According to RealtyTrac, the rate of foreclosures across the U.S. is slowing. Versus May, June foreclosures fell at a 3 percent clip.

25 states showed improvement month-over-month, led by many of the same areas that had fueled foreclosure activity in 2007.

A sampling of RealtyTrac’s data includes:

• California : Foreclosures down 4.54 percent
• Georgia : Foreclosures down 14.91 percent
• Arizona : Foreclosures down 0.07 percent
• Michigan : Foreclosures down 6.00 percent
• Illinois : Foreclosures down 15.65 percent

However, the improving nature of the data is not what is making news this morning. Instead, the press is reporting that foreclosures are up by half since last year and that bank seizures have tripled.

And while the annual data may be accurate, that doesn’t mean that it’s necessarily relevant to home buyers and home sellers across the country.

This is because people buying and selling homes don’t usually boast an “annual” mentality; when someone’s an active participant in the real estate market, the mentality is “right now”.

In other words, annual data fits an economist, but month-to-month data fits you.

June’s foreclosure data may be the start of a trend, or it may be a blip. It’s really too soon to tell. But the RealtyTrac data reinforces what real estate professionals already know — that markets all over the country are showing signs of life.

A noon-hour, mortgage-bond rally rendered homes more affordable for Americans Tuesday. It was the second straight day on which this happened.

On both days, the action was swift.

The speed at which Monday’s and Tuesday’s respective rallies tore through mortgage markets illustrates how deep the uncertainty that surrounds the U.S. economy really is.

One reason why the market swings so quickly is that, lately, traders are tending to follow the herd.

As a mortgage rate shopper, it’s outstanding when the herd is moving in your favor. However, when the herd moves in the opposite direction, the impact on your monthly housing cost can be huge.

Volatility has been the common theme for mortgage rates in 2008 and it’s likely to remain a factor until the nation’s economic picture gets a little bit more clear.

Some experts are saying that may happen in 2009. Therefore, you should be prepared for rapid mortgage rate movement and act accordingly when you see a rate-and-payment combination that makes sense for your household budget.

The payment you see in the morning is likely to be gone by the afternoon.

It’s a terrific time to buy a home, but not because homes happen to be affordable.

It’s a terrific time to buy because the variety of mortgage products available to home buyers looks poised to shrink.

Monday, Alt-A mortgage lender IndyMac Bank stopped accepting mortgage applications and it’s likely that other Alt-A lenders will likely follow suit.

Alt-A loans are ones in which borrowers can’t (or won’t) verify one of two major underwriting criteria:

• Evidence of income
• Evidence of assets

Since the Credit Crunch began last July, Alt-A mortgages have been a steady source of funds for “in-between” borrowers — those that are not quite prime, and not quite sub-prime. IndyMac was among the largest lenders of its type and had outlasted many of its peers.

Its position as a market leader and subsequent exit from lending means that the remaining Alt-A lenders will likely make one of two choices in the coming weeks:

1. Raise rates and fees because of greater Alt-A mortgage risk, or
2. Follow IndyMac’s lead and exit mortgage lending altogether

Both outcomes would be harsh for home buyers of all types because when any large bank takes mortgage-related losses like IndyMac just did, it tends to create major risk aversion in the market.

Risk aversion impacts everyone – even the “good” borrowers.

Banks have been nervous about lending for several months and so they’d rather pass on an “average” mortgage application rather than risk getting stuck with a potentially “bad” one. IndyMac’s exit may cause fewer mortgages to get approved.

In other words, buyers eligible for financing today may be ineligible tomorrow.

Therefore, if you’re a home buyer and you know your credit profile is less-than-ideal, consider writing a purchase contract sooner rather than later. Your mortgage options may be thinning, and the ones you have may be getting more expensive.

Last week, Forbes Magazine published a Top 10 list that should grab the attention of housing market bottom-feeders.

The Top 10 list of Increasingly Affordable U.S. Housing Markets shows that falling home prices and steady mortgage rates are providing a support floor in some of the country’s most beat-up regions.

