Glenda Williamson Team News -- Glenda Williamson, Real Estate Blogger

Home Buyers Are Out In Full Force

Wed, 04 Feb 2009 09:35:15 -0700

A real estate trade group reported Tuesday that Pending Home Sales ticked higher in December 2008. A "pending home sale" is a home under contract to sell, but not yet closed.

The group positions Pending Home Sales report as a predictor of future activity, suggesting that home sales will spike 60 days hence.

This is good news for the economy.

However, despite the Pending Home Sales report's correlation to the actual number of homes sold in the future, that connection may not be the report's best use. This is because of what Pending Homes Sales doesn't measure.

Specifically not included in Pending Homes Sales are:

Sales of new construction homes
Sales of For Sale By Owner properties
80 percent of non-surveyed MLS transactions

And, lastly, it should be noted that Pending Home Sales tracks contracts -- not closings -- and until a home is sold and closed, nothing has really happened in the economy. That's especially relevant in a market like this in which finding financing isn't always so easy.

Pending Home Sales still has its place, though, because it's a terrific look at the current buy-side demand for homes. Clearly, low mortgage rates and falling home prices are making an impact and this is why the December's Pending Home Sales report is so important. It's the third housing report this month that shows the demand for homes rising while the supply of homes falls.

The other two reports:

The number of "used" homes sold monthly is rising
The number of new homes being built are falling

This is good news for home sellers and for the economy. If housing is expected to lead the U.S. out of recession, the seeds for that recovery may have already been planted.

(Image courtesy: The Wall Street Journal)

More Good News For Home Buyers : Mortgage Guidelines Ease Up

Tue, 03 Feb 2009 09:20:23 -0700

If the unfreezing of credit is paramount to an economic rebound, the first signs of a thaw may be here.

Monday, the Federal Reserve released its quarterly survey of 84 member banks. In it, the Fed says that fewer than half of its responding banks tightened "prime" mortgage guidelines over the last 3 months.

This is good news for active home buyers and other Americans in want of a new mortgage.

"Prime" is a vague term with respect to home loans, but it usually refers to mortgage applicants who can document:

Equity or downpayment in a home
Credit scores over 740
Excessive income versus debt

In looking at the Fed's survey, we can infer that because less than 50% of banks made credit less available, more than 50% did not. Borrowing may not be easier for prime borrowers, in other words, but it's not harder, either. Count this as a small victory for the housing market.

All of this said, however, guidelines remain restrictive.

In the 12-month period beginning late-2007, banks continuously clamped down on low credit scores, low downpayments, and high debt-to-income levels. In addition, Fannie Mae added new fees based specific loan traits and second mortgages practically vanished from the marketplace.

The cumulative outcome of these actions precludes many Americans from participating in the current Refi Boom. However, if the trend reported by the Fed continues, lending may open up a bit later this year, providing a boost to housing and to the economy.

Experts believe that the tightening of credit helped create this recession. The loosening of credit, therefore, may be the way out.

The Flashing Garage Parking Signal Protects Your Car From Nicks And Dents

Mon, 02 Feb 2009 08:45:00 -0700

In an organized garage, every car has its space.

Unfortunately, getting a car into that space isn't always so easy. At some point, most homeowners have pulled their car too far forward into the garage, nicking the car's paint and finish.

The Flashing Garage Parking Signal aims to solve the parking dilemma.

The device is an adjustable, 44-inch tall parking aid that light up red when touched by a car. It comes with a weighted base to prevent slippage and its pole is flexible to protect cars from damage.

Aside from 2 batteries, there's no assembly required. Just place the device on the floor of your garage where you want your front bumper to stop and you'll get a perfect, nick-free park job every time.

The Flashing Garage Parking Signal costs $17 at Amazon.

Sell Your Home For 17% More, 40% Faster This Spring

Fri, 30 Jan 2009 09:49:10 -0700

Super Bowl Weekend traditionally marks the start of the Spring Buying Season in real estate. Anecdotally, real estate agents will tell you that buyer activity tends to tick higher at this time of the year.

Meanwhile, with mortgage rates still trolling near all-time lows and Congress debating a first-time homebuyer tax credit, 2009 may bring out even more buyers than we've seen in the past.

