Mortgage and Real Estate Insight

Rates Remain Low - Housing Starts Fall

Hunter Palmer (Vision Bank) — Thu, 19 Nov 2009 08:41:39 -0600

Mortgage rates continue to hover near record lows with the rate on the benchmark thirty year flirting with 4.875% this week. The rate on the fifteen year fixed rate has dipped below 4.50% coming in at 4.375%. Thirty year rates on most government loan programs including FHA. VA and Rural Development have eased to 5%. Rates were helped this week after Federal Reserve Chairman Ben Bernanke gave a speech on Monday in which he cited “economic headwinds” as rationale for keeping rates low for the foreseeable future. Low interest rates helped keep the value of the dollar low against other major currencies and driven the price of gold to record highs in recent weeks as investors look for a safe alternative to the U.S. currency.

On Wednesday the Commerce Department reported that permits for new home construction tumbled 10.7% in October to their lowest level in six months to an annual rate of 529,000. The October housing starts were also 30.7% below the October 2008 figures. The numbers were also well below economist’s forecast that had expected housing starts to com in at 600,000 for the month. This was the second month in a row where housing starts did not meet analysts’ expectations.

On a brighter note, the National Association of Realtors reported last Friday that nearly half of all homes now being sold are to first-time homebuyers. NAR said that 47% of all new homes being sold are to first-timers. This is up from 41% in 2008 and up a whopping 11% since 2006. Most industry experts credit low home prices, low interest rates and the first-time homebuyer tax credit. That credit was extended last week through June 2010.

Pending Home Sales Rise

Hunter Palmer (Vision Bank) — Tue, 03 Nov 2009 16:21:38 -0600

The National Association of Realtors reported on Monday that the September Pending Home Sales Index jumped 6.1% t0 110.1 after a 6.4% rise in August. The big rise far surpassed analysts’ expectations who anticipated a more modest rise of 1.2%. Most economists contributed the large increase to the estimated 200,000 to 400,000 first-time homebuyers rushing to take advantage of the $8,000 tax credit set to expire on November 30^th. To that end, many analysts are anticipating a drop in pending home sales after November 30^th.The NAR report helped offset a Commerce Department report last Thursday that showed new home sales fell unexpectedly on September after rising for five straight months. Commerce said new home sales fell 3.6% in September to a seasonally adjusted annual rate of 402,000. It was the first decline since March. Ironically, the drop was also attributed in part to the expiring first-time buyer credit. Go figure.

Mortgage rates for thirty year conventional loans have remained defiantly in the 5.125% to 5.25% range for several weeks now despite increased volatility in the bond and stock markets. Bond traders are betting that rates will remain low for some time to come while stock traders are increasingly unsure about the sustainability of the 2009 rally. Mixed economic reports coupled with the possibility of a jobless recovery have helped keep investor optimism in check to an extent. We could get some direction on interest rates this week when the Federal Reserve’s Open Market Committee concludes their two day meeting on monetary policy. Most expect the Fed will leave rates unchanged but they could signal future increases in their adjournment remarks on Wednesday.

The Federal Reserve is now nearing the end of its $1.25 trillion buyback of mortgage-backed securities having already purchased $977 billion since the program began earlier this year. As I have stated in past articles, this program has been largely responsible for keeping mortgage rates so low for so long. With only twenty two weeks and $273 billion to go, we may begin to see long term rates begin to edge up in the coming months as the huge demand created by the program tapers off. Stay tuned.

Housing Starts Miss Forecasts

Hunter Palmer (Vision Bank) — Wed, 21 Oct 2009 09:48:20 -0500

Mortgage rates remain low again this week helped out by reemerging doubts about the stock rally and economy as a whole. The benchmark thirty-year, fixed-rate stands just above 5% with no points and the fifteen year is just below 4.50%. While paying a point was buying a full ½% discount to the rate in the first quarter of the year, that premium has narrowed significantly and a point today is only buying a 1/4% rate improvement. There has been renewed volatility in rates over the past couple of weeks but the day to day ups and downs have always offset leaving rates virtually unchanged. I am still somewhat surprised that twelve month highs in the equity markets would have not dampened demand for bonds but so far we are not seeing it. As long as there is robust demand for bonds rates will remain in their current range.

Some disappointing news on the housing-front this week as the Commerce Department reported on Tuesday that housing starts for October missed economists’ expectations. Though still up .5% from the previous month, the seasonally adjusted annual rate of 590,000 starts was significantly less than the 610,000 most economists had expected. Housing starts are down 28.2% from September 2009. In another, perhaps more worrying, report, Fiserv, the financial and information analysis firm, said that home prices would continue to fall through 2010. They expect the median home price to drop an additional 11.3% by June, 2010 but expect an increase of 3.6% in the following year. There was a silver lining in the report, however, that showed while prices in some markets such as Miami, Orlando and Phoenix could see additional declines in excess of 20%, home prices in some markets are predicted to actually rise in 2010.

I had a lot of response to last week’s article regarding the new HVCC appraisal guidelines and Truth in Lending requirements. I thought, in fairness, I should point out that Freddie Mac released figures today in support of the HVCC. Freddie Mac said that overall appraisal quality had gone up since the implementation of HVCC May 1^st and said it had cut lender repurchase risk substantially. Freddie reported an additional 15% of the appraisals it has reviewed since HVCC took effect are in line with the values produced by their automated valuation models. I felt I should give the other side of the story but I still don’t have to agree with it.

