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!
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.
Happy Monday everyone! I hope you had a great Halloween weekend -- I sure did playing with the cutest 2 year olds on the planet! Here's last week's recap, and a preview of what's to come this week.
Mortgage Rates
It was another volatile week for mortgage rates, so depending on when you locked your rate, you could see a difference of about .125%. Overall, the week ended only slightly better than where it began, but depending on your lender's margins, you may/may not have seen that improvement passed on in the form of a lower interest rate. This morning's bond prices opened slightly lower than where they ended Friday, so you may see an increase of about .125% to your rate, if at all.
Last Week's News
The big news last week was 4th Quarter GDP went up 3.5%. Media outlets were buzzing with excitement saying this is a sign the recession is over. However, its important to note that Cash for Clunkers played a big role in our GDP. Some estimate once Cash for Clunkers is taken out of the equation, our GDP is closer to 1.9%.
Another big headline is the possible extension of the $8,000 first-time home buyer tax credit. The extension is not official yet, but the latest version I saw floating around would extend the $8,000 tax credit to first-time home buyers until April 2010, AND open it up to non-first-time home buyers up to $6,500 (read full details of the proposal here). The House and Senate still need to come to an agreement on the final bill, but it looks like some form of an extension will be passed.
Forecast for the Week
The Federal Open Market Committee holds a two day meeting this week with its Rate Decision and Policy Statement due out Wednesday. Friday is another big day with Initial Jobless Claims and the Jobs Report due out. Friday has the potential to have a big affect on mortgage rates as the unemployment rate will be announced (currently sitting at 9.8%) Generally speaking, bad news for the overall economy is good for mortgage rates (and visa versa). The stock market has been fueled lately by companies' higher earnings (perhaps by cost-cutting measures in the form of layoffs), and mortgage rates have risen. It will be interesting to see how mortgage rates will react to our jobless recovery.
Want to read more of my updates? Follow me on Twitter! I post real estate and mortgage news on a semi-frequent basis.
Mortgage rates suffered some volatility mid-week, but ended Friday about where they opened on last Monday. The same cannot be said about today, as rates opened about .125% higher than where they ended on Friday.
Last week showed the market is absorbing much of its housing inventory, which dropped to a 7.8 month supply, down from 10.1 months in April. This is in part due to builders' caution in beginning new developments -- Housing Starts and Building Permits came in below expectations last week. On the other hand, Existing Home Sales came in better than expected, with nearly 45% of homes sold to first-time home buyers!
PPI fell, however next month it could be higher as oil and natural gas prices have soured lately. Remember, high oil prices are not good for mortgage rates, and could send them higher.
Forecast for the Week
The Treasury Department will auction off nearly $123B in debt this week, which could cause some major volatility in mortgage rates this week, so hold on to your hats.
Other potential market movers this week are Wednesday's New Homes Sales, and Thursday's Initial Jobless Claims Report and GDP report. Lastly is another read on inflation with Friday's Core Personal Consumption Expenditure (PCE) Index.
Follow me on Twitter, for real-time semi-frequent updates on mortgage and real estate news!
Last week was another very volatile week for mortgage rates, which ended the week about .125% worse than where they began. This increase, followed by an increase in rates week before last, is an indication that rates maybe on a more permanent rise.
Why did rates increase? Firstly, the stock market did remarkably well last week; as a general rule, when the stock market does well, mortgage rates rise as money flows out of mortgage bonds and into stocks. Also, the CPI came in higher than expected last week, which indicates inflation (the archenemy of mortgage rates) may be on the horizon. And lastly, the Fed has begun to scale down its purchase of mortgage-backed securities. Its now averaging $14B a week in purchases, which is down from the $25B that its been averaging until recently.
Hate to say it, but all signs are showing rates are beginning to increase. Luckily, we are still at historic lows; however, I'd recommend moving quickly if you're seriously considering buying or refinancing a home before rates get much higher.
Forecast for the Week
This week shows no sign of relief from volatility as we have a pretty jam packed week of economic news.
We'll hear more about inflation on Tuesday with the Producer Price Index and Core Producer Price Index due out. We'll also hear more news on the housing front with Building Permits and Housing Starts on Tuesday, and Existing Home Sales on Friday. And lastly, we'll hear about unemployment with Thursday's Initial Jobless Claims Report.
All reports have the ability to move mortgage rates quickly, so if you're adverse to risk, I'd recommend locking your rate if you're happy with the payment it provides you.
If you like my commentary, you'll love working with me! Give me a call if you're interested in buying or refinancing your home!
Interested in timelier mortgage and real estate news, Follow Me On Twitter. I post market updates on a semi-frequent basis as they come out.
Over the last month there's been a lot of back and forth on whether the Federal Housing Administration (FHA) is the next agency to need a bailout. Both sides of the argument agree FHA's delinquencies are rising and capital reserves are falling; but disagree on whether its current and future reserves are enough to withstand these rising delinquencies. This debate has me biting my fingernails as over half of my business is FHA loans, but with compelling arguments coming from either side, who do I believe? If you're also trying to wrap your mind around what exactly is going on, here's a breakdown of what FHA skeptics contend, and FHA's defense. Who do YOU believe?
