New Construction Market Expected To Soar This Summer

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via: TheMortgageReport.com by Dan Green

Buyers of new construction are on the clock. With builder confidence rising and new home sales expected to pop, the best time to buy a new home this year may be right this very minute.

Builder Confidence At 5-Year High

After a seasonal dip in April, the National Association of Homebuilders reports that the May Housing Market Index rose 5 points to 29.

The 5-point jump marks the sharpest one-month climb for homebuilder confidence in close to 10 years.

It also raises the benchmark index to a 5-year high.

As an index, the NAHB's homebuilder confidence report is scored from 1-100. Readings north of 50 indicate favorable conditions for builders. Readings south of 50 indicate unfavorable conditions.

The HMI has been below 50 since April 2006. It's never been higher than 78 (December 1998).

Buyer "Foot Traffic" Soaring

The Housing Market Index is different from most home market statistics in that it's a psychological reading as opposed to a physical one. It doesn't measure actual homes sold but builders' expectation for how many homes will sell.

The HMI is a composite of three separate surveys sent to NAHB members. The survey questions are as follows :

1. How are market conditions for the sale of new homes today?
2. How are market conditions for the sale of new homes in 6 months?
3. How is prospective buyer foot traffic?

Based on the responses from homebuilders, the Housing Market Index is scored.

This month, builders are reporting strong improvement across all three surveyed areas. Current home sales are up 5 points from April; sales expectations for the next 6 months are up 3 points form April; and, perhaps most importantly, buyer foot traffic is up 5 points from April and is now its highest point since 2007.

Higher "buyer foot traffic" tells us there's an increased demand for new construction -- the highest in 5 years, actually.

Buying New? Find Your Mortgage Budget.

With buyer traffic up and home supplies down, new construction prices appear set to rise later this summer. And, although builders aggressively compete with home resales and foreclosures for today's home buyers, don't expect to buy a home on a steal.

Builders know their market and price it right.

The good news, though, is that mortgage rates remain low and low downpayment programs are plentiful. In addition to the FHA's 3.5% downpayment program, the VA and the USDA both offer 100% financing to home buyers who meet underwriting criteria.

Freddie Mac 30-Year Fixed Rate Mortgage Rate Falls To 3.78%

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via: TheMortgageReports.com by Dan Green

Freddie Mac reports the 30-year fixed rate mortgage rate at an all-time low of 3.78% this week, down from last week's 3.79%.

The rate is available for mortgage applicants willing to pay an accompanying 0.8 discount points, plus a full set of closing costs. Last week, just 0.7 discount points were required. 1 discount point is equal to 1 percent of your loan size.

Other average mortgage rates as reported in Freddie Mac's weekly mortgage rate survey :

• 30-year fixed rate mortgage : 3.78% with 0.8 discount points
• 15-year fixed rate mortgage : 3.04% with 0.7 discount points
• 5-year adjustable rate mortgage : 2.83% with 0.6 discount points

Note that not all mortgage applicants will be eligible for Freddie Mac's published mortgage rates. The FHA Streamline Refinance use a different pricing model, as does the USDA 100% financing program and the government's HARP program for underwater mortgages.

 

Better Mortgage Rates Start With Better FICO Scores

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via: TheMortgageReports.com by Dan Green

If you plan to use a mortgage for your next home purchase, you’ll want to keep your credit scores as high as possible. Credit scores play an out-sized role in determining for which mortgage product you’ll qualify, and to which rate you’ll be assigned by your lender.

The higher your credit score, the lower your mortgage rate will be.

What Is A Credit Score?

History has shown that the best way to predict a person’s behavior over the near-term future is to look at that person’s behavior in the recent past. It’s a concept similar to the First Rule of Physics — an object in motion tends to stay in motion.

We can apply this theory to consumer credit, too. A person who has recently paid his bills on-time should continue to pay his bills on-time in the near-future.

This is the basis of credit scoring; using your past to predict your future.

To mortgage lenders, your credit score represents your likelihood of making on-time mortgage payments for the next 90 days. “90 days” matters because, after 90 days without payments, a homeowner falls into default.

Higher credit scores correlate with lower default risk which explains why people with high credit scores tend to receive lower mortgage rates than people with low credit scores. This is true across all loan types, including conventional, jumbo, and FHA mortgages.

Like most else in finance, those with the lowest risks get to pay the lowest rates.

Lenders Use The FICO Scoring Model, Exclusively

There are three main credit bureaus in the United States. They are Equifax, Experian and TransUnion. Each offers a bevy of credit-scoring products, available for purchase on their respective websites. Prices range from “free” to several hundred dollars.

