So, we’re a fair amount of distance from the end of the tax credit and what happens to existing home sales?    The demand has all but ceased…..

Why is that?   Because everyone who would have bought in the 2nd half of 2010 and 2011 bought in the first half instead.

All we did is spend billions and billions and borrowed future business……

Homebuyer Demand All But a ‘Standstill’: Altos Research « HousingWire

According to the report, even through mortgage rates stay at all-time lows, buyers aren’t being swayed, which means these supply and demand trends should continue through the rest of 2010.

“Increases in inventory nationwide show that demand simply isn’t there. As the market continues to correct itself, and as we head into the seasonally weak fall and winter months, expect more increases in inventory, and likely deepening declines in asking prices,” according to the report.

Random Posts

Calculated Risk: Bank Failure #110: Palos Bank and Trust Company, Palos Heights, Illinois

From the FDIC: First Midwest Bank, Itasca, Illinois, Assumes All of the Deposits of Palos Bank and Trust Company, Palos Heights, Illinois

As of June 30, 2010, Palos Bank and Trust Company had approximately $493.4 million in total assets and $467.8 million in total deposits. … The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $72.0 million. Compared to other alternatives, First Midwest Bank’s acquisition was the least costly resolution for the FDIC’s DIF. Palos Bank and Trust Company is the 110th FDIC-insured institution to fail in the nation this year, and the fourteenth in Illinois. The last FDIC-insured institution closed in the state was Ravenswood Bank, Chicago, on August 6, 2010.

It is Friday!

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• May 21, 2010 -- An Easy Friday? Only $6 Million?

Bill over at Calculated Risk did this quick update on the “news mood” of the day.   If he’s right, (and I believe he is), then we’re going to see more pressure pushing down on rates.   Not enough to provide a major move down (in my opinion) but just more to keep things “neutral.”

Calculated Risk: Negative News Flow

Although not unexpected, the news flow is about to take a more negative tone starting with the existing home sales report on August 23rd. We’ve been discussing this for some time … and I’d like to highlight just a few pieces of forthcoming data:

# The existing home sales report will show that sales collapsed in July (this is showing up in all the regional reports).

# The existing home months-of-supply will jump to double digits.

# House prices are probably falling again, although this might not show up in the repeat sales indexes until September or October (this data is released with a lag).

# On August 27th, the second estimate of Q2 GDP will be released. This will probably show a significant downward revision from the preliminary estimate of 2.4% annualized growth. The downward revision is due to lower construction spending than the BEA initially estimated, less contribution from inventory adjustments, and the June surge in exports.

# The unemployment rate will probably start ticking up again soon (or the participation rate will fall further).

Just something to be aware of …

Technorati Tags: Mortgage Rates, Housing Inventory, Unemployment

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• June 22, 2010 -- Existing Home Sales

Well, it’s time to take a look at what’s been happening this week.   A number of things come to mind, so here goes:

• FHA announced the details on a number of adjustments to their programs.   Here’s a couple of "headlines" from it:  1) "Short Refis" are becoming a possibility but the realities of the restrictions mean that in all eventualities, it won’t make that much of a difference.   2) Mortgage insurance premiums are being adjusted (and not going down).  3) Seller concessions are being reduced.  4) Credit score requirements and loan to value restrictions are being implemented.   Those with lower credit scores will have to have more of a down payment.    

• The Fed – They met this week and changed very little in their statement.   What did they change?   Basically what they did is that they said they were going to take any money they get in from mortgages that get paid off and use it to buy more mortgages.     So what does that mean?   A couple of things:   1) It means that the Federal Government isn’t going to get out of the mortgage business any time soon.   2) It means, based on what I’ve read, that mortgage rates will remain "volatilely" stable (is that a word?).    Let me explain – the general consensus was that as the Fed began their exit from the mortgage backed securities market, rates would climb as the mix between buyers and sellers became more weighted towards sellers.    IF the Fed had announced that they were going to buy more mortgages, we could have seen rates drop.   What they basically said was that they are going to keep their commitment to the mortgage world stable.   They aren’t going to pull out but they also aren’t going to dump Billions into the mortgage market right now.   So, I expect a lot of vibrating and market gyrations but no substantial movements for the foreseeable future.   That reminds me of a comment a customer of mine made once (who was a bond trader) – he and I were talking about the interest rate market and he made some long winded prognostications with all kinds of big words and then said, "That should cover the market until about 4:30 this afternoon."   In other words, no one really knows.

