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My Blog
Fed: Low Rates Likely Through 2010
Interest rates are likely to remain low into 2011, Federal Reserve policymakers hinted this week in at least two presentations. These indications came one week after the Fed shut down its program to buy mortgage-backed securities, which had kept rates at or near record lows in recent months.
In a speech Thursday, Fed Governor Daniel Tarullo said, "The relatively modest pace of recovery, the continued high rate of unemployment, subdued inflation trends, and well-anchored inflation expectations together suggest that the need for highly accommodative monetary policies will not diminish soon.
Likewise, Donald Kohn, Fed vice chairman in a speech in San Francisco, said the Fed would raise rates, in due course, but he also noted that low rates "help offset the lingering restraining effects on economic activity and prices."
So far, rates have risen modestly, but analysts speculate they will likely become much more volatile down the road.
Its an uncertain type of market, says Keith Gumbinger of HSH.com.
Michael Fratantoni, vice president of research and economics for the Mortgage Bankers Association, predicts that the Fed will have created a situation where there are days or weeks of low-rate opportunities, and other days and weeks when rates rise significantly.
Sources: The Wall Street Journal, Nick Timiraos (04/08/2010), and The Wall Street Journal, Jon Hilsenrath (04/09/2010)
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Here is the latest information that we have received from USDA in regards to the continuation of funding for the Rural Development Loan Program:
Single Family Housing Guaranteed Loan Program
April 27, 2010
Notice of Funding
This message is to notify you of the unobligated balances of fiscal year 2010 program funding for the Single Family Housing Guaranteed Loan Program.
Purchase: $1,046,482,690.77
Refinance: $84,377,998.61
Total: $1,130,860,689.38
We anticipate funding will likely be exhausted by May 7, 2010. The Administration is aware of our funding shortfall. Currently two Bills have been introduced in an effort to secure additional funding, H.R. 5003 and H.R. 5017. The status of this proposed legislation is available to the public online at: http://thomas.loc.gov/home/bills_res.html.
Depending upon Congressional activity with the proposed legislation it is possible that the Agency may consider issuing Conditional Commitments.
Source: Michigan United Mortgage - Brighton, MI
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Bills to extend the maximum $8,000 tax credit for first-time home buyers, which expires Nov. 30, are pending in both the U.S. House and the Senate.
Sen. Christopher J. Dodd, a Connecticut Democrat and chairman of the Senate Banking, Housing, and Urban Affairs Committee, is co-sponsor of a bill with Georgia Republican Sen. Johnny Isakson that would raise the credit amount to a maximum of $15,000.
Senate Majority Leader Harry M. Reid of Nevada favors an extension of the current credit. He was quoted by the Las Vegas Sun saying, "It's something we can get done."
Odds are that the credit will be extended and broadened to cover all buyers next year, but the chances of the amount increasing arent as good, observers say.
Source: Washington Post Writers Group, Kenneth R. Harney (08/22/2009)
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Strong Gain in Existing-Home Sales
For the first time in five years, existing-home sales have increased for four months in a row, according to the National Association of REALTORS®.
Existing-home sales including single-family, townhomes, condominiums and co-ops rose 7.2 percent to a seasonally adjusted annual rate of 5.24 million units in July from a level of 4.89 million in June. Sales are 5.0 percent above the 4.99 million-unit pace in July 2008. The last time sales rose for four consecutive months was in June 2004, and the last time sales were higher than a year earlier was November 2005.
Largest Gain in a Decade
Lawrence Yun, NAR chief economist, said he is encouraged. The housing market has decisively turned for the better. A combination of first-time buyers taking advantage of the housing stimulus tax credit and greatly improved affordability conditions are contributing to higher sales, he said.
The monthly sales gain was the largest on record for the total existing-home sales series dating back to 1999.
Because price-to-income ratios have fallen below historical trends, there are more all-cash offers. In some recovering markets like San Diego, Las Vegas, Phoenix, and Orlando, the demand for foreclosed and lower-priced homes has spiked, and a lack of inventory is becoming a common complaint, Yun said.
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to 5.22 percent in July from 5.42 percent in June. The rate was 6.43 percent in July 2008.
