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Archive for March, 2010

Non-Farm Payrolls Mar 2008-Feb 2010Mortgage markets tanked last week, raising rates for Lake Geneva real estate  to their highest levels in a month. 

Most of the losses occurred Wednesday in what was the worst 1-day mortgage market performance in more than 6 months.  Even Friday’s rally could barely dent the losses.  Most of the movement was tied to geopolitical concerns and worries of a ballooning federal debt load

The best time to lock a conventional or FHA mortgage rate last week was Tuesday morning.

This week, markets should remain volatile.  There’s a large set of economic data due for release, plus trading volume will thin as the week goes on because markets are closed Friday for Good Friday.

Coincidentally, Friday is also the day that the March jobs report is released.

The non-farm payroll report is expected to show net job growth of 187,000 in March.  This is a large number as compared to last month’s net loss of 36,000 job.  However, analysts are already dismissing March’s numbers as skewed by both the bad storms of February, and the temporary hiring of Census workers.

In most months, major job growth would be bad for Lake Geneva real estate mortgage rates.  This month, that won’t be the case.  It will take a figure north of 200,000 to cause rates to rise and the higher the actual number, the more that rates will respond.

Also this week, on Wednesday, the Federal Reserve’s $1.25 trillion program to support mortgage markets sunsets.  Fed insiders estimate that the program dropped rates 1 percent since its inception in 2008.  It’s reasonable that mortgage rates will rise after its end, therefore.

Asst Vice President
1221 South Shore Drive
Delavan, Wisconsin, 53115
US
Work: 262-728-6209
Mobile: 262-745-5055
Lender, Lake Geneva Real Estate
Comments (0)

Home Price Index April 2007 to January 2010

Home values fell again in January, according to the Federal Home Finance Agency’s Home Price Index.  Values were reported down 0.6 percent, on average.

We say “on average” because the Home Price Index is a national report.  It doesn’t capture the essence of a local market like the Lake Geneva real estate market.

The most granular that the monthly Home Price Index gets is regional and January’s report shows that:

  • Values in the Mountain states rose 2.0%
  • Values in the Pacific states were flat
  • Values in the East North Central states fell 1.8%

It’s hardly helpful for home buyers entering the market, or home sellers trying to properly price a home.  Furthermore, because the Home Price Index reports on a 2-month delay, its data fails to reflect the current market conditions.

Versus January — the period from which HPI data is collected — mortgage rates are lower, buyer activity is up, and the federal home buyer tax credit is closer to expiring.  These each can have an impact on housing.

Ultimately, national real estate data like the Home Price Index is best suited for lenders and policy-makers.  National data helps to identify trends that shape formal policy, but it doesn’t help you, specifically. 

Since peaking in April 2007, the Home Price Index is off 13.2 percent.

Asst Vice President
1221 South Shore Drive
Delavan, Wisconsin, 53115
US
Work: 262-728-6209
Mobile: 262-745-5055
Lender, Lake Geneva Real Estate
Comments (0)

April 15 is Tax Day and the IRS estimates that the average U.S. household will receive a $2,800 tax refund this year.  If you’re among the Americans expecting a refund, this 4-minute piece from NBC’s The Today Show may be helpful.  It’s a talk about how to receive a refund and what to do with it.

Some of the key points discussed include:

  1. Why state-issued tax refunds may be delayed this year, although my Wisconsin return has already arrived.
  2. How wage-earning people can claim their “Making Work Pay” tax credit of up to $800
  3. How to direct a tax refund to a 529 college savings plan for an even bigger tax refund

There’s also some sensible pointers on using tax refunds to pay down credit card debt, and to fund retirement plans, among other purposes.

If you haven’t started your tax planning yet, try to avoid leaving it for the last weekend.  Not only will your tax preparer have more time for you now, but you’ll leave yourself more time to track down important statements and receipts that can boost your federal and state tax deductions.  I fyou need the name of taleneted tax preofessional give me a call.  I will gladly refer you one of the best in the industry.

Taxes are due in 21 days.

Asst Vice President
1221 South Shore Drive
Delavan, Wisconsin, 53115
US
Work: 262-728-6209
Mobile: 262-745-5055
Lender, Lake Geneva Real Estate
Comments (26)

Real estate is localCNNMoney.com recently published its 2010 forecast and projections for home prices in the country’s largest metro markets.   I wonder how Lake Geneva real estate will do?

Listed as “Top 25″ and also comprehensively by state, CNNMoney.com’s home price forecasts puts Santa Rosa, California at the top of 2010′s home appreciation list and Hanford, California at its bottom.

