Weekly update on San JoseMortgage Rates and economy news.
The Week That Was:
Freddie Mac in its Primary Mortgage Market Survey® reported that 30-year fixed-rate mortgage averaged 4.97 percent with an average 0.7 point for the week ending March 4, 2010. Last year at this time, the 30-year FRM averaged 5.15 percent.
The 5-year adjustable-rate mortgage (ARM) averaged 4.11 percent this week, with an average 0.6 point, down from last week when it averaged 4.16 percent. A year ago, the 5-year ARM averaged 5.08 percent.
Jan personal income was less than expected, up 0.1% while personal spending was strong at +0.5%.
Feb auto sales were expected to have increased, and they did; the only company that reported a decline was Toyota.
On the housing front; Jan pending home sales (the number of homes, placed under sales contract) jumped 12.3% from January 2009, but down 7.6% compared to December. According to National Association of Realtors, the drop was mainly because of harsh winter weathers.
The Week That Will Be:
There are only a few data points that will garner attention; they do not appear until Thursday and Friday when retail sales, weekly jobless claims and the University of Michigan consumer sentiment index hit.
The key this week is Treasury auctions; a total of $74B in 3 yr and 10 yr notes and a 30 yr bond on Tuesday, Wednesday, and Thursday.
Although the mortgage markets are presently holding well, if treasury rates break out to an up-trending move (3.75% on the 10 yr) mortgage rates will follow quickly. Unless there is a major shift in sentiment about the strength of the economic rebound, to the view of a double dip coming, interest rates won’t likely decline much more. The overall view is for increasing rates this year; estimates from 4.15% on the 10 yr note to as high as 5.00%; we don’t see 5.00%, more likely 4.25%. That would mean 30 yr mortgage rates at 5.50% to 5.60%.
I subscribe to live bond market movements and tweet about it. If you would like to be updated about live mortgage rates follow me on Twitter or get our Live Mortgage Rate Quote .
If you watched the Mortgage Rates recently, it has been very volatile. Sometimes, going up and down several times a day. Have you ever wondered what makes mortgage rates go up and down? Watch this clip which explains the dynamic between bonds and mortgage rates - in simple terms.
(Video created by Dustin Hughes and Nick Mallory, www.edgevolution.com and www.thelendingjournal.com)
I subscribe to live bond market movements and tweet about it. If you would like to be updated about live mortgage rates follow me on Twitter or get our Live Mortgage Rate Quote .
The California Housing Finance Agency (CalHFA) today announced that it will develop innovative initiatives to use nearly $700 million in new federal funding to help California’s neediest homeowners struggling with mortgages payments remain in their homes.
In addition to California, the funds will support efforts in Arizona, Florida, Michigan and Nevada. All five states have seen average home prices decline by 20 percent or more. In the early 2007, California’s median home price was $484,000 before dropping to a low of $221,000 in April 2009 - a drop of more than 50%. Since then, the price has started to stabilize in some parts of the state.
This program is intended for California’s low and moderate-income homeowners to assist unemployed homeowners, homeowners who owe significantly more than their homes are now worth and for those facing challenges associated with second mortgages. Steven Spears, Acting Executive Director of CalHFA said he expects the program to be ready to be implemented by mid-year or sooner. CalHFA would provide regular updates on the status of this program through the CalHFA web site at www.calhfa.ca.gov.
As Mr. Spears himself agreed, this funding alone will not solve the significant problems in the housing market. There are mainly two reasons why some of these initiatives, including widely publicized Home Affordable Modification Program (HAMP) have had limited effect so far. One, there are so many people in California with negative equity (as evidenced in the fall of median price chart above) and the other is the high unemployment rate (see chart below). If the borrower couldn’t afford the payment before and you reduce it by 10%, they’re not likely to afford that either.
I am hoping, CalHFA recognizes the unique situation of CA which is saddled with whopping drop in home prices and a double digit unemployment rate. Unless the program addresses these two issues directly, the effect at best will be limited.