"First-Time Buyer Tax Credit is Working"
An NAR practitioner survey showed first-time buyers purchased 30 percent of homes in July, and that distressed homes accounted for 31 percent of transactions. NAR President Charles McMillan said the first-time buyer tax credit is working. In addition to first-time buyers, were also seeing increased activity by repeat buyers. While many entry-level buyers are focused on the discounted prices of distressed homes, theyre also freeing some existing owners to sell and make a move, he said.
Realtors are the best resource for consumers in these changing market conditions because the transaction process has become more complex. Since its now taking longer to complete a home sale, first-time buyers who want to take advantage of the $8,000 tax credit should try to make contract offers by the end of September, McMillan said. Otherwise, they may miss the November 30 closing deadline.
Inventory Up, Prices Down
Total housing inventory at the end of July rose 7.3 percent to 4.09 million existing homes available for sale, which represents a 9.4-month supply at the current sales pace, which was unchanged from June because of the strong sales gain. Raw inventory totals are 10.6 percent lower than a year ago when the number of unsold homes was at a record.
The national median existing-home price for all housing types was $178,400 in July, which is 15.1 percent lower than July 2008. Distressed properties continue to weigh down the median price because they typically sell for 15 to 20 percent less than traditional homes.
Single-Family Homes and Condos
Single-family home sales increased 6.5 percent to a seasonally adjusted annual rate of 4.61 million in July from a pace of 4.33 million in June, and are 5.0 percent higher than the 4.39 million-unit level in July 2008. The median existing single-family home price was $178,300 in July, which is 14.6 percent below a year ago.
Existing condominium and co-op sales jumped 12.5 percent to a seasonally adjusted annual rate of 630,000 units in July from 560,000 in June, and are 5.9 percent above the 595,000-unit level a year ago. The median existing condo price was $178,800 in July, down 18.9 percent from July 2008.
By Region:
- The Northeast surged 13.4 percent to an annual pace of 930,000 in July, and are 3.3 percent higher than July 2008. The median price in the Northeast was $236,700, down 15.0 percent from a year ago.
- Existing-home sales in the Midwest jumped 10.9 percent in July to a level of 1.22 million and are 8.0 percent above a year ago. The median price in the Midwest was $157,200, which is 5.9 percent less than July 2008.
- In the South, existing-home sales rose 7.1 percent to an annual pace of 1.95 million in July and are 5.4 percent higher than July 2008. The median price in the South was $164,500, down 7.1 percent from a year ago.
- Existing-home sales in the West slipped 1.7 percent to an annual rate of 1.13 million in July, but are 1.8 percent above a year ago. The median price in the West was $202,300, which is 28.0 percent below July 2008.
Source: NAR
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Foreclosure Bargains Are Disappearing Buyers of foreclosure have to be quick these days. Some houses go under contract fewer than 90 minutes after they are put on the market, says Brad Geisen, founder of Foreclosure.com.
"For every listing that comes out, we have 10 buyers," says Cesar Dias, an associate with Approved Real Estate Group.....
Dias had 15 minutes of fame after introducing foreclosure sales tours last year. Now the tours are defunct because there are not enough homes to show.
"We had a lot of inventory last summer. Now we're down to 1,500 listings from more than 5,000," Dias says.
Even in the hard-hit Detroit & Metro areas, bargains are disappearing.
"For a good house that's not too beat up, in a good neighborhood, there's no lack of buyers in this market," says Andy Sakmar, founder of Century 21..... "There are a lot fewer of these properties than a year ago, and the super buys get multiple offers."
Source: CNNMoney.com, Les Christie (08/06/2009)
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Under the federal Neighborhood Stabilization Program, many new state and local initiatives are expected to roll out in the next few weeks that will help middle- and low-income families buy foreclosed homes in hard-hit neighborhoods.
In all, about $5 billion is available, including $50 million in technical assistance to get the programs up and running. Regulations limit participation to households earning no more than 120 percent of the median income with 25 percent of the money going to families earning less than half the median.
The funds must be used for primary residences in communities with the highest incidences of foreclosures and subprime loans. There also will be a lease-to-own program.
The Neighborhood Stabilization Program was authorized last summer, but it has been rolling out slowly because the volume of paperwork involved has stymied communities.
