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2013: Experts predict mortgage and housing market trends

January 8th, 2013

In his final press release of 2012, Freddie Mac chief economist Frank Nothaft pulled into stark focus just how good that year had been for home loan borrowers. He observed:

“Mortgage rates ended this year near record lows. The 30-year fixed-rate mortgage averaged 3.66 percent for 2012, the lowest annual average in at least 65 years. Rates on 30-year fixed mortgages were nearly 0.6 percentage points below that of the beginning of the year, which translates into an interest payment savings of nearly $98,600 over the life of a $200,000 loan.”

Mortgage rates set to rise?

That last sentence was especially startling: It means that, if you haven’t refinanced in the last year, you could end up throwing away close to $100,000 in excess interest payments between now and when your mortgage is finally paid off. Exactly how much you could save obviously depends on the amount of your home loan, and how long it still has to run.

But suppose mortgage rates fall even further, you might say. You don’t want to pay closing costs for a refinance now if you could make even bigger savings in 2013.

Good point — especially as nobody knows what’s going to happen to mortgage rates in the future. But some people should be able to make better guesses than others. So what do the experts at the Mortgage Bankers Association (MBA) and Fannie Mae think could happen?

The smart money? Refinance now.

In their December 2012 forecasts, both teams believed those mortgage rates would inch up during the coming year. The economists at the MBA expect those for 30-year fixed-rate mortgages to hold steady during the first quarter, but then to creep up, eventually to an average 4.4 percent in the October - December period. That’s up from a 3.7 percent average for 2012.

Both teams also agree that the “median price of total existing homes” (average house prices, excluding new builds) are likely to edge up, although there could be some volatility that might see prices drop below — as well as rise above — current levels. Fannie Mae’s people believe that those house prices will average $176,000 in 2013, up from $173,000 last year. Using different data, the MBA experts anticipate house prices to average $186,900 this year (and $193,600 in 2014), up from a 2012 average of $178,600.

If these experts are correct — and that’s a big “if” — then you might think it sensible to go ahead and refinance or apply for a new home loan now, rather than to wait longer. There’s no point in hanging around unless you, unlike the experts, believe mortgage rates and/or house prices are going to fall further.


Cousin Bubba wants a mortgage loan — from you!

April 26th, 2012

Whether you’ve won the lottery, profited from investments or just been diligent about building a nest egg, it’s possible that at some point a family member may come looking for some cash. If you’re really rolling in dough, you may even be asked to help with a mortgage loan. But should you get involved with such an important — and sizable — financial transaction?

First-time home buyers

A recent National Association of Realtors survey found that 7 percent of first-time home buyers relied on a loan received from a family member or friend to buy a home. At first glace this may seem like a bad idea all around, but there may be some cases in which becoming a relative’s mortgage lender makes sense. Use this checklist to decide if this is a lucrative financial opportunity or a potential disaster.

  1. Do you really have enough cash on hand to help your relative pay for a house? Do you have a hefty retirement fund and college savings for your kids? Are you going to struggle to pay daily expenses? Will you make more off the interest than with current savings and investments? A financial adviser can help review your situation to determine whether giving a relative a mortgage is a smart move or financial suicide.
  2. Is your relative responsible with money? If everyone in the family knows that Cousin Bubba is a deadbeat who is constantly dodging creditors, run the other way when approached for a home loan. Sure, you may want to help out your relative, but do you really want to get tangled up in his financial messes?
  3. Will a mortgage loan negatively affect your relationship? Just because you become your relative’s mortgage lender doesn’t mean you’ll have a say in how they maintain their home. Can you bite your tongue when he makes home improvements you absolutely can’t stand? Refrain from constantly making suggestions about what needs to be done in order to keep the peace.

Make it legal

If you feel confident about giving a relative a mortgage loan, make sure you have a solid legal agreement in place. An attorney can help with that. Another option is to set up an agreement through peer-to-peer lending organization National Family Mortgage, which says it has helped with more than $30 million in loans between relatives.

Mortgage applications rise as refinances fall

March 23rd, 2012

The number of borrowers applying for mortgages to purchase homes jumped earlier this month, but refinancing applications declined, according to the Mortgage Bankers Association (MBA). Applications for home purchases rose 4.4 percent for the week ending March 9 while those for refinancing fell 4.1 percent from the previous week.

“(Home) purchase applications are now almost 12 percent above the level one month ago, even after adjusting for typical seasonal patterns,” Michael Fratantoni, MBA’s Vice President of Research and Economics, said in a statement. “HARP volume continued to grow as a share of total refinance volume, reaching roughly 30 percent of refinance activity in the last two weeks. Typical HARP loans had loan-to-value ratios above 90 percent, indicating that lenders are reaching out to underwater borrowers.”

