As American as baseball and apple pie, realizing the American dream has always been associated with homeownership. In the second quarter of 2010, however, the number of homeowners realizing the American dream has dipped to the lowest level since 1999. According to a recent report by the U.S. Census Bureau, the rate of homeownership in the United States was just under 67 percent for the second quarter of 2010. According to the same report for the first quarter of the year, the homeownership rate was just over 67 percent. Unfortunately, homeownership figures continue to decline.

The S&P/Case-Shiller Home Price Indices, the leading measure for the housing market in the United States, reported Tuesday that home prices actually rose in May by 1.3 percent when compared to April. If home prices continue to rise, then it seems inevitable that the homeownership rate in the third quarter will continue to decline, forcing millions of Americans to rent rather than own.

The current housing price increases are sort of Catch 22. As housing prices and home values increase, the housing market heals. However, the rise in housing prices, coupled with the uncertainty surrounding the unemployment rate while our economy remains relatively unstable, will force prospective homeowners to remain as renters, preventing further healing within the housing market.

There is no disputing the fact that houses are no longer the investment vehicle they once were during the most-recent housing boom that resulted in today’s housing crisis. While homeowners used their properties as personal piggy banks, the economic collapse materialized. As unemployment rates continued to soar, combined with a drastic decline in property values, homeowners began to lose their homes in droves.

With millions of foreclosure properties remaining empty across the country, housing prices are on the rise nonetheless. While historically low mortgage rates remain in place as housing prices continue to rise, the time for prospective homeowners to realize the American dream may be passing.

One of two things needs to happen in order for the housing market to fully mend. Housing prices need to either level off or decline again, thus allowing potential homeowners to delve into homeownership, or the federal government needs to offset the housing price increases by offering further support to potential homeowners in the form of additional tax credits as an incentive to purchase homes. It clearly worked before. When the latest tax credits expired, purchases immediately began to decline to a virtual standstill.

When rates finally do begin to rise, it will be interesting to see where the housing market turns.

Robert Hyder

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According to Altos Research, the main driver for the price decline will be the excess housing supply that is currently on the market as well as the shadow inventory of distressed and REO property that is yet to hit the market.  Price declines will vary depending upon the market, the amount of housing supply in that given market, as well as demand in a given area.

There are a variety of estimates of the total amount of shadow inventory.  Depending upon which research firm you choose to believe, there could be anywhere from 4-7 million homes that constitute the shadow inventory.  Almost everyone is saying it will take several years to clear the inventory, which indicates we are in for a prolonged period of recovery.

Altos emphasized that the conditions will vary with locality, and that some regions may see a relatively quick recovery, while other places, such as California, Arizona, and Florida will take much longer to recover.

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Mortgage rates at Total Mortgage are currently near the lowest levels ever recorded.

One of the more popular mortgage products at Total Mortgage is the 30 year fixed conventional mortgage. This mortgage has a mortgage rate of 4.125 percent and a 4.323 percent APR. Other popular conventional mortgages include a 20 year and 15 year fixed conventional mortgage. For more information on these mortgages check out our mortgage rates page.

FHA mortgages are also very popular right now. A 30 year fixed FHA mortgage currently has a 4.000 percent mortgage rate and a 5.178 percent APR. For larger loans you may need a jumbo mortgage. A 30 year fixed jumbo mortgage has a 5.000 percent mortgage rate and a 5.203 percent APR.

Total Mortgage also has great adjustable rate mortgages (ARM). A 5/1 jumbo ARM has a 3.625 percent mortgage rate and a 3.657 percent APR. Other ARM’s include a 5/1 conforming ARM which has a 3.000 percent mortgage rate and an APR of 3.481.

Current mortgage rates are constantly changing; all mortgage rates were quoted at 10:00 a.m. on July 30th, 2010.

For more information on all of our mortgage rates and mortgage products call 877-868-2503 to speak with a licensed mortgage expert immediately!

