Mortgage rates have been on steady decline in Wisconsin since the start of 2012 as uncertainty for the future of the Eurozone and questions about the soundness of the U.S. economy have led investors into mortgage bonds in droves, lowering the 30-year fixed rate mortgage to its lowest point in history.
But it’s not just mortgage rates that are down. Closing costs are, too.
According to Bankrate.com’s annual Mortgage Closing Cost Survey, the average mortgage applicant paid seven percent fewer closing costs in 2012 as compared to 2011, on average. The year prior, costs had increased thirty-seven percent, on average.
A “closing cost” is any fee paid in conjunction with a mortgage settlement that would not be payable if the home was financed with cash. Closing costs for purposes of the Bankrate.com survey include such items as underwriting fees and appraisal costs. County transfer stamps, where required, however, were not included.
Like everything in real estate, closing costs vary by locale. There are some states in which closing costs tend to be high, and other states in which closing costs tend to be low.
The five states with the lowest closing costs for 2012, on average, are :
- Missouri : $3,006
- Kansas : $3,193
- Colorado : $3,199
- Iowa : $3,257
- Arkansas : $3,325
By contrast, the two most expensive states in which to close a mortgage this year are New York ($5,435) and Texas ($4,619). All figures assume a $200,000 loan size with 20 percent equity and excellent credit.
The good news is that, as a home buyer or refinancing household, you’re often not required to pay the closing costs which are itemized by your bank. When asked, many lenders will offer a low-closing cost or zero-closing cost option.
With low- and zero-closing cost programs, qualifying mortgage rates are raised by a small amount, which increases your monthly mortgage payment. Up-front settlement costs, however, are reduced or eliminated.
Opting for a low- or zero-closing cost mortgage is a trade-off between upfront costs and ongoing costs. Talk to your loan officer about your options to see which path is best for you.
View average closing costs for all 50 states at Bankrate.com.
The market for newly-built homes remains strong.
As reported by the U.S. Census Bureau, July featured 502,000 single-family housing starts nationwide on a seasonally-adjusted, annualized basis, marking the fourth straight month during which single-family starts posted north of one-half million.
The last time this milestone occurred was in the four months ending April 2010 — the last month of that year’s federal home buyer tax credit.
A “housing start” is a home on which construction has started and the rise in single-family housing starts is yet one more signal to buyers in Williams Bay and nationwide that the housing market has likely put its worst days behind it.
Home builders, it appears, agree with that sentiment.
Last week, the National Association of Homebuilders reported builder confidence to be at a 5-year high. Sales levels have been growing since January and builders expect the next six months to be blowout.
One of the main drivers of today’s new construction market is rising rental costs throughout many U.S. markets. It has helped to create an influx of new home buyers at a time when low mortgage rates have helped to keep new homes affordable.
As compared to one year ago, today’s home affordability is high.
- July 2011 : A $1,000 mortgage payment afforded a loan size of $196,200
- July 2012 : A $1,000 mortgage payment afforded a loan size of $223,000
That’s a 13.7% purchasing power increase in just twelve months — one reason why builders report buyer foot traffic through new construction at pre-recession levels.
The ability for buyers to access low downpayment mortgage programs is helping home sales, too.
The FHA offers a 3.5% down payment program and today’s home buyers are taking advantage. FHA mortgages now account for an estimated one-third of purchase money mortgages, and the VA and USDA are gaining market share, too, with their respective 100% financing program for certain qualified buyers.
With low rates, low downpayments and soon-to-rise home prices, it’s a good time to be a home buyer. If you’ve been shopping new construction, consider going under contract soon. As mortgage rates and prices rise, your personal home affordability falls.
Mortgage markets worsened for the third straight week last week as the U.S. economy showed new signs of expansion, and as little new news came from Europe.
August has been a rough month for rate shoppers. Since the start of the month, mortgage rates in Lake Geneva have climbed steadily and are now at a 7-week high.
According to Freddie Mac’s weekly Primary Mortgage Market Survey, the 30-year fixed rate mortgage is 3.62% nationwide, on average, for homeowners willing to pay 0.6 discount points plus a full set of closing costs. 1 discount point is equal to one percent of your loan size.
Homeowners not wishing to pay discount points are seeing 30-year fixed rate mortgage rates as high 4.00%.
These are the highest mortgage rates since Independence Day.
This week, mortgage rates may continue to move higher. There is a bevy of economic data set for publication in addition to the Federal Reserve’s release of its July/August meeting minutes. Mortgage rates are expected to get more bumpy as the week progresses.
No data will be released Monday or Tuesday. During these first two days, expect momentum and sentiment to drive markets. Lately, both have favored “higher rates”.
