Monday, July 27, 2015

Mortgage Rates Continue Pushing July Lows

Mortgage rates continued modestly lower for the 5th straight day, further extending Friday's push to the lowest levels of July.  Even so, most borrowers will see the same rates on lenders quotes, with the improvements in the form of lower closing costs compared to Friday.  The most prevalently quoted conventional 30yr fixed rates remain in a range between 4.0 and 4.125% for top tier scenarios.  Recent gains help more and more lenders move to the lower end of that range, while a very small minority are at 3.875%.
Last week's caution still applies: any time we see this many positive days in a row, rates are increasingly likely to pull back.  This will only become more true if rates continue to improve, but there is no implicit commentary about how long such a pull-back would last or how far it would go.  Any way you slice it, the lock/float outlook is less intense than it had been earlier in the month (meaning things are looking better), but the lowest rates in more than a month are always arguably a good opportunity to lock.

Read on HERE

Tuesday, July 21, 2015

Reverse Mortgage: How It Works And How It Can Benefit You

Reverse mortgages have made the subject of numerous controversial discussions, both among experts in the field, and seniors interested in making the most of their homes and ensuring their retirement plans. However, people's reluctance to this type of products is often generated by the lack of accurate information. The aim of this article is to provide you with relevant information about the mechanism of reverse mortgages, as well as the benefits they can generate.
How does it work?
A reverse mortgage can be defined in terms of a special home loan, especially designed for seniors aged at least 62, that allows you to borrow money against the equity of your home and transform it into cash you can dispose of in emergency cases or unexpected business opportunities. In simple terms, unlike conventional mortgages which require monthly payments from the homeowners' part, a reverse mortgage basically transforms the property itself into a steady income source.
Which are the benefits?
Misinformation and the fear factor often prevent elderly homeowners from benefiting from the equity in their house, an equity they have been building over time by paying their mortgages. Many seniors are not aware of the fact that a reverse mortgage doesn't imply a title transfer. That means that they will not only retain the ownership of the house, but also that, once they pass away and the loan is paid, the house will be passed on to the entitled heirs.
Another aspect worth mentioning is the fact that reverse mortgages guarantee homeowners the right to live in their houses until they die, sell the house, or decide to move. The only condition is for homeowners to be up-to-date with the correspondent property taxes and keep the house in a reasonable condition.
Moreover, if the contracted mortgage guarantees a monthly or annual income for life, any depreciation of the property's value will be the lender's responsibility. In addition, being considered equity and not proper income, payments are tax free and do not affect benefits such as social security or Medicare.
What should one do before pursuing one?
In order to avoid unpleasant surprises, seniors should do a thorough research before making a commitment and acquire a reverse mortgage. Carefully check eligibility, safeguards, pertinent taxes, payment plans, liability, interest rates etc. Information is widely reachable, both online and through direct discussions with authorized HUD or FHA counsellors or lenders.
Before making a lifetime commitment, it is highly important for seniors to carefully educate themselves and fully understand which their options are, how the loan process works, and which are their rights and responsibilities.

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Saturday, July 18, 2015

For The Moment, Stability Returns

It seems for the moment that stability is returning to the markets now that Greece has verbally accepted the terms under which additional money will be lent to the country.  There still remains the possibility that plan could go up in smoke as there is staunch opposition to the austerity plan by many people in Greece.  At least for now it appears that Greece will not be leaving the Eurozone and that money to save the failing economy will be forthcoming shortly.

In the absence of any real housing data for the week, we are left to ponder the meaning of the Mortgage Bankers Association report on mortgage applications.  The MBA reported that for the week ending July 10th purchase applications declined 8.0 percent.  This follows the prior week in which applications jumped 7.0 percent.

The general feeling by many professionals in the industry is that the mid-summer housing slowdown may be taking hold.  It is typical as we hit mid-July to see housing activity across the country decline.  For some areas of the country school begins at the beginning of August, and for other areas it is becoming peak vacation time.

The good news on the horizon is that many experts are predicting that even though interest rates have risen in recent weeks, and Janet Yellen keeps saying that a Fed rate increase is likely coming in the Fall, home purchasing is expected to jump in the 3rd and 4th quarters.  There is a lot of pent up demand for housing and with the improving labor market experts believe that the desirability to own real estate will continue to rebound.

