Mortgage and Real Estate Insight

Home Sales, Construction and Prices All Trend Higher

Hunter Palmer (Regions Mortgage) — Tue, 28 Sep 2010 17:14:49 -0700

A string of positive economic reports on the housing market over the past few weeks show the hangover from the first-time homebuyer tax credit is easing and demand for housing is slowly increasing. New home sales for August were of their lows from July and existing home sales rose a better than expected 7.6%. Perhaps the best news of the past week was the Commerce Department’ s report that new home construction surged 10.5% in August and 2.2% from a year ago. Many economists feel builders are beginning to anticipate a future shortage of housing when the economic recovery gets into full gear. Home prices also showed a 3.2% year-over-year increase in July according to the S&P Case-Schiller Home Price Index.

Mortgage rates remain just barely off their lows for the year but are still extremely attractive with the benchmark thirty-year, fixed-rate sitting at 4.25% with no points. The fifteen-year fixed also remains near historic lows at 3.75% with no points. Thirty-year government loans for FHA, VA and Rural Development are currently in the 4.25% to 4.375% range with no points. Rates have managed to stay low despite a month-long rally in the stock market thanks to continued weak employment and this month’s decision by the Federal Reserve’s Open Market Committee to leave rates unchanged and the return of European debt concerns.

On the local front, Rural Development funding has been restored and we are beginning to see a resurgence in first-time homebuyers entering the market and using the popular zero-down program to take advantage of low home prices, interest rates in the low 4% range and Rural Development’s lack of a monthly mortgage insurance component to purchase more home for the money than anyone would have thought possible just a few years ago. Those exceeding the $70,750 annual household income limit for Rural Development can still take advantage of this buyer’s market with FHA financing which only requires 3.5% down and has comparably low interest rates to Rural Development and no geographic restrictions. And let’s not forget one the most popular government loans for our area, VA Guaranteed, which allows for 100% financing, no income limits, no geographic restrictions and no monthly mortgage insurance.

Lastly, we have seen a steady increase in condominium purchases since early August when it became clear that BP had the Deepwater Horizon spill capped. While out-of-state second home buyers and investors were mostly taking a wait and see approach in June and July, we now see them returning in earnest to take advantage of rock bottom prices and all that Panama City Beach has to offer. The impact of the new Northwest Florida Beaches International airport and low-fare carrier Southwest is evident in the big increase in the number of buyers from Nashville, Texas and Northeast. The most encouraging thing about the current condo market demographic is that they are almost exclusively true second-home buyers who plan to use their unit as much as possible and allow their friends and families to use and enjoy when it is vacant. This sets the foundation for a sustainable condo market and steady price appreciation without the investors and flippers that brought so much volatility to the market in the past

Rates Rise Slightly - Home Prices Up

Hunter Palmer (Regions Mortgage) — Fri, 03 Sep 2010 16:07:06 -0700

Mortgage rates actually rose a bit this week for the first time in a couple of months. After bottoming out earlier in the week on renewed global economic fears, a string of positive economic reports had stocks rallying in the second half of the week creating a sell-off in US Treasuries. After falling to 2.42% on Monday, the yield on the ten year T-Note had risen to 2.72% by Friday afternoon causing a corresponding rise in the thirty year fixed mortgage rate from 4.125% to 4.375%.

The rally on Wall Street started on Wednesday when reports showing manufacturing activity in the US and China expanding. This was followed by upbeat reports on consumer spending and home prices and a better than expected report on August unemployment. The S&P Case Schiller Home Price Index showed that home prices have risen nationally by 3.6% over the past year and 4.4% in the second quarter. Perhaps the best news in recent days, however, was the unexpected jump in pending home sales in August. After a dismal July that reflected the end of the first-time homebuyer tax credit, the number of new contracts surprised everyone by rising 5.2% for the month.