Then, Wednesday morning, the National Association of REALTORS® releases its July Existing Home Sales report. Strong numbers will likely lead mortgage rates higher. That is, until that day’s 2:00 PM ET release of the Fed Minutes. This will be the week’s big market-mover.
Prior to its last meeting, the FOMC had said economic stimulus would be warranted given certain conditions and Wall Street took that to mean that the Federal Reserve was close to adding new stimulus. When the Fed did not add said stimulus August 1 as expected, mortgage rates rose.
The Fed Minutes will provide insight into some of the debate the shaped the discussion/non-discussion of new stimulus and, depending on what market sees, mortgage rates may rise or fall Wednesday — perhaps by a lot.
Then, on Thursday, the government releases its New Home Sales data for July. This, too, can influence mortgage rates.
If you’re not yet locked on a mortgage, it may be prudent to lock your rate in. Mortgage rates have trended higher this month, and may continue to move in that direction.
Mortgage rates in Williams Bay keep on rising.
According to Freddie Mac’s weekly Primary Mortgage Market Survey, for the third straight week, the 30-year fixed rate mortgage rate rose, this time tacking on 3 basis points on a week-over-week basis to 3.62%, on average, nationwide. The 3.62% mortgage rate is available to mortgage applicants willing to pay 0.6 discount points plus a full set of closing costs.
Freddie Mac’s published mortgage rates are compiled from a 125-bank survey.
Looking back, it appears that national 30-year fixed rate mortgage rates bottomed at 3.49% in late-July. In the weeks leading up to that bottom, mortgage rates had dropped in 11 of 12 weeks. Since then, though, rates have climbed steadily, moving to a 7-week high, depending on where you live.
Mortgage rates vary by region. As reported by Freddie Mac, mortgage applicants in the South Region currently pay the highest rates. Applicants in the North Central currently pay the lowest.
- Northeast Region : 3.62% with 0.6 discount points
- West Region : 3.59% with 0.6 discount points
- Southeast Region : 3.68% with 0.6 discount points
- North Central Region : 3.58% with 0.6 discount points
- Southwest Region : 3.66% with 0.6 discount points
Meanwhile, mortgage rates don’t figure to drop in the coming weeks. The same forces that drove mortgage rates down between January-July of this year are the same ones that are driving rates up today — expectations for new Federal Reserve-led stimulus.
Earlier this year, the economy was stalling; growing slowly, but not convincingly. This led to Wall Street speculation that the Federal Reserve would implement a bond-buying program that would lead mortgage rates down, among other outcomes. The Fed said it would do what is necessary to keep the economy on track which only served to fuel such speculation.
Last month, however, at the Federal Open Market Committee, Ben Bernanke & Co. did not add new stimulus, and seemed content to take a “wait-and-see” approach with the economy. And, since then, Europe appears to have put itself on-track and the U.S. economy has shown signs of expansion.
This August rise in rates is Wall Street reversing its bets; making plans for no new stimulus at all.
Mortgage rates so remain low, though. If you’ve yet to join this year’s refinance boom, or if you’re hunting for a home, consider locking something in. In a few weeks, mortgage rates may be higher still.
Home builder confidence rises again.
For August 2012, the National Association of Homebuilders reports the monthly Housing Market Index at 37 — an increase of more than 100% from one year ago and the highest HMI value since February 2007.
The Housing Market Index is an indicator of homebuilder confidence and when it reads 50 or better, the HMI suggests favorable conditions for home builders. Readings below 50 suggest unfavorable conditions for builders.
Despite the recent rise in home builder attitudes, however, the Housing Market Index remains mired below 50 where it’s been since April 2006.
For new construction home buyers in Williams Bay , the HMI may offer insight into the market for new homes through the end of this year. This is because the NAHB Housing Market Index is a composite survey, meant to gauge builder sentiment in three specific areas — current business, future business, and buyer activity.
When all three fronts are rising, it points to an improving market for sellers (i.e. home builders). Unfortunately, though, what’s good for sellers can be damaging to buyers. Builders are less willing to make concessions on price or product when markets are getting stronger.
In August, home builders saw strength across all three categories :
- Current Single-Family Sales : 39 (+3 from July)
- Projected Single-Family Sales : 44 (+1 from July)
- Buyer Foot Traffic : 31 (+3 from July)
Especially noteworthy in the August HMI is that builders project more sales for the next six calendar months than they have projected at any time in the last 5 years. With mortgage rates at all-time lows and buyer foot traffic growing, it’s no wonder confidence is high.
