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Archive for August, 2010

Sorry for the delay in getting this out, but I was dealing with a family emergency for the better part of last week.  I hope it was worth your wait.

Existing Home Supply (July 2009 - July 2010)Lake Geneva Mortgage markets improved last week despite a major mortgage bond sell-off Friday afternoon.  Prior to the jump, conforming mortgage rates had cut new, all-time lows by Thursday, only to lose up to 0.250 percent on the last day of the week.

Meanwhile, the same type of news that drove rates lower Monday through Thursday also contributed to rates rising Friday — revised projections for the U.S. economy.

Early in the week, “bad” news piled on which, in turn, lowered expectations for the economy and pushed Lake Geneva mortgage rates down:

Then, on Friday, two events revised the market’s expectations back higher:

When Chairman Bernanke talks, markets listen.  His comments about the U.S. economy helped fuel that late-Friday surge in Lake Geneva real estate mortgage rates last week.

This week, the momentum could continue — depending on the data. 

There’s a lot for markets to digest this week including key inflation figures from the government; home value data from Case-Shiller; Fed Minutes from the Federal Reserve; and, the always-important jobs report due Friday.

Since April, Lake Geneva mortgage rates have been on a downward trajectory and that may continue this week.  Or, it may not.  If you own a home and haven’t talked to me about a refinance, now is as good a time as any — Lake Geneva rates are at historic lows and could rebound at any time.

Last June, mortgage rates rose 1.125% in 10 days.  Under the right circumstances, it could happen again.

Travis Egan

Lake Geneva Real Estate, Lender

New Home Supply July 2009 - July 2010One day after the National Association of Realtors released the softest Existing Home Sales report since 1995, the U.S. Census Bureau released a similarly-weak New Home Sales report.

Americans bought just 276,000 newly-built homes in July.  That marks the fewest units sold since the government started keeping records in 1963.

In addition, although new home inventory actually dropped 2,000 units in July, the slowing sales pace still managed to push the national supply higher by 1.1 months.  At July’s rate of sales, the nation’s new home inventory would be exhausted in just about 9 months.

None of this news should surprise you, though.  It’s all been foreshadowed for weeks.

First, Single-Family Housing Starts have dropped in every month since April.  A “housing start” is a when a home starts construction and, because fewer homes are under construction, we should expect fewer homes to be sold.

Second, Building Permits are down.  The number of new permits peaked in March and have fallen 23 percent since.

And, lastly, home builder confidence ranks at its lowest levels since early-2009.  A contributing factor in that pessimism is dwindling buyer foot traffic.

Regardless, there’s two sides to the story.  Although the New Home Sales data looks bad for builders, it can be terrific  for you.  This is because new homes are more likely to be discounted when the sales cycle favors Lake Geneva real estate buyers.

Coupled with ultra-low Lake Geneva mortgage rates, the cost of buying a newly-built home Lake Geneva< Wisconsin  may have just become cheaper.

Travis Egan

Lake Geneva Real Estate, Lender

Existing Home Sales July 2009 - July 2010The number of home resales plunged by 1.4 million units in July, according to the National Association of Realtors®’ Existing Home Sales report.

It’s a drop of 27 percent from June; single-family home resales are at the report’s lowest levels since May 1999.

Furthermore, because of the sharp drop in sales volume, home inventories are spiking.

Homes for sale nationwide fell just short of 4 million units in July and, at the current sales paces, it would take 12.5 months for the existing inventory to be absorbed.

Home supply was just 8.9 months in June.

For home sellers of Lake Geneva real estate , the Existing Home Sales report is a bit of bad news.  Fewer sales and larger inventories put negotiation leverage in the hands of the buyers which, in turn, creates downward pressure on home prices.  It may also increase time-on-market.

For Lake Geneva home buyers, however, the data is decidedly welcome.  After a stimulus-driven spring buying season that favored sellers, the summer and early-fall market seem to favor buyers. More choices and more leverage is a positive.

It helps that home affordability is up, too.

Although there’s reports that home values are rising, their modest gains are more than countered by the ongoing rally in mortgage rates.  Freddie Mac says that 30-year fixed rate mortgage rates are at their lowest levels in history and, at today’s rates, every one-eighth drop in mortgage rates roughly offsets a 1.5% increase to home price.

Lake Geneva mortgage rates are down 0.75 percent since mid-April.

Travis Egan

Lake Geneva Real Estate, Lender

Senior Loan Officer Opinion Survey on Bank Lending PracticesThe tightening in Lake Geneva mortgage-lending policies that characterized the last 3 years appears to be slowing.

According to the Federal Reserve’s quarterly survey of senior bank loan officers, roughly 1 in 10 lenders added mortgage qualification hurdles between April and June.  It’s a huge departure from just 2 years ago when the mortgage industry was facing its first wave of challenges. 

During that period, eight in 10 lenders added hurdles.

For mortgage applicants looking for Lake Geneva real estate, this quarter’s Fed survey results signals that mortgage lending may have reached its limits of restriction.

Since 2007, mortgage guidelines have become increasingly restrictive.  There’s extra scrutiny on assets and tax returns; employment history is given more weight; loan purpose matters.  There’s a bevy of traits that can stand between you and an approval that didn’t exist a few years ago.

