By STU WOO
SAN FRANCISCO -- California's median price for an existing single-family house rose for the third straight month, a sign that the state's battered real-estate market may be bottoming out.
The median sales price increased to $267,570 in May for a California home, an increase of 4.2% from April, according to a report released Thursday by the California Association of Realtors. The inventory of unsold houses continued to drop, to 4.2 months' supply in May compared with 4.6 months in April and 8.7 months in May 2008. Prices were still well below their year-ago levels, down 30.4% compared with May 2008.
One explanation for the increase in housing prices is that fewer foreclosed properties are among those being sold, said Kirk Lesh, an economist for California Lutheran University's Center for Economic Research and Forecasting. Banks tend to sell foreclosed houses at lower prices than do people selling their own homes.
California's real-estate market, the nation's largest, is seen as a barometer of the U.S. economy. Housing prices soared during the boom, and their plummet during the market's collapse resulted in massive foreclosures and fueled the recession. Economists say the state's housing market will lag behind the nation's in recovering, so any indication of improvement in California bodes well for the rest of the U.S.
With Thursday's report, real-estate experts said they were a bit more optimistic that the California market is healing. But they warned that the state's 11.5% unemployment rate could result in more foreclosures and drive down real-estate prices again, as could lawmakers' plan to slash more than $10 billion from state spending to close a $24 billion deficit.
The budget proposals include laying off thousands of state workers and cutting health and welfare programs for millions of Californians, as well as raising taxes. If enacted, they would further batter the state economy and, consequently, the housing market, said Mr. Lesh, the economist.
The Realtors' report also said that 556,590 California houses were sold in May, up 35.2% from a year earlier. Sales may increase in coming months because prospective buyers believe the market is at a bottom, said Robert Bridges, a professor at the University of Southern California's Marshall School of Business. "The 'buy' decision would be a wise one right now because those pricing levels are getting attractive," he said.
Friday, June 26, 2009
Tuesday, June 23, 2009
Home Resales Up From Previous Month, as Prices Fall
WASHINGTON -- Existing-home sales rose a second month in a row during May, but prices again fell sharply, threatening a delay to a housing sector recovery.
Home resales increased by 2.4% to a 4.77 million annual rate from 4.66 million in April, the National Association of Realtors said Tuesday. The NAR originally reported April sales rose 2.9% to 4.68 million.
Wall Street expected a 4.80-million sales rate for previously owned homes in May.
Of the 4.77 million homes actually sold in May, about 33% were foreclosures and short sales. While elevated, that figure is lower than the 45%-to-50% range earlier this year.
Distressed property sales have pushed prices lower, year over year. The median price for an existing home last month was $173,000, down 16.8% from $207,900 in May 2008.
"We need to have increased sales to stabilize prices," NAR economist Lawrence Yun said.
Mr. Yun also said poor appraisals are stalling transactions. "There is danger of a delayed housing market recovery and a further rise in foreclosures if the appraisal problems are not quickly corrected," he said.
Low prices and mortgage rates have encouraged buying amid the recession. But rates have climbed. The average 30-year mortgage rate was 4.86% in May, up from 4.81% in April, Freddie Mac data show. Rates have gone up in June and analysts fear rising borrowing costs might restrain demand.
Tighter credit and a quarter-century-high unemployment rate of 9.4% have hurt sales. Realtors hope the $8,000 tax credit for first-time home buyers, inserted in the Obama administration's economic stimulus package, keeps prodding demand.
Previously owned home sales, year over year, were down 3.6% from the pace in May 2008, Tuesday's report said.
Weak demand has kept inventories of unsold homes high. Inventories of previously owned homes fell 3.5% at the end of May to 3.8 million available for sale. That represented a 9.6-month supply at the current sales pace, compared to 10.1 in April. Excess supply is depressing prices.
Regionally, sales in May compared to April rose 3.9% in the Northeast and 9.0% in the Midwest. Sales were flat in the South. The West slid 0.9%.
