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Consumer Sentiment has been on the rise since last February and it’s something to which Blairsville Home Buyers should pay attention.
The affordability of your next home may hinge on consumer confidence.
As the economy recovers from a near-the-brink recession, many of the elements of a full recovery are in place. Business investment is returning, household spending is expanding, and financial systems are gaining strength.
Consumer confidence is at a 2-year high.
What’s missing from the recovery, though, is jobs growth. Another net 20,000 jobs were lost in January. Data like that hinders economic growth.
That said, twenty-thousand jobs lost is a much better figure than the several hundred thousand that were shed per month throughout early-2009, but it’s still a net negative number. Not only does household income drop when Americans lose jobs but so does the average American’s confidence in his or her own economic future.
This is one reason why jobs growth is so closely watched by Wall Street — jobs are linked to higher confidence levels which, in turn, is believed to spur consumer spending.
Consumer spending represents 70% of the U.S. economy.
As confidence rises, it could be good news for the economy, but bad news for home buyers. More spending expands the economy and, all things equal, that leads mortgage rates higher.
Same for home prices. More confidence means more buyers which, in turn, squeezes the supply-and-demand curve in favor of sellers.
Later this morning, the University of Michigan will release its February Consumer Sentiment survey. If the reading is higher-than-expected, prepare for mortgage rates to rise and home affordability to worsen.
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The economy’s improving but lending standards are not. Nationally, banks are making mortgage approvals harder to come by.
Underwriting guidelines are tightening.
The data comes from the Federal Reserve’s quarterly survey to its member banks. The Fed asks senior bank loan officers around the country to report on “prime” residential mortgage guidelines over the most recent 3 months and whether they’ve tightened.
For the period October-December 2009:
- Roughly 1 in 4 banks said guidelines tightened
- Roughly 3 in 4 banks said guidelines were “basically unchanged”
Just 2 of 53 banks said its guidelines had loosened.
Combine the Fed’s survey with recent underwriting updates from the FHA and generally tougher standards for conventional loans and it’s clear that lenders are much more cautious about their loans than they were, say, in 2007.
Today’s Blairsville home buyers and would-be refinancers face a bevy of new borrowing hurdles including:
- Higher minimum FICO scores
- Larger downpayment requirements for purchases
- Larger equity positions for refinances
- Lower debt-to-income ratios
So, if you’re on the fence about whether now is a good time to buy a home, or make that refi, consider acting sooner rather than later. It doesn’t necessarily matter that mortgage rates are low, or that there’s an up-to-$8,000 home purchase tax credit for households that qualify. With each passing quarter, fewer and fewer applicants are eligible to take advantage.
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Like real estate, it appears that foreclosure activity is a local phenomenon, too.
As reported by RealtyTrac.com, more than half of all foreclosure-related activity in 2009 came from just 4 states:
1. California
2. Florida
3. Arizona
4. Illinois
More than 1.4 million filings made in 2009 are attributed to the above states. Furthermore, each ranks in the Top 10 for 2009 Foreclosures Per Capita.
The other states are Nevada, Utah, Georgia, Idaho, Michigan and Colorado.
Versus 2008, foreclosures are up 21 percent nationwide and that’s a big number, but a deeper look at RealtyTrac’s annual reports reveals a more positive undertone on the housing market.
1. 40 states fell below the national Foreclosures Per Capita average in 2009
2. Foreclosure activity fell on an annual basis in 10 states as compared to 2008
Foreclosures are still prevalent, though, and buying homes in foreclosure in Blairsville, Blue Ridge, and Ellijay Georgia continues to be big business. First-time buyers, move-up buyers, and real estate investors each are bidding aggressively.
Distressed homes account for one-third of home resale activity, according to an industry trade group.
That said, buying foreclosures can be tricky.
First, properties are often sold “as-is” and the cost of repairs may unwind the home’s status as a “value buy”. Furthermore, a lender may require specific fixes to be made prior to closing and that, too, costs money.
Second, buying a foreclosed home in Georgia isn’t as streamlined as buying a “normal” home. Closing on a foreclosure can be a 120-day process or longer. A 4-month time-frame may not fit your schedule.
And, third, finding foreclosures can be difficult. Despite the growth in foreclosure search engines, it still takes a good real estate agent to uncover the best homes at the best prices.
Read the complete foreclosure report and take a peek at RealtyTrac’s foreclosure heat maps. If you like what you see, Contact Me or give me a call at 706.994.8686.
There’s still good deals in the foreclosure market — you just have to know where to find them
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Mortgage rates are dropping this morning on weaker-than-expected Retail Sales data from December. Lower rates means more bang for your home-buying buck.