Rates Lower - Home Prices Still Rising

Hunter Palmer (Vision Bank) — Wed, 07 Oct 2009 13:25:28 -0500

Mortgage rates remain at near eight month lows as strong demand in the bond market drove the yield on the ten year Treasury note below 3.20% before rising slightly to 3.25% today on a renewed rally in stocks. The rate on the benchmark thirty-year is hovering right at 5% with no points and the fifteen-year stands at 4.375. Thirty-year rates actually were pushing 6% back in the spring so this is quite an improvement and rather unexpected. The general consensus has been that as the economy pulls out of recession and as signs of economic growth become more evident, rates would rise as inflationary pressures mounted but this has not materialized. As lingering fears over the shape of the US and world economies has driven the price of gold to a record $1,039 and ounce today, the dollar is flatlining and you are beginning to hear comments like "irrational exuberance" when describing the run up in stock prices this year. And there are other worrisome signs. Last week's unemployment report came in well below expectations as the overall rate of unemployment rose to 9.8%. Consumer confidence also fell unexpectedly last month and retailers are now forecasting a dismal hoilday shopping season ahead. Though I feel the overall economy is in a hugely better position than this time last year, I still say something has to give and I think that something is an invetibale correction stocks.

At least there is continued good news coming from the housing sector. Last Thursday the National Association of Realtors reported that homenuyers wrote more contracts to purchase homes than in any month this year. The August Pending Home Sale Index rose a whopping 6.4% and mared the seventh consecutive month of increases in the index. The August increase was well above economist's forecasts who had expected a modest rise of 1%. In contrast, July pending home sales rose 3.2%. Perhaps even better news for the hosuing market cam last Friday when the S&P Case-Shiller Home Price Index was released for July and showed that home pices in twenty cities across the US were up 1.6%. This was the third month in a row that the index has shown prices rising. The June index showed an increase of 1.4%. Even though July 2009 prices were still 13.3% below July 2008, the increase was still a pleasant surprise to analysts who site the data as evidence of a trend towards a stabilizing housing market.

Rates Ease Further - More Good Housing News

Hunter Palmer (Vision Bank) — Fri, 25 Sep 2009 14:56:15 -0500

We have had some good news on the housing front over the past week as the National Association of Homebuilders reported that builder confidence rose in September for the third consecutive month to its highest level since May of 2008. The Census Bureau also released a report on August home starts that showed builders broke ground on 598,000 new homes, up 1.5% from July. The good news was tempered, however, by a surprising drop in the number of single family home starts. While overall starts were up, thanks to a resurgence in multi-family property starts, single-family starts actually fell 3% in August. Some analysts suggested the drop in single-family home starts could simply be an anomaly and point to the overall report as yet another sign that the housing market has bottomed. Late this week many analysts were surprised when the National Association of Realtors reported that existing home sales actually fell unexpectedly in August after four consecutive months of increases. But just a day later, the Commerce Department reported that sales of new homes in August rose for the fifth straight month.

Mortgage rates have continued to defy the rally in the stock market with the benchmark conforming thirty-year, fixed-rate settling in at 5.125% with no points. The fifteen year fixed also improved to just under 4.50% as the bond market continues to bet that the Federal Reserve will keep rates low for the foreseeable future. Fed Chairman, Ben Bernanke, has helped reaffirm this belief by stating that while the economy may be approaching the end of the recession the overall economy, and particularly job growth, are likely to remain weak for some time. Indeed, at the adjournment of their Open Market Committee meeting this week the Fed left rates unchanged at 0% - .25%. With the apparent lack of any inflationary pressures on the horizon, the Fed is determined to keep monetary policy very accommodating to insure the economy does not slip back into recession. Over the short-run, I expect mortgage rates to remain in their current narrow range or possibly could ease even further.

One late report out this week from the IRS said that, so far, 1.4 million first-time homebuyers have taken advantage of the $8,000 tax credit. I, personally, have dealt with at least ten customers who are eligible and still have several in the pipeline yet to close. The credit is due to expire on November 30^th though there are already some calls from Congress that it should be extended. I’ll keep you posted.

Fannie Chief Sees Long Road to Recovery

Hunter Palmer (Vision Bank) — Fri, 11 Sep 2009 15:39:01 -0500

In his first public speech since taking over as CEO of Fannie Mae, Michael Williams painted a hopeful but difficult road to recovery for the housing market. Speaking before the Exchequer Club in Washington, Williams said the market over the past twelve months has had a “very, very, tough year.” Anyone looking objectively at the economy and the housing market sees hope,” he said, adding “The patient is out of intensive care but still has a very long road ahead to a clean bill of health.” He predicted foreclosures would continue to climb this year and that the inventory of foreclosed properties and unsold homes remain at “exceptionally high levels.” Still, Signs of a recovery in housing are undeniable. New and existing home sales have been posting better than expected gains while the number of pending home sales continues to rise at a record pace. Builder confidence has even managed to rise slightly in recent months and new home starts are showing signs of life as well.

