Mortgage Rates Hold Steady!

By DREW FITZGERALD And JOHN KELL

Mortgage rates changed little in the past week, snapping a streak of weekly declines that had taken fixed rates to the lowest points of 2011, according to the latest survey from Freddie Mac.

While the 30-year fixed-rate mortgage rate ticked up to 4.50% in the week ended Thursday from 4.49% last week, still well below last year's 4.75% average, rates on 15-year fixed-rate mortgages ticked down to 3.67% from 3.68% the previous week and 4.20% a year earlier.

Mortgage rates generally track Treasury yields, which move inversely to Treasury prices. Rates have slumped for months as yields on Treasurys slid amid economic uncertainty.

Freddie Chief Economist Frank Nothaft said mortgage rates held relatively steady after market participants shrugged off recent reports that inflation was picking up because the increases have been in line with expectations.

Home mortgage debt has been declining, especially through second mortgages, according to the Federal Reserve. Household mortgage balances fell by more than $930 billion from the March 2008 peak through this past March, with second mortgages accounting for $820 billion of that.

Meantime, the Mortgage Bankers Association on Wednesday said the volume of mortgage applications jumped a seasonally adjusted 13% last week from the previous week. Refinancing activity jumped nearly 17%, according to the weekly survey, which covers more than half of all U.S. retail residential mortgage applications. Purchasing activity rose 4.5% in the week ended last Friday.

In the latest week, five-year Treasury-indexed hybrid adjustable-rate mortgages fell to 3.27% from 3.28% last week and 3.89% a year earlier. One-year Treasury-indexed ARM rates rose to 2.97% from 2.95% the prior week but still down from 3.82% a year earlier.

To obtain the rates, fixed-rate borrowers required an average payment of 0.7 point. The five-year hybrid adjustable rate mortgages required a 0.6-point payment, while one-year adjustable-rate mortgages required a 0.5-point payment. A point is 1% of the mortgage amount, charged as prepaid interest.

Good and Bad News Bears Down on Home Loan Rates

"Bad news goes about in clogs, good news in stockinged feet." Welsh Proverb. And there was certainly both good and bad news in last week's Jobs Report. Here's what we saw...and what this means for home loan rates.

The Labor Department reported that just 36,000 jobs were created in January, with only 50,000 jobs created in the Private sector, much lower than the numbers anticipated. However, there were upward revisions to both November and December, which added another 40,000 jobs than previously reported.

But that's not the only bit of good news in the report. The Unemployment Rate fell to 9%, down from 9.4% last month, rather than increasing as had been expected. In addition, the U6 or "real" rate of unemployment, which includes discouraged workers and those who have accepted part-time employment for economic reasons, fell to 16.1%, from the previous month of 16.7%...and reflects the lowest level since April 2009!

So what does all of this mean when it comes to home loan rates?

It's important to remember two things:

First, the Fed's goals for their current Quantitative Easing policy (dubbed QE2) where $600 Billion is being injected into the economy are to (1) boost Stock prices, (2) create inflation, and (3) lower the unemployment rate.

Second, while these goals are designed to stimulate our economy and keep our recovery moving forward, they are also unfriendly to Bonds and home loan rates.

In recent weeks, we've seen evidence of all three goals: Stocks been improving, the unemployment rate has declined, and we've seen an increase in global unrest of late, not just in Egypt, but in other parts of the world as well... and much of this centers around runaway inflation in commodities and food.

This means that the old trading saying, "Don't Fight the Fed" is still ringing true. If the Fed wants to accomplish its three QE2 goals at the expense of Bonds and home loan rates, they probably will.

If you have been thinking about purchasing or refinancing a home, this is a great time to get started! Home loan rates are still very attractive, so call or email me if you want to talk about your situation.

Newsletter from Shane Atwell at Primary Mortgage

"No News is Good News"

It's been said that "no news is good news...." And while that can be true, lately many of the economic reports we have seen have been very good news, as they show signs that our economy continues to improve.

Stocks just enjoyed their seventh straight week of gains, due to the positive economic reports that have been streaming in. While this is certainly cause for celebration, an important question we need to consider is what does this mean for home loan rates in the short and long term?

On the one hand, improvement in the economy is good news on the housing front, as once people feel better about keeping their job or getting a new job, home purchasing activity will rise, and values will follow. But on the other side of the coin, as the labor market and economy improve, home loan rates will have to gradually rise as well. And remember, this all ties in with the Fed's plan to inject the full $600 Billion into our economy as part of their latest round of Quantitative Easing, known as "QE2."