Excluding motor vehicles and parts, December’s “ex-auto” sales receipts were down roughly $500 million from November. Analysts had expected receipts to grow.
The relevance of Retail Sales to home affordability isn’t obvious, but it’s definitely logical.
Retail Sales is directly related to consumer spending and consumer spending accounts for the majority of the U.S. economy. When consumer spending slows, the economy often does, too. It leads investors to seek out “safe” investments.
It’s the reason why stock markets often drop on weak economic data — stocks are among the riskiest investment classes available.
Conversely, the best place to find safety is in the market of government-backed bonds. This world includes products like U.S. Treasuries and many of the mortgage-backed bonds that help set mortgage rates for people all throughout the North Georgia Mountains. Weak economic data puts mortgage bonds in demand.
For rate shopper, this is good news. More demand for mortgage bonds causes mortgage rates to fall. Mortgage rates are lower this morning because Wall Street is shedding some risk.
December’s Retail Sales report closes out a year of generally-weak data. 2009 marks just the second time that Retail Sales fell year-over-year since the government started tracking it 40 years ago. The other year was 2008.
For home buyers in North Georgia Mountains and around the country, though, today may represent an opportune time to lock a mortgage rate. Housing data is still improving and other economic indicators are showing strength. Soon, Wall Street will shift from a “safe” mentality and move toward risk.
When it does, mortgage rates will rise.
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Despite the headlines, it’s important to remember that December’s jobs report wasn’t all bad news.
Sure, the economy shed 85,000 jobs last month and the Unemployment Rate failed to dip below 10%, but for home buyers and rate shoppers in the North Georgia Mountains , the news was just fine.
The soft employment data led mortgage rates lower, making homes more affordable for buyers.
There is two sides to every economic coin.
Since early-2008, the U.S workforce has been closely tied to home financing. As the economy slowed and jobs were lost, Wall Streeters pulled money from the risky stock markets and moved it to of the relative safety of bond markets, instead.
Safe haven buying led mortgage bond prices higher which, in turn, caused rates to fall. Mortgage rates fell to 6 all-time lows in 2009. In a related statistic, 4.2 million jobs were lost last year.
And this is why Friday’s non-farm payrolls report was so good for buyers.
See, in November, the economy added new jobs for the first time since 2007, housing looked strong, consumer confidence was growing. The safe haven buying reversed and mortgage rates took off. Analysts believed the nation’s economic turnaround was complete.
But now, after December’s jobs report returned to the red, Wall Street is forced to rethink its position. Safe haven buying is back and mortgage rates are lower because of it.
Over the next few months, expect a lot of this back-and-forth action in rates. In general, positive news for the economy will be met with higher mortgage rates and negative economic news will be met with lower mortgage rates. There will be exceptions, but the general rule should hold.
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FHA home loans are federal assistance mortgages made by lenders, and backed by the government. The FHA doesn’t make loans to Georgia homeowners — it insures loans made to Georgia homeowners by federally-qualified lenders.
By all accounts, FHA home loans are surging in popularity.
- 2006, FHA insured 3.3% of all mortgages made
- Q2 2009, FHA insured 19.2% of all mortgages made
A major reason for the increase can be tied to guidelines.
As compared to its conforming mortgage cousins Fannie Mae and Freddie Mac, FHA home loans have lower down payment requirements and lower credit standards. The FHA allows down payments of 3.5 percent for homes in Blue Ridge and Blairsville, GA. and Fannie Mae and Freddie Mac do not, as an example.
Another reason is that FHA home loans aren’t subject to credit score fees the way that conforming mortgages are. Through Fannie or Freddie, a home buyer with a 650 FICO and 20% down is subject to 3% in risk fees. Via the FHA, the fee is zero, making FHA the better “deal”.
The FHA published its 2010 loan limits. There’s no change from 2009.
The base 2010 FHA loan limits are:
- 1-unit : $271,050
- 2-unit : $347,000
- 3-unit : $419,400
- 4-unit : $521,250
We say “base” because these loan limits don’t apply to all areas equally. Higher-cost regions get higher loan limits, based on typical home values. Homes in Los Angeles County, for example, can be FHA-insured up to $729,750 in 2010, and there are special exceptions made for Alaska and Hawaii.
The official FHA announcement included a complete, county-by-county FHA loan limit list. The first spreadsheet shows each county at or above the $729,750 maximum; the second list is everyone else.
If your home’s county is on neither list, use the “base” numbers above.
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Just one month after touching a 3-year high, the National Association of Realtors® Pending Home Sales index plunged in November. A “pending” home sale is a home that is under contract to sell, but has yet to close.
The 16 percent drop marks the first retreat in Pending Home Sales since January of last year.
