New Home Sales--Remember Local Market Counts

Well...the news can't always be gangbusters.

But don't be too disappointed about New Homes missing the national consensus on housing starts.  No doubt the Housing Market is dictated by the local market.

In Hampton Roads, new home neighborhoods are starting to pop up and are seeing good activity.   In the past week, I had two buyers looking at new homes neighborhoods in Chesapeake and Virginia Beach.  

It was fascinating to see the activity the new home sites were experiencing.  With lots available in present releases still be limited to 10 or fewer, the buyers seemed to want to jump to get preferred lot before that lot was gone.

Kind reminds of The Eagle's song, Hotel California, with that line "We haven't had that spirit here since nineteen sixty nine".  Though it has not been since 1969, this attitude in buyers has been not seen for a few years.

Jim is so right...it is all about the rates right now.  These historic rates won't be here forever.  So sitting on the sidelines is not the way to play the game right now. 

Keeping you updated on the market! For the week of December 3, 2012 MARKET RECAP The news was disappointing, but not terribly so. We are referring to the dip in new-homes sales for October. The Commerce Department reports sales came in at an annual rate of 368,000 units last month, which was 17,000 shy of the consensus estimate for 385,000 units. Pricing was also a minor disappointment. The median price for a new home dipped 4.2% to $237,000. This marked the second-consecutive month of price weakness. Disappointing, yes, but hardly a cause for concern. Year over year, new-home prices are up 5.7%. Given the scant supply of homes, we don't see a backsliding trend developing. The number of new homes for sale is still only 147,000, representing a 4.8-month supply at the current sales pace. The longer-term perspective is another reason to remain optimistic. New-home sales have averaged 361,000 per month on an annual-rate basis through October. In other words, sales are on pace to increase 18% this year. What's more, we have plenty of room left to run. Even with the double-digit sales increase, 2012 will be the third-lowest sales year since the Census Bureau began tracking new home sales in 1963. It's also worth remembering that this year's average sales rate is still below the 375,000 average rate of sales in 2009. Most estimates we've seen (which are likely conservative) expect new-home sales to double within the next couple years. This would put the annual sales pace closer to historical norms, which is around 1 million sales on an annualized rate. Though new-homes sales disappointed in October, the trend in overall pricing – new and existing homes – remains strong. Most private data providers show prices increasing in more markets. This past week, Case-Shiller's home price index showed prices rose 0.4% in the 20 cities it follows. This was the sixth-constrictive month of price gains, with gains sweeping across all 20 cities. The trend in purchase applications is also encouraging. Rising applications point to rising home sales. Rates continue to make new historical lows (albeit by a couple basis points) each week. Low rates contribute to a high-affordability index. Low mortgage lending rates are an important variable in the home-purchase equation, but they are not the overriding variable. The above chart shows brisk sales even with lending rates 300 basis points higher than they are today. In other words, low lending rates have done about all they can do to stimulate sales. At this point, the key variables for a sustained housing recovery are economic growth and more credit-worthy borrowers having access to credit. Economic Indicator Release Date and Time Consensus Estimate Analysis Construction Spending (October) Mon., Dec. 3, 10:00 am, ET 0.4% (Increase) Important. Rising residential real estate construction is spurring overall economic growth. Mortgage Applications Wed., Dec. 5, 7:00 am, ET None Important. Purchase applications continue to point to stronger home sales. Unemployment Situation (November) Fri., Dec. 7, 8:30 am, ET Unemployment Rate: 8.0% Payrolls: 25,000 (Increase) Very Important.Financial markets are looking for a sustained trend in job creation growth. Consumer Credit (October) Fri., Dec. 7, 3:00 pm, ET $12 Billion (Increase) Moderately Important. Expanding credit use reflects higher consumer confidence. An Ode to Diversity When people contemplate what went wrong in the housing bubble, they frequently point to lending: subprime loans, interest-only loans, negative amortization loans, and securitization were the helium that inflated the bubble. That's not really true, nor fair. These products have been around for years and had served the borrowing public well. The problem was really the misguided belief that an asset – housing in this case – can only rise. The chief problem today, and a primary impediment to the housing recovery, is excessive regulation, which is limiting choice. A recent report from FBR Capital Markets points to a regulatory environment that is “plain vanilla” in that it favors the 30-year fixed-rate loan above all others. Now, there is nothing wrong with the standard fixed-rate mortgage products, but other mortgage products have their place. Indeed, you could argue that taking an interest-only loan to purchase a Phoenix-based home late in 2011 was a savvy business move; the buyer would have tied up little of his own capital to purchase a bargain-basement asset that has since appreciated strongly. Many regulators and even more mortgage-industry participants have called for the need for more private mortgage investors to enter the market. For that to occur, though, these investors need the freedom to offer products that will satisfy a wider swath of borrowers needs, while also enabling them to earn a profit. We think 2013 will become the year of diversity: that is, a more diverse, heterogeneous mortgage lending market with more private investors. We say that because economic growth impacts regulation, and we see economic growth in 2013. Generally, the higher the growth, the more accommodating the regulators. We look forward to a strong 2013, and a stronger, more flexible mortgage lending market. If

Up-to-Date Mortgage Info!!!

