Monday, June 11, 2012

Florida Ranks High in building codes.

IBHS study says Fla., Va. have best building codes

TAMPA, Fla. – June 11, 2012 – Florida and Virginia ranked highest in a new comparison study that examined residential building codes and enforcement systems in the most hurricane-prone states.

The two states scored 95 out of 100 possible points in the survey conducted by the Tampa-based Insurance Institute for Business & Home Safety (IBHS). Florida and Virginia got top marks because of strong statewide residential building codes, plus an effective regulation and enforcement process, according to the report.

The study, “Rating the States: An Assessment of Residential Building Code and Enforcement Systems for Life Safety and Property Protection in Hurricane-Prone Regions,” details how states can improve their building code systems in order to better protect their citizens, as well as how citizens can understand the need for stronger building codes.

Of the 18 states along the Atlantic Coast and Gulf of Mexico analyzed in the study, Mississippi was at the bottom of the list. Mississippi doesn’t have a statewide building code.

“Building codes are minimum building performance standards that are designed to reduce deaths, injuries and property damage caused by severe weather,” said Julie Rochman, IBHS president and CEO. “Homes that are built using stronger building codes should be less vulnerable to the effects of severe weather events, which should make property damage less likely and less intense.”

In the case of high-wind events, such as hurricanes, studies show that modern building codes can make a difference in reducing the amount of storm-related damage. When Hurricane Andrew struck South Florida in 1992 as a Category 5 storm it left behind a trail of devastation totaling more than $24.5 billion (in 2011 dollars) in insured damage, according to the Insurance Information Institute.

A study done by IBHS, the University of Florida and the FEMA Mitigation Assessment Team following Hurricane Charley, which struck Florida in 2004, found that modern building codes reduced the severity of losses by 42 percent and loss frequency by 60 percent.

However, Rochman said just having a modern building code is not enough.

“Good building codes have little value if they are not well-enforced,” she said. “Independent studies of damage following Hurricane Andrew and the 1994 Northridge Earthquake in California revealed that lax code enforcement needlessly increased total damage. Plan reviewers and building inspectors are vital to the success of building codes.”

© 2012 Florida Realtors®

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Friday, May 25, 2012

Florida’s housing market continues positive signs in April 2012
ORLANDO, Fla. – May 22, 2012 – Florida’s housing market had increased pending sales and higher median prices in April, along with a greatly reduced inventory of homes and condos for sale, according to Florida Realtors® latest housing data.

“Here in Florida, we’re seeing some strong numbers that show positive momentum for the state’s housing recovery and our economy,” said 2012 Florida Realtors President Summer Greene, regional manager of Better Homes and Gardens Real Estate Florida 1st in Fort Lauderdale. “Home prices continue to rise in many markets. Inventory is down to extremely low levels while pending sales are on the rise – almost 38 percent for single-family homes and 25 percent for townhomes and condos. It is not unusual to see multiple offers.

“Now the challenge will be for appraisals to catch up. Overall, we are very happy to see the market move in this direction and expect this trend to continue.”

Pending sales refer to contracts that are signed but not yet completed or closed; closed sales typically occur 30 to 90 days after sales contracts are written.

The statewide median sales price for single-family existing homes in April was $144,350, up 10.2 percent from the year-ago figure, according to data from Florida Realtors Industry Data and Analysis department, and vendor partner 10K Research and Marketing. The statewide median for townhome-condo properties was $108,000, up 16.1 percent over April 2011.

The national median sales price for existing single-family homes in March 2012 was $163,600, up 1.9 percent from the previous year, according to the National Association of Realtors® (NAR). In California, the statewide median sales price for single-family existing homes in March was $291,080; in Massachusetts, it was $267,500; in Maryland, it was $225,601; and in New York, it was $215,000.

The median is the midpoint; half the homes sold for more, half for less. Housing industry analysts note that sales of foreclosures and other distressed properties continue to downwardly distort the median price because they generally sell at a discount relative to traditional homes.

Statewide sales of existing single-family homes totaled 17,544 in April, down slightly, 0.7 percent, compared to the year-ago figure. Looking at Florida’s year-to-year comparison for sales of townhomes/condos, a total of 9,765 units sold statewide last month, down 4.9 percent from those sold in April 2011. NAR reported the national median existing condo price in March 2012 was $165,200.

In April, there was a 5.8-month supply of single-family homes in inventory and a 5.7-month supply for townhomes/condos, according to Florida Realtors.

“The housing numbers for the state of Florida continue to signal recovery,” said Florida Realtors Chief Economist Dr. John Tuccillo. “Sales in 2012 are above where they were in 2011, a harbinger of a third straight year of improvement. More importantly, pending sales are up dramatically, and inventory is still falling. Financing constraints still mean that a significant percentage of these will not lead to closed sales, but with the numbers up, we are confident that closed sales will continue to rise.

“The increase in both median and average prices suggests that investors are having a strong impact on the market, soaking up lower priced inventory and causing buyers to move up the price ladder.”

The interest rate for a 30-year fixed-rate mortgage averaged 3.91 percent in April 2012, down from the 4.84 percent average during the same month a year earlier, according to Freddie Mac.

To see the full statewide housing activity report, go to Florida Realtors website at, and click on the Research page; then look under Latest Housing Data, Statewide Residential Activity and get the April report. Or go to Florida Realtors Media Center at and download the April 2012 data report PDF under Market Data at:

© 2012 Florida Realtors®

Tuesday, April 17, 2012

Keeping you Updated on the Mortgage Market

For the week of April 16, 2012

The shift from winter tranquility to spring volatility is readily apparent in the mortgage markets. Fed Chairman Bernanke has noted that there are still considerable challenges which face the economy and that the Fed’s low rate stance is what is driving them back downward. Freshly-released minutes of the last Fed meeting from three weeks ago reflected the strong economy leading up to that point. This pushed rates back up, with the deepening woes in Europe and the weak March employment report causing rates to go back down again.

The statement accompanied by the close of the Monetary Policy Setting Committee and subsequent testimony of Fed Chairman Bernanke both suggest that the economic climate may require additional support for the coming time period. The meeting minutes themselves indicate otherwise, in them is a stronger assessment of the state of the economy – one in which the Fed may be less inclined to start or expand any programs designed to keep interest and mortgage rates low into the future.

In other words, the economy is growing but with less strength than previously thought. Interest rates had been easing somewhat, as an accumulation of the most recent economic data pointed towards expansion, with slightly less upward momentum at the end of the first quarter than at the beginning of it. The mixed signals are continuing.

