Mark A. Crain

Next month, FHA financing will see a couple of major changes that will significantly impact buyer borrowers. Effective April 5th (next month), the upfront Mortgage Insurance Premium (MIP) will increase from 1.75% to 2.25% which increases the loan amount, and as a result the monthly payment. Additionally and more importantly, the seller contribution on FHA financing will DECREASE from 6% to 3%, moving this popular first-time homebuyer financing option in line with Fannie Mae and Freddie Mac.

For the MIP increase, a 1/2 % increase on a typical Birmingham mortgage of say $175,000 means that the buyer's loan amount goes up $875 which isn't really that big of a deal, especially since it is financed and represents a very small increase in the monthly payment amount. But the seller contribution decrease on FHA financing could be a much bigger issue, especially in the Birmingham market where the average sales price is below $200,000. Currently, in a typical first-time homebuyer scenario, a prospect may have pretty good credit and a good job with adequate income but not accumulated cash for the down payment and closing costs. The buyer may be getting a gift for the down payment (typically 3.5%) with the realtor writing up an offer on behalf of the buyer where the seller pays up to 6% of prepaids and then closing costs. On a $175,000 mortgage, 6% is $10,500 so it is easily covers all closing costs and prepaids (assuming you can get the seller to pay that much!). At the new 3% rule, on the same mortgage, $5,250 is probably not enough to cover EVERYTHING and you'd likely be $1,000 or more short depending on a number of factors beyond the scope of this post. When you add up taxes, inspections, title search, recording fees, appraisal, underwriting, hazard insurance, settlement costs and so forth, on FHA financing transactions, the total accumulates quickly.

So then take FHA financing on a deal that is say $150,000 or $135,000 and you get the picture. With the decrease in the allowable seller contribution to 3%, some prospects are going to have to come up with some of their own cash and some prospects are just going to have to wait and accumulate some additional cash to get into their dream home. While this is a prudent move economically and financially for FHA, it doesn't come at the best of times given that the federal tax credit for first-time home buyers is set to expire 25 days after implementation of this new FHA financing rule.

Contact my contributor, Jimmy Kernan, Vice President of Regions Mortgage at 205-560-5652 to get prequalified or to answer any questions you may have about available financing programs. Click tax credit to get more information on the first-time or move-up homebuyers tax credit available for contracts signed by April 30th or send me a message at sold@markcrain.com. Go to house search to have homes meeting your criteria delivered directly to your inbox at no obligation!

This week's mortgage market update, provided by Jimmy Kernan of Regions Mortgage, shows that rates were relatively unchanged, hovering near 5% for conventional 30 year loans. Weaker than expected economic reports, which drive rates down, were offset on Friday by stronger than expected employment data. The economy lost fewer jobs than were expected in January with unemployment remaining at 9.7%. The volatile unemployment survey surprisingly showed an increase of 308,000 jobs in February, indicating that smaller companies were a source of job gains.

This week's mortgage market update showed that housing data was weaker than expected. January pending home sales fell 7.6% where the expectation was for a small increase. Pending home sales were still 12% higher than a year ago but the expected surge in sales from the extended homebuyer tax credit has failed to materialize, possibly due to harsh winter weather. The Fed's Beige Book reported that the economy continued its slow growth. The economic calendar for this week's includes release of the Trade Balance on Thursday and the Retail Sales report on Friday. Consumer sentiment will be also be issued on Friday.

Contact Jimmy Kernan to prequalify for your next mortgage before beginning your home search. Act now to take advantage of the federal tax credits for first time and move up buyers. Contact me to set up an automated home search where properties meeting your established criteria are sent directly to your inbox on a daily or weekly basis. If you have any questions regarding the market, selling your home or buying a new home, feel free to email me at sold@markcrain.com.

Preliminary Birmingham MLS market statistics through February, 2010 are disappointing at best for sellers and realtors but continue to support the notion that this is clearly still a buyer's market with great opportunities and bargains throughout the area. As a qualifier, these MLS market statistics are preliminary and are projected for February, 2010 in order to provide timely reporting of what is happening with real estate locally. Final numbers likely will be distributed next week in the local media but the figures and conclusions reached here are not expected to be materially diffferent. Also, this report is for single family residential and excludes townhouses and condominiums. I will provide comments next week as a follow up to this post as final numbers are released in the media.

Take a look at the chart above. First the good news. In comparison to January, 2010, sales in terms of units and volume ($) are up. Additionally, months inventory (non-average), a relative measure of supply and demand, is down slightly giving us hope that the market may have bottomed out. Finally, the number of days on market (time to sell) and sale to list price are nominally improved. The bad news is that in comparison to February, 2009, sales are down and months inventory are up both for the non-averaged (monthly) and 90 day average. The MLS market statistics graph below depicting months inventory (simple & 90 day average) probably illustrates it best; as shown from the graphic, months inventory, while dropping nominally overall from January, 2010, remains at levels well above the past 36 months.

