Economic Update: Improving Economy Bad for Mortgage Rates
An improving US economic outlook was negative for mortgage rates over the last week. Reduced concerns about Europealso caused a partial reversal in the “flight to safety” trade. As a result, mortgage rates ended the week higher.
Early in the month, the December Employment report showed a larger than expected increase of 200K jobs, and the Unemployment Rate continued to move lower. Last week, Weekly Jobless Claims fell to the lowest level since April 2008. The labor market is one of the most important factors in the health of the economy, and many investors now view the outlook as brighter than it has been since the financial crisis began. If this is the case, it will be great news for the economy, and job gains will increase the willingness and the ability of people to purchase homes.
The Housing sector data released last week was encouraging as well. January Existing Home Sales increased 5%, while the inventory of unsold homes declined 9%, to the lowest level since March 2005. December Housing Starts for single-family units increased 4%, and Building Permits for single-family units rose 2%. Finally, the January NAHB Home Builder confidence index rose for a fourth consecutive month to the highest level since 2007. Improving economic conditions, high affordability levels, and low mortgage rates are three solid reasons to be optimistic about the housing market.
The most highly anticipated economic news this week will be Wednesday’s Fed announcement. Investors will be looking for hints about whether the Fed will provide additional monetary stimulus. The most significant economic report will be Friday’s GDP data for the fourth quarter. GDP is the broadest measure of economic activity. Before that, Pending Home Sales will be released on Wednesday and Durable Orders and New Home Sales on Thursday. Leading Indicators and Consumer Sentiment round out the schedule. In addition, there will be Treasury auctions on Tuesday, Wednesday, and Thursday.
January 24, 2012 by James Williamson · Leave a Comment
FHA Contemplating Reduced Seller Paid Concessions
On Friday, FHA released a letter proposing that the maximum allowable seller concessions be reduced from the current 6% limit to something less. FHA is contemplating this change to “better manage risk” as they feel the current level exposes the FHA and borrowers to excess risk by creating an incentive that inflates the appraised value. FHA first mentioned this as a possibility all the way back on July 15, 2010. After bringing up the possibility of such a reduction a full year and a half ago, nothing has been heard from FHA again on the subject, until now. Reducing how much of the buyer’s costs that the seller can pay at closing would be a major blow to the real estate industry. Reducing this limit from 6% to say 3% would require most FHA buyers to bring more money to the table, to the tune of several thousand more $’s. This is money they simply don’t have in many cases. The official proposal will be finalized soon and then there will be a 30 day comment period in which we’ll be able to make lots of noise. Hopefully, our industry lobbyists will show up in a big way and keep this limit from decreasing! I will send you more info on how you can make your feelings known about this once the proposal is officially issued.
In the same announcement, FHA also mentioned they may soon require indemnification for “serious and material” violations of FHA originated loans. This means that any inaccuracy in a loan file could be interpretted as fraud or misrepresentation and cause the lender to have to repurchase the loan. A few of these repurchases could put a small lender out of business. Stated another way, FHA is proposing to make it harder for lenders to make FHA loans. Just what we don’t need right now!
January 24, 2012 by James Williamson · Leave a Comment
Economic Update
The news from Europe has been mostly negative over the last week. Economic growth in Germany has been slower than expected. Negotiations on restructuring Greek debt also have not progressed as planned. S&P is downgrading the debt of several European countries, including France. Lastly, the European Central Bank (ECB) has given no indication that it will provide relief to the troubled countries. As a result of all of this turmoil, investors shifted funds to relatively safer investments, including US mortgage-backed securities (MBS), which has helped mortgage rates move lower. However, we already know that Congress is imposing new fees on Fannie Mae and Freddie Mac later this spring that are going to cause mortgage rates to bump up as much as .25% over the weeks ahead. Anyone in the market to lock a mortgage rate should do it as soon as possible.
The most significant economic data due out this week are the monthly inflation reports. The Producer Price Index (PPI) focuses on the increase in prices of “intermediate” goods used by companies to produce finished products and will come out on Wednesday. The Consumer Price Index (CPI), the most closely watched monthly inflation report, will come out on Thursday. CPI looks at the price change for those finished goods which are sold to consumers. In addition, Industrial Production, an important indicator of economic growth, will come out on Wednesday. Housing Starts will be released on Thursday, and Existing Home Sales will come out on Friday. Philly Fed and Empire State round out a very busy week.
