Bob's Coto Blog

Are There Any Foreclosure Deals Left?

Bob Phillips (Realty Executives) — Fri, 13 Nov 2009 09:11:15 -0600

For the eighth straight consecutive month, national foreclosure activity in the U.S. was dominated by a small set of states.

As reported by RealtyTrac.com, more than half of October's foreclosure-related activity came from just 4 states:

California
Florida
Illinois
Michigan

The remaining Top 10 states in terms of total foreclosure activity included Arizona, Georgia, Texas, Ohio, New Jersey, and Maryland.

Foreclosures are up 19 percent from last October, but a deeper look at the RealtyTrac report revealed two positive developments for the housing market.

Foreclosure activity is down 3 percent from last month
Foreclosures per Household decreased in 9 of the 10 most heavily concentrated states

Furthermore, Nevada's foreclosure pace is down 4% from last year. This is a big deal because Nevada has long led the nation in foreclosure-related activity. Until last month, Nevada's year-to-year foreclosure rate hadn't fallen in more than 4 years.

It's too soon to say that the foreclosure market is drying up, but bargains are getting harder to come by. First-time buyers and bona fide investors alike have been snapping up property at a furious pace.

According to an industry trade group, distressed homes account for nearly one-third of home resale activity.

That said, buying foreclosures isn't for everyone.

For one, properties are often sold as-is and may be defective. The cost of repairs may negate "the deal" or "the steal" -- depending on the cost of the home.

In the end, fundamentally, buying a foreclosed home is the same as buying a "regular" home -- there's a contract and a closing. Most of the steps in the middle, however, are different.

Read the complete foreclosure report and take a peek at the foreclosure heat maps on the RealtyTrac website. If you like what you see, give me a call and let's discuss the possibilities.

There's still good deals in the foreclosure market, especially in the higher price ranges, and this is likely to continue for the next year, in my humble opinion.

Banks Raise Mortgage Qualification Standards

Bob Phillips (Realty Executives) — Thu, 12 Nov 2009 06:23:45 -0600

Despite the economy's improvement and prodding from Congress, banks don't seem ready to open their purse strings just yet.

Nationally, mortgage approval standards are tightening.

The data comes from a quarterly survey the Federal Reserve sends to its member banks. The Fed asks senior bank loan officers around the country whether "prime" residential mortgage guidelines had tightened in the last 3 months.

For the period July-September 2009:

Roughly 1 in 4 banks said guidelines tightened
Roughly 3 in 4 banks said guidelines were "basically unchanged"

Just one bank said its guidelines had loosened.

Combine the Fed's survey with recent underwriting updates from the FHA and from Fannie Mae and it becomes clear that mortgage lenders are much more cautious about their loans than they were, say, 2 years ago.

Today's borrowers face a host of hurdles including:

Higher minimum FICO scores
Larger downpayment requirements for purchases
Larger equity positions for refinances
Lower debt-to-income ratios

In other words, mortgage rates may stay low into 2010, but that won't matter to homeowners that don't meet minimum eligibility standards. With each passing quarter, that list gets smaller.

Therefore, if you're on the fence about whether now is a good time to buy a home, remember that, along with an increase in mortgage approval standards, home values are rising, too.

Acting sooner is probably better than acting later.

FHA Streamline Refinance Program : There are 5 Days Left

Bob Phillips (Realty Executives) — Tue, 10 Nov 2009 02:03:30 -0600

Consider this a last call for FHA Streamline Refinances. Starting next Tuesday, the popular rate-lowering program gets strict on borrowers.

There's 5 days left.

Under the current streamline refi guidelines, FHA homeowners have minimal program eligibility requirements.

FICO scores must be 620 or higher
The refinance must provide a "tangible benefit"
No mortgage lates allowed in the last 12 months

Beyond that, everything else goes, practically. There's no income, asset, or job verification with the current FHA Streamline program. Neither is there an appraisal requirement. It doesn't matter if you're 50% underwater.

Until next week, that is.

Beginning November 17, FHA Streamline Refinance applicants must show evidence of income and employment, plus proof of cash required to close. Furthermore, the FHA is limited loan-to-values to 97.75% for homeowners that want to "roll closing costs" into their mortgage.

In areas of declining home values, this may render refinancing impossible.

There's more changes, too, as highlighted by the Federal Housing Commissioner. Read up for yourself, or ask a mortgage professional for help.

If you're a homeowner and you're currently financed through the FHA, it may be prudent to explore the possibility of an FHA Streamline Refi. Mortgage rates are low right now and FHA guidelines are loose.

Starting next week, FHA Streamlines will be a completely different beast.

What's Ahead For Mortgage Rates This Week : November 9, 2009

Bob Phillips (Realty Executives) — Mon, 09 Nov 2009 13:44:35 -0600

Mortgage markets were extremely volatile last week, carving out a wide range between Monday and Friday.

Thankfully for rate shoppers, the overall momentum was positive.

Mortgage rates fell for the second time in as many weeks. Rates still sit higher versus their early-October lows.

