Mortgage Market Week in Review

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Tom

Quote of the Day

Facts do not cease to exist because they are ignored. Aldous Huxley, 1927

Existing Home Sales

This chart from Calculated Risk takes a look at what existing home sales are like.   Once again, we’re looking at a situation where the sales where the sales were better than last month but lower than last year.

Raises a couple of questions:

• Does the seasonality of home sales play into the difference between June and July?   I’m not sure that it does because normally June and July are part of the same “selling” season and these are “closed sales.”
• How much does the $8000 tax credit play into it?   I expect that we’re borrowing a lot of sales from the future.

Tom Vanderwell

Calculated Risk: August Economic Summary in Graphs

Sales in July 2009 (5.24 million SAAR) were 7.2% higher than last month, and were 5.0% lower than July 2008 (4.99 million SAAR).

Existing Home Sales

Is PMI DOA?

This is by no means conclusive, but it’s something to at least keep an eye on.   Let me explain:

• Without mortgage insurance, Fannie and Freddie can’t go higher than an 80% loan to value.
• The PMI companies are getting hit hard with the losses they are experiencing.
• If the PMI companies continue to get hit with bad losses, they might be unable to offer mortgage insurance.

What do I expect this to mean for the housing market?   A couple of things:

• Expect increasing pressure pushing more and more borrowers towards FHA.
• Expect tightening requirements for PMI loans.
• Expect increased fees on FHA’s side because of the losses they are facing and frankly because they can do it and get away with it.

PMI is not DOA, but it’s not completely healthy either and that’s going to make a difference over the next 12 to 48 months…..

Tom Vanderwell

Housing demand could snag on mortgage insurance – Mortgage Insider – OCRegister.com

Housing demand could snag on mortgage insurance
August 25th, 2009, 2:45 pm · posted by Mathew Padilla

Most of the home loans in this country are sold to Fannie Mae and Freddie Mac, which insist borrowers put down 20% or more of the purchase price of a home or pay for mortgage insurance. But is there enough insurance available? Here’s the latest on that issue from National Mortgage News:

Capital constraints on mortgage insurance companies could impede the ability of Fannie Mae and Freddie Mac to keep up with the demand for mortgage financing during the housing recovery, according to a report by the government-sponsored enterprises’ regulator. Former Federal Housing Finance Agency director James Lockhart has been urging the Treasury Department to provide capital assistance for the private MIs since last November. The Mortgage Insurance Cos. of America also is seeking assistance. “We have a request pending and we are waiting for a response,” said MICA spokesman Jeff Lubar. The GSEs can purchase single-family mortgages with loan-to-value ratios higher than 80% only if the homebuyer gets mortgage insurance. The FHFA Mortgage Market Note issued a few days after Mr. Lockhart’s departure projects that the demand for such high LTV loans could hit $230 billion in 2009. The ability of the MIs to meet that level of demand is “remote,” FHFA report says. “The industry’s ability to build and maintain sufficient capital to meet the needs of the enterprises over the short term without some federal assistance or an infusion of private capital is unclear,” the report concludes.

So the answer is more government support? Let’s hope not.

Case Shiller Home Price Index

The interesting things that I saw in this report…..

• Shiller himself says that this is an impressive turnaround and a “HUGE SUDDEN UPWARD” swing.   Should that sudden of a change make us nervous?
• The statistics in terms of how far the indexes have fallen since 2006 is quite something.
• The national home price index is still down by 14.9% for the 2nd quarter.   So was April that bad of a month that May and June are “positive” and we’re still down by 14.9% for the quarter?

I’ll have more on this later.   It’s a good sign but don’t read too much into it.

Tom Vanderwell

Home Prices Up Again in June as Housing Crisis Eases – Real Estate * US * News * Story – CNBC.com

The S&P/Case-Shiller composite indexes of 10 and 20 metropolitan areas both rose 1.4 percent in June from May, almost three times the 0.5 percent increases of the month before. May’s increases were the first in nearly three years.

“It is an impressive turnaround. This is a huge, sudden, upward swing,” Robert Shiller, economist at the Yale School of Management, told CNBC in a live interview.

The 10- and 20-city indexes have dropped 54.3 percent and 45.3 percent from their 2006 peaks, respectively.

S&P also said its U.S. National Home Price Index recorded a 14.9 percent decline for the second quarter, compared with a 19.1 percent year-over-year drop in the first quarter.

Compared with the first quarter, though, prices rose by 2.9 percent, marking the first such increase in three years.