January 17, 2012 by James Williamson · Leave a Comment
FHA Extends Anti-Flipping Waiver Through End of 2012
To cut down on fraud, FHA has had an anti-flipping regulation in place for years preventing a seller from selling a home owned less than 90 days. In an effort to accelerate the resale of foreclosed properties, FHA waived this rule in Feb of 2010 and then extended the waiver through the end of 2011. FHA recently announced that they are extending the waiver through the end of 2012. This announcement has been well publicized but its important to understand that this is simply an extension of FHA’s policy for most of the last two years. So, although this is good news, it is not necessarily new news. It is also important to understand that most every FHA investor has “overlays” on top of the stated FHA guidelines that make the FHA guidelines more restrictive. The most liberal overlays allow for the anti-flipping waiver BUT with the strict limitation that the resale price not be more than 20% greater than the acquisition price, even if there were renovations. An exception would need to be granted for a resale value of more than 20%. The bottom line is always be careful when your FHA buyers are buying homes that the seller has recently acquired. Check to see when the seller acquired the property and make the Loan Officer aware of the acquisition date if it was within the last six months.
January 17, 2012 by James Williamson · Leave a Comment
Mortgage Insurance Tax Break Gone
On Dec 31st, Congress let 58 tax code benefits expire, including credits for home energy improvements, credits for builders of energy-efficient new houses, and home buyer tax deductions for mortgage insurance. The mortgage insurance deduction has been a key mortgage financing benefit in place since 2007 which benefitted home buyers with income of $110k per year or less. Combined with the new fees they are imposing on Conventional loans this Spring, Congress continues to increase the costs of homeownership rather than reduce them! It should be noted that Congress still has the power to reauthorize all or some of the write-offs retroactively this year, but the current political atmosphere raises doubts about that happening. Its time to let our elected representatives know how we feel!
January 17, 2012 by James Williamson · Leave a Comment
Economic Overview
Increased concerns about European debt issues and the pace of global economic growth has caused investors to shift to relatively safer assets over the last week. As a result, mortgage rates have nestled down to right at the low point of the year.
Investors hoping for the European Central Bank (ECB) to expand its role in providing aid to euro zone countries have again been disappointed. The ECB has indicated that it currently has no plans to introduce any major new aid programs. It appears that ECB officials believe that the appropriate next step in easing the debt issues is for tighter budgetary discipline. In addition, European Union officials suggested that working out the details of an agreement on fiscal integration between the many EU countries may take months. Investors responded to the lack of significant progress by selling many European stocks and bonds and purchasing relatively safer assets such as US government guaranteed Treasuries and mortgage-backed securities (MBS).
Last week’s Fed statement also disappointed any investors looking for a shift in policy. It contained no major changes from the last statement. According to the Fed, the economy has been “expanding moderately”, which is a small upgrade from the prior statement. The Fed gave no indication of providing additional stimulus or changing its communications policies.
A lot of economic data is due out tomorrow with Durable Orders, Core PCE inflation, Personal Income, and New Home Sales all scheduled to be released. The mortgage markets will close early tomorrow on Friday ahead of the Christmas holiday. Also, note that trading volume is generally very light during the final two weeks of the year, which means that mortgage rates may be more volatile than usual.
December 22, 2011 by James Williamson · Leave a Comment
Real Estate Listing Tips
In today’s challenging market, where inventory is high and good buyers are in demand, it is more critical than ever that your listings stand out. To do so, they must be creative and exciting yet at the same time efficient, making the most of little space. Even if you’ve been selling homes for decades, this is one area that you constantly need to be evaluating and looking for ways to improve. Compliments of SoldMagazine.com, here are four tips to consider:
Tip #1: Use bullet points to highlight key data. A typical listing might contain several initial paragraphs requiring a reader to spend a few minutes reading to learn more about the house. In a world of short attention spans, home buyers often don’t have the patience to read the entire listing and, as a result, they often miss key selling points. Highlighting key facts with bullet points is a much more effective way to market your listing. Think like David Letterman by being brief and concise and listing the five or six best aspects of the house in bullet point style.
Tip #2: Highlight the best rooms with photos. If you write about a gourmet kitchen or fantastic spa shower in the master bathroom, make sure you include pictures of those rooms! You would be surprised at how many listings don’t include photos of the rooms that will sell the home. Be intentional about the photos you choose. If they are out of focus or dark, retake them. Read your listing and then review the photos to be sure they complement the story you are telling. Pretend you are a buyer. What would motivate you to tour the home?
Tip #3: Back up a flashy headline with truth. We’ve all seen headlines like: “A backyard paradise” or “Convenient to everything.” Bold and flashy catch attention, but when the prospective buyer arrives and sees a muddy yard with overgrown bushes or a home that’s right next to a gas station, the flashy headline can backfire. Lofty expectations are not met and the potential home buyer usually won’t stay when you’ve promised something that stretches the truth.