For pure "news", last week was a busy one:

The Federal Reserve held the Fed Funds Rate near 0.000 percent
The Unemployment Rate crossed 10 percent
The First-Time Home Buyer Tax Credit was extended to April 2010

Combined, the 3 events reinforced the growing belief on Wall Street that the U.S. economy is in recovery, but not yet out of the woods. This particular philosophy has been excellent for mortgage rates, helping to hold conforming 30-year fixed mortgage rates near 5.250 percent since the start of the year.

It helped rates last week, too. But low rates aren't without threats.

For one, the Fed's vote to hold the Fed Funds Rate near 0.000 percent will eventually spark inflation concerns. When it does, mortgage rates will rise. That won't be this week, though.

Actually, nothing may happen this week -- there's not much data to release. Apart from a retail report, a confidence survey and some Fed speakers, the calendar is bare. That, and Wednesday is a federal holiday.

However, without data, markets often trade on things like geopolitics, or energy concerns, or momentum. In other words, don't be lulled into thinking rates won't change this week.

At least for now, the mortgage rates look good. By the end of the week, that may not be the case.

Congress Expands And Extends The First-Time Home Buyer Tax Credit

Bob Phillips (Realty Executives) — Fri, 06 Nov 2009 10:24:26 -0600

Congress both extended and expanded the First-Time Home Buyer Tax Credit program Thursday.

The White House says the President will sign it into law today.

The up-to-$8000 tax credit's expiration date has been pushed forward to spring, requiring homebuyers to be under contract by April 30, 2010, and to be closed by June 30, 2010.

The program's basic eligibility requirements remain the same:

Buyers can't purchase the home from a parent, spouse, or child
Buyers can't purchase the home from an entity in which they're a majority owner
Buyers can't acquire the home by gift or inheritance
All parties to the purchase must meet eligibility requirements

The new law includes some notable updates, however.

For one, the definition of "first-time home buyer" has been expanded to include most homeowners with at least 5 years in their current home. "Move-up" buyers like these are now eligible for IRS tax credits, but with a cap at $6,500.

This means that you don't have to be a true first-time home buyer to claim the "first-time home buyer tax credit".

Other eligibility changes include:

The subject property's sales price may not exceed $800,000
The subject property must be a primary residence
Income thresholds raised to $125,000 for single-filers and $225,500 for joint-filer

And remember, the First-Time Home Buyer program grants a tax credit as opposed to a deduction. This means that a tax filer would receive a cash payment of $2,000 from the U.S. Treasury if his "normal" tax liability totals $6,000 and he was eligible for all $8,000 available under the new law.

The complete list of qualifying criteria is posted on the IRS website. Be sure to review it with a tax professional to determine your eligibility. Then mark your calendar for April 30, 2009.

It's 5 months away.

Because Of The Federal Reserve, You Should Lock Before 2:15 PM ET Today

Bob Phillips (Realty Executives) — Wed, 04 Nov 2009 00:09:51 -0600

The Federal Open Market Committee caps off a scheduled, 2-day meeting today in the nation's capital, its 8th meeting of the year.

The group adjourns at 2:15 PM ET and, as is customary, will issue a press release reviewing its monetary policy and the health of the U.S. economy.

The FOMC's post-meeting statements are brief but comprehensive. They're a window into the mind of the Federal Reserve and Wall Street picks apart every sentence for clues.

It's why FOMC meetings tend to shake up the mortgage markets -- for good and for bad.

After its September 2009 meeting, the FOMC said in its press release:

Financial markets have improved
Housing activity has increased
Economic activity has "picked up"

Since September, the momentum has picked up. Credit risks have reduced further, home sales are surging, and, although unemployment remains high, the Fed remains optimistic about a full economic recovery.

Today's FOMC press release will be closely watched. If the Fed alludes to strong growth with inflation in 2010, mortgage rates should rise. Reference to slower growth should help keep rates steady.

The FOMC is expected to leave the Fed Funds Rate within its target range of 0.000-0.250 percent -- the lowest it's been in history. However, it's what the Fed says Wednesday that will matter more than what it does.

If you're floating a mortgage rate or wondering if the time is right to lock, the safe approach is to lock prior to 2:15 PM ET Wednesday.

Higher Home Prices Ahead, Says The Pending Home Sales Index

Bob Phillips (Realty Executives) — Mon, 02 Nov 2009 17:36:55 -0600

The housing market continues to steam forward.

As reported by the National Association of Realtors®, the Pending Home Sales Index posted its 8th consecutive monthly gain in September.

It's the longest winning streak in the history of the index and Pending Home Sales are now at their highest levels since December 2006.

A Pending Home Sale is a home under contract to sell, but not yet closed. It's the precursor to an Existing Home Sale.

Trade group data shows that nearly 80 percent of "pending" homes close within 2 months. The majority of those remaining close within months 3 and 4.

When the Pending Home Sales Index rises, it tells us that market activity has picked up. September's data confirms what we've been noticing since February -- the Buyers Market is ending.

