Archive for March, 2010

Mortgage Rates : Volatility is on the Horizon

The 30 year rate rose from 4.96 to 4.99 this week. In the last 4 weeks 30 year mortgage rates have remained remarkably stable staying between 4.95 to 5.05. But it looks like that might change over the next few months. The economic instability in Greece and the rest of Europe could lead to instability in the mortgage markets, in addition the US government is likely to stop purchasing mortgage backed securities which could cause rates to rise. At the very least we should start seeing more volatility in mortgage rates for the rest of the year.

The 15 year rose from 4.33 to 4.34. The 5 and 1 year arms rose from 4.09 to 4.14 (5 year arm) and 4.12 to 4.20 (1 year arm). Below are rates from the weeks from Feb 25, 2010 to Mar 25, 2010

Mar 25, 2010
30-fixed 4.99 15-fixed 4.34 5 ARM 4.14 1 ARM 4.20

Mar 18, 2010
30-fixed 4.96 15-fixed 4.33 5 ARM 4.09 1 ARM 4.12

Mar 11, 2010
30-fixed 4.95 15-fixed 4.32 5 ARM 4.05 1 ARM 4.22

Mar 04, 2010
30-fixed 4.97 15-fixed 4.33 5 ARM 4.11 1 ARM 4.27

Feb 25, 2010
30-fixed 5.05 15-fixed 4.40 5 ARM 4.16 1 ARM 4.15

Sep 17, 2009
30-fixed 5.04 15-fixed 4.47 5 ARM 4.51 1 ARM 4.58

In addition to rates we always look to look at actual mortgage payments. We took today’s rates and translated them into a mortgage for a 200k house. We also did the same thing with rates from March, 11 2010 and rates from September, 17 2009

Mar 25
30-year $1072.42
15-year $1513.68
5-year ARM $971.04
1-year ARM $978.03

Mar 11
30-year $1067.53
15-year $1511.65
5-year ARM $960.6
1-year ARM $980.37

Sep 17
30-year $1078.53
15-year $1526.92
5-year ARM $1014.55
1-year ARM $1022.89

So again we see very minimal movement. Compared to two weeks ago a 30 year mortgage payment has risen but by less than half of a percent. The question of course is not what rates are doing now (nothing much) but what is going to happen moving forward. After months of stability due to the government buying mortgage backed securities to keep rates stable the general expectation is that rates are going to rise in the next month or at least see a lot more volatility. For people looking for a mortgage I would lock into a rate earlier rather than later. In addition, I would expect volatility moving forward. So just because you get a quote one week I would not expect to necessarily be able to obtain that rate the following week. The lending environment still remains pretty strict. So if you were able to obtaining lending a few years ago that is no guarantee to get a loan today. Therefore, it’s a good idea to look into getting approved sooner rather than later.

Ki is a real estate agent in Austin Texas. His site is focused on Austin Texas real estate. It also provides visitors a mortgage widget and a free mortgage calculator.

Hope for Homeowners

Hope for Homeowners program was enacted to assist homeowners either in default or at risk of foreclosure. It began in October of 2008 and will end on September 30, 2011. Those eligible for the program will be provided a new 30-year, fixed-rate FHA-insured mortgage. For homeowners finding it hard to pay their existing mortgages, this may provide an avenue to refinance their current mortgage into one that they can afford.

Both lender and homeowner must formally agree to participate before a new mortgage can be approved.

Some of the program requirements are as follows:

* Your home must be your primary residence, and you cannot have ownership in other residential property, like a second home.
* Your current mortgage originated on or prior to January 1, 2008, and you’ve made a minimum of six full monthly payments.
* You are unable to pay your current mortgage payments without assistance.
* Effective March 2008, your monthly payments to your mortgage company must have exceeded 31 percent of your combined gross monthly income.
* You attest that in the previous ten years you haven’t been convicted of fraud; intentionally not paid any debts; and didn’t deliberately or willfully submit false information when obtaining your current mortgage.

Before proceeding with the program, you’ll want to know some specifics:

* You must initiate the program through your lender, or a FHA-approved housing counselor or lender.
* Your new mortgage payment cannot exceed 31 percent of your monthly gross income.
* Your new mortgage cannot exceed 90 percent of the new appraisal of your home’s value.