Remember, the three part goal of QE2 is to create inflation, lower unemployment, and boost Stock prices - and we are seeing evidence of these goals occurring. Not only have Stock prices improved over the last seven weeks as we discussed above, but December's Jobs Report posted the lowest unemployment rate since May of 2009. And last week, we saw some evidence of inflation as the Producer Price Index (PPI), which measures inflation at the wholesale or producer level, came in higher than expected. While December's Consumer Price Index wasn't quite as hot as the PPI, going forward our increasing budget deficit could cause inflation to spike down the road.

So what's the bottom line if you have been thinking about purchasing or refinancing a home? Home loan rates are still very attractive right now, so call or email me if you want to get started.

Info from: Shane Atwell @ Primary Residential Mortgage

Key to Real Estate Rebound...

By: NICK TIMIRAOS And ANTON TROIANOVSKI from Wall Street Journal

After dragging the U.S. economy into a severe recession, property markets across the country now are relying on an economic recovery to help cure their hangover in the new year.


The housing sector, weighed down by a glut of unsold homes, needs job growth to boost demand and curb the flow of delinquent loans into foreclosure. For commercial real-estate investors, lackluster hiring means fewer new jobs to fill empty office space and less consumer confidence to drive activity in stores and distribution warehouses.

"The No. 1 biggest risk is that, for whatever reason, the overall economy does not grow sufficiently to produce any meaningful rebound in jobs," said Thomas Lawler, a housing economist in Leesburg, Va.


For housing markets, the past year was another bumpy ride. Home prices stabilized in the first half of 2010 as the government offered tax credits to spur sales, but transactions plunged to 15-year lows after that stimulus expired. Sales have rebounded only modestly and at the current pace, it would take 9½ months to work through the volume of existing homes listed for sale.

The market dodged a bullet in March when the Federal Reserve ended its purchases of $1.25 trillion in mortgage-backed securities. Many analysts expected rates to rise, but they defied expectations by falling to 60-year lows, thanks first to the European debt crisis and later as the U.S. recovery faltered. (As the year ended, rates were rising but they remained historically low.)

Tail winds to spur a recovery are gathering. Large price declines have made housing more affordable than at any point in the last decade. New housing construction is stuck at its lowest levels in more than 40 years. "That will help absorb supply in ways that a lot of people underestimate," Mr. Lawler said.

But sellers also still will have to chop prices. Overall, prices are down 29.6% from their July 2006 peak to October 2010, according to the Standard & Poor's/Case-Shiller price index. Many analysts expect home prices to decline by an additional 5% before stabilizing later this year. "We're bouncing along a bottom," said Ivy Zelman, chief executive of housing research firm Zelman & Associates.

Moreover, credit standards are still tight. And while mortgage delinquencies peaked in February 2010, foreclosures could remain at an elevated level for years as banks work through a huge backlog. The most realistic "best case" scenario for 2011 would "simply be a year in which things do not get worse," wrote Morgan Stanley housing analysts in a research report.

One of the most stubborn problems is the 10.8 million homeowners who owe more than their homes are worth, or 22.5% of all mortgage borrowers, according to CoreLogic Inc. These so-called underwater borrowers can't easily sell their homes, and they are at risk of defaulting if they lose their jobs.

Housing faces additional uncertainty because the government is set to reconsider how aggressively to support homeownership. Deficit hawks have their sights set on scaling back the mortgage-interest deduction, and the Obama administration later this month will put forth a proposal on how to revamp Fannie Mae and Freddie Mac and the broader mortgage market.

"What goes on in Washington will be of critical importance to housing," said John Burns, an Irvine, Calif.-based home-building consultant.

Another wild card: Regulators and prosecutors could uncover sloppy practices from the heyday of the housing boom. In September, some of the nation's largest banks, including units of Bank of America Corp. and J.P. Morgan Chase & Co., were forced to suspend foreclosures due to potentially fraudulent document-handling procedures.

Banks say they haven't evicted anyone who hasn't defaulted, but the foreclosure machinery has been slow to restart nonetheless. Some real-estate lawyers warn that problems could be worse if it turns out that loans weren't properly recorded or transferred during the process of bundling mortgages and selling them as securities.

Banks already face rising costs as foreclosures become more time-consuming. Investors, meanwhile, are pursuing new efforts to force banks to buy back money-losing mortgage bonds.

