Friday is a pivotal day for mortgage markets and conforming mortgage rates across Ohio. At 8:30 AM ET, the government will release its March Non-Farm Payrolls report.
More commonly known as “the jobs report”, the monthly Non-Farm Payrolls is a market-mover and home buyers would do well to pay attention. Depending on the report’s strength, mortgage rates could rise, or fall, by a measurable amount tomorrow morning.
It’s because so much of the today’s mortgage market is tied to the economy, and economic growth is dependant on job growth.
With more job growth, there’s more consumer spending and consumer spending accounts for the majority of the U.S. economy. Additionally, it generates more payroll taxes to local, state and federal governments. This, too, puts the broader economy on more solid footing.
Between 2008 and 2009, the economy shed 7 million jobs. It has since recovered 1.5 million of them. Friday, analysts expect to count another 190,000 jobs created. If the actual figure falls short, expect mortgage rates to ease.
Otherwise, look for rates to rise. Probably by a lot.
If you’re shopping for a mortgage right now, consider your personal risk tolerance. Once the BLS releases its data, it will be too late to lock in at today’s interest rates. If the idea of rising mortgage rates makes you nervous, execute your rate lock today instead.
On a 30-year fixed rate loan, each 1/8 percent increase to rates adds roughly $7 per $100,000 borrowed.
Standard & Poors released its Case-Shiller Index for the month of January this week. The index is a home valuation tool, measuring the monthly and annual changes in home prices in select cities nationwide.
January’s Case-Shiller Index gave a poor showing. As compared to December 2010, home values dropped in 19 of the Case-Shiller Index’s 20 tracked markets. Only Washington, D.C. gained. The results were only modestly better on an annual basis, too.
18 of 20 markets worsened in the 12 months ending January 2011.
According to the report, values are down 3.1% from last year, retreating to the same levels from Summer 2003. As a buyer or seller in today’s market, though, don’t read too much into it. The Case-Shiller Index is far too flawed to be the final word in housing.
The index has 3 main flaws, in fact.
The first flaw is the Case-Shiller Index’s lack of breadth. The report is positioned as a national index, but its data is sourced from just 20 cities nationwide.
Putting that number in perspective: the Case-Shiller Index tracks home values from fewer than 1% of the 3,100 U.S. municipalities – yet still calls the report a “U.S. Average”.
A second flaw in the Case-Shiller Index is how it measures home price changes, specifically. Because the index only considers “repeat sales” of the same home in its calculations, and only tracks single-family, detached property, it doesn’t capture the “full” U.S. market. Condominiums, multi-family homes, and new construction are ignored in the Case-Shiller Index algorithm.
In some regions, homes of these excluded types represent a large percentage of the market.
And, lastly, the Case-Shiller Index is flawed because of the amount of time required to release it.
Today, it’s almost April and we’re talking about closed home resales from January which is really comprised of homes that went under contract in October — close to 6 months ago. Sales prices from 6 months ago is of little value to today’s Cincinnati home buyer, of course.
The Case-Shiller Index can be a helpful tool for economists and policy-makers trying to make sense of the broader housing market, but it tends to fail for individuals in Indian Hill like you and me. When you want accurate, real-time housing figures for your local market, talk to your real estate professional instead.
On a seasonally-adjusted basis, the Pending Home Sales Index rose 2 percent last month, according to the National Association of REALTORS®. A “pending home sale” is defined as a home under contract to sell, but not yet closed.
February’s Pending Home Sales Index rebound breaks a 2-month losing streak, and reverses the recent downward momentum in housing. Both Existing Home Sales and New Home Sales volume showed a sizable loss last month.
For buyers and sellers of real estate in Cincinnati , the Pending Home Sales Index is of particular import. It’s one of the few forward-looking indicators in housing, and February’s data suggests a stronger spring season than was the winter.
3 of 4 regions showed marked improvement, which is good for housing. In the fourth — New England — it’s likely that inclement weather hampered results.
February was colder-than-normal and the month capped a record-breaking snowfall season for the region. Anecdotally, fewer homes are sold in the cold-and-snow of winter and it’s likely that the weather affected local housing markets.