If your home is appraised at $100,000, your new mortgage will be $90,000. The drawback, however, is that you must agree to share the original equity created – the $10,000 – and any future appreciation in the home’s value. The payout doesn’t occur, though, until or unless you sell your home. At that time, you will split the equity with FHA, accordingly. Year one, you would receive nothing, but the FHA receives 100% of the equity. Year two, you receive 10 percent; FHA receives 90 percent, etc.

Every year, thereafter, you will receive an additional 10 percent of the home’s equity until you reach year five. Year five, and after, you will split the equity with the FHA equally at 50 percent. Keep in mind, that if your home’s value diminishes when you decide to sell, you will owe nothing.

A major drawback to the program is that you have to come up with a 3 percent mortgage insurance payment upfront. You also have to pay a 1.5 percent annual premium for mortgage insurance on your outstanding balance, which will be added to your monthly mortgage payment. In addition, you will be responsible for paying closing costs on your new loan.

Your new interest rate may, or may not, be less than your current rate. It will be determined by current rates and provided to you by your lender. No second mortgage is allowed for the first five years after your new loan. The only exception is emergency repairs.

If you think this program may be able to meet your needs and keep you in your home, it might be worth looking into.

Ki helps buyers and sellers interested in the Austin market. The website has featured information and statistics for Austin real estate. The website allows future homeowners to search Austin real estate by Austin MLS number. The site also provides a graph showing recent mortgage rate trends.

How to Buy a Home with Nothing Down

Buying a home with no down payment sounds like an impossibility in today’s real estate market. Lenders have been tightening their belts and so has the federal government. On the other hand, however, the feds have also been creating new programs to meet the downturn in the real estate market. If you thought it was hopeless to buy a home with nothing down, well, you’ll be glad to know that you’re wrong!

The Housing and Economic Recovery Act (HERA) of 2008 and the American Reinvestment Recovery Act (ARRA) of 2009 have opened doors for today’s homebuyers who have no down payment, and provided an opportunity for certain public servants to purchase affordable housing. In addition, state, county and local governments and non-profit organizations provide mortgage assistance to qualified home buyers.

The scope of the first-time homebuyer tax credit was broadened. The deadline was extended to April 30, 2010, eligible current homeowners are included, the income level was increased, as was the maximum price for the home, and other factors of the tax credit changed, too.

One aesthetic that drew many homebuyers was that, for Federal Housing Administration (FHA) home loans, the tax credit could be borrowed against in the form of a “bridge loan” for a down payment or closing costs. A bridge loan is used when funding is expected in the near future and is only intended as a short-term loan.

For those who are active or retired military, the Department of Veteran Affairs (VA) loans have always been a good mainstay. With nothing down, you can purchase a home at a typically lower-than-market interest rate. The U.S. Housing and Urban Development (HUD) program has a program that is not a no down payment, but one that requires only $100 down. The “$100 Down Payment” program lets you buy a HUD home with a down payment of only $100.

The Good Neighbor Next Door Program (GNNB) is a HUD program that enables opportunities for public servants to purchase a home in specific communities for 50 percent off the list price of the home if FHA financing is obtained. If you are a full-time teacher, fireman, law enforcement officer or EMT, you are eligible for this program. Although this is not a “no-down-payment program,” HUD’s “$100 Down Payments” program can be applied to the GNNB in that only $100 is needed for a down payment if purchasing a HUD home. You get 50 percent off and only put down $100.

Homeownership Vouchers is another HUD program and it offers first-time home buyers the opportunity to buy a home with nothing down and receive mortgage assistance, along with help to pay other costs related to home ownership. You local Public Housing Authority (PHA) can assist you in the application process. The United States Department of Agriculture (USDA) provides two offerings that enable anyone who wants to live in a community to purchase a home with no down payment. Both offerings fall under the USDA Direct & Guaranteed Loans program.

Programs are offered through your state, county and local governments, along with non-profit agencies. Contact your state housing authority for details about programs in your local area – e.g. New Mexico Housing Authority, Maine Housing Authority, etc.