Home resales increased by 2.4% to a 4.77 million annual rate from 4.66 million in April, the National Association of Realtors said Tuesday. The NAR originally reported April sales rose 2.9% to 4.68 million.
Wall Street expected a 4.80-million sales rate for previously owned homes in May.
Of the 4.77 million homes actually sold in May, about 33% were foreclosures and short sales. While elevated, that figure is lower than the 45%-to-50% range earlier this year.
Distressed property sales have pushed prices lower, year over year. The median price for an existing home last month was $173,000, down 16.8% from $207,900 in May 2008.
"We need to have increased sales to stabilize prices," NAR economist Lawrence Yun said.
Mr. Yun also said poor appraisals are stalling transactions. "There is danger of a delayed housing market recovery and a further rise in foreclosures if the appraisal problems are not quickly corrected," he said.
Low prices and mortgage rates have encouraged buying amid the recession. But rates have climbed. The average 30-year mortgage rate was 4.86% in May, up from 4.81% in April, Freddie Mac data show. Rates have gone up in June and analysts fear rising borrowing costs might restrain demand.
Tighter credit and a quarter-century-high unemployment rate of 9.4% have hurt sales. Realtors hope the $8,000 tax credit for first-time home buyers, inserted in the Obama administration's economic stimulus package, keeps prodding demand.
Previously owned home sales, year over year, were down 3.6% from the pace in May 2008, Tuesday's report said.
Weak demand has kept inventories of unsold homes high. Inventories of previously owned homes fell 3.5% at the end of May to 3.8 million available for sale. That represented a 9.6-month supply at the current sales pace, compared to 10.1 in April. Excess supply is depressing prices.
Regionally, sales in May compared to April rose 3.9% in the Northeast and 9.0% in the Midwest. Sales were flat in the South. The West slid 0.9%.
Sunday, June 21, 2009
California Housing Shows Pockets of Recovery
REAL ESTATE JUNE 20, 2009 California Housing Market Shows Pockets of Recovery
Prices Have Dropped Far Enough to Lure Buyers in a Trend Also Showing Up in Other Parts of the Country
By JIM CARLTON
SAN JOSE, Calif. -- A home-sales revival that began last year in some of California's cheaper inland areas has begun to spread to several more expensive coastal areas, another hint that devastated real-estate markets in the state -- and other parts of the country -- may see less grim days ahead.
Homes are selling briskly again in the lower end of the market in Santa Clara County, just south of San Francisco, with prospective buyers making multiple offers and bidding well above asking prices. The median sales price of a single-family home in May was $445,000 in the county, up 5.7% from February, when prices stopped dropping.
Santa Clara County is one of several areas around the U.S. where prices have dropped far enough to lure buyers, including investors, back into the market. Other metro areas showing this trend include the northern Virginia suburbs of Washington, parts of Phoenix and San Diego, said Ivy Zelman, chief executive of research firm Zelman & Associates. Even in glutted markets like southern Florida, investors are "gobbling up distressed inventory" in some areas, she added.
Getty Images
Homes are designated as sold on a map of a new development in South San Francisco, Calif., last month. Homes in the area are selling briskly again.
In Northern California, a big factor is first-time buyers like Denise and Steve Petrosky, who are newly optimistic about the market and can afford a home for the first time. The Petroskys in February paid $374,900 for a three-bedroom home in Morgan Hill, just south of San Jose, that last sold in 2006 for $610,000.
The couple were too leery to enter the market last year while prices were still heading down, said Mrs. Petrosky, 43 year old, an office manager, but felt prices had bottomed early this year. "Basically, we had set a budget what we could afford, which was below $400,000," Mrs. Petrosky said. "When the prices came down below that, we bought, because we could afford to."
