What's Ahead For Mortgage Rates This Week : February 8, 2010

Mortgage markets improved last week on domestic jobs data and international banking concerns. The news triggered buying in the bond market and, as a result, conventional, FHA and VA mortgage rates improved for the 4th consecutive week.

Mortgage rates are now at a 6-week low but probably shouldn't be.  It underscores just how important global events can be to U.S. mortgage markets.

For example, corporate earnings continue to improve and key elements of the economy are strengthening.  Even the Federal Reserve acknowledges this.  In most circumstances, that would be a boon for the stock markets and bond markets would suffer, including mortgage bonds.

Last week, that wasn't the case.

Early in the week, as (1) China tightened its monetary policy, (2) Greece did little to quell lingering default fears, and (3) Spain raised its deficit forecasts, global investors sought to reduce their collective risk exposure. For safety of principal, many sold some of their more aggressive positions and moved the cash proceeds into the U.S. bond market -- which includes mortgage bonds. 

On Wall Street, this type of trading pattern is called a "flight-to-quality".  Because mortgage bonds are backed by U.S. government entities, the debt is considered to be ultra-safe.  Last week's extra demand for bonds helped to push prices up and mortgage rates down.

And that was before Friday's weak jobs report. Although the Unemployment Rate fell to 9.7%, the government reported a net loss of 98,000 jobs last month and this, too, helped mortgage rates tick lower.

This week, we'll hope for momentum to continue.

There's very little domestic news to move rates this week so keep an eye on the global market for similar stories like what we saw last week.  Or, if you're not sure what to look for, just give me a call or send me an email and I'll be happy to watch the markets and mortgage rates for you.

There's 100 Days Left To Claim The Homebuyer Tax Credit

November 6, 2009, Congress voted to extend and expand the First-Time Home Buyer Tax Credit program.  There's 100 days left to claim it.

The expiration date of the up-to-$8,000 tax credit has been pushed forward to spring, requiring homebuyers to be under contract for a home no later than April 30, 2010, and to be closed no later than June 30, 2010.

In addition, "move-up" buyers were also added to the program's eligibility list meaning you don't have to be a first-time home buyer to be eligible for the tax credit.  If you've lived in your home for 5 of the last 8 years, you meet the IRS requirements.

Move-up buyers are capped at a total tax credit of $6,500.

The tax credit's basic eligibility requirements remain the same:

• You can't purchase the home from a parent, spouse, or child
  
• You can't purchase the home from an entity in which they're a majority owner
  
• You can't acquire the home by gift or inheritance
  
• All parties to the purchase must meet eligibility requirements

The new law includes some notable updates, however. 

First, the subject property's sales price may not exceed $800,000. Homes sold for more than $800,000 are ineligible.  And, also, household income thresholds have been raised to $125,000 for single-filers and $225,500 for joint-filers.

And lastly, don't forget that the program is a true tax credit -- not a deduction.  This means that a tax filer who's eligible for the full $8,00 credit and whose "normal" tax liability totals $5,000 would receive a $3,000 refund from the U.S. Treasury at tax time.

The complete list of qualifying criteria is posted on the IRS website.  Review it with a tax professional to determine your eligibility.  Then mark your calendar for April 30, 2010.

There's just 100 days to go.

The 90 Day FHA Flip Rule Has Been Waived

Here is some good information that will hopefully help reduce the number of vacant foreclosed homes. This will open some more doors for your buyers! Let me know if I can be of assistance or if you have any questions!



FHA WAIVES 90 DAY FLIP RULE

HUD TAKES ACTION TO SPEED RESALE OF FORECLOSED PROPERTIES TO NEW OWNERS-measure to help bring stability to home values and accelerate sale of vacant properties.

In an effort to stabilize home values and improve conditions in communities where foreclosure activity is high, HUD Secretary Shaun Donovan today announced a temporary policy that will expand access to FHA mortgage insurance and allow for the quick resale of foreclosed properties. The announcement is part of the Obama administration commitment to addressing foreclosure.