There are some FHA changes coming down the pipe that I wanted to make everyone aware of. HUD, in an attempt to bolster FHA’s loan loss reserves, has altered their up-front and monthly mortgage insurance premiums for all case numbers assigned after October 4^th. The up-front premium will be reduced by .75% going form 1.75% to 1% of the base loan amount. However, the annual premium, that which is paid each month in the payment, will increase from .55% to 1.55%. This means that on a sales price of $100,000, the new up-front premium will be $965 ($100,000 X .965 X 1%) and the new monthly premium will be $124.64 (1.55% x $96,500 / 12). Compare this to the old formula ($96,500 X .55% /12) which would have yielded a monthly premium of $44.23. So borrowers will be paying roughly $80 more per month for their FHA mortgages on a sales price of $100,000 which will in turn reduce the amount of loan they will qualify for.

Lastly, Rural Development has announced they expect to have funding restored by the middle of this month so we no longer have to close with a conditional commitment.

Home Prices Up Slightly

Hunter Palmer (Regions Mortgage) — Thu, 01 Jul 2010 14:20:38 -0700

After a week of miserable news on the housing market, including last Friday’s report that show May new home sales fell 33% and existing home sales off 2%, we got some much needed good news on Tuesday which showed a modest gain in home prices nationwide. The S&P Case-Schiller Home Price Index of twenty major housing markets showed prices gained by nearly 1% in May over the prior month and 3.8% from the year earlier. Despite the recent gains, however, home prices still remain some 30% below their peak. Some economists fear that, without the stimulus provided by the now expired first-time homebuyer tax credit, the housing market recovery could lose momentum but others argue that the overall effect of the tax credit has been overblown.

You certainly can’t blame interest rates for any housing market woes as Freddie Mac reported last week that rates for thirty-year mortgages had reached an all-time low. And did I mention that was last week? On Tuesday the yield on the ten-year T-note fell below 3% for the first time since April of 2009 driving rates on thirty and fifteen-year mortgages down to 4.50% and 4.00% respectively. Global economic worries over a possible China slowdown and European debt have investors jittery and looking for a safe haven in the form of US Treasury debt - thus pushing down yields along with interest rates. The Federal Reserve's Open Market Committee also reaffirmed last week that it intended to keep interest rates exceptionally low for a considerable period of time.

The bigger picture for the housing market remains this. Despite the tax credit hangover the market experienced in May most analysts agree that pent up demand for housing will ultimately stabilize the market. This is supported by a report from the Mortgage Banker's Association last week that showed most banks across the country were adding mortgage staff to deal with a possible surge in home financing over the next year. Rates remain extremely low and, though not rising as much or as fast as many would like, home prices are indeed improving. As long as the US economic recovery can weather exterior threats from Europe and China I expect the housing market to continue to improve over the second half of 2010 and foresee significant gains in 2011.

Rates Stay Low - Builder Confidence Disappoints

Hunter Palmer (Regions Mortgage) — Thu, 17 Jun 2010 09:43:37 -0700

Mortgage rates remained at or near historical lows over the past week with benchmark thirty-year, fixed-rate at 4.75% with no pints and the fifteen-year, fixed-rate at 4.25%.Rates on FHA, VA and Rural Development loans are also all under 5.00%. Rate shave been held at bay by the usual suspects – European debt concerns, weak employment numbers and stick market volatility. The longer-term prognosis doesn’t see interest higher interest rates coming for some time. A research paper released by the San Francisco Federal Reserve on Tuesday argues that interest rates will remain low until 2012 thanks to high unemployment and low inflation.

Also on Tuesday, the National Association of Home Builders released their monthly builder confidence index which registered a surprise decline in June. The index came in at 17 after an unrevised reading of 22 in May. The sharp decline in builder confidence was attributed in part to the expiration of the first-time homebuyer’s tax credit but still came in well below the 22 reading most analysts were expecting. Yet the NAHB also noted that a shortage of housing could result if we see a turnaround in the jobs market that could, in turn, unleash a flood of pent-up demand for homes that builders may not be able to satisfy. To that end, the NAHB is supporting current legislation in Congress that would make $15 billion in loan guarantees available for private builders to meet such demand if it were to arise.