Home prices are still falling in many California markets. But the state's average existing single-family home price has been inching up for two months, with the median sales price climbing to $256,700 in April from $247,590 in February. Much of that increase is thanks to a growing number of pockets of recovery in the housing market.
In Northern California, the median price has risen for four straight months in Santa Clara and for three months in Contra Costa County, according to estimates by MDA Dataquick Information Services, a market-research firm in La Jolla, Calif. In Southern California, the median price has risen or stayed the same three months in a row in Los Angeles County.
Those price increases might not presage a lasting resurgence in California's housing market. The state's high unemployment rate -- 11.5% in May -- could lead to more foreclosed homes that banks could then dump on the market. California's median home price remains down 37% from a year ago.
More broadly, Ms. Zelman and other housing economists cautioned against interpreting signs of greater sales activity as meaning the housing bust was nearly over. Interest rates on 30-year, fixed-rate prime mortgages have risen well above 5% in recent weeks and could rise further if inflation fears push up rates. A national tax credit for first-time home buyers ends Nov. 30, removing a big incentive.
"The overall economy in California hasn't gotten its footing," said Katherine Aguilar Perez, executive director of the Los Angeles office of the Urban Land Institute, an industry think tank. "So it's difficult for me to say we have hit bottom." Still, she said, "there are some pretty clear signals there is some leveling."
A look at Santa Clara County shows some of the dynamics behind the leveling. Home to Silicon Valley in the north, the county of 1.8 million residents went into the slump with the rest of the state, with county unemployment shooting above 10% this year from 5% in 2007. The median price of a previously owned home fell 48% to $420,000 in January from a high of $805,000 in August 2007, according to Dataquick.
Late last year, the county's sales still lagged behind those in inland areas like Riverside and San Bernardino counties, where sales volumes were up 251% in November 2008 over November 2007, according to the California Association of Realtors. Santa Clara County's November sales were up only 16%. The inland sales were booming, in part, because prices fell further there.
Then the lights seemed to turn back on in Santa Clara County home sales. Sales were up 40% in December, and kept rising into 2009. The median price, which had slid steadily since June 2008, stopped falling in February. The number of pending sales in the county has nearly doubled to 3,882 as of last week from 2,096 a year ago, according to the Santa Clara County Association of Realtors.
The biggest catalyst, local agents say, has been affordability. By April, the number of Santa Clara county residents who could afford a home in the county, based on household income, had jumped to 50% from 18% two years ago, said Quincy Virgilio, president of the Santa Clara County Association of Realtors.
Typical buyers are Scott and Yuriko Herbig. Mr. Herbig, a 28-year-old engineer, said they had a budget of less than $400,000, and couldn't find anything in that range when they began looking in 2008. Then, early this year, Mr. Herbig said, the market suddenly started filling with homes under $400,000. The couple in March bought a four-bedroom home in Gilroy for $362,000. "We got lucky," Mr. Herbig said. "I think we hit right at the bottom."
As in other areas of California, the hottest part of the Santa Clara market has been at the lower end -- in this area, that's under $600,000. For example, prices rose 15.6% to $540,000 in April in one zip code near downtown San Jose from $467,000 in January, according to Dataquick.
By contrast, prices in some higher-income neighborhoods in Santa Clara County are still falling -- such as in parts of tonier towns like Cupertino and Los Gatos. Agents said that reflects borrowers' problems getting jumbo mortgages to make those purchases. Home prices are still falling in parts of San Francisco and San Diego County for the same reason, they said.
—James R. Hagerty contributed to this article.
Prices Have Dropped Far Enough to Lure Buyers in a Trend Also Showing Up in Other Parts of the Country
By JIM CARLTON
SAN JOSE, Calif. -- A home-sales revival that began last year in some of California's cheaper inland areas has begun to spread to several more expensive coastal areas, another hint that devastated real-estate markets in the state -- and other parts of the country -- may see less grim days ahead.