Just having your home on the market may not be enough to attract an offer, though -- the home has to have appeal. That brings us to home staging -- the process by which a homeowner re-organizes and re-presents his home to appeal to as many potential buyers as possible.

Home staging is part-science, part-art, and part-psychology. Homebuyers tend to judge homes within the first 8 seconds of seeing them so making a quality first impression can mean the difference between getting multiple bids, and just getting a lot of foot traffic.

The 4-minute video gives some quick-and-easy tips, including:

Create more light in the home
Clean up the closets and thin them out
Remove the clutter from every room in the house

Even though home inventories are falling, supplies are still higher than in previous years. Home sellers wanting to stand out in a crowd may want to consider staging their homes to help them sell more quickly.

Staged homes sell for as much as 17% more money and as much as 40% faster than non-staged ones.

Explaining What The Federal Reserve Did In Plain English (January 28, 2009 Edition)

Wed, 28 Jan 2009 15:48:01 -0700

The Federal Open Market Committee voted to leave the Fed Funds Rate unchanged today. It remains within a target range of 0.000-0.250 percent.

In its press release, the FOMC reiterated most of the key points from its December 2008 statement, including:

The U.S. employment outlook continues to deteriorate
Consumers and businesses continue to cut spending
The housing sector is still showing weakness

In addition, the FOMC addressed the "extremely tight" credit conditions for U.S. households and business, even as it said some financial markets are showing signs of improvement.

To the Fed, the latter is a precursor for the former. For Americans needing new mortgages or other forms of credit, it may mean that getting approved gets easier sometime late this year.

Most importantly, the Fed's press release again mentioned the policy-setting group's intention to "employ all available tools" to promote economic growth. This includes the open-market purchasing of mortgage-backed debt that has helped fuel the current Refi Boom. The Fed indicated a willingness to extend the program beyond the initial $500 billion, if necessary.

For each of the Fed's interventions, though, there is a trade-off.

Buying securities costs money and the Fed -- literally -- comes up with the cash by printing it. The extra supplies devalue the U.S. dollar which, if left unchecked, can cause the Fed's plan to backfire in the form of runaway money supply-led inflation. The Fed is aware of this risk and is pledged to monitoring it closely.

Overall, mortgage rates worsened today after the Fed's statement.

Source
Parsing the Fed Statement
The Wall Street Journal Online
January 28, 2009
http://online.wsj.com/internal/mdc/info-fedparse0928.html

How Today's Federal Reserve Meeting Could Change Home Affordability

Wed, 28 Jan 2009 09:33:50 -0700

The Federal Open Market Committee adjourns from its 2-day meeting today.

The monetary policy-setting group is expected leave the Fed Funds Rate within its current target range of 0.00-0.250 percent.

This is the lowest range for the Fed Funds Rate in history and, frankly, there isn't much room left to go lower. Therefore, markets aren't really concerned about what happens to the benchmark lending rate today.

Instead, markets will focus on the Fed's ideas to revive the U.S. economy.

In its post-FOMC press release last month, the Federal Reserve pledged to "employ all available tools" to get the economy moving in the right direction. At the time, some of those tools were already in play, including making direct loans to large companies and buying bad debts from commercial bank balance sheets.

And since that meeting, the Fed has put its money where its press release is.

Early this year, the Fed started a program to buy $500 billion in mortgage-backed debt and those ongoing purchases are part of what's keeping mortgage rates relatively low. The Fed has since made it easier for member banks to borrow money, too.

Each of these steps is meant to pour gas into the U.S. economic engine and the Fed is pledged to keep trying new approached until something works. And this is what mortgage markets will be concerned with today.

If the Fed's next stimulus plan is deemed ineffective or too costly for its own good, mortgage markets will likely sell off, causing mortgage rates to rise and making housing payments more expensive. The jump could be somewhat sudden because Fed announcements are often met with emotional, knee-jerk reactions.

By contrast, if the Fed's next steps are deemed on target, expect mortgage rates to fall only slightly. To some extent, this outcome is already priced into rates as of this morning.

The FOMC's official press release hits at 2:15 PM ET.