First time jobless claims continue to remain below the psychological critical number of 300,000.  It is considered that any number below this artificial threshold is indicative of a strong labor market.  Last week claims dropped from a revised 296K down to 281K.  The prior week’s jump is attributed in part to the automobile industry which contributed significant numbers to the report as auto manufacturers are completing their summer factory retooling.

Overall the economy appears to be stable.  It seems that when reviewing economic reports from month-to-month, many of them move back and forth from positive to mediocre.  As we have become used to doing…we must just continue to monitor them and look for trends however overall improvement exists.

With the combination of the typical mid-summer investor slowdown along with very few economic reports on tap, the stock markets are likely to be fairly stable next week.  Of course the wildcard can be anything that happened internationally with Greece or China.  Those two countries with their economic challenges always have the ability to impact investor behavior here in the United States.

Next week’s potential market moving reports:

·        Wednesday July 22nd - MBA Applications, Existing Home Sales & FHFA House Price Index
·        Thursday July 23rd - First Time Jobless Claims
·        Friday July 24th – 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.

Wednesday, July 15, 2015

Homebuyers Jump To Action As Rates Rise

After renting a two-bedroom unit for four years in a Pittsburgh suburb, Andy and Sarah Hadad decided the time had come to invest in a home where they could raise their 3-year-old daughter and build equity for their future.

Another deciding factor? The couple began to see mortgage rates moving higher. 

They breathed a sigh of relief when their lender was able to lock the interest rate on their 30-year mortgage at 4 percent.

"We know we will probably never see interest rates like this again," said Hadad, 28, a quality assurance engineer for a software company.

Average 30-year mortgage rates in June jumped to their highest levels this year, topping 4 percent for the first time since late 2014. The Washington-based Mortgage Bankers Association forecasts rates rising to about 4.5 percent by the end of 2015 and rising further next year.

The refinance boom that was in full steam when rates were much lower in the first half of the year is likely coming to an end. But the banking trade association expects a growing number of consumers to dive into the home buying pool in the months to come.

"We expect that purchase mortgage originations will increase to $730 billion in 2015 from $638 billion in 2014, driven higher by the stronger job market, increases in home prices and declining share of cash purchases," said Mike Fratantoni, chief economist for the Mortgage Bankers Association.

"The increase in rates will be a bit of a headwind for purchases," he said. "But the increase in household incomes from the tighter job market will more than offset the higher rates."

The Federal Reserve has been planting strong hints that it will raise interest rates this year. There is strong speculation that the current near-zero interest rate on federal funds -- the rate that banks loan each other money overnight -- is set to rise in September.

Since other interest rates -- like credit card, mortgage and CD rates -- are based on the federal funds rate, an increase by the Fed likely will lead to rising rates in bond markets and throughout the banking system.

Staci Titsworth, regional sales manager for Pittsburgh-based PNC Bank, said it makes more sense for people who want to buy a house to do it sooner rather than later in a rising interest rate environment.

"Higher rates will make it tougher for first-time home buyers because their affordability decreases," she said. "Everything is tied to how much a home buyer can afford. The higher the payment, the lower the loan amount."

Housing and mortgage expert Michael Sichenzia, based in Parkland, Florida, said mortgage rate increases are also connected to uncertainty in the world economy.

"When there is higher risk, you have higher rates." Sichenzia said. "Future homeowners are the group most likely to be affected by higher rates. If you are a future homeowner, you are in one of the highest risk categories on the risk curve."

He said first-time home buyers should lock in their interest rate. 

"Try to get a fixed rate locked in. Mortgage rates today will be cheaper, generally, than they will be six weeks from now. A 30-year fixed rate at 4 percent is basically free money," he said.

Mortgage giant Freddie Mac began documenting average mortgage rates in 1971 when rates for a 30-year mortgage hovered around 7 percent. By 1981, they had reached a nose-bleeding high of 16.63 percent.

According to interest rate aggregator, by 2003 and 2004, rates had fallen to their lowest average at 5.83 percent, preceding the housing crash, and climbed into the 6 percent range in the following few years after the crash.