Homes are selling briskly again in the lower end of the market in Santa Clara County, just south of San Francisco, with prospective buyers making multiple offers and bidding well above asking prices. The median sales price of a single-family home in May was $445,000 in the county, up 5.7% from February, when prices stopped dropping.
Santa Clara County is one of several areas around the U.S. where prices have dropped far enough to lure buyers, including investors, back into the market. Other metro areas showing this trend include the northern Virginia suburbs of Washington, parts of Phoenix and San Diego, said Ivy Zelman, chief executive of research firm Zelman & Associates. Even in glutted markets like southern Florida, investors are "gobbling up distressed inventory" in some areas, she added.
Getty Images
Homes are designated as sold on a map of a new development in South San Francisco, Calif., last month. Homes in the area are selling briskly again.
In Northern California, a big factor is first-time buyers like Denise and Steve Petrosky, who are newly optimistic about the market and can afford a home for the first time. The Petroskys in February paid $374,900 for a three-bedroom home in Morgan Hill, just south of San Jose, that last sold in 2006 for $610,000.
The couple were too leery to enter the market last year while prices were still heading down, said Mrs. Petrosky, 43 year old, an office manager, but felt prices had bottomed early this year. "Basically, we had set a budget what we could afford, which was below $400,000," Mrs. Petrosky said. "When the prices came down below that, we bought, because we could afford to."
Home prices are still falling in many California markets. But the state's average existing single-family home price has been inching up for two months, with the median sales price climbing to $256,700 in April from $247,590 in February. Much of that increase is thanks to a growing number of pockets of recovery in the housing market.
In Northern California, the median price has risen for four straight months in Santa Clara and for three months in Contra Costa County, according to estimates by MDA Dataquick Information Services, a market-research firm in La Jolla, Calif. In Southern California, the median price has risen or stayed the same three months in a row in Los Angeles County.
Those price increases might not presage a lasting resurgence in California's housing market. The state's high unemployment rate -- 11.5% in May -- could lead to more foreclosed homes that banks could then dump on the market. California's median home price remains down 37% from a year ago.
More broadly, Ms. Zelman and other housing economists cautioned against interpreting signs of greater sales activity as meaning the housing bust was nearly over. Interest rates on 30-year, fixed-rate prime mortgages have risen well above 5% in recent weeks and could rise further if inflation fears push up rates. A national tax credit for first-time home buyers ends Nov. 30, removing a big incentive.
"The overall economy in California hasn't gotten its footing," said Katherine Aguilar Perez, executive director of the Los Angeles office of the Urban Land Institute, an industry think tank. "So it's difficult for me to say we have hit bottom." Still, she said, "there are some pretty clear signals there is some leveling."
A look at Santa Clara County shows some of the dynamics behind the leveling. Home to Silicon Valley in the north, the county of 1.8 million residents went into the slump with the rest of the state, with county unemployment shooting above 10% this year from 5% in 2007. The median price of a previously owned home fell 48% to $420,000 in January from a high of $805,000 in August 2007, according to Dataquick.
Late last year, the county's sales still lagged behind those in inland areas like Riverside and San Bernardino counties, where sales volumes were up 251% in November 2008 over November 2007, according to the California Association of Realtors. Santa Clara County's November sales were up only 16%. The inland sales were booming, in part, because prices fell further there.
Then the lights seemed to turn back on in Santa Clara County home sales. Sales were up 40% in December, and kept rising into 2009. The median price, which had slid steadily since June 2008, stopped falling in February. The number of pending sales in the county has nearly doubled to 3,882 as of last week from 2,096 a year ago, according to the Santa Clara County Association of Realtors.
The biggest catalyst, local agents say, has been affordability. By April, the number of Santa Clara county residents who could afford a home in the county, based on household income, had jumped to 50% from 18% two years ago, said Quincy Virgilio, president of the Santa Clara County Association of Realtors.