With more homes under contract in the marketplace, homebuyers typically face one or more of the following:

   1. Competitive, multiple-offer situations
   2. Reduced purchase price leverage over sellers
   3. Fewer seller concessions

Therefore, if you're buying a home in the next several months, know that the 8-month run in Pending Sales will lead to a run in closed sales. It should result in higher home prices, too

Indeed, we're already seeing it.

What's Ahead For Mortgage Rates This Week : November 2, 2009

Bob Phillips (Realty Executives) — Mon, 02 Nov 2009 13:09:36 -0600

Mortgage markets improved last week after a series of hugely volatile trading sessions.

Rates carved out a wide range on the week, culminating in a late-Friday plunge that dropped rates by about 1/8 percent.

It was the first time in 5 weeks that mortgage rates fell.

Volatility like that of last week is nothing new on Wall Street; it's been a running theme in 2009. Volatility occurs when markets don't agree on what's next for the economy and, this year, there's been a lot of disagreement like that.

Data has been inconsistent. Take last week for example.

At 9:00 AM Tuesday morning, the Case-Shiller Index showed home prices rising nationwide. Because many analysts believe housing fueled the recession, strength in the sector is widely construed a positive for the economy.

Mortgage rates rose on the news.

But then, an hour later, the national consumer confidence report revealed a substantial deterioration in sentiment versus the month prior. The data forced Wall Street to do an about-face.

Housing is important to the economy, but it can't affect growth like consumer spending can. When Americans are less confident about their future income, they tend to keep their wallets closed, retarding economic growth.

Holiday Shopping Season is getting underway and the last thing businesses want to see is a suddenly reserved American shopper.

This week, the volatility should continue.

In addition to the release of key employment and housing data, the Federal Open Market Committee has a scheduled 2-day meeting. The group's Wednesday afternoon adjournment will influence mortgage rates.

The Fed is widely expected to keep the Fed Funds Rate in its target range near 0.000 percent, but it won't be what the Fed does that will matter as much as what the Fed says.

If the FOMC's press release shows optimism for the economy, mortgage rates will rise in response. Alternatively, if the Fed appears more dour, rates will fall.

Either way, consider locking your rate before the Wednesday afternoon announcement.

Forecast predicts 9.5% O.C. house-price gain

Bob Phillips (Realty Executives) — Mon, 02 Nov 2009 12:57:50 -0600

This is an article by Jeff Collins, in this morning's Orange County Register:

Home-data firm First American CoreLogic predicts that Orange County house prices will be up 9.5% next August from this past summer.

If accurate, the median price of an Orange County house would increase by nearly $48,000 from the $500,000 median reported by DataQuick in August and September.

Those price gains would outstrip appreciation rates for the nation’s 10 largest metro areas, First American reported. For example, Los Angeles County is forecast to see home prices rise 6.3%, the highest rate among the big 10. That’s followed by Miami-Dade County’s projected 6.1% gain.

First American projected that California’s house prices will increase 7.9% by August, while nationwide prices will go up 4.6%. First American expects U.S. home prices to hit bottom in March.

First American’s forecast is just the latest in the past five weeks. Among the others:

The UCLA Anderson Forecast predicted that O.C. home prices will go up between 15.9% and 16.6% in 2010, following by increases of 2.5% to 8.7% from 2011 to 2015. The median price isn’t expected to reach the boom-time peak of $626,000 until 2016 or 2017.
Anil Puri, dean of Cal State Fullerton’s Mihaylo College of Business and Economics, predicted that O.C. home prices will fall through the first half of 2010, and then either stay flat or rise by 2% to 3% at the most.
Economist Mark Schniepp — author of UCLA’s Orange County forecast — projected that home values in Ventura, Santa Barbara, Orange, and San Diego counties would return to 2004 levels by mid-2012, a gain of approximately 30%.
California Association of Realtors Chief Economist Leslie Appleton-Young forecast that California home prices will rise 3.3% next year, driven by sales of distressed homes.
Veros, specialists in automated real estate valuations, said their housing model shows Orange County housing values for their benchmark “single-family residential mid-price tier properties” rising 2% in the year ended Sept. 1, 2010.

First American’s Home Price Index showed that Orange County house prices fell 7.9% in August, its most recent data. Prices for non-distressed homes only — which excludes bank-owned houses and short sales (where prices are below debt) — had dropped by a slightly smaller margin: 7.1%.

Here’s a sampling of what we’ve covered in recent weeks:

You can subscribe to the Register at: http://lansner.freedomblogging.com

What The Media Missed In September's New Home Sales Report

Bob Phillips (Realty Executives) — Thu, 29 Oct 2009 13:21:11 -0500

Some days, newspaper headlines are a terrible place to get your real estate news.

Today is one of those days.

After the September New Home Sales report showed sales volume down from August, the mainstream media jumped on the story:

But the headlines miss the point, somewhat. Yes, home sales volume is important to housing, but it's not as important as home supply.

A deeper look at the New Home Sales data reveals an interesting comparison point:

New home sales volume fell 3.6%
The number of new homes available for sale fell 3.8%

In other words, sales outpaced supply -- a running theme this year and a positive signal for housing.

