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Archive for July, 2010

Consumer Confidence Index July 2008-July 2010For the second consecutive month, U.S. consumer confidence is plunging. July’s official reading is its lowest since July of last year and the figures run in stark contrast to just two months ago, when the index touched a multi-year high.

According to The Conference Board, July’s figures are reflective of a more pessimistic consumer; one concerned about “business conditions and the labor market.”

Falling confidence numbers are presumed to be poor for the economy.  For homeowner and home buyers of Lake Geneva real estate , however, they can create opportunity.  Low confidence can influence the Lake Geneva mortgage market in a positive manner, driving mortgage rates down.

Mortgage rates are already at their lowest levels of all-time.

The link between consumer confidence and everyday mortgage rates roots in consumer spending.

Consumer spending accounts for close to 70% of the overall U.S. economy so, the thought goes that, a less confident consumer is less likely to spend money, thereby retarding economic growth. This harms the stock markets and drives cash to bonds, including mortgage-backed bonds.

More bond demand leads bond prices to rise which, in turn, pushes mortgage rates lower.

The other side of lagging confidence is that Americans may be less likely to take new financial risks when they’re feeling unsure, including buying a new home. This can then drag on the housing market, negatively impacting home prices across Wisconsin.

Falling home values can help buyers, harm sellers, and stymie would-be refinancers.

It’s tough to predict how consumer confidence data will work its way through the economy, but in the near-term, it appears to be helping mortgage rates stay low. If you’re floating a mortgage rate with your lender, or contemplating a refinance, the time may be right to lock in a rate.

Low rates can’t last forever.

Impressive 4 bedroom, 3 bath Lake Geneva lakefront in immaculate condition with ideal level frontage.  Beautiful kitchen with granite counter tops, hardwood floors, two fireplaces and spacious family room in walkout lower level. Large deck with panoramic views, extensive landscaping and a large pier.  The home is up to date and in absolute move-in condition.  Take a look, you won’t be disappointed.

Thanks Bob Webster for sharing this property with us.

Contact Bob Webster of Keefe Real Estate
call (262) 348-3233 or (800) 364-7579 – 24 Hour Voice Mail 

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New Home Supply June 2009 - June 2010

After a down month in May, the sales of newly-built homes appears back on track.  This may be interesting news for Lake Geneva real estate buyers looking for a newly built home.

As published by the Census Bureau, June’s New Home Sales report showed:

  1. A 24 percent sales volume increase from the month prior
  2. A 2-month drop in the supply of newly-built home

There are now just 210,000 new homes for sale nationwide.

June’s data is a major improvement over May, but it’s possible that the true “new home market” may be softer than the statistics suggest.  This is for several reasons.

First, we’re comparing June’s sales data to the worst month in New Home Sales history.

In May, sales of new homes totaled just 267,000 units nationwide.  That’s one-quarter fewer sales than in the previous worst month in New Home Sales history.  May’s sales levels were awful by any measure but June’s improvement to 330,000 units remains second-worst sales levels ever posted.

Second, although much improved, June’s new home supply of 7.6 months is elevated versus the historical norm near 6.0 months.  The last year has averaged 7.7 months.

For buyers of new Lake Geneva real estate homes, this combination of low sales volume and higher-than-normal inventory may be a positive.  It’s the main reason why homebuilder confidence is reeling and the downturn has opened some doors for big discounts and deals.  Free upgrades and closing cost credits can make a well-priced home even more attractive.

Plus, with mortgage rates at all-time lows and expected to rise, home affordability is may never be better.

Travis Egan

Lake Geneva Real Estate, Lender

After a week off, I’m back.  Lake Geneva mortgage markets worsExisting Home Sales June 2009-June 2010ened last week for the first time in 6 weeks last week.  Investors were pleased with corporate earnings reports and the European bank stress tests results.  Stocks gained on the news, and bonds lost.

Lake Geneva real estate mortgage rates rose last week, but only slightly.  Rate are still hovering near their lowest levels of all-time.

Of the bigger stories last week was Existing Home Sales.  As reported by the National Association of Realtors®, sales volume was down in June and home supplies were up.  But figures were a bit better than expected, giving some hope for housing.