The Facts
Congress requires FHA to keep a minimum of 2% of loans insured by the agency in cash reserves
FHA commissioner, David Stevens, acknowledges the seriousness of falling below the 2% minimum threshold; but in his testimony before the House Financial Services subcommittee last week he stated FHA will not need a taxpayer bailout. He asserted the capital reserve fund can be replenished within the next three years according to an independent, non-governmental actuarial review of the MMI fund which is based on a conservative estimate of the housing market's future recovery. He states in the video below that this assumes no further catastrophic decline in homes prices:
In this interview Stevens asserts FHA has enough reserves to offset rising delinquencies. Although the capital reserve fund has dropped below 2%, its total reserves are as high as they've ever been.
So who do I believe? Clearly, FHA is strapped, but can it weather the storm? Its concerning to me that Stevens is betting FHA's health a "conservative" recovery in the housing market. Conservative according to who? That seems awfully subjective. The last time the mortgage industry banked on rising home prices didn't turn out too well, did it? Also, FHA's delinquency rate is roughly 7%, does that sound familiar to anyone else?
I'm not trying to be Debbie Downer, God knows if anyone hopes it all works out, its ME! I just hope FHA is prudent in its predictions and underwriting, even if that means tightening its lending standards for the overall health of our economy. Overall, I'm still on the fence on this one, although I am concerned. How about you? Do YOU think FHA will need a bailout?
Yesterday the House of Representatives unanimously voted to extend the $8,000 first-time home buyer tax credit to active military personnel, foreign service and intelligence officers. HR 3590 extends the existing tax credit to this group until November 30th, 2010. The bill now goes to the Senate, and is expected to pass with the same ease.
The bill was introduced by Rep. Charles Rangel (D-NY) because it was thought that military personel serving oversees this year did not have the same opportunity to take advantage of the tax credit. If the original qualifications are met, the extension applies to military personnel who spent at least 90 days of the current calendar year oversees. It also does not require borrowers to payback the tax credit if they are deployed after receiving it. The current tax credit requires borrowers payback the tax credit if they do not occupy the home within three years of receiving the tax credit.
No word yet on whether the $8,000 tax credit will be extended for all eligible borrowers.
The bond market is closed today for Columbus Day, but ended last week leaving a sour taste in our mouth. Mortgage rates averaged well the entire week, then went up approximately .25% on Friday alone.
Could this mean mortgage rates are beginning to increase after enjoying months of historic lows? Perhaps, however the general sentiment is rates will continue their small fluctuations in the short-term, followed by a precipitous increase approximately 1-2 years from now. I know what you're thinking, "Nicole, why are you so smart?" Well, I largely attribute that to my early childhood Montessori education...what? That wasn't what you were thinking? You want me to define small fluctuations vs. a precipitous increase? Oh, got it.
Well, over the last 6-12 months we've experienced a very volatile mortgage rate environment. Although rates have averaged at historic lows, its normal to see small .125-25% fluctuations any given week, only to return to lower levels. On the other hand, I would define a precipitous increase in mortgage rates as a drastic and lasting increase. What will cause this precipitous increase? Inflation, or the scent of inflation coupled with the Fed's shift in monetary policy to combat it. Last week Bernanke, even how inflation would be combated if this situation occurred. Why is it estimated to take 1-2 years to begin? Inflation has kept at bay during our recession; however, as the economy begins to turn around the vast amount of liquidity pumped into the system by our government will have to be sopped-up somehow to avoid inflation. The 1-2 year time-frame stems from the fact that most believe its going to take 1-2 years for the U.S. to experience recovery (read NY Fed Chairman, William Dudley's, predictions last week).
So those are small fluctuations vs. precipitous climb for you. Now, somewhere between those two is where mortgage rates will fall by March 2010. By this date the Fed halts its purchases of mortgage-backed securities, the very thing that's brought us historically low interest rates. How high will rates get when this happens? Not sure yet, some are estimating anywhere from .25% to .50% higher, but the truth is we just don't know yet. What we do know is rates will increase by March 2010. When exactly rates increase largely depends on how the Fed weans off its purchases vs. cutting cold turkey.
Forecast for the Week
OK, now that I've taken you out about 6 months, let's rewind back to this week and see the economic news due that may affect rates. Firstly, the Fed's Open Market Committee minutes come out Wednesday which could cause some volatility depending on what is said; and the Consumer Price Index (CPI) is due out Thursday giving us a read on consumer prices. Either report will be interesting especially after Bernanke's comments last week on protecting the economy against inflation.
If you've seriously been thinking about buying a home its time to move quickly given where rates could be headed by March 2010 (and beyond). I've saved my clients thousands of dollars by closely monitoring news and reports that affect interest rates, and I'd love to do the same for you!
If you're interested in buying a home, call me first to discuss your qualification. I've love the opportunity to work with you!
Disclaimer: ActiveRain Corp. does not necessarily endorse the real estate agents, loan officers and brokers listed on this site. These real estate profiles, blogs and blog entries are provided here as a courtesy to our visitors to help them make an informed decision when buying or selling a house. ActiveRain Corp. takes no responsibility for the content in these profiles, that are written by the members of this community.
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.
Posted by 
;)
;)