That said, lots of homeowners are still getting loans.

Verifiable income, good credit scores and equity are the “magic formula” and banks want to lend to good credit risks.  And the best news for those that qualify is that Lake Geneva mortgage rates are fantastic right now.

According to Freddie Mac, mortgage rates are as low as they’ve been in history.

So, if you’re among the many wondering if now is the right time to buy a home — or refinance one — remember that, although mortgage guidelines likely won’t get worse, mortgage rates probably will.

Travis Egan

Lake Geneva Real Estate, Lender

Refi Boom stretches household dollarsLake Geneva mortgage markets stalled last week in back-and-forth trading as Wall Street grappled with weak housing data, falling builder confidence, and worsening jobs numbers nationwide.

Because markets were volatile, rate shopping was challenging.

Conforming mortgage rates did managed to make a new all-time low last Thursday but quickly gave up those gains.  Most of Friday afternoon was spent in the red and, as a result, for the second straight week, mortgage rates failed to fall overall.

But, although last week’s action puts a damper on this summer’s Lake Geneva mortgage rate rally, the Refi Boom is still going strong.

According to Freddie Mac, as compared to April 8 when mortgage rates touched their recent high-point, pricing is hugely improved across 3 popular loan products.

  • 30-year fixed : Then, 5.21%; Now, 4.42%
  • 15-year fixed : Then, 4.52%; Now, 3.90%
  • 5-year ARM : Then, 4.25%; Now, 3.56%

As an example of potential savings, a homeowner of Lake Geneva real estate with a $250,000 30-year fixed rate mortgage would save $96 per month at today’s rates as compared to April’s. 

Over the life of a loan, that’s a savings of $34,560.

This week, it’s unlikely that the Refi Boom will meet its end, but that doesn’t mean you should wait for rates to fall further.  Lake Geneva mortgage rates tend to change quickly and without notice, and should rates rise, you may find that you’ve missed the market bottom.

If today’s rates appeal to your finances and budget, consider locking something in and moving forward.

Travis Egan

Lake Geneva Real Estate, Lender

Freddie Mac mortgage rates (January - August 2010)

Another week, another new low for conforming mortgage rates.  In fact, this week marks the 9th time in a row it’s happened.

Lake Geneva mortgage rates are (again) at their lowest levels in history.

The data comes from the Freddie Mac, a government group and major loan securitizer for the U.S. mortgage market.  Freddie Mac’s weekly survey is among the most widely-cited reports on mortgage rates and is the data used in home affordability models, among other statistics.

The 30-year fixed rate is averaging 4.42% nationally with an accompanying cost of 0.7 points.  1 point is equal to 1 percent of the loan size.  This week’s reported rate is lower by 0.02 percent from last week, and lower by 0.70 percent from one year ago.  We charge no orination points at Walwowrth State Bank.

On a region-by-region basis, though, “average” 30-year fixed mortgage rates are different.

  • Northeast : 4.44 with 0.6 points
  • Southeast : 4.44 with 0.8 points
  • N. Central : 4.42 with 0.4 points
  • Southeast : 4.46 with 0.5 points
  • West : 4.35 with 0.8 points

But this isn’t to say that mortgage pricing is better in, say, California as compared to Florida.  Note that the West Region — with the lowest average rate — has the highest required points.  This is because mortgage rates and mortgage fees move in opposite directions.  The type of low-rate/high fee structure common in the West may be right for some home buyers and would-be refinancers, but may not be right for others.

What’s important to remember is that, as a rate-shopper in Lake Geneva, it’s always your choice on how your loan is structured.  Banks offer multiple set-ups — with or without points — to meet every applicant’s budget.

As Lake Geneva mortgage rates continue to slide and touch new lows, it’s an excellent opportunity to see what your lender can do for you.  Low rates won’t last forever.

Travis Egan

Lake Geneva Real Estate, Lender

Closing costs by state, 2010

How much does a Lake Geneva mortgage cost?  The answer depends on where you live.  But no matter which your locale, chances are strong that you’ll pay more for a mortgage in 2010 as compared to 2009.

According to Bankrate.com and its annual Closing Cost Survey, a typical $200,000, purchase mortgage now carries an average $3,741 in closing costs — up nearly 37 percent from last year. 

As defined by Bankrate.com, “closing costs” is defined as the sum of two numbers.  The first group is labeled “origination charges,” a category that includes such items as underwriting fees, application fees and processing fees.  These fees are paid directly to the loan originator’s company at the time of closing.  Walworth State Bank’s cummulative total is $250.00.  These costs are not close to the actual costs for clients of Walworth State Bank.  The numbers are an avergae across the state.

The second grouping of costs is labeled “third-party fees.”  Third-party fees include appraisals, credit reports, settlement fees and title searches — items paid in connection with the loan, but not paid to the lending bank or broker.