When demand for homes is strong amid stagnant or falling supplies, home prices rise and that’s exactly what we’re seeing in many U.S. markets. It’s a good time to be a Wisconsin home buyer today, but market momentum appears to be shifting.
If you’re in the market for a newly-built home, therefore, the best “deal” may be the one you get today. Next year, your costs may be higher.
Rising home prices are taking a toll on today’s home buyers. For the first time in 4 quarters — and despite falling mortgage rates — home affordability is sinking.
Earlier this week, the National Association of Home Builders reported the Home Opportunity Index, a measure of home affordability, down to 73.8 for the second quarter of the year. This marks the metric’s first “down” quarter since the second quarter of 2011, and is its lowest reading since December 2010.
A home is considered “affordable” when its payments meet standard mortgage underwriting criteria for families earning the local median income. This definition is used for homes across all U.S. markets — including for homes in Lake Geneva.
73.8% of homes sold last quarter were affordable to households earning the national median income of $65,000. This is the 13th straight quarter dating back to 2009 that the index surpassed 70. Prior to 2009, the Home Opportunity Index had not crossed 70 even one time.
Like all real estate data, home affordability varied by locale.
In the Midwest, for example, affordability was highest. 7 of the top 10 most affordable markets nationwide were spread throughout the nation’s heartland. An Alaskan city took the top spot.
The top 5 most affordable cities for home buyers in Q2 2012 were:
- Fairbanks, AK (98.7%)
- Mansfield, OH (98.1%)
- Springfield, OH (95.9%)
- Carson City, NV (95.4%)
- Kokomo, IN (95.4%)
At #23, Ocala, Florida (91.7%) was the top-ranked South Region city last quarter.
By contrast, the Northeast Region and Southern California remained among the least affordable housing markets nationwide. Led by the New York-White Plains, NY-Wayne, NJ area, 9 of the 10 least affordable areas were in the Mid-Atlantic and California, and for the 17th consecutive quarter the New York metro area was ranked “Least Affordable”.
Just 29.4 percent of homes were affordable to households earning the area’s median income there, down from 31.5 percent three months ago.
The rankings for all 225 metro areas are available for download on the NAHB website.
Should you lease a new car, or should you buy one? Like most financial questions, the answer depends on your situation. For some people, leasing a car presents distinct economic advantages. For others, buying a car is the way to go.
There’s plenty of online material to help you choose your optimal path, but this 3-minute piece from NBC’s The Today Show serves as an excellent summary. In it, you’ll learn about the basics of leasing a car, and for whom leasing can be a great fit. You’ll also hear reasons to avoid a lease completely.
The NBC interview makes all of the following points :
- Leasing allows you to drive a car that may be “too expensive” to purchase
- Leasing puts you in a new car, with the latest safety features and gadgets, every few years
- Buying a car means that you have no mileage limits, and can sell at any time
For many people, it concludes, buying a car is preferable to leasing one, with a notable exception being those people who can claim their car or truck as a tax deduction. Be sure to check with your tax advisor if you plan to take that route.
However, for another group — homeowners and active home buyers — leasing a car can invite mortgage approval trouble. This is because a car lease payment is assumed by a mortgage underwriter to be a perpetual debt; one that never reduces or gets extinguished. When a lease is complete, it must be replaced with a new lease, and so on.
Therefore, no matter how many payments remain in a lease, mortgage applicants must use the full car lease payment for purposes of a mortgage approval.
By contrast, for people whom are owners of their automobiles, car payments must only be added to debt ratios if more than 10 car payments remain until the car’s loan is paid-in-full. For homeowners and buyers in Lake Geneva , this can improve debt-to-income ratios and support a higher purchase price on a home.
There is no firm rule for whether it better to lease a car or to own one. The arguments for both sides are compelling and reasonable. Start with the video, then do your own research.
Mortgage markets worsened last week as the investors moved back into risk-taking mode. Better-than-expected economic data in the U.S. plus a general feeling that the ongoing Eurozone issues will be soon be resolved (or lessened) contributed to a second straight week of rising mortgage rates.
One such data point was the weekly Initial Jobless Claims report.
According to the U.S. Department of Labor, the number of U.S. workers filing for first-time unemployment benefits unexpectedly dropped 6,000 from the week prior on a seasonally-adjusted basis. Economists had expected a week-over-week increase.
In addition, government-backed mortgage securitizers Fannie Mae and Freddie Mac both announced quarterly profits last week of a combined $8.3 billion. This, too, reflects well on the economy because both companies attributed strong results to a recovering housing market.
Conforming rates in Delavan rose for the second straight week, according to Freddie Mac’s weekly mortgage rate survey.