None, however, are particularly relevant in the home-buying process. This is because the nation’s mortgage lenders rely on a different credit model — the FICO model.

FICO is named for the Fair Isaac Corporation. It was “invented” in the 1950s and has become the mortgage industry standard for credit ratings. Today, FICO scores are omnipresent to the point that people generically refer to all credit scores as “FICO scores”.

This is akin to calling all adhesive bandages “Band-Aids”. FICO is the brand name — not the product.

FICO scores range from 300-850.

Credit Scores Change Mortgage Rates

Your FICO score has always influenced the mortgage rate for which you’re eligible. In 2008, though, it began to change your loan fees.

In response to major mortgage market losses, in April 2008, both Fannie Mae and Freddie Mac introduced something called Loan-Level Pricing Adjustments (LLPA). Loan-level pricing adjustments are “discount points” added to a mortgage rate, based on a specific borrower’s risk to the lender.

A discount point is a loan fee, paid at the time of closing. 1 discount point is equal to 1 percent of your loan size.

Example : A $300,000 mortgage that’s assessed 1 discount point will have $3,000 in extra fees due at closing.

Fannie Mae and Freddie Mac know that low credit scores correlate to high default rates so, like an insurance policy, they assigned the highest costs to the highest-risk borrowers.

Assuming a 20% downpayment, look at how discount points change based on credit score. Fees get massive for FICOs under 700.

• 740+ FICO  : There are no discount points required. This loan is “low risk”.
• 720-739 FICO :  0.250 discount points are charged to the borrower, or $250 per $100,000 borrowed
• 700-719 FICO :  0.750 discount points are charged to the borrower, or $750 per $100,000 borrowed
• 680-699 FICO :  1.500 discount points are charged to the borrower, or $1,500 per $100,000 borrowed
• 660-679 FICO :  2.500 discount points are charged to the borrower, or $2,500 per $100,000 borrowed

Now, not many new home buyers just have that kind of extra cash just laying around. Therefore, as an alternative to paying discount points with cash, many choose to “roll up” the fees into their respective mortgage rates. In general, 1.000 discount point can be “traded in” for a 0.250 increase to your mortgage rate.

Example : A consumer with a 680 FICO score is required to pay 1.500 discount points at closing, or can alternatively accept a mortgage rate increase of 0.375%.

This is why it’s important to keep your credit score high. There are real dollar costs for having scores under 740.

Improving On Your Credit Score

If your credit score is not as high as you’d like, the good news is that you can take steps to raise it — sometimes without even changing your spending habits.

Low Mortgage Rates Pump Buyer, Builder Confidence

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via: TheMortgageReports.com by Karen Lawson

Single Family Construction Permits Up

The U.S. Department of Commerce reports that housing starts rose in April, with work starting on more single family homes as compared to March. Builders also requested more permits for building single family homes.

During April, builders broke ground at a seasonally adjusted annual pace of 717,000 homes. This represents a 2.6% increase over March 2012, but is lower than January's seasonally adjusted annual pace of 720,000 homes. 

Although residential building permits fell to a seasonally adjusted pace of 715,000, the decline is attributed to a 23% decrease in the volatile apartment construction sector. Permits issued for new single family homes rose by approximately 2%, which suggests improving builder confidence as low mortgage rates prevail.

Improving Builder, Buyer Confidence

Home builders are gaining confidence as more consumers express interest in buying homes.

The National Association of Home Builders/Wells Fargo builder sentiment index reported its highest levels of builder confidence in 5 years in May. Increasing sales and foot traffic are positive signs of consumer interest in purchasing new homes.

Improving employment rates and record low mortgage rates are contributing to builder and home buyer confidence. New construction provides benefits for home buyers and communities by offering more housing choices for home buyers, providing jobs for contractors and construction workers and increasing revenue for communities. 

Low Mortgage Rates Extend Buying Power

Do you want to buy a home, but are uncertain about how much you can afford to spend, or if you can afford to buy? Low mortgage rates provide home buyers with lower monthly payments and the ability to pay off their mortgage loans faster. There are mortgage loan options suitable for many financial situations.

Requesting a current mortgage rate quote is your first step toward determining how much you can borrow for buying a new home or refinancing your current home loan.

FHA Mortgages For Condos : Guidelines About To Loosen?

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via: TheMortgageReports.com by Karen Lawson

The Issue : FHA Restricts Condominium Lending

For buyers of condominiums in places like Chicago, Illinois; New York City, New York; or Minneapolis, Minnesota, the FHA's popular 3.5% low-downpayment mortgage program has been elusive. Because of the FHA's strict condo requirements, few buildings are even FHA-eligible.