Notably, the number of move-up buyers outnumbers first-timers and the national median home price rose, suggesting that mid-to-upper home prices are getting some support.

This week, the market gets additional two pieces of housing data to add to the mix:

  1. New Homes Sales (Monday)
  2. Case-Shiller Index (Tuesday)

Both will have an impact on Lake Geneva mortgage rates.  In general, better-than-expected data should cause rates to rise for Lake Geneva real estate; worse-than-expected data should cause rates to fall.

Also this week, there’s two consumer confidence reports, the Fed’s Beige Book, and late-in-the-week inflationary data.  Mortgage markets should remain volatile with so much news headed down the pipe.

It’s too soon to declare the current 3-month rally over, but it’s been 3 weeks since rates dipped.  This can be a signal that mortgage rates have finally bottomed and that it’s time to lock your rate.

If you’re floating a mortgage rate, or thinking about a refinance, it’s time to get locked in.  Lake Geneva rates may drop this week, but then again, maybe they won’t.  There’s little sense gambling on a bet as big as a mortgage.

Travis Egan

Housing starts June 2008 - May 2010Lake Geneva mortgage markets improved for the 5th straight week last week as consumer confidence waned and inflation data tamed.  Investors ignored the news that 19 of 23 reporting S&P 500 companies beat their respective earnings estimates and sold off on stocks.

There’s concern about a potential economic slowdown for the months ahead and it may be well-founded.

Despite an improving jobs situation and booming retail sales, households are less optimistic about the future and so is the Federal Reserve.  In its post-meeting minutes released last week, the Fed revised its U.S. growth estimates downward for 2010 and 2011.

For rate shoppers for Lake Geneva real estate, this is excellent news.

Because of the weakness, conforming mortgage rates fell again last week, extending the current rally in rates to 16 weeks.  Lake Geneva mortgage rates are lower than at any time in measured history.

This week, data will be housing market-heavy and mortgage rates could rise or fall.

  • Monday: National Association of Home Builders Index
  • Tuesday: Building Permits and Housing Starts
  • Thursday: Existing Home Sales

Strength in any, or all three, of these housing-related reports should push mortgage rates higher on higher hopes for the economy.  Weakness, on the other hand, should have the opposite effect. 

Overall, though, mortgage markets are trending better.  Momentum is in effect and refinance activity is soaring.  That said, it doesn’t mean that rates won’t rise — they could absolutely.  It just takes a change in market sentiment.  And that could happen quickly.

Lake Geneva mortgage rates are artificially right now so even the slightest jolt could cause them to spike.  It would be similar to what happened in June 2009 when rates rose 1.125% in just 10 days’ time.  Therefore, if you’re shopping for a mortgage and like the rate you’ve been quoted, consider locking in as soon as possible.

There’s very little room for rates to fall further but a lot of room for rates to rise.  Make sure you’re on the right side of that bet.

Travis Egan

Lake Geneva Real Estate, Lender

FOMC June 2010 MinutesAccording to Freddie Mac, Lake Geneva mortgage rates made new all-time lows this week and the good news is that rates look poised to fall even more.

Since the Federal Reserve’s release of its June 2010 meeting minutes Wednesday, Lake Geneva mortgage rates are dipping even more and one of the main reasons why is because of some choice Fed words.

If you’ve never seen a Fed Minutes release, it reads academic.  The document is page after page of stats, facts and figures about the U.S. economy, accompanied by an in-depth recap of the intra-Fed member debates that shape the nation’s monetary policy.

At 7,333 words, the June Fed Minutes is the unabridged version of the more well-known, post-meeting press release.  The corresponding press release was just 360 words.

As it turns out, Wall Street didn’t like what it read in the minutes.  Specifically:

  1. The Fed expects below normal growth through 2012
  2. The Fed’s outlook for employment has dipped
  3. Credit conditions are easing only slowly

Furthermore, the Fed said its action may be needed if the economy were “to worsen appreciably”.

Overall, the economic optimism the Fed displayed earlier this year appears to be waning.  The economy is moving forward — just not as quickly as expected.  That should bode well for mortgage rates and home shopping for Lake Geneva real estate.