Mortgage rates rose slightly over the past week from near six month lows after stocks ended there near week long-skid and the NASDAQ and S&P 500 both closed Tuesday at 2009 highs. Bonds have held up pretty well, however, as there is still a desire for safe investments in the face of an uncertain economic future. This was evident on Monday when gold prices broke $1,000 per ounce. It is becoming pretty evident that the economy has stepped back from the abyss and is on a much more sound footing than this time last year but doubts still remain about the economy’s strength and the timetable for long-term recovery. As long as the doubts linger, interest rates should remain very attractive. The 30 benchmark thirty-year, fixed-rate is still around 5.25% and has remained in a .25% range for over a month now.

Pending Home Sales on Record Pace

Hunter Palmer (Vision Bank) — Fri, 04 Sep 2009 13:31:39 -0500

The National Association of Realtors reported Tuesday that its index of pending home sales rose 3.2% in July from June marking the sixth consecutive month of increases. Though not quite as high as the 3.6% increase reported in June, July’s increase marks the first time the index has posted six months of increases since NAR began tracking pending home sales in 2001. Economists generally expected a July increase of only 1.5%. NAR Chief Economist, Lawrence Yun, said in a written statement that “momentum in the housing market has clearly turned for the better.” “The recovery is broad-based across many parts of the country,” Yun said. “Housing affordability has been at record highs this year with the added stimulus of a first-time homebuyer tax credit.”

Mortgage rates have managed to ease slightly as bond prices have risen over the past week as stocks have fallen back from their 2009 highs in a sign that investors may finally be pulling back from what many have seen as a premature rally over the past six months. Thirty-year, fixed-rates fell to 5.25%, approaching a six month low and fifteen year rates hovered near 4.50%. We have yet to see any drop in jumbo rates which have remained above 7% for some time with little hope of relief in the foreseeable future as the secondary market for jumbos is nearly non-existent. Look for rates to remain in their current range over the coming week.

Sales, Home Prices Post Gain

Hunter Palmer (Vision Bank) — Thu, 27 Aug 2009 15:23:01 -0500

We have received more good news on the housing market this past week beginning with Last Friday’s report from the National Association of Realtors’ report on July existing home sales which showed a jump of 7.2% over June and up 5% from July of 2008. It was the biggest month-over-month increase in existing home sales since NAR began tracking the statistic in 1999. On Tuesday, the S&P/Case-Shiller Home Price Index showed home prices increased 2.9% in the three months ending June 30^th. This was the first quarter-over-quarter increase in three years providing further evidence that the housing market has since bottomed and is on the road to recovery. Late breaking news on new home sales came in this morning which showed a jump of 9.6% in July, the highest level since September 2008.

Mortgage rates have stayed in a range over the past week with only mild daily fluctuations in contrast to the increased volatility we had seen in the week prior. The Fannie Mae/ Freddie Mac conforming fixed-rate for single-family purchases stands at 5.375% with no points and the fifteen year stands at 4.625%. Rates have been helped by tame inflation reports and a well received government bond auction last week. Rates have even managed to brush off a better than expected 4.9% increase in durable goods orders reported today with bonds actually a hair higher after the report. I expect rates will remain in their current range over the next week as they have for the past month or so. In the longer term, we will have to see if there are further signs of an improving economy and, if so, will those signs be strong enough to bring some inflationary fears back into the market. So far all indications are that though we are in the beginnings of a recovery, it will be very slow and take some time to fully rebound.

Mixed Signals in Housing Data

Hunter Palmer (Vision Bank) — Thu, 20 Aug 2009 13:25:18 -0500

We got a mixed bag of economic data on the housing front this week that, on one hand disappointed, but upon closer analysis showed yet another sign that the battered housing market is recovering. On Tuesday the Commerce Department said that initial construction of new homes fell in July after surging in June. Housing starts fell 11% to a seasonally adjusted rate of 581,000 down form 587,000 in June. Commerce also reported that applications for new building permits also fell in July by a more modest 1.8% though both reports came in below economist’s forecasts. One caveat, however, was that when broken out by construction type, housing starts for single-family homes actually posted a 1.7% gain in July and applications for single-family permits rose by 5.8%. This is the silver lining in these reports as single-family homes are considered the core of the housing market and the overall numbers include the hard hit multi-family sector.

Mortgage rates remain very attractive after last week’s meeting of the Federal Reserve’s Open Market Committee reassured investors that interest rates would remain low for the foreseeable future as inflationary pressures are anticipated to remain weak for some time. Stocks have also helped out rates as consumer spending and consumer sentiment figures released last week have cast more doubt about a speedy recovery for the economy. The thirty-year conforming fixed rate is sitting right at 5.25% for single-family purchases and the fifteen-year is at 4.625%. Government rates have been just a tad higher at 5.50% and 5.00% respectively. As long doubts linger over the economy, we will continue to have the uncertainty factor that tends to maintain demand in the bond market and keep rates low. Without any inflationary pressures in the short-run, I don’t see any significant rise in rates over the coming weeks and we may even see some further easing.

Rates Rise - Home Sales Too

Hunter Palmer (Vision Bank) — Thu, 06 Aug 2009 08:37:30 -0500

Mortgage rates held up well last week as the Federal Reserve auctioned off a whopping $200 billion in US Treasury debt and even managed to improve somewhat by week’s end as I had predicted. This week has been another story however. After sliding to 5.25%, the rate on the benchmark thirty-year, fixed-rate climbed back to 5.50% as the ten-year Treasury note yield rose to 3.73% by Wednesday morning. Bonds prices have been falling in reaction to positive economic news and a renewed rally in the stock market though stocks looked ready to pull back by mid week. After a period of relative calm over the past several weeks, we are seeing a return to volatility and I expect to see some see-sawing of rates over the short-run as investors try to digest the mix of economic data and corporate earnings.

