September 2009

Housing Starts Slip, But Don’t Think The Recovery’s Been Halted

Housing Starts on single-family homes took a step backwards last month, falling month-over-month for the first time since January.

A “housing start” is new home on which construction has started.

Don’t let the slowdown fool you, however – the housing market’s recovery is still very much underway.

• Sales volume is up in most cities
• Home values are up in most places
• Low mortgage rates are making homes affordable

Builders were bound to take a construction breather sometime - especially with the looming expiration of the First Time Home Buyer Tax Credit.  The last thing they want is to be saddled with excess supply.

Some of the news coverage categorized August’s Housing Starts as troubling.  That’s likely overstating it.  One down month after 8 consecutive increases is not only acceptable, but it’s expected, too. 

Single-family starts are up 34 percent on the year.  The housing market is recovering just fine.

Need more expert advice? Ask the team of Certified Mortgage Planning Specialists at Benchmark Mortgage.

The Housing Market Index Reaches A 16-Month High

According to home builders around the country, the housing market is looking good.

Each month, the National Association of Home Builders releases its Housing Market Index report, a survey meant to “take the pulse of the single-family housing market”.

Respondents report on three facets of their business, each series weighted and averaged:

1. How are market conditions today?
2. How do market conditions look 6 months from now?
3. How is the traffic of prospective buyers of new homes?

For the 3rd straight month, the Housing Market Index improved.  It’s now at its highest level since May 2008.

The housing market has shown signs of life since March.  Both Existing Home Sales and New Homes Sales have soared and home values are up in a lot of towns.  Builders showing confidence is another positive signal.

Fed Chairman Ben Bernanke said that the recession is “very likely over” and strong housing data corroborates that statement. 

As the economy strengthens and housing does, too, home sellers will start to regain the upper-hand in contract negotiations.  If you’re an active home buyer, therefore, and looking for “a deal”, be aware that time is close to running out.

Need more expert advice? Ask the team of Certified Mortgage Planning Specialists at Benchmark Mortgage.

When Ben Speaks, Mortgage Rate Shoppers Need to Listen

On the 1-year anniversary of the Lehman Brothers collapse, Fed Chairman Ben Bernanke said Tuesday that the “recession is very likely over at this point”.  

His comments were supported by a Retail Sales report for August that was much better-than-expected.

Equities improved on the day, mortgage markets worsened, and home affordability suffered. 

The days of ultra-low mortgage rates may be coming to an end.

Since last September, mortgage bonds markets have been in Rally Mode.  As the Financial Crisis of 2008 worsened, investors fled the relatively risky world of stocks and moved dollars into safer investments like cash and bonds – including the mortgage-backed kind.

Risk aversion is common when market uncertainty exists but last year’s aversion was so strong that, by late-November, it had forced mortgage rates down to an all-time low. 

Since November, however, rates have been on the rise.  Stronger economic data and a general feeling of optimism have helped stock markets recover and some of those gains are coming at the expense of low mortgage rates.

Therefore, if you’re wondering what mortgage rates might do going forward, listen to the words of the Federal Reserve Chairman. If he sees economic recovery ahead, it’s probably going to happen.

It should spell higher mortgage rates into 2010.

Need more expert advice? Ask the team of Certified Mortgage Planning Specialists at Benchmark Mortgage.

The Reality of a 401(k) Withdrawal to Achieve a Lifetime Opportunity of Home Ownership

As downpayment requirements increase, anecdotally, home buyers are tapping 401(k) plans for extra cash.

Classified as a ”hardship withdrawal”, loans against your retirement funds can be cheap and simple.

1. There’s no credit check or approval process
2. There’s only a small set of paperwork
3. Money can be available in as little as a day

But just because you can get access to your retirement money doesn’t mean that you should.  401(k) withdrawals should only be made after careful consideration. 

There are some serious negatives, specifically with respect to taxation. 

If you open a 401(k) loan and don’t repay according to the loan terms, the withdrawal ends up getting taxed as income, plus a 10 percent penalty for people under 59 1/2. 

That’s a stiff penalty.

But, even if you do repay the loan on time, you’re still leaving yourself subject to double-taxation. 

• Taxation #1 occurs when the loan is repaid using post-tax dollars
• Taxation #2 occurs upon final withdrawal at retirement

Furthermore, when you borrow against a 401(k), you assume the opportunity costs of having that money out of the market.  Since March, the Dow Jones Industrial Average is up 44 percent.  If your 401(k) was empty, you’d have missed those gains forever.

Taking a loan against a 401(k) isn’t necessarily a bad idea, there just may be better choices. If you’re planning to withdraw from your 401(k) to make a downpayment on a home, talk with a qualified financial professional first.

You can never have too much good information.

Need more expert advice? Ask the team of Certified Mortgage Planning Specialists at Benchmark Mortgage.

