Advice For Your Buyers


Hello everyone, Do you get Rock Star Service from your lender? This is a recent testimonial from one of our realtor partners:

“WOW…..I want to thank each and everyone involved in “making it happen” for the Smith family. To fund their loan on time and on schedule despite the many hurdles and obstacles sent our way in three (3) weeks with two (2) long holiday weekends in between is a true testamen…t to our abilities to perform and exceed our clients expectations.” This is how we earn life-long customers.

The Meredith Team @ CMG
Erin & Kathleen
The Bay Area’s Premier

Mortgage Banker and Broker
(925)983-3048 office
(925)226-3215 efax

(925)918-0585 mobile
meredithteam@comcast.net
emeredith@cmgmortgage.com
https://meredithmortgageteam.wordpress.com/

The population is getting older, and those who are 65 and up now make up the biggest part of the nation’s population in size and percentage, according to newly released data from the U.S. Census Bureau. Older residents comprise 13 percent of the population, or 40.3 million people.

The older adult population increased by 15.1 percent from 2000 to 2010, while the combined remaining age groups saw 9.7 percent growth.

The states with the highest number of senior residents are:

  • Florida
  • West Virginia
  • Maine
  • Pennsylvania
  • Iowa

The state with the lowest number of seniors is Alaska (7.7 percent compared to Florida’s 17.6 percent). However, Alaska also has the largest growth rate for older populations, according to Census data.

Source: “New Census Data Show Increase in Older Adults,” St. Louis Post-Dispatch (Dec. 1, 2011)

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Baby Boomers Seek Smaller, Affordable Homes

With low home prices and ultra-low interest rates, the housing market is offering “perhaps the best deals of a generation,” notes a recent article by Bloomberg Businessweek.

Since the housing boom of 2006, home prices have fallen about 31 percent. Also, mortgage rates have been hovering at record lows for the past few weeks (4 percent range or even lower on 30-year fixed-rate mortgages, according to Freddie Mac’s mortgage market survey).

“It’s hard to see the possibility of losing on a home purchase right now, with these mortgage rates,” says economist Dean Baker. “Prices may go lower, but not by much.”

The article notes the following scenario: Buying a $300,000 home with a 4 percent mortgage rate and a 20 percent down payment would mean a $1,145 monthly payment. The Mortgage Bankers Association recently predicted that home prices may fall another 3.5 percent by mid-2012 but mortgage rates will increase by a half-point. So for that same loan under that scenario, a home would sell for $289,000 while the monthly mortgage bill would be $1,171–only a $26 difference.

For those who can qualify for a mortgage, “playing the waiting game” won’t result in much gain, Nariman Behravesh, chief economist at IHS in Englewood, Colo., told Bloomberg Businessweek.

Source: “Crazy Home Deals Await the Creditworthy,” Bloomberg Businessweek (Oct. 24, 2011)

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Rising rents are forcing renters to outspend home owners on housing costs, according to a new study.

Since 2005, home owners’ housing expenses have climbed from 31.9 percent of their household budget to 33.2 percent. On the other hand, in that same time period, renters’ expenses have jumped from 35.6 percent to 38.4 percent, according to the October CoreLogic U.S. Housing and Mortgage Trends.

In the last 26 years, home owners have increased the amount they spend on household expenses by 12 percent while renters have increased it by 22 percent, according to the study.

Earlier this month, Capital Economics economists noted that for the first time in 30 years the median monthly mortgage payment is about the same — or less — than the median rental payment.

Yet, with the bleak job market, home ownership rates continue to fall in many parts of the country, particularly among younger generations. CoreLogic found in its report that the home ownership rate for the 25-to-34 age group dropped from 51.6 percent in 1980 to 42 percent in 2010. For the 35-to-44 age group, home ownership rates fell from 71.2 percent to 62.3 percent over that period.

Source: “Renters Outspend Owners on Housing,” RISMedia (Oct. 25, 2011) and Capital Economics

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Bargains Abound: What Are Buyers Waiting for?

Forget the toasters and champagne flutes: More engaged couples are doing a different type of wedding registry that allows them to collect cash for a down payment on a home, according to a recent article in The Washington Times.