Since peaking in January 2009, the supply of newly-built homes has now dropped by 40 percent. The average sale price is up 15% over the same period.

This is why you can't get your real estate news from the headlines. You have to dig a little bit deeper to get the real story.

September's New Home Sales report was plenty strong. The housing market recovery continues.

Falling Home Supplies Mean More Multiple-Offer Situations For Buyers

Bob Phillips (Realty Executives) — Thu, 29 Oct 2009 12:58:56 -0500

The national housing supply fell to a 2-year low last month, according to the National Association of Realtors®.

At the current sales pace, existing home inventories would sell out in 7.8 months -- 30 percent faster versus November 2008.

For a 10-month window, that's a major housing supply reduction and it helps to explain why multiple-offer situations have been so common lately.

Moreover, the same report from NAR showed sales activity reaching its highest point since July 2007, too.

If you're looking for evidence that the long-standing Buyers Market is ending, this month's Existing Home Sales report might be it.

Even median sales prices -- typically dragged lower by distressed and foreclosed properties -- declined at its slowest pace in a year. The market may have turned a corner.

Home prices are rooted in the basic economics of supply and demand.

When supply outweighs demand, home prices fall
When supply lags demand, home price rise

Since March 2009, the market has been moving in the right direction. Low mortgage rates, ample housing supply and a first-time home buyer tax credit fueled buy-side demand so that home prices are now rising in many U.S. markets.

Of course we already knew all this in Orange County, California. We have been experiencing multiple offers as commonplace, in the lower price ranges, since February.

If home supplies stay on this path into 2010, expect home prices to rise even more.

Home Values In 95% Of Case-Shiller Markets Are Improving Year-To-Year

Bob Phillips (Realty Executives) — Wed, 28 Oct 2009 00:28:51 -0500

For August, the Case-Shiller Index showed annual home values improving across 19 of 20 U.S. markets. It's the first time in 3-plus years that the benchmark housing index has shown such strength.

According to a Case-Shiller Index spokesperson, "The rate of annual decline in home price values continues to improve."

It's yet another sign that housing may have already bottomed.

However, just because the Case-Shiller Index shows a stabilization in home values, that doesn't necessarily make it true. This is because real estate happens on the local level and the Case-Shiller Index is more "national". It tracks data in just 20 U.S. cities.

Homeowners everywhere else are unaccounted for.

Furthermore, even within the 20 tracked Case-Shiller markets, there's no allowance for the natural sub-markets that exist. Some neighborhoods under-perform and some neighborhoods out-perform.

Case-Shiller treats them all the same.

Despite its imperfections, though, the Case-Shiller Index remains a helpful, broader measurement of U.S. real estate. Economists believe that housing led the U.S. into the recession and they believe housing will lead us out, too.

If that's true, August's Case-Shiller data is another step in the right direction.

What's Ahead For Mortgage Rates This Week : October 26, 2009

Bob Phillips (Realty Executives) — Mon, 26 Oct 2009 08:24:49 -0500

Mortgage markets were volatile last week, making it very difficult to shop for mortgage rates.

On most days, lenders issued multiple rate sheets with the trend putting rates higher in the morning, and lower in the afternoon.

Overall, mortgage rates were unchanged on the week. It broke a three-week streak through which mortgage rates rose.

Rates remain roughly one-half percent higher than the lows of early-October.

The biggest positive for rate shoppers last week was tame economic data -- specifically concerning the Producer Price Index and the housing sector.

The Producer Price Index is an inflationary, Cost of Living-like measurement for businesses and it went negative in September. Analysts weren't expecting that and the surprise pulled rates down an eighth.

Similarly, in housing, both the Home Price Index and Housing Starts figures were softer than expectations. These, too, tugged mortgage rates down.

At least temporarily.

We say "temporarily" because -- all week long -- a steadily-weakening U.S. dollar was leading mortgage rates higher.

All things equal, mortgage rates rise as the dollar loses value and, last week, the dollar touched a 14-month low versus the Euro. The greenback's weakness countered most of the "positive" news for rate shoppers and is a major reason why rates were so volatile.

The volatility should continue into this week, too. With little data and no Fed speakers, look for mortgage rates to move with the market's momentum.

Lately, momentum has been pulling rates higher so if you're floating a rate and trying to time a bottom, the chances are good that we already passed it. Consider locking your rate before rates rise much further.

Once rates break 6 percent, they may not come back down.

Government : Home Prices Edged Lower In August?

Bob Phillips (Realty Executives) — Thu, 22 Oct 2009 23:39:18 -0500

According to the government, home values edged lower last month.

The Federal Housing Finance Agency's Home Price Index report shows values down by 0.3 percent from the month prior -- the index's first down month since April.

The Home Price Index is based on the value of homes financed via Fannie Mae or Freddie Mac and, in this sense, the FHFA Home Price Index is more of a "national" real estate index than its private-sector cousin, the Case-Shiller Index.