Other no down payment strategies include leasing with a purchase option, property trade and assumption loan. Lease a property with a contract that states you will buy the home for a set amount on a set date. Make sure that a significant amount of your lease payment goes toward the down payment of the home. Some homeowners have been known to trade properties of the same value. Assuming someone else’s home loan doesn’t always require a down payment, either.

Ki works in the Austin real estate market. His site provides a map based search of Austin homes for sale along with general information on Austin real estate. He also has a graph showing historical interest rates

Home Median Price Comparisons for Top 10 U.S. Cities

You might be surprised to find out the median price homes are selling for in the nation’s top ten largest cities. Below, you’ll find the median price for resale, new homes and foreclosures.

CITY Resale Median Price
+/- % New Home
Median Price
+/- % Foreclosures
Median Price
+/- %
New York, NY $625,000 -6.0% $4,500,000 0.0% $489,000 0.0%
Los Angeles, CA $449,000 -0.2% $749,900 +8.7% $344,000 +1.7%
Chicago, IL $279,900 0.0% $950,000 0.0% $190,868 -0.6%
Houston, TX $162,500 +1.6% $179,990 0.0% $96,791 +0.4%
Phoenix, AZ $175,000 -2.2% $321,465 -0.2% $161,600 -2.1%
Philadelphia, PA $167,900 0.0% $399,990 0.0% $83,000 +1.4%
San Antonio, TX $149,500 0.0% $251,145 -1.5% $94,455 +1.0%
Dallas, TX $224,900 +2.7% $195,512 0.0% $88,905 +1.9%
San Diego, CA $450,000 +2.3% $575,000 -8.0% $319,802 +1.5%
San Jose, CA $450,000 0.0% $570,860 -5.2% $435,000 +0.5%

There are several results this table tells us. Taking all figures at face value, you could assume that resale home prices in New York and Phoenix have not yet hit bottom. Los Angeles (L.A.) has a significantly lower decline, so this city may be leveling out somewhat. New home median prices are relatively holding their own in all cities, except L.A. and San Jose. That’s no surprise, however, due to the major overbuilding these cities were conducting prior to the real estate downturn.

New York sparkles in the median new home price, which is not a surprise, but, hey, it’s New York! Other high-cost-living cities holding their own in the same area are Los Angeles, Chicago and Philadelphia. Philadelphia’s foreclosure rates were lower than the national average through 2009. Los Angeles is a bit of a marvel with almost a nine percent average increase for new homes.

In most cities it appears that foreclosures are slowing down significantly; although, Dallas, Los Angeles., San Diego and Philadelphia are still climbing at an uneasy rate. New York, Chicago and Phoenix appear to shine in regards to movement in median foreclosure rates.

What this chart does not tell you is that the State of Texas has been experiencing ongoing high foreclosure rates, even higher in the last quarter of 2009 than it did the same time the previous year. That’s probably why such low figures show up in the Houston, San Antonio and Dallas median foreclosure sale prices.

Philadelphia only experienced around a 10 percent decline in home values, compared to the national average of 32 percent. The city was showing notable recovery in 2009, slowing down as the year came to a close. Even still, the low median foreclosure price for Philadelphia is curious.

Fortunately, the new year has ushered in some positive movement in the housing industry. According to Freddie Mac chief economist and Vice President Frank Nothaft, the decline in home values has slowed for the first quarter of 2010, which “point to the highest level of home-purchase affordability in at least 40 years … ”

He believes the decline to be proof of a move to stabilization for the first quarter of 2010 for existing home sales and for new construction of single-family homes. He admits, however, the figures are still low. The low numbers were consistent for all nine U.S. regions. In addition, seven regions experienced a slow in depreciation. East North Central states and New England showed modest overall appreciation.

Ki lives in Austin Texas. His website covers Austin Texas real estate with a search of the Austin MLS. His site also has statistics broken down by the different Austin MLS areas and a blog covering Austin real estate.

