Mortgage Rates Hold Near All-Time Lows

Author: Tory Barringer in Daily Dose, Data, Headlines, News January 29, 2015 Share on facebookShare on twitterShare on google_plusone_shareShare on linkedinMore Sharing Services32

Mortgage rates moved in a small range this week, hovering close to historical lows as economic troubles around the world weighed against progress at home.

According to data released by Freddie Mac on Thursday, the average interest rate for a 30-year fixed-rate mortgage (FRM) loan was 3.66 percent (0.6 point) for the week ending January 29. This week's movement marked a slight increase from last week's average 3.63 percent—the first time this year that rates have gone up in the company's survey.

The 15-year FRM averaged 3.98 percent (0.5 point), up from 2.93 percent last week.

Average rates on adjustable-rate mortgages (ARMs) also slid up for the week. According to Freddie, the 5-year Treasury-indexed hybrid adjustable-rate mortgage averaged 2.86 percent (0.4 point) this week, up from 2.83 percent, while the 1-year ARM averaged 2.38 percent (0.4 point), up from 2.37 percent.

"Mortgage rates ticked up this week for the first time in 2015 following positive home sales reports," said Len Kiefer, deputy chief economist for Freddie Mac. "New home sales surged 11.6 percent in December beating market expectations. Likewise, existing home sales rose 2.4 percent to an annual rate of 5.04 million homes in December."

Meanwhile, finance site Bankrate.com recorded rate declines in its weekly survey, putting the 30-year fixed average at 3.80 percent from last week's 3.81 percent. The 15-year fixed average fell more, dropping 5 basis points to 3.13 percent.

The 5/1 ARM was unchanged in Bankrate's report, resting at 3.19 percent.

"Mortgage rates remain at the lowest levels since May 2013, despite an improving U.S. economy," analysts for the site said. "The economic sluggishness overseas and increased stimulus from other central banks around the globe have kept the Federal Reserve 'patient' about raising interest rates and helped bring both bond yields and mortgage rates lower."

While the economic situation overseas got only a passing nod in the Federal Open Market Committee's latest statement, policymakers at the Fed don't seem interested in pushing their schedule for rate hikes forward, citing a decline in inflation as energy costs fall.

Experts expect that at this rate, the earliest the central bank will act on interest rates is in the summer.

When your home sales price is lower than the appraisal, here's what you can do.

By Shanon Emerson | January 19, 2015

There’s no way around it: any home purchase financed by a mortgage involves an appraisal. This is how the bank ensures that the size of the loan isn’t greater than the value of the collateral (the house) needed for the loan.

So what happens when the appraisal comes in below the price you and the buyer have agreed upon?

The good news is that a low appraisal doesn’t have to be a deal killer. Having a knowledgeable agent at your side can make all the difference when it comes to bouncing back from a low appraisal.

Here are the top six things you can do.

1. Reduce the price of the house to the appraised value
As the seller, you can always sell the house at the appraised value without negotiating with anyone. This is the fastest way to “recover” from a low appraisal, but it could mean leaving money on the table. (And that’s always hard to swallow.)

2. Have the buyer make up the difference
In some cases, the buyer will have enough cash on hand to cover the difference between the appraisal and the selling price at closing. If the buyer feels confident that the value is there for her — despite the appraisal — she can simply add cash to the down payment, and the lender should be satisfied.

3. Meet in the middle
If both parties still want the sale to go through, it could make sense to split the difference, with the seller dropping the price a bit and the buyer adding cash to the down payment.

For example, if the difference between the sales price and the appraised value is $10,000, the seller could lower the price by $5,000 and get the buyer to bring another $5,000 to closing. This solution depends entirely on the relative willingness and financial positions of the two parties.

4. Challenge the appraisal
This option is a bit of a long shot. Only the appraiser’s client — the lender — can demand a review of the appraisal, and only the buyer can request a review or a second appraisal.

As the seller, you can support the buyer in this effort by sharing the competitive market analysis that you received from your agent or by giving her the results of an independent appraisal, if you have one. You also can offer to split the cost of a second appraisal if the lender agrees.