Adding to the challenge of determining whether or not the current market conditions are moving upward or downward is the recent unemployment figures with 357,000 new applications for unemployment benefits filed during the last week of March. However, fewer people getting laid off is different than more people getting hired and new jobs being created. While job retention is an indicator of economic improvement, it is still a wobbly economy which needs steadying.

Broadening the recovery means hiring the under-employed as well as the unemployed. Over the past three months, a spate of hiring pushed new job creation well over the 200,000 level. Upon closer examination, the 120,000 new hires in March are exactly one-half of the February gain. This weaker-than-expected report counterbalances the FOMC’s ‘stronger’ minutes, and underlies the cause of retreating interest rates. While the nation’s unemployment rate slipped to 8.2% for the month, the contraction in the labor force itself accounts for at least a portion of the declining rates.

Economic Indicator - Release Date and Time -Consensus Estimate - Analysis

Bureau of Labor/PPI
April 16, 2012, 8:30 a.m. EST
Unchanged at 0.4 percent, but up from 0.1 January 2012
Moderately Important. Increase is holding steady which can help
Business Outlook Survey
April 19, 2012, 12pm EST
Up 2.3 from 10.2 in February 2012 to 12.5 in March
Important.With moderate price pressures, positive future movement is suggested.
Durable Goods Report
April 20, 2012, 8:30 a.m. EST
2.2 percent increase, following the 3.6 percent January decrease
Moderately Important. Increase is offset by prior decrease
S & P/Case Shiller Home Price Index
April 24, 2012, 9:00 a.m. EST
+0.2% positive annual growth in Denver
Moderately Important.Regional growth is tempered by national market condition decreases

Regional Growth Leading Recovery

Looking at the S&P/Case Shiller home price index, there are not enough signs to completely guarantee that prices have stopped their descent which began in 2006. The main overlying positive sign in median housing prices is that prices are not descending as rapidly compared to the last few years. The index itself is still down by more than 30 percent.

That covers the national outlook. The regional outlook, particularly for Denver, is a little bit rosier. Many residential developers, realtors, investors, and mortgage lenders are busy in some areas of the country; Denver being one of them.

There are still issues with the national foreclosure settlement between the major mortgage lenders, the state attorney generals, and the federal government. It remains uncertain how the market itself will behave once the five banks involved begin to write-down principal mortgage amounts of underwater properties. Analysts point out that it could stem the pace of foreclosures or enlarge the REO portfolios of these lending entities.

The only certainty for 2012, is that the housing recovery will be seen on a regional level, rather than national. Fortunately, for the Denver housing market, that is good news as it is one of the regions which is showing positive momentum and the beginnings of growth.
Article courtesy of Patti Wilson, Senior Loan Officer, Mutual of Omaha Bank.

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Tuesday, April 10, 2012

Keeping you updated on the market! For the week of April 9, 2012


Just as anticipated, mortgage rates have settled back a bit after its recent upward movement of fifteen basis points over the last two weeks. Widespread upward economic movement fostered the rise, but a more realistic approach to the economy’s forward momentum seems to be creeping back in.

Rates have bumped off a little from their historic bottoms of February, but the modest movement should not create any additional disturbance or turbulence for the housing market. Even in the worst-case scenario, the eighth percentage point increase in a loan’s interest rate is probably not enough to ruin most deals. Especially since that slight increase could be ‘brought down’ through the payment of approximately a half-point fee, perhaps less.

It should be no surprise to anyone who has applied for a loan recently that banks are being much more careful. A new repost indicates just how tight conditions have become – and how even borrowers with favorable credit profiles are being denied. Loans closed by banks and mortgage lenders in February had borrowers with an average credit score of 750; this average is up from 740 six months earlier, and an average loan-to-value ratio of 76%, with the average denied loan having a credit score of 699 and a loan-to-value ratio of 83%.

While there is no hard downshift in economic activity, research shows that essentially, with the new spring housing season approaching, we are in the same boat, just with more favorable mortgage rates. An accumulation of February data and early data available for March suggests that activity is stabilizing with a softer trend beginning. Federal Chairman Bernanke’s reassurance about the direction of interest rates doesn’t hurt either, in terms of tri mm ing any upward pressure for current rates.

Recent weekly data is reinforcing the notion that a cooler economic climate is in formation. Claims for new unemployment benefits moved downward in January to a rate which is the lowest it has been in 4 years. However, the unemployment benefits rate does not incorporate in statistics about workers who are under-employed. Approximately 9.3 million workers are considered underemployed as defined by the Bureau of Labor Statistics. That number is up from just over 8 million in July 2011, but down from a peak of approximately 9.5 million in September 2010. Overall, employment gains for March will be no better nor no worse than February.

Economic Indicator - Release Date and Time - Consensus Estimate - Analysis

Consumer Price Index
Monday April 12, 8:30 a.m. EST
Remains at 0.4 level
Important. Over the last 12 months, there has been a 2.9% increase.
Retail Sales Report
Tuesday April 13, 8:30 a.m. EST
1.1% increase over previous and 6.5% up from February 2011
Important. Only one area down from February 2011 rates.
Industial Production
Friday April 16, 9:15 a.m. EST
Holding steady at 0.4 rise
Moderately Important.Misc. goods and home electronics contribute greatly.
Housing Starts
Saturday April 17, 8:30a.m. EST
1.1% down from previous but 2.9% over February 2011
Moderately Important. Statistical analysis shows starts are for projects on existing homes.

Stability Increasing
It will be another month before anyone can take a look at the Gross Domestic Product for quarter one of 2012. Current information reveals that the last quarter of 2011 held a 3% clip for GDP , but the early indicators are revealing that there is a slight slippage from that pace. The economy’s ability to expand or grow, without kicking off inflation is thought to be around 2.8% GDP . However, as Chairman Bernanke points out, there needs to be considerably stronger growth for at least a little while, if the unemployment rate is to decline significantly.

According to the Chicago Federal Reserve National Activity Index – (an economic gauge which uses some 85 indicators to determine if the economy is growing faster or slower than its ‘potential’) – came in at a diminutive negative -0.09 for February 2012; down from a relatively brisk +33 in January. With the use of these figures, this puts GDP growth just shy of 2.8% for the month.

In February, orders for durable goods moved to 2.2% higher. This positive news was a tad below economic expectations, and was not as much of an anticipated recovery from the 3.6% decline in January. However, it is very co mm on to see swings from negative to positive and back again in durable goods ordered, while the current percentage holds its own.
Article courtesy of Patti Wilson, Senior Loan Officer, Mutual of Omaha Bank.
To see all homes for sale on Sanibel and Captiva Islands see my website

Tuesday, April 3, 2012

Bill could help short sale sellers in 2013

WASHINGTON – April 2, 2012 – Under U.S. law, a homeowner with an underwater mortgage who goes through a short sale has part of his or her debt forgiven by a bank. The amount forgiven is legally considered income, as if the lender gave the owner a monetary gift by saying, “You no longer have to pay this.”