Typical buyers are Scott and Yuriko Herbig. Mr. Herbig, a 28-year-old engineer, said they had a budget of less than $400,000, and couldn't find anything in that range when they began looking in 2008. Then, early this year, Mr. Herbig said, the market suddenly started filling with homes under $400,000. The couple in March bought a four-bedroom home in Gilroy for $362,000. "We got lucky," Mr. Herbig said. "I think we hit right at the bottom."
As in other areas of California, the hottest part of the Santa Clara market has been at the lower end -- in this area, that's under $600,000. For example, prices rose 15.6% to $540,000 in April in one zip code near downtown San Jose from $467,000 in January, according to Dataquick.
By contrast, prices in some higher-income neighborhoods in Santa Clara County are still falling -- such as in parts of tonier towns like Cupertino and Los Gatos. Agents said that reflects borrowers' problems getting jumbo mortgages to make those purchases. Home prices are still falling in parts of San Francisco and San Diego County for the same reason, they said.
—James R. Hagerty contributed to this article.
Thursday, June 18, 2009
Caution: First Time Homebuyer Tax Credit
Practice: Advances on the First-Time Homebuyer Tax credit
The First-Time Homebuyer Tax Credit, which offers up to $8,000 to qualifying buyers who purchase a home through Nov. 30, is a generous perk worth taking advantage of. But it can also get some home buyers into deep trouble.
In late May, the Department of Housing and Urban Development (HUD) said it would permit FHA-approved mortgage lenders to offer eligible borrowers an advance based on the tax credit. Borrowers, in most cases, are still required to make the standard 3.5% down payment required for FHA-insured mortgages, but they can add the value of the credit to the down payment or they can use it to pay for closing costs, says Cummings.
Repayment rules vary, but depending on the lender, borrowers will have to pay the loan each month, pay a lump sum when they receive their tax credit or make payments
over several years. And, in most cases, they'll be paying interest, too. (HUD recommends that lenders refrain from charging fees that surpass 2.5% of the tax credit.)
Bottom line for the borrower: If a borrower needs to rely on an advance of their tax credit to afford the purchase, then they'll probably have a hard time affording both their loan payments on the advance and the mortgage payments, says Cummings.
Risk for the economy: “We’re building a house of cards like we did before,” says Cummings. “We’re getting people into homes that they can’t necessarily afford with no equity, which is artificially propping up the market.” A new ripple effect of foreclosures could occur in the next two years as a result of this practice, he says.
The First-Time Homebuyer Tax Credit, which offers up to $8,000 to qualifying buyers who purchase a home through Nov. 30, is a generous perk worth taking advantage of. But it can also get some home buyers into deep trouble.
In late May, the Department of Housing and Urban Development (HUD) said it would permit FHA-approved mortgage lenders to offer eligible borrowers an advance based on the tax credit. Borrowers, in most cases, are still required to make the standard 3.5% down payment required for FHA-insured mortgages, but they can add the value of the credit to the down payment or they can use it to pay for closing costs, says Cummings.
Repayment rules vary, but depending on the lender, borrowers will have to pay the loan each month, pay a lump sum when they receive their tax credit or make payments
over several years. And, in most cases, they'll be paying interest, too. (HUD recommends that lenders refrain from charging fees that surpass 2.5% of the tax credit.)
Bottom line for the borrower: If a borrower needs to rely on an advance of their tax credit to afford the purchase, then they'll probably have a hard time affording both their loan payments on the advance and the mortgage payments, says Cummings.
Risk for the economy: “We’re building a house of cards like we did before,” says Cummings. “We’re getting people into homes that they can’t necessarily afford with no equity, which is artificially propping up the market.” A new ripple effect of foreclosures could occur in the next two years as a result of this practice, he says.
Saturday, June 13, 2009
Rates Continue to Rise
Home-mortgage rates took another leap this week, bringing the average rate on a 30-year fixed-rate mortgage to its highest in seven months, Freddie Mac reported Thursday.