• Speaking of Billions, the government is supposed to announce on the 17th (Tuesday) what they are going to do with Fannie and Freddie.    I’ll be honest with you that I have no idea what they are going to do or whether it’s going to work.    All I do know is that the current model isn’t working.   Expect a lot of wonderi! ng, market adjustments and "pontificating" as people all try to make their opinions heard about what happens…….

Below, I’ve pasted a copy of an "invite" to a totally free event that one of our lender’s banks (does that make sense?) is putting on this week Wednesday.   It’s only in Grand Rapids Michigan, so those who are farther away, I’m sorry!

Today’s real estate market is changing every day. Fifth Third Bank is proud to host an extremely insightful program that will provide a glimpse into the future of local housing and economic markets.

You are cordially invited to join Fifth Third Mortgage and Freddie Mac for this unique event designed exclusively for area real estate and housing professionals. This exceptionally worthwhile event will feature well-known speakers and is an event not to be missed.

Attendees will gain invaluable insight into:

• Housing and Economic information for the Grand Rapids area and the consumers you serve

• New Fifth Third Mortgage products and programs designed to get more clients into homes

• Floyd Wickman’s latest seminar — Mind, Time and Passion.

This program offers winning strategies to help you generate more business, close more deals and assess homebuyer readiness quicker and easier than ever before. Top mortgage loan originators will be on hand to answer questions and help you work through your toughest deals.

Don’t miss this opportunity. And feel free to bring a friend. Click here to register now — or visit http://guest.cvent.com/d/tdqfvn/1Q

Cascade Hills Country Club
3725 Cascade Road SE Grand Rapids, MI 49546
Wednesday, August 18, 2010 8:30 am – 12:30 pm

Onsite registration and Continental breakfast runs from 8:30 am to 9:00 am, with refreshments and networking. The seminar lasts from 9:00 am to 12:00 pm.
Seating is limited so RSVP today!

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• September 7, 2009 -- Mortgage Market Week in Review
• August 31, 2009 -- Mortgage Market Week in Review
• June 27, 2009 -- Mortgage Market Week in Review
• June 5, 2009 -- So what in the world is going on with interest rates?
• March 8, 2009 -- I’ve taken the liberty of posting my “Mortgage Market Week in Review” here…..

One of our team of lenders was asked to make a presentation to a finance class that is being held at for past clients of the local women’s shelter.   So it’s written from the standpoint of people who are starting over and who didn’t have much to work with because of what happened in the past.   I hope you find it educational……

Top 10 Things to Know about Buying a House in Today’s Market

10. The mortgage world figures you can afford up to 30% of your pre-tax income for a house payment and when counting other debts, up to 40%.  Go to http://www.zillow.com/mortgage/calculator/Calculators.htm  to learn more about payments.

9. The mortgage world only counts income that has a two year history and a likelihood of continuing for at least three years.   So, if you just started a straight commissioned job, or have been getting overtime for only 3 months, you are not going to be able to use that income.   Also works that way for child support too.

8. Unless you’ve been in the military, the minimum downpayment you have to come up with is 3.5%.   Plus you’ll need $3,000 for closing costs and prepaid taxes and insurance.   The days of the 0% down mortgages are gone.

7. If you are renting, pay your rent with a check so that you can provide your lender with a paper trail documenting that you paid on time.   Do the same thing for utilities, cell phone and insurance.   Make sure that they are in your name, not in someone else’s name (or at least that your name is on the account).

6. Most analysts are predicting a flat to slightly falling housing market for the rest of 2010 and going forward for quite some time.   So, don’t be in a hurry to buy a house.

5. Interest rates are expected to remain relatively stable for at least 12 to 18 months.

4. If you buy a house and the market continues to soften and you end up in a situation where you need to move (for jobs, family reasons, whatever), you quite often can’t.   However, if you rent, you have a lot more mobility.    Take that into consideration when looking at whether to buy or not.