Financial adviser Robert Hapanowicz, president of Hapanowicz & Associates Financial Services in Pittsburgh, said mortgage rates will generally track the level of intermediate to long-term bond rates, particularly U.S. Treasury bond rates.

"These rates are set in the bond market, so in this manner the mortgage market and bond markets are connected," he said. "Interest rates are moving higher because the economy is healthier. The employment picture is much improved and prices are starting to rise at more normal rates.

"Higher interest rates -- including mortgage rates -- are an initial sign of a stronger economy," Hapanowicz said. "Eventually, and at a certain level, however, higher interest rates will be a drag on the economy."

Hadad and his wife, Sarah, 22, a stay-at-home mom, are thrilled with the three-bedroom, one-bath home they bought last month in the same community they were renting for $149,900.

"Homeownership is fantastic," Hadad said. "I like having a home to come home to. It's something you own rather than coming home to a rental."

Homeownership is also cyclical. The couple's agent, Mike Netzel at Keller Williams Realty, was the same agent who sold Hadad's grandmother's home -- the home his father grew up in -- 17 years ago.


Sunday, July 12, 2015

The Sky Is Falling…

The sky is falling…no it’s not…yes it is…no it’s not…

If you have been following the stock market this week you would think that, depending on the hour of any given day, the Greece debt crisis is either going to plunge the world economy into the ocean, or it is not a big deal.  Stock market analysts and news commentators always look for an explanation as to the movements of the stock market and the behavior of investors at any given time and the see saw of the market this week has been tied mostly to what is happening with Greece.

The looming Greek debt crisis has not changed in the last week and the world financial markets recognize that the likelihood of Greece leaving the Eurozone is quite high.  Yet on any given day the market is either in a panic or a wait and see mode.  The behavior of investors, and worse the analysts seeking to explain every little nuance of movement in the markets, is creating a very unstable market in it of itself.

At this point and time the Greek government has submitted a bailout plan that will likely be the last opportunity for Greece to avoid what is likely to be a virtual complete collapse of their economy.  Hope is not high on the acceptance of this new proposal by their debtors.  The good news, not that there is any real good news when it comes to a country having a potential financial meltdown, is that the Eurozone countries seem prepared to deal with the meltdown if it comes to be and that the world economy is positioned to avert a global financial disaster.

Back here in the U.S., the Federal Open Market Committee (FOMC) has indicated that they are becoming more and more comfortable with the decision to begin raising interest rates.  Although no timetable has been given as to when the first rate hike will occur, the indication from the most recent FOMC meeting is that more of the members are comfortable with the idea to raise rates.

The minutes from the last FOMC meeting indicated that some of the members were ready to raise rates as of the last meeting.  Other members were not quite as ready but they are seeing that the economic indicators are falling in line with a rate hike in the near future.  It appears that the only thing preventing the FOMC from raising rates at this point is that the majority of the members would like to see just a little more improvement in employment growth.

The real estate markets in most parts of the country seem to be the strongest they have been since the great recession.  Real estate and mortgage professionals remain quite busy and property values continue to rise at a steady pace.  Mortgage applications jumped last week for purchases by 7.0 percent.

Next week’s potential market moving reports:

·        Tuesday July 14th – Retail Sales
·        Wednesday July 15th - MBA Applications, Producer Price Index & Industrial Production
·        Thursday July 16th - First Time Jobless Claims
·        Friday July 17th – Consumer Price Index and 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.

Thursday, July 9, 2015

Mortgage Rates Lowest In A Month After Fed

Mortgage rates moved lower at a healthy pace today, ultimately hitting the best levels in just over a month.  It was the 4th straight day of improvements and since June 29th, 6 out of 7 days have seen rates fall.  With today's gains, most lenders are back to quoting conventional 30yr fixed rates of 4.0% on top tier scenarios.  Some had already made that move over the past few days, but 4.125% remained relatively more prevalent until today. 

There are some notable exceptions here, with a very large lender or two still not quite down to 4.0%.  One final consideration is that recent volatility makes it hard for some lenders to adjust rate sheets as quickly as markets are moving.  As such, there is more diversity in rate offerings between lenders.  The disparity will continue as long as market volatility continues.  In the current landscape, where global uncertainty is is playing a fairly big role in domestic market movement, there's no reason to expect the volatility to subside any time soon.