Looking to March and April, therefore, we should expect Existing Home Sales data to rebound. This is because 80% of “pending” homes close within 60 days, and because improving weather should release pent-up demand for housing.
More sales plus higher home demand tends to lead home prices higher. If you’re in the market for a new home, consider that your best negotiation leverage comes in a weak market. As the seasons turn, your leverage looks poised to slip.
According to the EPA, the average U.S. household spends close to $500 each year on water and sewage bills. But by making just a few small changes, that figure could drop by as much as $170 annually. It’s all in how you use your water.
Don’t rinse food from dishes before putting them in a dishwasher. Scrape the dishes instead.
When brushing your teeth or shaving, turn off the water at the sink.
Use a rain barrel to capture rain, then use the rain to water plants and shrubs.
There’s a host of tips in the video but the recurring theme is that you should never “leave water running”. This is because water at home is “treated” water and the amount of energy required to treat 5 minutes’ worth of water from a faucet is equivalent to the amount of energy required to run a 60-watt light bulb for 14 hours.
That’s a lot of energy.
Water is a precious resource, and it can be expensive, too. Therefore, help the environment and your budget at the same time — practice water conservation at home.
It’s a great time for Cincinnati buyers and homeowners to look at the 15-year fixed rate mortgage.
According to Freddie Mac’s weekly Primary Mortgage Market Survey, the relative “discount” of a 15-year fixed rate loan as compared to a comparable 30-year product is the largest in recorded history. The interest rate spread between the two benchmark products is now 0.77%, nearly double the recent, 5-year average of 0.44%.
Despite its lower rates, however, homeowners that opt for a 15-year fixed mortgage should be prepared for higher monthly payments. This is because the principal balance of a 15-year fixed is repaid in half as many years as with a 30-year amortizing product.
The payment increase is 41% higher at today’s rates. If you can manage that, though, you’ll reap dramatic interest payments savings over time. For each $100,000 borrowed at today’s market interest rates, your mortgage interest costs on a conforming 15-year term mortgage will be lower by $56,000 versus an identically-structured 30-year term. The more you borrow, the more you save.
That said, not everyone should use the 15-year product.
One reason you may want to avoid 15-year products is because the higher payments may lead to financial stress. Unless your monthly income far exceeds your monthly debts, choosing a 30-year product may feel safer for you.
Another reason is that, with less mortgage interest paid, 15-year mortgages don’t allow for as many mortgage interest tax deductions. This can have tax implications to you each year. Or, maybe you prefer to have your home leveraged, investing “spare dollars” in stocks and bonds.
These are all legitimate cases to stick with a 30-year term, but if you’ve ever explored the idea of using a 15-year fixed rate mortgage for your home, today, the math is in your favor. Talk to your loan officer before the rates start rising.
Sales of newly-built homes plunged 17 percent to an seasonally-adjusted, annualized 250,000 units in February, and the supply of new homes rose to 8.9 months in February — a 1.5 month jump from January.
It’s the lowest New Home Sales reading in recorded history, according to the Census Bureau, and the third straight report to signal that home values may be slow to rise in Cincinnati and nationwide this season.
Earlier this week, the National Association of REALTORS® reported Existing Home Sales down 10 percent from February, and the Federal Home Finance Agency said home values slipped 0.3 percent between December and January.
There’s two interesting angles here. First, the one that’s largely neglected in the stories online.
Although New Home Sales read -17% last month, the data’s Margin of Error read ±19%. This means that, once additional homes are added to February’s New Home Sales tally, it’s possible that the reading actually rose 2%.
Because the Margin of Error exceeds the measured reading, February’s New Home Sales figures are of “zero confidence”. The Census Bureau even says as much in its report.
Or, if the initial reading is accurate, a second story emerges. Namely, how an increase in home supply may help this season’s buyers to negotiate better prices for a home, and upgrades from a builder.
There’s often more to a real estate story than its headline and February’s New Home Sales proves it.
Home sales data is easing so far in this calendar year. Home resales and new construction have dropped to multi-month lows and, in many cities, home supplies are rising. One housing sector that’s not slowing, however, is rentals.
The rental market is booming.
As reported by the Wall Street Journal, the average apartment vacancy rate is 6.6% nationwide, down from 8.0% last year. In addition, the number of occupied apartments rose by more during Q4 2010 than during any comparable period of the last 10 years.