For example, any of the following traits can disqualify a condo for FHA financing:

• Investor Concentration Exceeds 50% : The FHA will not currently finance a condominium unit if more than half of the building units are "rentals". This is increasingly common in big cities in which real estate investors are buying foreclosed units and rehabbing and renting.
• Commercial Space Exceeds 25% : The FHA will not currently allow condo financing in buildings for which commercial space (e.g.; retail stores, offices) accounts for more than one-quarter of the entire building square footage. Common areas and walkways do not count toward the 25%.
• More Than 15% Of Units Past-Due on Assessments : The FHA will not currently finance a condominium units if more than 15% of the units in the building are more than 30 days delinquent for assessments.

When a condo is deemed ineligible for the FHA, home buyers cannot use FHA financing in the building, and existing homeowners cannot refinance via the FHA (except via the FHA Streamline Refinance program).

Plans To Loosen Condo Lending Coming?

For home buyers with small downpayments, the FHA offers one of the few mortgage programs requiring less than 5 percent down. It also offers relaxed approval standards for qualified buyers.

This is one reason why there's a push within the FHA to make condo lending less restrictive. It's a plan that's not been publicly released, and it may not pass for weeks or months, but when changes are made, FHA condo loans will be more readily available, and the FHA will be using lending policy to help advance the housing market.

Southern California Home Sales Figures Rise

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via: DSNews.com by Tory Barringer

According to numbers released by DataQuick, last month’s home sales numbers in Southern California experienced a modest climb from last year.

Median home sales prices in Southland rose year-over-year in April for the first time in 16 months. The median price paid for a home in Southland was $290,000 this year, up from $280,000 in March 2012 and April 2011. This increase is attributed to gains in the region’s coastal counties, where home sales made up 71.5 percent of the area’s total, an increase from last year’s 68 percent.

Also cited as cause for this year’s higher numbers is the fact that foreclosed and discounted properties made up a smaller portion of sales.

While April’s $290,000 median still sits far below the high point of this real estate cycle-$505,000 in mid-2007-DataQuick president John Walsh said that the climbing numbers could be a good sign.

“The housing market continued its painfully slow crawl back toward normalcy last month,” Walsh said. “You can see it in the fading role of foreclosures, the uptick in median prices here and there, and the higher levels of sales in coastal counties.”

He warned, however, that there are many other factors to consider when looking at Southland’s real estate numbers.

“Of course, there are still a lot of things that make this market abnormal,” he said. “Investor and cash buying are still unusually robust. The jumbo loan market has yet to recover, and the use of plain-vanilla adjustable rate mortgages, or ‘ARMs,’ remains far below normal.”

ARMs made up 7.1 percent of April’s Southland home purchase loans, down from 8.5 percent a year earlier. Since 2000, ARMs made up a monthly average of about 36 percent of purchase loans.

In contrast to recent trends, the number of low-cost homes sold in Southland fell due to the decreased number of foreclosures being sold and the shrinking inventory of homes for sale. The number of homes sold in April for less than $200,000 was 4.7 percent lower than last year’s number while sales between $200,000 and $400,000 rose 5.5 percent.

Distressed sales, a combination of foreclosure resales and short sales, made up about 47 percent of April’s resale market-the lowest percentage since April 2008. Foreclosure resales accounted for 28.6 percent of distressed sales while short sales made up 18.4 percent.

Investor activity held near a record-high level, and the number of cash buyers remained at double the historical average. Cash purchases made up 31.5 percent of April home sales, just under last year’s 31.8 percent. Cash buyers paid a median of $225,000, $15,000 more than a year ago.

Absentee purchases made up 27.8 percent of Southland’s sales last month, an increase from 25.4 percent in April 2011. Absentee buying was greatest in the Inland Empire, where it represented 35.8 percent of all homes sold in April.

Last month’s typical mortgage payment for Southland buyers was $1096, down from last year and 62 percent less than the current real estate cycle’s peak in July 2007.

While foreclosure activity is high by historical standards, it has dropped greatly from its peak in recent years. DataQuick reported that financing with multiple mortgages is very low, and down payment sizes are stable.

Mortgage Rates Respond To Housing Starts Data

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Slowly and steadily, the housing market plods ahead. In April, for the third-straight month, the data backed up what today's home buyers have already found out -- in many U.S. markets, the bottom is behind us.

via: TheMortgageReports.com/Dan Green

Housing Starts Rise For 3rd Straight Month

The Census Bureau reports that Single Family Housing Starts rose 2 percent in April, climbing to 492,000 units nationwide on a seasonally-adjusted, annualized basis. 