Lastly, it appears that more revisions to FHA are in the pipeline. Though a proposal to raise the minimum down payment requirement to 5% appears to now be dead, what is not dead is a proposal to raise the monthly mortgage insurance premium, or MIP, to 1% annually or higher in attempt to shore up FHA’s dwindling reserves. I will give a thorough update on all changes to the FHA program once they are finalized.

Oil and the Emerald Coast

Hunter Palmer (Regions Mortgage) — Fri, 11 Jun 2010 12:07:50 -0700

With more and more Realtors and customers expressing concern regarding the potential effects the Deepwater Horizon oil spill could have on our local real estate market, I thought I would offer up my two cents and what I have been telling anyone interested enough to listen. While I will not attempt to minimize the enormity and severity of this unprecedented environmental disaster, I will offer my reasons for why we on the Emerald Coast should fare far better than our friends in Louisiana, Mississippi and Alabama. We here in Bay and surrounding counties have several things in our favor that should keep the oil impacts to a minimum.

The first and most obvious reason Florida Panhandle beaches will not feel the full brunt of the spill is simply proximity. The sickening images of birds literally drowning in oil and reporters up to their knees in thick crude are coming from those areas in Louisianan closest to the site of the spill. The enormous amount of oil released before any semblance of a response could be mustered by BP or the Feds all has inevitably found its way to the barrier islands and Marshes of the Louisiana coast. Similarly, wind, rain and wave action along with sunlight and humidity gradually break down the oil and, over time and distance, work to turn the oil into a less lethal substance at least in the short-run.

Another reason why the impacts here will be less severe is that if there is any coastal barrier that could be considered optimal for oil impact it would be a sandy beach. The marshes and estuaries of Louisiana are the worst place for oil as once it is there it is nearly impossible to clean up. In Alaska, after the Exxon Valdez incident, much of the impacted coast was rocky and gravely and subject to much greater tides than hear in the Gulf making cleanup painstakingly difficult. Our minimal tides and pure sand beaches mean that if the oil does come ashore, it will be easily cleaned up and carted away and the beach re-nourished…just as we do after a hurricane. Only this time it will be BP paying for it.

Lastly, between the Alabama-Florida state line to the tip of Cape San Blas, there are only five passes into the Gulf that oil could potentially enter our bays. The largest and most immediately threatened is, of course, the Pensacola pass where boom is deployed and skimmers are already operating. After that there is only Destin Pass, St. Andrews, Crooked Island pass and the entrance to St. Joe Bay and all of these are considerably smaller and more manageable than Pensacola. I feel confident that, in part because we have had so long to plan and prepare, that boom and skimmers will keep the oil out of Choctawhatchee, St. Andrews, and St. Joe bays as well as Crooked Island Sound and there will be little or no environmental impacts in these areas.

Again, it is not my intention to minimize the effect this catastrophe is having on the region and our way of life. It will take years before the entire Gulf Coast recovers from this man-made tragedy. But if there is a silver lining, the Deepwater Horizon was not drilling just off our coast when it exploded and took the lives of eleven men. It was off the coast of Louisiana where the impacts have been greatest. Of course, none of our good fortune to this point will hold out forever if BP does not stop the flow of oil into the Gulf. We have been lucky to this point and still have a lot in our favor, as I have mentioned, but until the flow of oil is permanently stopped, we cannot know how much we will ultimately have to clean up.