But like the Case-Shiller, the HPI is as notable for what it specifically excludes as for what it includes. Most notably, the Home Price Index doesn't account for homes meeting any of the following descriptions:

Is considered new construction
Is a multi-unit property
Is financed by an entity other than Fannie Mae or Freddie Mac

Given the resurgence of FHA financing this year, this last exclusion is especially glaring. FHA represents about one-third of all mortgage loans in 2009.

Because of these exceptions, some analysts label the Home Price Index incomplete. The same could be said of every method of home valuation, however. Case-Shiller only collects data from 20 markets, for example.

In light of these shortcomings, therefore, what's most important to today's home buyers and sellers is to know that each of the "popular" home valuation reports show similar patterns -- home prices have leveled and may be starting to recover in earnest.

For a region-by-region breakdown of the Home Price Index, visit the FHFA website.

As Gas Prices Rise, Mortgage Rates Are Rising, Too

Bob Phillips (Realty Executives) — Wed, 21 Oct 2009 22:35:32 -0500

With crude oil at its highest levels since October 2008, retail gas is up 8 cents per gallon this week.

It's bad news for home buyers and mortgage rate shoppers. The same force that's driving oil higher is linked to rising mortgage rates.

We're talking about the weakening U.S. Dollar which is now at its worst levels versus the Euro in 15 months.

Crude oil is priced in U.S. dollars, by the barrel. When the dollar loses value, more of them are needed to buy the same barrel of oil. As a result, predictably, the price of crude oil goes up.

Now, there are other reasons why crude oil is rising, but the fading U.S. dollar is one of the major ones and it's why we're addressing it.

The dollar has a similar impact on mortgage rates.

Mortgage rates are based on the price of mortgage bonds that -- like crude oil -- are also denominated in dollars. As the dollar loses value, so do mortgage bonds. This causes demand for bonds to drop and prices on bonds to fall.

Because bond prices and bond rates move in opposite directions, mortgage rates rise and thisis precisely what's happening on Wall Street today.

Since touching a 5-month low in early-October, mortgage rates have tacked on as much as 1/2 percent, depending on the product. Moreover, with the dollar showing no signs of a rebound, the upward pressure on rates should continue.

If you're trying to time the market bottom, you may have already missed it. Consider locking your mortgage rate before rates increase even more.

And your everyday signal that rates are rising? Just check your price at the pump. If gas prices are up, it's likely that mortgage rates are, too.

Housing Starts Rise In 8 Months Out Of 9 This Year

Bob Phillips (Realty Executives) — Wed, 21 Oct 2009 22:21:00 -0500

Housing Starts on single-family homes gained last month, marking the 8th time that's happened this year.

A "Housing Start" is a home for which the foundation has been excavated and, considered alongside other key market metrics, September data suggests that the housing market has stabilization is complete.

Momentum in housing is overwhelmingly positive:

Homes under contract are soaring
National home supplies are way down
Home values are up in a lot of markets

Despite the positive news, the press is calling September's Housing Starts data a "bummer". Citing a drop in monthly building permits, the media purports that housing will slow in the months ahead.

The conclusion may be right, but the rationale is may be wrong.

The probable cause for fewer permits isn't that the housing market is overdone. It's that home builders are choosing to exercise caution given the pending expiration of the First-Time Home Buyer Tax Credit and a still-growing number of foreclosed homes.

It's unclear what housing demand will be beginning in December and the last present a builder wants for the holidays is an excess of inventory.

It makes sense that building permits are down, in other words.

Looking back at February of this year, there's a host of signs that housing is on the path to recovery. Now, that path won't be a straight line and there's bound to be setbacks, but September's Housing Starts is not one of them.

Housing Starts are up 40 percent on the year.

Previewing The New Good Faith Estimate

Bob Phillips (Realty Executives) — Tue, 20 Oct 2009 16:08:35 -0500

The new Good Faith Estimate makes its debut January 1, 2010.

Expanded from 1page to 3, the legislators responsible for the new Good Faith Estimate want it to be simpler for homeowners and home buyers to understand than the former version.

By most accounts, Congress will meet this goal.

The new Good Faith Estimate includes plain-English explanations of every fee, charge, and interest payment involved in a purchase or refinance. It also includes a section called "The Shopping Cart" in which applicants can compare lenders.

The new Good Faith Estimate is concise, too. Using a series of "Yes/No" checkboxes on Page 1, mortgage lenders specifically note:

The interest rate on the mortgage
Whether the interest rate can change over time
Whether the loan carries a prepayment penalty
The length of the rate lock

Currently, this information is spread across 3 separate forms.

Furthermore, the new Good Faith Estimate simplifies rate-and-fee comparisons, showing applicants how a lower rate can be available for a higher set of fees, and vice versa.

For all of its clarity, though, the new Good Faith Estimate still fails to address the issue of "suitability". As in, is this the right loan for the right borrower? That's something only a loan officer can do.

For suitable advice, talk with a loan officer who both listens to your needs and helps you plan for them. Great terms on an unsuitable loan are often worse than "good" terms on the right one.

10/19/09 What's ahead for mortgage rates this week.

