Austin Mortgage Rates. Week of 12.28.09.

Much like the rest of 2009, Austin mortgage rates were very volatile last week.  Rates ended the week around where they began the week, which Freddie Mac estimates is around 5.14% nationally for conventional 30 year fixed rates. However, according to Freddie Mac mortgage rates have increased approximately .5% since the beginning of December -- wowza! 

So why are mortgage rates increasing?

Austin mortgage rates are determined by the price of mortgage-backed securities (MBS) on the secondary market (MBS prices and mortgage rates are inversely related).  It takes about four months for new loans to sell as MBS, and there are a lot of them currently being sold because of the high amount of loans originated in the late summer/early fall of 2009.  Unfortunately, there aren't as many buyers of MBS because the Fed has decreased its purchases.  Therefore, there's a high supply of MBS which is keeping their prices low (you know, basic supply and demand effect on prices).  As I've mentioned above, as MBS prices are kept low, Austin mortgage rates increase.  Whew! Confused yet? :)

What do increasing mortgage rates mean for you?

If you're a buyer, then your purchasing power decreases.  A $200,000 home with 20% down costs you $50 more a month now than it did at the beginning of December.

If you're a seller, increasing rates reduces the amount of buyers able to buy your home.

People, I know you've heard this before, but NOW truly is the time to buy/sell. Why? Austin mortgage rates will continue to rise as the Fed winds down its purchase of MBS by March 2010.  I heard on CNBC last week that Morgan Stanley expects Austin mortgage rates to be .75% than current rates by the end of 2010. No bueno.

Forecast for the Week

We have some economic news due out this week that has the potential to change Austin mortgage rates.  First off, Tuesday brings December's Pending Home Sales report.  Next, we'll hear some employment news on Thursday with the Initial Jobless Claims report and Friday's Jobs Report.  December's employment figures were better than expected, which wasn't good for mortgage rates.  Remember, generally speaking, better than expected economic news is bad for Austin mortgage rates, and visa versa.

Interested in semi-frequent updates on Austin mortgage rates, real estate news and commentary? Contact me or Follow me on Twitter!

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Nicole Lahti is a Loan Officer in Austin, Texas. Contact Nicole at nicole@nicolelahti.com, or 512-507-8312.

Austin Mortgage Rates. Week of 12-28-09.

Austin Mortgage Rates. Week of 12-14-09.

Austin mortgage rates ended last week approximately where they began.  There was a slight worsening to rates on Tuesday when the Producer Price Index (PPI) was released and showed signs of inflation; luckily, Austin mortgage rates lowered to their lower levels later in the week.

While we're enjoying historically low rates for now (see Historical Rate Trend to the right), this won't last very much longer.  As I've announced in previous posts, the Fed will be ending its purchase of mortgage-backed securities (MBS) by March 31, 2010.  Why is this important? The end to this program will increase Austin mortgage rates. Why?  Well, mortgage rates have been kept artificially low this past year by the Fed's purchase of MBS.  To date, the Fed has purchased $1.087 TRILLION in MBS, leaving only $163 billion left to purchase.  This averages out to $11.5 billion of purchases a week through March 2010.  That's a lot less than even lastest week's purchase of $16 billion.  Get where I'm going with this?

If you're looking to buy or refinance, NOW is the time to get moving as Austin mortgage rates won't stay this low for long!  Contact me if you'd like a rate quote, or need a referral to an Austin real estate agent.

OK, now that we got the bad news out of the way, how about some good news?  Housing Starts and Building Permit reports for November were released last week, showing signs of improvement in the housing sector.

Forecast for the Week

Tuesday will be a busy day -- Existing and New Home Sales for November are due out, and so is Gross Domestic Product. If you're on the fence about locking your interest rate, keep in mind you could see some volatility on Tuesday. Wednesday's Core Personal Consumption Expenditure, and Personal Income Report are also important as they'll give us a gage on inflation.  This is especially important to watch after last week's PPI report came in higher than expected.  And why is inflation important to monitor? Well, other than the obvious affect it has on your cost of living, it also directly affects Austin mortgage rates.  As I've mentioned in previous posts, inflation is the arch-enemy of mortgage rates -- as inflation goes up, so do mortgage rates.

Remember, generally speaking, better than expected economic news causes rates to increase, and visa versa.

Interested in semi-frequent updates on Austin mortgage rates, real estate news and commentary? Contact me or Follow me on Twitter!