The report’s methodology is simple:

• Take citywide income data as reported by HUD
• Match it against purchase prices from court records
• Run the math using “prevailing interest rates” from Wells Fargo

A city is considered “more affordable” if increasing numbers of “average families” can afford “average homes”. It’s not surprising, therefore, that the Forbes list is dominated by cities in which home prices have plummeted over the last year, and in which he economy is relatively sound.

This may suggest that a housing rebound is already underway in several of the cities listed as Increasingly Affordable U.S. Housing Markets, including:

• San Diego, CA
• Orlando, FL
• Riverside, CA
• Phoenix, AZ
• Las Vegas, NV

Read the complete study and its results at Forbes.com.

On the first Friday of each month, the Bureau of Labor Statistics releases its Non-Farm Payrolls report.

More commonly, it’s called the “jobs report”.

The jobs report is a sector-by-sector look into the U.S. economy and whether businesses are hiring — or firing — workers. This is one of the reasons why its release is so hotly anticipated each month — the jobs report can reveal a lot about the state of the U.S. economy.

Last month, the economy shed 62,000 jobs.

Now, many people will assume that job losses like this are terrible for the U.S. economy. Sometimes, that’s true.

This month, it’s not.

Given the ongoing tug-o-war between inflation and recession, markets are somewhat pleased with the June job loss figures because job losses reduce the likelihood of inflation in the U.S. economy.

Inflation is considered by many — Ben Bernanke included — to be among the top threats to the U.S. economy — it devalues the dollar and leads to increases in the Cost of Living.

Inflation also threatens home affordability because mortgage rates tend to rise when inflation is present.

June’s job losses — while bad for those impacted — is helping to relieve inflationary pressures on the economy and that is boosting markets performance this morning. Stocks are slightly up, and mortgage rates are slightly down.

In the summer of 2005, sub-prime mortgage lending was at its peak. Rates were relatively low and lending guidelines were relatively loose.

At the time, the “standard” sub-prime mortgage product was the 3/27 ARM.

The 3/27 had a few basic traits:

• A fixed, 3-year “starter rate”
• Every six months thereafter, the mortgage rate changed
• The formula by which it changed was (4.999 percent + 6-month LIBOR rate)

If the loan was interest only, it usually converted to principal + interest at the first adjustment, too.

Because the summer of 2005 was the peak of sub-prime lending, it makes sense that the summer of 2008 is the peak of sub-prime adjusting.

For homeowners with adjusting sub-prime loans, there is some (relative) good news out there.

Today, the 6-month LIBOR hovers near 3.15 percent, meaning that an adjusted mortgage rate will be in the neighborhood of 8.15 percent.

This is versus the rate of 10.30 percent that sub-prime borrowers faced last summer when LIBOR was much higher than it is today.

Adjustments of any size can strain a household budget, though, so if you’re a sub-prime borrower and your pending adjustment will cause financial strife, be proactive — talk to your lender before you miss a payment.

Lenders are often more willing to talk with “current” borrowers than with delinquent ones.

As flood waters ran through Iowa and other Midwestern states, the nation’s corn supply was thought to be in danger.

Prices spiked in the wake of the floods, adding to the already-peaking grocery bills that many Americans are now bearing.

But yesterday, in a surprise report, the Agriculture Department said that many farmers had over-planted corn earlier in the season in order to cash in on corn’s rising market value.

The abundance of planting is offsetting a portion of the flood damage and this year’s harvest is now predicted to be the second highest on record.

For Americans in need of a home loan, this is terrific news because more corn supply means lower food prices and that puts a hold on at least one source of inflation.

Inflation is the enemy of mortgage rates.

The revised outlook for this year’s corn supply is now so much better than it was yesterday that the price of a corn bushel fell by 30 cents at the Chicago Board of Trade — the maximum allowable amount by rule.

Now, rapid movements in the price of corn may not seem relevant to everyday life, but even the smallest of details about the economy can trickle down and impact you as a homeowner.

The strength of the housing market may be correlated to consumer confidence and consumer confidence is definitely tied to the Cost of Living. And the same goes for the mortgage market — it’s all related to inflation.

With a surprise crop of extra corn, things may look just a little bit better.

Source
Corn Crop Largely Intact, Despite Floods
Scott Kilman
The Wall Street Journal, July 1, 2008