As a gift, that money is income and taxable by the IRS when the homeowner fills out his yearly income taxes. However, a temporary law effective through Dec. 31, 2012, nixes that amount as homeowner income, making the debt forgiveness tax-free. A short sale in 2012, then, allows a homeowner to walk away free of debt.

As it stands now, that rule expires next year, and underwater homeowners who go through a short sale could be taxed on the amount forgiven.

However, a bipartisan bill introduced late last week by U.S. Senators Debbie Stabenow (D-MI) and Dean Heller (R-NV) – the Mortgage Relief Act – would extend that rule past Dec. 31 if approved by both the House and Senate and signed by President Obama. Senators Robert Menendez (D-NJ), Sherrod Brown (D-OH) and Jeff Merkley (D-OR) cosponsored the legislation.

“It is bad enough that so many families are faced with mortgages that now exceed the value of their home,” says Stabenow. “But to add insult to injury, without this bill, the IRS would once again require these families to pay hundreds or thousands of dollars in additional income tax when they sell or refinance their home. That’s just wrong.”

Stabenow championed the original Mortgage Relief Act of 2007 designed to fix the problem that now expires at the end of 2012.

Stabenow and Heller’s new bill will extend this tax protection for underwater homeowners through 2015.

Approximately, 20 to 25 percent of American homeowners are currently underwater on their mortgages.
© 2012 Florida Realtors®
See whats for sale on Sanibel and Captiva Islands here

Keeping you updated on the market.

April 2, 2012
One week's worth of data does not a trend make. We say that because of renewed concern the housing rally is set to peter out because of a burst of sub-par news.

The news on lower existing and new home sales was disappointing, to be sure, but hardly a foreboding omen. The news on pending home sales, which tracks contract signings for existing homes, wasn't all that bad either. The index was down 0.5% in February, but the index has been up for the most part over the past six months. Sometimes a little perspective is needed.

Pessimism was further heightened by the S&P/Case-Shiller home price index, which showed another price decline. Month-over-month, the average price declined 0.5 percent in January. Year-over-year, the average price is down 3.8 percent.

The fear properties in various stages of foreclosure and delinquency will continue to roil the market is on the rise. We are not terribly concern though; the attenuating factor being foreclosed and delinquent properties are a well-vetted, well-understood variable. More important, it's an improving variable. Data from CoreLogic show that faster REO-clearing rates and improving employment and low mortgage lending rates point to a sustained housing-market recovery.

In our opinion, frustratingly low appraisals and and too-stringent lending standards are more pressing issues for many buyers and sellers. Loosening the tethers on both, and particularly the latter, would go a long way toward keeping the recovery on course.

A strong economy would also go a long way toward sustaining the recovery. The good news is the economy continues to grow. The final number on gross domestic product shows that the economy grew 3.0 percent in the fourth quarter of 2011. This latest reported quarter was much stronger than the 1.8 percent growth reported in the third quarter of 2011.

The employment data support the notion the economy is growing. Yes, we are aware that Federal Reserve Chairman Ben Bernanke recently warned that improvements in the labor market may not be sustained, but we think otherwise nonetheless: Job creation has accelerated in recent months. Concurrently, jobless claims have decelerated. In fact, the latest report on weekly jobless claims shows the four-week moving average falling to its lowest level in four years.

Of course, the state of the economy always impacts credit markets. Interest rates dropped this past week when Bernanke stated he thought the economy has yet to reach full-recovery mode. Investors equivocated and money moved from stocks and co mm odities into U.S. Treasury securities. The mortgage market responded in kind, and we saw lending rates drop five to 10 basis points across most offerings.

We can't say for sure how long rates will stay down. We've seen a marked increase in volatility in lending rates in March. We think volatility will remain high going forward, which is why we feel impelled to say that the risk of waiting for lower lending rates outweighs the benefit of substantially lower lending rates materializing.

Economic Indicator, Release Date and Time, Consensus Estimate, Analysis

Construction Spending(February)
Mon, April 2,10:00 am , et
Important. Gains in residential real estate construction is driving spending gains.
Mortgage Applications
Wed., April 4,7:00 am , et
Important. The positive trend in purchase applications is a positive sign for home sales.
Employment Situation(March)
Fri. April 6,8:30 am , et
Unemployment Rate: 8.2%Payrolls: 235,000 (Increase)
Very Important. Another month of strong job growth will pressure interest rates to move higher.
Consumer Credit(February)
Fri., April 6,3:00 pm , et
$15 Billion (Increase)
Important. Rising credit use reflects increased confidence and economic growth.

The Most Persuasive Sign its Time to Lock and Load

Economist Hyman Minsky is the author of a persuasive short monograph titled “The Financial Instability Hypothesis.” Minsky basically states that the longer a market appears stable, the less stable it actually is because of excessive speculation and leveraging of that market.
We've been in a 31-year bull market in U.S. Treasury securities. That is, long-term real yields – yields adjusted for inflation – have been trending down since the early 1980s. A recent analysis by Credit Suisse shows that real rates on long-term Treasury securities are down to 50 basis points, or 0.5%.
Such a low rate doesn't compensate for opportunity cost and time value. In fact, the real interest rate is so low today, even the early 1900s can't boast of such low rates.

We've been in a very long bull market in bonds. Long sustained trends tend to lull participants into complacency. In turn, complacency tends to ratchet up the use of leverage. We don't know how much leverage there is behind this lending market, but we suspect more than there was 30 years ago Carry trade – borrowing short term to buy long-term credit instruments – has been a very lucrative, easy-money trade over the past decade.

The point is, 31 years is a long time, record lows don't last forever, and neither does easy money. If Minsky's hypothesis holds, the odds interest rates could rise in the near future is much higher than many borrowers think.

Article courtesy of Patti Wilson, Senior Loan officer, Mutual of Omaha Bank
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Monday, March 26, 2012

Keeping you updated on the market -for the week of March 26, 2012


Mortgage lending rates have been on the rise, and they've been on the rise in a big way. Over the past week it's possible that someone inquiring on the 30-year fixed-rate loan could have been quoted a price 50-basis points higher than what was available a month ago.
Rates have pulled back slightly, but they remain elevated compared to February's lows. We expect them to remain elevated. Markets appear less risk averse: Investors are no longer huddling behind U.S. Treasury securities every time Greece hiccups. The major stock market barometers – the Dow Jones Industrial Average and the S&P 500 Index – are approaching four-year highs.