A "housing start" is defined a home on which ground has broken and, after accounting for the upward revision to March's Housing Starts results, last month's Single-Family Housing Starts marks the third-straight month during which starts have climbed.

In addition, the number of building permits for single-family homes rose, too, in April.

As compared to the month prior, the number of permit issued to build new homes rose 2 percent, notching its second-highest reading since March 2010 -- the month before the end of that year's federal home buyer tax credit.

More than 85 percent of permit-granted homes break ground within one month.

Mortgage Rates Ignoring Housing Data?

When the U.S. economy sank last decade, employment and housing were two main casualties. More than 7 million jobs were lost, half of which have since been recovered.

The housing market, however, has a longer climb back. After dropping close to 19% from its April 2007 peak, on a national basis, values have remained somewhat steady. Some markets including San Francisco, California; Phoenix, Arizona.; and Detroit, Michigan have lifted from their respective lows. 

Other markets, including Atlanta, Georgia, have failed to make the same bounce.

This is one reason why Wall Street reacts more to jobs data than to housing data -- the jobs market is closer to recovery and its growth is more even. The other reason is Europe.

As Greece, France, and Spain slog through political and economic reform, they've spawned market uncertainty which, in turn, is driving investors to U.S mortgage-backed bonds. Mortgage bonds are viewed as a low-risk investment and a safe place to "park money" when global economies move toward distress.

In most months, the strong showing in U.S. Single-Family Housing Starts would lead all types of mortgage rates higher -- conventional mortgage rates, FHA mortgage rates, VA mortgage rates, and for jumbo loans, too. This month, though, with the future of the Eurozone uncertain, mortgage rates are slipping.

Check Your Housing Budget With A Real Mortgage Rate

Whether you're buying new construction, or buying an "existing home", you'll want to know what the home will cost you monthly, and to do that, you'll need a legitimate mortgage rate quote.

With mortgage rates low and low-downpayment programs including the FHA's 3.5% program for purchases up to $729,750, and the USDA's 100% program in qualified suburban and rural markets, you may find home affordability surprisingly high. Get started with a rate quote.

Home affordability in California reaches 24-year high

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via: HousingWire.com by Kerri Panchuk

Home affordability in California reached a 24-year high in the first quarter of 2012, with 56% of homebuyers able to afford a median-priced, existing single-family home in the state, the California Association of Realtors said. That is up from a home affordability rate of 55% in the fourth-quarter of last year and 53% in the first quarter of 2011.

CAR has been publishing its traditional housing affordability index since 1988 and described the first quarter of 2012 as the most affordable quarter yet.

To qualify as a homebuyer who could afford a home valued at California's median price of $276,040, a California buyer needed an annual income of $55,688 in the first quarter, CAR said.  

Counties located in the greater San Francisco Bay area saw housing affordability levels either rise or remain stable depending on the county the home resided in.

In Contra Costa County, affordability declined by one percentage point. With an affordability rate of 78% on the CAR index, San Bernardino County was the most affordable in the state, while San Francisco County is the least affordable with only 29% of households able to purchase a median-priced home within the county.

 

 

Home prices tick up in Southern California

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via: HousingWire.com by Kerri Panchuk

Southern California is beginning to see signs of a tepid recovery with the median sales price in the area edging up to $290,000 in April, according to real estate analytics firm DataQuick.

Compared to the months of March 2012 and April 2011 that is a 3.6% price hike, with the median price in both of those periods hitting $280,000 in the southern part of the state.

This is the first year-over-year price increase in 16 months, suggesting home affordability levels are driving Southern California home sales along with declining inventory levels and low-cost foreclosures.

Even though prices in April were higher than a year ago, they are still well below average, DataQuick said.

The April median price is 17.4% above the $247,000 median sales value recorded in the trough of the 2009 recession, but still 41.6% below the $505,000 peak reached in mid-2007.

"The housing market continued its painful slow crawl back toward normalcy last month. You can see it in the fading role of foreclosures, the uptick in median prices here and there, and the higher levels of sales in coastal counties," said John Walsh, DataQuick president.

There are several other factors keeping the recovering market in an abnormal state. Among them is a lack of a recovery in the jumbo loan market and the fact that many homeowners are still underwater, DataQuick said.   

A total of 19,284 homes and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange Counties in April. That is down 3.4% from 19,953 in March and up 5.1% from 18,344 in April 2011.