As expected, the expiration of the Homebuyer Tax Credit incentive is borrowing buyers from the future. Many of these buyers would have been in a position to purchase in the months ahead, given continued low interest rates and buyer-friendly home prices; this is reflected in recent home sales and mortgage application reports. For this to reverse five things need to happen:
1. Interest rate must remain low. - I believe interest rates will remain low for the unforeseeable future, at least until 2011.
2. Private-sector wages will need to rise, enabling the current employed to better qualify for mortgages. - Most of 2010 job growth has occurred in the government sector, ie. 230,000 Census workers.
3. New jobs must to be created in the private-sector to bring new households into the homebuying ranks. - Economists expect a decline of 115,000 jobs for June.
4. The consumer savings needs to increase thus creating the down payment and closing costs for home purchases. - the savings rate did increase in May from too 4% from 3.8% in April.
5. Consumer Spending must increase. - Latest statistics show consumer spending as flat in May at only .2% growith.
Steve Wood of Insight Economics concludes: "The growing economy, which is now creating private sector jobs with a lengthening workweek, combined with ongoing monetary and fiscal stimulus, has strengthened growth in personal income and wages and salaries. Although still soft, they are much stronger than they were just 6 months ago."
So, it appears that the US economy is modestly advancing on all five points. If it continues to improve it will still take time to create qualified homebuying households.
Monday, June 28, 2010
Friday, June 25, 2010
June 28th Key Mortgage News Bites
The Good,The Bad, & The Ugly
The Good - The Fed's kept the fund rate at the 0%-25% level given slow improvement in the economy.
Good and Bad - Due to record low interest rates of sub-5%, refinancing applications have increased over 51% since the end of April and they account for 74% of all mortgage applications.
The Bad - Existing home sales declined 2.2% in May.
The Ugly - New home sales declined 32.7% in May, the lowest level since this data was tracked in 1962.
Call Today for Personalized Mortgage Services
We are a full service mortgage brokerage firm offering Conventional, FHA, VA, CalPERS, CalSTRS and Jumbo mortgage programs up to $3,000,000.
Tom Drasler - (714) 478-3153 - Lincensed Mortgage Specialist DRE#01775516
"Serving Southern California Since 1996"
The Good - The Fed's kept the fund rate at the 0%-25% level given slow improvement in the economy.
Good and Bad - Due to record low interest rates of sub-5%, refinancing applications have increased over 51% since the end of April and they account for 74% of all mortgage applications.
The Bad - Existing home sales declined 2.2% in May.
The Ugly - New home sales declined 32.7% in May, the lowest level since this data was tracked in 1962.
Call Today for Personalized Mortgage Services
We are a full service mortgage brokerage firm offering Conventional, FHA, VA, CalPERS, CalSTRS and Jumbo mortgage programs up to $3,000,000.
Tom Drasler - (714) 478-3153 - Lincensed Mortgage Specialist DRE#01775516
"Serving Southern California Since 1996"
Modified Loans See High Default Rate
Credit Rating firms forecast 65% to75% of borrowers who receive lower mortgage payments as a result of loan modifications will default within 12 months. These are loan modifications supported under President Obama's Home Affordable Modification Program (HAMP).
The median debt to income ratio using debt payments to pretax income, still averages 64%, well above today's conventional lending standards of 45%.
Experts believe these failures are likely to be high largely because most of the borrowers are mired in credit-card debt, car loans and other obligations, leaving little left over for
The Treasury Department has said even with the modifications it often means little money is left over for food, clothing or such emergency expenses as medical care and car repairs.
The median debt to income ratio using debt payments to pretax income, still averages 64%, well above today's conventional lending standards of 45%.
Experts believe these failures are likely to be high largely because most of the borrowers are mired in credit-card debt, car loans and other obligations, leaving little left over for
The Treasury Department has said even with the modifications it often means little money is left over for food, clothing or such emergency expenses as medical care and car repairs.
FHA Reform Act - Update
H.R. 5072 & H.R. 4213 - FHA Reform Act of 2010
The House overwhelmingly passed reform legislation on June 11th that is believed will strengthen the FHA loan insurance program while keeping it available and affordable to responsible home buyers. Changes include:
• FHA to raise monthly insurance premiums and lower up-front premiums that place burdens on cash strapped borrowers.
• Amendment to increase FHA minimum down payment requirement from 3.5% to 5% was defeated; if approved it is estimated 300,000 homebuyers would be disenfranchised.
• Home Buyer Tax Credit CLOSING deadline is extended from June 30th to September 30th; Amendment does NOT extend the deadline for home buyers to qualify.
• The extension is expected to allow over 180,000 transactions to close that would not have otherwise made the June 30th deadline.
The House overwhelmingly passed reform legislation on June 11th that is believed will strengthen the FHA loan insurance program while keeping it available and affordable to responsible home buyers. Changes include:
• FHA to raise monthly insurance premiums and lower up-front premiums that place burdens on cash strapped borrowers.
• Amendment to increase FHA minimum down payment requirement from 3.5% to 5% was defeated; if approved it is estimated 300,000 homebuyers would be disenfranchised.
• Home Buyer Tax Credit CLOSING deadline is extended from June 30th to September 30th; Amendment does NOT extend the deadline for home buyers to qualify.
• The extension is expected to allow over 180,000 transactions to close that would not have otherwise made the June 30th deadline.
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