Your weekly dose of San Jose Mortgage Rates, Real Estate Trends and top Economy news.
The week that was:
Freddie Mac in its Primary Mortgage Market Survey® reported that the 30-year fixed-rate mortgage (FRM) averaged 4.93 percent with an average 0.7 point for the week ending February 18, 2010. The 5-year adjustable-rate mortgage (ARM) averaged 4.12 percent this week, with an average 0.5 point.
The National Association of Realtors® (NAR) reported that existing home sales rose in 48 states and the District of Columbia between the third and fourth quarters of 2009; 32 states experienced double-digit growth.
New home construction is also slowly improving. One-family housing starts rose to an annual pace of 484,000 homes in January, which is up almost 36 percent from January 2009, based on the U.S. Census figures. Moreover, homebuilder assessments of market conditions over the first half of 2010 improved in February, according to National Association of Homebuilders/Wells Fargo Housing Market Index.
The Fed increased the discount rate to 0.75% from 0.50%. It in itself is not going to increase lending rates, but it once and for all signals the Fed is finished supporting banks and other recipients of government largesse.
The Week that will be:
Jan housing statistics this week with new and existing home sales, both expected to have increased from Dec. The Dec Case/Shiller home price index also out.
And there is more; two consumer sentiment indexes (the Conference Board’s consumer confidence index and the U. of Michigan consumer sentiment index).
Interest rates are headed higher, in a choppy pattern but up. As for any potential for a sizeable decline in rates; it will take a solid break in the equity markets which at this point doesn’t seem likely.
Your weekly dose of San JoseMortgage Rates and Market Commentary.
The Week That Was:
Freddie Mac in its Primary Mortgage Market Survey® reported that the 30-year fixed-rate mortgage averaged 5.01 percent with an average 0.7 point for the week ending February 4, 2010, up from last week when it averaged 4.98 percent. The 5-year adjustable-rate mortgage (ARM) averaged 4.27 percent this week, with an average 0.6 point, up from last week when it averaged 4.25 percent.
Pending existing home sales rebounded by 1 percent in December from a record drop in November that was due in part to the original expiration of the homebuyer tax credit, according the National Association of Realtors®.
More recently mortgage applications for home purchases jumped 10 percent at the end of January, according to figures from the Mortgage Bankers Association.
The employment report dominated trade last week; once again the headlines don’t accurately reflect the true state of unemployment. 9.7% unemployed in Jan with non-farm job losses of 20K.
Consumers continue to slow spending; Dec consumer credit fell again by $1.73B. The 11th month in a row consumer credit has declined.
The Mortgage Rates for a 5 Year adjustable rate mortgage (ARM) sank to 4% (and lower in some cases)* yesterday for Bay Area homes. Freddie Mac average rates released on yesterday reported 5 Year ARM at 4.27% at 0.6 points. But the rate improvements later in the day has opened up great opportunities for home owners and First Time Home Buyers. This could be great news if:
You already own a home but plan to move out by 2016.
You are a First-Time Home buyer and would like to move up in next 5-6 years.
You plan to pay off or substantially pay down your mortgage in the next 5 years.
Assumption for the chart: 30 Year Fixed rate at 5.25% and the 5 Year ARM at 4%.
On a 5 Year ARM loan, the rate remains fixed for first 5 years and may adjust after that to a higher rate. In the chart above you could save more than $16,000 in next 5 years on a $417,000 balance even after accounting for a small closing cost to refinance. On a $700,000 balance that number is a whopping $28,000 and for $300,000 it is $12,000. There are no cost refinances available as well.
Don’t get me wrong. 30 Year Fixed rate is still a great option if you want a stable rate mortgage and plan to live in the house for a longer term. And the 30 year fixed rate continues to be at a historically lowest levels in low 5s.
Call me at 408.905.6261 or email me at shashank@arcuslending.com if you would like a free evaluation of your mortgage to see if an ARM loan is right for you. Since I am a mortgage broker approved with more than 100 lenders, I can shop for the best rates for you.