Mortgage Rates Fall Again

The 30 year rate fell from 4.97 to 4.95 this week. This is the 2rd week in a row where rates have fallen. The expectation has been (for several months) that rates were going to rise. It looks like an economic recovery, which is somewhat more tepid than expected, has stopped rates from rising. Instead at least the 30 year rate has remained remarkably stable. For most of 2010 the 30 year rate has stayed between 4.9 and 5.1. The 15 year dropped from 4.33 to 4.32. The 5 and 1 year arms dropped from 4.11 to 4.05 (5 year arm) and 4.27 to 4.22 (1 year arm). While the 30 year has mostly hovered moving up and down the 5 and 1 year arms have both dropped over a 10th of a point over the last month. Below are rates from the weeks from Feb 11, 2010 to Mar 11, 2010

Mar 11, 2010
30-fixed 4.95 15-fixed 4.32 5 ARM 4.05 1 ARM 4.22

Mar 04, 2010
30-fixed 4.97 15-fixed 4.33 5 ARM 4.11 1 ARM 4.27

Feb 25, 2010
30-fixed 5.05 15-fixed 4.40 5 ARM 4.16 1 ARM 4.15

Feb 18, 2010
30-fixed 4.93 15-fixed 4.33 5 ARM 4.12 1 ARM 4.23

Feb 11, 2010
30-fixed 4.97 15-fixed 4.34 5 ARM 4.19 1 ARM 4.33

Sep 03, 2009
30-fixed 5.08 15-fixed 4.54 5 ARM 4.59 1 ARM 4.62

So rates are interesting but let’s look at actual mortgage payments. Taking our mortgage calculator we determined the rates for a 200k loan. We also did the same thing with rates from February, 25 2010 and rates from September, 03 2009 (6 months ago)

Mar 11
30-year $1067.53
15-year $1511.65
5-year ARM $960.6
1-year ARM $980.37

Feb 25
30-year $1079.76
15-year $1519.78
5-year ARM $973.37
1-year ARM $972.2

Sep 03
30-year $1083.44
15-year $1534.07
5-year ARM $1024.09
1-year ARM $1027.68

Again we can see the differences are pretty slight. Rates have fallen both of the past 2 weeks. But a 200k mortgage payment would only have been $12.23 more 2 weeks ago for a saving of 1.13 percent, nothing to write home about. Compared to 6 months ago a mortgage payment is $15.91 cheaper today (for a drop of 1.46 percent), again nothing overwhelming.

So what do we think is going to happen? At this point we know what is going to happen just not “when”. At some point the economy is going to improve and rates are going to increase. But whether that will happen in 1 month or 12 we will have to wait and see.

What is our advice to people looking for a mortgage? First just because you got approved for a certain type of loan two years ago doesn’t mean you can get that same loan today. Banks have gotten a lot stricter with loans. First instance home equity loans are much harder to obtain. So long story short the best idea is to approach a bank/mortgage broker early in the process. Second while we don’t know when mortgage rates will rise there is certainly a better chance they will rise soon than fall. There is very little chance rates are going to fall in the short term. So there is probably decent risk but little gain in waiting for rates to fall further. I see 4.6 as probably a bottom that we could see in the next year or so.

Ki writes regularly about mortgage rates. His site covers Austin Texas real estate with a home search and general news. It also has a mortgage rate widget and a few free mortgage calculators.

The Relationship Between Housing and Jobs

Most economists blame the messy bursting of the housing bubble for the Great Recession, yet it’s jobs that are discussed the most on the news.
So what is the relationship, if any, between jobs and housing when it comes to the future of the economic recovery? Is it one of those vicious cycles where people can’t get jobs until the housing market recovers, but with a shaky job market no one is buying houses to put an end to the decline in housing? Just reading that sentence is enough to cause a headache.

Recently Mint.com, a personal finance website, had a map showing the future of job growth around the country. Then a couple of days after that there was a map depicting the current state of the housing market. The job growth map was based on information compiled by NPA Services, Inc, a statistics company In Washington, D.C.

The map depicts job growth in the next 20 years in major cities all over the country. It neither indicates what sectors the future jobs will be in, nor does it give information for how NPA Services arrived at these numbers. The housing map was compiled with information from the National Association of Realtors.