This route has long odds because the decision is ultimately up to the lender, and the lender doesn’t have the same investment in the transaction that the buyer and seller have. If the lender doesn’t have a compelling reason to doubt the appraisal, then that tends to be the end of the line. (In my experience, only a small percentage of these requests are granted.)

5. Put the house back on the market
If the buyer can’t or won’t put more money down, and you’re not interested in reducing the price, you can take your chances by allowing the deal to fall through and putting the house back on the market.

This can be disappointing to everyone involved. But if you’re in this situation because multiple offers brought the offer price above the asking price, then it might not be a bad way to go. You could get lucky and receive a cash offer when your agent relists the home. In that scenario, the appraisal won’t be an issue. Plus, even without the cash offer, another lender’s appraiser could have a more favorable point of view.

When considering scrapping your deal, don’t forget that at this point your house has been off the market for several weeks and you’re putting yourself that much farther from a closed sale.

This is where your agent is especially helpful. Your agent understands what the market is doing and can clarify your options so you can make the best decision for that moment. You might also have other options, as rules vary from lender to lender and from state to state.

6. Stay calm
The hardest tactic is also the most simple — above all, stay calm, look at the facts, and let your agent do the negotiating.

Home Sales Reverse November Decline, Jump 14.4 Percent in December

Author: Tory Barringer January 21, 2015 Share on facebookShare on twitterShare on emailShare on pinterest_shareMore Sharing Services0

December home sales topped the previous month by a double-digit percentage, defying the usual slowdown brought on by seasonal influences, according to a survey of metros nationwide.

RE/MAX reported that home sales activity jumped 14.4 percent nationally month-over-month December, a sharp reversal from November's 22.5 percent drop. Compared to the same month in 2013, December sales were up 3.9 percent, making it one of only a handful of months in 2014 to see transactions improve on a yearly basis.

Due on Friday is the National Association of Realtors' monthly estimate of existing-home sales, which economists expect will show an adjusted annualized transaction rate of 5.05 million, based on a pickup in contract signings in November.

"After a sluggish start, it's nice to see the year end on a positive note. Even though we're well into the winter months, homebuyers felt confident enough to enter the market in greater numbers than just one month ago," said Dave Liniger, CEO, chair, and co-founder of RE/MAX.

Out of 53 metro markets surveyed by RE/MAX last month, 42 reported higher sales on a year-over-year comparison, with 12 posting double-digit increases, the company said.

Continuing the prevailing trend since early 2012, home prices also climbed annually, rising 5.9 percent over December 2013 to a median $196,000. On a year-over-year basis, the national median home price has increased for 35 straight months in RE/MAX's survey.

At the same time, price growth has fallen off by half from 2013 as rising inventory levels and slightly lower demand make for a cooler market.

"With prices rising at a much slower rate than last year, sellers continue to increase their equity, while buyers don't feel priced out of the market," Liniger said.

Despite the improving trend in inventory, supply remains constrained, falling 10.7 percent in December compared to the year prior and 11.4 percent compared to November. Inventory has increased sequentially in 14 of the last 20 months, with November and December both proving an exception to the pattern, RE/MAX said.

Fed: Economy Growing at ‘Modest to Moderate’ Pace Amidst Concerns Over Oil Prices

Author: Tory Barringer January 14, 2015 Share on facebookShare on twitterShare on emailShare on pinterest_shareMore Sharing Services

Economic growth continued at a "modest to moderate" pace through November and December, though falling oil prices threaten to disrupt some areas in the coming months, according to reports collected by the Federal Reserve.

In the latest Beige Book report released on Wednesday, the Fed said that contacts in most of its 12 districts expect faster growth in the year ahead, though some in the Dallas district are worried about a slowdown as the oil market suffers.

While lower prices are bound to keep Americans happy at the gas pump, they could potentially be a problem for housing in oil-dependent states, including Texas, Oklahoma, and Louisiana. If the current decline impacts the local labor market (as the Dallas Fed indicated Wednesday in its own Beige Book), it could be a weight on their housing health in the next few years.

