Mortgage markets improved last week as foreign buyers of mortgage debt helped to push mortgage rates to a 4-week low.
It marked the 3rd consecutive week that rates improved, breathing extra life into this year's ongoing Refi Boom.
Fixed-rate, conforming mortgage rates fell about 0.125 percent on the week. ARMs did about the same.
There wasn't much data to move mortgage rates last week; investors worked mostly on momentum and trends. However, the Friday University of Michigan Consumer Sentiment survey release garnered some attention.
After worsening in August and September, consumer sentiment fell for the third straight month in October. Analysts worry about what it could mean to the economy. Holiday Shopping season is here and consumer spending fuels the economy. If households hold the purse strings tight, our nation's budding economic recovery may stall.
In a scenario like that, employment rates won't rebound so fast, but rate shoppers might not mind. Slower-than-expected economic growth tends to suppress mortgage rates, helping to improve home affordability overall.
This week, data comes back into focus.
At 8:30 AM ET today, the government will release October's Retail Sales report. This one should be closely watched for its ability to change rates. A weak report should drag rates down, and a strong one should push rates up.
Then, on Tuesday and Wednesday, look for PPI and CPI -- two key inflation indices. Inflation causes mortgage rates to rise so if either of these reports comes in hotter-than-expected, rates will almost certainly rise.
And, lastly, also on Wednesday, we'll get the Housing Starts report for October. Don't expect the markets to move on this one, but keep an eye on the data anyway. Housing markets remain crucial to economic recovery.
Despite rates hovering near recent lows, remember that markets change quickly. A rate quote from the morning is rarely valid by the afternoon and, when rates rise, rates rise fast.
From today's Los Angeles Times: If you fit the criteria and are considering buying another house in the coming year, you might want to speed up the process and close by the June 30 expiration date. By Kenneth R. Harney, November 15, 2009 Reporting from Washington - Take a close, hard look at the new $6,500 federal tax credit for so-called move-up home buyers that passed the Senate and House recently. Though it's been getting second billing to the original $8,000 credit for first-time purchasers -- now extended by Congress through June 30 -- the $6,500 credit for current homeowners just might have your name on it.
How does it work? When will it be available?
The new credit is available now. It took effect Nov. 6, the day President Obama signed the legislation that created it. This means that if you fit the key criteria -- you've owned and lived in your home for a consecutive five out of the last eight years, and your adjusted household income doesn't exceed $125,000 if you file taxes singly or $225,000 if you are married filing jointly -- you can claim the credit as soon as you close on a qualifying house.
That could be next week, next month or next spring. There is no "move-up" requirement in the new credit. In fact, homeowners who plan to downsize into a smaller dwelling may prove to be significant users of the credit, along with people who are moving because of employment changes.
If you fit the criteria and are considering buying another house sometime in the coming year, you might want to speed up the process and sign a contract by April 30 and close by the June 30 expiration date. Think of it this way: If the government is willing to give you $6,500 to act a little faster than you had planned, hey, why not?
Some other key features of the $6,500 credit you ought to know about:
* Whatever you intend to buy, the house cannot cost more than $800,000.
* The replacement house must become your main home. There is no requirement in the legislation that you sell your current home. You could rent it out, turn it into a second home or list it for sale later in 2010 when prices might be higher. If you plan to retain it, however, make sure that you move into the new house on the day you close so that there is no question it was your principal residence at that time.
* Like the first-time buyer credit, the $6,500 version permits a variety of dwelling types for your purchase. These include new or existing single-family homes, condominiums, manufactured or mobile homes, and boats that function as your principal residence. You cannot claim the credit if you are buying a second home or an investment property.
* The Internal Revenue Service is required by Congress to scrutinize claims for tax credits -- both for the $6,500 and the $8,000 credits -- far more closely in the coming months than it did earlier this year. This is because federal investigators have documented significant instances of fraud -- supposed home buyers who were as young as 4, and "sales" that were fabricated. Investigators also found numerous cases of technical violations, such as purchase transactions among immediate family members, which are prohibited.
The revised rules require taxpayers to submit copies of their settlement statements (HUD-1 forms), along with their requests for credits using IRS Form 5405. Congress' new rules also prohibit individuals under the age of 18 or who are counted as dependents on another taxpayer's filings from claiming the credit.
