Saturday, May 31, 2014

Housing Shortage And The Rise In Home Prices

The housing supply shortage continues to be playing a major factor in the rise in home prices. According to the Federal Housing Finance Agency, home prices increased 0.7 percent in March.  This follows an increase of 0.6 percent for the month of February.  Experts were predicting a smaller increase of 0.5 percent for March so it raises the possibility that home prices may be returning to a more rapid pace of growth in the coming months.

Gains for home prices were widespread across the country as eight of the nine Census regions showed prices increases in March. New England led the country with a 4.6 percent rebound.  Only the East South Central Census region declined but this comes on healthy increases in prior months.  Overall home prices are 6.4 percent higher than the same time last year.

Although home prices are not rising as fast as they were earlier in the economic recovery, the pace of growth is still considered moderately strong.

The Case-Shiller Home Value Index reinforces pretty much everything in the FHFA report.  The Case-Shiller 20-city adjusted index is up a higher than expected 1.2 percent in March.  The year-on-year rate, is slowing very slightly, at a rate of 12.4 percent versus the 13 percent range dating back to September 2013.

There is always a double edged sword when it comes to rising home prices.  Buyer affordability declines with home price increases which can reduce home sales.  However homeowner equity is also rising which affords more and more existing homeowners to be in positive equity positions.  Positive equity is healthy for the economy.

What used to be a telltale sign of home activity, the Mortgage Bankers Association of America mortgage application report no longer accurately reflects home purchase activity as much as it used too.  Because of the amount of cash buyers in the market place remains abnormally strong, there is sustained positive housing activity however mortgage application volume does not necessarily reflect it.  The MBA reported that last week applications for home purchase declined 1.0 percent.  Refinance applications, which had been trending higher, also declined 1.0 percent.

Consumer confidence continues to hold steady at moderate levels.  The Conference Board's measurement rose 1.3 points to a third straight plus 80 level at 83.0.  Any number of over 80 is considered a positive sign for confidence.

Next weeks market moving reports are:

  • Monday June 2nd - ISM Manufacturing Index and Construction Spending
  • Tuesday June 3rd - Factory Spending
  • Wednesday May 4th - MBA Applications and ADP Employment Report
  • Thursday June 5th - First Time Jobless Claims
  • Friday June 6th - National Unemployment Report

As your mortgage professional, I am happy to assist you with any information you may need regarding mortgage or real estate trends.  I welcome the opportunity to serve you in any way I possibly can.  Please feel free to reach me at (707) 455-7070.

Wednesday, May 28, 2014

Reverse Mortgages

When explaining a reverse mortgage to a senior homeowner, one of the most important terms a reverse mortgage loan officer will discuss is the "Principal Limit."
What is the Principal Limit and why is it important?
The Principal Limit (PL) is the gross amount of money the lender is willing to lend to the borrower of a Home Equity Conversion Mortgage or HECM reverse mortgage, based on a formula derived from Congressional legislation and implemented by the Department of Housing and Urban Development (HUD) and using the following three criteria: 
  • The lower of the Maximum Claim Limit or the Federal Housing Administration (FHA) appraised value of the home;
  • The age of the youngest borrower (must be 62 or older);
  • The current expected interest rate (based on the current 10 year London Interbank Offered Rate, or LIBOR rate, plus a stated margin for the adjustable rate HECM and based on the current fixed interest rate for the fixed rate reverse mortgage).
The three listed criteria affect the PL in the following ways:
  • The higher the value of the home (up to the maximum claim limit of $625,500) the higher the amount of the PL will be;
  • The older the youngest borrower (age is always based on the youngest borrower's age, not a blending of multiple borrowers' ages) the higher the amount of the PL will be;
  • And, conversely, the higher the current expected interest rate, the lower the amount of the PL will be.
The reason potential borrowers should become familiar with the term Principal Limit and what it means is because it is from this cash figure that all fees and set asides will be subtracted in order to arrive at the maximum cash or loan proceeds available to the borrower.
Congress Plans to Lower the Principal Limit
Congress lowered the Principal Limit for the fiscal year 2010 signifantly to make up for a perceived budget shortfall of approximately $798 million for HECM reverse mortgages put in place within that fiscal year. HUD has announced that for the fiscal year 2011 there will likely be decreases in the Principal Limit as well. The 2011 year begins in October 2010 for budgetary purposes.
 Until the budget bill has made it through the joint Senate and House committee, been voted on and signed, we do not know what the exact amount of the cut in the principal limit will be. Senior homeowners who have investigated HECM reverse mortgages prior to October 1, 2010 should contact a reverse mortgage lender to learn how the decreases in Principal Limits could impact  them personally if they pursue a reverse mortgage.