The 10 cities projected for highest home appreciation in 2010 are:

  1. Santa Rosa, CA : +6.0%
  2. Cheyenne, WY : +4.7%
  3. Kennewick, WA : +4.6%
  4. Merced, CA : +4.4%
  5. Bremerton, WA : +4.2%
  6. Fairbanks, AK : +4.2%
  7. Corvallis, OR : +4.1%
  8. Tacoma, WA : +3.9%
  9. Anchorage, AK : +3.8%
  10. Bend, OR : +3.3%

The Pacific Northwest is the region most heavily-represented among price gainers.  The Southeast and Middle Atlantic are most represented on the under-perform list.

However, just because a city’s homes are expected to appreciate (or depreciate) in 2010, that doesn’t mean that every home within its limits will follow suit.  Lake Geneva real estate cannot be grouped on a city level like CNNMoney.com tries to.  There will always be areas in demand within city limits in which prices rise, just as there will be out-of-demand areas in which prices fall.

Real estate data can’t be grouped by city or even by ZIP code, really.

Real estate in Lake Geneva, Wisconsin is more local than that.

When we say “real estate is local,”  it means that every street in every town has a distinct set of traits that drives its home values.  Homes that are one block closer to the train; or, homes that are facing north; or, homes that are made of brick.  Each of these characteristics can affect a home’s desirability which, in turn, can affects its sales price.

National surveys can’t capture “essence” like this.  They only report on the aggregate.

For local real estate data, look to established, publicly available websites and to active, local real estate agents or ask me to introuce you to one of the great agents I work with.  Both will have data and insight that can help you.  National surveys often make for good headlines, but do little to help homebuyers find good value.

Asst Vice President
1221 South Shore Drive
Delavan, Wisconsin, 53115
US
Work: 262-728-6209
Mobile: 262-745-5055
Lender, Lake Geneva Real Estate
Comments (3)

Fed Funds Rate (Feb 2007 - March 2010)Mortgage markets closed unchanged last week, but that’s not to say mortgage rates were calm.  Monday through Wednesday, rates improved steadily before a swift, late-week sell-off unwound the gains.

Lake Geneva real estate mortgage rates have been very low for a very long time — against the expectations of most market experts.  The speed of the Thursday-Friday reversal may signal that markets are preparing for change.

One key story from last week was the Federal Open Market Committee’s scheduled Tuesday meeting.  Upon adjournment, the Fed voted 9-1 to hold the Fed Funds rate in its current target range near 0.000% and reiterated its plan to keep rates low for “an extended period of time”. 

Kansas Fed President Thomas Hoenig was the lone dissenting vote.

For rate shoppers in Lake Geneva, Wisconsin and all of Walworth County, take note. 

The Fed specifically mentioned that the its $1.25 trillion mortgage buyback program will end, as planned, March 31, 2010.  This could force rates higher over the next two weeks because, according to the Fed, the existence of a buyback program forced rates lower by 1 percentage point in 2009.

When the program ends, it’s expected that markets will give back some of that 1 percent, leading to higher mortgage rates for conventional and FHA borrowers.

This week, in addition to the buyback program’s looming end-date, there’s several other potential influences on mortgage rates:

  1. The Existing Home Sales data for February is released Tuesday, along with the Home Price Index
  2. The New Home Sales data for February is released Wednesday
  3. Consumer Confidence data hits Friday

Strength in any — or all three — of these reports should put pressure on mortgage rates to rise.

But there’s one wildcard this week and that’s the aforementioned Kansas Fed President Hoenig’s scheduled speech Wednesday morning.  Typically, Fed members stay on message when making public appearances, but Hoenig is expected to talk about why rates should be higher, and what the Fed needs to do to prepare the economy for late-2010 and beyond.

His words could lead Wall Street to rethink its position on the mortgage bond market and that could cause Lake Geneva real estate mortgage interest rates to spike Wednesday afternoon.

Lake Geneva real estate mortgage rates remain volatile and are still relatively low.  If you’re unsure of whether now is a good time to lock in, consider that there’s a lot more room for rates to rise than to fall right now.  Especially with momentum shifting for the worse.

Asst Vice President
1221 South Shore Drive
Delavan, Wisconsin, 53115
US
Work: 262-728-6209
Mobile: 262-745-5055
Lender, Lake Geneva Real Estate
Comments (7)

Inflation is bad for mortgage ratesHomes are more affordable across the nation as the housing market emerges from a slow winter season with Lake Geneva real estate mortgage rates still near 5 percent.