The 30-year fixed-rate mortgage averaged 5.59% for the week ended June 11, according to Freddie Mac's weekly survey of conforming mortgage rates. That is up from 5.29% last week. The mortgage averaged 6.32% a year ago, and the rate hasn't been higher since the week ending Nov. 26, when it averaged 5.97%.
"Mortgage rates followed the increase in bond yields this week as the May employment report showed that the economy lost fewer jobs than the market consensus had expected," said Frank Nothaft, Freddie Mac vice president and chief economist, in a news release.
Rates on 15-year fixed-rate mortgages also rose, averaging 5.06% this week, up from 4.79% last week. The mortgage averaged 5.93% a year ago, and hasn't been higher since Dec. 11, when it averaged 5.20%. Five-year Treasury-indexed hybrid adjustable-rate mortgages averaged 5.17%, up from 4.85%. The ARM averaged 5.51% a year ago. And one-year Treasury-indexed ARMs averaged 5.04%, up from last week's 4.81%; it averaged 5.09% a year ago.
Mr. Nothaft said that while higher mortgage rates are slowing refinancing activity, they haven't slowed demand for home purchases.
The 30-year fixed-rate mortgage averaged 5.59% for the week ended June 11, according to Freddie Mac's weekly survey of conforming mortgage rates. That is up from 5.29% last week. The mortgage averaged 6.32% a year ago, and the rate hasn't been higher since the week ending Nov. 26, when it averaged 5.97%.
"Mortgage rates followed the increase in bond yields this week as the May employment report showed that the economy lost fewer jobs than the market consensus had expected," said Frank Nothaft, Freddie Mac vice president and chief economist, in a news release.
Rates on 15-year fixed-rate mortgages also rose, averaging 5.06% this week, up from 4.79% last week. The mortgage averaged 5.93% a year ago, and hasn't been higher since Dec. 11, when it averaged 5.20%. Five-year Treasury-indexed hybrid adjustable-rate mortgages averaged 5.17%, up from 4.85%. The ARM averaged 5.51% a year ago. And one-year Treasury-indexed ARMs averaged 5.04%, up from last week's 4.81%; it averaged 5.09% a year ago.
Mr. Nothaft said that while higher mortgage rates are slowing refinancing activity, they haven't slowed demand for home purchases.
Friday, June 12, 2009
New Ruling on $8000 Tax Credit for 1st Time Buyers
WASHINGTON (MarketWatch) -- Federal Housing Administration-approved lenders can now provide short-term loans to first-time borrowers eligible for the $8,000 home buyer tax credit.
But under guidance issued by the Department of Housing and Urban Development late last week, the loans must be on top of -- not instead of -- the minimum 3.5% down payment normally required on FHA-insured loans.
Houses still not priced to sellOne out of every four homes on the market has experienced a price reduction, but when you look at the discounts, sellers still are loath to lower their asking prices, a Trulia.com study says. Jonathan Burton reports.
Buyers can still receive down-payment assistance from their parents, employers, nonprofit groups and certain government entities. But other than that, the down payment must come from their own funds. See previous Realty Q&A.
Thus, FHA borrowers relying on the lender to finance the tax credit will have to come up with their own money for the 3.5% down payment. But after that, they can use the proceeds from the short-term loans to increase their down payments, cover their closing costs or buy-down their mortgage rate.
The rules for advancing the tax credit from a refund received weeks or even months after an eligible buyer files a tax return to cash at the settlement table were announced by HUD. Secretary Shaun Donovan, who said allowing buyers to take advantage of the credit right away is "a real win for everyone."
HomeQuest has been an approved FHA lender since 1996. Please call me at 714-478-3153 if you have questions on this announcement or any lending related questions.
But under guidance issued by the Department of Housing and Urban Development late last week, the loans must be on top of -- not instead of -- the minimum 3.5% down payment normally required on FHA-insured loans.