The 30-year fixed rate mortgage rate now averages 3.59% nationwide for mortgage applicants willing to pay 0.6 discount points plus a complete set of closing costs where 1 discount point is a loan fee equal to one percent of your loan size. This is a 10 basis point increase from late-July, when rates averaged 3.49%.
The 15-year fixed rate mortgage also moved higher, registering 2.84% last week after recently posting at 2.80%, on average.
This week, there won’t be much data to move markets. We’ll see the release of the Producer Price Index and the Consumer Price Index — two inflationary gauges for the U.S. economy — as well as July’s Retail Sales report. Beyond that, however, there won’t be much. Therefore, be wary of day-to-day momentum in the mortgage bond market.
Between January and July, momentum took mortgage rates lower; eventually to an all-time low. Since August 1, however, that momentum has reversed.
If you’re floating a mortgage rate or are otherwise not yet locked, get with your loan officer quickly. Mortgage rates may fall between today and Friday, but there’s much more room for rates to rise instead.
Foreclosure pipelines are re-filling nationwide.
According to data from RealtyTrac, a national foreclosure-tracking firm, the number of foreclosure filings dipped below 192,000 in July 2012, a 3 percent decrease from the month prior.
RealtyTrac defines a “foreclosure filing” as any foreclosure-related action, including a Notice of Default, a Scheduled Auction, or a Bank Repossession.
July marks the 22nd straight month during which foreclosure filings fell on a year-over-year basis. At some point soon, however, that streak may end. This is because, for the third straight month, on an annual basis, foreclosures starts are on the rise.
More than 98,000 homes started the foreclosure process in July, a 6 percent increase from July of last year. Connecticut, New Jersey and Pennsylvania experienced the biggest increases, rising 201%, 164% and 139%, respectively.
Each is a judicial foreclosure state, which means that foreclosures must go through the state court system prior to auction.
Nationwide, just a few states accounted for the majority of July’s total foreclosure activity. 5 states were home to more than half of all tracked activity, according to RealtyTrac.
- California : 21.9 percent
- Florida : 13.3 percent
- Illinois : 7.2 percent
- Georgia : 5.7 percent
- Texas : 5.2 percent
Collectively, these 5 states represent just 33 percent of the nation’s population.
In contrast to the five states above, the bottom 14 states accounted for just 1 percent of the nation’s foreclosure activity, led by North Dakota. In North Dakota, just 3 foreclosure filings were made in July. Other “fewest foreclosure” states in July included District of Columbia (7 filings), Vermont (31 filings), and South Dakota (63 filings).
For home buyers in Delavan , with more foreclosed properties expected to go for sale this year and next, there will be some excellent “deals” and discounts — foreclosed homes typically sell at discounts of 20% or more as compared to comparable, non-distressed homes. However, foreclosed homes are often sold as-is, which means they may have defects.
Before placing a bid on a foreclosed home, therefore, make sure to have an experienced real estate agent on your side. Buying a foreclosed home may save you money at your closing, but may cost you money longer-term.
80 U.S. metropolitan markets are showing “measurable and sustained growth” this month, according to the National Association of Homebuilders’ Improving Market Index.
It’s good news for the economy and good news for housing.
The NAHB’s Improving Market Index is meant to identify U.S. markets in expansion. It’s a composite of the three distinct data sets which, as a group, present a more holistic view of a given city’s growth :
- From the Bureau of Labor Statistics, the IMI tracks employment figures
- From Freddie Mac, the IMI tracks home price data
- From the Census Bureau, the IMI tracks single-family building permits
The home builder trade group compiles this data and, in order for a given metropolitan area to earn the label “improving”, the area must meet two specific growth conditions.
First, in a given city, each of the above data sets must show growth or expansion in the current calendar month. If one of the three do not show growth, the city cannot qualify.
Second, in a given city, at least six months must have passed since the most recent trough of all of the above metrics. It’s this second clause that can make the Improving Market Index meaningful.
By focusing on long-term growth trends within a city, the IMI ignores “blips” and seasonal irregularities.
The August IMI shows 80 improving markets nationwide, a 4-city decrease from July 2012. 5 new cities were added to the index including Miami, Florida; Terre Haute, Indiana; and Lubbock, Texas. Nine cities fell off the list.
Overall, 32 states are represented in the IMI, and the District of Columbia, too.
For today’s Lake Geneva home buyers, the IMI doesn’t provide much actionable information. It doesn’t show home prices, for example, nor the current demand for homes. What it shows is the strength of local economies, though, and in many cases, as the economy heats up, so do home prices.
The complete Improving Markets Index is available for download at the NAHB website.