New Home Sales Slip In October

After posting a strong September, the number of newly-built homes sold nationwide slipped in October.

Total units sold on an annual basis dropped by 25,000 from September; supplies of new homes climbed 0.7 months. Home supply is back to its rolling, 6-month average of 8.6 months.

Like everything else in real estate, however, the October's New Home Sales results varied by location.

For example, except for the South, each U.S. region posted a loss. In the South, there was a 3 percent gain. This is statistically significant because more new homes are sold in the South than in all other U.S. regions combined.

In October, the South accounted for 58 percent of all homes sold.

The dip in New Home Sales did not surprise Wall Street. New Home Sales is closely correlated to Housing Starts, and Housing Starts fell in July and August. Furthermore, it seems home builders expected the dip and are brushing it off.

In a poll taken 2 weeks ago, builders reported higher confidence in housing, and their respective prospects for the future. Home builder confidence is at its highest point since June.

For buyers , the effects of New Home Sales data are unknown. In a normal environment, falling sales volume and rising home supplies would help shift negotiation leverage away from the seller and toward the buyer, resulting in lower sales prices.

However, in this market, the "sellers" (i.e. home builders) are more confident about housing, and that offsets a buyer's statistical edge.

With home prices stagnant and mortgage rates rising, therefore, the best "deals" may come between now and the New Year.

What's Ahead For Mortgage Rates This Week : November 29, 2010

In a holiday-shortened week on Wall Street, mortgage markets improved on 3 of 4 days, but still posted its fourth consecutive losing week.

Unfortunately for rate shoppers and home buyers in utah , last week's 3 days of gains were mild improvements; the one day of deterioration was among the Top 10 worst days for mortgage bonds this year.

Mortgage rates are at their highest levels since mid-July. The Refi Boom is unwinding quickly.

Last week underscores the importance of the global community to the future of the U.S. mortgage market. Two of the main reasons why mortgage rates increased were non-domestic.

1. Concerns for a full-blown North Korea/South Korea conflict lessened quickly
2. The likelihood of a speedy, $85 billion bailout Ireland increased

The two events stemmed the typical safe-haven buying patterns that accompany geo-political and economic uncertainty, and drive down mortgage rates.

This week, mortgage rates may rise again.

First, Ireland's bailout package was signed Sunday morning and that relieves some pressure on the European Union.  Second, this week's economic releases should show that the U.S. economy is still expanding, and that U.S. consumers are still spending -- both are tied to higher rates.

A sampling of the week's releases include:

• Tuesday : Case-Shiller Index; Consumer Confidence surveys
• Thursday : Initial and Continuing Jobless Claims; Pending Home Sales
• Friday : Non-Farm Payrolls; Unemployment Rate

If you haven't locked a mortgage rate and are waiting for "the bottom", remember that the mortgage market waits for no one. Rates are much higher since the start of November and look ready to rise even higher.  Call your loan officer and get your application in process this week.

The longer you wait, the higher that rates could go.

Fed Minutes Help Push Mortgage Rates To 4-Month High

The Federal Reserve released its November 2-3, 2010 meeting minutes Tuesday afternoon. Mortgage rates in utah have been on the move since.

The Fed Minutes is a comprehensive review of Federal Open Market Committee meetings; a detailed look at the debates and discussions that shape our country's monetary policy. The report is published 3 weeks to-the-day after the FOMC adjourns.

Fed Minutes add depth to the briefer, more well-known "statement" to the markets which is issued upon adjournment. As a comparison:

• The November 3 statement contained 497 words
• The November 3 meeting minutes contained 6,623 words

If the Fed Statement is the executive summary, the Fed Minutes is the novel. And, the extra words matter.

When the Federal Reserve publishes its minutes, it gives clues about the groups next policy-making steps.  For example, in November's minutes, it's revealed that the Fed discussed setting inflation targets for the economy; holding occasional policy briefings for the press; and, working to set yields on instruments such as the 10-year Treasury note.

In addition, the Federal Reserve acknowledged a video conference hosted October 15, the second such "unannounced" meeting of the year.  The other was May 9, 2010.

Bond markets have not taken kindly to the Fed Minutes. The minutes show a propensity toward Fed "action", most of which markets believe to be inflationary. Inflation leads to higher mortgage rates and that's exactly what we've seen.

As compared to Tuesday morning, mortgage applicants are finding conforming and FHA mortgage rates to be higher by as much as 0.375 percent. In "real life" terms, assuming a 30-year term, that's an extra $264 in annual mortgage payments per $100,000 borrowed.

If you're still rate shopping, consider getting locked today. As a result of the recent shift, mortgage rates are now at a 4-month high.

October Existing Home Sales : Buyers And Sellers In Balance

After two months of surging sales, home resales fell by 100,000 units last month to 4.4 million homes nationwide.

October's Existing Home Sales tally is slightly below the report's 6-month rolling average, according to the National Association of REALTORS® -- a time span which includes this year's $8,000 federal home buyer tax credit's tail end.

Housing statistics have been wildly inconsistent during that period.

For the future of housing markets, though, it's encouraging that first-time and investment property buyers were both outnumbered by "move-up" buyers; buyers that have sold their respective homes in favor of larger ones. It's the move-up buyers that power housing.

In October, buyer profiles broke down as follows:

• First-time buyers : 32 percent of all buyers, unchanged from September
• Repeat home buyers : 49 percent of all buyers, down one tick from September
• Investors : 19 percent of all buyers, up one tick from September

As a point of comparison, first-timers represented 50 percent of all purchases in October 2009.