In the housing sector, the Fed reported little change for most districts, with both single-family home sales and construction flattening out. Sales were down somewhat on a yearly basis in Boston, Cleveland, Atlanta, Chicago, Minneapolis, Kansas City, and Dallas, while San Francisco posted a pickup. While existing-home sales fell annually in Philadelphia, contacts there are optimistic about pending home sales numbers, which improved year-over-year.

On the homebuilding side, construction on new homes slowed slightly in the Cleveland, Atlanta, Chicago, Minneapolis, and Kansas City districts. Homebuilding increased in some areas of the San Francisco district.

Overall, loan demand grew modestly, nudging up in Richmond, Kansas City, and Dallas, with the Philadelphia district also reporting a "modest" increase in total loan volume.

Credit quality also improved somewhat, with overall reductions in loan delinquencies. Credit standards were largely unchanged, though "several Districts commented that their contacts indicated that stiff competition for high-quality borrowers was leading to lower underwriting standards among lenders more generally," the Fed said.

Report Predicts Big Year for Housing in 2015 Based on Recent Government Actions

Author: Tory Barringer January 12, 201Share on facebookShare on twitterShare on emailShare on pinterest_sharMore Sharing Services

With 2015 less than two weeks underway, Fitch Ratings is the latest forecaster predicting great things for housing in the coming year. However, unlike other commentators, whose projections were based on encouraging market trends, the ratings agency says it's a combination of recent government actions that reinforces its view.

In a report released Monday morning, Fitch outlined five big events—all of which have taken place in the past few months—that, taken together, "could have a relatively meaningful impact on home buyer psychology, pent-up demand and housing trends in 2015 and beyond," the company says.

• The Federal Housing Administration's (FHA) announcement that it will lower insurance premiums to 0.85 percent annually: Historically considered one of the top resources for low-income and first-time homebuyers, FHA has fallen off in the past few years as it's been forced to raise premiums and require life-of-loan payments to help shore up its capital reserves. As a result of the changes, Fitch estimates that FHA's share of the new housing finance market through Q3 2014 was down to 11.9 percent from 15.6 percent in all of 2013 and 20.4 percent in 2012. With premiums set to come down by the end of January—a move the White House estimates will save the average FHA borrower $900 annually—the agency expects FHA-insured loans may become a more attractive option again.
• Fannie and Freddie's move to lower down payment requirements: In another action to open up mortgage lending, the Federal Housing Finance Agency (FHFA) announced in December that it has directed Fannie Mae and Freddie Mac to introduce programs offering down payments as low as 3 percent to qualified homebuyers. To minimize risk, FHFA said the programs will take into account compensating factors to prove creditworthiness and will feature homeownership counseling.
• FHFA's clarified rep and warrant framework designed to reduce lender confusion: Taking notice of FHFA's pursuit of certain originators over loans they sold to the GSEs, many lenders have set up stricter credit overlays (often worse than the GSEs' minimum requirements) in order to mitigate putback risk. To reassure lenders, both Fannie and Freddie updated their frameworks in November to better define what they consider to be a misrepresentation, a step that will hopefully spur originators to expand their lending criteria.
• Regulators' finalizing of the qualified residential mortgage (QRM) rule: FHFA, the Fed, the Comptroller of the Currency, and other financial regulators finalized in October a rule requiring banks to hold on to a portion of loans they sell, cutting out an exemption for low-risk mortgages. The final rule did away with an earlier provision requiring a 20 percent down payment for low-risk loans after mortgage bankers and trade groups voiced concerns about how such a requirement would restrict credit.
• A welcome decline in oil (and fuel) prices: An oversupply of oil has brought costs down by more than half, slashing costs at the pump considerably (in an interview with USA Today, Saudi businessman Prince Alwaleed bin Talal said he doesn't expect to see oil prices climb to $100 per barrel again.) The decline has left American drivers with more disposable income, opening up affordable housing options for those who were worried about their commute.

Report: Falling Negative Equity Rate Nearing Single Digits

Author: Tory Barringer January 8, 2015Share on facebookShare on twitterShare on emailShare on pinterest_shareMore Sharing Services23

The third quarter of 2014 saw more than a quarter of a million American homes return to positive equity, leaving about one in 10 still underwater,CoreLogic said in its Q3 2014 Equity Report released Thursday.