It’s a major reason why rents are up 2.3%.
Some areas, however, fared worse than others. This study of rent increases as published on MSNBC, for example, lists the 10 U.S. cities in which rents increased the most last year. And they may not be the cities you’d expect.
In order:
Greenville, SC (+11.2%; $669 average monthly rent)
Chattanooga, TN (+10.4%; $726 average monthly rent)
Savannah, GA (+8.4%; $866 average monthly rent)
Portland, OR (+8.1%; $875 average monthly rent)
San Jose, CA (+8.0%; $1,716 average monthly rent)
Nashville, TN (+8.0%; $786 average monthly rent)
Tacoma, WA (+8.0%; $900 average monthly rent)
Denver, CO (+7.5%; $873 average monthly rent)
Washington, DC (+7.4%; $1,473 average monthly rent)
Raleigh, NC (+7.4%; $785 average monthly rent)
Big cities New York (#18), San Francisco (#19), and Chicago (#24) showed modest gains, by comparison.
Not everyone across Ohio wants to be a homeowner, but renters are facing a squeeze. With mortgage rates historically low and home values slow to recover, in many cities, the cost-benefit analysis is shifting toward buying.
Existing Home Sales fell 10 percent last month, according to a report from the National Association of REALTORS®.
On an annual basis, 4.88 million homes were sold in February — the first time annualized home resales dropped below 5,000,000 since November 2010.
An “existing home” is one that’s not considered new construction.
And it’s not just sales volume that’s down. Home inventory is higher, too. At the current pace of sales, the number of months needed to sell the complete home resale inventory rose by 1.1 months, to 8.6 months nationally.
It’s the biggest one-month jump in supply since July 2010 — the month after last year’s federal home buyer tax credit program expired.
The data is somewhat unexpected, too. NAR’s Pending Home Sales report is a reliable predictor for the housing market and, based on recent findings, home sales were projected to climb in February. It’s unclear why they didn’t.
Regardless, the February sales data reveals an interesting breakdown by buyer-type. Notably, the percentage of first-time home buyers in the market grew by more than any other segment.
First-time home buyers : 34% of all sales, +5% from January
Repeat buyers : 47% of all sales, -1% from January
Real estate investors : 19% of all sales, -4% from January
Cash buyers represented 33 percent of all sales, up 1 tick from the month prior.
For Cincinnati home buyers, February’s Existing Home Sales data suggests more home supply and lower home prices this spring. However, rising mortgage rates could eliminate the monthly savings attributed to falling home values.
To get the most from your mortgage-buying dollar, lock while rates are low.
According to Consumer Reports, Americans waste as much as 25% of the products they purchase. From food to pharmaceuticals, pesky packaging is making it hard for consumers to use “the last drop” of the things they buy and, as such, products are thrown out prematurely.
It doesn’t have to be that way. Using household tools and basic steps, you, too, can make less waste and stretch your household dollar. This 5-minute interview on NBC’s The Today Show shows you how.
For example, you’ll learn:
How to get the last bit of ketchup from the jar (without adding water)
How to get the last bit of hair gel from the plastic bottle
How to get the last bit of body lotion from the bottom of the “pump” jar
Furthermore, you’ll learn how to rescue over-ripe bananas.
The less you waste at home, the more money you’ll save in the bank. Watch the video, take notes, and start making less waste.
Single-family housing starts plunged unexpectedly last month. Nationwide, starts fell 12 percent from the month prior; and 29 percent from February of last year.
February’s figures represents the worst 1-month drop in housing starts since May 2010 — the month that followed the expiration of last year’s federal home buyer tax credit — and puts single-family housing starts at a 24-month low.
In addition, single-family Building Permits plunged last month, too, shedding 9 percent from January. A building permit is a local government’s certification and approval to begin home construction.
Housing permits are an excellent forward-indicator for the housing market. This is because 93 percent of homes start construction within 60 days of permit-issuance. Fewer permits, therefore, directly reduces the number of new homes coming to market in the coming months.
For home buyers in Cincinnati looking at new construction or existing homes, this news should create a sense of urgency.