Source: CNNMoney.com, Les Christie (06/24/2009)
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Home Buyer Tax Credit Could Expand
A first-time home buyer tax credit of up to $8,000 has helped to move housing inventory during an otherwise sluggish real estate cycle. Now both legislators and the business community are hoping to build on the incentive's success by expanding it.
A number of bills have been introduced in the House and the Senate that lobby for an expansion of the measure. Among the proposed changes:
- Setting a new cap of $15,000.
- Extending the tax break into mid-2010.
- Making the benefit available to all home buyers, not just first-timers.
- Offering a separate tax credit to $3,000 for borrowers who refinance.
USA Today, Stephanie Armour (06/22/09)
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Should You Skip Your Mortgage Payment? By Marcie Geffner, bankrate.com | Published: 4/24/2009 If you've been tempted to skip a few mortgage payments to try to convince your lender to modify your loan, you may want to resist that temptation. Whether your goal is to stave off foreclosure or just make your payments more affordable, experts say deliberate delinquency is not as smart an idea as it may seem. The bottom line is that:
- If you can make your payment, you should do so.
- If you can't, you shouldn't.
- If you're in between, you should get help to assess your situation. "Back in the day, (lenders) would only provide modifications to people who were significantly behind because that evidenced that they truly needed the loan modified. They were of that mindset, and they didn't realize the enormity of the problem," says Gail Cunningham, a spokesperson for the National Foundation for Credit Counseling in Silver Spring, Md. "But now, they've realized that the logic of making someone become delinquent and dig a deep financial hole before you help them was really not good for anyone." That new thinking can be seen on some, though by no means all, of the lenders' Web sites, which have been updated to suggest, however subtly, that a late payment may no longer be a prerequisite to a loan modification. Christine Holevas, a spokeswoman for JPMorgan Chase in Chicago, declined to comment on whether homeowners should make a late payment to better their odds of a loan modification. But she reiterated the standard advice that you shouldn't wait until you've missed a payment to contact your loan servicer. Instead, you should pick up the phone as soon as you believe you may be in danger of delinquency. The federal government's new Making Home Affordable plan may be another reason why lenders have tweaked their policies with respect to delinquency and loan modifications. The new plan, which includes a loan modification program and a refinance program, offers lenders new incentives to participate. The loan modification program is open to borrowers who have missed one or more payments, but a missed payment is not a requirement. In fact, the FAQs for this program state that "responsible borrowers who are struggling to remain current on their mortgage payments are eligible if they are at risk of imminent default." Risk of default might involve a mortgage payment that has reset and is no longer affordable, a significant loss of income or other types of hardships. The refinance program is open only to homeowners who haven't made a payment more than 30 days late within the last 12 months. The FAQs for this program state that "borrowers who are currently delinquent or have been 30 days overdue more than once during the past 12 months will not qualify." That means if you deliberately missed a mortgage payment, you likely disqualified yourself from this program. If you're still tempted to skip a payment, you should be aware that, that choice will harm your credit score, according to Craig Watts, a spokesman for FICO in San Rafael, Calif. Credit scores weigh the recency, severity and frequency of your delinquent accounts, Watts says. That means the more recent a missed payment is, the greater the negative effect on your score will be. Payments made more than 90 days late--or never--will cause the most damage, and a pattern of delinquent accounts will hurt more than an isolated incident. A lower credit score might seem a small price compared with the prospect of a cheaper mortgage payment. However, that lower score will cause consequences that shouldn't be taken lightly. If your score drops, you'll have more difficulty refinancing your mortgage, getting a car loan, obtaining new credit cards, or opening new accounts at department or retail stores. You also could be required to make cash deposits to obtain utilities, cable television or cellular phone services, Watts says. The favorable terms you've enjoyed on your existing credit accounts could be altered to your detriment as well, Cunningham says. What's more, if you willfully skip a mortgage payment, you'll still owe that amount, plus additional interest and penalties that can add up fast. If you miss several payments, you might not be able to recover financially even if your lender modified your loan. And if you eventually lose your home due to foreclosure, you might not be able to rent another place to live once your credit score has been damaged. Distributed by Scripps Howard News Service. |
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