In commercial real estate, last year saw some markets start to come back after a dreadful 2009. The biggest winner: Washington, where the federal government sustained demand for office space from contractors, lawyers and lobbyists.

More broadly, downtowns across the country have seen things start to turn around, while suburban areas are still reeling from excessive construction and the economic ripple effects of the housing bust.

Vacancy rates are near historic highs, from 10.9% in retail space to 17.6% for office buildings across the country, according to data firm Reis Inc. The pace of construction starts for hotels, office buildings and other kinds of commercial real estate is still falling, with the total of $47 billion in commercial construction starts from January to November 2010 more than 8% below the same period the previous year, according to Reed Business Information.

When the economy does start posting a stronger recovery, investors will be watching how commercial real estate responds. There is concern that companies are figuring out how to use less space per employee, reducing new office-space demand, while the growing popularity of online shopping could eat into demand for retail space.

But in the financial markets, things are looking up. The market for commercial mortgages sliced, diced and sold on Wall Street is widely expected to expand this year amid investor demand and more certainty about where the real-estate market is heading.

J.P. Morgan Chase predicts that some $45 billion in commercial-mortgage bonds will be issued for U.S. assets in 2011, well above last year's level of roughly $10 billion but still a pittance compared to the 2007 peak of $228 billion.

For both landlords and lenders, amid falling rents and rising vacancies, low interest rates were a saving grace in 2010. As long as rates stay low, many commercial-real-estate players should be able to ride it out this year, as well. "If all this cash is still searching for yield, where else will it go?" said Murray McCabe, J.P. Morgan's real-estate investment-banking co-head.

Mortgage Forecast of the Week

The new year kicks off with a bang, as nearly all of the reports due out this week are rated as having the potential for a high impact on the markets!

•We start off right away Monday morning with the ISM Index. This is the king of all manufacturing indices and is considered the single best snapshot of the factory sector, so it has the potential to move the markets if it doesn't meet expectations that it will come in better than the prior reading.
•Tuesday brings us the first release of FOMC Minutes of the year. Although the Fed has already released its policy statement, the markets will be examining the minutes closely for indications of the Fed's thinking regarding important topics like inflation, rates, and the overall economy.
•We'll also see some important employment news this week. First up is the ADP National Employment Report on Wednesday, which measures non-farm private employment. The report is expected to show fewer jobs created in December than the previous reading of 93,000 jobs created in November.
•The ADP Report will be followed the next day with another round of Initial Jobless Claims on Thursday. In last week's report, Initial Jobless Claims was reported at the lowest level since July 2008. That was good news for the labor market, but we still need to see if this report was skewed by the holidays or if it was the start of a trend lower in new unemployment claims.
•The big news of the week will be the release of the all-important Jobs Report this Friday. The Average Work Week and Unemployment Rate are expected to hold steady, while Hourly Earnings and Non-Farm Payrolls are expected to rise.

Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result.

Published by: Shane Atwell @ Primary Residential Mortgage

"Where Do We Go From Here??"

Where do we go from here?

That question from Alicia Keys? song is on the minds of many Americans, as they wonder where home loan rates are headed after the recent negative news for Bonds.

Last week, Congress was busy at work on negotiations to extend the Bush-era tax cuts. That news kept a lid on any improvement for Bonds and home loan rates, due to the prospect of an ever-increasing deficit.

And adding to the troubles for Bonds and home loan rates last week was news that inflation is growing in China... and growing fast. How does that impact us? Remember, it's a global economy, so Bond prices all over the world worsen on news of inflation, which is bad for home loan rates.

So the big question is: Will home loan rates go back down? Although rates are still near historic lows, they have been headed up... and indications are that those unbelievably low home loan rates may be behind us. In fact, there are only a few things that would bring back the lows that we saw in early November:

• If the tax cut package doesn't get passed, it would be very bad news for the economy and Stock market - but it would help interest rates.

• If the Fed's recent round of Quantitative Easing falls on its face and doesn't meet its mission of creating inflation, boosting Stock prices, lowering unemployment and creating consumer demand - Bond prices could make some gains as the threat of deflation reemerges. But this is a long shot.

• If the financial problems in Europe worsen significantly - which would drive investors into the safe haven of the US Bond market - it could help Bond prices, but probably only modestly.

Realistically, the chances of these events happening are unlikely - and in the end, rates may see some brief and fleeting improvements, but many experts believe they will likely continue to creep up over time. And when you include the stimulative action of extending the present tax rates and adding further cuts, it's tough to see Bonds or home loan rates improving much.

