Market Insight

The Week Ahead for Mortgage Rates: January 30, 2012

Mortgage markets improved last week as news from the Federal Reserve, the U.S. economy, and Europe combined to spur new demand for mortgage-backed bonds.

Conforming mortgage rates rallied from Wednesday through Friday’s close, ending the week near all-time lows set earlier this year. Last week’s rally was sparked by the Federal Open Market Committee.

After its first meeting of the year, Chairman Ben Bernanke & Co. changed its projection for “exceptionally low rates” to at least late-2014. Previously, the Fed had said its benchmark Fed Funds Rate would remain low until 2013.

This, in conjunction with the Fed’s message that further economic stimulus may be coming, led Wall Street investors to increase their bets on mortgage bonds, pushing up prices and pushing down yields.

Lower yields means lower rates.

Mortgage rates were also helped lower by mixed data on the U.S. economy including weaker-than-expected housing reports, and another setback in the Greece sovereign debt negotiations.

Each time that Eurozone leaders have failed to reach an expected accord with Greece since 2010, mortgage rates have dropped. Last week was no different.

This week, with a large amount of U.S. economic data due for release and a high-profile summit among European Union leaders, mortgage rates are poised to move. Unfortunately, we can’t know in which direction.

Some of the news that will move markets include :

• Monday: Personal Consumption Expenditures
• Tuesday: Consumer Confidence; Case-Shiller Index
• Wednesday: Construction Spending
• Thursday: Weekly Jobless Claims
• Friday: Non-Farm Payrolls; Factory Orders

Of all of the economic releases, Friday’s Non-Farm Payrolls has the most potential to move markets. More commonly called “the jobs report”, Non-Farm Payrolls details the monthly change in national employment and the national Unemployment Rate. 

Jobs are believed to be the key to U.S. economic recovery so strength in jobs should result in higher mortgage rates throughout Northwest Indiana and the greater Chicago-land metro area.

Mortgage rates remain very low. If you’re nervous about mortgage rates rising this week or next, it’s as good of a time as any to lock your rate and start moving toward closing. This is The Week Ahead for Mortgage Rates: January 30, 2012.

Quick general rule of thumb when keeping an eye on mortgage rates.

Strong Economic News: $$$ from Bonds —> Stocks = Home Loan Rates Go Up

Weak Economic News: $$$ from Stocks —> Bonds = Home Loan Rates Go Down

If you or someone you know is thinking about buying a home, the combination of low home loan rates and affordable home prices make this an ideal time to buy a home. Want to know if you can afford a new home? Call or text me at 512-522-7284 to discuss your personal situation and your home loan options!

Housing and Mortgage: The Experts Make Their 2012 Predictions

As the new year begins, there are no shortage of stories telling us what to expect in 2012. Housing finished 2011 with momentum and mortgage rates closed at the lowest rates of all time.

Some expect those trends to continue through the first quarter and beyond. Others expect a rapid reversal.

Who’s right and who’s wrong? A quick look through the newspapers, websites and business television programs reveals “experts” with opposing, well-delivered arguments views. It’s tough to know who to believe.

For example, here are some “on-the-record” predictions for 2012 :

• Home prices will rise in 2012 (says Freddie Mac)
• Home prices will fall in 2012 (says CBS News)
• Mortgage rates will rise in 2012 (says American Banker) 
• Mortgage rates will fall in 2012 (says the LA Times)

The issue for buyers, seller, and would-be refinancers in Crown Point and nationwide is that it can be a challenge to separate a “prediction” from fact at times. 

When an argument is made on the pages of a respected newspaper or website, or is presented on CNBC or Bloomberg by a well-dressed, well-spoken industry insider, we’re inclined to believe what we read and hear.

This is human nature.

However, we must force ourselves to remember that any analysis about the future — whether it’s housing-related, mortgage-related, or something else — are based on a combination of past events and personal opinion.

Predictions are guesses about what might come next — nothing more.