Yet another sign of a thawing housing market could be seen in a report released on Tuesday that showed pending home sales rose for the fifth consecutive month in June. According to the National Association of Realtors, the Pending Home Sales Index rose to 3.6% during June. That was 6.7% higher than in June of 2008 and the first five consecutive month increase since July of 2003. The number surprised most analysts who had expected a meager .7% increase. The majority of the sales were in the lower-end segment of the market indicating that many first-time buyers are getting off the fence, lured by low rates, low prices and the $8,000 tax credit. With a deadline closing date of November 30 to be eligible for the credit, I expect we will see a surge of first-time buyer activity in the next ten weeks or so.

Rates Hold - Homes Data Positive

Hunter Palmer (Vision Bank) — Wed, 29 Jul 2009 10:42:54 -0500

Mortgage Rates have managed to survive some significant volatility in both the equity and bond markets over the past week to remain at 5.50% for thirty-year, fixed-rates. Stocks reacted positively last week after some better than expected initial corporate earnings but have since pulled back on more sober earnings reports and a second monthly decline in consumer confidence. Bond market volatility has been driven by a reaction to stocks along with a massive $200 billion government debt auction this week. It is expected that the Chinese and others will readily buy up this new debt but concerns linger as to how much of an appetite they will have in the long run as the Federal Reserve raises an unprecedented amount of cash to pay for stimulus and the purchase of mortgage-backed securities. As I have discussed before, it is this delicate balance between the issuance of new government bonds, creating excessive supply, and the purchase of mortgage-backed securities, to create demand, that has managed to keep rates low thus far. If bond prices can hold up through this week we should see reduced volatility and perhaps a slight dip in rates next week.

Last Friday the National Association of Realtors released June existing home sales figures that, while showing an increase of 3.6%, also showed prices of existing homes were 15.4% lower than in June of 2008. Still, the 3.6% increase in sales was slightly better than the 3.4% most economists had expected. On an even more positive note, the government said on Monday that new home sales rose by a whopping 11% in June to a seasonally adjusted 384,000 homes. And while that was still 21% below the same month last year, it still easily beat economists’ forecasts of 352,000 new homes sold. Perhaps the best news of the week came on Tuesday when the Case-Shiller index of home prices was released for May showing that home values rose on a monthly basis for the first time in nearly three years. The .50% increase was the first month-over-month increase since July of 2006. The Case-Shiller index also showed that home prices for May were off some 17.1% in the 20 major markets but May also marked the fourth straight month where the year-over-year decline lessened in those markets.

I have been reporting a lot of real estate statistics over the past eight months and what jumps out at me most is the in January it seemed for every positive report on housing, there were two that were negative…a kind of ‘one step up and two steps back’ scenario. By the middle of the spring, I was reporting roughly a 50/50 split between good news and bad news but now, for the last several months, all I am seeing is positive news. Granted, much of it, though positive, has not exactly been enough to make one jump for joy for a resurgent real estate market but it has been encouraging nonetheless. Two things are abundantly obvious in the recent data. Home sales, both new and existing, are rising and home prices are stabilizing. This has what has long been needed to correct the oversupply of housing through lower prices and increased demand. Let us hope this positive trend continues.

Rates Hold Steady - Housing Starts Surge

Hunter Palmer (Vision Bank) — Wed, 22 Jul 2009 10:45:17 -0500

Mortgage rates have managed to hold steady despite renewed optimism in the stock market spurred by better than expected corporate earnings reports and evidence the recession is nearing an end. The benchmark thirty-year, fixed-rate is right at 5.50% with no points and we are seeing more parity with other mortgage programs lately as both FHA and VA thirty-year rates are also at 5.50%. The rate on the fifteen-year, fixed-rate stands at 5.00%. Mortgage rates have benefited from reassuring remarks from Fed Chairman Ben Bernanke who on Tuesday told lawmakers at his semi-annual address before congress that he plans to keep monetary policy “extremely accommodative” for some time meaning no rate increases are likely for the foreseeable future. I do not expect to see rates rise over the next week unless the stock market gets on an exceptional run of gain. Many analysts still feel the market exuberance seen of late is still premature as investors continue to cheer less than expected losses instead of actual increases in net profits.

We had some great news on the housing front last Friday as the government reported that initial construction of homes as well as new applications for building permits surged more than economists had expected. Housing starts rose to as seasonally adjusted annual rate of 562,000 in June, up 3.6% from May. The consensus estimate was for an annual rate of 524,000. Single-family housing starts were up a whopping 14.4%. Building permits rose 8.7% in June to an annually adjusted 563,000 while economists had expected only 530,000. This was the highest number of new permits since December and the second straight month of increases since the all-time low set in April. All this is just more evidence that the battered housing market has bottomed and finally on the upswing despite a continuing rise in unemployment.

