Tuesday, December 11, 2012

After reading, Jim's Mortgage Matters below, you might think
my key observation that we again are hearing about how the fiscal cliff will really hit our pocket book.  Yet, this has gotten to be well stated(just hope they get it resolved).

Yet the message to be noted is:

In short, we don't see mortgage financing becoming meaningfully cheaper, even though rates have eased a few basis points each week for the past month. In fact, mortgages could become more expensive in 2013.

This statement comes after a lengthy dialogue on housing market and controls on mortgage financing.  Though the housing market improves monthly, it may not be long that mortgage rates will begin to make "housing more expensive".  Yet,  I don't expect that to dampen the pent up demand for homes that has formed over the past six years of caution among home buyers and sellers.

But again, the fiscal cliff's resulting higher taxes could no doubt take the "marginal" buyer out of the market due to tighter finances.

Thoughts????  What are your plans in 2013?





 
Keeping you updated on the market! For the week of 
December 10, 2012

MARKET RECAP
New-home sales inspired some recent consternation after it was reported that both volume and prices declined in October. A few commentators opined that one month could turn into two, and possibly more.
Color us skeptical; new-home sales remain far below their historical pace, while pricing remains robust in many local markets. And when looking at the aggregate national trend, pricing for both new and existing homes is decidedly up.

On pricing, CoreLogic's latest data show prices, which include distressed properties, rose 6.3% year over year in October. This marks the largest increase since June 2006 and the eighth-consecutive year-over-year increase in 2012.

Arizona was the standout market in CoreLogic's data, with prices rising 21.3% year over year. But guess which market is catching up? Nevada, where prices are up 12.4%. When prices were continually dropping in Nevada ( Las Vegas, in particular), we continually mentioned that it was a matter of time before they would reach a point where markets would clear and prices would rise.

When Las Vegas finally showed signs of recovery, we also posited that the real estate recovery would likely have become a country-wide phenomenon. This appears the case today.

The housing market is trending positively, to state the obvious, and it would likely trend even better if we could get more financing to more buyers. Mortgage purchase applications have been trending higher in recent weeks, but they still have a lot of room for improvement.

Unfortunately, we are still mired in a risk-averse lending market. That said, we are seeing a pick up in private participation. In the private-label residential mortgage-backed security (RMBS) market, issuance is up to $6 billion this year. That's not much, but it's more than double the $2.8 billion issued last year. Looking to next year, the market is expected to expand to $15 billion.

Discussing RMBSs might seem like delving into the arcane, but RMBSs matter because they're an indicator of private investor interest in the mortgage market. We've stated many times that more participation in mortgage lending is better than less participation.

But more participation means mortgages could get more expensive. In order to contract Fannie Mae's and Freddie Mac's presence in the mortgage market, as well as encourage the return of private capital investment, the FHFA aims to increase G-fees by 30 to 50 basis points to match recent private-label execution.

In short, we don't see mortgage financing becoming meaningfully cheaper, even though rates have eased a few basis points each week for the past month. In fact, mortgages could become more expensive in 2013.
 
Economic 
Indicator
Release 
Date and Time
Consensus 
Estimate
Analysis
Mortgage Applications
Wed., Dec. 12,
7:00 am, ET
None
Important. The trend in purchase applications suggests underlying strength for home sales.
Import Prices
(November)
Wed., Dec. 12,
8:30 am, ET
0.3% (Decrease)
Moderately Important. A slightly stronger dollar reflects lower import prices and lower inflation.
Retail Sales
(November)
Thurs., Dec. 13,
8:30 am, ET
0.2% 
(Increase)
Moderately Important. Sales are tacking higher with the economy.
Consumer Price Index
(November)
Fri., Dec. 14,
8:30 am, ET
All Goods: 0.3% (Decrease)
Core: 0.2% (Increase)
Important. Consumer prices remain non-inflationary, which means no increase in interest rates any time soon.
 
The Rise of Uncertainty

More than a few housing-market observers are concerned the fiscal cliff – the impending array of tax increases and spending cuts due January 1 – could derail the housing recovery. These concerns aren't unfounded.
If nothing is done between now and the end of the year, income tax rates will rise, and not just for the rich. The lowest marginal income tax rate, at 10%, will increase 50%, to 15%. Everyone in every tax bracket will have fewer dollars to spend and invest. Tightened personal budgets could force many marginal home buyers out of the market.

The greater concern, at least from an immediate perspective, is the expiration of the Mortgage Debt Relief Act of 2007. The act allows borrowers to exclude certain canceled debt on their principal residence as income. If the act isn't extended, many short sellers could be hit with a big tax bill for forgiven debt. This would be a serious impediment to the short-sale market, which has contributed mightily to the housing recovery.

The good news is that it appears likely the Mortgage Debt Relief Act will be extended. The bad news is that we continue to barrel toward the fiscal cliff, with no resolution in sight. The remaining weeks heading into January will be interesting, to say the least, and could be very impacting on the housing and mortgage markets.
 
 
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