The increase in mortgage applications for purchase came as the Bureau of Labor Statistics reported that the unemployment rate improved. The unemployment rate fell in 45 states, setting the national unemployment rate for the U.S. at 8.3 percent.

But despite this positive economic news, mortgage rates have remained near record lows. The average for a 30-year fixed-rate mortgage is 3.89 percent, and the 15-year loan sits at 3.2 percent. For purchasers shopping for a good deal, home prices fell to the lowest levels since the housing crisis began, according to the most recent S&P/Case-Shiller Home Price Indices, indicating that the time may be right for shoppers to go in search of real estate deals.

Delinquent home loan percentage decreases in Q4

March 1st, 2012

The mortgage delinquency rate fell to a seasonally adjusted rate of 7.58 percent to close the fourth quarter of 2011, according to the Mortgage Bankers Association (MBA). The serious delinquency rate, the percentage of loans 90 or more days past due or in the foreclosure process, also fell to 7.73 percent.

Mortgages helped by employment

Jay Brinkmann, MBA’s Chief Economist and Senior Vice President for Research and Education:

Mortgage performance continued to improve in the fourth quarter, reflecting the improvement we saw in the job market and broader economy,”┬áJay Brinkmann, the MBA’s chief economist, said in a statement. “The total delinquency rate and foreclosure starts rate decreased and are back down to levels from three years ago.

“A major reason is that the loans that are seriously delinquent are predominantly made up of loans originated prior to 2008 and this pool is steadily growing smaller as a percent of total loans outstanding. In addition, employment is the key driver of mortgage performance and the mortgage delinquency rate is actually falling faster than the unemployment rate is declining.”

The MBA survey also found that the percentage of mortgage loans in foreclosure at the end of the fourth quarter was 4.38 percent, down from 4.64 percent the previous year. Total delinquency rates and foreclosure starts fell from the previous quarter for most types of home loans, including prime fixed, prime adjustable-rate mortgage (ARM), sub-prime fixed and sub-prime ARM. FHA loans, however, saw an increase in delinquency and foreclosure rates.

Is help for mortgages on the way?

Finding the right help can be a game-changer if you are struggling with paying a mortgage on time. Whether you are hoping to refinance a home loan or think you may be eligible for help through the government’s recent settlement with mortgage loan servicers, it is important to check out all options that may be available to you. Talk with your mortgage lender or a housing counselor to find out what you can do to save your home.

Home builders more confident in November

December 13th, 2011

Home builders grew more confident in November, compared with October’s figures. Confidence in the market for single family homes rose by three points to 20, according to the National Association of Home Builders/Wells Fargo Housing Market Index. The index was at its highest level since May 2010.

Housing market faces challenges

Bob Nielsen, chairman of the National Association of Home Builders, said in a statement:

While this second solid monthly gain on the builder confidence scale is encouraging, the overall measure remains quite low due to many challenges that home building continues to face with regard to the high number of foreclosures, the difficulty of obtaining construction financing and accurate appraisals, and the restrictive lending environment that is discouraging potential buyers. These problems must be addressed so that housing can contribute to economic and job growth the way it has in the past.

Qualifying for low-rate mortgage loans

The increase in builder confidence is related to the fact that homeowners who are able to qualify for mortgages are looking to take advantage of current mortgage rates, which have dipped to historically low levels. Borrowers with good credit may be more willing to hunt for a new home at a bargain price if they can obtain a mortgage loan at such low rates. The NAHB anticipates that builder confidence will continue to improve going into 2012.

Help for the housing market

The state of the nation’s housing market continues to be of concern to many people inside and outside the real estate industry. Speakers at the 2011 Realtors Conference & Expo said that the struggling housing market needs to be a priority of the nation’s public agenda.

“A healthy housing industry helps everyone in the country,” said Rep. Gary Miller, (R-Calif.) at the conference. The housing market has led this nation out of every downturn we’ve had in the past. Congress needs to focus on stabilizing the market, and that must be dealt with today and in a comprehensive fashion that will serve homeowners today and in the future.”

Poll: Americans still want to be homeowners

April 19th, 2011

Despite woes in the housing market over the last five years, many Americans still believe in the dream of home ownership. A recent poll by the Pew Research Center found that 81 percent of adults agree that buying a home is the best long-term investment a person can make. That’s despite the fact that home prices have dropped 31 percent from 2006 peaks. Home ownership beat out having enough money to live comfortably in retirement, being able to pay for children’s education and being able to leave an inheritance for children.

