First Time Home Buyers and Sellers need to understand the numbers behind the numbers!

Earlier this week, Standard & Poors released its February Case-Shiller Index, a home price tracker for select metropolitan areas.

Overwhelmingly, home values fell in the 20 markets tracked by the Case-Shiller. Only San Diego showed a modest increase.  The other 19 markets averaged a 1.23 percent decline between January and February.

However, that’s not the story you read in the most papers. Instead, headlines read that home values were up in the United States, citing annualized data.

Unfortunately for active home buyers and sellers, year-over-year data isn’t all that helpful when making a real estate decisions. It’s the month-to-month data that matters. Month-to-month changes in home prices are what defines a housing market. Month-to-month is what sets the tone for contracts and negotiations on a purchase.

The rosier, annualized data published this past week just doesn’t capture the reality of what was the February 2010 market.  And even then, the data is somewhat useless because it’s from February and May will be upon us next week.

Case-Shiller is on a 2-month lag — hardly reflective of the “right now” of local real estate.

When you’re looking for real estate data that actionable, consider using sources that are more “real-time”. A real estate agent may be the right place to start.  Because for all the data that Case-Shiller and the other housing indices collect, it can never be as relevant to your individual needs as a well-executed, timely market analysis.

First Time Home Buyers: Mortgage markets improved last week on tame inflation data,

a benign statement from the Federal Reserve, and ongoing credit problems in Greece.

The factors combined to drop conforming mortgage rates to their lowest levels in 6 weeks.

It’s an unexpected development considering that mortgage rates were supposed to rise post March 31, 2010.  That was the day the Fed’s support for mortgage markets ended.

Since then, however, a month-long string of devastating economic and meteorological events within the Eurozone sparked a global flight-to-quality that benefited “safe” assets such as mortgage bonds.

May 2010 may not be so kind.

The week starts with news that Greece reached a $147 billion bailout agreement with the IMF Sunday. This is a plus for the Eurozone and mortgage market negative. Rates should rise on the bailout.

Also on Monday, the government releases Personal Consumptions and Expenditures data.

PCE is the Fed’s preferred inflation gauge and it’s expected to show an annual read of 1.3 percent. Anything higher and rates should rise.

Then, for the rest of the week, employment data takes center stage.

• Wednesday : ADP releases its private sector employment data
• Thursday : The government releases initial jobless claims
• Friday : The government releases April’s job report

Jobs are key to the U.S. economic recovery, tied to consumer spending, consumer confidence, and mortgage delinquencies.  If job growth is better than expected, mortgage rates should rise.  If job growth is worse, rates should fall.

There’s no “best day” to lock this week so keep an eye on the market.  However, if FHA mortgage rates rise as quickly in May as they fell in April, you won’t have much time to act. With FHA rates close to their lows, it may make sense to pull the trigger soon. Check in with us or your chosen mortgage pro and make sure that there’s nothing stopping you from locking in your mortgage loan when you feel that the time is right!

Home Buyers should know:

For the first time this year, Fannie Mae announced significant updates to its mortgage underwriting guidelines.

The changes include newer, harsher ARM qualification standards, the elimination of a once-popular loan product, and tighter rules for interest only mortgages.

Fannie Mae made its official announcement April 30, 2010.  The changes will roll out to home buyers and homeowners in Raymond and everywhere else over the next 12 weeks.

The first guideline change is tied to ARMs of 5 years or less.

Mortgage applicants must now qualify based on a mortgage rate 2% higher than their note rate.  For example, if your mortgage rate is 5 percent, for qualification purposes, your rate would be 7 percent.

The elevated qualification payment will disqualify borrowers whose debt-to-income levels are borderline.

The second change is Fannie Mae’s elimination of the standard 7-year balloon mortgage.  Balloon mortgages were popular early last decade.  Lately, few borrowers have chosen them, though.  Mostly because rates have been relative high as compared to a comparable 7-year ARM.

And, lastly, Fannie Mae is changing its interest only NH mortgages guidelines.

Effective June 19, 2010, Fannie Mae interest only mortgages must meet the following criteria:

1. The home must be a 1-unit property
2. The home must be a primary residence, or vacation home
3. The borrower’s FICO must be 720 or higher
4. The mortgage must be a purchase, or rate-and-term refinance. No “cash out” allowed.

Furthermore, borrowers using interest only mortgages must show two full years of mortgage payments “in the bank” at the time of closing.

Earlier this year, Fannie Mae-sister Freddie Mac announced that as of September 2010, it will stop offering interest only loans altogether.