Home Price Decline Slows Significantly

Hunter Palmer (Vision Bank) — Tue, 30 Jun 2009 16:03:19 -0500

Mortgage rates eased slightly this week as the bond market was reassured by comments form Chinese officials who indicated they still had a taste for US Treasury debt and that the dollar would remain their primary foreign currency reserve. Thirty year mortgage rates settled to just below 5.50% to 5.375% as the yield on the ten year Treasury fell back to 3.5% after pushing 4% two weeks ago. Fifteen year mortgage rates were even more attractive with the no point coupon at 4.75%. With inflation in check and the stock market sputtering I don't see any significant upward pressure on rates in the short-run. There will be several economic reports over the next week that could create some daily volatilty as investors attempt to determine whether the economy is turning the corner or still stuck in a rut.

A report released on Tuesday showed that we may have finally reached the bottom of the housing market nationally. The S&P Case Shiller Index of home prices, though down 18.1% from the same month a year ago, showed only a .6% drop from March to April. This is nearly three quarters lower than the previous month's decline of 2.2%. The Case Shiller index has shown a monthly decline for every month since July of 2006. Yale Economist and co-creator of the index, Robert Shiller, called it, " a striking improvement in the rate of home price decline." The good news was tempered, however, by another report that showed more prime mortgage loans became delinquent in the latest quarter and a report on consumer confidence showed a surpirse dip. It will be interetsing to see in this week's report from the National Association of Realtors on pending home sales whether more evidence of a housing recovery can be seen.

Rates Ease - Fed Meets

Hunter Palmer (Vision Bank) — Tue, 23 Jun 2009 14:52:50 -0500

Mortgage rates have eased slightly after their steep run up over the past three weeks. Thirty year mortgage rates now stand at 5.625% after peaking at 5.75%. Rates could have been pressured above 6% had it not been for the stalled rally on Wall Street that has seen stock prices fall modestly over the past couple of weeks. Investors are beginning to question whether the economy will pull out of the recession as soon as once thought. Continued weakness in the job market coupled with higher interest rates, a lackluster housing report showing weaker than expected existing home sales and a somber assessment by the World Bank of the world economy’s short-term prospects have combined to send stocks to their lowest levels in three weeks. This has helped renew interest in government bonds as evidenced by Tuesday’s well received auction of $40 billion in two year notes. It was weak demand for government bonds three weeks ago that sent mortgage rates soaring.

The Federal Reserve’s Open Market Committee began its two day meeting on Tuesday to discuss monetary policy and the direction of interest rates. It is almost universally believed that the Fed will leave rates unchanged at their current level of nearly zero. What investors will be most interested in when the Fed adjourns on Wednesday will be their statement which often reveals far more about the future direction of rates than any current action it may take. Interestingly, Ben Bernanke is coming up for reconfirmation as Chairman of the Federal Reserve and is likely to face some tough questions from members of Congress on how well he has handled the economic crisis thus far.

As I mentioned before, existing home sales rose 2.4% to an annualized rate of 4.77 million units in May from 4.66 million units in April. Sounds positive but analysts had expected a rise to 4.82 million units. Adding insult to injury - median home prices for May fell 16.8% over last year at this time. This contrasts last week’s report that housing starts for May surged some 17%. The mixed signals we are getting from the housing markets have been more positive than negative lately and are a sign the market is feeling for the bottom nationally. Locally, I still contend that bottom was reached back in February. I am seeing rising demand from first-time homebuyers and out of state condo purchasers in addition to those who had been on the fence and are now jumping into the market as rates begin to rise and home prices stabilize. This is, in my opinion and the opinion of economists, the best time in twenty five years to purchase a home and many it appears are starting to get that message.

Housing Starts Surge in May

Hunter Palmer (Vision Bank) — Tue, 16 Jun 2009 15:40:27 -0500

Mortgage rates have eased somewhat this week as weakness in the stock market has translated into higher demand for bonds. Stock have been hit by a renewed sense of uncertainty as investors wonder if the rally over the last several months has gotten ahead of the economic realities. A stock’s loss is a bond’s gain and the thirty-year fixed mortgage rate now stands at 5.50%. Fifteen year fixed rates are just below 5% at 4.875%. The jumbo market continues to be nearly non-existent with thirty year rates for loans over $417,000 back over 7% with no relief in sight.

More signs the housing market is stabilizing could be found in a report released by the Census Bureau that showed housing starts jumped 17.2% in May to an annualized pace of 532,000 after a revised estimate of 454,000 in April. The data also revealed that new building permits rose by 4% in May. Other news, on the economy as a whole, showed inflation at the wholesale level remains in check with the Producer Price Index rising by a modest .2% last month. Economists had expected a rise of three times that at .6%. Year over year, wholesale prices have fallen by 5% - the largest annual rate of price decline since 1949.

There is a lot of talk in the media about the fact that financing for real estate is so difficult to obtain these days and it is true that underwriting and credit standards have tightened significantly. Yet most of the difficulties lie in the second home, investor and condo markets. For primary residence purchasers buying single family detached homes, however, times could not be better. Low rates are still with us ( yes 5.50% is low) there is an $8,000 first –time buyer tax credit, home prices are their lowest in years and mortgage programs abound. FHA , Rural Development and VA loans are still extremely attractive options with relaxed down payment, credit, and debt ratio requirements and offer repeat and first-time buyers alike an opportunity to take advantage of the amazing deals to be found right now. I would be happy to explain these programs in detail with anyone interested.

