Market Insight

The Week Ahead for Mortgage Rates: February 27, 2012

Mortgage markets improved in a holiday-shortened week last week, drawing mortgage rates lower throughout Crown Point Indiana and nationwide.

Few new economic releases reached the markets, but those that did suggested recovery — especially with respect to housing and employment, two key drivers of the U.S. economy overall.

Mortgage rates tend to rise when on strong data. That’s not what happened last week, however.

Click here to see today’s mortgage rates.

First, in housing, the New Home Sales and Existing Home Sales reports each showed strength for December and January. Separate reports show that sales volume is rising nationwide even as the number of available homes for sale fall.

Home Supply is reaching bull market levels, which pressures home prices higher.

And then, in employment, the government’s Initial Jobless Claims report turned up good news too. The report’s 4-week moving average is now down to its lowest level since 2008, a figure that suggests that U.S. households are getting back to work and staying there.

As for rate shoppers in Northwest Indiana, don’t expect mortgage rates to fall forever.

Click here to see today’s mortgage rates.

Last week’s rate improvements were partly because the Greece bailout has yet to be finalized, and partly because concerns about Iran have sparked a mortgage bond flight-to-safety. International demand for U.S.-auctioned bonds was especially high last week and mortgage bonds benefited.

As the situations in Greece and Iran stabilize, mortgage rates should rise.

Click here to see today’s mortgage rates.

There are just two key data points set for release this week — the Pending Home Sales Index (Monday) and Personal Income and Outlays (Thursday) — plus two key European votes on the Greece bailout. The Case-Shiller Index will also be released and the FHA is expected to announce new mortgage insurance premiums.

Mortgage rates remain near all-time lows. If you’re still floating a rate, or waiting to refinance, consider moving up your timeframe. It’s a good time to lock your mortgage rate for the long-term.

Click here to see today’s mortgage rates.

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!

Fed Minutes Show Caution on Inflation and European Spillover

The Federal Reserve has released the minutes from its 2-day meeting on January 24-25, 2012.

The Fed Minutes is a summary of the conversations and debates that shape our nation’s monetary policy. It receives less attention than the Fed’s more well-known, post-meeting press release, but the Fed Minutes is every bit as important.

To rate shoppers in Schererville Indiana, for example, the Fed Minutes can provide clues about whether mortgage rates will generally rise or fall in the coming months.

Click here to see today’s mortgage rates.

The most recent Fed Minutes reveals a central bank divided on the future of the U.S. economy. The minutes show some Fed members in favor of new, immediate market stimulus. It shows others in favor of terminating the stimulus that’s already in place.

The Fed’s debate centered on the topic of inflation, and the pressures that a prolonged, near-zero Fed Funds Rate can place on the economy. Ultimately, the Fed did nothing, neither adding new stimulus nor removing that which is already in place.

It did, however, communicate a plan to keep the benchmark Fed Funds Rate rate “exceptionally low” through late-2014, at least.

Click here to see today’s mortgage rates.

The Fed Minutes included the following notes, too :

• On employment - Unemployment rates will “decline only gradually” in 2012
• On housing - The market is “held down” by the “large overhang” of distressed homes
• On inflation - Consumer prices have remained “flat”

Furthermore, the Fed expressed optimism regarding European financial markets, noting that market sentiment “appeared to brighten a bit”. Nonetheless, “spillovers” remain possible and the threat continues to weigh on markets. 

Mortgage rates are slightly worse since the Fed Minutes were released.

Click here to see today’s mortgage rates.

The Federal Reserve’s next scheduled meeting is March 13, 2012 - its 2nd of 8 scheduled meetings this year.

The Week Ahead for Mortgage Rates: February 21, 2012

Mortgage markets worsened last week as the Eurozone moved closer to a bailout agreement with Greece, and the U.S. economy displayed more signs of growth.

In response, mortgage rates climbed last week.