Houses still not priced to sellOne out of every four homes on the market has experienced a price reduction, but when you look at the discounts, sellers still are loath to lower their asking prices, a Trulia.com study says. Jonathan Burton reports.
Buyers can still receive down-payment assistance from their parents, employers, nonprofit groups and certain government entities. But other than that, the down payment must come from their own funds. See previous Realty Q&A.
Thus, FHA borrowers relying on the lender to finance the tax credit will have to come up with their own money for the 3.5% down payment. But after that, they can use the proceeds from the short-term loans to increase their down payments, cover their closing costs or buy-down their mortgage rate.
The rules for advancing the tax credit from a refund received weeks or even months after an eligible buyer files a tax return to cash at the settlement table were announced by HUD. Secretary Shaun Donovan, who said allowing buyers to take advantage of the credit right away is "a real win for everyone."
HomeQuest has been an approved FHA lender since 1996. Please call me at 714-478-3153 if you have questions on this announcement or any lending related questions.
Wednesday, June 10, 2009
Interest Rates WILL Keep Rising
The current debt being placed upon us by decisions made by the Obama Administration will keep interest rates on the rise.
The growing debt will burden Americans not just with heavier taxes but also with higher interest rates and slower economic growth. On June 3, Fed chairman Ben Bernanke warned Congress that heavy borrowing is one of the factors driving up rates. The trend is just beginning, according to Allan Meltzer, the distinguished monetarist at Carnegie Mellon. "Rates can only stay low if foreign investors keep buying our debt," he warns. "I predict far higher rates over the next few years." The risk that the U.S. will follow Britain, which was warned recently that it could lose its triple-A bond rating, has risen from virtually nil to a real possibility, judging by the sevenfold jump in the cost of insuring Treasury debt in the past year. The big borrowing is already spooking the bond markets. This year rates on 10-year Treasuries have jumped from 2.2% to 3.7%. A further increase in rates would aggravate the situation, raising the interest costs on the debt and increasing its size even more.
The growing debt will burden Americans not just with heavier taxes but also with higher interest rates and slower economic growth. On June 3, Fed chairman Ben Bernanke warned Congress that heavy borrowing is one of the factors driving up rates. The trend is just beginning, according to Allan Meltzer, the distinguished monetarist at Carnegie Mellon. "Rates can only stay low if foreign investors keep buying our debt," he warns. "I predict far higher rates over the next few years." The risk that the U.S. will follow Britain, which was warned recently that it could lose its triple-A bond rating, has risen from virtually nil to a real possibility, judging by the sevenfold jump in the cost of insuring Treasury debt in the past year. The big borrowing is already spooking the bond markets. This year rates on 10-year Treasuries have jumped from 2.2% to 3.7%. A further increase in rates would aggravate the situation, raising the interest costs on the debt and increasing its size even more.
Friday, June 5, 2009
Interest Rates Continue to Worsen!
It appears today's published job loss number is having the biggest influence on stock trading this morning. The smaller figure indicates that job cuts may be slowing, which is important for the economy to start to pull out of the recession. It fuels the theory that the economy may begin to recover later this year. This is bad news for bonds and mortgage rates because a slowing economy usually makes long-term securities such as mortgage-related bonds more attractive to investors. This news, coupled with concern about the next debt offering from the Fed has fueled another morning of bond selling.
This has not been a pleasant week for mortgage shoppers with rates ending the week much higher than it began. Next week is moderately important in terms of economic reports. There are a couple worth noting but they don't start until the middle of the week. There is no relevant data scheduled for release Monday, so there is little news to help change the current momentum in bonds. This could lead to further increases in rates until we get to the data. I'll be sending out more details over the next few days.
I am telling my refinance clients to continue to get their loan applications in regardless of this news, as with so much market volatility rates could quickly fall. It takes at least 15-20 days to receive mortgage underwriting approval anyway, so get your applications submitted and be in a position to lock an attractive rate should we see an improvement.