(Image courtesy: The New York Times)

Did We Just See The First 2 Signs Of A Housing Recovery?

Tue, 27 Jan 2009 08:45:00 -0700

Don't let the plunging median sales price fool you -- December's Existing Home Sales data has home sellers smiling.

Just one month after falling below the 5-million unit trend line, sales volume roared back by 300,000 homes in December, surprising housing analysts and making a case that this spring's Buying Season could be a competitive one.

Falling home prices helped fuel home sales. Nationally, the median sales price -- the point at which half of all homes sold for more and half sold for less -- was $175,400, down $32,000 from last year.

However, the most important part of December's Existing Home Sales report isn't making headlines.

At December's sales pace, it would now take 9.3 months to exhaust the existing home supply. Last month it was 11.2 months. This means that buyers are competing to purchase fewer homes which, in turn, puts upward pressure on home prices.

This is Supply and Demand at its most basic definition.

Economists have long said that the keystone of housing's recovery will be rebalancing in home supply. Coupled with the all-time low in housing starts, December's Existing Home Sales data signals future strength.

(Image courtesy: The New York Times)

Circular Thermostats Vary By 6 Degrees And Other Money-Saving, Home Heating Tips

Mon, 26 Jan 2009 08:45:00 -0700

Winter's halfway over, but that doesn't mean it's too late to make smart, money-saving, winter heating choices.

This 4-minute video from the NBC Today Show covers the important stuff:

Because "circular" thermostats are only accurate to within 6 degrees, what you should do about it
How to know if your furnace is energy-efficient
How "pull-away" caulking can seal window that leak heat
Using eco-heaters for room-by-room warming

The video's highlighted ways to winterizing your home range in cost from a few dollars to a few thousand dollars. Each, however, pays for itself via home heating bill savings in time.

Move-Up Homebuyers Face New Lending Challenges This Spring

Fri, 23 Jan 2009 09:55:23 -0700

When a homeowner sells his home and decides to buy a new one, there are 3 basic options for the residence -- sell it, keep it, or rent it.

Unfortunately, no matter which path they choose, move-up homebuyers in need of a new conforming mortgage will find qualifying for a home loan to be more difficult this season than in the past.

Mortgage guidelines are dramatically tighter for people "carrying two mortgages".

Among the changes this spring's buyers face:

Selling the primary residence
If you plan to close on your new home prior to the closing of your existing home -- even if it's only by a day -- both payments must be listed as monthly debts on your mortgage application. This will disqualify the majority of homebuyers.

Converting your residence to a second home
If your current home has less than 30 percent equity in it, your mortgage application for the new home will not be approved unless you can show 6 months worth of mortgage payments + taxes + insurance in reserves for the current home and new home combined.

Converting your residence to an investment property
If your current home has less than 30 percent equity in it, any rental income derived from a tenant is disallowed on your mortgage application for the new home. You must still count the mortgage payment + taxes + insurance as a monthly debt.

In other words, being a move-up buyer isn't as simple as it used to be. New lending rules make buying a new home an exercise in timing and financial planning. And the rules are expected to get tougher, too.

Therefore, if you expect to be a move-up buyer in the next 12 months, consider moving up your timeframe or -- at least -- planning ahead for it.

Understanding the new mortgage landscape and how they can influence your upcoming purchase may be the difference between getting approved for a home loan, and getting turned down.

Could Mortgage Rates Have Already Bottomed Out?

Thu, 22 Jan 2009 09:46:01 -0700

After improving through 11 straight weeks, mortgage rates finally ticked higher last week. This, according to Freddie Mac's weekly mortgage rate survey. The Freddie Mac survey showed that mandatory mortgage fees rose last week, too.

Unfortunately, the bad news for rate shoppers doesn't stop there.

Because Freddie Mac's rate survey is conducted on Tuesday but its reports aren't released until Thursday, the published data doesn't even account for the previous 48 hours of activity in which rates and fees have risen further.

Versus last week, 30-year fixed, conforming mortgage rates are up 0.16% on average nationwide. On a $200,000 home loan, this equates to a roughly $20 extra per month, or $7,055 over the life of a 30-year loan.

