Thoughts of a Sensible Mortgage Banker

Costs Flying Sky high While Others Nearly Plummet

noreply@blogger.com (The Editor) — Mon, 16 Jan 2012 22:24:00 +0000

One way of measuring inflation is to gauge how prices for an assortment of goods and services have varied over time. Another approach involves looking at changes in how much things cost relative to what the average worker earns (the flaw with this latter method, of course, is that those who don't have jobs may find that many, if not most, of the things they might want or need to buy are unaffordable).

In searching for airline tickets over the last six months for an upcoming family vacation to Italy I have seen the broad impact of fuel costs on ticket prices since a trip two years ago. Obviously, ticket prices move on hundreds of factors but the most influential input is the cost of jet fuel. In the last decade jet fuel cost per gallon is up 3.5x from 0.87 cents a gallon to 3.01 on average globally last month. Up to 70% of an entire airlines operating budget is fuel costs.

Click image for source and up to date index information.

Be that as it may, if one assumes that data from the Bureau of Labor Statistics is even remotely close to the mark, it would appear that the purchasing power of the average worker has improved over the past 10 years, which is contrary to popular wisdom (see dotted line in the chart below).

There could be any number of reasons why perceptions differ from the reported data. Among other things, the composition of the basket of goods that the BLS uses to construct its index might not be realistic, especially in today's fast-changing economy. Or maybe the pricing information they rely on doesn't jibe with consumers' experience on the ground. Then again, a cynic might note that authorities have an incentive to underestimate inflation and overestimate wage growth for pollitical gain.

Regardless, I thought it interesting to highlight those categories that have become the least and most affordable for the average worker over the past decade. Not surprisingly, gasoline and other energy-related products are a lot more expensive in relative (and absolute) terms than they used to be, which goes some way towards explaining the heightened demand for fuel efficient cars and why people are driving fewer miles than they used to. In contrast, it's easy to see why sales of flat screen TVs and other modern gadgets have jumped -- the products are much more affordable than they used to be.

Solar Power!

noreply@blogger.com (The Editor) — Thu, 22 Dec 2011 20:22:00 +0000

Home Solar Power Discounts - One Block Off the Grid

Jumbo and Conforming Loan Rate Update

noreply@blogger.com (The Editor) — Thu, 13 Oct 2011 00:17:00 +0000

Mortgage Delinquency continues to be a problem. It is our view that this could take several more years to run it's course. Average days till a home goes from first missed payment to getting listed as a foreclosure is roughly 1.5 to 2 full years in most states. The chart below is showing that over 10.18% of all mortgages are at least 60 days this is down from 10.58% at the March 2011 report. A modest improvement...

This is against the backdrop of an ultra-low purchase and refinance environment for conforming and jumbo mortgage loans.

www.bestjumborate.com

Global Slowdown. Ex-Asia No One Recovered. Asia Slowing Since 2010

noreply@blogger.com (The Editor) — Thu, 11 Aug 2011 04:14:00 +0000

TPL Aug 10 11

Jumbo Loan Rates Never Lower As Government Loan Limits Drop

noreply@blogger.com (The Editor) — Sat, 06 Aug 2011 01:24:00 +0000

If you have been keeping up with the real estate news, you may know that the mortgage loan limits on jumbo mortgage loans set by Congress are about to change. A jumbo mortgage is one that must be eligible to sell to Fannie Mae or Freddie Mac and it exceeds the amount of a conventional conforming limit. Depending on where you live, the upcoming lower loan limits could impact you. Beginning on October 1, 2011 the mortgage loan limits for homes across the entire country will be $625,500.

Currently, the maximum amount for jumbo mortgage loans is anywhere between $417,000 and $729,750. The maximum limit is determined by a couple factors, including the region of the country in which you live. Major metropolitan areas, where home prices are higher, today have limits closer to $729,750.

There are many people who will be affected by the new limits. Any homeowner who owns a home valued between $417,000 and $729,750 and wants to refinance is going to be affected by these new limits. There will be tighter credit restrictions and possibly even higher mortgage rates for homes that are valued above the new $625,000 maximum.

