Is an Assumable Mortgage Right for You?

Is an Assumable Mortgage Right for You?

NAR Focuses on Tax Policies, Sustainability -Possible tax credit for seling single family homes

NAR Focuses on Tax Policies, Sustainability

RE Investing: Retirement Life Raft or Sinking Ship?

RE Investing: Retirement Life Raft or Sinking Ship?

Do Lower Oil Prices Lead to Higher Housing Demand?

Keeping you updated on the market! For the week of December 8, 2014

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MARKET RECAP Do Lower Oil Prices Lead to Higher Housing Demand?  The question is intriguing, given the steep decline in oil and gasoline prices over the past couple months. After all, less money spent on gasoline, the more money that can be spent elsewhere. Housing is elsewhere.  CoreLogic recently tackled the oil/housing question in a blog post by one of its senior economist Molly Boesel. The quick answer is that it appears that lower oil prices can lead to higher housing demand. A few variables come into play, though: number of miles driven; the actual price of gasoline; and for certain homeowners, the price of oil for heating fuel.  Number of miles driven and gasoline prices are most interesting. Data show that the lower gasoline prices fall, the more buyers are willing to move from urban centers into higher-priced homes. The key is that consumers need to believe that lower gasoline prices are sustainable over the long haul. The longer gas prices fall, or hold lower levels, the more willing consumers are to buy a home, particularly a suburban home.   Predicting oil prices, though, is as difficult as producing mortgage rates, maybe more so. Oil prices can hold low levels for an extended time, as in the 1990s. But oil prices are frequently spiky, and the spikes can be quite volatile. Oil priced at $65/barrel in one year can soon be $140/barrel the next.  In short, we are not banking on oil prices holding these low levels. But if they do, the good news is that housing is likely to be a beneficiary. As for good news in the present, mortgage purchase applications continue to trend higher.  The Mortgage Bankers Association's purchase index was up again last week, posting a 3% increase. Purchase activity has been gradually ratcheting higher over the past month. We are seeing more purchase activity despite a slight decrease in mortgage credit availability.  This suggests more buyers are entering the market, and they are getting credit.  Going forward, sustained lower oil prices would be nice, and so would a sustained rise in purchase application activity. The former gives consumers more money, the latter signifies the return to a more normalized lending market.

 

Economic Indicator	Release Date and Time	Consensus Estimate	Analysis
Mortgage Applications	Wed., Dec. 10, 7:00 am, ET	None	Important. Purchase activity continues to trend higher and portends rising overall housing sales.
Import Prices (November)	Thurs., Dec. 11, 8:30 am, ET	1.5% (Decrease)	Moderately Important. Lower oil prices will continue to depress the import-price index.
Retail Sales (November)	Thurs., Dec. 11, 8:30 am, ET	0.2% (Increase)	Moderately Important. Despite lower energy prices, sales in total dollars are rising. The good news is that more dollars are flowing to bigger-ticket items.
Producer Price Index (November)	Fri. Dec. 12, 8:30 am, ET	0.4% (Decrease)	Moderately Important.  Falling producer prices ensure interest rates will continue to hold today's low levels.

 

Where Do We Go From Here?  We're near the time of the year when people begin to gaze into their crystal ball. What should we expect for 2015? Bill McBride at CalculatedRiskBlog.com gathered estimates from a number of difference sources. So far, nothing is out of the ordinary. Most prognosticators see the recent past extending into the future. New home sales estimates range between 498,000 and 620,000 units on an annualized rate for 2015. (The NAR estimate is on the high end.) Total home starts range between 1.056 million and 1.3 million units on an annualized rate. (The NAR again offers the high-end estimate.)  On the price front, nearly everyone has throttled back price-appreciation expectations for next year. Estimates range between 2.4% and 5.2% annual price increases at the national level. (CoreLogic offers the high-end estimate.) This is no surprise. We've been saying since the beginning of 2014 that price appreciation will decelerate.  We expect it to continue to decelerate to within the range most analysts expect. This is, after all, a normalized range based on historical trends.  As for mortgage rates in 2015, CalculatedRiskBlog doesn't say.  But we see the rate on the 30-year fixed-rate loan hovering between 4.0% and 4.5% for the first quarter of 2015.  After that, it is hard to tell. Rates will depend on economic growth, job growth, wage rates, and inflation. If they are mostly up after the first three months, the Federal Reserve will start to talk up interest rates, which will lead to rates actually rising. Article courtesy of Patti Wilson, American Momentum Bank

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

MARKET RECAP

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
None
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 www.SanibelHomeSeeker.com to see current pricing on the islands.

Keeping you updated on the Market

March 12 , 2012
MARKET RECAP
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
None
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.