The good news is that home loan rates are still extremely attractive and are still near historic lows for now. If you or someone you know has been thinking about purchasing or refinancing a home, NOW is the time to call or email to get started.

Info from: Shane Atwell from Primary Residential Mortgage

Mortgage Rates Hit Six Month High, Threatening Housing

Rates on fixed mortgages rose for the fourth straight week this week, hitting 4.61 percent. The surge could slow refinancings and further hamper the housing market.

Freddie Mac said Thursday that the average rate on a 30-year fixed loan increased sharply from last week's rate. And it is well above the 4.17 percent rate hit a month ago— the lowest level on records dating back to 1971.

The average rate on a 15-year fixed loan rose to 3.96 percent. Rates hit 3.57 percent last month—the lowest level since 1991.

Rates are rising after plummeting for seven months. Investors are selling Treasury bonds in anticipation of an extension of tax cuts and unemployment benefits that could boost the economy. That is raising the yield on Treasury bonds. Mortgage rates tend to track those yields.

The increase in rates already is discouraging homeowners interested in refinancing their homes. Refinance activity fell for the fourth straight week last week, according to the Mortgage Bankers Association.

However, the increase in rates may have convinced some homebuyers who were waffling to go ahead and make a move. Purchase application volume was up for the third consecutive week and is at its highest point since the beginning of May. Mortgage brokers and real estate agents agree that a sustained rise in mortgage rates eventually will sideline potential buyers.

To calculate average mortgage rates, Freddie Mac collects rates from lenders across the country on Monday through Wednesday of each week. Rates often fluctuate significantly, even within a single day.

Rates on five-year adjustable-rate mortgages averaged 3.60 percent, up from 3.49 percent. The five-year hit 3.25 percent last month, the lowest rate on records dating back to January 2005.

Rates on one-year adjustable-rate home loans slipped to 3.27 percent from 3.25 percent.

The rates do not include add-on fees, known as points. One point is equal to 1 percent of the total loan amount.

The average fee for 30-year and 15-year mortgages in Freddie Mac's survey was 0.7 point. It was 0.6 point for five-year and one-year mortgages.

Article from www.cnbc.com

5 Things to Do Now in Order to Buy a Home in 2011

There are lots of purchases that are highly prone to impulse buying: shoes on sale, puppies at the pound, and carrot cupcakes with cream cheese buttercream frosting come instantly to mind. (But that's just me.)

But houses? Not so much. Savvy, regret-free homebuying can take weeks or months of financial and lifestyle research and planning. If you want 2011 to be the year you become a homeowner, here are 5 things you should be doing, as we speak.

1. Minimize your holiday spending and save your cash. Instead of using the holiday sales to acquire a new winter wardrobe of cashmere sweaters, hold the discretionary spending down so you can give yourself the gift of homeownership! If you are serious about buying a home next year, don't run up additional credit card debt on gifts this year. Instead, make homemade cards or write holiday letters this year for everyone except the kiddos. And even for the kids, consider scaling back on the stuff, spending more of your time with them than your money, and getting started now saving toward your home purchase. (I don't think too many folks would argue that a less materialistic holiday season would hurt anyone, at any age.)

Kickstart your 2011 homebuying resolution by starting a "Home" savings account at an high-interest, online bank (the discipline-boosting goal is a bank that isn't super easy to transfer funds out of when you run low on cash), and set up an automatic deposit into it every payday. To get specific about your savings goal, if you're cash-flush, obviously a 20% down payment will get you top notch interest rates and provide you with the maximum ability to manage your monthly payments. If you're going to be more of a bootstrapping buyer, an FHA loan might be right up your alley - they offer a down payment of 3.5% of the purchase price.

All buyers should plan to have at least 3 percent of the purchase price saved up for closing costs, even if you want the seller to chip in. The lower-priced the home you want to buy, the more percentage points you should be willing to chip in for closing costs. It's easy for closing costs on an $150,000 FHA loan to run as high as $4,000 or more, considering transfer taxes, inspections, appraisals and mortgage insurance fees. So, even the scrappiest buyer should have a savings target somewhere around 6.5% of their target home's price. To buy a $200,000 home, for example, that would mean a savings target of $13,000.

Local real estate and mortgage pros can help you clarify realistic "cash to close" expectations and savings targets for your area - ask them, on Trulia Voices.