Quick Mortgage Update

Hunter Palmer (Vision Bank) — Fri, 12 Jun 2009 14:19:14 -0500

Thirty year mortgage rates have settled in around 5.75% this week as the volatility we’ve seen over the past couple of weeks has subsided. We could have been at 6.00% had it not been for a well received government auction of thirty-year Treasury bonds this week. The yield on the ten year note touched 4% at one point this week but has since come back down to 3.80%. The problem is that the markets are starting to worry less about the economy and more about inflation. Deficit spending, higher energy prices and pent-up demand have many fearing a spike in the rate of inflation that will eventually drive interest rates even higher. There is validity to this argument though I see that as more of a long-term scenario and that we will continue to see relatively low interest rates for some time as the government knows that a housing recovery is essential to the overall economy and that higher interest rates could stifle that recovery. The Fed stands ready to buy up billions more in mortgage-backed securities to help keep rates down if necessary.

Rates Rise Again but Steadying

Hunter Palmer (Vision Bank) — Wed, 10 Jun 2009 08:37:40 -0500

Mortgage rates rose another .25% over the last week and now stand at 5.75% for thirty-year fixed with no points. We are seeing some steadying, however, as the bond market appears to have stabilized and stocks have been flat for the last few days. With no large government bond auctions this week we should not see any further rate deterioration and rates could possibly ease slightly. Fed Chairman Ben Bernanke has expressed frustration with the rising rates insisting that low rates are critical to a sustained recovery in the housing market. To that end, he and the Fed stand prepared to purchase billions more in mortgage-backed securities to drive rates lower if necessary.

On the economic front, the Commerce Department reported last Friday that new claims for jobless benefits fell in May by a much larger than expected amount though the overall unemployment rate rose to 9.4% - its highest level in twenty six years. While on the surface it may appear that losing 450,000 jobs in one month is a bad thing it indicates a marked drop in the rate of job losses and further evidence the economy is stabilizing. On Tuesday, however, the government reported that wholesale inventories shrank to $405 billion, the lowest level since September, suggesting companies were adjusting inventories downward to offset further anticipated declines in sales.

One last note I reported on two weeks ago, HUD has now issued its final rule on utilization of the $8,000 homebuyer tax credit in conjunction with FHA insured mortgages. After first indicating they would allow for those funds to be used for repayment of a bridge loan to cover down payment and closing costs, HUD now has backed away from that plan fearing it carried many of the same risks as the now defunct homebuyer’s assistance programs. HUD ruled that while the tax credit funds may be borrowed against for such things as closing costs, pre-paids and rate buy-downs, the borrower must still bring 3.5% of his or her own funds to the closing table. This is a hugely significant decision as the major hurdle most FHA borrowers and, indeed, most first-time homebuyers is lack of down payment. Many saw the use of the tax credit for down payment as a way of bringing an untapped segment of the population into the housing market and thus stabilizing the sector and overall economy.

Pending Home Sales & Construction Spending Up

Hunter Palmer (Vision Bank) — Tue, 02 Jun 2009 09:34:44 -0500

What a difference a week makes! Last Wednesday I reported that the days of long-term mortgage rates under 5% were likely at an end. Seven days later we find the thirty-year fixed rate for conforming mortgages near 5.50%. A series of government Treasury auctions last week were met with little enthusiasm as investors are demanding a higher return than these bonds can deliver. The continued strength in the stock market, which saw one of its best months in recent memory in May, has also drawn investors away from bonds putting downward pressure on prices and increasing bond yields significantly. As of Tuesday, the yield on the ten year Treasury note stood at 3.64%

There is good news to on the housing front to report. On Tuesday, the National Association of Realtors reported that pending home sales rose a whopping 6.7% in April after a surprise jump of 3.2% n March. This shattered consensus expectations of a rise of only .5%. Also on Tuesday, the Commerce Department reported a surprise jump in construction spending in April. Commerce said spending rose .8% in April, the biggest increase since August. Analysts were anticipating a 1.3% decline. Most significantly, spending on residential construction rose .7% providing further indication that the housing market is attempting to recover. Another report from the Institute for Supply Management said its index of manufacturing activity rose to 42.8 in May from 40.1 in April – its highest reading since September. This news helped offset a report that showed consumer spending slipped .1% in April after falling .3% in March. All combined, the silver linings seen in reports on the health of the economy continue to lead many analysts to believe the severity for the recession is easing and that a recover will likely begin in the third quarter of this year.

My observations on the local real estate market tend to show the majority of purchasers we are currently seeing in the market are a mix of out of state second-home buyers taking advantage of the incredible deals and first-time homebuyers jumping off the fence sensing that prices will not go lower and seeing rates begin to rise. I am also seeing some locals taking advantage of the market conditions to downsize or make a change from single-family to condominium living. All in all, I see a good mix of buyers right now and plenty of financing options to fit their needs. We are returning to a normal market void of speculators and flippers which should lay the groundwork for long-term recovery and sustainability.

Rates Spike on Lackluster Bond Auctions

Hunter Palmer (Vision Bank) — Fri, 29 May 2009 16:55:12 -0500

Mortgage rates rose dramatically this week not only pushing through the 5% threshold but touching 5.50% at one point. We have settled back to 5.375% as of this afternoon but this is still a full half percent higher than we were this time last Friday. The volatility I spoke of in last week’s update turned into a full-fledged collapse in the bond market this week as a series of government debt auctions were met with only a lukewarm response. The problem is that there is such a flood of US treasuries coming on the market to raise cash for the myriad bailouts and stimulus that investors are losing interest (no pun intended) and looking for higher returns in stocks and other types of bonds. The Feds have done such a good job thus far of buying back debt that they were able to maintain an uneasy equilibrium in supply and demand for US treasury securities. That equilibrium appears to have now tilted towards over-supply.

