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Archive for December, 2011

Bank Repossessions Drop To A 44-Month Low

Posted by jleonetti on December 15th, 2011 No Comments

Foreclosure concentration November 2011Foreclosure activity continues to concentrate over just a few states.

According to foreclosure-tracker RealtyTrac, November’s foreclosure filings fell 3 percent as compared to October, and 14 percent from November 2010.

“Foreclosure filing” is a catch-all term for the various “action steps” throughout the foreclosure process. The grouping comprises default notices, scheduled home auctions, and bank repossessions.

As in most months, though, foreclosure activity remains concentrated by state. More than half of last month’s bank repossessions can be traced to just 6 states.

  1. California : 14.8% of all bank repossessions
  2. Florida : 12.7% of all bank repossessions
  3. Texas : 7.0% of all bank repossessions
  4. Georgia : 6.9% of all bank repossessions
  5. Arizona : 6.7% of all bank repossessions
  6. Michigan : 6.3% of all bank repossessions

Meanwhile, with just 5 repossessions, South Dakota topped the list of states with the fewest bank repossessions in November. The Mount Rushmore State accounted for just 0.009% of REO nationwide in a month in which bank repossessions dropped to a 44-month low point across the United States.

The drop in REO is coming at a tough time for today’s home buyers. Distressed properties are in high demand — mostly because they sell at steep discounts.

According to the National Association of REALTORS®, distressed homes accounted for 28 percent of all home sales in October. As fewer bank-owned homes become available, though, there will be fewer “deals” to be had.

Especially as the broader housing market continues to signal its recovery.

If you plan to buy a bank-owned foreclosed property, do your research first. As supplies drop, the price for foreclosed homes throughout new jersey relative to non-distressed homes may rise, rendering REO properties less of a relative “value”.

Before you write a contract, therefore, talk with a licensed real estate agent. There’s plenty of foreclosure data available online but, when it’s time to buy, you should have an experienced agent on your side.

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A Simple Explanation Of The Federal Reserve Statement (December 13, 2011 Edition)

Posted by jleonetti on December 13th, 2011 No Comments

Putting the FOMC statement in plain EnglishTuesday, the Federal Open Market Committee voted to leave the Fed Funds Rate unchanged within its current target range of 0.000-0.250 percent.

The vote was nearly unanimous for the second straight month. Just one FOMC member dissented in the vote, favoring additional policy stimulus beyond what the Federal Reserve currently provides.

In its press release, the Federal Reserve sais that the the U.S. economy is improving, noting that since its November 2011 meeting, the economy has been “expanding moderately”. The Fed also added that domestic growth is occurring despite some “apparent slowing in global growth” — a nod to ongoing uncertainty within the Eurozone.

The Federal Reserve expects a moderate pace of growth over the next few quarters, and believes that the jobs market will continue to improve, but slowly.

Other potential soft spots within the economy include :  

  1. A slowdown in business investment
  2. A “depressed” housing market
  3. Strains in global financial markets

The Federal Reserve added no new policies at its December meeting, and made no changes to existing ones. It re-iterated its plan to leave the Fed Funds Rate within its current range of 0.000-0.250 percent “at least until mid-2013″ and re-affirmed “Operation Twist” — the stimulus program through which the Fed sells Treasury securities with a maturity of 3 years or less, and uses the proceeds to buy mortgage bonds with maturity between 6 and 30 years.

Mortgage bonds are mostly unchanged since the Fed’s announcement, giving mortgage rates little reason to rise or fall.

Mortgage rates remain near all-time lows and, for homeowners willing to pay points + closing costs, 30-year fixed rate mortgages can be locked at less than 4 percent. If you’re thinking of buying or refinancing a home, it’s a good time to lock a mortgage rate.

The FOMC’s next meeting will be its first scheduled meeting of the new year. The meeting is slated for January 24-25, 2012.