Tip #4: Proof and fact check before you publish. Be sure to proofread your listings or have someone else with fresh eyes proof them for you. Not only are you looking for misspellings and grammar problems, but it’s also time to fact check against your photos. Does the picture show a 2-1/2-car garage and you list it as 3? Does the listing boast of wood floors in every room, but there’s linoleum in the laundry room? Catch inconsistencies before they make it into your ad!
December 22, 2011 by James Williamson · Leave a Comment
Economic Update
The economic data released last week was positive for the economy, with stronger than expected economic growth and lower than expected inflation. Retail Sales, Industrial Production, and Housing Starts all exceeded their consensus forecasts. Weekly Jobless Claims fell to the lowest level since April and the NAHB Home Builder Confidence Index rose to the highest level since May 2010. Meanwhile, Core CPI inflation was a modest 2.1% higher than one year ago. For mortgage rates, the tame inflation data was positive, while the relatively strong growth data was negative.
Investors continue to closely monitor the debt troubles in Europe. While Italy’s bond yields remained below the highs reached last week, bond yields in France and Spain climbed to new highs. Investors are concerned that nearly every euro zone country except Germany is at risk of seeing a sharp rise in yields, which will make it even more difficult to meet their debt obligations. Weaker euro zone countries are increasingly looking to Germany for additional aid, but the Germans are reluctant to bear the cost. The level of aid provided by Germany, most likely through the European Central Bank (ECB), will heavily influence the ability of the other countries to resolve their debt problems.
Ahead of Thanksgiving, Existing Home Sales will be released on Monday, revisions to third quarter Gross Domestic Product (GDP) Tuesday, and Durable Orders, Personal Income, Core PCE inflation, and Consumer Sentiment Wednesday. The FOMC Minutes from the November 3 Fed meeting will also be released on Wednesday. There will be Treasury auctions on Monday, Tuesday, and Wednesday. MBS markets will be closed on Thursday for Thanksgiving, but they will be open on Friday.
November 22, 2011 by James Williamson · Leave a Comment
FHA Loan Limits
Congress reinstated higher loan limits for FHA loans last week, however, this news is not the good news it seems to be for the Atlanta market. Several months ago, FHA loan limits were reduced by about $25,000 in metro-Atlanta. Congress has not returned these loan limits to the previous level, rather they approved legislation that allows for higher loan limits in certain “high-cost” areas of the country. In cities like San Francisco and New York, the loan limits are allowed to go as high as $729,750 for another two years. This is great news for these high-cost areas but is of no benefit to the metro-Atlanta area where the single-family FHA loan limit remains $320,850.
November 22, 2011 by James Williamson · Leave a Comment
Economic Overview: European Saga Continues / Unemployment Drops
The saga inEurope seems to change by the day. Two week ago, there was great optimism from the announced European bailout plan. That optimism faded last week as the Greek Prime Minister surprised investors by announcing that the proposed bailout package would be put to a public referendum within a matter of only a few days. Although Greek voters passed his plan, the saga eventually cost the Prime Minister his job as he resigned over the weekend. Fortunately, an agreement was quickly reached to form a coalition government, which is expected to accept the terms of the bailout.
In the meantime, the focus has shifted toItaly, a country with a much larger economy and much more at stake. While the budget vote passed, Italian Prime Minister Berlusconi failed to gain the support of a majority in Parliament. As a result, he too agreed to resign. Italywill either hold special elections or be ruled by a national unity government (a temporary coalition). A national unity government might be better able to implement politically unpopular austerity measures. After this news yesterday, investors reversed “flight to safety” trading and stocks rallied putting a little upward pressure on mortgage rates.
Shifting to the home front, not that long ago investors were concerned that the USeconomy was close to a “double dip” recession. Recent economic data and comments from Fed officials, however, have eased those fears. Last week’s Fed statement expressed a little more optimism about the economy than in the previous statement. Friday’s stronger than expected Employment data also suggested that the economy is gradually improving. Against a consensus forecast of 90K jobs, the economy added 80K jobs in October. In addition, the figures from prior months were revised higher by 102K jobs. The Unemployment Rate unexpectedly declined to 9.0% from 9.1% in September.
The Economic Calendar is very light this week. Import Prices and the Trade Balance will be released on Thursday and Consumer Sentiment is scheduled for Friday. There will also be Treasury auctions on Tuesday, Wednesday, and Thursday of this week. The Bond Market will be closed on Friday in observance of Veterans Day.
November 10, 2011 by James Williamson · Leave a Comment
