Plymouth, MN

A "Housing Start" is a privately-owned home on which construction has started. It's an important gauge of housing health because it tracks new housing stock nationwide.

In December 2009, starts fell by nearly 7 percent.

The news is mildly disappointing but not too bad. The likely cause for the Housing Starts drop is December's rough weather conditions. It's tough to break ground when Mother Nature won't coordinate and last month was especially hazardous in a lot of parts of the country.

More cheery, however, is that for the second straight month, Housing Permits exploded. 

A housing permit is an certification from local government that authorizes construction. After posting a 7 percent gain in November, permits rose by another 8 percent in December.

It's a signal that housing is, indeed, in recovery - despite the falling number of actual starts. More permits mean that builders plan to bring more homes on the market for what's expected to be a very busy spring home-shopping season.

According to the Census Bureau, 82% of homes start construction within 60 days of permit-issuance.  Therefore, Housing Starts should start rising soon anyway.

For home buyers, the news couldn't be better. 

With more homes coming online, competition among home sellers should increase, and that will suppress the rise in home prices in Minneapolis and nationwide. 

It's basic economics.  When home supplies grow faster than home demand, prices fall.

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Securing an FHA mortgage in Minnesota is about to get more expensive.

In a statement issued Wednesday, the Federal Housing Authority outlined policy changes to its mortgage assistance program. The shift is meant to both reduce the government group's portfolio risk while strengthening its overall financials.

For consumers, the changes mean higher costs.

As listed in the official announcement, there are 3 major guideline updates for the FHA:

1. Upfront mortgage insurance premiums are increasing to 2.25% from 1.75%
2. Minimum downpayments for applicants with sub-580 FICOs are rising to 10 percent
3. Seller concessions are being limited to 3%, down from today's allowable 6%

Furthermore, the FHA has appealed to Congress to raise an FHA borrowers' monthly mortgage insurance premiums.

To read the FHA's statement, it's clear what the group is trying to balance.  On one side, the FHA wants to provide affordable financing to families that need it. That's its mission statement. On the other side, though, the FHA must manage the risk that comes with insuring lesser-quality loans.

To that end, the FHA is stepping up its enforcement of "bad lenders" in hopes of stopping problems where they start.

Also in its new policies, the FHA is introducing a "termination clause". If banks or loan officers that produce more than their fair share of bad loans, they lose their right to originate FHA mortgages.

As a result, homebuyers in Plymouth should expect tougher FHA underwriting in 2010. Not because the FHA says so, necessarily, but because banks don't want to do "bad loans".  Lenders are incented to turn down at-risk applicants and, already, we're seeing examples of this. Despite FHA allowing 580 FICOs and lower, many banks have made 620 their minimum.

Some have other guideline overlays, too.

The FHA's new guidelines don't go into effect until spring.  So, between now and then, the old guidelines will apply.  Therefore, if you know you're going to need an FHA home loan in the next few months, consider moving up your time-frame.

If nothing else, you'll save some money at closing.

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November 6th, 2009, Congress voted to extend and expand the First-Time Home Buyer Tax Credit program.  There's 100 days left to claim it.

The expiration date of the up-to-$8,000 tax credit has been pushed forward to spring, requiring homebuyers in Maple Grove to be under contract for a home no later than April 30th, 2010, and to be closed no later than June 30th, 2010.

In addition, "move-up" buyers were also added to the program's eligibility list meaning you don't have to be a first-time home buyer to be eligible for the tax credit.  If you've lived in your home for 5 of the last 8 years, you meet the IRS requirements.

Move-up buyers are capped at a total tax credit of $6,500.

The tax credit's basic eligibility requirements remain the same:

• You can't purchase the home from a parent, spouse, or child.
• You can't purchase the home from an entity in which they're a majority owner.
• You can't acquire the home by gift or inheritance.
• All parties to the purchase must meet eligibility requirements.

The new law includes some notable updates, however. 