Home prices are based on supply and demand and overall home supply looks headed for a fall. Plus, with mortgage rates retreating and homebuilders projecting higher sales this summer, buyers may face rising home prices before long.
Sellers look poised to regain negotiation leverage.
For now, though, home affordability remains high with properties inexpensive and mortgage rates still low, historically. If you plan to buy a home in 2011, the February 2011 Housing Starts data may be reason to move up your time frame.
With home supplies dropping, prices are likely to rise.
Homebuilders are optimistic about the housing market this spring, relative to recent months.
According to the monthly Housing Market Index as published by the National Association of Homebuilders, after 4 straight months of reading 16, March homebuilder confidence ticked 1 point higher to 17.
It’s the highest confidence reading in 10 months.
A value of 50 or better indicates “favorable conditions” for home builders; with more builders viewing sales conditions as “good” than “poor”.
HMI hasn’t read higher than 50 since April 2006.
Regionally, the Housing Market Index showed mixed results. Confidence fell 1 point in the Northeast, held firm in the Midwest, and rose in the Southeast and West regions by 2 points and 4 points, respectively.
As an index, the monthly survey is actually a composite of three separate homebuilder surveys — a report on single-family sales; a report on current buyer foot traffic; and a projection for single family sales in the next 6 months.
March’s HMI breakdown shows that builders expect sales to be brisk over the next few months. Projected Single-Family Sales is running at its highest level since May 2010 — right as the $8,000 federal homebuyer tax credit was ending.
Single-Family Sales : 17 (Unchanged from February)
Buyer Foot Traffic : 12 (Unchanged from January)
Projected Single-Family Sales : 27 (+2 from February)
For home buyers in Cincinnati and across the country , the March Housing Market Index may signal the end of “builder discounts” and free upgrades. As home sales increase, builders are often less likely to make concessions.
In conjuction with rising mortgage rates and new, mandatory loan costs, buying a newly-built home may never be as inexpensive as it is right now.
If you expect to buy a newly-built home this year, consider moving up your time frame. The longer you wait, the more it may cost you.
Today, for the second straight meeting, the Federal Open Market Committee voted unanimously to leave the Fed Funds Rate unchanged within its target range of 0.000-0.250 percent.
The vote was 10-0.
In its press release, the FOMC noted that since its January 2011 meeting, the economic recovery “is on firmer footing”, and that the labor markets are “improving gradually”. In addition, household spending “continues to expand”. Nonetheless, the Fed said, the economy remains constrained by rising commodity prices and the “depressed” housing sector.
The FOMC statement also re-affirms the group’s plan to keep the Fed Funds Rate near zero percent “for an extended period”, and to keep its $600 billion bond market support package — more commonly called “QE2″ — intact.
And, lastly, for the third straight time, the Federal Open Market Committee’s post-meeting release statement included a paragraph detailing the Federal Reserve’s dual mandate of managing inflation levels, and fostering maximum employment. Although it acknowledged inflationary pressures on the economy, the Fed said inflation remains too low for the economy currently, and that unemployment remains “elevated”.
In time, the Fed expects both measurements to improve.
Mortgage market reaction to the FOMC has been negative since the statement’s release. Mortgage rates in Cincinnati are unchanged, but poised to worsen.
The FOMC’s next scheduled meeting is a 2-day event, April 26-27, 2011.
The Federal Open Market Committee meets today in Washington D.C. The FOMC is a special group within the Federal Reserve, led by Fed Chairman Ben Bernanke, and consisting of 12 members.
The FOMC’s official schedule calls for 8 meetings annually at which it reviews the nation’s economic and financial conditions, and chooses whether to change existing monetary policy.
The group’s last rendez-vous was a 2-day affair, January 25-26, 2011.
Today’s FOMC meeting represents a bona fide risk to home buyers and rate shoppers in Cincinnati and across the country. This is because when the Fed meets, Wall Street gets nervous which, in turn, causes mortgage rates to get volatile. And, as mortgage rates go, so goes home affordability.
Rate shoppers learned this the hard way after the FOMC’s last meeting.
In January, Wall Street deemed the Fed’s status quo message too soft on the looming threat of inflation. As a result, conforming mortgage rates rose through 7 of the next 10 days, driving pricing to its worst levels of the year.