We've spent a lot of time discussing and watching a big-picture move higher in rates for most of 2015.  The past few days have done more than any others to push back against that long term uptrend.  It's to a point where we can begin considering a shift in the trend.

There is a tremendously important caveat here.  The past few days of positivity have drawn heavily on uncommon global events and risks.  It's taken quite a lot of potential turmoil in European and Asian markets to get domestic interest rates to current levels.  Investors are forced to guard against the more negative outcomes from these global considerations.  If these events prove to be slightly less traumatic than the current level of defensiveness suggests, what had been the best push back against a long term uptrend will quickly become a fast move right back to previous levels.

In plain English now.  Bond markets drive mortgage rates and bond traders have built in some cushion against global risks in the form of rates that are slightly lower than they otherwise would be.  If the global, risky events don't end up to be as bad as they might be, that cushion would go away, meaning rates would rise, all things being equal.  If rates had occasion to be rising for additional reasons, the pace would be doubly swift.

Monday, July 6, 2015

Mare Island Financial Assistance and Education BBQ Was A Success!

A Financial and Education Fair was conducted by the Mare Island Chapter on June 14th, 2015. 

Pictured is Michael O’Rouke from Big Valley Mortgage talking to a soldier from the 483rd TC BN. Participants from the local community included John Donohoe, First Command Financial, Roy Crouch, Bellevue University, and Michael O’Rourke, Big Valley Mortgage.

 Fifty five soldiers collected financial information to include finance advice, VA benefits, education assistance, home loan information, and talked to financial and education experts. The Mare Island chapter also gave out free hot dogs and chips.

Friday, July 3, 2015

Employment Not As Strong As Anticipated..

The employment picture may not be as good as the Fed would like it to be.  After many months of consistent employment growth, the June employment report released on Thursday was not as strong as anticipated.  This could put more pressure on the Fed to delay raising interest rates.  The International Monetary Fund has been very vocal in recent weeks urging the Fed not to increase rates for at least the remainder of the year.

The unemployment rate on a national level declined from 5.5 percent down to 5.3 percent.  Lately drops in unemployment were attributed to significant hiring.  This month’s decline is primarily related to once again people not looking for jobs.  The increase of 223,000 jobs for the month of July was below most analyst’s expectations and significantly lower than May’s 280,000 increase.  Some experts attribute the decline in hiring to be more related to the end of the school year.

Momentum in the housing market is continuing at a strong pace.  The pending home sales index rose 0.9 percent for the month of May.  This was better than market expectations of 0.6 percent.  The index is at the highest point since prior to the real estate bubble days of 2006 and the trend is expected to continue.  This report continues the strong momentum we saw in last week’s existing home sales report.

The West has been leading the way in sales were pending home sales rose 2.2 percent in May for a 13.0 percent year-on-year gain. Pending sales in the South are up 10.6 percent from the same time last year and remain strong even though the most recent report shows a decline of 0.8 percent.  The Midwest also declined by 0.6 percent but remains ahead of last year by 7.8 percent.  The Northeast rose sharply where housing is bouncing back strongly from the harsh winter.  Sales were up 6.3 percent in this report and higher by 10.6 percent from a year ago.

Home price appreciation seems to be slowing despite high demand.  The Case-Shiller Home Price Index showed an increase of only 0.3 percent for the month of April.  Many analysts were expecting the number to be better.  Home prices overall from the same time last year are up 4.9 percent.

On a more positive note construction spending jumped 0.8 percent for May greatly exceeding Econoday expectations of only 0.5 percent.  The bulk of the growth however was not in residential construction.  Month to month the location in which construction spending is focused varies so the fact that this report does not show residential homes as the primary area of spending is not alarming at this time.

In a positive sign for the economic future consumer sentiment has risen to the strongest level of the recovery.  Typically stronger sentiment leads to more spending which leads to stronger economic growth.

Next week’s potential market moving reports:

·        Monday July 6th – ISM Non-Mfg Index
·        Wednesday July 8th - MBA Applications and FOMC Minutes Release
·        Thursday July 9th - 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.