Rates Remain Under 5.00%

Hunter Palmer (Regions Mortgage) — Tue, 01 Jun 2010 17:31:52 -0700

Despite bouncing off their lows for May, mortgage rates remain below 5% with the benchmark thirty-year, fixed-rate coming in at 4.875% with no points and the fifteen-year, fixed-rate right at 4.25% with no points. A steep drop in the yield on the ten year Treasury note over the past several weeks has lead to some of the lowest rates of the past twelve months just in time for the summer buying season. Ongoing volatility in the equity markets combined with uncertainty over European sovereign debt has brought a level of fear back into the markets which have benefited US Treasury debt prices thus driving rates lower since a bond’s yield moves inversely to its price. Government rates are also very attractive with most thirty-year fixed on VA and FHA sitting around 4.75% and jumbos are still under 6.00% at around 5.875%.

There is some important news on the government lending front. First, Rural Development is finally back up and running after a two week hiatus that left many loans in limbo. RD is once again willing to issue “conditional commitments” subject to eventual Congressional funding but the secondary market investors are willing to purchase loans with the conditional commitments so we have no issue in closing them. The new RD guarantee fee has been raised from 2.041% to a rate not to exceed 3.5%. FHA also implements a new guideline this month that could have a real impact on FHA borrowers. After raising the up-front MIP from 1.75% to 2.25% in April, HUD has now restricted seller paid closing costs and pre-paids to just 3% of the sales price – down from 6% before. This means that, in addition to 3.5% minimum down payment contribution, it is very likely the borrower will no be paying additional cash at closing to cover the seller-paid shortfall.

Lastly, although the funding for the National Flood Insurance Program expired again on May 31^st, we are still able to close loans in a flood zone if we can show that the borrower has applied for flood insurance with their insurance provider and provide a one-year paid receipt for the coverage. This should mean business as usual with no disruption to closings on properties in a flood zone.

HVCC One Year Later

Hunter Palmer (Regions Mortgage) — Tue, 25 May 2010 16:23:27 -0700

It is hard to believe but the sweeping regulation governing real estate appraisals known as the Home Valuation Code of Conduct or HVCC is already one year old. The controversial rule negotiated by New York state Attorney General Andrew Cuomo, Fannie Mae and Freddie Mac along with their regulator the Federal Housing Finance Agency was designed to place a barrier between mortgage brokers, Realtors and appraisers with the assumption that those with an interest in seeing values manipulated would now be excluded from choosing the appraiser, ordering the appraisal or challenging the value determination thus eliminating inflated values and the subsequent fraud seen over the past decade. This all sounded very good on paper but was quickly met with concerns once implemented.

The biggest problem most cited by mortgage lenders and Realtors alike is the inability to choose the appraiser. Not in the sense of being able to use one’s appraiser buddy who has all his eggs in your basket and thereby may feel compelled to get to the needed value for fear of losing future orders. Rather, I refer to the inability under HVCC of simply being able to pick an appraiser familiar with the market and type of property. Because of the so-called ‘firewall’ between mortgage production staff and appraisers it became necessary under HVCC to utilize the services of Appraisal Management Company’s or AMCs. This is because the selection of the appraiser must be random and handled by a disinterested third party. Because the AMCs have no way of knowing whether it is a condo in southern Bay County or a farm or in northern Walton, they have no way of selecting an appraiser familiar with the area or with particular knowledge of the property type. The AMCs also have no way of selecting an appraiser based on experience or expertise. They most often base their criteria on who is the cheapest and who can get it done the fastest. This has lead to many of the most seasoned and experienced appraisers opting out of the AMC model or worse - leaving the industry all together.

The inherit problems with the HVCC model are obvious. What we are often left with, unfortunately, is appraisals not making value and contracts falling apart. And while I respect the value opinions of 95% of the appraisals I see, the limited inability to challenge a value or even order another appraisal in some necessary instances is made nearly impossible under HVCC. My brother, who is also an appraiser in Alabama, and I often laugh when together that we are not even aloud to talk under HVCC guidelines - obviously a jest but indicative of how we both feel about our inability to discuss the value of a property under the rule. Again, I feel that the HVCC was well intentioned and I have certainly seen cases where top producing loan officers had appraisers in their pockets and had predetermined the appraised value before the placing the order. I know there have been abuses and I firmly believe they contributed, along with many other factors, to the housing bubble bursting. I do wish, however, that more thought had been put into the practical application of the HVCC. As with so many good intentions, the outcome is often quite different from the original vision set forth. If lenders, borrowers, Realtors and, indeed, appraisers are to be best served, a review of HVCC on its one year birthday is in order.