Soft housing and low rates are an excellent combination for Lake Geneva real estate home buyers but whereas home values rise with a gradual pace, mortgage rates change in an instant.  It’s something worth watching.

Each 0.25% increase to conventional or FHA rates adds approximately $16 per month for each $100,000 borrowed.  Lake Geneva real estate mortgage rate volatility can change your household budget.

If you’re trying to gauge whether rates will be rising or falling, one keyword for which to listen is “inflation.”  Lake Geneva real estate mortgage rates are highly responsive to inflation.

By definition, inflation is when a currency loses its value; when what used to cost $2.00 now costs $2.15.  As consumers, we perceive inflation as goods becoming more expensive.  However, it’s not that goods are more expensive, per se.  It’s that the dollars used to buy them are worth less.

This is a big deal to mortgage rates because mortgage bonds are denominated, bought, and sold in U.S. dollars.  As the dollar loses value to inflation, therefore, so does the value of every mortgage bond in existence.  When bonds lose their value, investors don’t want them and bond prices fall.   Mortgage rates move opposite of bond prices. 

Prices down, rates up.

In today’s market, the relationship between inflation and mortgage rates is helping home buyers.  The Cost of Living made its smallest annual gain in 6 years last month and the Fed has repeatedly said that inflation will stay low for some time.  The combination is driving investors to buy mortgage bonds which, in turn, is suppresses rates.

So long as it lasts, the cost of homeownership will remain relatively low.  Combined with the expiring tax credit, the timing to buy a Lake Geneva home may be as good as it gets.

Asst Vice President
1221 South Shore Drive
Delavan, Wisconsin, 53115
US
Work: 262-728-6209
Mobile: 262-745-5055
Lender, Lake Geneva Real Estate
Comments (7)

Housing Starts Mar 2008-Feb 2010Single-family Housing Starts idled last month, dropping just 3,000 units from the month prior, or 0.2%.

According to the Commerce Department’s report, February marked the 8th straight month in which Housing Starts straddled the half-million marker, dating back to June 2009.  The Lake Geneva real estate market has seen very similar statistics.

This is a different slant on the Housing Starts story as told by the press.

Most publications are reporting that Housing Starts fell 5.9 percent in February.  Technically, this is true.  Housing Starts did fall 5.9 percent last month.   However, the Housing Starts data is comprised of three parts:

  1. Single-Family Housing Starts
  2. 2-4 Unit Housing Starts
  3. “Apartment Building” Housing Starts (i.e. 5 or more units)

The press tends to lump all 3 together but that’s not relevant for everyday homeowners and buyers. 

2-4 unit homes, and apartments and condos are a different housing class as compared to single-family homes and are notoriously volatile, too.  Single-family starts are more steady and better reflect the country’s housing stock.

Single-family housing starts are up 32 percent over the last 12 months. 

Meanwhile, the pace of new buyers has not kept up with the pace of new housing stock.  Therefore, because home prices are based on supply-and-demand, the price for a newly-built home was down, on average, 7 percent nationwide in January.

With the federal home buyer tax credit expiring soon, home buyers looking for Lake Geneva real estate will likely create new demand for homes.  And with Housing Starts holding steady near 500,000, that should push prices higher through the spring months.

Asst Vice President
1221 South Shore Drive
Delavan, Wisconsin, 53115
US
Work: 262-728-6209
Mobile: 262-745-5055
Lender, Lake Geneva Real Estate
Comments (0)

Putting the FOMC statement in plain EnglishToday, the Federal Open Market Committee voted 9-to-1 to leave the Fed Funds Rate unchanged, in its target range of 0.000-0.250 percent.

In its press release, the FOMC noted that the U.S. economy “has continued to strengthen” and that the jobs markets “is stabilizing.”   It also said that business spending has “has risen significantly.”

This is a slight departure from the Fed’s January statement in which housing was not mentioned and business spending was said to be “picking up.”

It’s also the sixth straight statement from the FOMC in which the Fed described the economy with optimism.  This is a signal to markets that 2008-2009 recession is over and that economic growth is returning.

The economy is not without threats, however, and the Fed identified several:

  1. High unemployment threatens consumer spending
  2. Housing starts are at a “depressed level”
  3. Consumer credit remains tight

The message’s overall tone, however, remained positive and inflation is within tolerance limits

Also in its statement, the Fed confirmed its plan to hold the Fed Funds Rate near zero percent “for an extended period” and to end its $1.25 trillion commitment to the mortgage market by March 31, 2010.  Fed insiders estimate that the bond-buying program lowered mortgage rates by 1 percent since its start.