The Era of Low Rates may not be over, but it may be time to get off the fence.

(Image courtesy: Freddie Mac)

An Interactive Chart For Home Values

Wed, 21 Jan 2009 08:45:00 -0700

The S&P/Case-Shiller Home Price Index is a popular measure of domestic home prices, released monthly.

The index reports on the largest 20 U.S. markets, painting a broad picture of real estate values nationwide.

Despite the Case-Shiller Index's two obvious flaws -- (1) it only counts repeat sales on single-family residences, and (2) it only includes 20 major housing markets -- the model makes it easier to identify broader real estate trends in our nation's largest cities.

Data, though, is just data. It often takes a good picture to bring it all home. Enter The New York Times.

On its website, The Gray Lady has posted an interactive Case-Shiller graphic. For each of the 20 cities studied, users can compare how home values rose versus the national composite throughout the early part of the decade, and how values have fallen since.

Not surprisingly, of the 20 cities that showed stable growth pre-2006, nearly all are outperforming in the current real estate climate.

Home Safety Tips : Portable Electric Space Heaters

Tue, 20 Jan 2009 08:45:00 -0700

For spot heating, many homeowners turn to portable electric space heaters; it's often more efficient to plug one in than to raise the household thermostat by a degree or two.

But using a space heater isn't as safe as it is simple. According to the National Fire Protection Association, in 2005, space heaters were responsible for:

32% of home heating-related fires
57% of home heating-related property damage
73% of home heating-related civilian deaths

Space heaters cause a disproportionate amount of damage versus central heating systems and fireplaces. Therefore, it's important to practice safety and care when using space heaters.

Some basic space heater safety tips include:

Don't place anything that can burn within three feet away of the space heater.
Make sure that your space heater has the label of a recognized testing laboratory such as Underwriters Laboratory.
Never use an extension cord on a space heater.
Turn space heaters off when leaving the room or going to bed.

And, of course, be sure to follow the manufacturer's safety instructions.

Source
Heating Safety Tips
National Fire Protection Agency

Mortgage Rates Are Falling But Loans Require More "Points"

Fri, 16 Jan 2009 09:24:15 -0700

Another week, another headline screams how mortgage rates have falled to an all-time low.

Freddie Mac published its weekly mortgage rate survey Thursday and found that the "average" mortgage rate is now 4.96 percent, the lowest since the survey started in 1971.

But, if we look beyond the headline, we find that there's another part of the story worth watching. Mortgage rates are falling but the number of points required to lock those rates is not.

Lenders now require an average payment of 0.7 points to get the 4.96 percent rate from the headlines. That's up from 0.6 percent last week and 0.4 percent a year ago.

A "point" is a fee equal to 1 percent of the loan size.

Therefore, to get access to a 4.96 percent interest rate on a $200,000 home loan, today's lender would require an extra $200 versus last week and $600 versus last year. Today's mortgage borrower would be subject to a $1,400 closing cost in addition to the "typical" closing costs accompanying a purchase or refinance.

This is a period of historically low rates -- there's no doubt about that. However, the cost of getting access to low rates is increasing. The press doesn't always tell that part of the story and it's one more reason to look deeper than the headlines.

(Image courtesy: The Wall Street Journal)

How The Right Amount Of Economic Weakness Can Help A Home Buyer

Thu, 15 Jan 2009 09:35:00 -0700

After a weak holiday shopping season, annual retail sales declined in 2008.

It marks the first annual Retail Sales decline since the government started tracking the data 40 years ago.

It also gives credence to the notion that the U.S. economy is suffering through a deeper recession that previously thought. A pullback in spending -- especially during the shopping-heavy month of December -- highlights the cautious nature of today's American shoppers.

And in a strange sort of way, all of this may end up being good news for spring home buyers.

Because Retail Sales are reflective of consumer spending, a dramatic pullback helps to keep the economy in slow gear, countering the inflationary impact of government stimulus and direct intervention. Inflation, you'll remember, causes mortgage rates to rise. Its absence, therefore, helps to keep mortgage rates low.