3. When you rent and the water heater breaks, call the landlord.    When you own and the water heater breaks, you have to pay for it.    Consider that in your budgets as well.

2. When you apply for a mortgage, the bank wants to know that you have not only the downpayment, but also a “cushion” of two months house payments in reserves.   That’s a good idea even if you aren’t buying a house.

And Finally……

Before you talk to a Realtor about buying a house, sit down with a friendly banker who can help you walk through the details and determine whether it’s a good idea and how much you can afford.

Hope those help!   Call or e-mail if I can help further……

Related Posts

• May 26, 2010 -- More on New Home Sales
• March 26, 2010 -- Fed Gets Nervous – What Does it Mean for Mortgage Rates?
• February 19, 2010 -- TARP Money? Color me skeptical…..
• December 2, 2009 -- A Disaster for Democrats? Yeah, but what about the rest?
• December 2, 2009 -- The Fat Lady? She isn’t even in the building yet…..

If you think the bottom is in place in the housing market, according to these two analytical firms, think again…….

Analysts Warn Home Sales and Prices Not Yet at Rock Bottom « HousingWire

Home sales have yet to hit the trough of the recession, according the US Housing Market Monthly report by Capital Economics released Monday. Further, the economics firm states that pending home sales will do little to push home sale numbers higher. In fact, the number of pending home sales is so diminished, down 32% in the wake of the tax credit expiration, that existing sales will only dip in the coming months as these mortgage agreements are finalized.

Analysts at Moody’s Investors Service agree, stating that the odds of a near-term double-dip recession increased to one in four from one in five predicted this spring. If this double-dip happens, Moody’s estimates home prices will fall along with sales — an estimated 20% before stabilizing in early 2012.

Technorati Tags: House Prices, Real Estate Market

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Okay, this is getting to be a recurring theme.    Let me explain:

1. The government announces a new program to “help” underwater homeowners.
2. People “in the business” look at the details and the loop holes and the nature of the program and issue their “estimates.”

and guess what, they determine that it’s a situation where relatively few people will actually qualify for the program.

So once again, it’s a case of good press but very little results…….

Amherst: ‘Relatively Few’ Loans Will Qualify for FHA Short Refi Program « HousingWire

The amount of mortgage loans eligible for the new Federal Housing Administration (FHA) Short Refinance program will be “relatively few,” given debt-to-income restraints and that it’s a volunteer program, according to Amherst Securities Group.

Last week, the US Department of Housing and Urban Development (HUD) announced the new program would provide additional refinancing options to underwater homeowners starting Sept. 7. JPMorgan analysts estimated that 9m mortgages could be eligible for the program, but Amherst doesn’t believe as many will actually make it through the process.

Technorati Tags: FHA Short Refi

Random Posts

I want to apologize for not getting this out to you last week.   Due to the fact that my wife and one of my older daughters were out of the country on a mission trip and because of all that entailed, there just wasn’t enough time in the day or the week.

So, let’s take a brief look at what’s been transpiring lately.   I’m going to hit on a couple of main points:

• Housing Inventory
• Housing Sales
• The Flow of Money
• The passing of financial reform by Congress
• What Bernanke said
• What it all means for mortgage rates.

Housing Inventory- A number of reports have come out and they all have shown to varying levels that the inventory of houses on the market has increased.   I heard it explained yesterday this way:  "Sellers put their homes on the market trying to take advantage of the $8,000 tax credit and now they are kind of stuck out there."

Housing Sales – in what has to be the biggest non-surprise of the year, housing sales are down.   Why is that not a surprise?   Because we (the taxpayers) are no longer providing an $8,000 "tax credit hit" to encourage people to buy now rather than later.    It reinforces the view of a lot of people (present company included) that the main effect that the tax credit had was to take the second half of 2010 and all of 2011′s sales and move them into the first half of 2010.

The Flow of Money – the normal pattern is that when the stock market goes up, money flows into the stock market (making it go higher) and out of the bond market (which inversely pushes rates higher.)   Since the stock market has been a bit "ambivalent" lately (also known as volatile), you would think that would kind of leave money staying relatively calm, but money seems to be moving "in droves" into the bond market.   This is putting downward pressure on bond rates, mortgage rates and anything else associated with them.   The "normal" fundamentals seem a bit out of whack right now, so I’m just a bit concerned about how long things will follow the pattern we currently have.

