The Real Estate Report

Mortgage and Lending with Qivana NMLS # 17358

Sean Wheelan
TMG Mortgage, Ltd
1287 Post Rd
Warwick, RI 02888

Did you know that The Mortgage Group, for the 2nd year in a row, was one of the fastest 5,000 growing companies in the US! In the August 2010 addition of INC. magazine we were up to #2,782 from 2009's ranking of 4,136!!! IMPORTANT! If you currently have a FHA mortgage and would like to lower your rate without an appraisal, call or email soon. If you have a loan that is serviced by Fannie Mae or Freddie Mac and are slightly under water, we may be able to help folks if their negative equity is 5% or less. This program is also available for investment properties. Call or email for details. If you are a homeowner over age 62, and would like more information on the merits of a Reverse mortgage, please contact me. Remember, your referrals are the lifeblood of my business. Thank you for remembering me. I Hope you enjoy this newsletter.

August 31, 2010

More Using the "D" Word

No, we are not talking about a depression here. We are talking about the more constant use of the word "deflation." Actually, deflation can be considered a depression of prices. We often say that one of the objectives of the Federal Reserve Board is to fight inflation. We can also say that another objective of the Fed is to protect us against deflation, however the threat of deflation comes up so rarely, there is little discussion of the issue. We all know why higher prices are bad for the economy. When consumers have to spend more of their income on staples, they have less money left over to spend and contribute to economic growth. Inflation is typically accompanied by higher rates which also depress the economy. If money will be worth less in future years, banks that lend money have to charge high rates in order to make a profit.

So why would deflation be bad news? Deflation is not only a symptom of a poor economy, it would contribute to the lack of economic growth as well. Why would a manufacturer produce goods if those goods are likely to fall in price below the replacement value? We have such an example right now where builders have found in some areas that homes are selling for less than the replacement costs. Why build a home if you can’t sell it at a price that is equal to the cost of building? Here is the good news. Natural population growth in the world has put so much pressure on natural resources such as energy, it is not likely that deflation will become a problem. It is more likely that the slow economic growth we are experiencing will be accompanied by low rates of inflation and therefore low rates such as we are experiencing. And this is a good thing, because we need these low rates if we are going to continue to grow out of the slump. A little inflation right now is good news but increased rates of inflation while the economy is not growing would be bad news. Then we would be discussing another bad word: stagflation.

The Markets. Like a broken record (or we should say records), the weak economic data continues to contribute to the current string of record-breaking rates. The streak has been running for over two months now. Freddie Mac announced that for the week ending August 26, 30-year fixed rates averaged 4.36%, down from 4.42% the previous week. The average for 15-year fixed fell to 3.86%. Adjustables were stable with the average for one-year adjustables down slightly to 3.52% and five-year adjustables remaining at 3.56%. A year ago 30-year fixed rates were at 5.14%. Attributed to Amy Crews Cutts, deputy chief economist, Freddie Mac, "Existing home sales plunged 27 percent in July, while new homes fell 12 percent to a new all-time record low, which led to some market concerns that the housing market may slow the economic recovery. As a result, long-term bond yields fell to the lowest levels since January 2009, allowing fixed rates to ease to new record lows this week. Much of the slowdown in sales, however, was expected due to the recently expired homebuyer tax programs, which pulled through future home purchases into the first half of the year. The average existing home sales over the first seven months of 2010 were nearly 8 percent higher than over the same period a year ago. Moreover, house prices still appear to be stabilizing. Nationally, house prices rose 0.9 percent on a seasonally-adjusted basis during the second quarter of this year this year after 11 consecutive quarterly declines, according to the Federal Housing Finance Agency’s purchase only index. Eight of the nine census regions experienced positive gains, compared to none in the first quarter." Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.

Current Indices For Adjustable Rate Mortgages
Updated August 27, 2010

Daily Value Monthly Value

August 26 July
6-month Treasury Security 0.19% 0.20%
1-year Treasury Security 0.25% 0.29%
3-year Treasury Security 0.77% 0.98%
5-year Treasury Security 1.38% 1.76%
10-year Treasury Security 2.50% 3.01%
12-month LIBOR
1.124% (July)
12-month MTA
0.370% (July)
11th District Cost of Funds
1.797% (June)
Prime Rate

 Breaking News:  One of the most popular housing programs in the United States is tightening their guidelines for refinances, effective with loan applications taken on September 7th. If you are thinking about taking advantage of today’s record low rates, the time to act may be now as FHA is tightening their standards by requiring more equity in their homes for those who want to refinance to lower their payments.

More than 48 percent of first-time buyers expect home prices to increase by this time next year, according to a survey by Century 21 Real Estate. The survey posed questions to people who had bought or sold a home in the last year. Sixty percent of first-time home buyers say they didn’t understand the process of buying a home, and more than 85 percent of both first-time buyers and sellers said that using a real estate professional was important. The top three skills valued in a real estate professional by both buyers and sellers were knowledge of the area, trustworthiness, and responsiveness. More than 80 percent of buyers believe now is a good time to buy a home. In choosing a home, 95 percent of first-time home buyers thought price was the most important consideration, but 90 percent were also very concerned about neighborhood safety. About 54 percent of first-time sellers think home prices are more affordable now than they were this time last year, and 50 percent were selling because they were purchasing a property they saw as more attractive and better suited to their needs. Source: Century 21 Real Estate LLC

2009 survey of home owners conducted by the U.S. Census Bureau and the U.S. Department of Housing and Urban Development shows that most of them are satisfied with their residences. About 70 percent of respondents rated their homes an 8, 9, or 10 on a scale of 1 to 10, with 28 percent giving them the "best" rating of 10. Residents of new construction tend to rate their homes even more highly: 84 percent gave them between an 8 and 10, and 45 percent gave a perfect 10 rating. Likewise, more than 68 percent of residents rated their neighborhoods highly, with 25 percent giving it a "best" rating. People living in newly built homes rate their neighborhoods especially highly: 75 percent rated their neighborhoods highly and 35 percent said their neighborhoods were 10s. The nation’s home owners paid a median of $1,000 in monthly housing costs in 2009, compared with $808 for renters, according to the findings. The most common reasons recent movers had for choosing their neighborhoods were convenience to job (20 percent), convenience to friends or relatives (14 percent), look/design of neighborhood (10 percent), and the house itself (10 percent). Source: US Census Bureau

Reis Inc. reports that the nation’s second-quarter apartment vacancy rate slipped 20 basis points to an average of 7.8 percent from the first three months of the year — the first drop in over two years. SNL Financial, meanwhile, notes that the average occupancy for apartments owned by REITs increased nearly 100 basis points from a year earlier to almost 95 percent as of the end of March. Falling homeownership, coupled with the young and employed leaving their parents’ homes or roommates to rent their own units at a rapid clip, suggest that demand for multifamily housing could climb at a modest clip for at least the next several months. Investor Business Daily


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