Mortgage Rates Expected To Creep Higher

Record Low Rates May Be Behind Us

Mortgage applications slow as rates rise

Mortgage applications fell in mid-October to their lowest level since August. At the same time, Zillow’s Mortgage Marketplace reported a slight increase in the rate for a 30-year fixed mortgage — up 2 basis points from 3.26 percent to 3.28 percent.

MBA sees Fed policy supporting slow rise in rates

The Mortgage Bankers Association (MBA) is predicting an average rate of 3.8 percent for 30-year fixed mortgages in the fourth quarter, rising to 3.9 percent in the first quarter of 2013 — with a steady, slow rise to land around 4.4 percent by the fourth quarter of 2013.  Jay Brinkmann, the MBA’s chief economist, thinks “continuing purchases of mortgage-backed securities through the Federal Reserve’s QE3 program will likely keep the 30-year fixed-rate mortgage below 4% through the middle of 2013.”

International economy impacted rates more than expected

According to Brinkmann, factors economists normally expect to drive interest rates, such as inflation, were less significant than other factors —

“it was uncertainty in European economies and actions taken by the Federal Reserve that moved rates so low this year.”

Gathered from

• 30-Year Fixed Mortgage Rate Up Slightly; Current Rate is 3.28%, According to Zillow Mortgage Rate Ticker (Nasdaq)
• U.S. mortgage applications slump as borrowing rates rise - MBA (Reuters)
• Mortgage rates will rise next year, but slowly (MarketWatch)

Housing: The Reasons It Is Coming Back

 Monday, we told you that many experts are beginning to call a bottom in house prices. Why? Writing in the Financial Times, Roger Altman, former deputy Treasury secretary, explained why he is so bullish on housing:

“This surge will be driven by a combination of improving house prices, a lower inventory of homes for sale, rising rates of household formation and population growth, and improving access to mortgage credit.”

Altman gave his thoughts on each point:

PRICES

“The S&P/Case-Shiller Composite 20 City Home Price index has risen 8 per cent since March. Indeed, Barclays has projected that, by 2015, nominal home prices will exceed their 2006 peak. Home affordability is also way up, as the ratio of mortgage payments to both income and rents has never been more favourable. Moreover, the relationship of home prices to household income is back to the level of 30 years ago. Rising prices and affordability, of course, lead directly to the buying and building of homes.”

HOUSING INVENTORY

“The levels of relevant supply have fallen sharply. The number of homes for sale has fallen back to its long-term average of 2m. Yes, there is a larger “shadow inventory” of homes that are in foreclosure or carry delinquent or defaulted mortgages. However, many of these are distressed, in that they have not been physically maintained. This means that the supply has become two-tiered – quality homes and distressed homes. For most buyers, only the first of these two markets is relevant and the supply there is approaching its lowest level since 1992.”

POPULATION GROWTH

“Housing demand is going to be strong, driven by demographics. The International Monetary Fund forecasts that the US population will increase by 15m during the 2012-17 period, more than the increase of the past five years. The two groups of the population that are growing fastest are the over-55s and the so-called echo boomers, the grandchildren of the baby-boom generation. The first group has the highest rate of home ownership. The second has been renting disproportionately, and is primed to start buying. JPMorgan estimates that 6m new units of housing are needed by 2017 just to serve the bigger population.

HOUSEHOLD FORMATIONS

“There is the coming recovery in household formation. According to JPMorgan, this rate was steady at about 1.4m annually from 1958 up to 2007. But, it plunged below 500,000 for the three years following the financial crisis, as young people moved in together or lived with parents. Now it has doubled from that level and estimates of pent-up households are at an all-time high. Most expect formation rates to rise much further still, exceeding the 50-year average for a few years.”

IMPROVING ACCESS to MORTGAGE CREDIT

“The availability of mortgage credit is starting to improve. Underwriting standards tightened sharply following 2008 and the proportion of home sales that are financed by new mortgages is now at a 10-year low. However, household finances have improved sharply, with debt service ratios returning to pre-crisis levels. Moreover, banks also need the income from originating mortgages. Mortgage credit availability is therefore opening up, which also boosts home sales.”
It seems apparent that many aspects of the housing market are in the process of turning much more positive.

 Housing: The Reasons It Is Coming Back

Foreclosures Hit a 5-Year Low

Filings Down 16% Year-Over-Year

 

Lowest foreclosure activity level since 2007

RealtyTrac recently reported that September’s foreclosure filings (just over 180,000) were the fewest monthly filings recorded since July 2007.

Month to month

Total foreclosure filings fell 7 percent from August 2012 to September 2012 — the second consecutive month of declining filings.

Foreclosure starts also down

Foreclosure starts (homes entering the foreclosure process) dropped from the prior month by 12 percent and from September of 2011 by 15 percent. August 2012 was also down from the previous month, the first drop in monthly foreclosure starts after three consecutive months of increases.