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America’s Best Places To Raise A Family, Listed By State

Posted by jleonetti on December 13th, 2011 No Comments

Great Places To Raise A FamilyBusinessWeek recently released its 2011 America’s Best Place to Raise a Family rankings. College-town Blacksburg, Virginia took top honors, breaking a 2-year win streak for the Chicago, Illinois region.

In 2009, suburban Mount Prospect, Illinois placed first. Last year, it was Tinley Park, Illinois.

The BusinessWeek report employs data from real estate information firm Onboard Informatics to make its rankings, compiling data across categories such as education, crime, and jobs plus access to parks and affordable homes. All selections are limited by population; all selections are home to 50,000 residents or fewer. Median incomes are within 20 percent — plus or minus — of the state’s median income levels.

BusinessWeek names one winner in each state. The winners in the 10 most populous states and their nearest “big city” are listed below

  1. California : East San Gabriel (Los Angeles)
  2. Texas : Wells Branch (Austin)
  3. New York : Hampton Manor (Albany)
  4. Florida : Niceville (Fort Walton Beach)
  5. Illinois : Morton Grove (Chicago)
  6. Pennsylvania : Cecil-Bishop (Pittsburgh)
  7. Ohio : St. Henry (Dayton)
  8. Michigan : Spring Arbor (Jackson)
  9. Georgia : Hoschton (Atlanta)
  10. North Carolina : Tryon (Spartanburg, SC)

The winners in all 50 states can be found on the BusinessWeek website.

Rankings like the BusinessWeek America’s Best Place to Raise a Family can be useful for home buyers , but like everything in real estate, statistics do not apply to every home equally. Even within the “best towns”, there are areas in which school systems are better, crime figures are lower, and amenities are more plentiful.

Therefore, before you make the decision to buy a home, talk with a real estate agent who has local market knowledge. It’s the most effective means to get data that matters to you.

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What’s Ahead For Mortgage Rates This Week : December 12, 2011

Posted by jleonetti on December 12th, 2011 No Comments

Federal Reserve meets this weekMortgage markets were mostly unchanged for the 6th consecutive week last week as Wall Street’s uncertainty regarding the future of U.S. and global economies remain.

Mortgage bonds made gains made through the early part of the week, which caused mortgage rates in delaware to drop Monday through Wednesday afternoon. Those gains were erased, however, as 23 of 27 Euro leaders reached agreement on fiscal coordination and budget planning, sparking optimism for the future of the Eurozone, in general.

Mortgage rates rose Thursday and Friday.

This week, the momentum may continue. The main story we’ll be watching is the Federal Open Market Committee’s Tuesday meeting — its 8th scheduled meeting of the year and its last until 2012. 

When the Fed meets, mortgage rates are often volatile.

At its meeting, the FOMC is expected to vote the Fed Funds Rate unchanged within its current range near zero percent. However, it won’t be the Fed’s vote on the Fed Funds Rate that changes markets. Wall Street is keyed in to two other elements, instead.

The first element is the verbiage of the FOMC’s press release to markets. Issued upon adjournment, the FOMC’s press release identifies strengths and weaknesses in the U.S. economy, and offers an outlook for the future plus potential threats. The “tone” of the press release can change how mortgage bonds trade.

If the Fed describes an economy in recovery with few threat to growth, mortgage rates are likely to rise post-FOMC. By contrast, if the Fed says the economy has slowed, mortgage rates should fall.

The second element on which Wall Street is focused is the likelihood of new, Fed-led economic stimulus. Should the Federal Reserve modify existing support programs, or introduce new ones, mortgage rates are sure to shift. Unfortunately, we can’t know in which direction — it will depend on the size of the program and its expected impact on the U.S. economy.

The Fed adjourns Tuesday at 2:15 PM ET.

Beyond the Fed, there is other rate-moving news, too, including Tuesday’s Retail Sales report, Thursday’s Producer Price Index, and Friday’s Consumer Price Index. Each has the capacity to change mortgage rates so if you’re floating a mortgage rate, it may be a good time to lock one in. 