According to the jobs map, Denver job growth by 2030 is expected to be 1.3 million and the current housing market there has improved with sales up 1.8 percent. Colorado has gone from being down in home sales more than 11 percent in 2008. Colorado’s current unemployment rate is 7.5 percent. With an unemployment rate better than national average it’s perhaps not a stretch to see job growth in Colorado.

Los Angeles is expected to increase jobs by 1.9 million in the next 20 years, but that area is still taking a hit in the housing market with prices down over 12 percent. Home sales have yet to come back statewide and California’s unemployment rate is 12.4 percent. It might take twenties years for California to hit its stride again.

Atlanta is supposed to be the job Mecca over the next 20 years with 2.5 million jobs heading to that city, yet housing hasn’t rebounded there, with home prices down over 16 percent. Sales are starting to come back after being down 6-10 percent in the state of Georgia, but Georgia’s unemployment rate is 10.3 percent. With home values so low, it could take awhile for this area to be out of the recession.

Texas, where the current unemployment rate is 8.3 percent, is expected to see significant job growth in most of its major cities in the next 20 years. The housing market in Texas also started to rebound at the end of last year.

The housing news for January is not good. The winter is historically not a great time to sell a house, and this winter has been particularly tough. According to the Commerce Department, housing sales were down 11.2 percent last month. There was a small gain in sales in the Midwest, otherwise this drop was seen in housing markets across the country.

It’s an interesting idea that the areas where housing is recovering will have jobs soon to follow, but at this point it’s just fancy graphics. As a special section in Time last year pointed out about the future of jobs in America, 20 years ago the Internet was hardly heard of, there was no blogosphere or Facebook. How can anyone know exactly what might happen to the job market in the next twenty years? We still have to get through this year.

Ki helps clients interested in moving to Austin Texas. His site has a search of the Austin MLS along with general information on Austin Texas real estate. For people interested in keeping up with the market their is a blog covering Austin real estate with sales and statistics broken down by Austin MLS area.

Remodeling Amenities That Add to the Sale of Your Home

In preparing a home for sale, some homeowners don’t have a clue where to concentrate their efforts and appreciate a valuable tip or two. Read the questions below. If the answer is yes to any of these, follow the strategy to fix it:

* Is the wallpaper throughout your home outdated?
If yes, replace the wallpaper, or paint or texture over it.

* Is your paneling outdated?
Typical grooved paneling is outdated. If you have this type of paneling in your home, paint it a neutral color. High-quality paneling without grooves, which is $30+ a sheet unfinished, as of January 2010, is timeless. Tongue-and-groove is also timeless. Knotty pine and other high-quality paneling, however, are outdated.

* Are your cabinet embellishments outdated?
If yes, modern knobs are available for sale at most hardware stores. Pick out some classy ones for an inexpensive and easy way to make the cabinets in your kitchen and bathroom “pop.”

* Is your kitchen up-to-date?
Do you have outdated vinyl flooring? How about the counter tile that needs new grout or the old faux brick backsplash? Replaced outdated vinyl flooring with either updated classy vinyl or inexpensive tile, which is easy to do-it-yourself. Hire out the vinyl installation. For the faux brick or other faux backsplash and wall covering, remove it. It is outdated. Paint the wall a neutral color.

* Is your master bath up-to-date?
If you have neutral tiles and colors, you’re good to go. If not, you’ll need to consider replacing the colored tile and toning down the bright wall colors. Don’t go crazy by buying travertine and the most expensive fixtures. Stay with the standard of the neighborhood, since you may or may not recoup your money in the sale. If you’ve got frumpy bathroom cabinets and mirror, consider replacing them with inexpensive modern and classier ones. Whether you do-it-yourself or hire it out, it always benefits the seller to ensure the master bath is updated.

* Is your home painted inside and out with neutral colors
If you have a pink house inside and out, you can pretty much be guaranteed that if you even get an offer, you will have to concede several thousand on the sale price of your home. It is worth it to purchase the paint and apply it before putting the house on the market.

* Is your carpet a neutral color?
Carpet must be a neutral color, too. If you have blue, mauve or any of the other 70s and 80s crazy colors, you need to consider ripping out the carpet. Find out if you have hardwood floors underneath. If it was built in the 60s or before, you may be in luck. Refinishing hardwood floors can add thousands to your bottom line. Or, if no hardwoods are present, find the cheapest elegant neutral-colored carpet to replace your old outdated rug.