In short, investors want more return. They are less satisfied with the 2% return offered on 10-year U.S. Treasury notes, which makes these notes more risky. If more investors demand a higher coupon payment, more investors will sell low-coupon Treasury securities, thus forcing the yield on these securities to rise.

As U.S. Treasury note and bond yields go so goes mortgage-backed securities yields and so goes mortgage lending rates. We are not terribly concerned though. We don't think rising rates will crimp the housing recovery, because higher economic growth and rising employment will more than offset higher interest rates.

Home builders appear to share our sentiment. The National Association of Home Builders sentiment index shows optimism has risen to a five-year high. This suggests to us the bust is officially over and that housing is on sustainable growth trajectory.
That said, housing starts did edge down in February, but from an upwardly revised January posting. Permits were the positive takeaway, increasing 5.1% for the month.
Last week we mentioned that if we saw a reversal of fortune in Las Vegas, then the housing recovery has likely turned the corner and become a nationwide phenomenon. This might just be serendipity, but, lo and behold, the FDIC reports that single-family home permits in Nevada increased 16.1% in the fourth quarter of 2011 compared to the fourth quarter of 2010. Maybe miracles really do happen.

Like new-home sales, existing-home sales are also displaying sustained strength. Sales dipped slightly – by 0.9% to 4.59 million annualized units – in February, but the data follow an extremely strong and upwardly revised January sales posting. Over the past six months, sales have been trending perceptibly higher.

We are further encouraged by the trend in existing home prices, which have been firming and moving higher in 2012. The median price of an existing home moved up 1.3% to $156,600 in February.

Overall, we like the direction the housing market has taken. We also like the idea of mortgage markets moving to more normalized, market-driven pricing. We think this points to a much stronger, sustainable market over the long term.

Economic Indicator, Release Date and Time, Consensus Estimate, Analysis

Pending Home Sales Index(February)
Mon, March 26,10:00 am , et
98 Index
Important. Recent readings point to higher private residential real estate investment.
Consumer Confidence(March)
Tues, March 27,10:00 am , et
72 Index
Important. Economic growth is outweighing higher gasoline price concerns.
Mortgage Applications
Wed., March 28,7:00 am , et
Important. Purchase applications have been resilient despite the spike in interest rates.
Gross Domestic Product(4th Quarter 2011)
Thurs., March 29,8:30 am , et
3.0% (Annualized Growth)
Important. Growth above the psychological 3% level could push interest rates higher.

Time to Return to the Real Lending World

One of our soap box issues over the past year has been the lack of private lending money. Our interest was naturally piqued when we read that Institutional Risk Analytics released a report titled "The Real Role of Banks in Residential Mortgage Finance."
The report basically expounds many of our concerns: The Federal Reserve's low-rate policies are discouraging private money from entering the mortgage-backed securities market, which means many lenders have to adhere to the strict standards of Fannie Mae and Freddie Mac. Having the market dominated by the Federal Reserve and two government-backed entities attenuates private credit formation.

Rising mortgage lending rates would draw more private capital into the market, which means there would not only be more credit but more credit that would meet the demands of a more diverse group of borrowers.

To be sure, the spike in rates we've seen over the past week has taken the wind out of the refinance boom. But as more borrowers realize that higher rates are more likely than lower rates, more borrowers will be motivated to act and more lenders will be motivated to lend.
It's also worth remembering that even if mortgage lending rates rise above 5%, the monthly payment on a median mortgage would make up only 14% of the current median income, because homes are so affordable these days. Rising rates would not disrupt the market, they would simply reset expectations to market reality.

Article courtesy of Patti Wilson, Senior Loan officer Mutual of Omaha Bank.

Check out my website to see current pricing on the islands.

Monday, March 19, 2012

Keeping you updated on the market. For the week of March 19, 21012

So what's up with home prices? That is, are home prices up? Over the past two months we've reported on a slew of data that show prices are down, but the data have been somewhat stale: much of them focused on the last quarter of 2011.

Where prices are going, not where they've been, matters. More contemporary data – the data most likely to portend the future – show prices on the rise.

RE/ MAX reports that home prices increased year-over-year in February for the first time in 18 months. RE/ MAX opines that the turnaround signifies “a very active selling season.”
We agree, because the price increases were much steeper in many local markets than we had anticipated. Miami posted a 20.5% year-over-year gain; Phoenix, a 12.5% gain; and Detroit, a 8.9% gain. Not so long ago, these three burgs were in full free-fall mode. (When Las Vegas shows a double-digit year-over-year percentage price increase, you can be sure the recovery has spread nationwide.)

The outlook is also looking rosier for new home sales. The home builder sentiment index has been rising for the past five months, and the rising optimism appears justified. Barclays Capital reports that initial data for the year are encouraging, noting that “the spring selling season has arrived strongly enough to kick-start a positive feedback loop in housing for the first time since 2005.” Barclays raised its rating on a number of home builder stocks.

Signs of a sustained rebound are also reflected in mortgage purchase applications, which have been rising over the past month. The MBA reports that purchase applications are nearly 12% higher than where they were just a month ago and are approaching the level when the federal home-buyer tax credit fueled the market two years ago.

More purchase activity is understandable: Affordability remains high and mortgage loan rates remain low. The prime 30-year fixed-rate loan still hovers around 4% (and when we say “around” we mean mostly above lately).
Rates have been on the rise, though, and this isn't a surprise. Over the past two weeks, the yield on the 10-year U.S. Treasury note is up 30 basis points. Long-term mortgage lending rates take their queue from the 10-year U.S. Treasury note, which guides the rates on long-term mortgage-backed securities. Where the yield on the 10-year Treasury goes, mortgage lending rates generally follow.

We've been saying since the beginning of the year that we couldn't see rates dropping materially lower. The corollary is the risk of rates moving higher is likely rising. The scuttlebutt we're hearing is that some lenders are already looking to 4.5% to 4.75% by June.
Rates are rising for a number of reasons. The economy is improving and investor confidence is rising, which means investors are becoming less risk averse. Money is flowing out of the bond market and into the stock market, thus pushing yields on bond investments higher and yields on stock investments lower.

It's impossible to know with certainty where mortgage lending rates will be in three months, but if the choice were between 3.5% and 4.5%, we'd give you dollars-to-donuts odds on the latter.