Article Source:

Sunday, May 25, 2014

Memorial Day Tribute

A tribute to the men and women who fearlessly defend the freedoms we all enjoy. God bless them.

Wednesday, May 21, 2014

Achieving A Stress Free Home Buying Experience

It would be nice to think that buying a new home could be planned and executed easily; surely it is simply a matter of knowing what you want (and what you are prepared to compromise on) and knowing how much you can afford. Sadly it is never quite that straightforward, partly because it is an emotional decision, which means that you might not like what, on paper, could be the perfect house or conversely like something that does not "tick all the boxes". And once you have decided on a particular house those same emotions can lead to the whole thing being very stressful. Nevertheless, it is possible to keep that stress to a minimum (even if the stress cannot be entirely eliminated) by following some simple advice.
Stress-induced feelings of anxiety or even panic can be controlled but if you allow those emotions free-rein then it will make it hard to make good decisions and hard to avoid making bad decision. And when you consider that a house-purchase is such a huge expense for the majority of us we all want to make the right decision.
Buying a home is a complex process that few of us do on a regular basis and it fundamentally affects our emotions, lifestyle and finances for many years, which is a scary thought. What is most frightening are the things we don't really understand like the mortgage jargon and legal jargon involved in dealing with banks and solicitors. But you can relieve this fear by reminding yourself that the professionals involved in the process are just that - professionals - who do this sort of thing every day of their working lives. This does, of course, mean that they sometimes use jargon without thinking that the ordinary citizen might not understand it. So if you don't understand something then just ask for a simple explanation. Questions and concerns that remain unresolved will just fuel your anxiety.
You can also educate yourself on some of the more common aspects of house purchasing by doing some research in advance - there are plenty of professional websites offering advice and clarification about the whole process.
If you are moving to a new area you may also have some concerns about that but, again, you can do some research to find out as much as you can. Frequent trips to the area may not be possible if it is too far away but try getting involved in online communities focussing on a particular neighbourhood.
Once you are at the point of making an offer, prepare yourself for a range of outcomes to avoid an emotional rollercoaster. Any, or all, of the following may happen before a house is legally yours:
• Your best offer will not be accepted
• Your offer will be accepted but then you will be gazumped
• You will get involved in a bidding war with another buyer
• The buying process will be delayed by others in the chain
• You cannot secure a good mortgage deal
• The survey finds unexpected defects with the property
• The surveyor undervalues the property
• The local authority search reveals some problem in the immediate vicinity
• Your buyer withdraws from the purchase of your existing home
• You or your partner loses their job
If you know what the worst events could be then you can handle them relatively calmly if they actually happen. But don't forget that moving house can go smoothly and that a new home is an exciting new chapter in your life so don't forget to enjoy it. If the worst happens, stick your stuff in self-storage and go on a holiday of a lifetime!

Article Source:

Sunday, May 18, 2014

Headed For A Refinance Boom Or......

Are we headed back into a refinance boom?
Is the decline in mortgage rates a good thing for the housing market?

The answer to the first question may certainly be a "Yes".  However the answer to the second question regarding it being a good thing for the housing market, the answer is "not necessarily".

Mortgage rates have been tumbling over the last week and mortgage rates have hit new lows for 2014.  In fact mortgage rates currently are about at the same level as October of last year.  Applications for refinances jumped in the prior week by 7.0 percent according to the Mortgage Bankers Association.  Expectations are that refinance applications will rise again in next week?s MBA report because mortgage rates declined further this current week and that drop is not reflected in the current spike in refinance applications.