Freddie Mac reports the average 30-year fixed rate mortgage at 3.99% with 0.7 discount points, plus closing costs.

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Reduce Long-Term Loan Costs With A 15-Year Fixed Rate Mortgage

Posted by jleonetti on December 9th, 2011 No Comments

Comparing 30-year fixed rate mortgage to 15-year fixed rate mortgages

For as low as 30-year fixed rate mortgage rates are in new jersey today, 15-year fixed rate mortgage rates are even lower.

According to Freddie Mac’s weekly mortgage rate survey, the average 15-year fixed rate mortgage rate is now 3.27% nationwide with an accompanying 0.8 discount points. 1 discount point is a closing cost equal to 1 percent of your loan size.

The current 15-year fixed rate reading is just one tick above the all-time, 15-year fixed rate mortgage low of 3.26% set in October 2011.

If you’ve ever thought of “going 15″, it’s a terrific time to talk to your lender.

The primary benefit of using a 15-year fixed rate mortgage as opposed to a 30-year fixed rate one is that a 15-year fixed rate mortgage dramatically cuts the long-term interest costs of your loan. The downside is that monthly payments are relatively large.

At today’s mortgage rates, per $100,000 borrowed :

  • 15-year fixed rate mortgage : $704 principal + interest monthly
  • 30-year fixed rate mortgage : $477 principal + interest monthly

So, for homeowners opting for a 15-year fixed rate mortgage, the monthly principal + interest payments will be 48% higher as compared to a 30-year fixed rate mortgage of the same loan size. Long-term, however, because the 15-year fixed rate mortgage interest rate is lower and because it pays off in half the time of a 30-year loan, a homeowner will save $45,000 in interest costs per $100,000 borrowed.

$45,000 per $100,000 borrowed is a huge amount of savings. It’s monies that can be used for college tuition, home improvement projects, retirement savings, or anything else. 

That said, the 15-year fixed rate mortgage is not ideal for everyone.

Because it requires higher monthly payments, a 15-year fixed rate mortgage may add stress to your household budget. Furthermore, once you commit to a 15-year loan term with your lender, you can’t revert back to a 30-year loan term without a refinance and refinances can be costly.

Therefore, be sure of yourself when selecting a 15-year fixed rate loan. The rewards are great, but the risks can be, too.

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Simple Real Estate Definitions : Tax And Insurance Escrow

Posted by jleonetti on December 8th, 2011 No Comments

Escrow taxes and insuranceAs a homeowner , your fiscal responsibility extends beyond just making mortgage payments. You must also pay your home’s real estate taxes as they come due, as well as your homeowners insurance policy premiums.

Failure to pay real estate taxes can result in foreclosure. Failure to insure your home is a breach of your mortgage loan terms.

There are two methods by which you can pay your real estate tax and homeowners insurance bills.

The first method is to pay your taxes and insurance as the bills come due, usually semi-annually. Depending on your home’s tax bill size and the cost to insure your home, these payments can feel quite large — especially if you’ve failed to budget for them properly.

The second method of paying your taxes and insurance is to give your lender the right to pay them on your behalf, a process known as “escrowing for taxes and insurance”.

When you escrow your real estate taxes and homeowners insurance, you pay a portion of your annual obligation to your lender each month, which your lender then holds in a special account for you, and disperses to your taxing entities and insurance company as needed. Lenders prefer that homeowners escrow taxes and insurance because, in doing so, the lender is assured that tax bills remain current and that homes stay insured.

Want a discount on your next mortgage rate? Tell your lender that you’re willing to escrow.

To help calculate your monthly escrow payment to your lender, do the following :

  1. Find your home’s annual real estate tax bill
  2. Find your home’s annual homeowners insurance premium
  3. Add the two figures and divide by 12 months in a year

The quotient is your monthly “escrow”; the extra payment you’ll make to your lender each month along with your regularly scheduled principal + interest payment. Then, when your tax bills and insurance premiums come due, your lender will make sure the payments are made on your behalf.