Bob Phillips (Realty Executives) — Mon, 19 Oct 2009 14:20:05 -0500

Mortgage markets worsened last week on better than expected economic data, causing mortgage rates to rise.

Last week was the third consecutive week that mortgage rates moved higher and, since touching a multi-month low in early-October, conforming mortgage rates are up by about a half-percent.

It's likely rates will continue to rise, too. That's because the same force that held rates down for so long is now the force pulling them up -- expectations for the U.S. economy.

Over the last 6 months, it wasn't clear in what direction the country was headed. The housing sector has been gaining in strength, but the rest of the economy has been a question mark.

Last week put an end to some of those questions:

Retail Sales posted stronger-than-expected results
Consumer Sentiment matched September 2008 levels
Jobless and continuing claims fell below consensus estimates

Expectations for the U.S. economy are changing on the fly. As a result, stock markets gained last week and mortgage markets lost.

This week, rates could move higher still. There are an unusually large number of key economic reports including on housing and inflation, plus a handful of speeches from key Federal Reserve members.

With each positive announcement, mortgage rates should rise.

10/19/09 What's ahead for mortgage rates this week.

Bob Phillips (Realty Executives) — Mon, 19 Oct 2009 14:19:31 -0500

Mortgage markets worsened last week on better than expected economic data, causing mortgage rates to rise.

Last week was the third consecutive week that mortgage rates moved higher and, since touching a multi-month low in early-October, conforming mortgage rates are up by about a half-percent.

It's likely rates will continue to rise, too. That's because the same force that held rates down for so long is now the force pulling them up -- expectations for the U.S. economy.

Over the last 6 months, it wasn't clear in what direction the country was headed. The housing sector has been gaining in strength, but the rest of the economy has been a question mark.

Last week put an end to some of those questions:

Retail Sales posted stronger-than-expected results
Consumer Sentiment matched September 2008 levels
Jobless and continuing claims fell below consensus estimates

Expectations for the U.S. economy are changing on the fly. As a result, stock markets gained last week and mortgage markets lost.

This week, rates could move higher still. There are an unusually large number of key economic reports including on housing and inflation, plus a handful of speeches from key Federal Reserve members.

With each positive announcement, mortgage rates should rise.

Orange County Housing Report: Two Polar Opposite Markets

Bob Phillips (Realty Executives) — Sun, 18 Oct 2009 10:37:18 -0500

Here is the latest Orange County, California Housing Report from my friend Steven Thomas, the President of Altera Real Estate. Steven's report is the most comprehensive study of our local real estate market, and is an extremely up to date depiction of the market as it is today. Enjoy.

Orange County Housing Report: Two Polar Opposite Markets

With Halloween fast approaching, the differences between the lower end and higher end Orange County housing market are SPOOKY. It is extremely ironic that the general public expects a really soft real estate market with a lot of inventory and that buyers get to call all of the shots. That is entirely not true for homes priced below $1 million with an expected market time of only 1.88 months. That translates to an incredibly HOT seller's market. That range represents 71% of the current active listing inventory.

The upper range, homes priced above $1 million, represents 29% of the active listing inventory, but has an expected market time of 10.37 months. Anything over 10 months is basically an almost frozen market, a deep buyer's market. So, today's Orange County buyers need to know that the lower the range, the hotter the market. From $750,000 to $1 million, the expected market time is 3.76 months, not incredibly hot, but not incredibly slow either. The word on the street is that there is not that much new, fresh inventory hitting the market, so if a great property comes on the market that is priced right, don't expect it to last very long.

Below $750,000 is crazy, and below $500,000 is just NUTS. That's right, N-U-T-S!!! Tremendous competition, multiple offers, and selling prices close to or above the asking prices are the norm. This is where many who have not experienced the Orange County housing market by sitting in a car and touring the few homes on the market within their areas of interest simply will not believe me. So, if you are in doubt, take a look around for homes in the lower ranges. The hot market is a reality. The homes that do not sell are overpriced, in poor condition or are in a poor location.

It is not just distressed homes that are selling. 50% of demand, the number of new pending sales during the past month, is sellers with equity in their homes. Homes that are priced right are selling and selling fast. The sales to list price ratio for homes priced below $1 million is 99%. That means that on average, homes are discounted by only 1% off of their asking prices. For homes priced below $500,000, the sales to list price ratio is 100%, meaning that, on average, they are selling for their full asking price. That should be the headline in local newspapers and the topic for the nightly news: "Most homes in Orange County are selling for their asking prices and they are selling fast!"

Let me clarify one important point though, the lower ranges are experiencing a seller's market, but are not experiencing appreciation. Prices have stabilized because there is just too much demand. But, with so many distressed properties still in the mix and many appraisal issues, prices are not going up. With the government's changes to the appraisal process, known as "The Home Valuation Code of Conduct," more and more homes are not appraising for the agreed upon purchase prices. The government had the right intention, but I can write a book as to how the code of conduct has made the housing recovery process much more challenging. When an appraisal comes in too low, the buyer, the seller, or a combination of the two, makes up the difference, OR the pending sale falls apart and the home is placed back on the market.