Rate shoppers should not be surprised that rates ticked north. Since mid-2011, weakness in Greece has helped keep mortgage rates low and the same is true for a weak U.S. economy. Wall Street has sought “safe assets” as protection from the risk and that’s driven mortgage rates down.

Now, the safe haven buying that served to anchor low rates appears poised to reverse.

Click here to see today’s mortgage rates.

Last month, it was shown, consumer spending rose to record levels and the housing market surpassed analyst expectation again. Homebuilder confidence is now at a 4-year high and Single-Family Housing Starts topped one-half million units for the second straight month.

Conforming mortgage rates in Northwest Indiana rose for the first time in a month last week. Unfortunately, few shoppers knew because Freddie Mac’s weekly mortgage rate survey failed to capture the change. The survey deadline was Tuesday. Rates started rising Wednesday morning.

Freddie Mac’s weekly mortgage rate survey put the average 30-year fixed rate mortgage unchanged at 3.87% for borrowers willing to pay 0.8 discount points plus a full set of closing costs.

Mortgage rates are higher today.

Click here to see today’s mortgage rates.

Beyond Greece and the U.S. economy, inflation is another reason mortgage rates are up. Inflation is the enemy of mortgage rates and, an on annual basis, the core Consumer Price Index registered 2.3% — it’s highest reading since 2008. The Fed expects inflation to ease later this year but if gas prices stay high, the Fed’s forecast may be wrong.

This week is holiday-shortened. Look for Greece to dominate headlines (again) and watch for housing data toward the end of the week. Existing Home Sales is released Wednesday. New Home Sales is released Friday.

For now, mortgage rates remain low. It’s a safe time to lock a long-term rate.

Click here to see today’s mortgage rates.

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!

The Week Ahead for Mortgage Rates: February 13, 2012

Mortgage markets were mostly unchanged last week as Greece — once again — was front-of-mind for Wall Street investors. The nation-state is attempting to avoid a debt default, and has been attempting to avoid default since May 2010.

Early in the week, Greece reached a deal with European Union leaders to secure additional financial aid. By Friday, however, the deal was in doubt, as the EU leaders declared that the Greek Parliament would have to pass new austerity measures before the aid would be released.

Click here to see today’s mortgage rates.

Austerity measures have been unpopular in Greece, giving rise to riots among citizens and resignations among politicians. Markets responded to the potential undoing of the debt deal by seeking safety in bonds — including U.S. mortgage-backed bonds.

The Greek debt default story has helped fuel low mortgage rates in Indiana and Illinois. Once a final deal is reached, mortgage rates are likely to rise.

For now, though, mortgage rates remain at all-time lows.

Click here to see today’s mortgage rates.

According to Freddie Mac’s weekly mortgage rate survey, the average, conforming 30-year fixed mortgage rate held firm at 3.87% last week for mortgage borrowers willing to pay an accompanying 0.8 discount points plus applicable closing costs. 1 discount point is equal to one percent of your loan size.

For borrowers unwilling to pay discount points and/or closing costs, average mortgage rates are higher.

Click here to see today’s mortgage rates.

This week, data returns to the U.S. economic calendar.

Greece will still be in play, but the health of the U.S. economy will determine in which direction mortgage rates will go. There are two inflation reports due — the Consumer Price Index and the Producer Price Index.

The former is a “cost of living” indicator for U.S. households; the latter measures the same for business. Inflation is bad for mortgage rates so if either report comes in unexpectedly high, mortgage rates are likely to rise.

Click here to see today’s mortgage rates.

The same is true for Tuesday’s Retail Sales report.

Retail Sales account for close to 70% of total U.S. economic activity. An unexpectedly strong Retail Sales figure will suggest that the domestic economy is improving and that, too, would pressure mortgage rates up.

If you’re shopping for a mortgage, or floating one with your lender, consider locking in this week. Mortgage rates don’t have much room to fall and there’s much room to rise.

Click here to see today’s mortgage rates.

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!

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!

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