November 2009

What’s Ahead for Mortgage Rates This Week: November 30th

Mortgage markets improved last week on stronger-than-expected economic data and safe haven buying.

The holiday-shortened trading week amplified what should have been modest gains into large ones.

Conforming mortgage rates dropped by about a quarter-percent last week, dropping them near their best levels of the year – and of all-time.

Oddly, mortgage rates are falling as the U.S. dollar weakens. This is atypical because mortgage bonds are repaid in U.S. dollars.  When the value of the dollar is falling, therefore, the value of holding mortgage bonds become less over time. 

Investors are snapping up bonds with fury, however. Partially because of lingering concerns related to Dubai, and partially because of faith in the U.S. economy’s long-term health.

This week, those beliefs could be shaken to the core — specifically because of Friday’s jobs report.

It’s no secret that the economy is growing.  Housing is improving, banks are re-capitalizing, and businesses are making capital investment.  However, employment is lagging.

More than 4 million jobs have been lost this year and the unemployment rate is north of 10 percent for the first time since 1983.  Consumers are worried for their jobs and are guarding their wallets the holiday season as a result. 

The economy can’t grow without consumer spending, though, and that’s why Friday’s job figures will play an especially large role in mortgage markets. If employment data goes positive, stock markets will rally at the expense of mortgage rates.

Conversely, if data looks worse, mortgage rates should dip.

Either way, it’s a gamble.  If you haven’t looked at the benefits of a refinance lately, waiting until Friday to see what happens may be ill-advised.  This is because the last two times mortgage rates fell this low, markets corrected within 48 hours, sending rates soaring higher.

Rates look good today. Consider locking something in before rates have reason to rise.

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

Why Mortgage Rates Are Back to All-Time Lows

Home affordability improved this week after the Federal Reserve released its November 3-4, 2009 meeting minutes.

The FOMC Minutes is a companion to the Federal Reserve’s post-meeting press release. It’s released 3 weeks after the Fed adjourns and details the internal debates that shape our nation’s monetary policy. 

As compared to the press release, the minutes can be rather lengthy. November’s press release featured 428 words, the minutes offered 6531.

However, this extra level of detail shapes markets and mortgage rates.  With Wall Street unsure about the economy’s path, investors look to our nation’s central bankers for guidance.

The Fed has made several points clear:

1. The economy shows tell-tale signs of improvement
2. Unemployment threatens the recovery
3. Inflation pressures are low, for now

Overall, the FOMC Minutes paint the economy as in a state of measured repair, and under tight federal surveillance.  Investors like this message and, as a result, stock and bonds markets are improving.

If you haven’t checked mortgage rates lately, make a point to do that.  In the wake of the FOMC Minutes, conforming mortgage rates are now hovering near their all-time lows set exactly 1 year ago.

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

It’s Official – Home Prices Are No Longer in Free Fall

According to the Federal Housing Finance Agency, the Home Price Index posted its first quarterly increase since 2007 last quarter.

The news was reported Tuesday.

The Home Price Index is an interesting metric.  It’s huge in its scope, accounting for every home sold in the country that backs a mortgage bound for Fannie Mae or Freddie Mac with two notable exceptions:

1. It doesn’t track new construction
2. It doesn’t track multi-unit homes

Because the Home Price Index makes these specific exclusions, and because it doesn’t account for FHA and jumbo mortgages, some analysts discount the HPI’s relevance.  They prefer the private-sector Case-Shiller Index instead.

Now, to be fair, the Case-Shiller has its own set of flaws, too. 

For example, it excludes condos and co-ops, and only tracks sales in 20 cities nationwide.  But, of all the private home valuation models, Case-Shiller is the most well-known and most widely-used.

The Case-Schiller Index was also released Tuesday and the report showed the same results as its government-issued counterpart — home values increased between the second and third quarter.

When the Home Price Index and Case-Shiller Index reach similar conclusions, markets tend to buy-in.  Home buyers should, too. 

Home values have likely bottomed and are starting to turn higher, as shown in two separate reports.  High sales volume and dwindling supply are contributing factors.  So are low mortgage rates and a tax credit.

If you’re on the fence about buying a home, at least consider your options.  In 2010, homes are unlikely to be as cheap to buy, or as cheap to finance.

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

Surprise! Existing Home Sales UP Again

Another month, another piece of evidence that the housing market is in recovery.

Existing Home Sales surged in October as the nation’s homebuyers took advantage of low mortgage rates, low list prices, and, for some, a generous tax credit.

Home resales are 23 percent higher versus a year ago and home supply is down to 7 months nationwide.

Inventory hasn’t been this low since February 2007.

The news shouldn’t be surprising, however.  The same real estate trade group that produces the Existing Home Sales report also publishes a monthly report meant to predict future home sales called the Pending Home Sales Index.

Pending Home Sales have been through the roof since mid-May.

