Jerry Berry Mortgage Blog

Mortgage Rates Make New Lows For The 9th Week In A Row

Freddie Mac mortgage rates (January - August 2010)

Another week, another new low for conforming mortgage rates.  In fact, this week marks the 9th time in a row it’s happened.

Mortgage rates are (again) at their lowest levels in history.

The data comes from the Freddie Mac, a government group and major loan securitizer for the U.S. mortgage market. Freddie Mac’s weekly survey is among the most widely-cited reports on mortgage rates and is the data used in home affordability models, among other statistics.

The 30-year fixed rate is averaging 4.42% nationally with an accompanying cost of 0.7 points. 1 point is equal to 1 percent of the loan size.  This week’s reported rate is lower by 0.02 percent from last week, and lower by 0.70 percent from one year ago.

On a region-by-region basis, though, “average” 30-year fixed mortgage rates are different.

  • Northeast : 4.44 with 0.6 points
  • Southeast : 4.44 with 0.8 points
  • N. Central : 4.42 with 0.4 points
  • Southeast : 4.46 with 0.5 points
  • West : 4.35 with 0.8 points

But this isn’t to say that mortgage pricing is better in, say, California as compared to Florida. Note that the West Region — with the lowest average rate — has the highest required points.  This is because mortgage rates and mortgage fees move in opposite directions.  The type of low-rate/high fee structure common in the West may be right for some home buyers and would-be refinancers, but may not be right for others.

What’s important to remember is that, as a rate-shopper , it’s always your choice on how your loan is structured. Banks offer multiple set-ups — with or without points — to meet every applicant’s budget.

As mortgage rates continue to slide and touch new lows, it’s an excellent opportunity to see what your lender can do for you. Low rates won’t last forever.

No Comments by Jerry Berry on August 20, 2010
filed in Mortgage Rates
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How Much Should You Expect To Pay In Mortgage Closing Costs?

Closing costs by state, 2010

How much does a mortgage cost? The answer depends on where you live. But no matter which your locale, chances are strong that you’ll pay more for a mortgage in 2010 as compared to 2009.

According to Bankrate.com and its annual Closing Cost Survey, a typical $200,000, purchase mortgage now carries an average $3,741 in closing costs — up nearly 37 percent from last year.

As defined by Bankrate.com, “closing costs” is defined as the sum of two numbers.  The first group is labeled “origination charges”, a category that includes such items as underwriting fees, application fees and processing fees.  These fees are paid directly to the loan originator’s company at the time of closing.

The second grouping of costs is labeled “third-party fees”.  Third-party fees include appraisals, credit reports, settlement fees and title searches — items paid in connection with the loan, but not paid to the lending bank or broker.

It’s unclear why closing costs appear to have escalated into 2010, but Bankrate.com suggest that recently-enacted federal lending laws are a culprit:

  1. The new law requires loan officers to be accountable to a Good Faith Estimate’s accuracy. Bankrate.com’s prior-year surveys may have been “understated”, therefore, because of a lack of accountability.
  2. The cost of federal compliance is high, and banks may be passing on compliance costs to consumers

To see the complete list of closing costs by state, visit the Bankrate.com website.

No Comments by Jerry Berry on August 19, 2010
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Single-Family Housing Starts Fade In July

Housing starts August 2008 - July 2010Sometimes, you need to look deeper than the headlines to get the news that matters. This basic truth’s latest example comes from the July Housing Starts data, as published by the U.S. Census Bureau.

According to the newspapers, Housing Starts improved last month:

  • US Housing Starts Make Modest Rebound (FT)
  • Housing Starts Rise Slightly (MoneyWatch)
  • Housing Starts Tick Higher In July (MarketWatch)

However, these stories are speaking in terms of all housing starts — not just the single-family ones. This is a major point of difference for home buyers because the most people don’t buy the multi-unit homes and apartment buildings that’s also a part of the Housing Starts data. 

The overwhelming majority of buyers buy single-family homes and in July, as in the previous 3 months, the number of single-family housing starts fell.