For example, at the start of 2009, few people expected the 30-year fixed rate mortgage to stay below 6 percent, but it did. Then, at the start of 2010, few people expected the 30-year fixed rate mortgage to stay below 5 percent, but it did.

All we can know for certain about today’s market is that both mortgage rates and home values are low, creating favorable home-buying conditions in and around Northwest Indiana and nationwide.

At that start of last year, few people expected mortgage rates to even reach 4 percent. Today, rates “with points” price in the 3s.

What 2012 has in store we just can’t know.

CATAWAMPUS! What’s Gone Wrong With The Our Lakefront Homes?

Party Like It’s 2005!

That’s to say, party on, if you live on the beach. And you have deep enough pockets to hold on through thick and thin.

A few isolated pockets of  Lake County Indiana, and Porter County Indiana must not have gotten the memo that we are in a real estate recession. With all our sophisticated communications devices and 24 hour news, we should all be on the same page on these things. Still, some people stubbornly refuse to face the reality that their homes are not as valuable as they used to be. The Lake Michigan waterfront seems to be one of the places where “the bubble” still lives, at least in people’s minds.

Economists like to discuss “orderly” markets where buyers and sellers can negotiate win/win deals by making small trimming adjustments until both sides have reached agreement. But some lakefront sellers are dug-in. And since lenders and buyers must adhere to more stringent rules now, than in the past, deals are simply not happening. The market has hit the wall.  When sellers dig in; buyers can only borrow so much. If buyers don’t have their own cash to waste on an overpriced home, the mortgage lending system will not allow them to overpay using other people’s money.

But those who MUST sell learn a hard dose of reality when they finally must cross the line back into the real world. Because when their appraisal reveals an inflated price, they discover that banks are not rolling out the red carpets for Jumbo loans like they used to.

I ran an analysis of the various lakefront communities to see where the disconnects have been most severe. Some of these results are fairly predictable from talking with local REALTOR’s. Others are surprising, because some Lakefront communities do have quite orderly markets.

Remember our discussion about Price-Per-Square Foot? If you are not familiar with this measurement, this is a common denominator which allows us to compare a large home versus a small one. Regardless of the size, a higher number means a “better” home (better location, higher quality of construction, larger lot, nicer architecture, fixtures and amenities) while a lower number means a less desirable property. How close you are to the water; on the beach versus across the street, or a block away, are big factors which will spike up or down the PPSF of one house versus another when comparing two similar homes.

In most NWI communities, average homes range from about $80 to $140 per square foot. And a home that is priced accurately for the local market can be expected to sell in 6 to 9 months. But in the rarefied air of the beach, it’s a wide open scenario.  Here is the list of of what you can expect to see in each of these markets, and how stagnated things become when sellers dig-in.

BEVERLY SHORES, INDIANA:

We will start here, the most egregious disconnect between buyers and sellers, Beverly Shores. This sparsely populated community has some magnificent unspoiled views of the lake from Lakefront Road. But the disparity between the prices folks want for their properties and what buyers are willing to pay is the most extremely out-of-sync.

Active Listings Average PPSF:  $267   Homes SOLD PPSF:  $188   Difference:  -30%

Time needed to sell existing inventory at current Absorption Rate:  3 years, 7 months.

SHOREWOOD FOREST, VALPARAISO, INDIANA:

There are some fantastic buys here for a savvy negotiator who has good credit and  is willing to make make low-ball offers. Prices have already dropped some, but as the statistics show, there is still more room to come down before the market comes into harmony.

Active Listings Average PPSF:  $139  Homes SOLD PPSF:  $109  Difference:  -22%

Time needed to sell existing inventory at current Absorption Rate:  4 years, 5 months.

MILLER BEACH, GARY, INDIANA  (From Maple Ave to the beach):

Active Listings Average PPSF:  $144  Homes SOLD PPSF:  $115   Difference:  -20%

Time needed to sell existing inventory at current Absorption Rate:  3 years.