Economic Indicator, Release Date and Time, Consensus Estimate, Analysis:

Home Builders Index(March)
Mon, March 19,10:00 am , et
30 Index
Important. Rising optimism points to a rising new-home sales through the summer.
Housing Starts(February)
Tues, March 20,8:30 am , et
702,000 (Annualized)
Important. Starts continue to expand toward a more normalized rate.
Mortgage Applications
Wed., March 21,7:00 am , et
Important. Gains in purchase applications point to monthly strength in home sales.
Existing Home Sales(February)
Wed., March 21,10:00 am , et
460,000 (Annualized)
Important. Rising sales on firming prices reflect a strengthening housing market.
New Home Sales(February)
Fri., March 23,10:00 am , et
330,000 (Annualized)
Important. Sales finally appear to have developed a sustainable uptrend.

Time's a Wastin'
The economy continues to improve at an accelerating pace: Jobs are now being added at a minimum rate of 200,000 a month and unemployment has fallen in 45 states and the District of Columbia .

More people working and more economic growth means the overhang of REO and distressed properties will be be picked over sooner rather than later. It also means more pressure on interest rates to rise.

Yes, the Federal Reserve is doing everything in its power to hold interest rates low. It continues to reinvest principal payments from its holdings of Treasury notes and bonds and mortgage-backed securities into more mortgage-backed securities. The Fed's demand for these securities helps hold lending rates low. Problem is, the Fed lacks the power to stem market forces in perpetuity. If the market demands higher mortgage rates, it will eventually get it.

Given the surge in demand that will occur with HARP 2.0 and a continued rise in purchase applications, we think it is riskier than it has been in years to wait to refinance or purchase a home. In other words, we think the market will get its wish for higher lending rates sooner than many home buyers or refinancers think.

Article courtesy of Patti Wilson, Senior Loan Officer, Mutual of Omaha Bank.

Tuesday, March 13, 2012

NAR: Tax rumor keeps spreading

WASHINGTON – March 13, 2012 – Contrary to a viral email that seems to die out but then return with a vengeance, there is no across-the-board real estate tax starting in 2013.According to the National Association of Realtors® (NAR), there is a new real estate tax effective in 2013, but it will affect very few sellers – only people with a high annual income who turn a sizable profit on their home sale.

A 3.8 percent levy on certain investment income was included in healthcare legislation two years ago. Part of that investment income includes capital gains from home sales for individuals who make $200,000 per year or more, or married couples who earn at least $250,000. However, even these individuals won’t pay the tax unless the home sale earns them over $250,000 for an individual or $500,000 for married couples. And even if someone qualifies under these two conditions, a tax may still not be levied. Other tax details are considered before the 3.8 percent tax kicks in.

NAR recommends that Realtors become familiar with the tax, but they avoid coaching their clients because the tax details are complicated. The actual tax due will vary from individual to individual because the elements used to calculate “adjusted gross income” differ from taxpayer to taxpayer.

NAR has published a brochure on how the tax works, which is now available online. Download the 3.8% tax brochure (PDF).
© 2012 Florida Realtors®

Monday, March 12, 2012

Keeping you updated on the Market

March 12 , 2012
Home prices continue to garner front-page attention. CoreLogic reports that prices declined for the sixth-straight month in January, dipping 1% from December. Year-over-year prices are down 3.1%. In short, CoreLogic says that prices are about where they were 10 years ago.
CoreLogic offers one set of data on home prices, Clear Capital offers another, less ominous set. According to Clear Capital, national home prices declined only 1.9% year-over-year. What's more, its data show short-term prices being more stable, with prices falling only 0.6% from the third quarter to the fourth quarter of 2011.
Everyone is keeping a close eye on distressed properties. Now that last year's “robo-signing” foreclosure imbroglio is behind us does that mean we will see a surge in foreclosed and REO properties? And if so, how will they impact inventory and prices?
Pertinent questions, to be sure, and ones we don't have a ready answer for. We do know that the inventory of existing homes for sale declined 21%, or by 600,000 units, in 2011. At the most recently reported sales pace, that means we are looking at 6.1 months of supply – the lowest inventory level since April 2006. Lower supply supports higher prices.
Today's low inventory is attributed to falling foreclosure volume. But now that banks are free to foreclose, two million more homes are expected to hit the market over the next two years. If that's the case, then distressed inventory will rise sharply. Returning to economics: higher supply leads to lower prices.
There are a few extenuating factors though. The economy is improving, and continues to add jobs at an increasing rate. The private sector added 216,000 jobs last month, according to the latest national employment report from Automatic Data Processing. That's a significant increase over the 173,000 jobs added in January. More people working means more people who can afford a home.
The rise in REO properties could be offset by a decrease in other market segments. For instance, there was a significant increase in short sales in the fourth quarter of 2011, which pushed the number up to nearly 910,000 units nationwide. That said, the long-term trend for short sales is down; fewer short sales could be a counterweight to rising REO units.
Housing formation is another attenuating factor. After 2007, household formation plu mm eted to 300,000 per year from its historical rate of 1.25 million. We see a lot of pent up demand. The population continues to grow, the economy continues to improve, home affordability is at a multi-decade high. The market is ripe for a spike in new household formation.
In short, we don't expect new REO properties to upset the housing recovery like the more dire pundits are predicting.

Economic Indicator, Release Date and Time, Consensus Estimate, Analysis.

Retail Sales(February)
Tues, March 13,8:30 am , et
1.1% (Increase)
Important. Sales remain robust on improving consumer confidence.
Federal Reserve FOMC Meeting
Tues, March 13,2:15 pm , et
Federal Funds Rate: 0% to 0.25%
Important. The Fed will hold short-term rates low and monitor agency debt in order to hold long-term rates low too.
Mortgage Applications
Wed., March 14,7:00 am , et
Important. The rise in purchase applications points to an encouraging start to the spring buying season.
Producer Price Index(February)
Thurs., March 15,8:30 am , et
All Goods: 0.4% (Increase)Core: 0.2% (Increase)
Moderately Important. Producer prices are heating up, but credit markets remain unfazed.
Consumer Price Index(February)
Fri., March 16,8:30 am , et
All Goods: 0.5% (Increase)Core: 0.2% (Increase)
Important. Deflation is no longer a concern, though rising consumer inflation could cause some Fed members to rethink the Fed's low-rate policies.