______

Nicole Lahti is a Loan Officer in Austin, Texas. Contact Nicole at nicole@nicolelahti.com, or 512-507-8312.

Austin Mortgage Rates. Week of 12-14-09.

Austin Mortgage Rates: Week of 12-7-09.

The national Freddie Mac 30-year fixed rate for the week of 12.07.09 was 4.81%, up approximately .125% from the previous week. Austin mortgage rates fall under Freddie Mac's southwest region's rate of 4.83%.  Look to the right for Freddie Mac's interest rate chart for the last year -->.

So why did rates increase last week? The Treasury auctioned off 10-year and 30-year treasuries last week, which compete directly with mortgage-backed securities for buyers. This competition increases the supply of mortgage-backed securities, and Economics 101 tells us when supply increases, prices drop. When prices of mortgage-backed securities drop, mortgage rates go up.

Forecast for the week

This week brings a lot of economic news that may affect Austin mortgage rates. First, Tuesday brings the Producer Price Index report which measures inflation at the wholesale level, and Wednesday brings the Consumer Price Index report which measures consumer prices. Both reports give us an indication of inflation (or lack thereof). Why is inflation important to mortgage rates? Because inflation is the arch-enemy of mortgage rates – as inflation increases, so do Austin mortgage rates. 

On Wednesday we’ll also hear how well the housing market is doing, with a read on Building Permits and Housing Starts. The Federal Reserve will also issue its Interest Rate Decision and Policy Statement on Wednesday. A change in rates is not expected, but we should still keep an attentive ear to what the Federal Reserve says in its policy statement as it has the ability to move markets, and cause a change in Austin mortgage rates.

Remember, generally speaking, better than expected economic news causes rates to increase, and visa versa.

Interested in semi-frequent updates on Austin mortgage rates, real estate news and commentary? Contact me or Follow me on Twitter!

______

Nicole Lahti is a Loan Officer in Austin, Texas.  Contact Nicole at nicole@nicolelahti.com, or 512-507-8312.

Austin Mortgage Rates. Week of 12-7-09.

We had some good news and bad news last week, let's start with the good!  The national unemployment rate came in better than expected at 10%.  Only 11,000 jobs were lost in November, much lower than the 125,000 expected loss, AND the fewest number of jobs lost since December 2007!  While this is great news, and sent stocks rallying, it was to the detriment of mortgage bonds which raised rates (that's the bad news, by the way).  Overall, rates are about .25% worse than where they were around Thanksgiving time.

Other big news last week was HUD Secretary Shaun Donovan's testimony before Congress.  In this testimony, he announced plans to tighten FHA's lending stadards in order to improve its portfolio performance and raise capital reserves to federally mandated levels.

Forecast for the Week

Economic news is light early part of the week, and picks-up mid-week.  10-yr and 30-yr Treasury bills will be auctioned off Wednesday and Thursday.  It will be important to watch how this goes as these longer term treasuries compete with mortgage bonds, which can affect mortgage rates.  We'll also see Initial Jobless Claims for November and Balance of Trade on Thursday, and Retail Sales on Friday.

Generally speaking, strong economic news affects mortgage rates negatively, and visa versa.  If you want to keep up-to-date with breaking real estate and mortgage news, Follow Me on Twitter!

Make it a GREAT week!

This week Housing and Urban Development (HUD) Secretary, Shaun Donovan, presented to Congress his plans to tighten FHA's lending standards.  In his testimony to the House Committee on Financial Services, Donovan made it clear, FHA is NOT "the next subprime" despite the fact that FHA has fallen below its minimum capital reserve requirement of 2% to .53% of its total insurance-in-force.  He once again reiterated that FHA can withstand the current economic downturn, "under all but highly severe economic scenarios." (i.e., "we'll be OK, unless things get REAL bad.")

FHA's market share has increased from 3% in 2006 to currently 20% of purchases and 30% of refinances.  Donovan admits FHA's infrastructure was not prepared for this increase, and therefore caused capital reserves to fall. Therefore, in order to improve the quality of FHA's portfolio, improve performance of future loans, and increase capital reserves to federally mandated levels, Donovan plans to make the following changes to lending requirements:

1. Reduce allowable seller concessions.  Currently, sellers can contribute up to 6% of the sales price towards buyers' closing costs; FHA plans to reduce this amount to 3%.  HUD's concern is higher seller concessions cause excessive risk by creating an incentive to inflate appraised values.

