. Before this rule, a direct endorsement underwriter could determine if any of the borrower's outstanding debts should impact the approval of the FHA-backed mortgage.

After April 1, the borrower must either pay off the outstanding balance on these collections accounts or document a payment arrangement that the lender must then submit to the FHA before closing. The payment arrangement will be counted into the debt-to-income ratio for the new home loan.

Jeremy Radack, a real estate attorney who helps builders in Houston get buyers financed, expects between a 33% and a 50% reduction in FHA originations this year because so many borrowers in the 650 to 680 FICO score range have a past due collections account.

"Take the 750 borrower with a medical collection outstanding from five years ago when they were in college for $5,000. Is that really a bad loan? I don't think FHA looked at how much of their performing borrowers have collections accounts," Radack said. "There are so many other things they could do to mitigate risks to the fund."

The rule excludes disputed accounts from more than two years ago, along with those related to theft. But the lender must document an identity theft or police report on the fraudulent charges.

The unintentional consequences could be severe for those still originating mortgages.

"We expect this revision will certainly kick some buyers out of the marketplace, and we’re in ongoing efforts to quantify how extreme the impact will be," said Lisa Jackson, senior vice president of research at John Burns Real Estate Consulting. "We did a quick sample of some of our builder clients focused on the entry level. They cited impact to varying degrees, with one reporting the new rule would disqualify 60% to 84% of his buyers currently under contract at specific communities."

An FHA spokesman said the rule was designed as another protection for the FHA emergency fund. The fund levels slipped to 0.2% of at-risk insurance last year, well below the 2% mandated by Congress. The FHA will raise insurance premiums on April 1 as well to boost the fund by $1 billion.

"When performing loan-level reviews of FHA loans, we found that many borrowers with mortgage payment delinquencies had prior credit deficiencies including unpaid collections and unresolved disputed accounts prior to the approval of their loan," the spokesman said. "This change was made to eliminate this layer of risk to FHA-insured loans and help protect our insurance fund."

Because of the FHA insurance premium raises to 1.75%, Radack expects the more qualified borrowers to go to Fannie Mae or Freddie Mac loans, which have smaller charges for private market insurance premiums.

"FHA is not going to be in my vocabulary," Radack said.
Posted by IT Admin on March 26th, 2012 5:28 PMPost a Comment (0)

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As the U.S. housing market continues the long process of correction, banks are starting to look more favorably on short sales, according to recent data from Irvine, Calif.-based RealtyTrac.

Until recently, short sales - when banks allow homeowners to sell homes for less than they owe on the mortgage - have not been popular with lenders, who hoped to recoup more money from foreclosure sales. Yet, as foreclosures continue to plague the market, there may be more incentive to simply dispose of those properties before they become bank-owned.

During the fourth quarter of 2011, pre-foreclosure sales (most often made up of short sales) rose 15 percent over the same time in 2010 to a total of 88,303 homes, although they were down 5 percent from the previous quarter. Pre-foreclosure sales made up 10 percent of all fourth quarter sales, and 9 percent of all 2011 sales.

"We continued to see a shift toward pre-foreclosure sales, or short sales, and away from REO [real estate-owned] sales in the fourth quarter," said Brandon Moore, chief executive officer of RealtyTrac in a press release. "Nationally, pre-foreclosure sales increased 15 percent from a year ago while REO sales decreased 12 percent. Pre-foreclosure sales outnumbered REO sales in several bellwether markets, including Los Angeles, Miami and Phoenix, where REO sales had outnumbered pre-foreclosure sales a year ago. That trend will likely show up in more local markets in 2012 as lenders recognize short sales as a better option for many of their non-performing loans."

These short sale-led increases were concentrated in several states. Michigan saw the largest jump in pre-foreclosure sales with a 103 percent increase from the fourth quarter of 2010. Georgia,s pre-foreclosure sales jumped 59 percent, Arizona,s grew 48 percent, Washington,s rose 36 percent and Nevada saw such transactions climb 29 percent. Other states that saw more than 20 percent increases were Oregon, Illinois, Ohio, California, and Texas.

Even as lenders okay struggling homeowners to sell these properties in greater numbers, it is still taking a long time to get them through the entire process. In the fourth quarter, pre-foreclosure sales took an average of 208 days to sell from the first stages of foreclosure. And while that is down from the third quarter,s 318 days, it is up significantly from the average sale of 237 days from the fourth quarter of 2010.

The average price for short sales has fallen as well, along with home prices across the market. During the fourth quarter, pre-foreclosures carried an average price tag of $184,221, a drop of 3 percent from the previous quarter and an 11 percent decline from the previous year. The discounts to buyers remain sweet though, as pre-foreclosures prices averaged 21 percent below the average prices for traditional sales not involving foreclosure.

It certainly makes sense that banks would step up approval of these short sales, as they face greater stockpiles of foreclosures after the ,robo-signing, mess clogged up the pipelines.

"Sales of foreclosures in the fourth quarter continued to be slowed by questions surrounding proper foreclosure paperwork and procedures," Moore added. "Even so, foreclosures accounted for nearly one in every four sales during the quarter and for the entire year. We expect to see foreclosure-related sales increase in 2012."