In fact, single-family housing starts are down by nearly 25 percent since April and are now at their lowest levels since May 2009.

This is a much different message from the headlines above.

It’s not surprising that single-family housing starts are down; builder confidence is down as well and the two metrics tend to trend in the same direction.

Furthermore, building permits for single-family homes fell in July, too.

As a home buyer, the drop in Housing Starts should help reduce housing inventory in the months ahead.  This may lead home prices to rise because home values are based on supply and demand.  For home sellers, falling starts should help reduce competition for buyers.

Each real estate market is unique and supply levels will vary from ZIP code to ZIP code. For up-to-the-minute inventory levels, make sure to talk with your real estate agent.

No Comments by Jerry Berry on August 18, 2010
filed in Housing Starts
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Home Builder Confidence Falls Again; Home Buyers Gain Leverage?

NAHB Housing Market Index August 2008-2010Home builder confidence in the newly-built, single-family housing market is down for the third straight month this month.

After reaching a 3-year high just 90 days ago, the National Association of Homebuilders’ Housing Market Index is now at a multi-year low. It’s since dropped by almost half.

As an economic indicator, the HMI’s goal is to “take the pulse of the single-family housing market”. It surveys home builders across the country and asks them to report on 3 facets of their business:

  1. How are market conditions today?
  2. How do market conditions look 6 months from now?
  3. How is the prospective traffic of new buyers for new homes?

Responses are then collated, weighted, and presented as the Housing Market Index.

The August HMI reading of 13 is the lowest since March 2009.

Not surprisingly, the main reasons why HMI is down echo the main reasons why consumer confidence is down. Jobs growth continues to be weak; credit guidelines remain restrictive; and, home values are recovering slowly, pressured by distressed properties.

Builders report watching foot traffic stagnate and most likely won’t want to be stuck with excess inventory into the fall and winter months.  For home buyers , drops in builder confidence like this can be an excellent negotiation tool.

Builders may be more likely to offer incentives and/or price reductions into an uncertain economy, as compared to a strong one. Furthermore, weakness in home building indirectly drags mortgage rates lower. 

This one-two combination can make for cheaper homes with cheaper monthly payments.

No Comments by Jerry Berry on August 17, 2010
filed in Homebuilders
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What’s Ahead For Mortgage Rates This Week : August 16, 2010

Retail Sales (August 2008 - July 2010)Mortgage markets worsened last week, putting a pause on the mortgage rate rally that dates to mid-April. Mortgage rates rose last week and home affordability suffered.

The Refi Boom remains in full effect, but rates are not as dazzling as they were a week ago.

It’s somewhat strange that mortgage rates rose last week given the heavy dose of negative-bending news.

Mortgage rates often to fall on such news, but last week, they rose. The biggest reason was weak demand on a new 30-year bond issuance from the government. In turn, that weakness spilled over into mortgage bonds, which pushed rates up. 

This week, mortgage rates could rise or fall — it depends on how new data influences market sentiment.

  • Monday :  Home builder confidence survey
  • Tuesday : Housing Starts and Building Permits; Producer Price Index
  • Thursday : Jobless claims; 2 Fed members make speeches

Keep a close eye on the housing-related data early in the week. It’s widely believed that housing will lead the economy forward so a rebound in home builder confidence, or a jump in building permits, for example, should push rates even higher. Weakness

In the meanwhile, if you haven’t spoken with your loan officer about a refinance, consider reaching out this week. Rates are lower than they’ve ever been in history and more people are getting financing than the news would have you believe. You can’t know until you ask so make that call today.

No Comments by Jerry Berry on August 16, 2010
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Higher (And Lower) FHA Mortgage Insurance Premiums Start October 4, 2010

FHA mortgage insurance premiums ready to changeFor the second time this year, the FHA is modifying mortgage insurance.

Beginning with FHA case numbers issued on or after October 4, 2010, the FHA is changing its upfront and annual mortgage insurance premium structure.