Ready, Set, Refinance
We expect to see a surge in mortgage applications in coming months. Couple low rates with HARP 2.0, the federal mortgage program that will enable millions of underwater homeowners to tap the mortgage market, and mortgage loan demand is sure to grow.
The combination of low rates and HARP 2.0 alone is enough to send business through the roof. Now we get word the Obama administration wants to allow more homeowners to refinance by dropping fees on federally insured mortgages. The administration's plan has the FHA dropping upfront insurance premiums on streamline refinances from 1% to 0.01%. The FHA would also drop annual premiums from 1.15% of the loan balance to 0.55%.
There is one catch: the lower fees only apply to borrowers who took out loans before June 1, 2009 . Still, lower-fee FHA loans are expected to help two to three million borrowers refinance.
The prospect of rising mortgage demand is worth keeping in mind as we head into the spring and summer selling season. Lenders will be busy, and sometimes very busy. Our advice, which we've offered in the past, is not to wait. For buyers, home affordability has never been better; for refinancers, rates have never been lower.
Given the present market dynamics, we think the risk of waiting to refinance or to buy a home far outweighs the possible reward of a lower home price or a lower interest rate.
Article courtesy of Patti Wilson, Senior Loan Officer, Mutual of Omaha Bank.

Sunday, March 4, 2012

Keeping you updated on the market. For the week of March 5, 2012.

Home sales have developed a positive up trend in the past six months, and it appears that trend will be sustained at least into the near future.
The pending home sales index rose 2.0 percent in January to hit 97, the highest reading in nearly two years. New contract signings were particularly strong in the South, which posted an impressive 10.5-percent gain. The good is that the rest of the country isn't lagging far behind: national year-over-year contracts are up 8.0 percent.
Lower prices are an obvious factor in driving sales volume. While lower prices drive demand, they also reduce supply. Home supply has been dropping nationally for some time now, though concrete numbers are tough to gauge given the uncertainty over the hidden inventory of foreclosed properties. The estimates we've seen on these shadow homes range between two million to four million nationally.
Whatever the actual numbers are on distressed properties, it appears many markets have already reached peak saturation, which means levels should begin falling. According to analysts at Clear Capital, Atlanta and Tuscon, Ariz. are two regions likely to see a drop in REO properties during the year. We wouldn't be surprised to see similar prognostications forthcoming for Las Vegas, Phoenix, and Central California.
The fact markets are reaching an REO saturation point is one sign that housing is reaching a tipping point. Affordability is another. In many parts of the country, affordability is at a multi-decade high.
We've been preaching over the past year that residential real estate is the investment for the next decade. We stand by our exhortations. Unfortunately, many potential buyers still feel otherwise. They are weary of catching a falling knife; that is, buying a property that will continue to depreciate.
Falling knives were a very real concern three years ago; that's not the case today. Yes, home prices nationally could continue to fall, but you always have to look past national numbers to the local market – many of which are rebounding.
Mortgage rates are another reason we like real estate. Rates continue to skim along a 60-year low. But the economy is improving – GDP posted a better-than-expected annual 3.0-percent growth rate for the fourth quarter of 2011. What's more, job growth has accelerated and unemployment has dropped. In other words, rates are unlikely to go much lower.
Costs associated with mortgages could go higher, though. The buzz on the new HARP 2.0 is growing louder and attracting many underwater borrowers keen to refinance. The buzz will grow even louder over the next month as interest intensifies.
Rising loan demand tilts the table toward lenders, so we think its prudent for potential buyers to not wait and to take advantage of what remains a very low-cost mortgage financing market.

Economic Indicator
Release Date and Time
Consensus Estimate
Factory Orders(January)
Mon., March 5,10:00 am , et
0.5% (Increase)
Moderately Important. Manufacturing continues to lead the economy's recovery.
Mortgage Applications
Wed., March 7,7:00 am , et
Important. The rising percentage of purchases to refinances reflects greater interest in leveraged real estate.
Consumer Credit(January)
Wed., March 7,3:00 pm , et
$10 Billion (Increase)
Important. The uptrend in credit use reflects rising consumer confidence and continued economic growth.
Employment Situation(February)
Fri., March 9,8:30 am , et
Unemployment Rate: 8.3%Payrolls: 208,000 (Increase)
Very Important. Continued strong job growth could force the Federal Reserve to rethink its low-interest rate policies
International Trade(January)
Fri., March 9,8:30 am , et
$48.8 Billion (Deficit)
Moderately Important. A depreciating dollar and higher oil prices have raised the deficit over the past two months.

The Foreclosures-to-Rental Solution
We tend to become more cautious when a theme grips the market. Residential rental property is the hottest theme these days. Even the great Warren Buffett is bullish on rentals, declaring that he would buy a couple hundred thousand single-family homes and rent them, if only he had a way to manage them.
Another prominent supporter of rentals, Lewis Ranieri, the co-inventor of the mortgage-backed security, lays out the case in a research paper for using federal entities to support converting foreclosed properties into rentals. According to Ranieri, his foreclosure-to-rental model can be developed in “most every market in the United States,” and thus help clear the distressed-housing overhang.
We see a few unintended consequences, though. When markets don't develop organically, there tends to be inefficiency – you get too much or too little of something. Just look at housing six years. The market was incentivized for more home ownership, and we got too much of it.
Single-family rental properties are fine, to be sure, but large swaths of single-family rentals might not be. Rents are rising, but they don't always rise. Rents impacted capitalization rates. If rents drop, so will capitalization rates and property values. In addition, renters don't care for properties as well as owners. Could a higher percentage of neglected properties translate into more downward price pressure for owners?
All we're saying is that before we ask for something we need to be sure we really want it; unintended consequences can be very costly in the long run.
Article courtesy of Patti Wilson, Senior Loan Officer, Mutual of Omaha Bank.

Thursday, February 23, 2012

Housing Crisis to End Soon!

Capital Economics expects the housing crisis to end this year, according to a report released Tuesday. One of the reasons: loosening credit.

The analytics firm notes the average credit score required to attain a mortgage loan is 700. While this is higher than scores required prior to the crisis, it is constant with requirements one year ago.
Additionally, a Fed Senior Loan Officer Survey found credit requirements in the fourth quarter were consistent with the past three quarters.
However, other market indicators point not just to a stabilization of mortgage lending standards, but also a loosening of credit availability.
Banks are now lending amounts up to 3.5 times borrower earnings. This is up from a low during the crisis of 3.2 times borrower earnings.
Banks are also loosening loan-to-value ratios (LTV), which Capital Economics denotes “the clearest sign yet of an improvement in mortgage credit conditions.”
In contrast to a low of 74 percent reached in mid-2010, banks are now lending at 82 percent LTV.
While credit conditions may have loosened slightly, some potential homebuyers are still struggling with credit requirements. In fact, Capital Economics points out that in November 8 percent of contract cancellations were the result of a potential buyer not qualifying for a loan.
Additionally, Capital Economics says “any improvement in credit conditions won’t be significant enough to generation actual house price gains,” and potential ramifications from the euro-zone pose a threat to future credit availability.