2. Create a minimum FICO score requirement.  Currently, FHA financing does not have a minimum FICO score requirement; however, most (if not all) lenders impose their own minimum FICO score requirement for FHA loans they provide.  The new minimum FICO score requirement has not been announced.

3. Increase borrowers' minimum investment requirement.  HUD would like an increase to the current minimum investment of 3.5% so borrowers have more "skin in the game".  The new minimum investment requirement has not been announced.

4. Increase of mortgage insurance premiums. Borrowers currently pay a 1.75% upfront premium, and a .55% annual premium (in most cases, may be lower for refinances, lower LTV's and shorter terms).  HUD would like to increase these premiums to raise capital for its reserve account.  Congress must pass legislation to increase the premium amounts.

5. Increase lender accountability.  HUD wants its lenders to also have more "skin in the game" and has proposed new lender standards including (1) an increase to lender net worth requirement, and (2) an assumption of liability for FHA loans originated, underwritten and serviced.

I agree with some of these changes, but not all. The fact of the matter is FHA will tighten its lending requirements.  So what does that mean to you? 

If you're a home buyer, you need to start preparing for your home purchase further in advance.  This means getting pre-qualified sooner, so you have proper direction on saving for your down payment and maintaining (or achieving) clean credit. Depending on your current situation, you may need plenty of time to do this, perhaps 6-12 months.  I happen to know a GREAT lender who can help you with this...ehh hmmm ;).

If you're a Realtor, get your buyers pre-qualified fast to make sure they have enough time to prepare for buying a home.  Also, there will be some confusion when these changes are made, so make sure you trust the lender you work with, and feel confident in their ability to close your loans.  Once again, I know a GREAT lender who can help you ;)

Realtors for the most part understand this since changing lending standards have been par for the course for at least 2 years.  One more piece of advice if you think these changes will affect the majority of your clientele -- it may be prudent to get a jump start on revamping your marketing to target a clientele that will not be as affected by these changes.  I know that's something I will be considering.

Those are just my two cents.  How about you?  What do you think of the proposed changes, and as a home buyer or Realtor, what are you going to do differently to adapt?

As you've probably already heard, the $8,000 federal tax credit for first-time home buyers has been extended and expanded to include move-up buyers.  While this is great news, the most common issue for a first time buyer still remains...How do I get the money needed for down payment on a home purchase? Well, I'm glad you asked! Here are some ideas of where to come-up with the funds:

• Get a Gift – With FHA financing the buyer can get a gift from a relative for the down payment and closing cost. A gift letter signed by donor and recipient as well as evidence of donor’s ability to give the gift will be required.

• 401K loan – You can borrow the money from your self, in most cases this loan will not count against your qualifying debt to income ratio and as a first time home buyer the most 401k programs will allow this transaction.

• Life insurance – If you have a whole life policy you can either borrow against it or cash it in. Since most of these are purchased with after tax dollars there are no tax implications.

• Secured loan – If you have an asset that is free and clear such as a vehicle you may be able to get a secured loan against the value of the asset.

• Down Payment Assistance – Several Government entities offer down payment assistance programs for first time home buyers (contact me if you're interested in learning about the several programs I offer).

• Sale of personal property – With verification of value and a bill of sale, the funds from the sale of personal property can be used for the down payment.

• Human Resources – Some Employers offer down payment assistance as a benefit to their employees. These awards are eligible for down payment through FHA financing.

• Tax Refund – Our buyer can use this year’s tax refund to become a homeowner. A copy of this year’s tax return and a copy of the refund check or bank statement showing the amount of the refund on deposit is all that is required.

• Second Job – Even though we may not be able to use this income to qualify the borrower if the borrower has not had the job for two years, the cash earned from this second job can be used for the down payment. Pay stubs from the second job and bank statements can provide a paper trail to source the funds.

And of course...

• Savings/Budgeting – Cutting back on extras along with any one of the above mentioned ideas will get our buyer into a home faster.

Call me today if you have questions on any of how to buy a home using any of the above mentioned sources!

Time for another edition of my week in review!  Rates are near this year's lows, and are having a tough time pushing any lower.  As I've mentioned in previous posts, the Fed will be slowing down the purchase of mortgage-backed securities through 1st quarter 2010; so if you're on the fence about buying or refinancing, I'd recommend moving quickly if you're payment sensitive because RATES WILL BE INCREASING.