Homes Data Promising - RD in the Lurch Again

Hunter Palmer (Regions Mortgage) — Tue, 18 May 2010 17:31:19 -0700

The National Association of Homebuilders reported this week that their “Housing Market Index”, a survey among its members to quantify builder sentiment about the housing market, rose three points in May to 22. While this is still well below the 50 mark which indicates builders feel optimistic about the housing market, it is the highest reading since August of 2007. It has not been above 50 since April of 2006. Meanwhile, the Commerce Department reported that new home construction soared in April – up nearly 41% from the same moth last year. The number of starts in April was also 5.8% higher than the previous month. The number of applications for new building permits actually fell for the month - down 11.5% from March. April 2010 applications were, however, still nearly 16% higher than the same month in 2009.

Now for the latest in the soap opera that has become Rural Development. After warning for weeks that the program would be out of funds sometime in May, we were all relieved last week when USDA issued a memo saying the program had been saved and that a new 3.5% Guarantee Fee would insure the solvency of the program and that loans in the pipeline could close as scheduled. Well, the emotional roller coaster continues as late last week USDA rescinded their earlier memo saying that funds were depleted and no new commitments, even conditional commitments, could be issued at this time. This means I have four files gathering dust in Marianna and four customers unsure as when they will be able to close. I will be sure and provide an update as this drama continues to unfold.

Mortgage rates remain very attractive with the benchmark thirty-year, fixed-rate at 4.875% with no points. As I said last week, continued uncertainty surrounding the European debt situation and the slide in the value of the Euro has kept investors rattled and rates have thus improved even further. Gold prices are setting records and bond prices continue to climb and this, combined with returned volatility in the stock market, should keep up the downward pressure on rates in the short-run.

RD Preserved - Rates Fall

Hunter Palmer (Regions Mortgage) — Thu, 13 May 2010 15:18:22 -0700

As a flood of first-time homebuyers rushed to take advantage of the $8,000 tax credit the Rural Development program has been strained to the limit with a year’s allocation of funds expected to be depleted sometime tomorrow. There has been little interest in Congress to extend funding and it now appears that without a last minute vote to re-fund the program, Rural Development will be out of funds by week's end. This will leave lenders with only the ability to secure “conditional commitments” from Rural Development. The good news is there are still investors out there that will purchase loans with only a conditional commitment from RD. This means that loans currently in process that missed the deadline to secure funds will still be able to close – a relief for both lenders and the thousands of RD first-time buyers who were under contract prior to April 30^th but not yet closed. Now for the bad news. Any loan that misses the deadline and is forced in a conditional commitment will see their up-front Rural Development Guarantee Fee jump from 2.041% to 3.5%. This is because legislation in the House of Representatives is calling for the RD program to be budget neutral and the higher up-front fee will ensure RD is self-sufficient.

Mortgage Rates continue to benefit from the increased volatility in the stock market as well as lingering concerns over European debt and the effects it could have on the US and global economies. The benchmark thirty-year, fixed-rate stands at 5.00% even and only a .25% point will by you down to 4.875%. The fifteen-year fixed-rate stands at 4.375%. Jumbo rates are also beginning to feel the love as the once frozen secondary market for non-conforming loans is slowly beginning to thaw. The thirty-year Jumbo rate stands at 5.875%. So while some were pointing to a spike in interest rates in the second quarter of this year, it has, thus far, failed to materialize. Despite the $1 trillion bailout for Greece and the Euro, fears remain that the underlying global debt problem could domino into a financial calamity similar to the sub-prime mortgage crisis of 2008. Until those fears are quelled, the demand for bonds should keep yields and mortgage rates low in the short-run.