The weak Pending Home Sales data is an indication that Existing Home Sales data will be soft this month. This is because, historically, 80 percent of Pending Home Sales convert to “closed sales” within 60 days, and most of the rest close within 120.
With Pending Home Sales down, the housing market should lose some of its momentum. For today’s home buyers, this kind of slack can represent a terrific opportunity.
Home prices are a function of supply and demand; of buyers and sellers. When buyers outnumber sellers, competition leads to bidding wars, ultimately, and higher home prices overall. The imbalance can also create a sense of urgency that results in over-paying for a home.
When buyers are sparse, on the other hand, the psychology of real estate shifts.
Home sellers are keenly aware of foot traffic and requests for second and third showings. Without buyers, their homes can’t sell. They also note a lack of general feedback from the market.
It’s at this point that seller fear can creep in and it becomes a buyer’s best time to buy.
Based on November’s Pending Home Sales data, it’s clear that home sellers are in abundance right now. Home buyers have leverage.
It may not last.
With mortgage rates easing lower this week, the federal home buyer tax credit still in effect, and the Holiday Season officially over, buyers are getting back to business in Blairsville and everywhere.
Plus, with the tax credit deadline of April 30, 2010 fast approaching, buyer activity should increase over the next 4-6 weeks.
The market looks ripe for a buy but don’t rush it. Take your time and bid right. But when you’re ready, be ready — once the market momentum shifts back to sellers, you might lose all that leverage you built up through the winter.
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2010 is just a few days old and already the “experts” are making predictions for the year.
Housing calls and mortgage rate predictions run the gamut:
- Home prices will fall in 2010
- Home prices will rise in 2010
- Mortgage rates will rise in 2010
- Mortgage rates will rise by a lot in 2010
Given how varied their outlooks, it’s clear that the professionals have no better view of the future than the amateurs. An expert can make an educated guess, but it’s a guess nonetheless.
Last year, Wall Streeters predicted a 25% pullback in home prices. 12 months later, we know prices didn’t fall. Wall Street also predicted higher mortgage rates for 2009. That prediction was fulfilled.
There’s a lot of talk on CNBC and elsewhere about what’s coming in 2010. Before you take those predictions to the bank, just remember that analysts do a much better job interpreting data from the past than projecting it into the future.
The only thing that’s certain right now is that mortgage rates are historically low, the government is giving tax credits to qualified buyers, and there’s a lot of good “deals” in housing. Make the most of what’s out there today because it will take 12 months for us to look back and know which predictions were right and which were wrong.
Until then, predictions are just opinions and guesses.
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How Do I Increase My 2009 Mortgage Interest Tax Deduction?
For many American homeowners, interest paid on a mortgage is tax-deductible in the year in which it was paid.
Knowing that, eligible homeowners can increase their 2009 tax deductions just by making their January 2010 mortgage payment before the end of the year.
By paying in 2009, the mortgage interest paid can be applied against 2009’s itemized tax deductions even though the payment isn’t technically due until 2010.
It can reduce your tax burden come Thursday, April 15, 2010.
And lest you think you’re paying the mortgage “in advance”, remember that mortgage interest is paid in arrears; a payment due January 1 accounts for interest that accumulated in December 2009 anyway.
Tax planning is a complicated issue and not all homeowners qualify for mortgage interest tax deductions. Check with your tax professional before making tax planning decisions.
If you don’t have an accountant you trust, call or email me anytime; I’m happy to make a recommendation to you.
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Should I Consider A 15-Year Fixed Mortgage?
For today’s home buyers and homeowners that can manage the higher monthly payments, 15-year fixed rate mortgage rates look attractive as compared to comparable 30-year products.
The 15-year/30-year interest rate spread is near its 5-year high.
Despite lower rates, however, homeowners opting for a 15-year fixed mortgage should be prepared for its higher monthly payments. This is because the principal balance of a 15-year fixed is repaid in half the years as with a standard, 30-year amortizing product.
As compared to 30-year terms, 15-year products repay 3 times as much principal each month.
Versus a 30-year, 15-year fixed mortgages have a few downsides worth noting. The first is that, because 15-year mortgages are heavy on principal and light on interest, homeowners who itemize tax returns may have to claim a smaller mortgage interest tax deduction at tax time.
Another negative is that the sheer size of the payment. If you run into fiscal trouble down the road, the only way to reduce the monthly obligation is to refinance into a 30-year product and that costs money to do.
In other words, be sure you can manage the payments over the long-term before you opt for a 15-year term. If you can manage it, though, the rewards are tangible.
At today’s rates, a 15-year fixed and 30-year fixed costs $230 extra per $100,000 borrowed.
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