OGDEN DUNES, PORTAGE, INDIANA:

There are many homes here from the 1950′s and ’60′s which need major rehabs, yet many sellers with pink fixtures still regard them as made from gold. Regardless of where the location is, when rehab needs $100,000 in work, it should be priced accordingly. Some of the sellers in OD need more than just the “tough love” conversation about their asking price, but a swift kick for being so blatantly greedy, (IMHO, of course).

Active Listings Average PPSF:  $190  Homes SOLD PPSF:  $152    Difference:  -20%

Time needed to sell existing inventory at current Absorption Rate:  3 years, 7 months.

DUNE ACRES, PORTER,  INDIANA:

This is a special case since many of the homes are opulent and have legitimately high price tags. And there is simply not much turnover. So although the prices are close, there are simply few transactions. But with 10 homes for sale and only one sold within the past year, a seller will need to be very patient waiting for his number to come up.

Active Listings Average PPSF:  $242   Homes SOLD PPSF:  $230   Difference:  -5%

Time needed to sell existing inventory at current Absorption rate:  10 years

BRIGHT SPOTS OF SENSIBILITY:

It is not all doom and gloom in this market study. Several lakefront communities have found buyers and seller expectations matching up well to make an orderly and “normal” real estate market.

LONG BEACH, MICHIGAN CITY, INDIANA:

Recent sales in this posh community have actually been HIGHER per square foot than the current crop of homes for sale.

Active Listings Average PPSF:  $228   Homes SOLD PPSF:  $252   Difference:  +11%

Time needed to sell existing inventory at current Absorption Rate:  1 years, 9 months

LAKE OF THE FOUR SEASONS, WINFIELD, INDIANA:

Winfield gets the prize for the being most affordable lakefront community as well as having the most “normal” juxtaposition between buyers and sellers. Sure, it’s not Lake Michigan; but it’s still the beach.  Here again, SOLD homes went for higher prices (on per square foot basis) than the current Active inventory.  Sweet!

Active Listings Average PPSF:  $83   Homes SOLD PPSF:  $89  Difference:  +7%

Time needed to sell existing inventory at current Absorption rate:  10 months

CONSULT YOUR LAKEFRONT AUTHORITY:

For anyone needing a reality check in today’s shifted market, contact me for the market facts. If someone you know needs the “tough love” conversation about their dormant property, I am here as your consultant as well as your negotiator.  Let’s kick into gear! For both Buyers and Sellers alike, I make house calls with the ice water ready for those sleepy listings. 2005 is over; it is time to wake-up and drink the espresso  if you want to make a deal. Volunteer yourself, or turn in a friend you care about! My two-step program is available now.

Federal Reserve Announces New Twist to Stimulate Economy

The Federal Open Market Committee (FOMC) gathered for the 6th of eight scheduled meeting for 2011.

Since the last FOMC meeting in August, the economy failed to add any new jobs and the unemployment rates has remained above 9 percent. Growing fears of another recession have been fueled by the poor performance throughout every sector of the economy.

Economists and financial analysts worldwide have been on the edge of their seat waiting to hear how the FOMC intends to prevent another recession while keeping a lid on inflation.

Why should Northwest Indiana and Chicago Illinois home buyers and homeowners even care about the FOMC meetings?

First of all, the FOMC meetings provides a bird’s eye view of what the Federal Reserve believes to be important factors impacting the overall economy.

Second and more importantly, the press release from the FOMC meetings provides guidance to the financial markets on how the Federal Reserve will accomplish their dual mandate to foster maximum employment and price stability.

According to FOMC Statement Press Release from today, the committee had this to say about the economy.