With all those distressed properties to dispense of, short sales will be a more and more popular avenue to get those soured loans off the books.

Posted by IT Admin on March 26th, 2012 5:20 PMPost a Comment (0)

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March 20th, 2012 11:01 AM
Here are the top tens mistakes to avoid if you’re planning on refinancing your current mortgage or looking to finance a new home.

Anything in this list should be avoided at all costs to ensure your credit score is as high as possible and that you don’t run into any qualification problems when it comes time to get that sparkling new mortgage.

1. Avoid bankruptcy and foreclosure. Either could keep you out of the mortgage game for several years for obvious reasons.

2. Avoid mortgage lates. Even if your credit score is up to snuff, mortgage lates can disqualify you with many banks and lenders. Makes sense doesn’t it?

3. Avoid listing your property on the MLS and then attempting to refinance that same property within a year. Lenders don’t love the idea of giving you a loan on something you don’t actually want.

4. Avoid charge offs and collections, especially medical collections (Almost everyone has one, often in error, and they can easily be removed. They kill your FICO score!)

5. Avoid credit counseling. (This will significantly drop your credit score, and many lenders won’t lend to borrowers who have used these services.)

6. Avoid opening new credit cards or making excessive charges on existing credit lines before and during the loan application process. This can hurt your credit score and increase your debt load, which could lead to disqualification. See debt-to-income ratio for more on that.

7. Avoid attempting to get a mortgage with less than 2 years consecutive employment in the same occupation or field. Prove you will actually continue to make the money you’re currently making and you’ll get a mortgage.

8. Avoid attempting to get a mortgage without documented 12 month housing history. And it can’t be from a family member unless you can provide cancelled checks! Yes, lenders want to know that you paid your rent on time previously.

9. Avoid attempting to get a mortgage without your own verifiable assets that cover at least two months of your proposed mortgage payment, including taxes and insurance. Translation: the money needs to be in your account, not under your mattress.

10. Avoid attempting to get a mortgage without 3 tradelines with a minimum 2 year history on each. Yes, credit is the root of all evil, but also a necessary one (unless you’re paying for your house with cash…)

*The last four on this list pertain especially to first-time homebuyers. Many banks and mortgage companies now offer no-doc loans that don’t require income, assets, or employment. But they’ll still ask for your housing history.

And first-time homebuyers usually always have to verify assets, housing history, employment, and credit depth. Sure, you might find a lender willing to give you a mortgage, but your mortgage rate will be less than desirable!

If you think you’ve got better mortgage no-nos, or feel I could add some to this list, please feel free to contact me and I will add them. The more tips we’ve got, the more money we save people.

Posted by IT Admin on March 20th, 2012 11:01 AMPost a Comment (0)

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March 20th, 2012 10:49 AM

Housing starts in the United States fell 1.1% to 698,000 units in February, down from 706,000 in January, the government said Tuesday.

At the same time, the Commerce Department reported that housing starts are up 34.7% when comparing the month of February to the same period a year earlier. In fact, the nation recorded only 518,000 housing starts in February of 2011, suggesting substantial positive gains over the course of the past 12 months.

Meanwhile, privately owned housing completions in February hit an annual rate of 568,000 units, up 6.2% from the January estimate of 535,000 and 7% below the February 2011 rate of 611,000. And single-family completions reached 421,000 units, up 8.25% from 389,000 in January.

Building permits, an indicator of future housing activity, also rose 5.1% to 717,000 permits in February when compared to January's rate of 682,000. The February rate also is up 34.3% from last year's estimate of 534,000 building permits.


 

Posted by IT Admin on March 20th, 2012 10:49 AMPost a Comment (0)

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March 5th, 2012 11:28 AM
If construction remains at or slightly above last year’s levels, and household formation rates rise to 1.1 million, the supply of housing will begin to normalize in two to four years according to Barclays Capital analysts.

After 2007, household formation plummeted to 300,000 to 500,000 per year from its historical rate of 1.25 million because of weak availability of credit, among other things. It has yet to recover. The analysts say, household formation rates — a function of population growth, overall economic activity and home affordability — should determine the fate of the housing market in coming years.

They also expect a 3% to 4% decline in home prices through March and then a 1% appreciation this year and in 2013, followed by a few years of 2% to 3% growth.

However, a broad-based stabilization in home prices is unlikely until overall excess supply starts dwindling. "We think this will be achievable only if household formation exceeds net construction for a sustained period," Barclays says. "Programs like the FHFA’s REO rental program can help on the margin in certain areas but will not have a big enough sustained impact."

Alleviating the excess supply by increasing household formation is extremely difficult to achieve by policy tools, especially in an environment with high barriers to credit. "Keeping interest rates low can help, but only to a certain extent if underwriting criteria remain tight," analysts say.

However, loosening underwriting guidelines is unlikely considering the abundance of bad underwriting in recent memory and that most new mortgages are backed by the government.

Posted by IT Admin on March 5th, 2012 11:28 AMPost a Comment (0)

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