What’s Ahead for Mortgage Rates This Week: September 14th

Mortgage markets improved last week, briefly touching their best levels in 3 months. 

However, a rough Friday afternoon took away some of those gains.

Mortgage rates touched their lowest levels of the week Friday morning before tacking on an eighth-percent or more over the last 90 minutes of trading.

It’s the second straight week in which mortgage rates fell.

Last week was an odd week, of sorts, because economic data was lacking.  Markets, therefore, improved mostly on momentum plays and a general shift from cash positions into bonds. 

This week, data returns.

In addition to the Consumer and Producer Price Indices — “Cost of Living reports” for households and businesses, respectively — markets will also digest a Retail Sales report, Housing Starts for August, and 3 speeches from members of the Federal Reserve.

Each has the power to move markets.

Furthermore, Wall Street will be taking positions ahead of next week’s Federal Open Market Committee meeting.  The Fed is expected to leave the Fed Funds Rate in its current range near 0.000 percent but don’t forget — the Fed doesn’t control mortgage rates. 

Just because the Fed Funds Rate won’t change doesn’t mean mortgage rates won’t.  Expect volatility Tuesday and Friday, and be wary of momentum.  Mortgage rates tend to rise faster than they fall. 

If you’ve been floating your mortgage rate over the past few weeks, it may be prudent to lock in Monday or Tuesday.

Need more expert advice? Ask the team of Certified Mortgage Planning Specialists at Benchmark Mortgage.

Why An 800 Credit Score Doesn’t Really Matter

Since 2007, mortgage lenders have clamped down in many areas of underwriting, but none more so than in the area of credit scoring.

Minimum FICO levels are up 120 points or more and conforming mortgage lenders now levy large fees on borrowers whose scores are below 740.

Keeping your credit scores high is a worthwhile goal, but it’s not always easy to do – especially when you don’t know the ins-and-out of how the credit scoring system works.

The Wall Street Journal wrote a terrific piece on credit scoring this week. It’s full of helpful, relevant tips for home buyers, homeowners, and everyone else.

Aside from covering the five basic components of a credit score – shown at left - the piece provides insightful advice on credit-related topics including:

• The difference between a “hard inquiry” and a “soft inquiry”
• Why paying for your credit report is a foolish use of funds
• Why it doesn’t matter if you have an 800 FICO

The article also talks about the optimal balance a person should carry on their credit cards to get the biggest FICO boost.

Credit scores determine your mortgage rate.  Therefore, do what you can to keep your scores high. Follow the tips in the Wall Street Journal article and lean on public resources like myFICO.com.

Having good credit can be a real money-saver.  Month after month after month.

Need more expert advice? Ask the team of Certified Mortgage Planning Specialists at Benchmark Mortgage.

The Geographical Concentration Of Foreclosures

Once again, the country’s foreclosures are concentrated in just a few states.

As reported by foreclosure-tracking company RealtyTrac.com, more than 50 percent of the country’s foreclosure-related actions in August occurred in just four states:

• California : 25.76 percent
• Florida : 17.4 percent
• Michigan :  5.4 percent
• Nevada : 5.0 percent

The rest of the “Top 10″ foreclosure states included Arizona, Illinois, Georgia, Ohio, Texas and New Jersey.

Versus July’s numbers, the U.S. foreclosure rate improved last month.  However, the August data is awful in comparison to last year — foreclosures are up nearly 18 percent.

The silver lining? High foreclosure rates are yielding tremendous opportunities for today’s home buyers. Buyers of distressed properties now account for about one-third of all home sales and low mortgage rates and a federal tax credit are spurring sales.

Search the complete August 2009 foreclosure report for yourself, including foreclosure heatmaps and other trends on the RealtyTrac website.

Simple Real Estate Definitions: Quitclaim Deed

By its most common definition, a quitclaim deed is a document by which one person passes legal and financial ownership of a home to another person.

It’s also a way for an owner of a home to remove himself from the title to the property.

Often misspelled as “quick claim deed” or “quit claim deed”, quitclaim deeds have a multitude of applications, including:

• Assigning a home to a trust or entity
• Adding a partner to title after marriage
• Removing a partner from title after divorce

In order to quitclaim a property, the grantor must have the legal right to assign the property to a grantee, or else the quitclaim deed is worthless.  For example, you can’t quitclaim your interest in City Hall to your neighbor because you don’t actually own City Hall. 

This is where quitclaim deeds vary from warranty deeds (or grant deeds) — the types of transfers that occur when real estate is sold.  In instances of the former, the title to a home is guaranteed to be clear.

Before using a quitclaim deed on your own home, consult an estate planning attorney.  Transferring real property can ruin a will, or trigger taxes — it’s important to consult a professional for help.

Need more expert advice? Ask the team of Certified Mortgage Planning Specialists at Benchmark Mortgage.

« Previous Page — Next Page »