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New Homes Sales Gain in June, But Gains Are Relative

New Home Supply June 2009 - June 2010

After a down month in May, the sales of newly-built homes appears back on track.

As published by the Census Bureau, June’s New Home Sales report showed:

  1. A 24 percent sales volume increase from the month prior
  2. A 2-month drop in the supply of newly-built home

There are now just 210,000 new homes for sale nationwide.

June’s data is a major improvement over May, but it’s possible that the true “new home market” may be softer than the statistics suggest.  This is for several reasons.

First, we’re comparing June’s sales data to the worst month in New Home Sales history.

In May, sales of new homes totaled just 267,000 units nationwide. That’s one-quarter fewer sales than in the previous worst month in New Home Sales history. May’s sales levels were awful by any measure but June’s improvement to 330,000 units remains second-worst sales levels ever posted.

Second, although much improved, June’s new home supply of 7.6 months is elevated versus the historical norm near 6.0 months.  The last year has averaged 7.7 months.

For buyers of new homes in Mauldin , this combination of low sales volume and higher-than-normal inventory may be a positive.  It’s the main reason why homebuilder confidence is reeling and the downturn has opened some doors for big discounts and deals. Free upgrades and closing cost credits can make a well-priced home even more attractive.

Plus, with mortgage rates at all-time lows and expected to rise, home affordability is may never be better.

Posted in Housing and Real Estate, Reports. Tagged with , , , .

By scott
July 27, 2010

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Mortgage Rates This Week – July 26, 2010

Mortgage rates worsened last week for the first time in 6 weeks last week. Investors were pleased with corporate earnings reports and the European bank stress tests results.  Stocks gained on the news, and bonds lost.

Mortgage rates rose last week, but only slightly. Rate are still hovering near their lowest levels of all-time.

Of the bigger stories last week was Existing Home Sales. As reported by the National Association of Realtors®, sales volume was down in June and home supplies were up. But figures were a bit better than expected, giving some hope for housing.

Notably, the number of move-up buyers outnumbers first-timers and the national median home price rose, suggesting that mid-to-upper home prices are getting some support.

This week, the market gets additional two pieces of housing data to add to the mix:

  1. New Homes Sales (Monday)
  2. Case-Shiller Index (Tuesday)

Both will have an impact on mortgage rates. In general, better-than-expected data should cause rates to rise in South Carolina ; worse-than-expected data should cause rates to fall.

Also this week, there’s two consumer confidence reports, the Fed’s Beige Book, and late-in-the-week inflationary data.  Mortgage markets should remain volatile with so much news headed down the pipe.

It’s too soon to declare the current 3-month rally over, but it’s been 3 weeks since rates dipped. This can be a signal that mortgage rates have finally bottomed and that it’s time to lock your rate.

If you’re floating a mortgage rate, or thinking about a refinance, it’s time to get locked in. Rates may drop this week, but then again, maybe they won’t.  There’s little sense gambling on a bet as big as a mortgage.

Posted in Mortgage Rates, Rate Update. Tagged with , , , , .

By scott
July 26, 2010

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Housing Starts Drop 0.7% In June

Single-family Housing Starts eased lower last month, falling by 0.7 percent from May, or 3,000 units nationwide.

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

June’s Housing Starts data is somewhat soft and may partially explain why home builder confidence dropped to its lowest level since April 2009, but for buyers and sellers in Mauldin , the Housing Starts report is not nearly as bad as headlines say.

This is because when the press reports on Housing Starts, it doesn’t single out single-family homes. The press lumps every type of home into a single, giant reading. As a result, news outlets are reporting Housing Starts down 5 percent — a somewhat misleading figure.

The 5 percent figure is actually a combination of 3 separate housing types:

  1. Single-Family Housing Starts
  2. Multi-Unit Housing Starts (2-4 Units)
  3. Apartment Building Housing Starts (5 or more units)

But, single-family homes are what most Americans purchase. This is why the single-family starts data is more relevant than the combined figure commonly reported by the press. 2-4 units and apartment buildings are a different realm of buyer.

That said, though, we can’t even be sure that June’s Single-Family Housing Starts report is accurate. As noted in the Department of Commerce’s press release, the data’s margin of error is 10.7 percent which means the reported results are of “no confidence”.

In other words, there is no statistical evidence to prove the actual change was different from zero.