On the flip side, applications for purchase applications declined by 1.0 percent during the same period of declining mortgage rates   Logic would suggest that if the cost of borrowing mortgage money is lower, housing should pick up.  Unfortunately that does not seem to be the case as the decline in rates is due to great uncertainty in the stock markets about future economic growth.

Concern about the housing market along with the overall health of the economy has investors very concerned on many levels.  The stock market has been on a tear upward over the last few months with new records being achieved.  Now investors are pulling their money out of the stock market and placing it in the bond market which has sent the stock market tumbling this week.  Money flowing into the bond market always lowers mortgage rates.

For the second question I posed in the beginning of this article regarding declining rates and the housing market, this may not be a good thing for housing.  When mortgage rates decline due to economic uncertainty, more potential home buyers will not take action because of fear regarding employment.  Although there has not been any signs of employment slowing presently, according to the labor department, corporate profits in this first quarter along with GDP and industrial production were far below expectations.  The signs of a possible slowing economy may ultimately lead to uncertainty in the labor markets which then keeps potential home buyers on the sidelines. (We have seen this before)

I cannot predict the future regarding housing nor will I try.  Anything can happen in the coming months and we need to hope that investor and employment uncertainty calm down so the markets do not continue to act in what appears to be a panic mode more than anything else.  My gut tells me this is just a temporary occurrence and things will stabilize in the coming weeks.

Next weeks market moving reports are:

  • Wednesday May 21st - MBA Applications, FOMC Minutes & Janet Yellen Speaks
  • Thursday May 22nd - First Time Jobless Claims & Existing Home Sales
  • Friday May 23rd - New Home Sales

As your mortgage professional, I am happy to assist you with any information you may need regarding mortgage or real estate trends.  I welcome the opportunity to serve you in any way I possibly can.  Please feel free to reach me at (707) 455-7070.

What Sets Us Apart!

Mike, branch manager at Big Valley Mortgage, talks about what sets them apart.

Thursday, May 15, 2014

Vacaville Sunrise Run May 18th!

Sunday May 18th 2014
Vacaville Sunrise Run
10 mile/5k/10k/kids
California's Legendary Roadstop will now become a destination RUN STOP
Register Today!

Monday, May 12, 2014

Good News And Bad news

The good news? Mortgage rates will remain low for the foreseeable future.  More good news? Mortgage rates have dropped to the lowest point thus far in 2014.  The bad news? The economy is slowing.  More bad news?The housing market seems to be stalling considerably.  Finally, the labor markets are not recovering at the pace in which the Fed had hoped.  This is the quick recap of Fed Chairman Janet Yellens speech delivered on Thursday of this week.

Signs of economic slowing are becoming more and more pronounced.  Last week the dismal report on first quarter GDP showed just how much the economy is slowing.  Many of the housing reports are not nearly as robust as they were last year. The statistics in the labor markets are not nearly as positive as the headlines make them appear.

The impact of lower mortgage rates is certainly making a difference in purchase home financing.  The Mortgage Bankers Association of American reported that loan applications for home purchasing surged 9.0 percent last week.  This is the largest single week jump we have seen all year.  Surprisingly however is that applications for refinances only rose 2.0 percent.  Historically refinances are more sensitive to mortgage rates than are purchases.  It is expected that next weeks application numbers for both purchase and refinances will show another increase as rates continued to decline throughout this week.

According to RealtyTrac, the use of all cash to purchases homes is currently at 43% for the first quarter of 2014.  That is an increase of 19 percent from the same time last year.  It is also the highest level since Realty Trac began tracking this data since the early part of 2011.

Inventory shortages as well as tight lending guidelines is providing cash buyers a competitive edge in the bidding process on homes.  Sellers are more apt to accept the sure thing of a cash buyer rather than having to wait for the possibility of a purchaser having to obtain mortgage financing.