Positive economic factors:

• Household spending has been increasing
• Inflation has moderated from earlier peaks
• Longer-term inflation expectations have remained stable

Negative economic factors:

• Economic growth remains slow
• Overall labor market conditions continue to weaken
• Unemployment rate remains elevated
• Household spending has flattened
• Investment in nonresidential structures is still weak
• Housing sector remains depressed

Based on the Federal Reserves interpretation of the economy, the committee voted 7-3 in favor of:

1. extend the average maturity of its holdings of securities
2. reinvest principal payments from its holding of agency debt and agency mortgage-backed securities in agency mortgage-backed securities
3. maintain the target range for the federal funds rate at 0 – 0.250%

The Federal Reserve also elaborated on how they will extend the average maturity of its holdings of securities.

The Committee intends to purchase, by the end of June 2012, $400 billion of Treasury securities with remaining maturities of 6 years to 30 years and to sell an equal amount of Treasury securities with remaining maturities of 3 years or less.

What does all this really mean to Northwest Indiana and Chicago Illinois home buyers and homeowners?

The Federal Reserve is running out of options and tools to foster maximum employment. The economy appears to be heading for another recession despite the best efforts of the US Treasury and Congress.

This new initiative (aka. Operation Twist) by the Federal Reserve appears to be a re-balancing of short-term debt and long-term debt on the Fed’s portfolio. The Fed is attempting to refinance their debt overall a longer time frame as to minimize the cash flow crunch in the same manner as consumers who refinance short-term debt into longer-termed mortgages.

At the end of the day, will the Fed have enough money to accomplish their objectives of paying bills while paying down the existing debt? Only time will tell. In the mean time, the Federal Reserve will take advantage of the low interest rate environment as well.

Likewise, home buyers and homeowners in Northwest Indiana and Chicago Illinois should capitalize on low home loan rates now before they end. Call or text me at 512-522-7284 to discuss your home loan options!

Federal Reserve Vows to Keep Low Rates Through Mid-2013

The Federal Open Market Committee (FOMC) gathered for the 5th of eight scheduled meeting for 2011.

The biggest announcement since the last FOMC meeting in June, which there have been many, is obviously the downgrade of the US credit rating by Standards & Poor’s over the weekend.

This downgrade has devalued the US dollar and has had immediate impact on stocks worldwide. Combine our domestic woes with the debt crisis in Europe and it is no surprise why stock investors are running scared.

Why should Northwest Indiana and Chicago Illinois home buyers and homeowners even care about the FOMC meetings?

First of all, the FOMC meetings provides a bird’s eye view of what the Federal Reserve believes to be important factors impacting the overall economy.

Second and more importantly, the press release from the FOMC meetings provides guidance to the financial markets on how the Federal Reserve will accomplish their dual mandate to foster maximum employment and price stability.

According to FOMC Statement Press Release from today, the committee had this to say about the economy.

Positive economic factors:

• Business spending on equipment and software continues to expand
• Longer-term inflation expectations have remained stable
• Underlying inflation has moderated from earlier peaks

Negative economic factors:

• Household spending has flattened
• Investment in nonresidential structures is still weak
• Overall labor market conditions deteriorating
• Housing sector remains depressed

Based on the Federal Reserves interpretation of the economy, the committee voted 7-3 in favor of:

1. maintain the target range for the federal funds rate at 0 – 0.250%
2. maintain its existing policy of reinvesting principal payments from its securities holding

The Federal Reserve also elaborated on how long a near zero percent Fed Funds Rate would last.

Committee currently anticipates that economic conditions – including low rates of resource utilization and a subdued outlook for inflation over the medium run – are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.

What does all this really mean to Northwest Indiana and Chicago Illinois home buyers and homeowners?

The Federal Reserve is running out of options and tools to foster maximum employment. The economy appears to be heading for another recession despite the best efforts of the US Treasury and Congress.

Even with the US credit downgrade, mortgage bonds are in high demand forcing home loan rates lower. It is hard to forsee how mortgage rates could get any lower based on everything that is happening domestically and worldwide. One hint of good economic news and mortgage rates could reverse course instanteously.

Therefore, home buyers and homeowners in Northwest Indiana and Chicago Illinois should take quick action to capitalize on low home loan rates before they end. Call or text me at 512-522-7284 to discuss your personal situation and your home loan options!

