The housing market continues to improve however it is not without is challenges. Existing Home Sales climbed another 4.3% above last month’s increase. The increase in sales is coming at a cost...the median price of homes declined 4.6% and the average home price dropped 4.0%.
Mortgage rates continue to remain historically low however they are starting to creep up and borrower rate sensitivity is evident in the latest figures released by the Mortgage Bankers Association. Mortgage rates have risen slightly in the last week and the MBA has reported that applications for purchase applications declined 2.9% and refinances dropped 4.8%.
The only negative in housing is Friday’s New Home Sales Report. New home sales in December fell 2.2 percent to a disappointingly soft annual rate of 307,000. While the number fell short of expectations, the dip did follow three consecutive gains-4.1 percent in September, 1.7 percent in October, and 2.3 percent in November. It is not surprising to some that the number declined, as mentioned before, the continued reduction in median and average home prices works better for the existing home sale market versus new construction.
The stock market has been steadily increasing at a modest pace. The upward movement in the market is contributed to mainly positive economic news. In recent months manufacturing, retail sales and many of measurements of economic performance have all been improving steadily.
In addition, the employment picture continues to improve with First Time Jobless Claims remaining the same from the prior week. The current level of claims bodes well for the next highly anticipated jobs report to be released in 2 weeks. Almost all experts predict a further decline in national unemployment.
As great as the improving trend of economic news has been lately, there still remains two potential economic storms that can create havoc for the economy. The first is the rising gas prices which we all have been experiencing at the pump. So far we all seem to be taking it in stride and no large economic impact is being felt. The big question is at what price point will consumers once again begin curtailing spending? There is no agreement amongst experts as to what this number is. My feeling is simply let’s hope we don’t hit it whatever that number is.
The second potential economic storm is the continued uncertainty in Europe. For the last two weeks Greece potential debt default has been the focal point of the markets. For now, the good news is that it appears that many of the pieces are in place to avoid a default.
Housing Recommendation: Home prices are at the lowest point in 10 years. When you combine low mortgage rates with low home prices, affordability is now at one of the highest points on record. With the continuing improvement in home sales along with the improving employment picture, this can lead to more purchases and ultimately a reduction in home inventory. A reduction in inventory will cause home prices to rise. If you are thinking about purchasing a home, you may want to start your search now. If you own a home and have yet to refinance, it is likely that rates will rise impacting your potential interest rate savings. ACT NOW!
Friday, February 24, 2012
Friday, February 10, 2012
As promised, this week was absent of any real significant economic news and the lack of market movement reflected that. The main focus of investors has been the meetings in Greece working to avoid a default on the countries debt. It appears that they are making progress in coming up with a plan however it is a painfully slow process and undoubtedly once an agreement is reached, many will speak up in objection to the plan. Unfortunately we have seen this scenario play out over and over in many European nations for the past year.
The big headline announced on Thursday is the 26 billion dollar settlement reached between the nation’s 5 largest banks and 49 state attorney generals. The settlement is to compensate and assist homeowners that have been either foreclosed on improperly, or homeowners that owe significantly more than the value of their home.
The basics of the plan are as follows:
17 billion dollars will be used to reduce principle balances for underwater borrowers and assist homeowners that are behind on payments.
3 billion dollars will go towards refinancing mortgages for borrowers that are underwater but current on their payments. This will enable these borrowers to take advantage of the incredibly low mortgage rates.
5 billion dollars will go to state and federal governments to enable them to fund payments to homeowners that have lost their homes due to improper foreclosure proceedings.
The remaining 1 billion dollars will be paid directly by Bank of America to the Federal Housing Administration to settle charges that its subsidiary, Countrywide Financial, defrauded the housing agency.
The final piece of the settlement is that the banks will eliminate robo-signing all together and use proper legal procedures in completing foreclosures.
It has been a while since you have heard me be critical of anything, however I must break down this settlement for you so you can see what a joke this settlement really is. If you don’t like sarcasm, I suggest you stop reading now.