*All rates shown are for 30 day rate locks. Longer locks available. The APR for conventional loan amounts is calculated using a loan amount of $417,000, 2 points, a $495 application fee, $500 loan processing fee, $715 underwriting fee and a $16 flood certification fee. The APR for jumbo loan amounts is calculated using a loan amount of $500,000, two points, a $495 application fee, $500 loan processing fee, $715 underwriting fee and a $16 flood certification fee. The APR for FHA loan amounts is calculated using a loan amount of $295,000, two points, a $495 application fee, $500 loan processing fee, $715 underwriting fee and a $16 flood certification fee. Some rates and fees may vary by state. All interest rates listed are for qualified applicants and are subject to mortgage approval. All rates are subject to change without notice.

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Since the passage of the financial reform bill, the government has set its sights on reforming Fannie Mae and Freddie Mac.  This is good because the bailout of Fannie and Freddie (which is actually a bailout of large banks) has cost U.S. taxpayers $145 billion so far.  Some estimates place the ultimate cost of the bailout between $400 billion and $1 trillion. The Fannie and Freddie bailout will ultimately be the most costly part of the government stimulus plans.

Today David Stevens, Assistant Secretary for Housing and Urban Development as well as the Federal Housing Administration released this statement regarding reform initiatives for Fannie and Freddie.  While the statement doesn’t contain any specific ideas as to how to initiate reform, I liked the overall tenor of it.  Stevens said the “question is not if but when” Fannie and Freddie will be reformed.  Stevens said:

“From the beginning, the Obama Administration has made clear that the current structure of the government’s role in the housing finance market is unsustainable and unacceptable.  Fundamental reform is clearly needed.  But winding the GSEs down abruptly is not the answer.  It would destabilize an already fragile housing industry and put the loans already on the books of these institutions at even greater risk.  We must proceed with great care and thought and we move to a new housing finance system – it’s just too important, with too much at stake, to rush.”

A conference is going to be held on August 17th in Washington that will begin the process of formulating a plan for reforming Fannie and Freddie.  Stevens emphasized the need to “get it right” because the stake are huge – the mortgage market is the second largest securities market in the world, and Fannie and Freddie hold more than $5 trillion in mortgage guarantees and have $1.5 trillion in mortgages and securities on their books.

Finally, Stevens said that the support for Fannie and Freddie was not an endorsement of their business models, but that it was necessary because failure to do so would have had dire consequences for the economy.

How do you think Fannie and Freddie should be reformed?  Let us know in the comments section below.

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Total Mortgage currently has some of the most affordable mortgage rates in Massachusetts.

Adjustable rate mortgages (ARM) can be a great option if you are considering taking out a home loan. A 5/1 ARM currently has a 3.000 percent mortgage rate and a 3.481 percent APR. For borrowers with larger loans a jumbo ARM may be necessary. A 5/1 jumbo ARM has a 3.625 percent mortgage rate and a 3.657 percent APR.

One of the most popular mortgages in Massachusetts is the 30 year fixed conventional mortgage. This mortgage product has a 4.125 percent rate and a 4.323 percent APR. Other popular 30 year mortgages include 30 year FHA and 30 year fixed jumbo mortgages. A 30 year fixed FHA mortgage has a 4.000 percent mortgage rate and a 5.178 percent APR. A 30 year fixed jumbo mortgage has a 5.000 percent mortgage rate and a 5.203 percent APR.

Current mortgage rates change frequently; all rates were quoted on July 30th, 2010 at 9.00 a.m.

For more information on all of the mortgage products available in Massachusetts call 877-868-2503 to speak with a licensed mortgage professional today!