Any home buyer who wants to buy a home priced above the new maximum is also definitely going to be affected. Currently, jumbo mortgage loan rates are often lower than traditional mortgage rates and qualified buyers can put as little as 3.25 percent down to purchase the home. But with the new caps, mortgage rates are going to increase and home buyers will need to put down a much larger payment for the home. The down payment requirements could be as high as 20 percent.

Some of the bigger cities with higher home prices will definitely feel the punch. Places like New York City, San Francisco, Miami and Los Angeles where homes are typically priced in the jumbo mortgage loan range will see some effect from the lowered maximums. According to the National Association of Home Builders, nearly 1.4 million owner-occupied homes in more than 200 counties across the county will be valued above the $625,500 jumbo loan limit.

BestJumboRate.Com said that they are reaching out to clients who will be affected to alert them of the new guidelines. Most people simply don’t know about the new limits or the October 1 deadline for imposing the new limits.

Before criticizing the reduction, though, consider this: The Federal Housing Administration, or FHA, raised the limits for a jumbo loan in 2008. This increase in limits was only supposed to be temporary. Since 2008, the higher limit caps have been renewed each year. As of right now, those limits are set to expire on September 30, 2011. It is not like the federal government with taking action to lower the limits; rather, legislative inaction would result in the current limits expiring and reversion to the old limits.

So what does this mean for you? If you are thinking of refinancing your jumbo mortgage loan or taking out a jumbo loan to purchase an upper-end home, now may be the best time to initiate the process. The opportunity to capture a government insured rate that is often .25-.50% lower than a traditional jumbo mortgage loan won't be able if you wait until after September 30.

Uncle Sam."Show me the Money."

noreply@blogger.com (The Editor) — Sat, 30 Jul 2011 03:16:00 +0000

Please visit Visualizing Economics for the Super Big Chart.

Housing in For Long Road to Recovery

noreply@blogger.com (The Editor) — Thu, 28 Jul 2011 21:36:00 +0000

From San Francisco Fed President John Williams: The Outlook for the Economy and Monetary Policy

Some excerpts on housing:

One of the most important currents holding back recovery has been housing. The collapse of the housing market touched off the financial crisis and recession. In most recessions, housing construction falls sharply, but then leads the economy back when growth resumes. As you well know, that snapback hasn’t occurred this time. Before the crisis, residential investment as a share of the economy was at its highest level since the Korean War. Today, housing construction remains moribund and residential investment as a share of the economy has fallen to its lowest level since World War II.

On one level, that’s not surprising. We simply built too many—in fact, millions too many—houses during the boom and we are still feeling the effects of this overhang. Consider housing prices. From their peak in 2006 until early 2009, home prices nationwide fell by nearly a third. When you exclude distressed sales, prices appeared to bottom out in 2009 and early 2010. New housing starts also appeared to stabilize in 2009, after plummeting some 75 percent during the housing crash. ...

The $64,000 question is when will the housing market finally recover? One daunting challenge for such a recovery is the huge number of homes in foreclosure. Almost 7 million homes have entered into foreclosure since the first quarter of 2008 and some 2 million are still in the foreclosure process. In addition, there is a shadow inventory of homes currently owned by delinquent borrowers. When you add up unsold new houses left over from the boom, homes for sale by owners, foreclosed residences for sale by lenders, and the shadow inventory of houses at risk of distressed sale, you come up with a massive supply overhang.

Over time, more reasonable prices and an improving economy ought to bring buyers off the sidelines and set the stage for recovery. But high unemployment and anemic wage gains are leaving people worried about their income prospects and cautious about buying homes. Also, the dramatic plunge in home valuations since 2006 has made some first-time homebuyers wary about entering the market because of worries that prices might fall further.

These are key points: Usually housing is a key engine of recovery, but not this time because of the massive supply overhang. And looking forward:

It’s only a matter of time before we work off the inventory overhang and construction picks up. How much time it takes will depend in part on what happens with foreclosed properties. If we begin making progress on working down the foreclosure inventory, then single-family housing starts could plausibly rise from their current level of about 400,000 per year to an average level of perhaps 1.1 million per year in three or four years, according to research at the San Francisco Fed.⁴ To put this in perspective, such an increase would boost real gross domestic product, or GDP, by at least 1 percent.