The settlement states that borrowers that are “severely underwater” will receive money for principal reduction. The irony is that the average principal reduction will be about $20,000. If a borrower is “severely underwater” isn’t their negative equity much greater than that? Do you really think $20,000 is going to incentivize a borrower that is $80,000 or more under water to start making payments?
Secondly, imagine you are a homeowner that was improperly foreclosed on, you lost your home, your life has been uprooted illegally, and now you receive a check for no more than $2,000. Let’s see, your house was illegally taken from you but you now have $2,000 in your hand…yep I know I would feel so much better. NOT! (I am not suggesting that homeowners that lost their homes illegally in foreclosure, would not have eventually lost them, however the law needs to be followed and the banks have not been punished for wrong doing.)
Lastly, 20 billion of the total settlement will be paid out gradually as claims are approved. None of the 5 banks are writing checks for anything more than 1 billion up front. All other money to be paid out will come as claims are settled and agreed upon. To put it in perspective, think for a moment how long does it take for these banks to approve short sales, or properly process a foreclosure, or complete a loan modification? (Average on all counts is 6 months or more) Do you really think they are going to process these claims quickly? Not a chance in this world they will do it. They will let this drag on as long as they can. That is how they do business.
I apologize for the rant today. Next week I will be better. I guess you know how I feel about the big banks huh?
As your mortgage professional, I am happy to assist you with any information you may need regarding mortgage or real estate information. I welcome the opportunity to serve you in any way I possibly can. Please feel free to reach me at (916) 517-1800.
The big headline announced on Thursday is the 26 billion dollar settlement reached between the nation’s 5 largest banks and 49 state attorney generals. The settlement is to compensate and assist homeowners that have been either foreclosed on improperly, or homeowners that owe significantly more than the value of their home.
The basics of the plan are as follows:
17 billion dollars will be used to reduce principle balances for underwater borrowers and assist homeowners that are behind on payments.
3 billion dollars will go towards refinancing mortgages for borrowers that are underwater but current on their payments. This will enable these borrowers to take advantage of the incredibly low mortgage rates.
5 billion dollars will go to state and federal governments to enable them to fund payments to homeowners that have lost their homes due to improper foreclosure proceedings.
The remaining 1 billion dollars will be paid directly by Bank of America to the Federal Housing Administration to settle charges that its subsidiary, Countrywide Financial, defrauded the housing agency.
The final piece of the settlement is that the banks will eliminate robo-signing all together and use proper legal procedures in completing foreclosures.
It has been a while since you have heard me be critical of anything, however I must break down this settlement for you so you can see what a joke this settlement really is. If you don’t like sarcasm, I suggest you stop reading now.
The settlement states that borrowers that are “severely underwater” will receive money for principal reduction. The irony is that the average principal reduction will be about $20,000. If a borrower is “severely underwater” isn’t their negative equity much greater than that? Do you really think $20,000 is going to incentivize a borrower that is $80,000 or more under water to start making payments?
Secondly, imagine you are a homeowner that was improperly foreclosed on, you lost your home, your life has been uprooted illegally, and now you receive a check for no more than $2,000. Let’s see, your house was illegally taken from you but you now have $2,000 in your hand…yep I know I would feel so much better. NOT! (I am not suggesting that homeowners that lost their homes illegally in foreclosure, would not have eventually lost them, however the law needs to be followed and the banks have not been punished for wrong doing.)
Lastly, 20 billion of the total settlement will be paid out gradually as claims are approved. None of the 5 banks are writing checks for anything more than 1 billion up front. All other money to be paid out will come as claims are settled and agreed upon. To put it in perspective, think for a moment how long does it take for these banks to approve short sales, or properly process a foreclosure, or complete a loan modification? (Average on all counts is 6 months or more) Do you really think they are going to process these claims quickly? Not a chance in this world they will do it. They will let this drag on as long as they can. That is how they do business.
I apologize for the rant today. Next week I will be better. I guess you know how I feel about the big banks huh?
As your mortgage professional, I am happy to assist you with any information you may need regarding mortgage or real estate information. I welcome the opportunity to serve you in any way I possibly can. Please feel free to reach me at (916) 517-1800.
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