* The rates are subjected to change any time without notice. Credit, Income, Equity and other eligibility required to qualify.
Some major changes went into effect today for FHA loans on San Jose & rest of the Bay Area Condominiums.
I. Elimination of “Spot Loan” Approval Process
If a condo project was not approved by FHA, a “spot approval” was allowed just for financing one unit. This process has been eliminated as of today. Now the entire project has to be approved either directly by HUD (process called HRAP) or by a Direct Endorsed Lender (process called DELRAP). With all the liabilities involved around the process most of the direct endorsed lenders would prefer HUD to directly approve the project. This can cause major delays at 2 ends:
Collecting all the required documents from Home Owner’s association (HOA)
HUD’s review of those documents to approve/reject the project
Dont be surprised if FHA loans on un-approved condominium projects take 60 days or more to close at least till the time HUD comes up with faster turn times or a more efficient process.
II. FHA Concentration Requirements
The FHA concentration (Percentage of units which has FHA loans in a project) requirement will be increased temporarily to 50 percent.
Exceptions to 50 percent Concentration Level - The FHA concentration may be increased up to 100 percent if the project meets all of the basic condominium standards plus some of the additional items.
III. Owner-Occupancy Requirements
At least 50 percent of the units in a project must be owner-occupied or sold to owners who intend to occupy the units. For proposed, under construction, or projects still in their initial marketing period, FHA will allow a minimum owner occupancy amount equal to 50 percent of the number of presold units.
Vacant or tenant-occupied real estate owned (REOs), including properties that are bank owned, may be excluded from the calculation of the required owner-occupancy percentage (should be removed from both the numerator and denominator).
IV. Pre-Sale Requirements
In the case of new construction, the pre-sale requirement will be reduced temporarily to 30 percent.
As of today, 45 condominium projects are approved in San Jose. If you are a buyer or a seller and would like to know if a certain project is approved or not, call me at 408.905.6261 or email me at Shashank@ArcusLending.com
Your weekly dose of San Jose Mortgage Rates and Market commentary.
The Week that was:
Freddie Mac reported in its Primary Mortgage Market Survey® that 30-year fixed-rate mortgage (FRM) averaged 4.98 percent with an average 0.6 point for the week ending January 28, 2010, down slightly from last week when it averaged 4.99 percent. The 5 year adjustable-rate mortgage (ARM) averaged 4.25 percent this week, with an average 0.6 point, down from last week when it averaged 4.27 percent.
Q4 advance GDP was stronger than expected at +5.7% but will likely be revised lower when we get the preliminary revision next month.
Treasury once again was able to get strong demand for $118B of notes sold last week.
In my humble opinion, Obama’s State of the Union speech was more fluff than substance in the aftermath of voter rebellion in Massachusetts; cost cutting and more job growth help but not specifics.
The Week that will be:
This is going to be employment week with Jan data coming on Friday.
No Treasury borrowing this week, however, on Wednesday Treasury will announce the following week’s auctions for 3 yr notes, 10 yr notes and 30 yr bonds; likely about $80B in total.
Market volatility this week will likely be up a little with interday swings that will keep markets in check until the employment data on Friday morning.
If you are in the market to buy or refinance a San Jose home and want to find out how economy news can affect your mortgage rates call me at 408.905.6261 or email me shashank@arcuslending.com.
The Fed’s statement today does not augur well for Bay Area Mortgage Rates. The Fed’s policy-setting committee stuck to a plan to end its purchases of mortgage securities by the end of March.
Background - The program to purchase agency mortgage-backed securities (agency MBS) was announced by the Federal Reserve on November 25, 2008. On Wednesday, March 18, the FOMC announced the expansion of the Federal Reserve’s program to purchase agency MBS up to $1.25 trillion by the end of the year. On September 23, 2009, the FOMC announced that the Federal Reserve will purchase a total of $1.25 trillion of agency mortgage-backed securities and gradually slow the pace of these purchases, anticipating they will be executed by the end of the first quarter of 2010.