Tuesday, February 7, 2012

Keeping you updated on the market! For the week of February 6

Some weeks we feel like Sisyphus: We push the boulder up the hill only to have it roll back down again.
This is one of those weeks. Home prices, which were pushed higher through the first nine months of 2011, began rolling back in the fourth quarter of 2011. Unfortunately, it appears they are not finished rolling.
The latest price data from CoreLogic certainly isn't encouraging on that front. CoreLogic's home price index shows that home prices fell 4.7 percent in 2011, thus marking the fifth-consecutive yearly drop. The positive takeaway is that when distressed properties are excluded, home prices only dropped 0.9 percent. The unfortunate takeaway is that CoreLogic sees distressed properties exerting their negative influence through 2012.
S&P/Case-Shiller's home price data was equally frustrating. According to Case-Shiller, home prices were down 3.7 percent year-over-year in November, with 18 of the 20 markets its follows posting loses. We can take some solace in knowing that the aggregate data were skewed by an 11.8 percent drop in Atlanta and a 9.1 percent drop in Las Vegas. Remove Atlanta and Las Vegas, and the data suggest a more price-stable market.
It's easy to get discouraged when you think markets have turned for the better, only to discover they continue to back track. We refused to get discouraged, though, because there is always good news to found.
Consider homebuilders. Their sentiment and activity have improved palpably over the past few months. Residential construction spending, in particular, has been on the mend. In fact, the latest data from the Census Bureau show spending increased a robust 3.8 percent month-over-month in December, which helped lift the year-over-year rate into positive territory at 0.7 percent.
Another bit of good news for housing, and for all businesses for that matter, is that the economy continues to produce jobs. Automated Data Processing estimates that 170,000 new jobs were created in January. Over the past few months, payrolls have been growing at a monthly six-digit clip. More people earning a paycheck means more people spending and investing.
More people earning a paycheck also means more people who can qualify for a mortgage. And mortgages have never been cheaper. Rates fell again this past week after the Federal Reserve announced it will hold interest rates low through 2014. If you consider rates on an after-tax basis, you're looking at effective rates as low as 2.75% on a 30-year, fixed-rate loan. That's less than the rate of inflation.
We would argue that for most people it's more remunerative to finance a home at these low rates and then invest the money elsewhere than it is to use the cash to buy a home outright. Even though home prices have eased in the past couple months, we still think leveraging real estate is a smart move for buyers and investors with a long-term outlook.

Economic Indicator
Release Date and Time
Consensus Estimate
Consumer Credit(December)
Tues., Feb. 7,3:00 pm , et
$10 Billion (Increase)
Important. Consumer willingness to take on more debt points to improved confidence and greater spending.
Mortgage Applications
Wed., Feb. 8,7:00 am , et
Important. Extended HARP will likely produce a surge in refinance activity in coming months.
Wholesale Trade(December)
Thurs., Feb. 9,8:30 am , et
No Change
Moderately Important. A rising sales-to-inventory ratio points to improving 1 st-quarter economic growth.
International Trade(December)
Fri., Feb. 10,8:30 am , et
$48.7 Billion (Deficit)
Moderately Important. The deficit has been rising on a stronger dollar.

Time for a New Game Plan
The latest news on falling home prices is frustrating because it appears to be a self-fulling prophesy that is difficult to escape: Falling prices generally spur demand, unless more potential buyers expect that prices will continue to fall, then prices keep falling. Unfortunately, more people believe home prices will continue to fall these days.
Falling mortgage prices, specifically rates, are also a negative, in our opinion. First, the prospect of even lower rates impedes potential borrowers and buyers from acting. If there is a good prospect of getting a better rate tomorrow, why act today? Rising rates, or at least the prospect of rising rates, as we've often argued, would get people moving again.
Ultra-low mortgage rates have also homologated the market, meaning everything fits a specific template because most everything is sold to Fannie Mae and Freddie Mac. Private investors simply can't compete with the government-subsidized loans that dominate the market today. This limits the amount of tailoring that can be done to make each mortgage product best fit the borrower's need.
We understand that mortgage rates are an important variable in home affordability, but affordability isn't as important as clarity on the outlook of the economy. If you are secure in you outlook, half a percentage point won't make much of a difference in your buying or financing decision.
Article courtesy of Patti Wilson, Senior Loan officer, Mutual of Omaha Bank.

Sunday, January 29, 2012

Market Recap for the week of January 30, 2012

The data on housing were mixed this past week, but we would say that, for the most part, they listed more positively than negatively.
Last Friday, the NAR reported sales of existing homes rose 5 percent to an annual rate of 4.61 units in December. This marked the third-consecutive month of sales growth. This latest increase helped reduce inventory to 2.38 million units, the equivalent of a 6.2-month supply at December's sales pace.
Pricing was the one bugaboo in the NAR's data. The median price for an existing home was $166,100 for 2011, a 2.5 percent drop from 2010 and the lowest median price since 2002. This is a disappointment, but hardly a disaster. We’ve said many times that national numbers usually lack a meaningful connection to local markets.
The news on distressed properties was a little more encouraging. RealtyTrac reports that homes in some stage of foreclosure dropped 11 percent in the third quarter of 2011 compared to the previous quarter. Of course, part of the improvement is due to the ongoing matter of banks working through last year's auto-signing imbroglio. That said, our own anecdotal evidence suggests an improving distressed-property market.
The new-home market is also improving, just not so obviously. New home sales eased 2.2 percent to an annual rate of 307,000 units in December, which pushed inventory up to a 6.1-month supply. Like existing-home prices, new-home prices were also pressured for the month, with the national median price dropping to $210,300.
Recent new-home data suggest that December's numbers might just be a hiccup: Homebuilder sentiment has improved markedly in recent months, as has the longer-term sales trend.
Speaking of trends, the trend in mortgage rates is expected to hold for the long term. On Wednesday, the Federal Reserve stated that interest rates will remain low until at least through 2014, pushing back a previous date of mid-2013. According to Federal Reserve data, the economy simply isn't growing at the pace it had expected.
The impact of the Fed's revised policy was both immediate and palpable. Before the announcement, the 10-year Treasury note yield had been creeping higher and was yielding 2.06 percent just before Fed Chairman Ben Bernanke stepped up to the mike. After he had stepped down, the yield had dropped to 1.96 percent.
So it appears low base mortgage rates are with us for the long term, but that doesn't mean low-cost mortgages are. A r ecent increase in fees Fannie Mae and Freddie Mac charge lenders will push costs higher. Expect the fee increase to raise borrowing costs a quarter percentage point.
It's worth pointing out that we said “appears” in connection with low mortgage rates. Nothing is certain where the economy and investor behavior is concerned. To be sure, if we were forced to place a bet, we’d likely bet on January 2013 mortgage rates matching January 2012 rates. We suspect most everyone else would place that same bet. That fact, in and of itself, is a contrarian indicator that rates aren't necessarily destined to stay at today's levels.