I could mention more bad news on the housing sector this week like the fact that 12% of all mortgages are now currently in some form of delinquency or foreclosure – 49.8% of which were prime loans - but it’s the weekend and we have plenty to be happy and thankful for. I know I continue to be very busy with out of state condo purchasers and we are seeing more and more first-timers coming into the market. Even at 5.375% mortgage rates remain very attractive and there are plenty of signs that worst of this housing downturn is behind us.

Quick Mortgage Update

Hunter Palmer (Vision Bank) — Wed, 27 May 2009 10:52:57 -0500

On Tuesday, a dismal housing report showing home prices decline some 19% year over year in the first quarter was outweighed by a report showing consumer confidence jumped by its biggest amount in six years to its highest levels in eight months reigniting the rally in the stock market. On Wednesday, the Mortgage Banker’s Association of America reported that applications dropped 14% last week as the highest interest rates in two months have sharply curtailed refinances.

If the current exuberance in the equity markets continues to put downward pressure on bond prices, we may see the last of sub 5% mortgage rates. Investors are looking for higher returns and seem to believe increasingly of late that the end of the recession will be sooner rather than later. Still, I do not expect mortgage rates to spike dramatically but, rather, slowly rise as risk aversion diminishes in the markets. Look for rates to stay around 5% for the next month or so with increased day to day volatility.

Condos Clarified

Hunter Palmer (Vision Bank) — Fri, 22 May 2009 16:04:07 -0500

Since I am getting so many questions these days regarding condos and condo-tels and since the secondary market for these properties, i.e. Fannie and Freddie, has all but disappeared, I thought I would try and clarify why a project will or will not fly. First, a condo-tel is not a new concept. It has always been a type of property designation we use along with single family detached, duplex, etc. The problem is that for many years, Fannie and Freddie did not adequately identify beach-front, resort-style condominiums for what they really were. So what makes a condo-tel? Actually, any number of things. I have heard many times that a project is not a condo-tel because it doesn’t have an on-site rental desk. While an on-site rental desk would classify a project as a condo-tel the absence of one does not make it immune. If they have a website that advertises rentals it is a condo-tel. If an owner is required to rent per the bylaws it is a condo-tel. If it has daily maid service it is a condo-tel. So if a project doesn’t have any of these things then it is okay with Fannie and Freddie and fixed-rate financing is available? Not necessarily.

There is another classification we use for condominiums and this is the term ‘warrantable.’ Warrantable refers to whether it can be warranted as sellable to Fannie or Freddie meaning it meets their criteria for an acceptable condominium project. So what makes a condominium ‘non-warrantable’? If the developer is still in control of the HOA it is non-warrantable. If more than 50% of the units are investor owned it is non-warrantable. If one entity owns more than 10% of the total units it is non-warrantable. If the project has pending litigation against it or if a large percentage of owners are delinquent in their HOA dues, or any number of other factors cited by the appraiser can lead to a project being classified as non-warrantable. Every once in a while we come across a project that we can warrant but they are rare to say the least.

Between a project having one or more condo-tel attributes or having one or more of the non-warrantable attributes, you can see that most every condo here on the beach has no secondary market financing available. This is why a few banks like Vision have developed alternative vehicles to get these properties financed. Our portfolio 3/1 and 5/1 ARMs are not a panacea. Yes, they carry a certain amount of risk and the rates are at a premium over the current thirty-year fixed-rates, but, in the absence of a secondary market, these ARMs are the best alternative for providing financing to the buyer while protecting the bank from interest rate risk and meeting our future capital requirements. It is our hope that in there will eventually be a thawing in the secondary market for condos and that our products can provide a bridge to that future. In the meantime, we will continue to lend on these properties because we have a vested interest in seeing them sell and we have a firm belief that the collateral is sound.

Tuesday Mortgage Update

Hunter Palmer (Vision Bank) — Tue, 19 May 2009 15:56:10 -0500

Thirty year mortgage rates have been attempting to push through the 5% ceiling over the past few days as continued gains in the stock market have beaten up on bond prices. Jumbo rates remain frustratingly in the 6.875% range stifling any potential recovery in the high-end home sector. Government loan rates for thirty-year mortgages are now all in line with conventional rates hanging right around 5% for the past several weeks for VA, FHA and Rural Development. High-rise condo financing remains extremely difficult to obtain here in Florida though some local banks are offering in-house portfolio ARMs such as my 5/1 and 3/1 to try and help second-home buyers take advantage of the incredible deals out there right now.

We’ve had some more mixed news on the housing front as builder confidence sank to an eight-month low while the NAHB/Wells Fargo Housing Opportunity Index showed an increase in home affordability in the first quarter to 72.5% making it the best time in two decades to buy a home. HousHousing Starts

Housing starts for April fell 12.8% but, upon closer inspection of the numbers, most of that decline was in apartment and condominium construction while single family home starts actually ticked up slightly for the month.