Birmingham MLS market statistics are frustrating for realtors and sellers given (1) interest rates are near historical lows (under 5%!), (2) housing prices are very low historically with bargains in every price range and (3) the looming expiration of the federal tax credit for first-time and move-up homebuyers. The hope in the real estate community is that we will experience a surge in demand in March and April. As buyers become aware that time is of the essence to take advantage of the federal tax credit and the threat of higher interest rates is real, more people will begin to "get off the fence" and make a move, especially with an improvement in the weather. Unfortunately for some, it likely will be too late given that the federal government is not likely to extend the credit again.

For sellers, these MLS market statistics mean that you need to (1) price aggressively, (2) stage your home to impress prospective buyers and (3) engage an experienced, quality agent to maximize your net proceeds and minimize time on the market. For buyers, it means you continue to enjoy a strong negotiating position and have lots of choices before making a final decision.

Visit tax credit for more information about what the government incentive could mean to you as a buyer / seller in this market. Click free comparative market analysis (CMA) or send me an email with your address to get recent home sales and listings in your area to assist in determining an appropriate listing price for you home.

The National Association of Realtors recently published its 10 Home Features Buyers Want. I thought it was meaningful and helpful so I am including it here (not necessarily in order).

1. Large kitchens with islands.

2. Two-car garages with three-car garages even more desirable.

3. Home offices.

4. Community walking paths and playgrounds.

5. Ceilings fans.

6. Energy efficiency, including energy-efficient appliances and windows and extra insulation.

7. Soaking tub in the master suite and / or an overside shower with a seating area.

8. Main floor master suite.

9. Stone and brick exteriors rather than stucco or vinyl.

10. Outdoor living space.

Knowing the home features buyers want is important to know as a seller and buyer. For the seller, to the extent you can add some of these items prior to listing, you likely will reduce marketing time and improve your net proceeds from the sale. For buyers, selecting homes with these features will impact long-term appreciation and future resale of the home.

For tips on home staging, the federal tax credit or comparable sales in your area, visit my website at www.markcrain.com or contact me at sold@markcrain.com and I will gladly respond to any request you may have regarding information associated with buying or selling a home.

This week's Birmingham mortgage market update, provided by Jimmy Kernan of Regions Mortgage, reflects a week of surprising news that has yielded lower rates. After several weeks of focus on Fed actions and events in foreign markets, domestic economic data was the primary influence on mortgage markets this week.

While it is rarely a big market mover, this week's Consumer Confidence report shocked investors. The index declined to 46.0, far below the consensus forecast of 55.0, and the lowest level in nine months. Consumers are clearly worried about the labor market, and an increase in Jobless Claims in recent weeks has amplified the issue. The decline in confidence has potentially negative consequences for the economy. Consumer spending accounts for about 70% of economic activity, and this data raises concerns about the level of future spending. Also, home sales suffer during periods of low consumer confidence, and the housing data released this week reflected consumer insecurity. Of course, slower economic growth is favorable for mortgage rates, which fell after the report came out.

In contrast to the weakness seen in many of the consumer-driven economic reports, the manufacturing sector has been demonstrating strong performance in recent months. Fourth quarter Gross Domestic Product (GDP), the broadest measure of economic activity, rose at a brisk 5.9% annual rate, largely due to a pickup in manufacturing. The added boost from manufacturing may be temporary, however. During the financial crisis, companies drew down inventories as much as possible to conserve capital. As the economy has shown improvement, companies have been increasing inventories closer to pre-crisis levels. When the inventory rebuilding is complete, manufacturing is expected to return to more normal levels. Other items to note from last week:

1. Weekly Jobless Claims unexpectedly jumped to a three-month high

2. January New Home Sales dropped 11% from December to a record low

3. Bernanke said he doesn't anticipate any MBS sales by the Fed in the near term

4. The Fed purchased $11 billion in agency MBS, with about $44 billion more to go

For the week ahead, the biggest economic event is the important Employment report due out Friday. As usual, this data on the number of jobs, the Unemployment Rate, and wage inflation will be the most highly anticipated economic data of the month. Personal Income and the ISM manufacturing index are to be released today (Monday). ISM Services and the Fed's Beige Book will be released on Wednesday. Pending Home Sales, a leading indicator for the housing market, will come out Thursday. Productivity, Construction Spending and Factory Orders will round out the schedule.

The first step in the process of buying a home is to get prequalified for a mortgage. Contact Jimmy Kernan via phone at 205-560-5652 or email at james.kernan@regions.com to get started. For information on homes that have sold in your neighborhood or homes currently listed that you may have an interest in, go to search birmingham MLS and set up your own personalized search. You can view homes or set up an automated search that will deliver property links directly to your inbox on a daily, weekly or monthly basis free of charge!