To apply, go to: http://www.tomdrasler.com/loanapplication
This has not been a pleasant week for mortgage shoppers with rates ending the week much higher than it began. Next week is moderately important in terms of economic reports. There are a couple worth noting but they don't start until the middle of the week. There is no relevant data scheduled for release Monday, so there is little news to help change the current momentum in bonds. This could lead to further increases in rates until we get to the data. I'll be sending out more details over the next few days.
I am telling my refinance clients to continue to get their loan applications in regardless of this news, as with so much market volatility rates could quickly fall. It takes at least 15-20 days to receive mortgage underwriting approval anyway, so get your applications submitted and be in a position to lock an attractive rate should we see an improvement.
To apply, go to: http://www.tomdrasler.com/loanapplication
Tuesday, June 2, 2009
April Home Sales Report - Forming a Bottom
WASHINGTON (MarketWatch) -- Pending sales of existing homes rose for the third month in a row in April, boosted by record-low mortgage rates and special incentives for first-time buyers, a real estate trade group reported Tuesday.
The pending home sales index for April rose 6.7% after a 3.2% increase in March, the National Association of Realtors said. The index, based on sales contracts on existing homes, was 3.2% above April 2008.
"This is yet another positive indication that the bottoming process is forming" in home sales, wrote Jennifer Lee, an economist for BMO Capital Markets. "Now if only prices would stabilize."
The NAR reports on sales of existing homes in a separate report once a transaction closes, usually six to eight weeks later. In April, existing-home sales rose 2.9% to a seasonally adjusted annual rate of 4.68 million, 3.5% below year-earlier sales rates.
With mortgage rates hovering near all-time lows, housing affordability has improved, said Lawrence Yun, chief economist for the NAR. Yun expects existing-home sales to rise about 17% by the end of the year to a seasonally adjusted annual rate of 5.48 million. Sales of new homes, by contrast, are expected to fall another 12% to a 308,000 annual rate.
"Since first-time buyers must finalize their purchase by Nov. 30 to get the credit, we expect greater activity in the months ahead, and that should spark more sales by repeat buyers," Yun said.
The federal government is offering an $8,000 tax credit for first-time home buyers, which can be used for the down payment. Other incentives are being offered by state or local governments.
Recently, first-time buyers have accounted for about half of sales, a much larger percentage than in normal markets. With a large number of owners underwater in their mortgage, many are not able to sell their home in order to buy a different house. About half the sales have been foreclosures or short sales.
The pending home sales index for April rose 6.7% after a 3.2% increase in March, the National Association of Realtors said. The index, based on sales contracts on existing homes, was 3.2% above April 2008.
"This is yet another positive indication that the bottoming process is forming" in home sales, wrote Jennifer Lee, an economist for BMO Capital Markets. "Now if only prices would stabilize."
The NAR reports on sales of existing homes in a separate report once a transaction closes, usually six to eight weeks later. In April, existing-home sales rose 2.9% to a seasonally adjusted annual rate of 4.68 million, 3.5% below year-earlier sales rates.
With mortgage rates hovering near all-time lows, housing affordability has improved, said Lawrence Yun, chief economist for the NAR. Yun expects existing-home sales to rise about 17% by the end of the year to a seasonally adjusted annual rate of 5.48 million. Sales of new homes, by contrast, are expected to fall another 12% to a 308,000 annual rate.
"Since first-time buyers must finalize their purchase by Nov. 30 to get the credit, we expect greater activity in the months ahead, and that should spark more sales by repeat buyers," Yun said.
The federal government is offering an $8,000 tax credit for first-time home buyers, which can be used for the down payment. Other incentives are being offered by state or local governments.
Recently, first-time buyers have accounted for about half of sales, a much larger percentage than in normal markets. With a large number of owners underwater in their mortgage, many are not able to sell their home in order to buy a different house. About half the sales have been foreclosures or short sales.
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