ECONOMIC NEWS UPDATE
What's the latest news in the constantly-changing mortgage finance business?
As reported by Fortune on CNNMoney.com, "After four years of plunging home prices, the most attractive asset class
in America is housing." Research firm Metrostudy, which tracks new-home inventories for 65% of the U.S. market, reports that the
steep drop in construction over the last few years has reversed the supply glut, with starts now well below closings.
The firm believes the low inventory should eventually lead to higher prices.
The Fortune posting also cited a new study from a major bank that found homeowners now pay only 9.8% of their income in after-tax
mortgage, tax and insurance payments, down from 17.2% at the 2007 peak. This means it's now cheaper to pay a mortgage and the
other major homeowner costs than it is to rent the same house in 28 out of 54 major markets.
Fortune further reports that where existing home inventories average close to seven months, a modest boost in demand will result
in solid gains in home prices and new construction. This could happen quickly in markets now showing good job growth. Moody's Analytics
forecasts prices going up three to four points faster than inflation over the next few years in virtually all such markets. They see home
prices rising with rents, with apartments in short supply. Of course, the housing recovery still requires job creation and consumer confidence back
to normal, but we finally seem headed in that direction.
Minimum down payment for conventional loans is 5%, for FHA loans it's 3 1/2% , for VA loans it's Zero, and for mobile
homes it's 10%. But many conventional lenders want 10% to compensate for the declining market conditions,
and the best interest rates are secured at 20% down, especially if you want to avoid the Mortage Insurance Premium.
In addition, many lenders want a cushion of up to 3 months' of principal & interest as back-up in the
borrowers' savings account.
BUT THERE ARE EXCEPTIONS. There is a Zero down program offered by the US Dept. of Agriculture, with no Mortgage Insurance Premium.
Properties located east of Highway 9, or north of 140th St NW in Marysville, or on the Tulalip Indian Reservation are eligible,
(basically the I-5 corridor is excluded). There are also state bond 2nd mortgages available (up to $10,000 for down payment and closing costs),
for eligible first-time home buyers. So please contact me for a full discussion of your down payment options.
A FICO score of 680 or above is now needed to secure the best rate on a conventional mortgage, and 640 for an FHA mortgage.
MEMO: On April 18th, 2011, FHA annual mortgage insurance premium increased 1/4%. This means $41.67 more per month on a $200,000 mortgage.
In October, 2011, 30 year fixed Freddie Mac & Fannie Mae loans on average where being
approved for 4.2% plus 0.6 point (average), 15 year fixed were 3.97%. This continues the upward tick after a 39 year low of 4.17%
in November 2010. Please contact Angela Cohen at angelac@networkhomeloans.com, or Century 21 Mortgage
at www.century21mortgage.com for an update on current rates.
The PENDING HOME SALES INDEX for the Northwest Multiple Listing Service (our regional service)
rose 21% in October 2011, over the previous year, with an 11% drop in prices. Since reaching a cyclical low in
June 2010, pending home sales have demonstrated that the market is recovering modestly on its own;
having risen unevenly for the last six out of twelve months.
With the news report that the federal government will ease out of supporting the housing market over the next 5 to 7 years,
and foreign investors demanding higher interest rates , because of our rising deficit, and the uncertainty in
the market, higher interest rates are probably in our mid-term future, although they will remain at the current low rates
through 2012.
The national unemployment rate retreated to 8.5% for December, 2011, returning from double digits last year.
Washington State's unemployment rate still hovers below the national average. This causes analysts to conjecture
that the peak of unemployment probably occurred Octobe, 2010.
In October, 2011, the temporary upper limit for conventinal mortgages dropped from $567,500 to 506,000. Loans above this
amount will be considered to be "Jumbo Loans" with higher interest rates and closing costs. Since almost 1/3 of available inventory
in King County is over 506,000, this has a dampening effect on homes selling in this price range.
The January 2012 Employment report showed a larger than expected increase of 240K jobs, and the Unemployment Rate continued to move lowerm, to 8.3% This week, Weekly Jobless Claims fell to the lowest level since April 2008.
The labor market is one of the most important factors in the health of the economy, and many investors now view the outlook as brighter than it has been since the financial crisis began. If this is the case, it will be great news
for the economy, and job gains will increase the willingness and the ability of people to purchase homes.
The Housing sector data released this week was encouraging as well. January Existing Home Sales increased 5%, while the inventory of unsold homes declined 9%, to the lowest level since March 2005.
This adds to the shrinking inventory in our area.
Well-priced starter homes and move-up homes in move-in condition are seeing multiple offers.
The operative word here is move-in condition. Fixer-uppers take much longer to sell, as before.
December Housing Starts for single-family units increased 4%, and Building Permits for single-family units rose 2%. Finally, the January NAHB Home Builder confidence index rose for a fourth consecutive month to the highest level since 2007.
Improving economic conditions, high affordability levels, and low mortgage rates provide solid reasons to be optimistic about the housing market.
The Federal Reserve has injected 100 billion dollars into the mortgage market since Sept 2008, and added
560 billion more dollars in 2009. THIS WILL CONTINUE TO EXERT DOWNWARD PRESSURE TO INTEREST RATES. But looking farther ahead, this piling on of huge debts by the US government, will increase interest rates a couple of years down the road, as we are going to have to pay back that debt.
So now is the best time to buy a new house.
If you are thinking on making an offer to purchase a "short sale" listing, plan on closing at least 90 to as much as 180 days after
mutual acceptance. There is a lot of extra time and negotiating skill involved in getting the banks on board. Their way
of doing business has not yet adjusted to the new realities of the market place, where 1/3 of all listings are now short sales.