Between Fannie Mae, Freddie Mac, the FHA, and other government-supported entities, the U.S. government now backs 96.5% of the U.S. mortgage market.  So long as mortgage default rates are high, expect approvals for all borrower types to continue to toughen. There’s a good chance that FHA mortgage lending guidelines will get tighter still but, typically, those that are already approved for their FHA mortgage will not suffer from guideline changes that arise so get that FHA mortgage approval process started and done!

As the federal home buyer tax credit nears its April 30 end-date, there’s a lot of would-be home buyers in Raymond still working to get under contract.

A piece of advice for all of them : If your pre-qualification and/or pre-approval letter is more than 8 weeks old, it would be prudent to have your lender “re-pre-approve” you.  Mortgage guidelines have been in flux and your original lender letter may now be invalid.

For example, over the past half-dozen months, the majority of mortgage lenders have reduced their risk tolerance with respect to:

• Maximum debt-to-income ratios
• Minimum allowable credit scores
• Calculation of “assets in reserve”

For buyers of condominiums and co-ops, even the subject property itself is coming under tougher scrutiny.

Today’s mortgage applicants need to be a complete package. It takes more than just good income and credit to get approved anymore and today’s buyers should revisit their qualifications. What passed underwriting in January may not pass in May.

Being pro-active brings other advantages, too. If a mortgage re-pre-approval does unearth an issue, it’ll be easier for every party to the transaction to address and correct it up-front versus trying to clean up a mess once a home’s already under contract.

Talk to your agent and your loan officer about your pre-qualification/pre-approval letter before you bid on a home.

The federal home buyer tax credit expires April 30 and the deadline is sparking a home sale surge. It figures to burden real estate, mortgage and title offices nationwide over the next 60 days so plan your closing date accordingly.

Especially because the last Friday in May is the Friday before Memorial Day.

Now, if the connection between the tax credit and Memorial Day is not immediately clear, think of your own office on a 3-day weekend’s Friday. Some of your colleagues take a half-day at work, others take the entire day off.

Office-wide, productivity drops.

The same is true in the real estate space. Offices are short-handed ahead of a holiday so, if you’re under contract for a home and plan to close in May, consider a closing date other than Friday May 28, 2010.

And meanwhile, with 6 weeks until Memorial Day, here’s some steps you can take today prepare for other people’s time off later.

1. Notify your lender of your planned vacation time between now and your scheduled closing
2. Purchase a homeowners insurance policy and prepay the first year. Send proof of payment to your lender.
3. Have Power of Attorney forms lender-approved and signed by all parties in advance, if applicable
4. Deposit gift monies and/or retirement fund withdrawals into an acceptable bank account, if applicable
5. Schedule your final walk-through as far in advance as is realistic so there’s time to make “fixes”, if needed
6. Have your closing funds ready at least 1 day in advance

The tax credit’s expiration is around the corner and as it gets closer, real estate-related businesses are taking on more work. Basic title and mortgage tasks are taking longer to complete and that should persist for a while.

Get ahead of the curve and beat your contract dates handily. Use the checklist above and be responsive to your lender’s requests.

And, if at all possible, avoid closing on the Friday before Memorial Day and even the Tuesday after — it’s when office staffs are at their smallest.

Home Buyers, especially First Time Home Buyers, will feel the impact of today’s meeting for weeks.

Today, the Federal Open Market Committee voted 9-to-1 to leave the Fed Funds Rate unchanged within in its current target range of 0.000-0.250 percent.

In its press release, the FOMC noted that, since March, the U.S. economy “has continued to strengthen” and that the jobs markets “is beginning to improve”.  This is a step up from the last meeting after which the Fed said jobs were “stabilizing”.

It also reiterated that business spending “has risen significantly”.

Today’s statement marks the 7th straight press release in which the Fed shows optimism for the U.S. economy. Furthermore, the Fed has now closed all but one of the programs it created to support markets during last year’s financial crisis.

Threats remain to growth, however. The Fed fingered a few:

1. Employers are reluctant to hire new workers
2. High unemployment threatens consumer spending
3. Consumer credit (still) remains tight

Also in its statement, the Fed re-acknowledged its plan to hold the Fed Funds Rate near zero percent “for an extended period”.  This was expected.

Overall, the statement’s tone was positive and the Fed noted that inflation is within tolerance.

FHA Mortgage market reaction has been muted thus far. FHA and non government mortgage rates are unchanged post-FOMC.