Mortgage rates were down Wednesday afternoon and Thursday and remain historically low.  All it would take to reverse rates, however, is a run of positive news on jobs, growth, and consumer spending.  Therefore, if you know you need to lock a Lake Geneva mortgage rate in the near-term, it may be a good time to make the call. 

Lock your mortgage rate and move on.

Travis Egan

Lake Geneva Real Estate, Lender

Foreclosures per capita, June 2010

313,841 foreclosure filings were made in June, according to foreclosure-tracking firm RealtyTrac.  The figure represents a 3 percent drop from May and 7 percent drop from June of last year.  However, foreclosure filings remain relatively high nationwide.

June marks the 16th straight month the filings topped 300,000.  One in every 411 U.S. homes received some form of notice last month with foreclosure density varying wildly from state-to-state.

Like everything else in real estate, it seems, foreclosures are a local phenomenon.

The states with the highest foreclosures per capita were:

  • Nevada : 1 foreclosure filing per 88 homes
  • Florida : 1 foreclosure filing per 171 homes
  • Arizona : 1 foreclosure filing per 189 homes

The states with the lowest foreclosures per capita were:

  • Vermont : 1 foreclosure filing per 26,051 homes
  • West Virgina : 1 foreclosure filing per 8,058 homes
  • South Dakota : 1 foreclosure filing per 6,528 homes

Wisconsin stats are somewhere in the middle of the states with 4.315 foreclosure properties or one in every 595 housing units.  Walworth County had 80 foreclosure properties or one in every 628 housing units.  What’s most interesting is how Lake Geneva real estate fared.  Lake Geneva real estate had 23 foreclosure properties or one in every 444 housing units.  The percentage of Lake Geneva real estate of the 80 Walworth County foreclosure proerties is 29% of the overall figure. 

Overall, 40 states beat the national Foreclosure Per Capita average and 10 states fell below.  The sheer volume of REO, though, is creating interesting buying opportunities for first-timer buyers, move-up buyers, and Lake Geneva real estate investors.

Homes bought from banks are usually less expensive than non-foreclosure homes.  This is one of the major reasons why distressed sales account for roughly 30 percent of all home resales.  Less expensive, though, doesn’t always mean “cheaper.”  Foreclosed homes are often sold as-is and may be defective or otherwise uninhabitable.

Making repairs to get these Lake Geneva homes into “living condition” can be costly.

Therefore, if you’re buying a foreclosed home, make sure you know what you’re buying before you make your bid.  Have a certified professional inspect the home to check for damage, and consider enlisting the help of a Lake Geneva real estate agent to assist with negotiations and management of the contract.  If you don’t know one I would be glad to recommend one to you.

The process of buying a Lake Geneva foreclosed home is different from buying a typical resale.  Make sure you do your homework.

Travis Egan

Lake Geneva Real Estate, Lender

Loan-level pricing adjustments add to mortgage costsConforming Lake Geneva mortgage rates may be posting all-time lows this week, but that doesn’t mean you’ll be eligible for them. You may have already called your loan officer and found this out the hard way.

It’s because of a federally-mandated mortgage-pricing scheme known as “loan-level pricing adjustments.”

In effect since April 2009, loan-level pricing adjustments are changes to a loan’s base rate and/or fee structure based on that loan’s inherent risk to Wall Street.  It’s similar to auto insurance pricing adjustment in that a sports car, all things equal, will cost more to insure than a comparably-priced minivan.

More risk, more cost.

In mortgage lending, loan risk can be loosely grouped into 5 categories. Mortgage applications for Lake Geneva real estate featuring any of the five traits are subject to price adjustments:

  1. Credit Score (i.e. the borrower’s FICO is below 740)
  2. Property Type (i.e. the subject property is a multi-unit home)
  3. Occupancy (i.e. the subject property is an investment home)
  4. Structure (i.e. there is a subordinate/junior lien on title)
  5. Equity (i.e. mortgage insurance is required by the lender)

Furthermore, loan-level pricing adjustments are cumulative.

A 3-unit investment home will face larger adjustments than an owner-occupied 3-unit home, for example.  It’s these adjustments that explain why you may not be eligible for the rates you see advertised online and in the newspapers — your particular loan may be subject to this risk-based pricing that raises your Lake Geneva mortgage rate and closing costs.