Economic Indicator
Release Date and Time
Consensus Estimate
S&P Case/Shiller Home Price Index(November)
Tues., Jan. 31,9:00 am, et
0.1% (Increase)
Moderately Important. Prices weakened in the fourth quarter, but are showing signs of stabilizing in January.
Consumer Confidence(January)
Tues., Jan. 31,10:00 am, et
68 Index
Important. Improving confidence will help home sales heading into the spring-buying season.
Mortgage Applications
Wed., Feb.1,7 :00 am, et
Important. Activity dropped in the past week, but the four-week trend remains positive.
Construction Spending(December)
Wed., Feb. 1,10:00 am, et
0.2% (Increase)
Important. Spending on residential real estate construction continues to build momentum.
Productivity & Costs(4th Quarter 2011)
Thurs., Feb. 2,8:30 am , et
Productivity: 0.2% (Decrease)Costs: 0.1% (Decrease)
Moderately Important. The drop in productivity and costs reflects slower fourth-quarter economic growth.
Employment Situation(January)
Fri., Feb. 3,8:30 am , et
Unemployment Rate: 8.5%Payrolls: 105,000 (Increase)
Very Important. Falling job growth will further anchor low interest rates.

Buy Low, Be Happy, an online real estate marketing firm, recently released a study on homeowner satisfaction. HomeGain found that homeowners with the lowest cost basis were the happiest. Specifically, HomeGain found homeowners who acquired their properties for less than $75,000 were the most satisfied.
Now, HomeGain's survey might seem like an exercise in belaboring the obvious, but it's proof that price really does matter. Despite what has occurred in housing over the past four years, if you purchased a $75,000 home a few years ago, you're likely ahead on your purchase (which is why you're satisfied).
Though it might be obvious, HomeGain's point is, nevertheless, worth driving home to our clients. Price matters, and it matters a lot. Buying at a sufficiently low price can offset many sins.
Low prices are found mostly in depressed markets, which is the housing market today. Depressed markets are ephemeral, so if we want to maximize our clients' happiness in 2020, it behooves us to impress upon them the importance of buying today.
Article Courtesy of Patti Wilson, Senior Loan Officer Mutual Bank of Omaha.

Monday, January 2, 2012

Keeping you updated on the market! For the week of January 2, 2012

The news is understandably slow the week between Christmas and New Year's Day. The most notable release was last Friday's news on new home sales, which rose to an annualized rate of 315,000 units in November, a 1.6-percent gain over October.

To be sure, we have a long way to go until we reach the normalized construction rate of 1.5-million units per year. Nevertheless, we expect the new-home market to gain pace in 2012. After all, there are only 158,000 units in inventory. Even at the current slow sales pace, this equates to a record low six-month supply

Over the past three years, new-home construction has fallen far below historical norms and also below the level needed to keep pace with population growth. The fact is our country gains roughly 2.7 million people and one million new households annually.

You might not see supply as a problem. We are all familiar with the glut of distressed properties. Indeed, Bank of America expects eight million distressed homes to come to market over the next four years. These homes, we've so often heard, will continue to depress new home construction.
We view B-of-A's outlook with a skeptical eye. There is a likely prospect that many of these distressed properties will simply go away. Destruction is too frequently overlooked in many supply projections. A house is not a permanent structure. Many are destroyed by fire, wind and flood each year. Many more are lost through simple decay and abandonment. Based on U.S. Census data, 300,000 homes are lost annually. That number will surely rise in years to come.

In short, the math – low inventory plus more households minus more home destruction – suggests to us a rebound in new-home construction. We are not alone in this contention, either. Wells Fargo projects that housing starts will continue to rise each year for the next five years before reaching once again the normalized construction rate of 1.5-million units annually by 2017.

Of course, projections are one thing, betting on those projections is another. Here, we see an encouraging trend. Big money is starting to wager on housing. The Wall Street Journal reports that many large hedge funds are investing billions in housing-related investments. Other investors have followed suit. Shares of homebuilders are up 30 percent over the past three months, making them one of the best performing investments in the market.

Economic Indicator
Release Date and Time
Consensus Estimate
Construction Spending(November)
Tues., Jan. 3,10:00 am, et
No Change
Important. Residential spending is accelerating and contributing more to economic growth.
Mortgage Applications
Wed., Jan. 4,7:00 am, et
Important. Markets are anticipating increased purchase activity to start 2012.
Factory Orders(November)
Wed., Jan. 4,10:00 am, et
2.5% (Increase)
Important. Growing order momentum is indicative of increased economic activity.
Employment Situation(December)
Fri., Jan. 6,8:30 am , et
Unemployment Rate: 8.7%Payrolls: 150,000 (Increase)
Very Important. Job growth is accelerating, which is encouraging for housing, but less so for low interest rates

Up For A New Year
As we approach the end of the old year nearly all of us stop to ask, “How will the new year unfold?” Of course, none of us know with any certainty the answer to that question, but it can be insightful (and fun) to ponder. So, how will 2012 unfold, at least as it pertains to the housing and mortgage markets?

Both markets will obviously be influenced by economic growth, which, in turn, will spur job growth. We see a pick up in economic growth and job growth in 2012.

The economy has been growing at a sluggish rate for too long now. The United States is unique in that Americans tire of pessimism quicker than most other cultures, and then we do something about it. In our opinion, rising consumer confidence points to a lot of pent-up demand that is waiting to bust loose, and will bust loose in 2012.

A pick up in demand, in turn, necessitates new hires. In fact, a recent survey by found that nearly one in four employers is keen to add new permanent full-time employees. These employers are simply waiting for a clear sign the coast is clear. We think they will get that sign in the first quarter of 2012.

Greater economic activity will obviously impact the housing market. We see accelerated sales volume in both the new and existing home markets. We also expect to see prices stabilize in the first half of the year, and then appreciate perceptibly in the second half.

As for the mortgage market? This is much more difficult to call. The Federal Reserve has stated it intends to hold rates low through 2012. However, all it takes are a few persuasive signs that the economy is back on track, and the Fed could easily backtrack from its stated goals. All we can say is that we would be much less surprised to see mortgage rates 50 basis points higher six months from today than 50 basis points lower.
Article Courtesy of Patti Wilson, Senior Loan Officer, Mutual of Omaha Bank
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