Fannie Mae Mortgage Bonds 48 Hour Reversal of Fortune

It seems as if it were just yesterday that everyone in the financial sector was astounished how low the yield for the Fannie Mae 30 year fixed mortgage bonds had been pushed. Wait a second…it was yesterday.

Fast forward to the closing bell today and it was a complete reversal of fortune for Fannie Mae mortgage bonds. Take a look at the chart below and observe the performance from yesterday through today.

It should be noted that when the price increases on the Fannie Mae mortgage bond, it actually has an inverse relationship with mortgage rates. Coincidentally, mortgage rates on 30 year fixed rate home loans would go down. The opposite holds true as well. When Fannie Mae mortgage bonds decrease in price, 30 year fixed mortgage rates increase.

As you can see in the chart from the past 48 hours, Fannie Mae mortgage bonds are actually worse than where they opened Thursday morning. Although this occurs often in today’s volatile bond market, it is the extreme range in price movement that was all the buzz.

Rarely do you see Fannie Mae mortgage bonds increase and/or decrease more than 50 bps a day. In this case, they changed near 100 bps both days. What does all this mean to you as a home buyer or someone who was interested in refinancing their home?

Mortgage rates literally decreased by more than 0.250% – 0.375% on Thursday to only increase 0.375% – 0.500% today. If you’re uncertain as to which way mortgage rates are trending, we don’t blame you. The quickest and easiest way to monitor the daily rate trend is to keep an eye on the rate meter to the right.

Don’t have the time or the patience to keep close tabs on how Fannie Mae mortgage bonds and mortgage rates are trending? Call or text me at 512-522-7284 to get your personalized rate monitor service.

Highland Indiana Real Estate Market Summary, June 24, 2011

The Highland Indiana real estate market continues to trade in a narrow range this month. Although the market did experience a recent dip and a rebound, the pattern is not solid enough to point to a clear trend in market change.

Prices have been trending gradually lower since their peak in October of  2010.  Currently prices are down 8.3% from that point.  This week’s Median List Price is$154,900, a stable equilibrium for Highland prices.  That mid-$150K level has been hit several times, both on up-side as well as down since the recession began in 2007.

Seasonal  patterns often show a spike up at the end of the traditional summer buying season, and we may still see one this year.  We might also see this curve continuing to simply flatten out, with all the weak economic news nationally in employment and housing starts affecting existing home sales. Looking back several years, the average range for Highland Indiana homes has “traditionally”  been in the mid-150′s, so we may see prices return to these levels as a new baseline.

The MLS shows 15 single family homes listed as PENDING with prices from $69,000 to $254,000. Altogether there are 103 for sale;  it takes 135 days on-market to sell the average Highland area home.

There are 3 condo’s and 6 duplex town-homes on the PENDING list in Highland Indiana. These are located in Porte de Leau, Georgetowne, Park Place, and Whispering Oaks developments, plus a few free-standing duplex units.  There are 36 condo’s on the ACTIVE list, seeking new owners, and 23 town-homes. Median asking prices are just under $130,000 and price-per-square foot is currently $102. Actual selling prices will be slightly less.

All these fundamentals indicate that it is still a strong BUYERS market, with interest rates remaining low and prices low as well.  If you know someone looking for a Highland area home or condo, make sure they know about my premium service for finding and selecting from ALL the available market inventory.

First Time Buyers Find Choices In Highland Indiana Real Estate

For anyone looking for their first home, Highland Indiana is a great place to start. A snapshot of the market revealed that there are presently 36 listings (15 condo / town-homes and 21 single family residences below $120,000 in Highland.

New Buyers Test the Water:

As we recover from the recession here is a short history: Condo prices hit bottom last July and are currently signaling an upturn. Single family residential prices in Highland Indiana hit their bottom more than a year ago and have actually had a decent rally since then, with median list price maintaining $156,450, for residences and $133,900 for condos. Remember that median is defined as the midpoint or center line, with basically 50% above and 50% below that line. Consequently out of the 92 single family and the 53 condo’s, half the properties will be above and half below the median.