Keeping you updated on the market! For the week of  January 31, 2011 MARKET RECAP We hope we see marked improvement in the home-builder sentiment index on its next release, because the news on new home sales in December was better than just about anyone expected, jumping 18 percent to an annual unit rate of 329,000. What's more, supply came down and prices jumped. The former fell to 6.9 months, versus 8.4 months in November, and the latter jumped 12 percent to a median $241,500. We did say “marked” and not “phenomenal.” As encouraging as the news on new-home sales was, it wasn't perfect. The fall off in purchase applications over the past few weeks points to a fall off in new-home sales for January. In addition, much of the improvement was concentrated in the West, not evenly distributed throughout the regions. Then again, it rarely is. Real estate is, after all, local. Overall, though, we remain encouraged. This and the previous week's existing-home sales report is good news for housing. Now it's a matter of seeing if the winning streak can be strengthened and extended. Some in the financial media speculated that the buying rush was tied to December's jump in mortgage rates, which encouraged home shoppers to hop off the fence and act. We tend to agree with the speculators. We've been saying over the past half-year that rising rates would be more stimulative than dissuasive. Expecting lower prices and then getting them over an extended period lulled people into an unwarranted sense of certainty and nonchalance. The rate hikes over the past two months have shocked the market back to reality and motivated many people to act. Another shock could be forthcoming for price-deflation proponents. The S&P/Case-Shiller home price index showed a year-over-year price decline in November, with a 0.4 percent decline for the composite 10 index and an adjusted 1.6 percent decline for the composite 20 index. David Blitzer, chairman of the index committee at S&P, warned that "A double-dip could be confirmed before Spring.” Blitzer defined a double-dip as both the 10- and 20-city composite indexes setting new post-peak lows. We are not so sure in light of December's data on median home prices. There is also the issue of money supply, which has increased dramatically over the past two years and is set to continue increasing this year. The Federal Reserve is confident it can manage any spike in inflation, but we remain circumspect. Inflation often works like pouring a new bottle of ketchup: You keep smacking the bottom of the bottle repeatedly and nothing comes out. You smack it again and find you have ketchup (and price increases) all over the place. The prospect of sudden inflation is a primary reason we continually warn borrowers and buyers not to procrastinate. Mortgage rates continue to hold steady, and to us, that's an opportunity to act. However, the 30-year fixed-rate loan continues to parallel movement in the 10-year Treasury note, and the 10-year Treasury yield is itching to move higher. Economic Indicator Release Date and Time Consensus Estimate Analysis Personal Income & Outlays (December) Mon., Jan. 31, 8:30 am, et Income: 0.4% (Increase) Outlays: 0.5% (Increase) Important. Spending habits reflect improving consumer confidence. Construction Spending (December) Tues., Feb. 1, 10:00 am, et 0.2% (Decrease) Important. Spending levels are stabilizing after months of decline. Mortgage Applications Wed., Feb. 2, 7:00 am, et None Important. Concerns over lower home prices and stagnating rates are slowing activity. Productivity (4th Quarter 2010) Thurs., Feb. 3, 8:30 am, et 0.2% (Increase) Important. Moderating productivity suggests increased business hiring. Factory Orders (December) Thurs., Feb. 3, 10:00 am, et 1.1% (Increase) Important. The long-run trend reflects persistent strength in manufacturing. Employment Situation (January) Fri. Feb. 4, 8:30 am, et Unemployment Rate: 9.4% Payrolls: 150,000 (Increase) Very Important. Unexpected strength in hiring could prompt the Federal Reserve to re-examine its low-interest-rate policies. Money on the Move Correlations between asset classes are always on the move and always changing: when one asset class gets hot, the others tend to cool. In case no one has noticed, the stock market is hot these days. In fact, the two leading stock-market benchmarks – the Dow Jones Industrial Average and the S&P 500 Index – are posting multi-year highs. We broach this point to note that money invariably moves to the hot asset class, and in today's market, that's stocks. This money also invariable moves at the expense of the former hot asset class, and the former hot asset class is Treasury securities. As money leaves an asset class, the required expected return on that class rises to reflect its diminishing popularity and to entice money to return. As we noted above, mortgage rates are tethered to Treasury rates. We also noted that inflation would get rates moving higher, but so will money moving away from Treasury securities into other asset classes. We think this notion of asset rotation is one more arrow in the quiver of those of us expecting higher mortgage rates in 2011. If you wish to unsubscribe, click on the link below and send the email. If this message was forwarded to you, please reply to the sender. Click Here To Unsubscribe EQUAL HOUSING LENDER This Newsletter is for informational purposes only. The information contained herein may not be applicable to every situation or jurisdiction and we urge you to consult your professional advisor prior to acting on information contained herein. The content, accuracy and opinions expressed herein are not verified or endorsed by the sponsor hereof.

Mortgage Rate Gamble

Is History About to Repeat Itself???

   One of the greatest gambles today is in Last Vegas or playing the lottery....