In speaking with real estate professionals from all around the country it is clear that the trend for housing is improving.  Although we are not seeing the typical spring market boom with homes coming on the market for sale, there are definitely reports of more inquiries by home owners.  It is creating optimism for the future in that there has been a significant increase in sellers making inquiries on finding out the value of their home.  Many agents are hearing the same words from the sellers that are making the inquiries...  "We are not ready to put our house on the market just yet, however we are thinking about it". (Inquiries are definitely a positive sign for the future of housing)

Next weeks market moving reports are:

        Tuesday May 13th  Retail Sales
        Wednesday May 14th - MBA Applications, Producer Price Index & Housing Market Index
        Thursday May 15th - First Time Jobless Claims Consumer Price Index & Industrial Production
        Friday May 16th  Housing Starts

As your mortgage professional, I am happy to assist you with any information you may need regarding mortgage or real estate trends.  I welcome the opportunity to serve you in any way I possibly can.  Please feel free to reach me at (707) 455-7070.

Tuesday, May 6, 2014

Outside Of Mondays Volatile Trading Day....

Outside of Mondays volatile trading day, the stock market was unusually stable for the remainder of the week through Thursdays closing bell.  On Monday the stock market took a wild ride in the Dow Jones Industrial Average dropped as much as 177 points before recovering back to close higher than where it started the day.  Mondays volatility was more having to do with perception than any real economic data. 
Investors that were surveyed on Wall Street seemed to blame Mondays mid-day sell off on the perception that many stocks, especially those related to social media are grossly overvalued.

Housing, the Fed, and the Department of Labor dominated the week?s most significant news.  The housing data for the week shows continued signs of slow improvement in the real estate market.  Monday the Pending Home Sales Index showed the first signs of spring momentum.  After 9 consecutive months of declines, the pending home sales index jumped 3.4 percent in March.  February's report was also revised upward by 3 tenths to 0.5 percent. 

On Tuesday the Case-Shiller Home Value Index report was released.  For the month of February home price appreciation was strong and slightly more than expected.  According to the report home values in the 20 major cities measured by the index rose 0.8 percent.  Values on the west coast, especially San Francisco, led the rise.  Home values in the index are 12.9 percent higher than the same time last year.

Applications for purchase mortgages took an unexpected drop for the week of April 25th.  There has been some upward movement in mortgage rates however the increase is not necessarily believed to be the reason for the decline.  The Mortgage Bankers Association of American reported that purchase applications declined 4.0 percent.  Applications for refinances dropped 7.0 percent.

The one area of concern in this weeks economic data was Wednesdays GDP report.  The first quarter of 2014 showed that economic growth has come to a virtual standstill. GDP for the first quarter only increased a far lower than expected 0.1 percent.  Harsh weather across the country seems to be what experts believe is the main culprit.  Economic growth in the last quarter of 2013 was 2.6 percent so it is easy to understand why this years first quarter report took many by surprise.

On Wednesday the Fed announced that they are continuing to leave the plan for monetary policy in place.  The Fed will continue to reduce the amount of stimulus they are pushing into the economy through their bond buying program.  Investors on Wall Street expected this announcement from the Fed and there was virtually no reaction when the announcement hit the newswires.

There is much optimism for future employment data as ADP reported payroll growth of 220,000 for the month of April.  March?s figures were also revised up to 209,000.  Employment data has been steadily improving and that is having a positive impact on the latest consumer confidence report.

Next week is very light on market moving data:

        Wednesday May 7th - MBA Applications and Fed Chair Janet Yellen Speaks
       Thursday May 8th - First Time Jobless Claims

As your mortgage professional, I am happy to assist you with any information you may need regarding mortgage or real estate trends.  I welcome the opportunity to serve you in any way I possibly can.  Please feel free to reach me at (707) 455-7070.

Saturday, May 3, 2014

Sunrise Run In Vacaville!

Sunday May 18th 2014
Vacaville Sunrise Run
10 mile/5k/10k/kids
California's Legendary Roadstop will now become a destination RUN STOP
Register Today!