This may happen again beginning today.
At 2:15 PM ET, the FOMC will adjourn and make a press release to the markets. The Fed is expected to keep the Fed Funds Rate near its target range of 0.000 percent, and to keep its $600 billion bond buy program in place. That doesn’t mean mortgage rates will idle, however.
Depending on the verbiage of the Fed’s statement, Wall Street will make its new bets. A tough approach on inflation should push mortgage rates down; a soft approach should pressure rates up. Either way, you may want to lock your mortgage rate prior to 2:15 PM ET — just to be safe.
Once the Fed adjourns, you’re at the market’s mercy.
Most of the cleaning can be handled with household items like rags and cleansers, but for a few of the items, you may want to rent a machine from a local hardware store or supermarket. Carpet shampooers are a noteworthy example. Rental costs are nominal and the potential time savings are big.
For some households Spring Cleaning is a one-day affair. For others, it’s a weekend project that lasts a month. However you choose do it, keep this checklist handy and you’ll have an easier time.
FHA Streamline Refinance guidelines are changing. For the better.
In an effort to improve its loan portfolio, the FHA is loosening approval standards on its popular refinance program, rendering large groups of homeowners suddenly FHA Streamline-eligible.
Now, that may seem counter-intuitive — lowering qualification standards in order to reduce loan defaults — but in the FHA’s case, it makes complete sense. It’s because the FHA doesn’t make loans. It insures them. What’s good for FHA-insured homeowners is good for the FHA, therefore.
All things equal, lower housing payments for its insured homeowners should correlate to fewer FHA loan defaults in Ohio and nationwide.
One interesting facet of the FHA’s new rulebook is the manner in which the government group is applying common sense to the approval process. So long as the homeowner is current on their mortgage and there’s a demonstrable benefit in the refinance, the FHA reasons, there’s good reason to insure the new loan.
The FHA defines “current on the mortgage” as being up-to-date on payments, and having zero 30-, 60-, or 90-day lates within the last 12 months. Demonstrating benefit is a little more tricky.
According the FHA, “benefit” is defined by refinance type.
When refinancing any fixed rate mortgage, or an existing ARM to a new ARM, the borrower’s new monthly (principal + interest) + (mortgage insurance premium) must be 5% or more below the current levels to meet the FHA’s minimum benefit requirements.
The refinance of any ARM to a fixed rate mortgage is considered an acceptable benefit.
Beyond that, Streamline Refinance guidelines are simple:
Income is not verified, or required
Employment is not verified, or required
Assets are not verified, unless required to meet closing costs
Note that an appraisal is not required, either This allows “underwater” homeowners to refinance their FHA-insured home loan without penalty. The downside is that without an appraisal, the new loan size may not exceed the current principal balance plus the FHA’s 1% upfront mortgage premium. All other charges must be paid as cash at closing.
The FHA Streamline program is a refinance program special to FHA-insured homeowners. To confirm your own eligibility, check with your lender.
Friday is a pivotal day for mortgage markets and conforming mortgage rates across Ohio. At 8:30 AM ET, the government will release its March Non-Farm Payrolls report.
Sales of newly-built homes plunged 17 percent to an seasonally-adjusted, annualized 250,000 units in February, and the supply of new homes rose to 8.9 months in February — a 1.5 month jump from January.
Home sales data is easing so far in this calendar year. Home resales and new construction have dropped to multi-month lows and, in many cities, home supplies are rising. One housing sector that’s not slowing, however, is rentals.
Existing Home Sales 
Single-family housing starts plunged unexpectedly last month. Nationwide, starts fell 12 percent from the month prior; and 29 percent from February of last year.
Homebuilders are optimistic about the housing market this spring, relative to recent months.
Today, for the second straight meeting, the Federal Open Market Committee voted unanimously to leave the Fed Funds Rate unchanged within its target range of 0.000-0.250 percent.
The Federal Open Market Committee meets today in Washington D.C. The FOMC is a special group within the Federal Reserve, led by Fed Chairman Ben Bernanke, and consisting of 12 members.
The calendar has turned March in Cincinnati and warmer weather is around the corner. Get ready for Spring Cleaning Season.
FHA Streamline Refinance guidelines are changing. For the better.