About half of those polled (47 percent) said their home is worth less than it was before the recession started, while 31 percent said their home’s value has remained the same and 17 percent said the value has risen. Of the people who said their home had lost value, 37 percent strongly agree and 45 percent somewhat agree that buying a home is their best long-term investment.

When to get a mortgage

Many of these people may be waiting until home prices rise so they can try to sell and get a mortgage to purchase a different property. Renters also believe in home ownership, with 81 percent saying they would like to buy a place. While home prices may not have reached the bottom yet, that doesn’t mean it doesn’t make sense to get a mortgage at this time. It’s just important to do your research to get the best home loan deal possible.

Comparing mortgage loans

Avoid letting your emotions get the better of you when shopping for a home loan. Mortgage rates have been inching up recently and there is an expectation that they will continue rising this year, according to a Sacramento Bee report. But current mortgage rates are still affordable for people who have the means and credit to buy a home.

If you aren’t in the market for a new mortgage and can afford your current payments on a home loan, it probably makes sense to stay put. Also, if you have bad credit you will have a difficult time getting a mortgage lender to approve you for a home loan. Keep working on repairing your credit and saving up a down payment until you are in a position to buy into the American dream of home ownership.

All-cash deals made up 28 percent of home purchases in 2010

March 4th, 2011

Having enough money to purchase a home outright might seem like a fantasy, but 28 percent of all homes bought in 2010 were all-cash deals, according to a recent Wall Street Journal article. Areas that had more depressed housing markets had more all-cash purchases.

Among the areas that saw a lot of these purchases is Miami-Fort Lauderdale, were over 50 percent of purchases involved cash buyers. About 42 percent of real estate purchases in Phoenix were all-cash deals.

“The prices were just irresistible,” Richard Stoker, who paid cash for two condos in Miami Beach, Fla., told the Wall Street Journal. “Florida’s been hit pretty hard.”

No mortgage loans

Buyers who pay with cash may receive a discount off the price of a home.They also have the freedom that comes with owning a property free and clear of a mortgage. Often people who are able to purchase a house with cash are investors. According to San Diego-based DataQuick, “All-cash deals have become popular in many Western markets where prices have dropped sharply, luring investor buyers who don’t always qualify for traditional mortgages. Moreover, sellers favor the relative speed and certainty of all-cash transactions.”

While investors are more likely to do all-cash deal, that doesn’t mean that there aren’t buyers out there who can afford to buy a home without a mortgage. The Money Saving Mom blog describes in a series of articles how one couple scrimped and saved to get the money they needed to buy a home in an all-cash deal. Buying a home with cash isn’t for everyone and requires a lot of sacrifices and careful planning. To determine if it is even possible to aim for the goal of buying a house with cash, you may need to work with a financial advisor to put together a plan.

What if you need a mortgage?

If, however, paying cash is too unrealistic of a goal to achieve, you’ll need to plan for getting a home loan if you want to buy a house. Be prepared to provide plenty of documentation about your income and assets when applying for a home mortgage. You also want to have the best credit possible since many mortgage lenders expect you to have a credit score of at least 720 to qualify for the best mortgage rates.

Report shows African-Americans, Latinos are less likely to receive mortgages

February 24th, 2011

African-Americans and Latinos are less likely to receive mortgage loans as the housing crisis has deepened, according to a recent report from ComplianceTech, a provider of technology and mortgage data analysis for government agencies, nonprofits and financial institutions. The analysis of data from 2004 to 2009 shows that there are disparities in the availability of mortgage credit to African-Americans and Latinos. Members of these groups have more difficulty financing a home regardless of whether they are new home buyers or homeowners looking to refinance.

The sub-prime mortgage crisis

The analysis also debunks the erroneous notion that mortgage lending to minorities was at the root of the sub-prime mortgage crisis. Data in the report show that whites actually received the highest number and dollar volume of sub-prime mortgage loans, and are likely to have more mortgage loans in foreclosure. Whites received 4.1 million sub-prime mortgages between 2004 and 2009, Latinos 1.3 million, African-Americans 1.2 million and Asians 179,000.

The report states:

As the foreclosure crisis threatens the financial stability and mobility of families across the country, it will be particularly devastating to African American and Latino families, who already lag behind their white counterparts in terms of income, wealth and educational attainment. Furthermore, the indirect losses in wealth that result from foreclosures as a result of depreciation to nearby properties will disproportionately impact communities of color.Fewer prime mortgages

African-Americans and Latinos have lower origination rates and higher costs when they are approved for mortgages. Between 2004 and 2009 the market share of prime rate mortgage loans for African-Americans fell 62.67 percent and 61.62 percent for Latinos. The market share of prime rate mortgages grew 12.54 percent for whites and 19.6 percent for Asians.