If you’re unsure whether escrowing is right for you, talk to your loan officer and/or financial planner. There are valid reasons to choose either path.

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Have Mortgage Rates Bottomed Out?

Posted by jleonetti on December 7th, 2011 No Comments

Mortgage Rates Bottomed Out?

Mortgage rates have troughed. Or, so it seems.

According to Freddie Mac’s weekly Primary Mortgage Market Survey, the average 30-year fixed rate mortgage is 4.00 percent nationwide — roughly the same rate as it’s been for 5 weeks. 

During that times, rates have ranged between 3.97 and 4.02 percent with an accompanying 0.7 discount points, plus “typical” closing costs. Closing costs vary by state and 1 discount point is equal to 1 percent of your loan size.

In other words, to get the weekly, published Freddie Mac rate, borrowers in new jersey should expect to pay a complete set of fees to their respective lenders. The larger the loan, the higher the costs. “Low-fee” and “no-fee” loans are available, too — typically in exchange for a slightly rate.

A breakdown of the Freddie Mac survey shows that interest rates and discount points vary by region. Typically, states in the West Region offer the lowest rates but with the highest costs. East Region states work in reverse; rates are often highest but the accompanying points are fewest.

The most recent mortgage rate breakdown by region shows :

  • Northeast Region : 4.00% with 0.7 discount points 
  • West Region : 3.96% with 0.8 discount points
  • Southeast Region : 4.06% with 0.9 discount points
  • North Central Region : 3.97% with 0.7 discount points
  • Southwest Region : 4.04% with 0.7 discount points

What’s most notable, though, is that in all 4 regions, rates are well below their 2011 highs. Since mid-April, mortgage rates have been in descent, dropping for 5 consecutive months before reaching to their current, “rock-bottom” levels in early-November.

Since then, however, rates have idled and the forces that combined to make rates low are subsiding. The U.S. economy is showing signs of a rebirth; the Eurozone is edging closer to solvency; and the housing market is recovering.

So, if you’ve been wondering whether now is a good time to refinance, or whether higher rates will harm home affordability, the answer is yes. Get in touch with your loan officer to review your home loan options because, looking ahead to 2012, mortgage rates look poised to rise.

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Fed Minutes Suggest New Economic Stimulus Next Week

Posted by jleonetti on December 6th, 2011 No Comments

FOMC minutesThe Federal Open Market Committee released its November 2011 meeting minutes, revealing a Fed split on whether new stimulus is needed for the U.S. economy.

The Fed Minutes is published 8 times annually, three weeks after each scheduled Federal Open Market Committee meeting. It’s the official record of the meeting’s policy-shaping debates and dialogues.

The Fed Minutes is the lengthier companion piece to the FOMC’s more well-known, post-meeting press release.

As compared to press release which is concise and focused at 492 words, the Fed Minutes is comprehensive and broad, totalling 7,682 words over 11 pages, complete with charts.

The November minutes reveal Fed opinions on a variety of economic issues :

  • On employment : Unemployment will gradually decline through 2014
  • On housing : The market remains depressed. Foreclosures are “holding back” growth.
  • On rates : The Fed Funds Rate should remain low until mid-2013

There was also discussion about the government’s revamped HARP program, and how it should help more homeowners get access to low mortgage rates. The Fed sees this as a positive for housing, and for the economy.

There was little in November’s Fed Minutes to surprise Wall Street, however, the Fed did discuss the possibility of new market stimulus, a topic Wall Street expects the FOMC to address next week at its last scheduled meeting of 2011.

Should the Fed introduce new market stimulus next week, and should it arrive in the form of additional mortgage bond purchases, expect for mortgage rates to fall across new jersey and nationwide. If the Fed declines new stimulus, mortgage rates should rise.

The FOMC meets Tuesday, December 13, 2012.