The government’s loan-level pricing adjustment schedule is public information.  See what your lender and how your loan quote is made at the Fannie Mae website.  Or, if you find the charts confusing, just call or email me or another taleneted Walworth State Bank loan officer for help with interpretation.

Travis Egan

Lake Geneva Real Estate, Lender

Lake Geneva mortgage markets improved again last week — if only barely — throughout a holiday-shortened week devoid of “major” data and market conviction.

Up-and-down trading characterized the week which ended with Lake Geneva mortgage rates slightly lower versus the week prior.

Mortgage rates have fallen in 4 consecutive weeks and are on an extended rally that dates back to mid-April.

This week, however, data returns and rates could reverse.  Especially with inflation numbers are in play.

Inflation is the enemy of Lake Geneva real estate mortgage rates.

Inflation is bad for mortgage rates because mortgage rates based on the price of mortgage-backed bonds.  When inflation pressures mount, the demand for mortgage-backed bonds wanes and that pushes bond prices down which, in turn, pushed bond yields (i.e. rates) up.

There’s three pieces of inflation-related news this week.

The first inflation-related story is the Federal Reserve’s Wednesday release of the minutes from its last meeting.  Now, when the Fed adjourned June 23, it said “underlying inflation has trended lower.”  However, there was more to the conversation that what the FOMC released in its post-meeting statement. 

Markets will be looking for clues.

Then, Thursday, the Producer Price Index is released.  The Producer Price Index is a measure of business operating costs.  When PPI is increasing, it means that “doing business” is more expensive — an inflationary situation.  It’s inflationary because higher business costs are often absorbed by consumers in the form of higher prices for goods and services.

A rising PPI is usually bad for Lake Geneva mortgage rates.

And lastly, Friday, the Consumer Price Index is released.  The CPI measures the average American’s “cost of living.”  Like PPI, when the Consumer Price Index is rising, mortgage rates tend to follow.

Other releases of import this week include Retail Sales and two consumer confidence surveys.

Last week, mortgage rates again made new all-time lows.  If you haven’t checked with me or another Walworth State Bank loan officer about the possibility of a refinance, make that call this week.  Delavan mortgage rates can stay low for a long time, but they can’t stay low forever.  Lock your rate while you can.

Travis Egan

Lake Geneva Real Estate, Lender

Monthly change in Home Price Index from April 2007 peak

Last week, the Case-Shiller Index reported Lake Geneva home values up 0.8 percent across 20 tracked markets.  The public-sector Federal Housing Finance Agency has reached a similar conclusion.

Reporting on a two-month lag, the government’s Home Price Index shows home values up 0.8 percent in April, buoyed by the expiring federal home buyer tax credit and low Lake Geneva mortgage rates.  It’s a positive signal for a recovering housing market — for Lake Geneva real estate and everywhere else.

But just because the Home Price Index says home values are rising, that doesn’t mean they are.  The Home Price Index methodology is flawed on multiple fronts.

First, the Home Price Index reports on a 60-day delay.  This two-month lag turns the HPI a trailing indicator for the housing market instead of a forward-looking one.  If you’re a Lake Geneva home buyer looking for direction, HPI won’t give it to you — you’ll have to get that analysis from your real estate agent.  If you don’t have a fantastic Lake Geneva real estate agent I would be glad to reccomend one to you.  I only work with the best.

Second, HPI only accounts for home values in which the home’s attached mortgage is backed by Fannie Mae or Freddie Mac.  As the FHA market share grows, fewer homes get included in the HPI sample set, and HPI values may be skewed high or low.

And, third, HPI doesn’t account for new home sales — only repeat ones.  This, too, eliminates a major segment of the market.

All of that said, though, the Home Price Index remains important to housing.  It’s still the most comprehensive home valuation model in print and it’s been giving strong readings since the start of year.  You can’t ignore that on any level.

It’s July and you may have missed the “rock bottom” home prices from earlier in the year, but homes are still relatively inexpensive.  Couple that with all-time low Lake Geneva mortgage rates and home affordability looks excellent.  Consider making an offer while the terms are right.

Travis Egan

Lake Geneva Real Estate, Lender