⁴ By contrast, if we can't work down the foreclosure inventory, then a return to normal construction levels could be delayed several more years.

Jumbo Loan Rates Continue Hovering Below 5%

noreply@blogger.com (The Editor) — Tue, 26 Jul 2011 21:43:00 +0000

Here is your jumbo mortgage rate chart as well:

Energy: Where the jobs of today and tomorrow are found.

noreply@blogger.com (The Editor) — Mon, 25 Jul 2011 07:30:00 +0000

Renewable energy is the fastest growing energy sector, despite the fact we still get the majority of our power from non-renewable sources. Oil, coal and fossil fuels are not only in limited supply, but are also detrimental to the health of the planet. On the other hand, renewable energy is in infinite supply and draws its power cleanly and naturally. Solar, wind, water and geothermal energy sources are the future of the industry and are expected to create 12 million new jobs through 2030. In West Virginia alone, a mere two percent of the state’s geothermal power could replace its entire electrical capacity. In just one hour, the Sun provides enough power to meet the world’s energy needs for a year.

Show Me The Money

noreply@blogger.com (The Editor) — Thu, 14 Jul 2011 03:54:00 +0000

As we have previously discussed the current unemployment rate and poor GDP figures hide the enormous gains of the high net worth and high earners. Cap Gemini has all of the details.

Most of America may be treading water, but the High Net Worth Individuals are getting their piece of the pie.

Jumbo Loan Strategic Defaults on the Rise

noreply@blogger.com (The Editor) — Tue, 28 Jun 2011 01:28:00 +0000

When Tracy Bremmer, director of decision sciences at Experian, talks about mortgage defaults, she has more than reams of data behind her. She has personal experience. She tell a story, embellished slightly but still representative, of a "neighbor" who bought their house near the height of the boom only to see it lose 40% of its value, plunging their mortgage so far underwater it would take years to surface. Then they noticed the house across the street from them for sale for roughly half of what they paid for theirs. So they bought it, and just stopped paying their original mortgage.

This family is semi-fictitious but is not alone. Ethics, morality and possible straight-up savvy aside, we started thinking about these "strategic defaulters" as a newly trending consumer segment, as they tend to become a strange new class of renters:

Data being released later today from Experian will show that in the first half of 2010, an estimated 275,000 people just walked away from mortgages they could afford to keep paying because they had become such awful investments. That adds up to roughly 17% of defaulters. While that figure is down 35% from the first half of 2009, as evidence of a double-dip housing crash mounts, "we expect the incidence of strategic defaulting to go up," said Ms. Bremmer.

Estimates of the number of mortgages under water in the U.S. hover just over 1 in 4 but that could jump to half in the coming years. Recent data from Corelogic suggests that almost 10% of mortgages originated just last year are already in the negative equity range. The Federal Reserve shows average homeowner equity at just 38% down from 61% a decade ago. We could go on, but you get the idea. A lot of home owners are hosed.

These are no deadbeats in a traditional sense. The Experian data show that they are more likely to have had a jumbo loan mortgage, have had excellent credit scores, have had more than one house or investment property, and have a higher than average household income. They also stay current on all their other bills. If you look at the incidence in these charts, the proportion of strategic defaulters keeps going up.

They should be owning and spending like home owners. But they're not, and for up to the next seven years they might have a hard time finding a mortgage while their credit recovers. "As many strategic defaulters as there are," said Ms. Bremmer, "there are many more people who are short-selling. Those people are renting, too."

For more great information and to contact the team that created the report please visit Experian Decision Analytics

Ultimate Buy American: Foreign Purchase of US Residential Real Estate

noreply@blogger.com (The Editor) — Sun, 19 Jun 2011 02:18:00 +0000

Last year, international buyers spent a whopping $41 billion to purchase US residential Real Estate. Some of this is attributable to the weak American Peso, but lower US RRE prices relative to European counterparts are also a factor.

Via Trulia, we can see the fascinating data flow of what overseas home buyers are looking at homes in which states. The global house hunters might surprise you. Click for highly interactive map courtesy of TRULIA.