In addition, it's earnings season on Wall Street and weak corporate guidance has spurred a 6-day decline in the Dow Jones Industrial Average. As dollars leave the stock market, investors are parking them in the safer world of bonds. This includes mortgage bonds, of course, which further pressures rates lower.

As we're seeing, economic weakness -- to a point -- can be the friend of a person in need of a new home loan. For active home buyers or people entering the market this spring, therefore, the timing may be just right.

(Image courtesy: The Wall Street Journal Online)

When Is A 5.000 Percent Mortgage Rate Really 3.600 Percent?

Wed, 14 Jan 2009 09:58:00 -0700

An oft-touted benefit of homeownership is its tax benefits. However, like most IRS-related items, understanding how the benefits work is not always clear.

In general, homeowners are entitled to two home-related tax deductions -- one for annual mortgage interest paid, and one for real estate tax bills paid.

Not everyone is eligible, though. Some of the exclusionary traits include total amount borrowed, and whether or not the home is a primary or secondary residence.

The official IRS publication is filled with notes and explanations but, in general, you can calculate your approximate mortgage interest tax deduction using the following math:

Sum your annual mortgage interest and real estate taxes paid
Find your tax rate on the IRS tax bracket schedule
Multiple your tax rate by the sum from Step 1

This is grossly simplified, but fairly accurate.

As an example, a homeowner paying a combined $20,000 in 2008 mortgage interest and real estate taxes, and who is in the 28% tax bracket, may be due $5,600 in tax credits.

The availability of mortgage interest tax deductions is one reason why loan officers make reference to "after-tax mortgage rates". An after-tax mortgage rate is effective interest rate, post-tax code, and can be calculated using the formula below:

(After-Tax Mortgage Rate) = (Mortgage Rate) * (1 - Marginal Tax Rate)

The same homeowner with a 5.000% mortgage rate, therefore, has an after-tax mortgage rate of 3.600%.

Because not every homeowner is eligible for home-related deductions, and because not every homeowner should claim them, talk with your personal accountant before making any tax-related decisions.

Half The Story : The National Housing Inventory Fell In December

Tue, 13 Jan 2009 09:49:00 -0700

Home prices are largely based on Supply and Demand.

If demand outweighs supply, home prices rise
If supply outweighs demand, home prices fall

It's good news for home sellers, therefore, that "used" homes for sale fell 6 percent nationally last month. Less supply often means higher prices.

Of the 29 metropolitan areas tracked in real estate brokerage firm ZipRealty's survey, only Philadelphia showed an increase.

But the survey isn't perfect. For example, it doesn't track the demand side of the equation -- buyer activity.

Anecdotally, November and December are slower for buyer foot traffic than, say, March and April. December's drop in supply, therefore, may reflect the expectation of reduced buyer interest.

In addition, the ZipRealty survey ignores the supply of newly-built homes, and of foreclosed properties. In some cities, that can amount to a quarter of the market supply or more.

And lastly, the survey addresses the nation and not the nation's neighborhoods. This is an important distinction because real estate is not a nationwide market, nor is it even a citywide market. Real estate is highly local and responsive on a neighborhood-level.

National surveys rarely capture that point.

(Image courtesy: The Wall Street Journal Online)

The Touch-Up Topper Replaces Expensive, Bulky Ironing Boards

Mon, 12 Jan 2009 08:45:00 -0700

Ironing boards can be bulky and awkward -- especially in a cramped laundry room.

Instead of fumbling with a folding board for a quick press, look to the Touch-Up Topper instead.

The Touch-Up Topper is a heat-resistant, portable ironing surface that rolls or folds for storage. Using sewn-in magnets, the quilted pad fastens to the top of most washers and dryers, turning any metallic surface into an instant ironing surface.

At 32" x 18 1/2", the Touch-Up Topper has a larger ironing surface than traditional ironing boards and it costs less, too. The Touch-Up Topper costs $14.95 and is available for sale at SkyMall.

It's Semi-Official : New Conforming Mortgage Fees Go Into Effect Monday

Fri, 09 Jan 2009 09:52:13 -0700

Even though its effective date is April 1, 2009, mortgage applicants should start seeing Fannie Mae's new fee structure from lenders beginning this Monday, January 12.

