As a sign that some normalcy is returning to mortgage markets, the premium attached to jumbo mortgage rates is getting smaller.

A “jumbo”-sized loan is one that exceeds $417,000 on a single-family residence, among other criteria.

Conforming 30-year fixed rate mortgages and jumbo 30-year fixed rate mortgages tend to move in the same direction over time. You can see that illustrated on the left-side of the graph.

But, as we move towards the right, we can see how, beginning in mid-August of this year, the general direction of mortgage rates for these two products diverged.

In mid-August, you’ll remember, is approximately when the bottom fell out of the credit risk markets.

Since late-September, though, jumbo loan risk appears to be declining. The chart above from Bankrate.com shows that while conforming rates have remained relatively flat, jumbo mortgage rates have dropped by about 0.125%.

In mortgage markets, the credit pendulum tends to swing too far in both directions. Getting approved for a home loan may have been too easy last year, and it may have been too tight last month.

Today, though, the pendulum appears to be moving towards the middle once again.

NOTE: Bankrate.com publishes rates based on advertising, and not market conditions so the chart does not reflect actual mortgage rates. It does reflect a trend, however. The chart is meant to show how jumbo, 30-year fixed loans are moving lower with respect to conforming, 30-year fixed rate home loans.

When people move into a new home, they tend to spend money on goods for the new residence. Aside from electrical supplies, paint and/or fresh air filters, new homeowners also tend to buy furniture.

With home sales volume lower nationwide, therefore, so is the volume of furniture sold in retail stores. As reported by the Associated Press, this could be the worst year for furniture sales since 2001.

As one analyst put it: “No one wakes up in the morning and has to replace their sofa.”

So, for the savvy homeowner looking to remodel with new furniture, pre-holiday season may be a terrific time to do a little shopping. The furniture industry’s extra supply should pressure sales prices lower.

As a shopper, one way to take advantage is to visit large furniture retail stores and pay attention to floor models. These pieces typically carry the largest discounts because the stores need to keep their inventory and the “look” of their store turning over from season to season.

Another method is to shop by catalog. It’s more challenging to find the perfect piece for a room when you can’t view it in person, but catalogs can offer outlet-like prices for high-quality furniture.

Source
Mortgage slump hits home decor industry
Associated Press
October 7, 2007, 7:05 P.M.

(Image courtesy: Room and Board)

On the first Friday of each month, the Bureau of Labor Statistics releases its employment report for the United States.

Last month, the jobs report showed that the economy actually lost jobs for the first time since 2003. The total loss of jobs equaled 4,000 and contributed to the Federal Reserve’s decision to lower the Fed Funds Rate for the first time since that same year.

Of course, today is First Friday so a new employment report hit the wires earlier this morning. The news was good for the economy, but not so good for people in the market for a new home loan.

The employment report showed that 110,000 new jobs were created in the United States, reversing the negative trend from August. More employed workers means more money earned means more money spent. That’s why the news is good for the economy.

Now, for the bad news.

An important detail about the employment report is that it quantifies the number of jobs created in the month prior, and it also revises its calculations for the two months prior to that. These revisions are necessary because by the time First Friday arrives, there just isn’t enough time to survey enough companies to make data 100% accurate.

Well, August’s data was revised from a 4,000 job loss to an 89,000 job gain.

Psychologically, this is major because the job loss in August was a huge reason why markets screamed for the Fed to lower the Fed Funds Rate. Now, it appears, that move may have been premature.

Wall Street is frenzied on this holiday-shortened trading day. Could the Fed reverse its course now that it has new data? Mortgage rates are soaring higher as expectations adjust for the Fed’s next meeting October 30-31, 2007.

Where does your money go? If you’re like most Americans, more than half of it goes towards housing and transportation alone.

This is according to the Consumer Expenditure Survey performed by the Bureau of Labor Statistics.

The most recent study shows American household spending habits from 2005, but the percentages change little from one year to the next.

The largest expenditures by household are:

• 32.7% for housing
• 18.0% for transportation
• 12.8% for food
• 5.7% for healthcare
• 5.1% for entertainment
• 4.1% for apparel
• 2.0% for education
• 1.2% for personal care products/services
• 0.8% for life and personal insurance

With this industry-by-industry breakdown, we can see how changing where you live and how long you commute can be the best ways to keep your household budgets in check.

Saving money on haircuts, clothing and food can make an impact, too, but not nearly as much as living in less expensive home or changing driving habits.

Along with the housing market, home remodeling trends are changing.

Earlier this decade, home remodeling projects tended to maximize a home’s resale value. Upgrades centered on replacing appliances, finishes and flooring with more “upscale” product.

That line of thinking appears to be changing.

Many designers are now focusing on comfort and livability, reflecting the changing needs of homeowners.

Carefully consider how you live in your home before planning a remodel. In what rooms do you spend the most time? How does the home’s layout impact the “flow” of your home?

These conversations will help you understand the work that your home really wants. Small changes such as widening a doorway, adding lighting, or replacing moulding can make more of difference than buying new extra-deep kitchen cabinets.

Homeowners are tending towards warmth-creating practical projects as opposed to purely modernization. The subtle irony that their changes are rendered the home more inviting to would-be buyers, thus increasing the home’s value after all.

“Warmth” creates an at-home feeling for everyone who steps through the door and that can be as appealing as a pedestal sink in the powder room.

Think of it like “curb appeal” for the soul.

Effective November 7, 2007, the Federal Housing Administration is expected to ban home buyers’ use of seller-financed Downpayment Assistance programs.

DPAs are (were?) very popular in FHA mortgage circles as a way to help buyers finance their new homes.

FHA loans currently require a downpayment of at least three percent on a home purchase. That three percent, however, is not required to come from the buyer’s own funds; it can come from a “gift” as long as the gifter is a family member or a non-profit organization.

Downpayment assistance programs are the latter, incorporated as non-profit organizations.

Typically, DPA programs works like this:

• Buyer makes an offer for a home
• Seller accepts the offer
  Seller contributes the necessary three percent to non-profit organization
• Non-profit organization “gifts” the three percent to the buyer while keeping a $500 service fee
• Buyer buys home with three percent gift as downpayment

The main reason cited for the ban is that downpayment assistance programs push home sale prices three percent higher than they otherwise should be. The extra three percent is not “home value” — it’s “help” and is repaid over time in the form of a higher loan amount.

One study cited by FHA and used to pass the ruling said that home buyers participating in downpayment assistance programs go delinquent with two times the frequency of home buyers that don’t.

According to the Washington Post , there are more than 200 charities nationwide currently offering such programs.