...The waiver will take effect on February 1, 2010 and is effective for one year, unless otherwise extended or withdrawn by the FHA Commissioner. To protect FHA borrowers against predatory practices of "flipping" where properties are quickly resold at inflated prices to unsuspecting borrowers, this waiver is limited to those sales meeting the following general conditions:

· All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction.

· In cases in which the sales price of the property is 20 percent or more above the seller's acquisition cost, the waiver will only apply if the specific conditions are met, which include the requirement of a 2nd appraisal and property inspection.

Specific conditions and other details of this new temporary policy are in the text of the waiver, available on HUD's website at:

http://www.hud.gov/offices/hsg/sfh/waivpropflip2010.pdf

Retail Sales Dropped In December And Now So Are Mortgage Rates

Mortgage rates are dropping this morning on weaker-than-expected Retail Sales data from December. Lower rates means more bang for your home-buying buck.

Excluding motor vehicles and parts, December's "ex-auto" sales receipts were down roughly $500 million from November. Analysts had expected receipts to grow.

The relevance of Retail Sales to home affordability isn't obvious, but it's definitely logical.

Retail Sales is directly related to consumer spending and consumer spending accounts for the majority of the U.S. economy. When consumer spending slows, the economy often does, too. It leads investors to seek out "safe" investments.

It's the reason why stock markets often drop on weak economic data -- stocks are among the riskiest investment classes available.

Conversely, the best place to find safety is in the market of government-backed bonds.  This world includes products like U.S. Treasuries and many of the mortgage-backed bonds that help set mortgage rates.  Weak economic data puts mortgage bonds in demand.

For rate shopper, this is good news.  More demand for mortgage bonds causes mortgage rates to fall.  Mortgage rates are lower this morning because Wall Street is shedding some risk.

December's Retail Sales report closes out a year of generally-weak data.  2009 marks just the second time that Retail Sales fell year-over-year since the government started tracking it 40 years ago.  The other year was 2008.

For home buyers around the country, though, today may represent an opportune time to lock a mortgage rate.  Housing data is still improving and other economic indicators are showing strength.  Soon, Wall Street will shift from a "safe" mentality and move toward risk.

When it does, mortgage rates will rise.

The 2010 Conforming Loan Limits

A conforming mortgage is one that, quite literally, conforms to the mortgage guidelines set forth by Fannie Mae or Freddie Mac.

Each year, the government sets the maximum allowable loan size for a conforming mortgage, based on "typical" housing costs nationwide. 

Loans in excess of this amount are typically called "jumbo".

While home prices increased from 1980 to 2006, so did conforming loan limits.  Since then, however, as home prices have dipped, the conforming loan limit has held.

Now, in 2010, for the 5th consecutive year, the government set $417,000 as the nation's conforming mortgage loan limit.

The 2010 conforming loan limits, as released by the government, are:

• 1-unit properties : $417,000
  
• 2-unit properties : $533,850
  
• 3-unit properties : $645,300
  
• 4-unit properties : $801,950

But conforming loan limits don't apply to all U.S. geographies equally.  As a result of various economic stimuli since 2008, the government now considers certain regions around the country "high-cost" areas.  In these areas, conforming loan limits can range to $729,750.

There are less than 200 such areas nationwide.  The complete list is published on the Fannie Mae website.

Housing Starts Are Down And Why It's Terrific News For Sellers

A "Housing Start" is a home on which construction has started and, for the 4th straight month, national single-family housing starts held steady last month. 

When the demand for homes grows faster than the number of homes for sale, prices increase. 

As recent home sales data confirms, buyers currently outpace sellers and one consequence of this is an increase in multiple-offer situations this year. 

It's no wonder home prices are up across so many neighborhoods.

October's Housing Starts report is yet another piece of housing data foreshadowing rising home prices into 2010.

Building Permits were also down in October, a potential demand-to-supply imbalance magnifier. Without permits, there's no future construction. This drains supply. Meanwhile, tax breaks and low rates tend to stimulate demand and, right now, we've got both. 

Therefore, so long as demand remains semi-constant into the New Year, expect home prices to rise. 

In many markets, they already are.

Simple Real Estate Definitions : APR