The passing of Financial Reform - I’m going to go on record and say a couple of things about the Financial Reform act that got passed.   It is over 2300 pages long.    I doubt that very many of the people who voted either for or against it read and understood the entire thing.   I think there are a lot of things that we are going to find out in the future that would fall under the category of "unintended consequences" of this bill.    I’ve read a number of very notable financial minds (Barry Ritholtz, Yves Smith and others) who have all made a very convincing case that we didn’t need a whole batch of new rules and regulations, we just needed to go back to the way things were in the early 1990s and enforce those rules.   That would solve enough of our problems that it would get things back on track.    But, as a friend of mine liked to say after giving his opinion,  "That, and $1.25 (adjusted for inflation to $4.50) will get you a cup of coffee."

What Bernanke Said: Bernanke gave his semi-annual prepared remarks to the Senate this week.    The words that caused ripples in the markets were these two:   "Unusually uncertain."   A couple of thoughts about those particular words as they were used:

• Based on the discussions that I’ve had with various bankers (both internal and otherwise) both in Michigan and elsewhere, I have to say I agree with Uncle Ben.   There is a very mixed bag of results out there.    Many of them used words like "sporadic" and "varied" and other words that would make you see the market as Unusually Uncertain.
• The fact that, in prepared remarks, the Fed Chairman used those words is a bit surprising.  You know the old saying, "If the Fed chairman sneezes, the markets catch a cold?"   Well, I’m sure that the Fed Chairman used those words very carefully and if he felt it was justified to say that, the markets are a bit more varied and rough than many would like to believe.

What does it all mean for mortgage rates?  A couple of thoughts:

• As you’ll see when I send out today’s rates later (probably around 1:00), rates are at historic lows.    That’s not an over exaggeration.   I have never in the 22 years I’ve been in the business seen rates lower than those.
• But as property values continue to see pressure being put on them (see falling sales and rising inventories above), it gets harder and harder to actually get the best rate that’s out there.
• I had a fellow banker ask me yesterday, "what does it take to get the best possible rate?"  Here’s a quick overview of that:  1) A credit score of 740 or above.  2) A loan to value of 80% or less on the first mortgage.   3) A total loan to value (first mortgage plus the balance owing on the 2nd mortgage plus the available credit on 2nd mortgage) can not exceed 90% of the value of the house.
• Does that mean we can’t go higher than that?   Depending on who owns your mortgage, absolutely not.   We have a LOT of other possibilities, but to get the best possible rate, that’s what’s needed.
• Maybe it’s just the conservative banker in me, but I really don’t see these rates lasting for "too long."    But I would be lying if I told you I knew how long too long was.   

So there you have my overview of the last two weeks – falling home sales, rising inventory, uncertain Federal Reserve, new laws and lower rates.   As always, if you know anyone who needs help navigating today’s mortgage market, let me know.   I’d be happy to help.

Thanks!

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It just seems wrong to use the term “only” and “$9 Million” in the same sentence…..

Homebuyer tax credit extension bill passes Senate – Jun. 30, 2010

The extension will only raise the deficit by $9 million.

Technorati Tags: Home Buyer Tax Credit

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Here’s another question that we received from a reader.   I thought it would be good to share with everyone.

This is something that needs to be dealt with immediately.   Here’s my recommendations:

• I’m going to assume that since you are reading Straight Talk and are even asking the question that means that you’d like to stay in the house.
• I’d get in contact with your lender and explain what’s happened.   Explain that you have gotten a new job and can now make the payments.   Ask them to consider modifying the loan again and tacking the past due amounts on to the “end” of the loan.   Or to take the portion that you are behind on and spread it out over the next three or four years (with a higher payment for that period.)
• Don’t just put your head in the sand and ignore the issue.  I can pretty much guarantee you that your lender will be more than willing to give you a chance to get caught up and prove that you can get back on top rather than take your house.

Good luck!  I hope the new job works well and I hope that your lender will work with you.

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