Some of Highland Indiana’s notable condo developments to are:

• Eagle Ridge
• Eagle point
• Porte De Leau
• Georgetowne
• Spring Creek
• Wildwood Terrace
• Les Chateaux
• White Oak Estates

If you are a busy professional, do shift work,  or just have a full social schedule, remember that in a condominium there is no yard work, snow shoveling, or repairs you are responsible for. These are all handled by your Property Owners Association and paid by your monthly assessments, often times along with your property insurance, internet and cable. Many town-homes also have this arrangement so your free time is all your own.

Another thing that makes Highland remarkable is the diversity of housing. If you are a bargain hunter wiling to deal with short sales and fixer-uppers, Highland has a few of these too.  But even the small 700 square foot properties are generally well kept. And while we have been discussing starter homes here, one of the other notable developments in Highland is at the opposite end of the price scale, the White Oak area, and it’s higher end cousins. We will feature these in a future post.

Feature of the week:

Check out this beautiful ranch in the Homestead Gardens subdivision with an asking price of only $122,500. Everything has been done: decorator painting, blown-in insulation, finished laundry room, new windows, roof, AC compressor. There’s a pool and shed, plus huge nature area behind the home. What’s not to love? I may be looking at this one myself, and I would enjoy hearing your feedback on it too. Call me for an appointment and we can check it out together.

 

 

Fed Wants More Stimulus Despite Positive Economic Signs

The Federal Open Market Committee (FOMC) gathered for the 1st of eight scheduled meeting for 2011.

Since the last FOMC meeting in December the US economy has been providing positive signals on the scope and pace of a jobless recovery. The stock market has enjoyed a nice rally since the beginning of 2011 as well.

The biggest announcement from the December FOMC meeting was the Federal Reserve’s commitment to Quantitative Easing (QE2). There has been plenty of debate since the December 14th FOMC meeting about the effectiveness QE2.

Why should home buyers and homeowners in Northwest Indiana even care about the FOMC meetings?

First of all, the FOMC meetings provides a bird’s eye view of what the Federal Reserve believes to be important factors impacting the overall economy.

Second and more importantly, the press release from the FOMC meetings provides guidance to the financial markets on how the Federal Reserve will accomplish their dual mandate to foster maximum employment and price stability.

According to FOMC Statement Press Release from today, the committee had this to say about the economy.

Positive economic factors:

• Household spending picked up late last year
• Business spending on equipment and software is rising
• Longer-term inflation expectations have remained stable
• Underlying inflation have been trending downward

Negative economic factors:

• Household spending…constrained by high unemployment, modest income growth, lower housing wealth, and tight credit
• Business spending…investment in nonresidential structures is still weak
• Employers remain reluctant to add to payrolls
• Housing sector continues to be depressed

Based on the Federal Reserves interpretation of the economy, the committee voted 11-0 in favor of:

1. maintain the target range for the federal funds rate at 0 – 0.250% for an extended period
2. maintain its existing policy of reinvesting principal payments from its securities holdings
3. intends to purchase $600 billion of longer-term Treasurys by the end of the 2nd quarter 2011

The Federal Reserve reaffirmed it’s commitment to Quantitative Easing 2 and is prepared to see it through to the end. The FOMC also acknowledged that the economic recovery is continuing, but not at a pace sufficient to improve the labor market.

What does all this really mean to home buyers and homeowners in Northwest Indiana?

The Federal Reserve is running out of options and tools to keep interest rates at historic lows. The rising trend in home loan rates since the last FOMC meeting in December 2010 is proof that worldwide bond markets are becoming numb to the FOMC’s influence. Therefore, home buyers and homeowners in Northwest Indiana should take quick action to capitalize on low home loan rates before they end.

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