All racial groups experienced a decline in the volume of prime mortgage loans. African-American prime loan volume plunged to $19.5 billion in 2008 from $82 billion in 2004. Latino prime mortgage loan volume fell to $40.2 billion in 2009 from $171 billion in 2004. Prime mortgage loan volume for whites fell to $876 billion in 2009 from $1.2 trillion in 2004, while Asians saw loan volume decline to $90.6 billion in 2009 from $121 billion in 2004. However, white and Asian borrowers saw increases in prime loan volume between 2008 and 2009, while African-Americans and Latinos experienced declines.

Cash-in refinances break record in 4th quarter

February 3rd, 2011

More homeowners than ever paid down mortgage loan balances while refinancing their homes in the fourth-quarter of 2010, according to Freddie Mac. During the period, 46 percent of homeowners who refinanced mortgages brought cash to closing to lower their principal balance. That is the highest “cash-in” share since Freddie Mac began tracking refinance activity in 1985.

Paying down mortgages and other debt

Frank Nothaft, Freddie Mac vice president and chief economist, said in a statement:

Consumers are generally shedding debt, and mortgages are just another way they’re doing it. Between 2007 and the third quarter of 2010, mortgage debt declined more than $400 billion, according to the Fed. The estimated volume of net equity cashed out in our report do not account for the homeowners who have paid off their mortgages in their entirety.

Cash-out refinancing

Freddie Mac also reported that the percent of cash-out refinances, in which homeowners cashed out some home equity, fell to a record low. Borrowers who increased their mortgage loan balance by at least 5 percent accounted for 16 percent of mortgage refinancing. The cash-out refinance share has averaged 62 percent over the past 25 years.

Getting a cash-out refinance deal has gotten tougher for many borrowers as the housing crisis has dragged on. Lower home values, high unemployment and tougher lending standards all have put the brakes on the my-house-is-a-piggy-bank mentality that swept America before the housing downturn.

Taking advantage of low mortgage rates

Some savvy homeowners who still have good credit have can use current market conditions to their advantage. Instead of using low mortgage rates to simply lower monthly payments, you can choose to also reduce the amount of principal being refinanced by bringing cash to closing. This strategy can give you a choice of making the new lower payments or continuing to pay down your mortgage faster by sticking with the higher payments you made before refinancing. Either way you end up paying out less interest over the life of the mortgage loan.

When shopping around to compare mortgage loans, let lenders know that you are interest in bring cash to closing to pay down the principal. This could work in your favor and allow you to get a better mortgage rate. Bring cash to closing also could push up your home equity enough to get rid of monthly mortgage insurance (MI) payments.

US home prices dropped 4.1 percent in 2010

January 7th, 2011

U.S. home prices fell 4.1 percent in 2010, according to a report from Clear Capital. The provider of data services for the real estate industry also said that home prices dropped in 70 percent of major markets, pressured by high unemployment and REO saturation above 22 percent during the year. REO saturation is the proportion of homes that are sold as bank-owned.

Is there a recovery?

Dr. Alex Villacorta, senior statistician with Clear Capital, said in a statement:

Some housing markets are well on their way to recovery, while others are experiencing a renewed downturn reminiscent of the housing crash only two years ago. Understanding which path a given market is likely to follow is dependent on several key factors, but the two clear drivers are local unemployment rates and the prevalence of distressed homes.

Housing markets change

Only eight major markets experienced double digit declines during the year, indicating that rapid and severe declines are subsiding. Those markets were Dayton, Ohio; Columbus, Ohio; Milwaukee, Wis.; Tucson, Ariz.; New Haven, Conn.; Jacksonville, Fla.; Virginia Beach, Va.; and Richmond, Va.

Of the 15 major markets that had price gains, six were in California, a state that has been hit hard by the housing crisis and had a lot of homeowners default on mortgage loans. Those markets were Riverside, San Diego, Los Angeles, San Jose, San Francisco, and Fresno.

Home mortgage applications

Some housing markets were lifted by home buyers taking advantage of a government tax credit. The tax credit encouraged many people to apply for mortgages while interest rates were at or near historical lows. Without the tax credit some homeowners may not have enough money saved up for a mortgage loan down payment and may put off buying a house.

Markets expected to continue struggling

The clear Capital data indicates that housing markets in the West may continue to struggle this year, and that Arizona may post double digit declines. Major Arizona cities have unemployment below the national average, but REO saturation in Tucson is more than 12 percentage points above the national level and more than 19 percentage points for Phoenix.

California markets that improved this year and posted gains may not experience that again this year. Also, housing markets in the South also are expected to struggle, with four of the 10 worst declining markets being in that region.