Spanish Elite Say: Let Them Drink Sangria.

noreply@blogger.com (The Editor) — Fri, 27 May 2011 18:25:00 +0000

Looking at these pictures from Barcelona one would think this is Tunisia, Cairo, or at best, Athens. Instead, it is from the once incomparably wealthy capital of Catalunia (although they did have Olympics there: an event guaranteed to result in at least one municipal bankruptcy at some point in the future).

Why?

¿Por qué?

NTT Docomo Rube Goldberg Style AD:Beautiful

noreply@blogger.com (The Editor) — Fri, 20 May 2011 23:08:00 +0000

Corporations:Just Doing Their Job?

noreply@blogger.com (The Editor) — Sun, 15 May 2011 22:37:00 +0000

Via: OnlineMBA.com

Housing Bubble: New NOW in Color

noreply@blogger.com (The Editor) — Thu, 28 Apr 2011 16:13:00 +0000

Great set of charts from Visualizing Economics, showing the 2000-06 period, the 2007-11 collapse, and the c0ombination of the two.

My one beef is with the phrase Housing Bubble. As the charts show, the bubble was very specifically limited to a handful of regions. Nationally, we had a Housing boom & bust — but the “bubble” was in Credit. This was thanks to Greenspan’s ultra-low rates, the abdication of lending standards, that were driven by the demand to feed the Wall Street securitization machine.

Anyhow, here is what the price changes look like mapped out:

>
click for larger map

Amazing Time Lapse

noreply@blogger.com (The Editor) — Sat, 16 Apr 2011 18:08:00 +0000

The Mountain from Terje Sorgjerd on Vimeo.

Until I'm back posting on the jumbo mortgage market enjoy the beauty all around us in this awe inspiring time lapse.

How Low Can Housing Prices Go?

noreply@blogger.com (The Editor) — Wed, 02 Mar 2011 23:44:00 +0000

As the bubble continues it's long grinding deflation we are seeing a classic 'buyers-strike', the spring buyers haven't appeared despite historically low interest rates and home prices continue to be discounted over asking prices of just 2-3 months ago.

Here is the national home purchase application index. It measures the applications in process to buy a new home. The survey is pretty solid in that about 50% of large lenders are surveyed every week. If this was an EKG, the patient is dying, get the paddles stat!

The spike you see in Q1 2010 is the end of the home buyer tax credits and a major push by the FED to push mortgage rates down. As the tax credits expired on a Federal and state level the number of new buyers started to disappear. Then during Q3 2010 and Q4 2010 we had excellent fixed mortgage interest rates

This prompted another group of buyers to get an application in and start the home buying process. Then because of inflation, Federal government budget issues, and prospects for a better national economic environment(b.s.), mortgage rates moved back up again from the best levels in history. The amount of inventory that will be coming onto the local real estate market is huge:

These are foreclosed homes currently owned by Fannie, Freddie and FHA. They may or may not be on the market yet. Some are in need of repair, some are listed etc. As with all goods/services, supply and demand will lead the market to adjust prices. I fully expect much lower(10-25%) prices in some former bubble states. If people are concerned about jobs and unemployment is around 9-10% you can't expect any stability in housing, in the golden state unemployment is 12.3%, ouch.

Now with the recent wallet shock of $4 gas on the household and business budget it's going to be a tough spring selling season. Blockbuster closing hundreds of stores, Borders doing the same it doesn't broadcast confidence to people as they go about their daily lives.

Buyers... remember it's an asking price. Bargain accordingly. Here is your jumbo mortgage rate chart as well:

Paying More For Most Everything

noreply@blogger.com (The Editor) — Sat, 19 Feb 2011 02:09:00 +0000

Today’s must read piece is the WSJ discussion of Inflation:

“The pace of consumer price increases in the U.S. is quickening after being dormant for months. But a tug of war between the prices of goods and the prices of services, playing out beneath the surface, could keep inflation from becoming the worry it is in China, Europe and many emerging markets.”

Prices rose 1.6% in January 2011 vs 2010 — the biggest increase in eight months. The key has been commodities — gasoline, cotton, wheat, coffee, and oil are all higher.