Under the new terms, assuming a 30-year fixed rate FHA mortgage with at least 5 percent equity:

  • Upfront MIP drops to 1.000% of the amount borrowed from 2.250%
  • Annual MIP increases to 0.850% of the amount borrowed from 0.500%

For homeowners , this switch in MIP decreases the upfront cost of an FHA-insured mortgage, but increases the loan’s long-term costs.

Using a $100,000 mortgage as an example, upfront MIP falls to $1,000 from $2,250; monthly MIP jumps to $70.83 from $41.67. The FHA expects the change will yield an additional $300 million in premiums monthly.

The update is a huge win for the FHA whose reserve funds are self-proclaimed to be “perilously low”.  The extra monies should help recapitalize and stabilize the government group.

The FHA is on pace to back 1.7 million loans this year.

For the majority of refinancing FHA homeowners and home buyers, the MIP change is neither good nor bad — the borrowing landscape will just looks a bit different.  Yes, loans will cost more to carry each month, but also they’ll be less expensive to procure. It’s a trade-off and you can apply math formulas to solve for the best time to apply FHA. 

It may be wise to get your FHA case number before October 4, for example, depending on your time frame in the home and the expected life of the mortgage. Or, it may be better to wait until after October 4 to apply.

If you’re unsure of how the new FHA mortgage premiums will impact your mortgage, be sure to call or email your loan officer for help.

NOTE : The FHA originally announced an implementation date of September 7. It was subsequently amended to October 4, 2010.

No Comments by Jerry Berry on August 13, 2010
filed in FHA Mortgages
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How Big Is The Foreclosure Market? It Depends On Where You Live, Of Course.

Foreclosure concentration, by state (July 2010)Foreclosure filings rose 4 percent nationwide last month versus June, according to foreclosure-tracking firm RealtyTrac.com. For the 17th straight month, total filings topped 300,000.

A foreclosure filing is defined as default notice, scheduled auction, or bank repossession.

As with most months, just a handful of states dominated foreclosure activity nationwide.

  • California : 14.9 percent of all activity
  • Florida : 11.6 percent of all activity
  • Arizona : 6.4 percent of all activity
  • Michigan : 6.2 percent of all activity
  • Georgia : 6.1 percent of all activity
  • Texas : 4.9 percent of all activity

Together, these 6 states represent just 30 percent of the overall U.S. population.

The other 44 states (and Washington D.C.) were home to the remaining 49.0%.

Despite this imbalance, though, in all markets, foreclosures and REO are making a profound impact on pricing and product. “Distressed” homes now represent 32 percent of the overall resale market nationwide, according to the National Association of Realtors®.

Buying a foreclosed home can make for a terrific “deal”, but buying in the REO market is decidedly different from buying a non-foreclosed property.

As 3 examples:

  1. Buying bank-owned homes can take 120 days to close.
  2. Foreclosures aren’t always listed for sale publicly. Some inventory is privately-held.
  3. Bank-owned homes are often sold “as is”. There may be defects that render the homes mortgage-ineligible.

If you have an interest in buying REO, consider talking with a real estate agent first. Even the negotiation process is different as compared to a non-distressed sale. It helps to have an experienced professional representing your interests.

No Comments by Jerry Berry on August 12, 2010
filed in Foreclosures
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A Simple Explanation Of The Federal Reserve Statement (August 10, 2010 Edition)

Putting the FOMC statement in plain EnglishToday, in its first meeting in 6 weeks, the Federal Open Market Committee voted 9-to-1 to leave the Fed Funds Rate unchanged. 

The Fed Fund Rate remains at a historical low, within a prescribed target range of 0.000-0.250 percent.

In its press release, the FOMC said that, since June, the pace of economic recovery “has slowed”. Household spending is increasing but remains restrained because of high levels of unemployment, falling home values, and restrictive credit.

Today’s statement shows less economic optimism as compared to the prior year’s worth of FOMC statements dating back to June 2009. The Fed is looking for growth to be “more modest in the near-term” than its previous expectations.

Weaknesses aside, the Fed highlighted strengths in the economy, too:

  1. Growth is ongoing on a national level
  2. Inflation levels remain exceedingly low
  3. Business spending is rising

As expected, the Fed re-affirmed its plan to hold the Fed Funds Rate near zero percent “for an extended period”.