One last note of interest…HUD has backed away from its earlier consideration of allowing local government and banks to make short-term bridge loans to first-time homebuyers for their $8,000 tax credit to use as a down-payment for the purchase of a home with a federally insured mortgage. HUD officials, upon closer examination of the proposal, felt it too much resembled the seller-funded home-buyers assistance programs of days gone by. Federally insured mortgages which allowed for the borrower to receive gift funds under these programs defaulted at three times the average rate. FHA now requires that all borrowers make a minimum down payment contribution of 3.5%. This supersedes the recent legislation passed in the Florida legislature to allow for such programs.

Rates Remain Low - Pending Home Sales Up

Hunter Palmer (Vision Bank) — Tue, 05 May 2009 14:32:06 -0500

Mortgage rates have remained, quite remarkably, in a narrow range - remaining below 5% despite the ten-year Treasury note taking a beating for the past week with the yield now at 3.14% The reason this is remarkable is that the ten-year yield has risen 75 basis points over the past several weeks while mortgage rates have barely budged. Normally we would see a tight correlation between the two but these are hardly normal times. Rates have, instead, been held down by Federal Reserve actions that have balanced a healthy demand for mortgage-backed securities with government debt auctions needed to raise dollars for everything from fiscal stimulus to government bail-outs. I admit I am a little surprised that mortgage rates have remained so low but I certainly am not complaining.

More positive economic news on the housing-front this week as the National Association of Realtors reported that pending home sales rose by an unexpected 3.2% in March. The Commerce Department also reported that construction spending in March rose .3% which may not sound like much but it is far better than the 1.5% decrease analysts had expected. Many economists are now saying the market is “testing the bottom” as home inventory has now fallen just under a ten month supply and pent up demand could squeeze inventories further in the months ahead.

While we wait for the results of the Government’s “stress tests” for the nineteen largest U.S. banks, it appears that banks are now at least more willing to lend to each other. The three month LIBOR index fell below 1% for the first time ever on Tuesday. This is the most common rate index for measuring the rate of liquidity in the financial system. In contrast, the LIBOR exceeded 6% back in September as banks were refusing to lend to each other over fears they would not be able to repay. If the majority of the large banks pass the “stress tests”, or at least don’t fail them, a renewed confidence in the health of the financial system should further lubricate the credit markets.

Mid-Week Market Update

Hunter Palmer (Vision Bank) — Wed, 29 Apr 2009 15:03:53 -0500

This past week saw a mixed bag of economic news that had mortgage rates in a quandary. Positive reports on new and existing home sales along with signs of a slowing in the rate of home price decline signaled a possible recovery in the housing market that put upward pressure on rates. These reports were tempered, however, by the Mortgage Bankers Association’s release of its weekly mortgage application index which fell to 960.6 lead by a 21.9% drop in refinance applications. Purchase applications, on the other hand, fell by only .6%. Consumer confidence surged by more than analysts had expected leading many to believe consumers may be willing to open their pocket books in the coming months. Consumer spending will be crucial if we the second quarter is top the first quarter’s dismal GDP which fell by a whopping 6.1% in the first quarter. Economists had expected a drop of 4.7% All of these mixed signals have combined to leave mortgage rates basically unchanged since last week despite daily volatility. The thirty year fixed-rate stands right at 4.875% and the fifteen year stands at 4.375%. We have one new wild card in the mix as the threat of a global pandemic from the swine flu has markets world-wide somewhat rattled. If the outbreak becomes more widespread and serious in the coming days, this could hurt global markets and give a boost to bonds and help ease rates further.

Friday Mortgage Wrap Up

Hunter Palmer (Vision Bank) — Fri, 24 Apr 2009 14:36:41 -0500

More good news on the housing front this week as reports on new and existing home sales both beat analysts’ expectations and showed signs of a bottoming despite a monthly decline for March. Possibly the best news this week was Wednesday’s report from the Federal Housing Finance Agency showed home prices actually edged up .7% from January to February for single family residences. These encouraging housing reports coupled with some better than expected corporate profit reports have reignited the stalled rally on Wall Street sending stocks higher for the week. The gains for stocks, however, came at the expense of the bond market with the ten-year Treasury note getting pounded sending the yield to right at 3% in Friday trading. Mortgage rates, while slightly higher, have managed to resist the rise in bond yields thanks to the Fed’s ongoing program of purchasing up to $750 billion in mortgage-backed securities. Rates remain near record lows and we are even beginning to see some relief in the Jumbo market where rates have remained stubbornly close to 7% for thirty-year fixed.

I have some interesting anecdotal news this week as well. I actually had two bidding wars break out this week over a condo and a single family home I was trying to finance - something I haven’t seen since before the crash. This further convinces me that this market has bottomed and is on its way back up. I am seeing more appraisals make value and, better yet, come in above sales price, which is another sign of a resurgent market. The challenge remains the strict underwriting standards and shortage of loan programs that have choked off what would otherwise be a flood of business. I am closing primarily condos but, for every ten applications I take, three may go beyond the pre-approval stage and actually close due to the limited financing options available. Yet as more and more of these deals get closed, and as more buyers rush to snap up the bargains before rates begin to rise, the crippling “distressed market” designation should eventually be lifted for Florida real estate. This is crucial to providing our potential customers the same access to the mortgage programs and less-stringent underwriting guidelines enjoyed in our neighboring states.