Shiller tempered the optimism by pointing out that previous slumps have seen bumps in prices only to fall later.

Case Shiller Home Price Index

CPI Report

The Consumer Price Index was flat compared to last month but down compared to last July. A couple of quick thoughts on what that might mean for the mortgage world:
1. If it was seen that the financial world is still coming to an end, then it could push rates down. But most people believe that we’ve “stepped back” from the edge of the financial abyss.
2. So, most of the drop in the CPI happened “earlier” and the fact that it has leveled off tends to mean that we’re looking at a bottoming of the deflation risk (keeping in mind that 1 month does not a trend make). That could actually put upward pressure on rates.

So, overall, I expect that this is not something that’s going to put downward pressure on rates but potentially the opposite.

More later.

Tom Vanderwell

Bernanke and Rate Hikes

So we’ve got a 60% chance the Fed will raise rates in January and a 100% chance by March.   Guess what, that’s not the big issue.   In my mind, we’ve got 12 to 18 months before we’ve got any substantial issues as far as interest rates.   But then we’re going to see some really big challenges.   More on that later.

Tom Vanderwell

Rate hike odds post Bernanke testimony | The Big Picture

Following two days of testimony (and the WSJ editorial) from Bernanke where he repeated that interest rates will stay low for an extended period of time, that inflation will remain subdued for a few years more and that unemployment will remain elevated for a period of time, the odds of a year end rate hike are down to 13% from 27% one week ago and 46% one month ago. A 25 bps hike to .50% is not fully expected until the March ‘10 meeting. The January ‘10 meeting rate hike odds are at 60%. In the discussion on exit strategies too over the past few days, ending QE and many of its liquidity facilities will be a cake walk compared to normalizing the fed funds rate in terms of its impact on the economy.

Bernanke, Interest Rates

Quote of the day….

The Big Picture

Quote of the Day

“People are living longer than ever before, a phenomenon undoubtedly made necessary by the 30-year mortgage.” —Doug Larson

Quote of the day

Why Should a Buyer Use a Realtor?

A good friend of mine, (who I’ve never met) and co-author and founder of the Bloodhound Realty Blog, Greg Swann, wrote a column on there about a question that I think deserves more attention.   He addresses some issues that I see consumers on a daily basis “glossing over” when they consider whether to work with a buyer’s agent or to just work with the seller’s agent.

He’s given me permission to repost it here.   Enjoy!

Tom Vanderwell

With MLS listings available everywhere on the internet, why do you need a buyer’s agent?

By: Greg Swann, Phoenix Real Estate, Post Archive, RSS Feed
Posted: Saturday, July 18th, 2009, 6:43 pm MST
Category: Disintermediation, Marketing, Real Estate, Technology

This from my Arizona Republic real estate column (permanent link):

Here’s an intriguing question: Given that it’s so easy to search for homes on the internet, why do you need a buyer’s agent?

Face it, if you use the MLS search tool on my web site, you’re seeing exactly the same listings I see. And you know better than I ever could what you like and what you don’t like.

By now, the home search process is at best a partnership between the agent and the buyer. In some cases the buyer and I will work together to perfect our search criteria. But many buyers simply search the available inventory on their own, emailing me the MLS numbers of the homes they want to see.

So why do those buyers need a buyer’s agent?

Realtors hoarded the MLS data for so long that even they came to believe it was the source of their value to buyers. But this is very far from the truth.

You don’t need me to search for listings, although I’m happy to do that. And you don’t need me to open lock-boxes. You need a buyer’s agent to guide you through what is in fact an arcane and perilous process — potentially a financial disaster. You might not need me to find your next home, but you need me to make sure that you get it — or that you pass on it, if that is what is truly in your best interests.

A skilled buyer’s agent will write the kind of purchase contract that will prove surprising to you at every turn, with every term and condition tailored to achieve your best advantage. Your agent will supervise the inspection process and negotiate the optimal solution to the repair issues. Your agent will be prepared for every pitfall in the escrow process.

If you bought and sold houses every day, you could do all these things yourself. It’s because you don’t — and because the seller and the listing agent are looking to take advantage of your naiveté at every turn — that you need a skilled buyer’s agent as your steadfast champion in the home-buying process.

Steal this book: I’m going to write one or two more columns on this theme. If you want to use any of them on your real estate weblog, feel free. Just give me a link back to http://www.bloodhoundrealty.com/

Mortgage Market Update – What Ben Says

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