If Housing Starts did, in fact, drop in June, it will help to reduce the Stonehaven housing inventory, which will provide support for local home values. For home sellers, this could be good news. Fewer homes for sale means less competition for buyers.

Posted in Housing and Real Estate, Reports. Tagged with , .

By scott
July 21, 2010

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Sagging Homebuilder Confidence Opens The Door For Good Deals

NAHB Housing Market Index July 2008-2010Builder confidence in the housing market slipped this month, according to the National Association of Homebuilders’ monthly Housing Market Index.

The Housing Market Index is actually a weighted composite of 3 separate surveys. One measures current single-family sales; one measures projected single-family sales; and one measures traffic of prospective buyers.

All three surveys were down in July:

  • Single-Family Sales : From 17 (June) to 15 (July)
  • Single-Family Project : From 22 (June) to 21 (July)
  • Buyer Foot Traffic : From 13 (June) to 10 (July)

The HMI’s July reading of 14 puts confidence at its lowest point since April 2009.

For home buyers in Simpsonville , a drop in builder confidence could create an opportunity for negotiation.

Remember, it wasn’t too long ago that most builders were flush with home inventory, unable to find willing buyers. To help move product at that time, builders dropped prices and offered incentives including free upgrades. If confidence continues to sag going forward, home purchase deals of that nature may return — especially as the foreclosure market gets larger.

See, in the past, builders’ main competition for buyers were the existing home sellers.  Today, builders compete with the existing home sellers and the banks with REO. 

It’s a terrific time to be a home buyer, in other words — sellers are fighting for you. It’s no wonder sellers have little leverage anymore. Couple that with all-time low mortgage rates and affordability for homes is at an all-time high.

If you’re planning to buy a home later this year, you may want to consider moving up your time frame. The market looks ripe for good deals this summer.

Posted in Housing and Real Estate, Reports. Tagged with , , , .

By scott
July 20, 2010

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Mortgage Rates This Week – July 19, 2010

Mortgage rates  improved for the 5th straight week last week as consumer confidence waned and inflation data tamed. Investors ignored the news that 19 of 23 reporting S&P 500 companies beat their respective earnings estimates and sold off on stocks.

There’s concern about a potential economic slowdown for the months ahead and it may be well-founded.

Despite an improving jobs situation and booming retail sales, households are less optimistic about the future and so is the Federal Reserve. In its post-meeting minutes released last week, the Fed revised its U.S. growth estimates downward for 2010 and 2011.

For rate shoppers in South Carolina , this is excellent news.

Because of the weakness, conforming mortgage rates fell again last week, extending the current rally in rates to 16 weeks. Mortgage rates are lower than at any time in measured history.

This week, data will be housing market-heavy and mortgage rates could rise or fall.

  • Monday : National Association of Home Builders Index
  • Tuesday : Building Permits and Housing Starts
  • Thursday : Existing Home Sales

Strength in any, or all three, of these housing-related reports should push mortgage rates higher on higher hopes for the economy. Weakness, on the other hand, should have the opposite effect. 

Overall, though, mortgage markets are trending better.  Momentum is in effect and refinance activity is soaring. That said, it doesn’t mean that rates won’t rise — they could absolutely. It just takes a change in market sentiment. And that could happen quickly.

Mortgage rates are artificially right now so even the slightest jolt could cause them to spike. It would be similar to what happened in June 2009 when rates rose 1.125% in just 10 days’ time. Therefore, if you’re shopping for a mortgage and like the rate you’ve been quoted, consider locking in as soon as possible.

There’s very little room for rates to fall further but a lot of room for rates to rise. Make sure you’re on the right side of that bet.

Posted in Mortgage Rates, Rate Update. Tagged with , , , , .

By scott
July 19, 2010

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The Fed’s June Minutes Keep Mortgage Rates In Rally-Mode

FOMC June 2010 MinutesAccording to Freddie Mac, mortgage rates made new all-time lows this week and the good news is that rates look poised to fall even more.

Since the Federal Reserve’s release of its June 2010 meeting minutes Wednesday, mortgage rates are dipping even more and one of the main reasons why is because of some choice Fed words.

If you’ve never seen a Fed Minutes release, it reads academic. The document is page after page of stats, facts and figures about the U.S. economy, accompanied by an in-depth recap of the intra-Fed member debates that shape the nation’s monetary policy.