New, Existing Home Sales Surge

Hunter Palmer (Regions Mortgage) — Wed, 28 Apr 2010 11:41:22 -0700

Breaking a four month string of declines, new home sales jumped 26.9% in March for the best improvement in a single month in forty-seven years. Sales were up in every region of the U.S. but were particularly strong in the South where sales of new homes increased by 43.5%. The report on new home sales followed closely on the heels of a stronger than expected report on existing home sales which showed a 6.8% increase in March. The seasonally adjusted annual rate of 5.35 million units reflected in the numbers represented a 16.1% increase over existing home sales in March of 2009. Analysts credit most of the surge in home sales to the first-time homebuyer tax credit as buyers rush to get in under the deadline.

Mortgage rates remain at historically low levels but have subject to increased market volatility of late with the benchmark thirty-year, fixed rate bounding between 5.125% and 5.375%. After touching 4% two weeks ago the yield on the ten-year Treasury note now stands at 3.76% which explains the quarter percent swing. While many are forecasting higher rates ahead, it is looking increasingly unlikely that we will not see a significant increase in rates in the next two quarters and possibly not until 2011. With the end of the homebuyer tax credit and other Federal stimulus measures drawing to an end, some economists point to a possible double-dip recession if employment growth and home sales cannot continue to improve on their own. Until the double-dipper theorists are proven wrong, I expect the Federal Reserve to keep interest rates extremely accommodative in the short-run.

Tax Credit Countdown

Hunter Palmer (Regions Mortgage) — Thu, 22 Apr 2010 09:59:42 -0700

As the deadline looms for first-time homebuyers to qualify for the $8,000 Federal tax credit, lenders nationwide are fearful of a decline in loan originations as a result after a surge in recent months. Buyers must be under contract no later than April 30^th and must close on or before June 30^th to receive the credit. Unlike in November of 2009, when the original tax credit was set to expire, there are far fewer voices in Washington and elsewhere calling for a second extension. It will be interesting to see if the expected drop in home sales resulting from the expiring tax credit can be offset by the increased demand typically seen in the late spring and summer.

I wanted to provide updates on two issues I discussed last week. Funding for the National Flood Insurance Program has now been restored after a two week shutdown that left us in limbo unable to secure new flood insurance binders. Also, there has yet to be any resolution to the funding for the Rural Development program though there are bills under consideration in Congress to restore funding and raise the guarantee fee in an effort to make the program self-sufficient and budget neutral. While we wait on the final legislation we have been told by USDA that they now expect for the current funding to last until mid-May instead of the end of April as previously thought.

After a volatile two weeks, mortgage rates have settled back to near their lows for the year. The benchmark thirty-year, fixed-rate is currently at 5.125% with no points. The fifteen-year fixed is just under 4.50% with no points. So far, knock on wood, we have not seen the spike in interest rates predicted by some when the Federal Reserve’s program of purchasing mortgage-backed securities wound down. It now appears that despite some positive signs in leading indicators, retails sales and corporate earnings, continued weakness in the labor market and the sluggish real estate market continue to weigh on the economic recovery. Until we see more robust job creation and solid gains in housing expect mortgage rates to remain at or near their current levels.

Rates Remain Low - PMI is Back In Florida

Hunter Palmer (Regions Mortgage) — Thu, 18 Feb 2010 12:26:02 -0800

Mortgage rates have been unfazed by recent stock market volatility and have managed to stay low despite improvements in employment, retail sales and housing starts which are typically all signs of an improving economy and usually result in weaker demand for bonds. But worry over some sovereign debt problems and a sense of uncertainty regarding the global economy have renewed investors’ demand for perceived safe havens such as US Treasury securities and the dollar thereby helping keep rates low. This despite signals from the Federal Reserve that it may be time to start tightening monetary policy in order to ward off inflation down the road.