The FOMC’s next scheduled meeting is a 2-day affair, June 22-23, 2010.  The 55-day span between meetings will be the FOMC’s longest of 2010.

Home Buyers need to look behind the numbers.Sales of newly-built homes rose in March.But the news may not be as good as what the media is telling us.Find out why. Read more…

FHA Mortgage rates and home affordability particularly for first time home buyers have improved lately, thanks to an unlikely ally — Mother Nature.

In the 7 days since Iceland’s Eyjafjallajökull erupted, ash clouds have grounded planes, disrupted businesses, and stranded exports in warehouses worldwide.

It’s a drag on commerce that’s spilled over onto Wall Street. As experts debate the potential for future seismic activity, traders are taking some of their investment risk off the table.

In trading circles, it’s called “safe haven buying”. When the market gets cloudy, investors often move their cash into relatively safe assets.  This includes government-backed securities — mortgage-bonds among them.

Demand for bonds rise, pushing up prices and driving down rates.

FHA mortgage rates touched a 3-week low earlier this week.

Volcanic eruptions and like natural disasters remind us: mortgage rates change for all sorts of reasons. Some we can predict, most we cannot. There’s literally thousands of influences on the FHA mortgage market.

If you’ve been shopping for a first home or floating a mortgage rate, luck’s been on your side. Mortgage rates have fallen post-Eyjafjallajökull. However, as ash clouds dissipate and business resumes worldwide, investors will regain their collective appetite for risk and safe haven buying will reach its natural end.

When that happens, FHA mortgage rates will rise.

Therefore, use the seismic uncertainty to your advantage.  Consider locking your FHA mortgage rate sooner rather than later — while rates are still low. The “first time” home buying rush is on top of us and, with the end of the First Time Home Buyer Tax Credit, good FHA mortgage lenders and real estate agents are starting to get busy!

First Time Homebuyers should know that, after a strong March showing and a surprise upward-revision for February, Housing Starts are, once again, trending better.

It’s yet another signal that the housing market in Bedford and nationwide is stabilized.

A Housing Start is a new home on which construction has started and, over the last 6 months, home builders are averaging one half-million starts per month.

This marks the highest 6-month average since 2008 and a reading one-fifth percent better from 12 months ago. Revisions to prior data have all been higher, too.

Even more interesting, though, is that the number of newly-issued building permits is exploding. Permits were up more than 5 percent last month and have climbed back to the levels of late-2008.

Housing permits are an important data point in housing because permits are precursors to actual housing starts. According to the Census Bureau, 82% of homes start construction within 60 days of permit-issuance.

Therefore, because March’s housing permits increased, we should expect Housing Starts to continue to rise into the early months of summer.

This, too, reflects well on housing because the federal home buyer tax credit won’t be in existence this summer. The simple fact the homes are being built now shows that housing is likely to expand even after the tax credit expires.

Non-military members must be under contract by April 30, 2010 and closed by June 30, 2010 in order to claim up to $8,000 in federal tax credits.

For first time homebuyers and those looking to refinance,mortgage markets improved last week for the second week in a row.  And, also for the second week in a row, rates were down on “safe haven” buying — just not for the same safe haven reasons as before.

If you’ll remember, safe haven buying is when investors sense market risk, then move money toward less risky investments.

Well, because the U.S. government backs the bonds of Fannie Mae and Freddie Mac, mortgage bonds tend to fit the “less risky” description and as Iceland’s volcanoes shut down air traffic in Europe, mortgage bonds benefited.

That was early in the week.

Then, on Friday, when the SEC announced fraud charges against Goldman Sachs, a second wave of bond buying began as Wall Street fled the stock market. Mortgage rates fell a second time and the improvement carried through the market’s weekly close.

Conforming and FHA rates for NH home buyers and those looking to refinance their NH mortgages are as low as they’ve been since March.

This week, there’s not much data due until Thursday, but even Thursday’s releases won’t make a huge impact on rates.

1. Initial Jobless Claims : Important vis-a-vis broader employment figures. A strong number could push rates up.
2. Existing Home Sales : Housing remains a key part of the economy. Strong sales are expected because of the tax credit.
3. Producer Price Index : A “Cost of Living” index of business. A weak reading is expected because inflation is low.

Then, Friday, New Home Sales is released.

The bigger risk to Manchester home buyers this week than data is the reversal of the safe haven buying patterns that have kept mortgage rates down over the past 10 days.  Keep an eye on the markets and your loan officer on speed dial.  Markets can — and do — change quickly.

You’ll want to time your lock accordingly.