*All rates shown are for 30 day rate locks. Longer locks available. The APR for conventional loan amounts is calculated using a loan amount of $417,000, 2 points, a $495 application fee, $500 loan processing fee, $715 underwriting fee and a $16 flood certification fee. The APR for jumbo loan amounts is calculated using a loan amount of $500,000, two points, a $495 application fee, $500 loan processing fee, $715 underwriting fee and a $16 flood certification fee. The APR for FHA loan amounts is calculated using a loan amount of $295,000, two points, a $495 application fee, $500 loan processing fee, $715 underwriting fee and a $16 flood certification fee. Some rates and fees may vary by state. All interest rates listed are for qualified applicants and are subject to mortgage approval. All rates are subject to change without notice.

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One of the more popular mortgages in New Jersey is the 30 year fixed conventional mortgage. The current mortgage rate for a 30 year fixed conventional mortgage is 4.125 percent and has a 4.323 percent APR. Another popular product is a 30 year fixed FHA mortgage, which currently has a 4.000 percent mortgage rate and a 5.178 percent APR.

Adjustable rate mortgages (ARM) are also becoming pretty popular in New Jersey. Many people choose an ARM because it offers a low initial mortgage rate. A 5/1 conforming ARM currently has a 3.000 percent mortgage rate and a 3.481 percent APR. A 5/1 jumbo ARM, meant for larger loans, has mortgage rate of 3.625 percent and a 3.657 percent APR.

Other popular jumbo mortgages include 30 and 15 year fixed mortgages. A 30 year fixed jumbo mortgage has a 5.000 percent rate and a 5.203 percent APR. A 15 year fixed jumbo mortgage has a 4.000 mortgage rate and an APR of 4.349 percent.

Mortgage rates are constantly fluctuating; all rates were quoted at 2:20 p.m on July 29, 2010.

For more information on all of the mortgage products available in New Jersey call 877-868-2503 to speak with a licensed mortgage expert immediately.

*All rates shown are for 30 day rate locks. Longer locks available. The APR for conventional loan amounts is calculated using a loan amount of $417,000, 2 points, a $495 application fee, $500 loan processing fee, $715 underwriting fee and a $16 flood certification fee. The APR for jumbo loan amounts is calculated using a loan amount of $500,000, two points, a $495 application fee, $500 loan processing fee, $715 underwriting fee and a $16 flood certification fee. The APR for FHA loan amounts is calculated using a loan amount of $295,000, two points, a $495 application fee, $500 loan processing fee, $715 underwriting fee and a $16 flood certification fee. Some rates and fees may vary by state. All interest rates listed are for qualified applicants and are subject to mortgage approval. All rates are subject to change without notice.

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Unfortunately, Fiserv is predicting that single-family home values will fall 4.9 percent over the next twelve months. The predicted drop is attributed to joblessness and the ensuing lack of income, and the massive overhang of distressed and REO property that is either on or will soon hit the market.  U.S. News and World Reports actually has a pretty good article on yahoo today that lays out the top 6 reasons for the continued weakness of the housing market.  I recommend checking it out.

The steepest declines are predicted for the Nevada, Arizona, and Florida markets, all off which are predicted to decrease 9-11 percent over the next year.  David Stiff, Fiserv chief economist was quoted in the article as saying: “The stabilization of residential real estate markets will take many years as buyers and sellers try to find price levels that clear large inventories of vacant homes from the market.  Consequently, we expect to see prices bounce up and down around their lows for the next two to three years, especially in markets that experienced the largest home prices bubbles.” In a previous report, Fiserv predicted that it will take until 2025 for homes to get back to 2006 levels in the aforementioned states.

More and more the wisdom of the crowd seems to be indicating that housing prices are going to decline in the next twelve months.  The only way that I can see that home prices will not fall would be if there was some sort of dramatic turnaround in the labor market, which seems unlikely right now.

What do you think will happen with housing prices?  Let us know in the comments section below.

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Mortgage rates fell to record lows last week, according to Freddie Mac.