   The greatest gamble is waiting out
               lower 
                          Mortgage Rates

 Rates have been in 5% range or below since
               DECEMBER 2008 
       And we were teased when rates dipped below
                  4% for a few moments in the late 2010.

Yet the party may be over!!!

    Rates have ticked up to 4.25-4.5% range in the past couple of weeks with many mortgage watchers seeing the market lean toward higher rates.

   Thinking you should ignore this sentiment as it
is identical to that heard in late 2007 and 2008 when rates were in the 6 % range for the 1st time 
in a couple of years???  Remember what happened in 2008 and since....want to go through that again???

      The basis for the belief that rates will move higher is simple....INFLATION!! 

    Been awhile since we heard that word.  But with
the large National Debt, new "insertion of capital"(i.e. printing more money) by the Fed, any kind of economic growth, INFLATION could be a real possibility.  A bit of INFLATION is good; lots of INFLATION could derail an economy.

With INFLATION comes higher cost of money....higher interest rates.


If you are locked into a low 4-5% mortgage, great!!!  You are protected.

If you and your family really needs a larger, smaller or just a different home, you are gambling if you think rates will go down!! 


Take the sure bet!!! Refinance or buy now!!!


Think differently...express yourself!!!  Love to hear your point of view...we can talk about it!

What Happen to those Interest Rates???

Oh so you heard that mortgage interest rates have sneaked up a bit??? Wondering if you should call the 800 number or log onto the website of that mortgage company offering 1% mortgage money??

I am not surprised that either statement might be true for you. Yes, the mortgage rates are up to the 6.5% range now but do you know that is still historically low? Actually any rate below 8% is considered awesome if taken in historical context. Just ask someone, maybe your mom or dad, about the mortgage rates in the 80's. Could you imagine 18% rates???

So if your sitting on the fence and wondering "Is now the time to buy?", here is some food for thought. If you bought a $300,000 house and took a loan at 6.5% interest for 30 yrs vs 18%, you would save over $2100 per month!!!! Yet lots of couples and individuals bought their first or their 4th home in the 80s....so do we have it good.

Yet, rates do need to be monitored as they move with the market. Though mortgage interest rates are directly tied to 10yr bonds or the movement in the stock market, the direction and volume in these two items can directly impact. Think of like this, if breakfast cereal prices go up to the upswing in Ethanol production, we know they are tied directly together as they are two different uses for grain...yet the lowered availability of a limited production of corn, for example, to make Corn Flakes could very well cause the price to increase at the grocery store.

Same is true in the financial world but a bit in reverse. When the stock market is humming, as it has been now(do you know it hit a record high yesterday prior to retreating?), the 10yr bonds must over a better rate of return to attract the investor. This causes mortgages to rise as they are bundled into marketable securities after you or I get our mortgage and have to compete to get the investor to buy the security. Seem complicated...it is....this barely scratches the surface but hopefully helps.

Knowing whether the rates will go up or not is a tough item to predict. Can we guarantee the Stock Market will continue to rise or that it will drop 400 pts in a day? Probably not...or we would be rich shortly if we knew the time and date. Yet, because we don't know, buyers and sellers alike need to know that a 6.5% interest rate today will change tomorrow. In fact, most banks establish "the day's rate" around 10am each business day!

If a buyer waits and the rate drops a 1/4 % to 6 1/4%, he/she would save approx. $41/month on his $250,000 note. But it jumped a quick 1/2 to a still historically low 7%, he/she will pay an additional $84 per month. So what's your bet?

Before I forget, let me give you a hint about mortgage rates. For "A" paper loans(standard Conventional, VA and FHA financing) the rates are pretty much a direct reflection of the rates
Ginnie Mae and Fannie Mae will accept(complicated to explain relationship between these quasi-governmental bodies) and what the banks can offer. That is where the rub comes when you see an ad for 1% mortgages or 3.25% mortgages or a loan broker tells you he can get you a 8% loan in a 6.5% market.

Though I or any one can't say the following is true for every situation but caution is needed.
Frequently when a 1% mortgage is offered, that rate is good for a month and will increase based on a basis such as Treasury Bonds. Or it could be 10yr note with negative amortization; as you pay 1% interest on your loan, 5.5% of the value of the loan is added back into the loan each month. Yes, this would increase the payoff balance on the note each month...you would have to know you are going to make alot more money or that the house will appreciate rapidly to meet the new loan balance(you have heard home prices are steady to dropping a bit?).

Situations such as this is why I always point my clients to a Mortgage Company that loans its own money. So the fact the name of the company is "X Mortgage" doesn't tell the story.
There are companies linked to banks like Suntrust or Wachovia as well as mortgage companies aligned with a Realtor company, such as Advance Mortgage that is directly underwritten/financed via Wells Fargo. Also you will find fine mortgage companies like Countrywide Mortgage or Atlantic Bay Mortgage that have large investors/stock based company that loans its own money. For all these type of companies, you always want to ensure you know if you are talking about "A" Money or "B" Money, as these companies do have "alternative" financing options for individuals with no downpayment or lower than 600 credit scores(yes the credit score counts!). Good flexibility to meet all borrower's needs but it is good to know which type of money as it can impact fees and rates charged.