Dana Ostomel, founder of Deposit a Gift in New York City, says that about 15 percent of their registries are to raise down-payment funds for a home and another 15 percent are for home-improvement funds to pay for upgrades like a new roof or furniture.

“Given that 75 percent of today’s engaged couples already live together and are older, very often they are already established with the household basics that you find on a traditional registry,” Ostomel said. “What they want is the gift of big-ticket items and longer term goals, like the gift of home ownership.”

The FHA permits gifts from a wedding to be used as a down payment, but lenders are required to document that the funds are gifts. About 27 percent of first-time home buyers use gift money from relatives and friends for a down payment, according to a 2010 National Association of REALTORS® Profile of Home Buyers and Sellers survey.

Source: “Registries Raise Cash Gifts, Avoid Etiquette No-No,” The Washington Times (Oct. 20, 2011)

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Down Payment Remains Obstacle to Home Ownership

Improved Job Report Sends Mortgage Rates Higher

Daily Real Estate News | Friday, October 14, 2011

 

After posting record lows the last few weeks, mortgage rates inched higher this week, Freddie Mac reports in its weekly mortgage market survey. Yet, rates still remain near 60-year lows.

“An employment report that was better than market expectations helped to lift long-term Treasury bond yields and mortgage rates as well,” Frank Nothaft, Freddie Mac’s chief economist, notes. In September, the economy added 103,000 workers; however, the unemployment rate still remained high at 9.1 percent.

Here’s a closer look at rates for the week ending Oct. 13.

  • 30-year fixed-rate mortgages: averaged 4.12 percent, with an average 0.8 point, moving up from last week’s record-hitting 3.94 percent average. A year ago at this time, 30-year rates averaged 4.19 percent.
  • 15-year fixed-rate mortgages: averaged 3.37 percent with an average 0.8 point–that’s up slightly from last week’s low of 3.26 percent average. Last year at this time, 15-year rates averaged 3.62 percent.
  • 5-year adjustable-rate mortgages: averaged 3.06 percent, with an average 0.6 point, and inching up from last week’s 2.96 percent. Last year at this time, the 5-year ARM averaged 3.47 percent.
  • 1-year ARMs: averaged 2.90 percent with an average 0.6 point, a drop from last week’s 2.95 average. A year ago, 1-year ARMs averaged 3.43 percent.

Source: Freddie Mac

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Housing Can Be ‘Key Engine of Job Growth’

Daily Real Estate News | Wednesday, September 28, 2011
In the past, both the luxury housing market and the low-end market moved in tandem, but these days, they're moving in opposite directions.

The luxury market is outperforming the rest of the market, with Zillow reporting a 0.7 percent gain since February in the prices of properties worth $1 million or more but more than a 1.5 percent decline in lower-priced homes.

At the lower end, houses sit on the market for months without receiving an offer, and most buyers are unable to qualify for financing despite record-low mortgage rates. In Miami, $1 million-plus condos are flying off the shelves, but two-bedroom condos in gated communities can be had for as little as $25,000.

Condo Vultures founder Peter Zalewski says, “In the 20 years that I have been in South Florida real estate, I have never seen a greater divide between those who have and those who have not.” Experts attribute the strength of the luxury market to international buyers, who view U.S. properties as undervalued assets and who can pay in cash. Home purchases by foreign buyers rose to $82 billion in 2010 from $66 billion in 2009; and they accounted for 33 percent of purchases in Florida, up from 10 percent four years ago.

Source: “Housing Market Is Terrific, If You Are Rich,” USA Today (09/25/11)

Daily Real Estate News | Friday, September 30, 2011

 

Starting Saturday, many borrowers in pricey housing markets may find they’ll need a higher down payment or pay higher rates. The size of mortgages that the government will back in several high-priced regions is set to drop on Oct. 1, which some analysts expect will serve as another thorn to the housing market.

In 2008, Fannie Mae and Freddie Mac raised its cap on conforming loans up to $729,750 in some of the most expensive housing markets so that larger mortgages would be available to home buyers. But those caps are set to reset on Oct. 1, scaling back to a maximum of $625,500 in some areas of the country.