Labor, on the other hand is not. Wages are flat, unemployment is stubbornly high, and hence, prices for Services are flat to lower. That is keeping a lid on inflation.

Hence, the dueling deflation versus hyper-inflation commentaries:

“Soaring commodities costs world-wide are pushing up prices for many goods, while a slowly recuperating U.S. economy, soft housing market and a persistently high unemployment rate are holding down prices for U.S. services.
Goods prices were up 2.2% from a year earlier, paced by jumps in food and energy prices, according to the Labor Department’s January consumer-price index, and are rising faster than they did before the recession. But services prices were up only 1.2% from a year earlier, far below the 3.4% inflation rate registered for services between 2000 and 2008.
The opposing pull of prices for goods and services could have a big effect on the course of U.S. inflation. Federal Reserve Chairman Ben Bernanke is betting that rising prices for goods like gas and food will not spread into the broader economy. He and many private forecasters do not expect the U.S. to see the kind of rising inflation now plaguing China, India and other parts of the world.
Goods inflation has outstripped services inflation for long stretches since mid-2007, something that hadn’t happened since the 1970s. For most of the last 30 years, goods prices had been held down, in part, by cheap imports from low-wage countries like China. But recently, China and other developing markets have become huge consumers of commodities, which is putting upward pressure on American prices for many globally traded goods.”

Well worth reading in its entirety. Inflation must be managed carefully by governments and central banks. I fully expect this will continue to impact mortgage rates especially long term fixed jumbo loans. We have seen them move from 4.875%(best level ever) in the summer to about 5.50% now.

Housing Bubble: Winners, Losers and the Aftermath

noreply@blogger.com (The Editor) — Thu, 17 Feb 2011 21:36:00 +0000

http://marketplace.publicradio.org/features/anatomy/foreclosure/

Marketplace has a special report on the housing crisis through the lens of one house that fell into foreclosure. There is an interactive version of the story, and links to audio version and the companion 30-min documentary:

SoCal Connected and the acclaimed public radio show Marketplace have teamed up to take a tough look at the housing market crisis through one Los Angeles home. This special, reported by Marketplace’s Kai Ryssdal, traces the property from savvy investment boom to foreclosure bust and back again. We’ll meet the couple who bought the home low in 2002, improved it, and sold it four years later at almost triple the price; the couple who bought high and lost the home to foreclosure; and the couple who bought it this year at a fraction of the price it sold for in 2006.
The story of Lot 354 reflects the lending practices that contributed to the crisis in America’s housing market, how economic forces led to the housing crisis and what the future may hold for both buyers and sellers.

Listen to the radio program

How Does a Cash Advance Buy Respect?

noreply@blogger.com (The Editor) — Fri, 28 Jan 2011 01:46:00 +0000

Economic life in challenging times can do a number on your dignity. Particularly for the working person, always having to fight to pay bills on time, a single emergency expense (such as broken appliances, insurance deductibles and medical co-pays) can make all your hard work seem futile. If you need to buy back some respect, maybe a online cash advance can help you do it.

What is a cash advance? It’s your next paycheck, except it comes earlier. It won’t be the full amount, but a portion of your pay – which might be just enough to pay the most important bills. Cash advance loans are available through online payday loan companies, and restore respect for you and your work in the following ways:

• Cash advance loans respect you for working hard. If you have a job, you can get a cash advance. No collateral is required. No stellar credit rating is necessary (a cash advance is based on a paycheck only, so even if you have a very poor credit score it doesn’t matter). Just prove you are employed for one to three months and have a checking account where your loan can be received electronically.

• You manage your bills on YOUR schedule. Of course your rent or mortgage is due on one day, your phone and utility charges on others. Perhaps you have car loans and insurance payments that hit at different times during the month. With a cash advance, you will be able to pay those bills on their due date. That’s control of the calendar.

• An easy application respects your time. The whole process of applying for a cash advance loan takes about 20 minutes. That’s it – once the application is submitted online, from your personal computer, you simply sit back and get the approval. Check your bank the following morning and the money will be there.

After you’ve managed the bills for the month, and worked out a plan to repay the loan, you can look in the mirror with respect as well. You’ve earned it.