The reason why Fannie Mae's mandatory loan fees are hitting lender pricing so far in advance is because lenders can take up to 30 days to package and sell a loan to Fannie Mae post-closing. In effect, this moves the April 1 start date to March 1.

Then, figuring that March 1 is roughly 45 days from now and that 45 days is a normal window on which to close on a home or on a refinance, the start date again pushes back, this time to January 15.

Given lenders' typical timeframe to close, fund, and sell a loan to Fannie Mae, in other words, it's normal that pricing reflects the fee changes two-and-a-half months in advance. Homebuyers and would-be refinancers would do well to take notice.

If you are floating a mortgage rate today -- or shopping for one -- consider locking it in before the close of business. Effective Monday, any number of traits in your home loan could increase your closing costs:

Your credit score
Your downpayment / equity percentage
Your home's property type
Your reason for wanting a mortgage
Your loan type

For a complete look at Fannie Mae's new, mandated loan fees, visit the Fannie Mae web site. If you have trouble interpreting the worksheet, call or email me and we can talk about it together.

New Fannie Mae Loan Fees Target Condo Buyers, Among Others

Thu, 08 Jan 2009 08:45:00 -0700

When conforming mortgages started defaulting en masse in late-2007, mortgage guarantor Fannie Mae created a loss-offsetting, fee-generating scheme dubbed "loan-level pricing adjustments".

The concept was basic: For mortgage applicants with high-risk profiles, collect up-front payments to offset potential long-term losses.

Similar to the auto insurance model in which younger drivers pay higher premiums, riskier applicants pay higher fees.

At the inception of the program, Fannie Mae defined "risk" as a combination of borrower credit score and home equity percentage. In general, lower FICOs and higher LTVs paid more costs.

Effective April 1, however, Fannie Mae's definition of risk is expanded. By a lot. Fannie Mae's new loan-level fees now impact any conforming mortgage that meets any of the following criteria, with the exception of fixed rate loans of 15 years or less.

Up to 0.75% fee: Secured by a condo/co-op with less than 25% equity
Up to 0.50% fee: Features a junior mortgage (i.e. HELOC, HELOAN)
Up to 1.00% fee: Features interest only payment options
Up to 1.00% fee: Secured to a 2-unit property
Up to 3.00% fee: Is designated as "cash out"

Each 1 percent in fees equals 1 percent of the borrowed amount. Therefore, a condo buyer with a $200,000 first mortgage and a $25,000 line of credit is subject to a mandatory 1.25% charge of $2,500, due at closing.

However, it doesn't stop there. Fannie Mae has also adjusted its original FICO-LTV matrix so that nearly every applicant -- irrespective of credit score -- will face higher closing costs on their home loan.

Mortgage rates may be falling, but the cost of financing a home is rising.

Fannie Mae's latest announcement is its fifth risk-based pricing update in the last 15 months. It's likely it won't be the last, either. Therefore, if you're torn between to buy a home now or later, consider that the cost of waiting may outweigh the benefits of falling prices or falling rates.

Sure, Mortgage Rates Are Lower, But Mandatory Fees Are Not

Wed, 07 Jan 2009 08:45:00 -0700

With respect to mortgage rates, you can't always believe what you read in the papers. Or what you see.

A terrific example is the chart at right.

Published by Freddie Mac, it shows the 30-year fixed mortgage's "going rate" as reported by the nation's mortgage lenders. On December 30, 2008, that rate was 5.1 percent.

But 5.1 percent is only half of the relevant information. There's a mandated fee schedule that accompanies the Freddie Mac-reported rate survey.

Currently, the published fee required to get a 5.1 percent mortgage rates is 0.7% of the borrowed amount, or $700 per $100,000 borrowed. This fee is more commonly known as "points" and versus last year, it's nearly doubled from 0.4 points.

So, yes, conforming mortgage rates are low and they have fallen near all-time lows but there's more to the story than just the interest rate -- there are the fees that go with them, too.

Mortgage rates and loan fees often move in opposite directions so to get lower rates, consider paying additional points. Conversely, to face fewer fees, accept a higher rate. It's a trade-off and your loan officer can help you best understand the choices.

(Image courtesy: The Wall Street Journal)