Mortgage market reaction to the Fed press release is, in general, ambivalent. Mortgage rates in Lake Geneva are unchanged this afternoon.  Which is good news for Lake Geneva real estate buyers.

The FOMC’s next scheduled meeting is a 2-day affair, April 27-28, 2010.

Asst Vice President
1221 South Shore Drive
Delavan, Wisconsin, 53115
US
Work: 262-728-6209
Mobile: 262-745-5055
Lender, Lake Geneva Real Estate
Comments (0)

Fed Funds Rate (Feb 2007 - March 2010)The Federal Open Market Committee adjourns from a scheduled 1-day meeting today, its second of the year. 

The FOMC has held the Fed Funds Rate in a target range of 0.000-0.250 percent since December 16, 2008, and the voting members of the Fed are expected to vote “no change” again today.

However, no change in the Fed Funds Rate doesn’t necessarily mean no change in mortgage rates.   This is because the Fed Funds Rate is a different interest rate from the rates Lake Geneva real estate home buyers get from a loan officer. 

  • Fed Funds Rate : Short-term rate at which banks borrow from each other
  • Mortgage Rate : Long-term rate of interest a homeowner pays on a mortgage

Lake Geneva real estate mortgage rates are more responsive to what the Fed says as compared to what the Fed does. 

After each FOMC meeting, Fed Chairman Ben Bernanke & Co issue a formal press release to the markets.  At roughly 400 words, the statement is a brief commentary on the strengths, weaknesses, and threats for the U.S. economy.

Wall Street watches the statement with great interest and this is why mortgage rates are often volatile on the days of an FOMC adjournment.  One mention of a word like “inflation” and traders rush to dump their mortgage bond positions.

Inflation is the enemy of mortgage rates.

I say again, “inflation is the enemy of mortgage rates.”

After the Fed’s last meeting in January, it told us that the economy had “weakened further”, led by steep declines both in housing and employment.  Global demand was off, too.  The negative tone of the Fed’s statement caused Lake Geneva real estate mortgage rates to fall to near an all-time low.

This month, expect a less gloomy message.

Since January, there’s been a modest rebound in housing, employment appears more stable, and Retail Sales just posted huge gains.  If the Fed alludes to improvement in any or all three, mortgage rates will likely reverse and zoom higher.

We can’t know what the Fed today will say so if you’re floating a mortgage rate and wondering whether to lock, the safe approach would be to do it today, prior to 2:15 PM ET.

Asst Vice President
1221 South Shore Drive
Delavan, Wisconsin, 53115
US
Work: 262-728-6209
Mobile: 262-745-5055
Lender, Lake Geneva Real Estate
Comments (6)

Lake Geneva real estate mortgage markets worsened last week with little economic news to push markets in either direction.  Momentum trading and rebalancing of portfolios drove mortgage rates higher, on average.

Wisconsin FHA and conventional mortgage rates in rose last week, marking the first time that’s happened this month. 

Mortgage rates for Lake Geneva real estate have been on impressive run lately and mortgages are priced far better than what most experts predicted.  Weaker-than-expected economic data is one reason why.   Lack of economic data may be another.

This week, however, data returns.

  • Monday : Industrial Production and Home Builder Index
  • Tuesday : Housing Starts and Building Permits
  • Wednesday: Consumer Confidence
  • Thursday : Producer Price Index and Initial Jobless Claims
  • Friday : Consumer Price Index and Continuing Jobless Claims

And, as if all that weren’t enough to spook you, the Federal Open Market Committee meets for a scheduled, 1-day event Tuesday.

The Federal Reserve is expected to vote to hold the Fed Funds Rate in its current target range near 0.000%, but that doesn’t mean mortgage rates won’t change.  Markets are responsive to the FOMC’s post-meeting press release and any clear talk of economic strengthening should drive rates higher.

Wall Street is in Wait-and-See Mode and this week will give it plenty to look at.

If you’re floating a mortgage rate, or waiting to lock, be prepared for wild swings in mortgage rates — especially leading up to Tuesday afternoon’s FOMC adjournment.  The Fed adjourns at 2:15 PM.

Asst Vice President
1221 South Shore Drive
Delavan, Wisconsin, 53115
US
Work: 262-728-6209
Mobile: 262-745-5055
Lender, Lake Geneva Real Estate