2. Research financing, areas homes, prices, agents and online. Smart homebuying takes a lot of research and knowledge-gathering. Since most buyers find it much harder to qualify for a mortgage than it is to find a home you'd love to live in, start with studying up on home financing and what it will take for you to get a home loan (note: FHA loans are preferred by the average homebuyer on today's market who has less than a 10% down payment, so start your research there).

If you're considering relocating next year, now's the time to start narrowing down states, cities and even neighborhoods that may or may not work for you. Take into account the job market, housing and other costs of living, and income and property tax rates, as well as the critical lifestyle inputs that vary from state-to-state, like weather and whether the place is a personality fit for you and the life you want to live, be it urban sophisticate or outdoors adventurer.

Also, start to develop a feel for home prices in a what-you-get-for-your-money type way, and start narrowing down the home styles and even neighborhoods that might fit your aesthetic preferences and lifestyle. If you're one of those rare buyers-to-be who is not already obsessively house hunting, hop on Trulia and start regularly checking out homes and neighborhoods, making sure to take advantage of the neighborhood ratings and reviews feature, which empowers you to surface what other folks think and say about an area.

3. Rehab your credit, if you need to. Go to AnnualCreditReport.com and check out your credit reports - from all 3 bureaus - for free. (Note - these will not give you your credit score for free - that costs extra, but it will give you the actual detailed credit reports.) Audit them for errors and do the work of disputing inaccuracies to have them corrected. Pay particular attention to: accounts that are not yours/you never opened, derogatory information that should have "aged off" your report by now (i.e., 7 years for late payments, 10 for bankruptcies) and balances or credit limits that are inaccurate (i.e., your credit card balance is listed at $2500, but you actually only owe $250.) These are the errors most likely to foul up your financing, so follow the instructions each bureau provides to correct them, stat. While you're at it, don't close any accounts, even if you are able to pay some down or off - actually, check out these tips for getting the bank to give you the best possible home loan, without unintentionally making your score worse!

4. Run your numbers. In the past, some overextended homeowners complained that they felt pushed into a mortgage they couldn't afford. Pundits blamed that on the real estate and mortgage industry, but I have witnessed firsthand many a homebuyer push themselves or their spouses into buying too expensive of a home. Eliminate this issue entirely by doing this - run your own numbers, before you ever even talk to a salesperson or start looking at homes beyond your means. (I assure you, once you see the million dollar home you think you can afford, the $250,000 home you can actually afford will be underwhelming.)

Get your monthly finances in order, and get a clear read on how much your monthly bills are - outside of housing. Decide how much you can afford to spend every month for housing, when you buy your home. Get clear on exactly how much cash you plan to have at hand to put into your transaction up front. When, in the next step, you begin working with a mortgage broker, you'll want to share these numbers with them, early on in your conversation, to empower them to tell you what home price you can afford - not based on their rubrics, but based on what you say you want to spend every month and what you want to put down.

5. Talk to a real estate and mortgage broker (1 of each). Trulia is a great place to find an engaged, communicative, tech-savvy real estate broker or agent in your area. You can use our Find a Pro directory or simply start participating in the Trulia Voices Community, asking your questions and tagging them for the town where you plan to buy a home, and paying attention to the agents who give timely, thorough responses to your questions, and communicate in a language you understand.

Drop one (or a few) an email, letting them know you'd like to work on putting an action plan together for buying a home next year, and would like to talk with them about what action steps need to go on the list. Ask them to brief you on the timeline of a transaction in your local market, and to point out for you things like when along the process you'll need to bring money in, when you'll need to miss work and come into their office or the closing office, whether they offer conveniences like digital document signing, and generally the local standard practices about which buyers you'll need to know. Depending on your target home purchase timeline, they might even want you to take a spin with them and look at a few properties to reality-check your expectations or narrow down a broad wish list.

In addition to chatting with them about timing your purchase vis-à-vis your other life events and plans for the year, make sure to ask for referrals to a local, trustworthy mortgage broker or two - preferably one that has worked with them and closed a number of transactions with their clients. (In fact, many busy real estate pros will want you to talk with their trusty mortgage partner before they get too involved in your planning process. You may think you only need a month to get ready to buy, but once the mortgage folks weigh in, it might turn out that you actually need a few.) When you do get in touch with the mortgage maven, if you're serious about buying, you will want them to actually pull your credit report, check the actual FICO scores that come up on their system and give you their professional recommendations for what final tweaks you can do to your debts to get your credit score where it needs to be.

Article from Trulia by Tara@Trulia