Existing Home Sales were announced today, and jumped 10% in October!  As good as that sounds, keep in mind a lot of these sales were likely due to buyers meeting the original first-time home buyer tax credit deadline (which was recently extended to June 30th).

Forecast for the Week

Its a short, but busy week!  Tuesday brings our latest GDP report, and Wednesday brings the New Home Sales report and an inflation gage through the Core CPI.

If you want updates throughout the week on the above mentioned reports, FOLLOW ME ON TWITTER!

Happy Thanksgiving everyone!

I'm organizing an East Austin Open House Tour this Sunday from 1:00-4:00 PM. Its specific to Area 5 in Austin, and includes trendy, affordable homes and condos. 

Start at 2516 East 8th Street for your map and tour guides.  Come show your support (and some GREAT homes) and stop by!

Rates opened up flat last Monday from the previous week.  There was some upward pressure during the week with relief on Friday when the unemployment rate came in higher than expected. 

190,000 jobs were lost in October, much higher than the $175,000 expected loss, putting our unemployment rate at 10.2%.  Remember, this does not include people who have given-up looking for jobs, or those who are "underemployed" by taking part-time jobs, or positions in which they are over-qualified.  If these people were taken into account, it's estimated that the real unemployment rate would be closer to 17.5% -- wowza!

On a lighter note...Pending Home Sales were up 6.1% for October, which is heavily attributed to first-time home buyers meeting the original tax credit deadline.  Speaking of which, here is a brief of the tax credit extension signed into law by President Obama on Friday:

Tax Credit for First-Time Home buyers

FTHBs (that is, people who have not owned a home within the last three years) may be eligible for the tax credit. The credit for FTHBs is 10% of the purchase price of the home, with a maximum available credit of $8,000. Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.

Tax Credit for Current Homeowners

The tax credit program now gives those who already own a residence some additional reasons to move to a new home. This incentive comes in the form of a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years. Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.

What are the New Deadlines? In order to qualify for the credit, all contracts need to be in effect no later than April 30, 2010 and close no later than June 30, 2010. Those in the military do have some special extensions on the timelines available.

What's So Great About a "Tax Credit"?

The benefit of a tax credit is that it's a dollar-for-dollar benefit, rather than a "tax deduction", or reduction in a tax liability that would only save you $1,000 to $1,500 when all was said and done. So, if a first-time home buyer who qualified for the entire benefit were to owe $8,000 in income taxes and would qualify for a tax credit of $8,000, she would owe nothing. Better still, the tax credit is refundable, which means the home buyer can receive a check for the credit if he or she has little or no income tax liability. For example, if a first-time home buyer is eligible for a tax credit of $8,000 but is liable for $4,000 in income tax, she can still receive a check for the remaining $4,000!

Higher Income Caps

The amount of income someone can earn and qualify for the full amount of the credit has been increased. Single tax filers who earn up to $125,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, single filers who earn $145,000 and above are ineligible. Joint filers who earn up to $225,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, joint filers who earn $245,000 and above are ineligible.

Maximum Purchase Price

Qualifying buyers may purchase a property with a maximum sales price of $800,000.

Forecast for the Week

There's not much economic news due out this week other than Thursday's Initial Jobless Claims Report, and Treasury auctions.  With record amounts of debt being sold via Treasury auctions, its important to see how well they are received as that has a direct affect on mortgage rates.

Like my weekly review?  Follow me on Twitter for semi-frequent updates on real estate and mortgage news as it comes out!

You may've just heard that President Obama signed the extension of the $8,000 tax credit into law.  There have been some other meaningful changes, including offering the tax credit to repeat buyers (up to $6,500) who have lived in their home at least 5 years, and an increase to the income limits.  Rather than regurgitating the million other blog posts and articles about the extension, here's a link to an article that explains it all.

So here's my question.  What is the $8,000 tax credit's true affect on sales?  To date, an estimated 2 million people have taken advantage of the tax credit, but how many of these sales would have occurred even if the tax credit wasn't offered? How many of these sales perhaps just occurred sooner rather than later?

In an effort to answer this question (in a very rudimentary, non-scientific way) I've devised a QUICK 5 question survey for all my Real Estate friends out there. 

Now, I'm no statistician, so please no comments on how I could've better framed questions. Please just take 2 minutes to answer a few questions on how the tax credit has affected YOUR personal sales.  I'll post the results early next week.

Click Here to take survey

Thanks!