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What’s Ahead For Mortgage Rates This Week : December 5, 2011

Posted by jleonetti on December 5th, 2011 No Comments

Non-farm payrolls Dec 2009 - Nov 2011Mortgage markets made little change last week for the fifth time in as many weeks.

As Wall Street watched both the Eurozone and the U.S. regain their respective footing, expectations for a new Fed-led stimulus increased, which prevented mortgage rates from rising.

According to Freddie Mac, the average 30-year fixed rate conforming mortgage rose just 2 basis points last week to 4.00% nationwide with an accompanying 0.7 discount points. 

1 discount point is equal to 1 percent of your loan size.

For every $100,000 borrowed at 4.00 percent, therefore, today’s pennsylavania mortgage applicant should expect to pay $700 in “points”. Mortgage rates for “zero-point loans” are higher than Freddie Mac’s published, average value.

This week, with few economic releases set for release, last week’s big stories should carry over into the current one — the biggest of which was a worldwide, coordinated central bank effort to increase system liquidity.

The European Central Bank, Bank of England and U.S. Federal Reserve were joined by the central banks of Japan, Canada and Switzerland in the effort. Stock markets rallied on the news.

Another of last week’s big stories was the sharp drop in the U.S. Unemployment Rate.

After hovering near nine percent since April, the Unemployment Rate broke out of range, dropping to to 8.6% in November. This is the lowest national Unemployment Rate since March 2009, a milestone achieved via the combination of new jobs created (+192,000 in November with revisions) plus a smaller U.S. workforce.

The U.S. economy has added 1.9 million jobs in the last 14 months.

Lastly, last week’s New Home Sales and Pending Home Sales Index releases support the growing belief that the U.S. housing market is in recovery. Both reports showed strong growth for October, corroborating what home builders have been saying — the housing market is improving and buyer ranks are growing.

Home supplies are lower in many U.S. markets.

This week, rate shoppers should be on alert. Market momentum changes quickly, and rates are currently anchored by the expectation of new Federal Reserve stimulus. The Fed meets December 13, 2011. As that date approaches, expectations could change, causing rates to rise.

Mortgage rates remain near all-time lows. It’s a good time to lock a rate with your lender.

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More Housing Strength : Pending Home Sales Surged In October

Posted by jleonetti on December 2nd, 2011 No Comments

Pending Home Sales 18 Months Ending October 2011

If you’re waiting for home prices to reach its bottom, you may have missed your window.

After 3 consecutive months of easing, the Pending Home Sales Index jumped 10 percent in October, lending credence to the belief that housing is in recovery.

The Pending Home Sales Index is a monthly publication from the National Association of REALTORS®. It measures the number of homes under contract to sell nationwide. October’s reading is the highest for all of 2011, and the second-highest dating back to April 2010.

April 2010 was the last month of the last year’s federal home buyer tax credit.

For buyers and sellers nationwide, the Pending Home Sales Index is a housing metric worth watching. Different from the Existing Home Sales and New Home Sales reports which report on “the past”, the Pending Home Sales Index is a forward-looking housing market indicator.

According to the National Association of REALTORS®, 80% of homes under contract close within 2 months.

The majority of the rest close within Months 3 and 4.

The spike in October’s Pending Home Sales Index, therefore, foretells a strong Existing Home Sales report for November and December. Not that we should be surprised! Home builders have been telling us for weeks that the market is strengthening, and that home supplies are at multi-year lows.

The only wild-card is the market’s out-sized contract failure rate. One in three pending home sales failed to close in October — nearly double the rate of the month prior and 4 times the rate of October 2010. Should this high failure rate continue, the Pending Home Sales Index’s role as a forward-looking indicator would be muted.

Overall, though, new buyer demand for housing accompanied a smaller home supply will result in higher home prices through 2012. And, with mortgage rates expected to rise, monthly carrying costs will be higher, too.

Looking at the data, the best time to buy a home may be right now.

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