On the other side, if you need to sell because you are "under water", (i.e. your house is now worth less than your mortgage,
come talk to me about the specialists we have in our office who will help you renegotiate your mortgage if you want to stay in your house. If you have determined that you will not stay in your house, I will list your "short sale" property, and negotiate
with your bank any offer below the balance owing on your mortgage. Plan on this process taking on average about 90 days
to complete, after we have a buyer for your property.
In 2009 the FHA backed 1.9 million homes, which is 30% of the entire housing market and 50% of the first-time home buyer's
market. In order to reduce their possible exposure to having to pay off too many bad loans in future years, the FHA is tightening
its requirements this spring. These new requirements will cost home buyers more money in loan costs. For example, the up-front 1.75%
mortgage insurance premium will increase to 2.25%. That 1/2 point increase on a $300,000 home will add $1500 to the homebuyer's cost.
Another big change will be that the seller will only be able to pay 3% of the home buyer's closing costs, down from the current 6%.
That 3% contribution to the closing costs will cost the buyer of a $300,000 home an extra $9,000. These These FHA rules plus the running
out of the home buyer's credits will put pressure on home lookers to become home buyers this spring.
60% of all mortgage loan applicants are denied in this current climate of tight credit and increased stringency in
underwriting requirements. So if you are considering buying a house in the next 2 years, now is not too early to contact
your mortgage broker to verify your pre-qualification for a mortgage in your target range. If you need to increase your FICO
score, or to work in other ways on your qualifications, a good broker can mentor you through the process. If you have not
worked with a mortgage broker before, please contact me for a recommendation.
49% of homeowners, in a recent survey, think that their homes have increased in value or remained the same over the
last 12 months, YET in reality, 74% of all homes, across the United States, have lost value. We need to get real, and
understand that 4 years of double digit increases in Snohomish & King Counties have inflated home prices beyond the
prospective buyers' ability to afford them. Prices now are retreating to a more realistic level. Most home sellers will still
have an appreciated asset, if they bought their homes 4 years ago or longer. Some homeowners, sadly, who bought
at the height of the bubble, will see their home's value less than what they purchased it for. But, taking the long view, if
they keep their asset 5 years, they will probably see an appreciation in their investment (just don't look for double digit annual
increases, more like 4 to 5% per year. Home values slid for the 8th consecutive quarter, declining 11.6% in 2008, and having fallen 17.5% since their peak in
2006. One in 5 homes is currently in foreclosure, and one in 6 homeowners have a negative equity ( they are "under water")
In the trenches of the sub-prime housing crunch, it will serve us well to remember the history of the housing market:
1. During the last 43 years, real estate values have risen about 6% annually, on average.
2. The average rate of return on a 20% down payment has been 28% annually.
3. Mortgage rates will be nearing their all-time low by summer.
4. Housing values have risen through all 6 recessions in the past 43 years.
5. Inventories are higher than in recent years, but nowhere near their historic highs.
6. The US population will continue to increase, and so will demand for housing.
7. Real estate purchases are not like day-trading ,but long-term steady growth.
According to the Mortgage Bankers Association, the foreclosure rate for Washington State is much lower than the national rate. This means
our state is performing better than the national average in dealing with toxic mortgages. National figures are weighted by the contributions of
California, Florida, Arizona and Nevada, four states whose real estate market has tanked. In those markets property values have declined as
much as 40%. In Washington State, King County, by contrast, has declined 11% and Snohomish County has declined 17%. Unfortunately,
we will only really know the bottom of the market after we have moved up on the other side.
Then, of course, it will be a matter of chasing the market up the hill. When everybody else is buying, and the newspapers declare an
end of the real estate downturn, the best deals will already have been snapped up. On October 20, 2008, Smart Money Magazine listed the 20
best estate markets in the country, and guess who was number 1? Yes, the Seattle area came in first. Why? Because we have full employment,
4% vacancy rates and housing prices that never reached the unaffordable range like California, Florida, Nevada & Arizona. So come talk to me
about finding you the property you want at a great price and a low interest rate.
These opportunities will not wait forever. Interest rates will go up as we dig out from 8 years of unchecked spending , the cost of the Iraq war,
and the cost of the bailout.
REVERSE MORTGAGE:
If you are at least 62 years old, plan on living in the house you want to purchase, and have a substantial down payment - you may be interested
in an FHA-insured program which requires no monthly payments, and has no income, credit or asset requirements.
You only pay your real estate taxes and fire/hazard insurance. The government does not share in any future equity in the house,
as in earlier programs. You can sell the house at any time, and your balance can never be higher than the market value
of the home. Please call or e-mail me for a referral to a lender who specializes in this type of mortgage.
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An interesting article appeared in the Wall Street Journal, entitled "10 Reasons to Buy a Home". Please click to read:
http://online.wsj.com/article/SB10001424052748703376504575492023471133674.html
Interested in purchasing a forclosed or short-sale home? This article should be of interest to you:
http://www.trulia.com/blog/taranelson/2010/11/5_more_foreclosure_myths_-_busted?ecampaign=cnews201011B&eurl=www.trulia.com/blog/taranelson/2010/11/5_more_foreclosure_myths_-_busted
FOUR DAY WEATHER FORECAST
Everett, WA
Updated Thursday, February 09, 2012 3:35 AM
Cloudy | 45°F | High: 51°F
Low: 42°F
Wind: 6 mph
Humidity: %
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Friday
49° / 40° |
Saturday
50° / 38° |
Sunday
47° / 39° |
Monday
49° / 36° |
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