First, the subject property's sales price may not exceed $800,000. Homes sold for more than $800,000 are ineligible.  And, also, household income thresholds have been raised to $125,000 for single-filers and $225,500 for joint-filers.

And lastly, don't forget that the program is a true tax credit - not a deduction.  This means that a tax filer who's eligible for the full $8,00 credit and whose "normal" tax liability totals $5,000 would receive a $3,000 refund from the U.S. Treasury at tax time.

The complete list of qualifying criteria is posted on the IRS website.  Review it with a tax professional to determine your eligibility.  Then mark your calendar for April 30th, 2010.

There's just 100 days to go.

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Mortgage markets showed little conviction last week, carving out just a narrow trading channel. There was very little data on which for markets to move, leaving mortgage rates momentum-bound.

Luckily for rate shoppers, mortgage rate momentum was favorable. Rates were slightly lower Monday through Thursday before breaking downward Friday afternoon. Home shoppers this past weekend caught a nice break.

Last week marked the second straight week in which mortgage rates fell.

This week, in holiday-shortened trading and with little economic data set for release, expect mortgage rates to again move on momentum. The biggest report of the week is Wednesday's Producer Price Index.

Producer Price Index is important to mortgage rates because of its role in inflation.  PPI is akin to a Cost of Living-type measurement, but for business.  As business costs rise, the thought goes, it's not long before consumer costs rise, too. Businesses eventually pass on costs, after all.

In this manner, a rising Producer Price Index can foreshadow rising consumer prices, and, therefore, inflation.

Inflation is awful for mortgage rates.

PPI expectations have revised downward this month, especially because last week's data showed a deceleration in consumer prices nationwide. If PPI isn't as weak as expected, mortgage rates will rise.

Other influential data this week includes Housing Starts, Consumer Confidence and Initial Jobless Claims.

So far, 2010 has been for mortgage rates in Wisconsin and around the country. If you're in need of a rate lock, this week may be a good time to take one.

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Like real estate, it appears that foreclosure activity is a local phenomenon, too.

As reported by RealtyTrac.com, more than half of all foreclosure-related activity in 2009 came from just 4 states:

1. California
2. Florida
3. Arizona
4. Illinois

More than 1.4 million filings made in 2009 are attributed to the above states. Furthermore, each ranks in the Top 10 for 2009 Foreclosures Per Capita.

The other states are Nevada, Utah, Georgia, Idaho, Michigan and Colorado.

Versus 2008, foreclosures are up 21 percent nationwide and that's a big number, but a deeper look at RealtyTrac's annual reports reveals a more positive undertone on the housing market.

1. 40 states fell below the national Foreclosures Per Capita average in 2009.
2. Foreclosure activity fell on an annual basis in 10 states as compared to 2008.

Foreclosures are still prevalent, though, and buying homes in foreclosure in Minneapolis continues to be big business.  First-time buyers, move-up buyers, and real estate investors each are bidding aggressively.

Distressed homes account for one-third of home resale activity, according to an industry trade group.

That said, buying foreclosures can be tricky.

First, properties are often sold "as-is" and the cost of repairs may unwind the home's status as a "value buy".  Furthermore, a lender may require specific fixes to be made prior to closing and that, too, costs money.

Second, buying a foreclosed home in Minnesota isn't as streamlined as buying a "normal" home. Closing on a foreclosure can be a 120-day process or longer. A 4-month time-frame may not fit your schedule.

And, third, finding foreclosures can be difficult. Despite the growth in foreclosure search engines, it still takes a good real estate agent to uncover the best homes at the best prices.

Read the complete foreclosure report and take a peek at RealtyTrac's foreclosure heat maps.  If you like what you see, talk to your real estate agent about what to do next.

There's still good deals in the foreclosure market - you just have to know where to find them.

 

website: http://www.homeloansmidwest.com/

youtube channel: http://www.youtube.com/midwesthomeloans

blog: http://www.homeloansmidwestblog.com/