Now, let's take a closer look at the upper ranges. Homes above $1 million may represent 29% of the active listing inventory, but they only represent 7% of demand. As is customary, the higher the range, the slower the market. In this downturn it is even more pronounced. The sales to list price ratio in the upper range is 92%. That takes into account the LAST list price after many price reductions. The sales to ORIGINAL list price ratio is 85%.

This vast discrepancy is due to unrealistic expectations on the part of sellers within the higher ranges and illustrates the need to carefully price a home based upon recent sales activity, 90 days or sooner is preferable, and all pending activity. Sellers in the upper ranges should not fall into the trap of giving too much weight to active listings. In this market, a buyer is not going to take into consideration another active listing that has sat on the market for months in coming up with an offering price. Appraisers are not going to give active listings much credence either. The market is so slow in the upper ranges that a great price, super condition and a great location still may equate to a long market time. Demand is just too low, so sellers need to pack their patience and enjoy the ride; this may take a while.

So, how do the rest of the numbers look? So, how do the rest of the numbers look? The active listing inventory increased by just six homes within the past couple of weeks, remaining under the 8,000 mark and totaling 7,923. That's 4,799 fewer than last year and 9,836 fewer than two years ago. Ask any agent and their number one complaint is a lack of inventory in the lower ranges.

Demand, the number of new pending sales within the past month, dropped by 73 in the past couple of weeks to 3,197. Last year's demand was 524 fewer and two years ago was 2,022 fewer. The expected market time for all of Orange County increased slightly in the past couple of weeks from 2.42 to 2.48 months. The expected market time last year was at 4.77 months and two years ago it was at 14.73 months.

The number of distress properties on the market increased for the first time since November of 2008. Within the past couple of weeks the number of foreclosures and short sales increased by 79, now totaling 2,398, returning to early September 2009 numbers. 30.3% of the active inventory is distressed compared to 42.9% last year. There are currently only 322 foreclosures in all of Orange County, an increase of two in the past two weeks. Foreclosures only represent 4% of the active listing market and have an expected market time of 0.67 months.

Foreclosures are HOT and are, on average, selling for 4% above their asking prices. There are currently 2,076 short sales on the active market, an increase of 77 over the past two weeks. Short sales currently represent 26% of the active listing inventory, a major player in today's marketplace. The expected market time for short sales is currently at 1.82 month versus 6.08 months one year ago. Short sales are also a hot segment within the marketplace; however, buyers should not expect instantaneous results and quick closings. Short sales must wait for "lender approval," which can take anywhere from weeks to months. ( End of report.)

The Myth called “The Shadow Inventory” of foreclosed properties.

Bob Phillips (Realty Executives) — Sat, 17 Oct 2009 15:41:18 -0500

The Myth called "The Shadow Inventory" of foreclosed properties. ( aka, "The alleged forthcoming Tsunami of foreclosures". )

For the past year or longer, there has been a veritable Tsunami of articles, warning us of a gigantic wave of foreclosures heading our way - destined to give us yet a further "crash" of real estate prices, both locally, here in Orange County, and Nationally. The catalyst for this forthcoming wave is an alleged "Shadow Inventory" of properties, already foreclosed, but being warehoused by the lenders who took them back, in order to not flood the current real estate market with a doubling or tripling of properties, which would theoretically drive prices down even further than they've already gone.

These articles were almost all based upon charts and graphs that had been formulated by various financial institutions, and were designed to provide a peek at the potential future of many types of mortgages which had been originated 3, 5, or more years ago, giving financial "experts" facts to base their opinions of the market that would exist when the loans adjusted, at some future point.

It is easy to look at some of these charts from a year or two ago and conclude that there are a whole lot of troublesome mortgages that could be coming due at the worst possible time. Frankly, going back four or five years, and looking at similar charts then, one could easily foresee the financial woes that came upon us a couple of years ago, which have brought us to our present dismal condition - as a local economy, and as a Nation.

The problem, that people writing the warning articles mentioned above, is this. They are reading last year's charts the same way they read similar charts 4 or 5 years ago, and coming to the same conclusions, not considering that there have been a multitude of changes implemented over the past year and a half, that have wrought corresponding changes in the results forecasted. Many of the troubled homes forecasted a year ago to hit the market early this year never really did. Sure, there are a lot more foreclosures on the market than there were 3 years ago, but not nearly the huge wave that had been forecasted.

So then, this spring, the pundits who created the charts of a year or two ago, told us that they were revising their projections - pushing them off for 6 months or a year. They hadn't been wrong in their forecasts - the Government had merely intervened, postponing the inevitable. That wasn't an entirely correct assessment of the situation, as it was more complicated than just that simple conclusion.

Yes, there was a foreclosure moratorium or two, both National, and locally, but there were many additional factors, simultaneously affecting the future of the mortgages portrayed on the charts. Many of the troubled loans had already been refinanced into ones more friendly to the borrowers. Many of the properties involved had already been sold, eliminating their mortgages. Many of the properties were now becoming short sales. And still more loans were starting to be modified. These factors, acting in concert, have had a serious impact upon the properties and mortgages that had been forecasted years or even months earlier.