At 7,333 words, the June Fed Minutes is the unabridged version of the more well-known, post-meeting press release.  The corresponding press release was just 360 words.

As it turns out, Wall Street didn’t like what it read in the minutes.  Specifically:

  1. The Fed expects below normal growth through 2012
  2. The Fed’s outlook for employment has dipped
  3. Credit conditions are easing only slowly

Furthermore, the Fed said its action may be needed if the economy were “to worsen appreciably”.

Overall, the economic optimism the Fed displayed earlier this year appears to be waning. The economy is moving forward — just not as quickly as expected.  That should bode well for mortgage rates and home shopping in Simpsonville.

Mortgage rates were down Wednesday afternoon and Thursday and remain historically low. All it would take to reverse rates, however, is a run of positive news on jobs, growth, and consumer spending.  Therefore, if you know you need to lock a mortgage rate in the near-term, it may be a good time to make the call. 

Lock your mortgage rate and move on.

Posted in Fed Funds Rate, Housing and Real Estate, Mortgage Rates, Rate Update, Reports. Tagged with , , , , .

By scott
July 16, 2010

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Foreclosure Activity Slows Again In June 2010

Foreclosures per capita, June 2010

313,841 foreclosure filings were made in June, according to foreclosure-tracking firm RealtyTrac. The figure represents a 3 percent drop from May and 7 percent drop from June of last year. However, foreclosure filings remain relatively high nationwide.

June marks the 16th straight month the filings topped 300,000. 1 in every 411 U.S. homes received some form of notice last month with foreclosure density varying wildly from state-to-state.

Like everything else in real estate, it seems, foreclosures are a local phenomenon.

The states with the highest foreclosures per capita were:

  • Nevada : 1 foreclosure filing per 88 homes
  • Florida : 1 foreclosure filing per 171 homes
  • Arizona : 1 foreclosure filing per 189 homes

The states with the lowest foreclosures per capita were:

  • Vermont : 1 foreclosure filing per 26,051 homes
  • West Virgina : 1 foreclosure filing per 8,058 homes
  • South Dakota : 1 foreclosure filing per 6,528 homes

Overall, 40 states beat the national Foreclosure Per Capita average and 10 states fell below. The sheer volume of REO, though, is creating interesting buying opportunities for first-timer buyers, move-up buyers, and real estate investors in Mauldin.

Homes bought from banks are usually less expensive than non-foreclosure homes. This is one of the major reasons why distressed sales account for roughly 30 percent of all home resales. Less expensive, though, doesn’t always mean “cheaper”. Foreclosed homes are often sold as-is and may be defective or otherwise uninhabitable.

Making repairs to get these homes into “living condition” can be costly.

Therefore, if you’re buying a foreclosed home, make sure you know what you’re buying before you make your bid. Have a certified professional inspect the home to check for damage, and consider enlisting the help of a real estate agent to assist with negotiations and management of the contract.

The process of buying a foreclosed home is different from buying a typical resale. Make sure you do your homework.

Posted in Housing and Real Estate, Reports. Tagged with , .

By scott
July 15, 2010

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Mandatory Loan Fees Keep Borrowers From Getting Their Absolute Lowest Rate

Loan-level pricing adjustments add to mortgage costsConforming mortgage rates may be posting all-time lows this week, but that doesn’t mean you’ll be eligible for them. You may have already called your loan officer and found this out the hard way.

It’s because of a federally-mandated mortgage-pricing scheme known as “loan-level pricing adjustments”.

In effect since April 2009, loan-level pricing adjustments are changes to a loan’s base rate and/or fee structure based on that loan’s inherent risk to Wall Street. It’s similar to auto insurance pricing adjustment in that a sports car, all things equal, will cost more to insure than a comparably-priced minivan.

More risk, more cost.

In mortgage lending, loan risk can be loosely grouped into 5 categories. Mortgage applications in Mauldin featuring any of the five traits are subject to price adjustments:

  1. Credit Score (i.e. the borrower’s FICO is below 740)
  2. Property Type (i.e. the subject property is a multi-unit home)
  3. Occupancy (i.e. the subject property is an investment home)
  4. Structure (i.e. there is a subordinate/junior lien on title)
  5. Equity (i.e. mortgage insurance is required by the lender)

Furthermore, loan-level pricing adjustments are cumulative.