It’s unclear why closing costs appear to have escalated into 2010, but Bankrate.com suggest that recently-enacted federal lending laws are a culprit:

  1. The new law requires loan officers to be accountable to a Good Faith Estimate’s accuracy. Bankrate.com’s prior-year surveys may have been “understated,” therefore, because of a lack of accountability.
  2. The cost of federal compliance is high, and banks may be passing on compliance costs to consumers

To see the complete list of closing costs by state, including where Wisconsin ranks, visit the Bankrate.com website.

Travis Egan

Lake Geneva Real Estate, Lender

Housing starts August 2008 - July 2010Sometimes, you need to look deeper than the headlines to get the news that matters.  This basic truth’s latest example comes from the July Housing Starts data, as published by the U.S. Census Bureau.

According to the newspapers, Housing Starts improved last month:

  • US Housing Starts Make Modest Rebound (FT)
  • Housing Starts Rise Slightly (MoneyWatch)
  • Housing Starts Tick Higher In July (MarketWatch)

However, these stories are speaking in terms of all housing starts — not just the single-family ones.  This is a major point of difference for home buyers of Lake Geneva real estate because most people don’t buy the multi-unit homes and apartment buildings that’s also a part of the Housing Starts data. 

The overwhelming majority of buyers buy single-family homes and in July, as in the previous 3 months, the number of single-family housing starts fell.

In fact, single-family housing starts are down by nearly 25 percent since April and are now at their lowest levels since May 2009.

This is a much different message from the headlines above.

It’s not surprising that single-family housing starts are down; builder confidence is down as well and the two metrics tend to trend in the same direction.

Furthermore, building permits for single-family homes fell in July, too.

As a home buyer, the drop in Housing Starts should help reduce housing inventory in the months ahead.  This may lead home prices to rise because home values are based on supply and demand.  For home sellers, falling starts should help reduce competition for buyers.

Each real estate market is unique and supply levels will vary from ZIP code to ZIP code.  For up-to-the-minute inventory levels, make sure to talk with your real estate agent.  If you don’t have a great Lake Geneva real estate agent than contact me so I can recommend one to you.

Travis Egan

Lake Geneva Real Estate, Lender

Retail Sales (August 2008 - July 2010)Lake Geneva mortgage markets worsened last week, putting a pause on the mortgage rate rally that dates to mid-April.  Mortgage rates rose across Wisconsin last week and home affordability suffered.

The Refi Boom remains in full effect, but rates are not as dazzling as they were a week ago.

It’s somewhat strange that Lake Geneva mortgage rates rose last week given the heavy dose of negative-bending news.

Mortgage rates often to fall on such news, but last week, they rose.  The biggest reason was weak demand on a new 30-year bond issuance from the government.  In turn, that weakness spilled over into mortgage bonds, which pushed rates up. 

This week, mortgage rates could rise or fall — it depends on how new data influences market sentiment.

  • Monday:  Home builder confidence survey
  • Tuesday: Housing Starts and Building Permits; Producer Price Index
  • Thursday: Jobless claims; 2 Fed members make speeches

Keep a close eye on the housing-related data early in the week.  It’s widely believed that housing will lead the economy forward so a rebound in home builder confidence, or a jump in building permits, for example, should push rates even higher. 

In the meanwhile, if you haven’t spoken with me about a refinance, consider reaching out this week.  Lake Geneva mortgage rates are lower than they’ve ever been in history and more people are getting financing than the news would have you believe.  You can’t know until you ask so make that call today.

Travis Egan

Lake Geneva Real Estate, Lender

FHA mortgage insurance premiums ready to changeFor the second time this year, the FHA is modifying mortgage insurance.

Beginning with FHA case numbers issued on or after October 4, 2010, the FHA is changing its upfront and annual mortgage insurance premium structure.

Under the new terms, assuming a 30-year fixed rate Lake Geneva FHA mortgage with at least 5 percent equity:

  • Upfront MIP drops to 1.000% of the amount borrowed from 2.250%
  • Annual MIP increases to 0.850% of the amount borrowed from 0.500%

For homeowners of Lake Geneva real estate and everywhere else , this switch in MIP decreases the upfront cost of an FHA-insured mortgage, but increases the loan’s long-term costs.

Using a $100,000 mortgage as an example, upfront MIP falls to $1,000 from $2,250; monthly MIP jumps to $70.83 from $41.67. The FHA expects the change will yield an additional $300 million in premiums monthly.

The update is a huge win for the FHA whose reserve funds are self-proclaimed to be “perilously low.”  The extra monies should help recapitalize and stabilize the government group.

The FHA is on pace to back 1.7 million loans this year.

For the majority of refinancing FHA homeowners and home buyers, the MIP change is neither good nor bad — the borrowing landscape will just looks a bit different.  Yes, Lake Geneva loans will cost more to carry each month, but also they’ll be less expensive to procure.  It’s a trade-off and you can apply math formulas to solve for the best time to apply FHA. 

It may be wise to get your FHA case number before October 4, for example, depending on your time frame in the home and the expected life of the mortgage.  Or, it may be better to wait until after October 4 to apply.

If you’re unsure of how the new FHA mortgage premiums will impact your mortgage, be sure to call or email me for help.

NOTE : The FHA originally announced an implementation date of September 7.  It was subsequently amended to October 4, 2010.

Travis Egan

Lake Geneva Real Estate, Lender