Changes have happened, and the data of even just a year ago is obsolete. That is why there wasn't a wave of foreclosures earlier this year that had been forecast, and why the coming wave being forecast for now or early 2010 is NOT going to materialize, in my humble opinion. I fully expect that 2010 will be a virtual duplicate of 2009 - with a lot of foreclosure properties coming onto the market in the spring, and just like this year, for them to be swallowed up quickly by a huge wave of pent-up buyers - eager to take advantage of low prices, and low interest rates - just like this year. And, just like this year, prices will continue to nudge upward - not "crash" further downward - at least here in Orange County, California. By the way, those buyers, from earlier this year, and those expected next year, are the REAL Tsunami in both our current, and our forthcoming, real estate markets.

A recent report from ForeclosureRadar.com: No Shadow Inventory of Bank Owned Homes

The Fed Thinks The Economy Is Improving And What It Means For Home Affordability

Bob Phillips (Realty Executives) — Thu, 15 Oct 2009 23:55:50 -0500

Mortgage rates are higher after the Federal Reserve released the internal notes of its September 22-23, 2009 meeting.

Known as the "Fed Minutes", the report details the conversation and cross-currents that led to the Federal Reserve's decision to vote "unchanged" on the Fed Funds Rate after its last meeting.

The Fed Minutes are the lengthy companion to the more famous, succinct post-meeting press release.

As a comparison:

Press Release: 383 words
Minutes: 6934 words

The extra level of details is a big deal because Wall Street is perpetually in search of clues about what the Federal Reserve is going to do next.

In the past week, multiple Federal Reserve members hinted that the Fed Funds Rate may rise as early as April 2010. Fed Chairman Ben Bernanke even alluded to it, too.

The minutes revealed that the economy may improve even faster than was previously expected, too.

These acknowledgements are part of the reason why mortgage rates are up. Because the Fed Funds Rate rises to accommodate a growing economy, the prospect of economic recovery is drawing money into the stock market and away from mortgage-backed bonds.

Less demand for bonds means lower prices which, in turn, leads to higher rates.

Should Joint Homeowners Keep Separate Bank Accounts?

Bob Phillips (Realty Executives) — Wed, 14 Oct 2009 10:18:47 -0500

When you own a home with a spouse or partner, the issue of what's mine, what's yours, and what's ours can be a divisive one.

Each household has its own money management methodology and, according to financial talk-show host Suze Orman, most leave significant room for improvement.

In this 4-minute piece aired on NBC's The Today Show, Orman talks about co-managing finances with topics including:

How to determine how much money goes into a "personal" spending account versus a "family" spending account
The importance of both parties taking an active role in bill-paying
How to manage the money when one partner doesn't earn an income

Being aware of money is the first step towards protecting it.

The FHA Is Changing Its Streamline Refinance Guidelines November 2009

Bob Phillips (Realty Executives) — Wed, 07 Oct 2009 04:28:13 -0500

Beginning November 17, 2009, the FHA will make it harder to qualify for its popular Streamline Refinance program.

Available exclusively to homeowners with existing FHA home loans, the streamline program is meant to help homeowners reduce mortgage payments as simply as possible.

As such, the program carries minimum eligibility requirements.

In fact, the FHA Streamline Refinance is more notable for what it doesn't require from applicants.

There's no income verification
There's no asset verification
There's no employment verification
There's no appraisal required

The two biggest qualifiers, really, are that the homeowner meets a minimum credit score and that the new loan doesn't exceed the original balance of the old loan.

The new program guidelines, however, are much stricter.

Effective next month, among other requirements, applicants must show evidence of employment and income, plus proof of cash required at closing.

Furthermore, homeowners can't finance closing costs into the mortgage without a complete home appraisal. In areas of declining value, this may render refinancing with the FHA impossible.

Therefore, if you're a homeowner with an FHA mortgage, consider contacting your loan officer before the November 17 deadline to explore your Streamline Refinance options. Mortgage rates are low and you never know for what you'll qualify.

The worst thing you can do is to wait too long to find out. Once the deadline passes, the old guidelines will be history.

Pending Homes Sales Gain For The 7th Straight Month

Bob Phillips (Realty Executives) — Tue, 06 Oct 2009 00:56:54 -0500

Buoyed by a generous tax credit, affordable homes, and low mortgage rates, the Pending Home Sales Index posted its seventh consecutive monthly gain in August.

It's the longest winning streak in the index's history and the highest reading in 2-1/2 years.

It's also another signal that the housing market is in recovery.

"Pending home sales" are a forward-looking indicator, measuring the number homes under contract to sell, but not yet closed.

Historically, 80% of homes under contract close within 60 days. Most others close within 120 days.

It's no wonder home values are rising in so many markets.

Home buyers -- take note. If you're plan to purchase a home between now and the New Year, expect that the recent run in pending sales will turn into run of closed sales which, in turn, should pump prices up and drop home inventory.

With mortgage rates hovering near 4-month lows, the best way to find a value in housing may be to act sooner rather than later.