I have a couple of things of note from the mortgage front. After a long absence in the wake of the mortgage meltdown, private mortgage insurance is once again available in Florida. It still sounds strange to say but PMI is now available for conventional loan purchases up to 90% loan to value provided the borrower has a 680 credit score and it is a primary residence. During the absence of PMI in Florida a buyer had to have a 20% down payment to obtain a conventional mortgage.

FHA announced that beginning April 5^th, the up-front mortgage insurance premium will rise from 1.75% to 2.25%. The increase in the MIP is part of a comprehensive look at the FHA program which has grown to 40% of all mortgage originations and has seen its reserves dwindle in recent years and faces even more losses with 500,000 loans currently headed towards foreclosure. Other potential changes include lowering the seller allowed contributions from 6% to 3% of the sales price and instituting a minimum credit score requirement.

Housing Reports Solid - Rates Fall

Hunter Palmer (Regions Mortgage) — Tue, 01 Dec 2009 14:11:13 -0800

After a week off for Thanksgiving I have plenty of good news to report since my last update. Last week, the National Association of Realtors reported that, for the month of October, existing home sales surged 10.1% to a seasonally adjusted annual rate of 6.1 million units – far exceeding the 5.7 million units most economists expected. Also last week, the S&P Case/Schiller Home Price Index showed that home prices nationwide rose 3.1% in the third quarter, matching a 3.1% increase in the second quarter and marking the second consecutive quarter prices have risen. In a similar report of local interest – the Florida Association of Realtors reported that Panama City Beach condo prices actually rose 3% in October over 2008, the first increase this year, and sales of condos were up 88% in October ’09 over ’08.

On Tuesday, The National Association of Realtors reported what is possibly the most encouraging housing report I’ve seen in some time. NAR reported that pending home sales skyrocketed 32% in October marking the ninth month of consecutive increases in new contracts which is considered a leading indicator of where the housing market is headed. Pent up demand coupled with the first-time homebuyer tax credit and rock bottom prices all contributed to NAR’s highest Pending Home Sales Index to its highest level since March 2006.

If all this wasn’t enough, mortgage rates have fallen since my last update to below 5%. The thirty-year conforming fixed-rate now stands at 4.75% - a full .25% lower than two weeks ago and approaching record lows once again. Rates have fallen in reaction to a rally in US Treasuries sparked by the Dubai World debt crisis last week. In a sign that the US Dollar and US bonds are still considered the safest bet, investors around the world dumped foreign currencies for fear of the Dubai situation having a global domino effect and gobbled up dollars and US Treasury bonds like so much leftover turkey. Though the Dubai situation was largely diffused by the beginning of this week, bonds held onto their gains and rates remain low as a result. As we close out the year, barring another unforeseen financial crisis or geo-political incident, I expect we will see less volatility in the coming weeks and mortgage rates to hover right at or slightly higher than current levels.

Rates Remain Low - Housing Starts Fall

Hunter Palmer (Regions Mortgage) — Thu, 19 Nov 2009 08:41:39 -0800

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 (Regions Mortgage) — Tue, 03 Nov 2009 16:21:38 -0800

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 (Regions Mortgage) — Wed, 21 Oct 2009 09:48:20 -0700

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 (Regions Mortgage) — Wed, 07 Oct 2009 13:25:28 -0700

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 (Regions Mortgage) — Fri, 25 Sep 2009 14:56:15 -0700

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 (Regions Mortgage) — Fri, 11 Sep 2009 15:39:01 -0700

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 (Regions Mortgage) — Fri, 04 Sep 2009 13:31:39 -0700

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 (Regions Mortgage) — Thu, 27 Aug 2009 15:23:01 -0700

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 (Regions Mortgage) — Thu, 20 Aug 2009 13:25:18 -0700

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 (Regions Mortgage) — Thu, 06 Aug 2009 08:37:30 -0700

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 (Regions Mortgage) — Wed, 29 Jul 2009 10:42:54 -0700

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 (Regions Mortgage) — Wed, 22 Jul 2009 10:45:17 -0700

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.