For home buyers, October's Existing Home Sales report is neither weak nor strong. It signals that, with mortgage rates low and home affordability high, housing may be reaching some form of balance. Because -- although home sales are down -- home supplies are down, too.

We can infer that buyers outnumber sellers, but probably not by much. In most areas, negotiation leverage is still up for grabs.

At the current pace of sales, the complete housing stock would be depleted in 10.6 months.

Applying For A Mortgage Soon? Don't Open New Credit Cards On Black Friday.

Black Friday is 3 days away. It's the official start of the 2010 Holiday Shopping Season.

Sales are expected to top $111 billion this year and, already, businesses are vying for shoppers and their dollars. Newspaper circulars are getting larger, and in-store discounting is more prevalent.

But one discount that shoppers should think twice about is the popular "Open A Charge Card, Save 20%" promotion. The short-term savings may be tempting, but the long-term costs may be huge.

It's because of how credit scores work.

According to myFICO.com, "new credit" accounts for 85 out of 850 possible credit scoring points, with new credit defined by such traits as:

• Number of recently opened accounts
• Number of recent credit inquiries
• Time since recent credit inquiries
• Proportion of new accounts to all accounts

These traits are negatives against a FICO score so with each new, in-store credit card application, a person's credit score will fall. The fall will be especially pronounced for persons lacking credit "depth", or who have made a disproportionately large number of new credit applications recently.

For soon-to-be homeowners, or would-be refinancers , credit scores are worth keeping high. This is because credit scores change the mortgage rates and/or loan fees for which an applicant is eligible.

As an illustration, assuming 20% equity on a $200,000 conforming loan:

• 740 FICO : No added loan costs
• 720 FICO : 0.250% increase in loan costs, or $500
• 700 FICO : 0.750% increase in loan costs, or $1,500
• 680 FICO : 1.500% increase in loan costs, or $3,000
• 660 FICO : 2.500% increase in loan costs, or $5,000

 

It's expensive to have a low credit score -- more expensive than the money saved by opening a card at the mall, anyway.

That said, if you know you won't need your credit for a mortgage within the next 6 months, the risk of applying for in-store credit cards is likely small. But if you'll need your FICO soon, consider paying for your gifts full price.

What's Ahead For Mortgage Rates This Week : November 22, 2010

Mortgage markets worsened last week as the U.S. dollar gave up ground in currency markets, and inflation concerns mounted. In response to the events, conforming mortgage rates in utah rose for the third straight week.

Mortgage rates have now climbed by as much as half-percent since the start of the month, and Freddie Mac reports average loan fees to be higher, too.

The 7-month rally in rates may be nearing its end. The 30-year fixed rate mortgage is at a 4-month high after reaching an all-time low just 3 weeks ago.

The abrupt change in rates makes for an interesting study in expectations, and how they can influence a market.

Remember, inflation is bad for mortgage rates. Inflation devalues the dollar which, as a consequence, devalues repayments made to mortgage bond holders. As a result, when inflation is present, mortgage bonds tend to sell-off which causes mortgage rates to rise.

This is what's been happening these past 3 weeks. However, we're not in an inflationary environment. To the contrary:

1. The Federal Reserve has said inflation is too low to be economically healthy
2. Last week, the Cost of Living posted its lowest year-over-year gain in history

But mortgage rates are rising anyway. This is because global investors believe the Fed's most recent market intervention -- a $600 billion bond purchase program -- will later lead to inflation. Just on the expectation, markets are behaving like inflation is already here.

This week is holiday-shortened, and rates should remain volatile. There's a bevy of data including the Existing and New Home Sales reports, consumer confidence data, and the FOMC Minutes from the November 3 meeting.

If you haven't locked a mortgage rate, consider locking one today. Rates have farther to climb than the fall.

Mortgage Rates Still Rising. Is This The End Of The Refi Boom?

Rock-bottom mortgage rates may be gone for good.  This week's Freddie Mac Primary Mortgage Market Survey shows in numbers what utah rate shoppers have learned the hard way -- mortgage rates are spiking.

During the 7-day period ending November 18, the average 30-year, conforming fixed rate mortgage jumped to 4.39 percent, an increase of 0.22% from the week prior.

And it's not just rates that are soaring. The average number of points charged to consumers increased to 0.9 percent last week. For most of the year, that cost had been 0.7 percent.

One "point" is equal to 1 percent of your loan size.

With the sudden rise in mortgage rates, we have to question whether the Refi Boom is ending. Between April and early-November, conforming mortgage rates dropped more than a full percentage point and, during that time, a lot of homeowners capitalized on the market. Refinance activity was strong; rates cut new lows each week.

Today, however, Wall Street sentiment is different. There's a growing concern for the future of the U.S. dollar, and that's making mortgage bonds less attractive to investors. As demand drops, so does the underlying bond's price which, in turn, causes mortgage rates to rise.

Buy-sell patterns like this are common. The speed at which they're changing is not.  Mortgage lenders can barely keep up with the volatility, issuing up to 4 separate rate sheets in a day.

Therefore, if you're shopping for mortgage rates, or wondering whether it's finally time to join the Refi Boom, the time to lock is now. Mortgage rates should remain volatile through the New Year, at least. At what level they'll be then, though, is anyone's guess.