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Mortgage Shoppers Find the Silver Lining

January 10th, 2008

Mortgage news looked pretty cloudy over the first week of January:

  • Shares of the nation’s largest mortgage lender, Countrywide Financial, declined sharply on bankruptcy rumors (New York Times)
  • The head of home loan financier Fannie Mae forecast that it may take two years or more for the housing market to work its way out of the current lackluster performance (The Buffalo News)
  • Against this backdrop, the number of Americans purchasing pre-owned homes was lower than expected (USA Today)

So why were mortgage shoppers smiling? Because there is a very real silver lining among all those clouds.

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Bank of America to acquire Countrywide?

January 10th, 2008

Today the Wall Street Journal and CNNMoney.com reported that Bank of America may soon acquire Countrywide Financial, and that the two companies are already in advanced talks toward cutting a deal. Both stocks are up significantly amidst the rumors and the prospect of the acquisition is being met with optimism by mortgage servicers. This may bring quick relief to the financial problems reported by Countrywide earlier as the result of higher-than-normal defaults. Bank of America appears ready to seize this opportunity to pick up a great company for a good price and become the largest provider of residential mortgages.

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Mortgage Rates Down Again

January 8th, 2008

Yesterday, Freddie Mac released the results of its latest Primary Mortgage Market Survey®. It shows that mortgage rates have fallen again. 30-year fixed-rate mortgages (FRM), the 15-year FRM, the one-year Treasury Indexed ARM, and the five-year Treasury-indexed hybrid ARM are all down again, and are much lower than they were this time last year.  That’s the best thing about today’s mortgage market. When you’re considering a sizable, long-term loan like a mortgage, getting a low interest rate makes a world of difference.

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New Vs. Used - What’s the best deal in today’s market?

January 4th, 2008

The Commerce Department announced last week that new home sales fell in November, and that new home prices fell by an average of $14,000 per single-family home. Builders are reducing the number of new groundbreakings, offering special deals for buyers, and lowering prices. But none of this is happening quickly enough, and current inventories are still growing, despite the fact that there is a 9.3 month supply of new homes on the market today. Meanwhile, pricing and sales rates on existing homes are doing much better.

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Home Prices Are Like Snowflakes…

January 3rd, 2008

In mortgage news this week: Housing information released the day after Christmas shows that average U.S. home prices declined for the tenth straight month in October. And yet, for all the attention these statistics get, national home price data should have very little impact on most potential homebuyers.

One reason for this, appropriately for this time of year, has to do with the old saying that no two snowflakes are alike. It turns out that home prices are a bit like snowflakes — not, as a cynic would suggest, because they are melting, but because home prices vary considerably by neighborhood, and no two neighborhoods are exactly the same. So, when national home price figures are quoted on the news, those averages have very little to do with what any given homebuyer is likely to encounter. Potential homebuyers need to do a little first-hand research, and fortunately, the tools to do so are readily available.

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Existing Home Sales: Declining or Stablizing?

January 3rd, 2008

On Dec. 31, Businessweek reported that “existing home Sales are probably at a record low and will continue to weigh on the economy in 2008.” On the very same day, the National Association of Realtors reported that existing home sales are on the rise and expected to recover in 2008.  So which is it? And what’s really going on?

Actually, in terms of what happened with November existing home sales, most of the difference between these two claims is just spin. A growth in sales of 0.4 percent is on the cusp between slight growth and no growth at all. But either way, existing home sales are lower these last two months than they have been historically. The real question is, will existing home sales continue to “weigh on the economy” or  are we really headed for “recovery in 2008.”

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A Drop in Housing Prices is Not the End of the World

January 3rd, 2008

This week I came across an article written by San Francisco’s Carol Lloyd for the SFGate.com on the topic: “If housing prices drop 15 percent, what would it mean to you?  Released in July of 2004, this article was written three and a half years ahead of it’s time. It takes a look at three very different profiles of potential buyers or sellers to see what the impact would be if housing prices dropped by 15 percent. This scenario did not occur after the article was written (prices are higher in the Bay Area now than they were three and a half years ago), but the article speaks words of wisdom to those of us who are still worried about the possibility of a drop of this magnitude.

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Sunny Sign in Home Resales Shocks Many Experts

January 2nd, 2008

Yesterday, the Chicago Tribune published an article entitled Sunny Sign in Home Resales that highlights the recent rise in existing home sales reported for November. As the article reported, the increase came as a surprise to experts. Why is this? Frankly, it’s because many of the experts have been overly “doom and gloom” in their outlook these last few months. Predictions of mayhem have been ringing in the air for so long that even good news such as this, supported by non-disputed sales figures, is still dismissed by half the experts, who can’t explain it, but still claim they’re not convinced we are on the road to recovery. What follows will shed some light on the reasons why some people aren’t ready to admit that the current situation isn’t as bad as they’ve been projecting.

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