State by state, the news is either very good or very bad

The national decrease in foreclosure activity was driven mainly by declining activity in the non-judicial states (states where foreclosure proceedings do not go through the courts). Nevada, Oregon and Utah — all non-judicial states — saw foreclosure activity rate drops of more than 60 percent. Of the 24 non-judicial states, 20 saw a decline in foreclosure activity.

Judicial states, however, are not faring as well. In 14 of the 26 judicial states, foreclosure activity increased year-over-year. New Jersey saw a 130 percent increase in activity in the third quarter, New York experienced a 53 percent increase, and activity in Pennsylvania, Connecticut and Illinois jumped 31 to 36 percent.

For more on recent foreclosure activity, read RealtyTrac’s complete report here.

6 Straight Months of Rising Home Prices

Year-Over-Year Home Prices Continue To Improve

 

Prices increasing both year-over-year and month-over-month

CoreLogic — one of the largest real estate data sources in the country — posted its latest Home Price Index Report recently, showing a 4.6 percent rise in national home prices from August 2011 to August 2012. That’s the largest annual increase in home prices in more than six years. From July, August home prices showed a 0.3 percent increase.

Biggest price gains are in Arizona, Idaho and Utah

CoreLogic analyzes the data both including and excluding “distressed sales,” which it defines as “short sales and real estate owned (REO) transactions.” Arizona, Idaho and Utah were all in the top five states in annual home price appreciation, both with and without distressed sales.

·        Arizona tops the list of largest price gain both with and without distressed sales — showing an 18.2% increase in price across all sales and a 13% price increase when distressed sales are excluded.

·        Utah home prices went up 8.9% across the board and 10% when distressed sales are excluded

·        Idaho saw home prices increase 10.4% annually when looking at all sales, and 8.6% when distressed sales were excluded

States with falling prices include Rhode Island, New Jersey and Alabama

When distressed sales were factored out of the analysis, only three states posted a drop in home prices from August 2011 to August 2012 — Rhode Island, New Jersey and Alabama.

·        Rhode Island home prices decreased 1.7% excluding distressed sales — when distressed sales are included, RI home prices showed an annual 2.6% drop

·        New Jersey saw a 1.4% drop in annual prices both with and without including distressed sales

·        Alabama showed home prices falling just 0.2% if distressed sales are factored out — even including distressed sales, at 0.7% Alabama showed almost the smallest drop in home prices in the country

Continued home price gains in September

According to the report, CoreLogic is predicting a seventh month of annual home price increases in September of 5 percent, albeit with a small drop month-to-month from August of 0.3 percent:

The CoreLogic Pending HPI indicates that September 2012 home prices, including distressed sales, are expected to rise by 5 percent on a year-over-year basis from September 2011 and fall by 0.3 percent on a month-over-month basis from August 2012 as the summer buying season closes out. Excluding distressed sales, September 2012 house prices are poised to rise 6.3 percent year-over-year from September 2011 and by 0.6 percent month-over-month from August 2012.

 

 

For the complete CoreLogic Home Price Index Report, click here (PDF).

How You Can Get The Most From Your Homeowners

Part 1: Be Prepared Not Surprised When Disaster (or Damage) Strikes

 

1. Review Your Policy Every Year

Life changes and market changes can impact your home insurance policy — everything from having a baby to declining property values may mean the insurance policy you have in place should be adjusted.

Kiplinger’s 10 Reasons Your Insurance May Need A Checkup goes through items including

1. Have you gotten married or divorced?
2. Have you acquired any new valuables such as jewelry, electronic equipment, fine art, antiques?
3. Did your teenager get a driver’s license?

New or changed circumstances can mean you should make changes to your policy — reviewing your policy at least once a year will help prevent unpleasant surprises.

2. Understand When You’re Covered and When You’re Not

As The Nest puts it “Insurance pays for sudden, accidental events, not for gradual decline and aging.” If a tree falls on your roof, repairing or replacing the roof should be covered by your policy. If, however, your roof starts leaking after 10 years due to age or general wear and tear, standard home insurance policies won’t cover the cost.

Keep in mind, too, that “wear and tear” vs “natural causes/disasters” can be differently addressed by different insurers and in different parts of the country. Policies in hurricane prone areas such as Texas and Florida generally do not cover roof damage that is caused during a storm.

If you live in a flood prone area (either living near the coast or large body of water or in a hurricane zone), be aware that homeowners insurance doesn’t extend to property damage caused by floods. In fact, the Insurance Information Institute estimates that only about 12 percent of homes in flood prone areas have flood coverage. You can obtain flood insurance through the National Flood Insurance Progam. Earthquake damage also requires a separate policy.