Home Values Continue To Decline

noreply@blogger.com (The Editor) — Tue, 25 Jan 2011 21:26:00 +0000

Data through November 2010 shows negative annual growth rates in 17 of the 20 MSAs and the 10- and 20-City Composites compared to what was reported for October 2010.

The 10-City Composite was down 0.4% and the 20-City Composite fell 1.6% from their November 2009 levels. Home prices fell in 19 of 20 MSAs and both Composites in November from their October levels.

Only four regions – Los Angeles, San Diego, San Francisco and Washington DC – showed year-over-year gains. Eight markets – Atlanta, Charlotte, Detroit, Las Vegas, Miami, Portland (OR), Seattle and Tampa – hit their lowest levels since home prices peaked in 2006 and 2007, meaning that average home prices in those markets have fallen even further than the lows set in the spring of 2009.

Your CS Housing chart round up, click for even larger graph:

Mortgage Rates Rise Across the Board

noreply@blogger.com (The Editor) — Wed, 05 Jan 2011 22:03:00 +0000

Word of the Week:

hesitates3rd person singular present of hes·i·tate (Verb)

1. Pause before saying or doing something, esp. through uncertainty.

2. Be reluctant to do something. More »

Merriam-Webster

Seems a lot of conforming mortgage folks missed the low 4% rates and never locked. He who hesitates loses. The price of borrowed mortgage money has risen about .50% in the last few weeks. We have seen increases especially on fixed jumbo loan products and fixed conforming government backed(taxpayer). This is pressuring home shoppers especially. We have heard from a lot of realtors that the recent rapid rate increases has resulted in clients waiting or being forced to downgrade or offer less on the property. It really is about the payment for all but the top 1-2% of earners.

For a client borrowing a cool million on a jumbo mortgage, a .50% rate move is not insignificant. From 5% on a 30Y Fixed Jumbo Loan in late November to the first week of the new decade at 5.50% for a very well qualified borrower, moves the payment from $5368 to $5677. Long run that is over 100k in additional interest cost. Higher or lower from here? Biased higher. Nothing more concrete as Mr Jumbo Mortgage's crystal ball is in for warranty repair in a small Turkish village. Great Charts Below:

Job Market Improvement Boosts Jumbo Loan Rates

noreply@blogger.com (The Editor) — Wed, 05 Jan 2011 17:21:00 +0000

ADP reports:

Private-sector employment increased by 297,000 from November to December on a seasonally adjusted basis, according to the latest ADP National Employment Report® released today. The estimated change of employment from October to November was revised down but only slightly, from the previously reported increase of 93,000 to an increase of 92,000.

This month’s ADP National Employment Report suggests nonfarm private employment grew very strongly in December, at a pace well above what is usually associated with a declining unemployment rate. After a mid-year pause, employment seems to have accelerated as indicated by September’s employment gain of 29,000, October’s gain of 79,000, November’s gain of 92,000 and December’s gain of 297,000. Strength was also evident within all major industries and every size business tracked in the ADP Report.

This latest report came in very strong vs estimates of about 100k new jobs added in this period. This has resulted in an small early morning rally on Wall St. Stocks are slightly higher but the biggest change is a rise in the 10Y Treasury from 3.33% to 3.45% as of 12:11 EST. We have seen a boost in mortgage rates across the board. Market based jumbo loan programs are up about .125%-.25% from yesterdays best levels. The plane is boarding don't be late before the captain shuts the door on 5% fixed jumbo loan rates.

Jumbo Loan Rates: Was 2010 the Lowest?

noreply@blogger.com (The Editor) — Wed, 05 Jan 2011 00:39:00 +0000

Well, the final figures for 2010 are in and we may very likely have seen the best jumbo loan rates ever. But time will tell. If the economy double dips into a recession or the moon falls to earth causing epic panic then we may go back down to the sub 5% range for very well qualified clients. But the strong winds are blowing the sails of global economic recovery with the US projected to grow 2-3% in 2011. A rising economy will continue to push jumbo mortgage rates up. Mr Jumbo Mortgage advises to lock anything in the low to mid 5% range given the current environment. As in all things this could change in a minute. Contact our office anytime we can be of service here.