A 3-unit investment home will face larger adjustments than an owner-occupied 3-unit home, for example. It’s these adjustments that explain why you may not be eligible for the rates you see advertised online and in the newspapers — your particular loan may be subject to this risk-based pricing that raises your mortgage rate and closing costs.

The government’s loan-level pricing adjustment schedule is public information. See what your lender and how your loan quote is made at the Fannie Mae website. Or, if you find the charts confusing, just call or email your loan officer for help with interpretation.

Posted in General Mortgage Info, Guidelines, Misc. Tagged with , , , .

By scott
July 14, 2010

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Should You Refinance Your ARM, Or Let It Adjust Lower?

ARM adjustment schedule 2008-2010

If your adjustable rate mortgage is due to adjust this year, don’t go rushing to replace it just yet. Your soon-to-adjust mortgage rate may actually go lower. It’s related to the math behind the ARM.

Conventional, adjustable-rate mortgages share a common life cycle:

  1. There’s a “starter period” in which the interest rate remains fixed
  2. There’s an initial adjustment period after the starter period called the “first adjustment”
  3. There’s a subsequent annual adjustment until the loan’s term expires — usually at Year 30.

The starter period will vary from 1 to 10 years, but at the point of first adjustment, conventional ARMs become the same. A homeowner’s new, adjusted mortgage rate is determined by the sum of some constant, and a variable. The constant is most often 2.25% and the variable is most often the 12-month LIBOR.

As a formula, the math looks like this:

(Adjusted Mortgage Rates) = (12-Month LIBOR) + (2.250 Percent)

LIBOR is an acronym standing for London Interbank Offered Rate. It’s the rate at which banks borrow money from each other and, lately, LIBOR has been low. As a result, adjusting mortgage rates have been low, too.

Last year, 5-year ARMs were adjusting to 6 percent or higher. Today, they’re adjusting to 3.375%.

Based on the math, it may be wise to just let your ARM adjust this year. Or, depending on how long you plan to stay in your home, consider a refinance to a new ARM.  Starter rates on today’s adjustable rate mortgages are exceptionally low in Greenville , as are the rates for fixed rate loans.

Either way, talk to your loan officer about making a plan. With mortgage rates as low as they’ve ever been in history, homeowners have some interesting options. Just don’t wait too long. LIBOR — and mortgage rates in general — are known to change quickly.

Posted in General Mortgage Info, Housing and Real Estate, Misc, Tips. Tagged with , , , .

By scott
July 13, 2010

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Mortgage Rates This Week – July 11, 2010

Mortgage rates  improved again last week — if only barely — throughout a holiday-shortened week devoid of “major” data and market conviction.

Up-and-down trading characterized the week which ended with South Carolina mortgage rates slightly lower versus the week prior.

Mortgage rates have fallen in 4 consecutive weeks and are on an extended rally that dates back to mid-April.

This week, however, data returns and rates could reverse. Especially with inflation numbers are in play.

Inflation is the enemy of mortgage rates.

Inflation is bad for mortgage rates because mortgage rates based on the price of mortgage-backed bonds.  When inflation pressures mount, the demand for mortgage-backed bonds wanes and that pushes bond prices down which, in turn, pushed bond yields (i.e. rates) up.

There’s three pieces of inflation-related news this week.

The first inflation-related story is the Federal Reserve’s Wednesday release of the minutes from its last meeting. Now, when the Fed adjourned June 23, it said “underlying inflation has trended lower“. However, there was more to the conversation that what the FOMC released in its post-meeting statement. 

Markets will be looking for clues.

Then, Thursday, the Producer Price Index is released. The Producer Price Index is a measure of business operating costs. When PPI is increasing, it means that “doing business” is more expensive — an inflationary situation. It’s inflationary because higher business costs are often absorbed by consumers in the form of higher prices for goods and services.

A rising PPI is usually bad for mortgage rates.

And lastly, Friday, the Consumer Price Index is released. The CPI measures the average American’s “cost of living”. Like PPI, when the Consumer Price Index is rising, mortgage rates tend to follow.

Other releases of import this week include Retail Sales and two consumer confidence surveys.

Last week, mortgage rates again made new all-time lows. If you haven’t checked with your loan officer about the possibility of a refinance, make that call this week.  Mortgage rates can stay low for a long time, but they can’t stay low forever. Lock your rate while you can.

Posted in Mortgage Rates, Rate Update. Tagged with , , , .

By scott
July 12, 2010

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