According to the company's latest estimates, an additional 273,000 U.S. homes recovered to a positive equity position in Q3, bringing the total number of mortgaged homes with equity to approximately 44.6 million—about 90 percent of all mortgaged properties in the nation.

As home values rise and borrowers continue to gain equity, CoreLogic's analysis indicates that nearly 5.1 million properties are still upside-down on their mortgage. That figure represents about 10.3 percent of all residential properties with a mortgage compared to about 13.3 percent the year prior.

"Negative equity continued to decrease in the third quarter as did the level of homes mired in the foreclosure process. This should hopefully translate into less friction in the housing market as we move forward," said CoreLogic president and CEO Anand Nallathambi. "Better fundamentals supporting homeownership in the face of higher rents should attract more first-time homebuyers to the market this year and next."

With home prices expected to appreciate about 5 percent in the next year, CoreLogic economist Sam Khater predicts the national negative equity rate should fall another 2 percentage points to roughly 8 percent—"still above average, but approaching the pre-crisis level."

The bulk of home equity recovered in the last few years has been at the high end of the housing market, CoreLogic said. The company's report shows 94 percent of homes valued at more than $200,000 are in positive equity, while 85 percent of homes below that threshold are in the same position.

Declines in negative equity in the third quarter were concentrated in a handful of states, with Nevada, Georgia, Michigan, and Florida seeing some of the biggest improvements. However, those states are still experiencing higher than average levels of underwater mortgages. The problem is worst in Nevada and Florida, which both topped the list of states with the highest negative equity rates (at 25.4 percent and 23.8 percent, respectively).

Furthermore, out of the nearly 45 million mortgage properties that are above water, CoreLogic estimates that 9.4 million (19 percent) have less than 20 percent equity, while 1.3 million (close to 3 percent) have less than 5 percent equity.

These under-equitied and near-negative equitied properties still present a challenge to the housing market, as those borrowers are likely to have a difficult time refinancing or selling their home. They're also at risk of slipping back underwater should home prices see a surprise reversal.

Report: President to Announce Reduction in FHA Premiums

Author: Tory Barringer January 7, 2015 Share on facebookShare on twitterShare on emailShare on pinterest_shareMore Sharing Services

President Barack Obama will announce this week a reduction to Federal Housing Administration (FHA) mortgage insurance premiums, according to media reports.

Bloomberg reported Wednesday that FHA will cut its mortgage insurance premiums to 0.85 percent, a 0.5 percentage point reduction. Obama is expected to make the announcement on Thursday in a scheduled speech on the housing market in Phoenix, Arizona.

FHA raised premiums in response to its declining mortgage insurance fund, which forced the agency to take a $1.7 billion bailout in 2013. Since then, it has rebuilt its capital, spurring some commentators to call for a cut.

When reached for comment, a HUD representative said he could not comment or confirm that the FHA premiums would be cut. A separate source familiar with the matter was able to confirm it, however.

The announcement would come as welcome news to many of housing's biggest trade organizations, who have been vocal in the past few months about the consequences of higher premiums.

In a statement to DSNews, Chris Polychron, president of the National Association of Realtors (NAR), said the group is hopeful at the rumor, adding that current premiums "have priced too many potential homeowners out of the market." NAR estimates that in 2014 alone, nearly 234,000 creditworthy borrowers were priced out of the housing market because of high FHA premiums.

"By lowering its fees, FHA will provide greater access to homeownership for historically underserved groups," Polychron said. "I look forward to attending the speech ... and sharing our views with President Obama."

Housing analysts have also joined the rising chorus of those urging for lower premiums. In a report put out before Wednesday's announcement, researchers Laurie Goodman, Bing Bai, and Jun Zhu at the Urban Institute argue that FHA could still net at least $2 billion in 2015 with premiums as low as 0.9 percent annually, allowing the agency to continue rebuilding its insurance fund.

"It makes sense to make up the shortfall more slowly, pricing new business more appropriately for the risk," the group said. "Thus, rather than attempting to make $5.7–$6.8 billion with its 2015 book of business ... it would serve the FHA better to lower the premiums and achieve the reserve at a more gradual pace."