There were no surprises in the Fed’s statement so, as a result, the mortgage market’s reaction to the release has been neutral. Mortgage rates are unchanged this afternoon.

The FOMC’s next meeting is scheduled for September 21, 2010.

No Comments by Jerry Berry on August 10, 2010
filed in FOMC
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The Fed Is Meeting Today. Should You Float Or Lock Your Mortgage Rate?

Fed Funds Rate June 2007-June 2010The Federal Open Market Committee holds a one-day meeting today, its fifth scheduled meeting of the year, and sixth overall since January.

The FOMC is the government’s monetary policy-setting arm and the group’s primary tool for that purpose is an interest rate called the Fed Funds Rate. 

The Fed Funds Rate is the prescribed rate at which banks borrow money from each other and, since December 16, 2008, the Federal Reserve has voted to keep the benchmark rate within a target range of 0.000-0.250 percent.

It’s the lowest Fed Funds Rate in history.

Because the Fed Funds Rate is near zero, it’s accommodative of economic growth, spurring businesses and consumers to borrow money on the cheap. This, in turn, fosters economic growth within a U.S. economy that is somewhat tentative and facing headwinds.

The Fed has said over and again that it will hold the Fed Funds Rate “exceptionally low” for as long as conditions warrant.  It’s expect that the Fed will reiterate that message in today’s post-meeting press release.

However, just because the Fed Funds Rate won’t be changing today, that doesn’t mean that mortgage rates won’t.  Mortgage rates are not set by the Federal Reserve; open markets make mortgage rates.

Mortgage rates tend to be volatile when the Fed is meeting. This is because the Fed’s press release highlights strengths and weaknesses in the economy and, depending on how Wall Street views those remarks, bond markets can undulate and mortgage rates are based on the price of mortgage-backed bonds.

When Ben Bernanke & Co. speak, Wall Street listens. 

The Fed’s press release today will be dissected and analyzed.  Talk of higher-than-expected inflation, or better-than-expected growth should have a negative effect on rates. Talk of an economic slowdown may help rates to fall.

Either way, we can’t be certain what the Fed will say or do this afternoon so if you’re floating a rate right now and wondering whether the time is right to lock, the safe choice is to lock before 2:15 PM ET today.

No Comments by Jerry Berry on August 10, 2010
filed in FOMC
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What’s Ahead For Mortgage Rates This Week : August 9, 2010

Federal Reserve meets August 10 2010Mortgage markets improved again last week on softer-than-expected economic data, punctuated by Friday morning’s weak jobs report. Conforming mortgage rates dropped on the news, making new, all-time lows.

Mortgage rates have been on an extended rally dating back to mid-April.

This week, there’s a lot of data and news due for release, the most influential to markets of which is the Federal Open Market Committee’s scheduled policy meeting.

8 times annually, the FOMC meets to discuss the nation’s monetary policy with respect to the current and projected U.S. economic conditions. Sometimes the FOMC takes action on the economy. Other times, it does not.

Either way, Fed meetings are market movers and it’s a gamble to float a mortgage rate ahead of an FOMC get-together.

There’s other’s stories to watch this week, too. Each has the ability to change mortgage rates.

  • Tuesday : FOMC meeting; Consumer Confidence data
  • Thursday : Jobless Claims
  • Friday : Retail Sales; Consumer Price Index

It’s a busy week on Wall Street, to be sure, and rate shoppers would do well to pay attention. Not only can the FOMC meeting change mortgage rates for every product in every market, but it can also change the outlook for mortgage rates going forward.

Rates are at an all-time low and low rates can’t last forever. We’re in the middle of a Refi Boom today and, soon, the boom will be over.

If you haven’t spoken to a loan officer about refinancing your home, or locking a mortgage rate, your best time to make the call is prior to the FOMC’s Tuesday afternoon adjournment at 2:15 PM ET. Mortgage rates will get jumpy leading up to the meeting, and will most certainly be volatile afterward.

No Comments by Jerry Berry on August 8, 2010
filed in Weekly Review
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