3. Make Sure Your Policy Matches Your Needs

Your homeowners insurance policy should be tailored to your life and your home — if you’re not concerned with finding a temporary place to live while repairs are underway, make sure you’re not paying for “displacement coverage,” which provides reimbursement for living costs while you are out of your home.

Confirm whether your policy covers “replacement costs” or “actual cash value.” If you are covered for the “cash value” of an item, its value will be based on the value the item would have had — that is, if your ten year old stereo system is stolen, you will be reimbursed the amount that old stereo would cost. If you’re covered with “replacement cost,” however, your policy should pay to replace that stereo with a comparable brand new one. It’s a good idea to make and maintain a household inventory of the contents of your home (with receipts if you have them), including your clothes and jewelry.

There are online tools that will help you determine replacement costs for your home for less than $10:

• AccuCoverage walks you through a detailed questionnaire to prepare a fairly specific report outlining the costs of replacing your home
• HomeSmartReports offers a quick review and then provides high and low estimates for replacing your home, but doesn’t allow for custom features

Homeowners insurance resources

• Home Insurance Basics (insure.com)
• What does a standard home insurance policy cover? (homeinsurance.com)
• How Do You Get Your Homeowners Insurance to Pay for Your Leaking Roof? and 5 Important Elements in Any Homeowner's Insurance Coverage (TheNest.com)
• Hurricanes and Flood Insurance: What Homeowners Should Know (nolo.com)
• Breaking Down Homeowner’s Insurance Coverage (moneycrashers.com)

Next Week, Part 2: Saving Money While Keeping Your Home Protected

 

 

Completed Foreclosures Down…in Most States

According to the latest foreclosure report from CoreLogic, there were 57,000 completed foreclosures in the U.S. in August 2012, down from 75,000 in August 2011 and 58,000  in July 2012.
Mark Fleming, chief economist for CoreLogic reveals:

“August marks the fourth month in a row there were fewer completed foreclosures, which is more evidence that the housing industry is finding its footing. While we are seeing improvement on a national level, there remain higher concentrations of foreclosures in some areas with five states accounting for nearly half of all completed foreclosures nationwide during the last year.”

The five states with the highest number of completed foreclosures for the 12 months ending in August 2012 account for 48.1 percent of all completed foreclosures nationally. They are:

• California (110,000)
• Florida (92,000)
• Michigan (62,000)
• Texas (58,000)
• Georgia (55,000)

The five states with the lowest number of completed foreclosures for the 12 months ending in August 2012:

• South Dakota (25)
• District of Columbia (113)
• Hawaii (435)
• North Dakota (564)
• Maine (612)

We still must realize that part of the reason completed foreclosures are declining is that banks are finding other ways to  liquidate their distressed properties. According to Anand Nallathambi, president and CEO of CoreLogic:

“The reduction in foreclosure volumes is to some degree being facilitated by the rising popularity of alternative resolution methods, such as short sales and loan modifications.”

Tomorrow we will address what is happening with shadow inventory (houses that will probably enter the market as distressed sales in the future).

Completed Foreclosures Down... in Most States

Short Sale vs Foreclosure – 10 Common Myths Busted

It’s likely you’ve heard the term “short sale” thrown around quite a bit. But what, exactly, is a short sale?

A short sale is when a bank agrees to accept less than the total amount owed on a mortgage to avoid having to foreclose on the property. This is not a new practice; banks have been doing short sales for years. Only recently, due to the current state of the housing market and economy, has this process become a part of the public consciousness.

To be eligible for a short sale you first have to qualify!

To qualify for a short sale:

• Your house must be worth less than you owe on it.
• You must be able to prove that you are the victim of a true financial hardship, such as a decrease in wages, job loss, or medical condition that has altered your ability to make the same income as when the loan was originated. Divorce, estate situations, etc… also qualify.

Now that you have a basic understanding of what a short sale is, there are some huge misconceptions when it comes to a short sale vs. a foreclosure. We take the most common myths surrounding both short sales and foreclosures and give a brief explanation. LET’S BUST SOME MYTHS!!

Click on this link, Short Sale vs. Foreclosure - 10 Common Myths busted, and continue reading.

Protect Your Nest Egg

Protecting your home’s value is always a top priority, and the Mortgage Interest Tax Deduction is an important part of making homeownership a good investment. A resolution is pending in the House of Representatives to keep the deduction in its current form. Americans overwhelmingly oppose any action by Congress to scale back or eliminate the deduction. The consequences could be devastating for homeowners, the housing market and the nation’s economy. To learn more about this issue, go to www.protecthomeownership.com.
 

If you need a dedicated expert in Real Estate to help with this or anything related to lowering the cost of homeownership, call today. Let’s talk.

 

Source: National Association of Home Builders