* Do you have colors in your home from a previous decade?
Are you seeing a common theme here? Neutral colors are the way to go throughout your home if you’re looking to sell your abode quickly.

* Do you have popcorn ceilings?
Another clue that your home is “dated” is popcorn ceilings. They went out with foofy bangs in the 70s. Scrape them off and paint them.

When you’re deciding on the work to be done, it’s better if you do a walkthrough with a pad of paper and pen in-hand prior to performing the work. Make note of all the things that need repair in each room, even the little things. The more repairs you do, the less dickering you will experience with buyers during offers. There is a lot of preparation that goes into getting your house ready for sale. Go to the effort and expense to get it done, and you will reap a powerful payoff.

Ki helps people looking in for homes in the Austin real estate market. His site provides a free Austin home search along with statistics on Austin real estate. There are also several charts showing mortgage rate trends.

Mortgage Rates Start To Fall

The 30 year rate fell from 5.05 to 4.97 this week. Mortgage rates have been yo-yoing the last few weeks. The 30 year rate rose from 4.93 to 5.05 last week. This week the 30 year rate dropped from 5.05 to 4.97. Throughout February rates where remarkably stable due to the lack of news. Now it looks like their are multiple factors (FED increasing the discount rate, housing sales falling) that are affecting mortgage rates but the market seems unsure about what direction rates should move in. The 15 year dropped from 4.40 to 4.33 this week. The 5 year arm dropped from 4.16 to 4.11 (5 year arm). The one year arm jumped drastically from 4.15 to 4.27 (1 year arm). Since the 1 year arm is above the 5 year arm it has once again turned into a pointless product since there is virtually no reason to get a 1 year arm when 5 year arms are lower. Below are rates from the weeks from Feb 04, 2010 to Mar 04, 2010

Mar 04, 2010
30-fixed 4.97 15-fixed 4.33 5 ARM 4.11 1 ARM 4.27

Feb 25, 2010
30-fixed 5.05 15-fixed 4.40 5 ARM 4.16 1 ARM 4.15

Feb 18, 2010
30-fixed 4.93 15-fixed 4.33 5 ARM 4.12 1 ARM 4.23

Feb 11, 2010
30-fixed 4.97 15-fixed 4.34 5 ARM 4.19 1 ARM 4.33

Feb 04, 2010
30-fixed 5.01 15-fixed 4.40 5 ARM 4.27 1 ARM 4.22

Aug 27, 2009
30-fixed 5.14 15-fixed 4.58 5 ARM 4.67 1 ARM 4.69

So rates are one thing but it’s also interesting to look at actual mortgage payments. We used our free mortgage calculator and determined mortgage payments from today’s mortgage rates. We also did the same thing with rates from February, 18 2010 and rates from August, 27 2009.

Mar 04
30-year $1069.97
15-year $1512.66
5-year ARM $967.55
1-year ARM $986.22

Feb 18
30-year $1065.1
15-year $1512.66
5-year ARM $968.71
1-year ARM $981.53

Aug 27
30-year $1090.82
15-year $1538.17
5-year ARM $1033.67
1-year ARM $1036.07

So payments are slightly up (0.45 percent) from two week ago. But overall payments are still low by historical standards. Payments are 1.91 percent lower than what we were seeing 6 months ago.

So what do we expect to see moving forward? In general the expectation is that rates are going to increase. There is some speculation about how high rates are going to increase. There have been a few people speculating that in the best case scenario rates are going to stay low and then increase slightly to 6 or 6.5 percent. No one (in the news at least) has been expecting rates to decrease. So I would expect rates to be higher in 6 months from now.

Given that what is our advice? I would avoid arms. The risk that rates will be substantially higher in 5 years doesn’t seem to justify the slightly lower rates one can get on a 5 year arm unless one is absolutely certain that A) they are going to move in less than 5 years and B) they will be able to relatively quickly sell their house in 5 years.

Ki writes frequently about mortgage rates. His site covers Austin Tx real estate. It also provides a mortgage rates widget and a mortgage calculator widget.