So, with pending home sales showing no signs of slowing and 80% of pendings turning into actual, closed sales, we can expect existing home sales volume to rise in the coming months, too.  Especially because Congress extended the home buyer tax credit to include (1) “Move-up” buyers and, (2) Buyers with higher household incomes.

It’s terrific news for home sellers. The housing market turnaround means higher sale prices and fewer concessions to buyers long-term.

To buyers, on the other hand, the news isn’t so good. The window to find a “deal” appears to be closing quickly.

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

What’s Ahead for Mortgage Rates This Week: November 23rd

Mortgage markets worsened last week on a mixed bag of economic data.  Inflation data came in soft, but so did the start of the holiday shopping season.

For the first time in a month, mortgage rates worsened last week, adding roughly 0.125 percent on conforming fixed-rate products, and a little bit more on ARMs.

Despite rates worsening, there was still some good news for home buyers and would-be refinancers. Mortgage rate volatility was markedly lower than in recent weeks.  You could shop for mortgage rate last week and actually take your time about it.

This is in stark contrast to the last month or so over which mortgage rates changed every few hours, on average.

This week, though, because a heavy data calendar is combining with a holiday-shortened trading week, rates aren’t likely to stay as tame.

• Monday: Existing Home Sales
• Tuesday: Consumer Confidence, Home Price Index, Fed Minutes
• Wednesday: New Home Sales, Personal Income and Outlays

Each of these data points are market-movers by themselves. In tandem, however, they could really shake things up. Then, at the tail end of the week, markets will react to Black Friday.

If stores look full Friday and initial receipts appear high, stock markets should rise at the expense of bonds, leading mortgage rates higher.

Additionally, expect that mortgage rate changes will be amplified because of low trading volume.  This could work in your favor, or out of your favor – depending on the market direction.

With mortgage rates at such low levels and unlikely to fall much further, locking a rate is advisable. If you choose to float, though, keep your qualified mortgage professional on speed dial because when rates do rise, they’re going to rise quickly. 

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

Should You Consider a 15-Year Fixed Mortgage?

For today’s home buyers and homeowners that can manage the higher monthly payments, 15-year fixed rate mortgage rates look attractive as compared to comparable 30-year products.

The 15-year/30-year interest rate spread is near its 5-year high.

Despite lower rates, however, homeowners opting for a 15-year fixed mortgage should be prepared for its higher monthly payments.  This is because the principal balance of a 15-year fixed is repaid in half the years as with a standard, 30-year amortizing product.

As compared to 30-year terms, 15-year products repay 3 times as much principal each month.

Versus a 30-year, 15-year fixed mortgages have a few downsides worth noting.  The first is that, because 15-year mortgages are heavy on principal and light on interest, homeowners who itemize tax returns may have to claim a smaller mortgage interest tax deduction at tax time.

Another negative is that the sheer size of the payment.  If you run into fiscal trouble down the road, the only way to reduce the monthly obligation is to refinance into a 30-year product and that costs money to do. 

In other words, be sure you can manage the payments over the long-term before you opt for a 15-year term.   If you can manage it, though, the rewards are tangible.

At today’s rates, a 15-year fixed versus a 30-year fixed costs $230 extra per $100,000 borrowed.

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

Hooray for Sellers as Housing Starts Down Again.

A “Housing Start” is a home on which construction has started and, for the 4th straight month, national single-family housing starts held steady last month. 

When the demand for homes grows faster than the number of homes for sale, prices increase. 

As recent home sales data confirms, buyers currently outpace sellers and one consequence of this is an increase in multiple-offer situations this year. 

It’s no wonder home prices are up across so many neighborhoods.

October’s Housing Starts report is yet another piece of housing data foreshadowing rising home prices into 2010.

Building Permits were also down in October, a potential demand-to-supply imbalance magnifier. Without permits, there’s no future construction. This drains supply. Meanwhile, tax breaks and low rates tend to stimulate demand and, right now, we’ve got both. 

Therefore, so long as demand remains semi-constant into the New Year, expect home prices to rise. 

In many markets, they already are.

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

No Changes Set Forth for 2010 Conforming Loan Limits

A conforming mortgage is one that, quite literally, conforms to the mortgage guidelines set forth by Fannie Mae or Freddie Mac.

Each year, the government sets the maximum allowable loan size for a conforming mortgage, based on “typical” housing costs nationwide. 

Loans in excess of this amount are typically called “jumbo”.

While home prices increased from 1980 to 2006, so did conforming loan limits.  Since then, however, as home prices have dipped, the conforming loan limit has held.

Now, in 2010, for the 5th consecutive year, the government set $417,000 as the nation’s conforming mortgage loan limit.

The 2010 conforming loan limits, as released by the government, are:

But conforming loan limits don’t apply to all U.S. geographies equally.  As a result of various economic stimuli since 2008, the government now considers certain regions around the country ”high-cost” areas.  In these areas, conforming loan limits can range to $729,750.

There are less than 200 such areas nationwide.  The complete list is published on the Fannie Mae website.

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

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