Housing analysts say the drop will make it more expensive and harder for some buyers to qualify for home purchases in expensive markets, particularly along the coasts.

“The down-payment issue is the most significant aspect form borrowers standpoint,” says Greg McBride, a senior financial analyst at Bankrate.com. “These changes will price some prospective borrowers out of the market.”

Source: “Big Borrowers Face Larger Down-Payments, Rates,” MarketWatch (Sept. 30, 2011) and “Big Mortgages: Harder to Get and More Expensive With Loan Caps,” CNNMoney (Sept. 30, 2011)

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On Loan Limit Drop, Middle Faces Hard Hit

House Fails to Vote on Extending Loan Limits

As part of the Administration’s plan to increase homebuyer use of private mortgage insurance (PMI) on mortgages underwritten or purchased by Fannie Mae and Freddie Mac, the Federal Housing Finance Agency (FHFA) has proposed changes to shift the risk of loss on mortgage defaults and foreclosures from the U.S. Treasury to the private sector.

The two government sponsored enterprises (GSEs) currently require PMI or Federal Housing Administration (FHA)-provided insurance on some but not all mortgage loans with loan-to-value ratios (LTVs) over 80%. [For more on the comparative costs of PMI and MIP, see the first tuesday Market Chart, FHA, PMI, or neither?]

The FHFA now seeks to make GSE-based financing more comparable to financing independently provided by the private sector, partially in an effort to recoup losses sustained by Fannie and Freddie (and thus the U.S. Treasury) during the Great Recession and financial crisis. Fannie and Freddie have been repeatedly criticized since the collapse of the housing market for their loss-generating business practices and lack of “skin in the game.” [For other recent attempts to encourage private-style lending practices from GSEs, see the May 2011 first tuesday article, Fannie and Freddie show some skin.]

first tuesday take: Political ill will for Fannie and Freddie as they currently exist seems likely to succeed in the long run — either by making the GSEs fully-independent private entities or dissolving them altogether. Neither step, however, can take place successfully unless private mortgage bankers step up to the plate and deliver the loans it is their business function to make.

The federal government needs to quickly take the GSEs out of the lending business – especially by removing their government guarantees. Only then, when the playing field is leveled, will private mortgage bankers see they can achieve profitability through fully-regulated mortgage activity structured to prevent any hazardous competitive advantage in the market.

With luck, we can soon do away with both GSEs once and for all, and in the process be rid of their government-backed guarantees that have so badly misaligned mortgage funding and misallocated personal wealth in the real estate industry. With the removal of these agencies, and the simultaneous elimination of harmful mortgage interest tax deductions, it will finally be possible to achieve long-term stability in sales volume and prices. [For more on the flaws of mortgage tax deductions, see the June 2011 first tuesday article, Subsidizing the American dream.]

RE: “FHFA changes may boost private mortgage insurance”, from Housingwire.com

 

 

 

Loan Applications Rise for Refinancing, Home Purchases

Daily Real Estate News | Wednesday, September 28, 2011

 

Mortgage applications increased last week, with both refinancing and home purchase demand increasing, the Mortgage Bankers Association says in its weekly report.

Applications for U.S. home mortgages increased 9.3 percent for the week ending Sept. 23, according to MBA’s seasonally adjusted index.

Refinancing applications made up the biggest part of that increase, rising 11.2 percent last week. Loan requests for home purchases increased 2.6 percent.

Meanwhile, mortgage rates continue to hover near record lows, luring home owners and buyers who can qualify for the low rates.

“Mortgage rates declined last week, at least partially in response to the Fed’s announcement that they would shift their portfolio toward longer-term Treasury securities, and that they would resume buying mortgage-backed securities,” Mike Fratantoni, MBA’s vice president of research and cconomics, said in a statement.

Source: “Mortgage Applications Rose Last Week: MBA,” Reuters (Sept. 28, 2011)

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Fed’s Latest Move May Send Rates Lower

Mortgage Rates Remain at Record Lows

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