Freddie Mac is reporting the average mortgage rate for a 30 year mortgage is 4.54 percent for the week ending July 22. This is down .02 percent from the previous week when the average rate was 4.56. At this point in time last year the average mortgage rate for a 30 year mortgage was 5.25 percent, over .7 percent higher.

15 year mortgages also dropped to historic lows, with the mortgage rate falling to 4.00 percent. A week prior the average rate was 4.03 percent and a year ago the same mortgage product had an average mortgage rate of 4.69 percent.

Despite incredibly affordable mortgage rates the amount of mortgage applications being filed is not very high. Most people who could gain financially from refinancing have either done so already or are struggling to qualify for a new loan. Home buying remains very low due to poor job reports and low levels of consumer confidence. In addition tightened lending practices have made it tougher for some borrowers to receive financing.

After six consecutive weeks of record low mortgage rates the question has to be when will mortgage rates stop falling? Let us know how you feel in the comments section below.

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We just bought property behind the Great Wall. On the good side!

I’ve been talking about the Chinese housing bubble for the last couple of months.  While I am certainly not alone in this, it is a topic that I do not feel has received any where near enough ink in the press.  Today there is a very good article on Vox that was linked to from the Wall Street Journal that discusses the Chinese residential housing bubble in depth.  I highly recommend reading the Vox article.  A recession (or even a slowdown) in China prompted by a collapse of the Chinese real estate market could have dire effects on the worldwide economy.

A key quote from the Vox article:

“China is experiencing spectacularly fast growth – so fast that many fear it is driven by a bubble – a propert bubble to be precise.  Recent memories of what happened when the US housing market bubble burst make the possibility of a Chinese housing bubble a critical concern for the world economy.”

The authors go on to emphasize that there are some difficulties with the lack of data regarding the Chinese market.  Private land ownership was relatively rare until the 1990s, so there is not a lot of old data.  Further, the information that comes out of China is controlled by the Chinese government, so it is possible that we are not getting the full story as to what is going on.

The Vox authors (Yongheng Deng, a real estate professor at the University of Singapore, Joseph Gyourko, a professor at the University of Pennsylvania, and Jing Wu, a professor at Tsinghua University), go on to say that “available data strongly suggests that prices are quite risky at current levels, and that it would take little more than a modest decline in expected appreciation to engender sharp drops in prices“.

The authors go on to suggest that price-to-rent ratios in many Chinese cities are reaching a point that suggests prices are becoming unsustainable, and that this is often one of the signs of a burgeoning property bubble.

The conclusion of the article says that an anticipated moderate slowdown in home price appreciation could lead to a sell-off by Chinese property owners that could spark precipitous price declines.  If this were to happen it could have dire ramifications for the worldwide economy, which has largely been driven by the strength of the Chinese economy for at least a year.

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According to the article, foreclosures rose in nearly 75 percent of U.S. metro areas with populations of more than 200,000 in the first half of 2010. According to RealtyTrac, we are unlikely to see significant increases in home values until 2013.  A quote from an interview with Rick Sharga, senior V.P. at RealtyTrac said:

“We’re not going to see meaningful, sustainable home price appreciation while we’re seeing 75 percent of the markets have increases in foreclosures.  We’re not going to see real price appreciation probably until 2013.  We don’t see a double dip in housing, but we think it’s going to be a long painful recovery for the next three years.”

The cities with the highest foreclosure rates are all concentrated in California, Nevada, Florida, and Arizona.  This is unsurprising, as cities in these states underwent some of the greatest price inflation during the bubble years.  According to Reuters, average home prices are 29 percent lower than at their 2006 peak.  Additionally, we are on a pace to see an all-time high number of homes seized by banks this year.

Unemployment is running close to 10 percent, and wider measures of unemployment are near 16.5 percent.  It does not appear that these numbers are going to come down any time soon.  At the end of the day, unemployment is the root cause of nearly every other problem that our economy is facing.  Until we make strides towards solving that problem, everything else we do is likely to be marginally effective at best.

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