* Home buyers in 2009 -- those who go to closing after Nov. 6 but no later than Dec. 31 -- can claim the $6,500 credit on their 2009 federal tax returns, or amend their 2008 returns. Similarly, eligible buyers in 2010 will be able to file for the credit on their 2009 returns or 2010 returns. Talk to your tax advisor regarding timing decisions.
* If you aren't sure if you can make the deadlines established for the new credit -- a binding contract by April 30 and a settlement by June 30 -- do not assume that Congress will provide another extension. All the political and budgetary signs point the other way, and some of the primary authors of the credit insist that this is it -- no more extensions next year. Take them at their word.
One consumer resource that answers frequently asked questions about both the $6,500 and $8,000 extended credits is www.federalhousingtaxcredit.com, sponsored by the National Assn. of Home Builders.
kenharney@earthlink.net
Distributed by the Washington Post Writers Group.
For the eighth straight consecutive month, national foreclosure activity in the U.S. was dominated by a small set of states.
As reported by RealtyTrac.com, more than half of October's foreclosure-related activity came from just 4 states:
The remaining Top 10 states in terms of total foreclosure activity included Arizona, Georgia, Texas, Ohio, New Jersey, and Maryland.
Foreclosures are up 19 percent from last October, but a deeper look at the RealtyTrac report revealed two positive developments for the housing market.
Furthermore, Nevada's foreclosure pace is down 4% from last year. This is a big deal because Nevada has long led the nation in foreclosure-related activity. Until last month, Nevada's year-to-year foreclosure rate hadn't fallen in more than 4 years.
It's too soon to say that the foreclosure market is drying up, but bargains are getting harder to come by. First-time buyers and bona fide investors alike have been snapping up property at a furious pace.
According to an industry trade group, distressed homes account for nearly one-third of home resale activity.
That said, buying foreclosures isn't for everyone.
For one, properties are often sold as-is and may be defective. The cost of repairs may negate "the deal" or "the steal" -- depending on the cost of the home.
In the end, fundamentally, buying a foreclosed home is the same as buying a "regular" home -- there's a contract and a closing. Most of the steps in the middle, however, are different.
Read the complete foreclosure report and take a peek at the foreclosure heat maps on the RealtyTrac website. If you like what you see, give me a call and let's discuss the possibilities.
There's still good deals in the foreclosure market, especially in the higher price ranges, and this is likely to continue for the next year, in my humble opinion.
Despite the economy's improvement and prodding from Congress, banks don't seem ready to open their purse strings just yet.
Nationally, mortgage approval standards are tightening.
The data comes from a quarterly survey the Federal Reserve sends to its member banks. The Fed asks senior bank loan officers around the country whether "prime" residential mortgage guidelines had tightened in the last 3 months.
For the period July-September 2009:
Just one bank said its guidelines had loosened.
Combine the Fed's survey with recent underwriting updates from the FHA and from Fannie Mae and it becomes clear that mortgage lenders are much more cautious about their loans than they were, say, 2 years ago.
Today's borrowers face a host of hurdles including:
In other words, mortgage rates may stay low into 2010, but that won't matter to homeowners that don't meet minimum eligibility standards. With each passing quarter, that list gets smaller.
Therefore, if you're on the fence about whether now is a good time to buy a home, remember that, along with an increase in mortgage approval standards, home values are rising, too.
Acting sooner is probably better than acting later.
Consider this a last call for FHA Streamline Refinances. Starting next Tuesday, the popular rate-lowering program gets strict on borrowers.
There's 5 days left.
Under the current streamline refi guidelines, FHA homeowners have minimal program eligibility requirements.
Beyond that, everything else goes, practically. There's no income, asset, or job verification with the current FHA Streamline program. Neither is there an appraisal requirement. It doesn't matter if you're 50% underwater.
Until next week, that is.
Beginning November 17, FHA Streamline Refinance applicants must show evidence of income and employment, plus proof of cash required to close. Furthermore, the FHA is limited loan-to-values to 97.75% for homeowners that want to "roll closing costs" into their mortgage.
In areas of declining home values, this may render refinancing impossible.
There's more changes, too, as highlighted by the Federal Housing Commissioner. Read up for yourself, or ask a mortgage professional for help.
If you're a homeowner and you're currently financed through the FHA, it may be prudent to explore the possibility of an FHA Streamline Refi. Mortgage rates are low right now and FHA guidelines are loose.
Starting next week, FHA Streamlines will be a completely different beast.
Serving So. Orange County, in Southern California, since 1976 - over 32 years! My office is just outside the gates of Coto de Caza. My California DRE # is 00581357
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