The purchases have helped to drive down mortgage interest rates (refer chart below for Mortgage Rates in the last decade. Source - Freddie Mac), providing an important boost to U.S. housing and financial markets. When the Fed stops buying, rates on mortgages could turn higher. According to Fannie Mae chief economist Doug Duncan Mortgage Rates can go up by 30 to 50 basis points if Fed stops buying Mortgage Backed Securities. In fact, immediately after Federal Open Market Committee (FOMC) Statement today, most of the lenders issued a repricing for worse. For a $500,000 an increase in 50 bps in rate means an increase of $155 a month on a San Jose home mortgage payment.
In its meeting in December, some Fed officials argued the housing market might not be ready for an end to the MBS purchase plan and suggested keeping it in place for a longer period or even expanding it. With Fed now saying the economy had “continued to strengthen” and business spending was “picking up” ; it is trying to gradually pull back from the many programs initiated between 2007 and 2009 to stabilize the financial system and lift the economy.
So if you were planning to take a mortgage either to refinance or buy a home, time could be running out for low mortgage rates. Call me today at 408.905.6261 or email me at shashank@arcuslending.com and let me shop 100+ lenders for you to get you the best Bay Area Mortgage Rates.
Your weekly dose of San Jose Mortgage Rates and Market commentary.
The week that was:
Freddie Mac reported in its Primary Mortgage Market Survey® that 30-year fixed-rate mortgage averaged 4.99 percent with an average 0.7 point for the week ending January 21, 2010, down from last week when it averaged 5.06 percent. The 5-year adjustable-rate mortgage (ARM) averaged 4.27 percent this week, with an average 0.6 point, down from last week when it averaged 4.32 percent. Note that these averages are for conforming loan amounts $417,000 and lower.
Wall Street Journal reported that California’s inventory of unsold, previously owned homes shrank to a five-year low in December, in another sign that the state may be coming out of its worst housing slump in decades. The supply of unsold single-family homes dropped to 3.8 months from 5.6 months a year ago and 16.6 months in January 2008. The inventory levels are now at their lowest level since 2005, resulting in frenzied sales with multiple offers in some cities. In Santa Clara County, inventory has dropped to 50 days from 243 a year ago.
One of the most surprising developments last week was the way the Senate is back-peddling the confirmation of Ben Bernanke for his second term. Greenspan, Paul Volker, Warren Buffett, most former Fed officials; and last but not least, investors want Bernanke confirmed but now its populist movement for weak minded politicians that are increasingly worried they too may be tossed on the unemployed rolls in Nov that has weakened Bernanke support.
FHA announced a series of changes to their Down Payment, Credit Score, Seller Contribution and Mortgage Insurance guidelines.
Credit Score/DownPayment Guideline Change :
New borrowers will now be required to have a minimum FICO score of 580 to qualify for FHA’s 3.5% down payment program. New borrowers with less than a 580 FICO score will be required to put down at least 10%.
This change will be posted in the Federal Register in February and, after a notice and comment period, would go into effect in the early summer.
Effect of this change - This will have minimal to no impact on Bay Area First Time Home Buyers. Almost all the lenders already have a self-imposed 620 minimum credit score guideline. Some even require a 640 minimum score.
Reduce allowable seller concessions from 6% to 3%
According to FHA - The current level exposes the FHA to excess risk by creating incentives to inflate appraised value. This change will bring FHA into conformity with industry standards on seller concessions.
This change will be posted in the Federal Register in February, and after a notice and comment period, would go into effect in the early summer.
Effect of this change - Because of low inventory and the risk of not getting the property appraised at contract price seller have already reduced their contribution on transactions. In my personal opinion, 3% is still good enough to cover for most of the Buyer’s closing cost, if not all. Again, this rule too will have a minor impact for San Francisco Bay Area First Time Home Buyers who are considering FHA as their loan option.
If you would like to know how these changes to FHA loan requirements would impact you, feel free to call me at 408.905.6261 or email me at shashank@arcuslending.com
FHA today increased it’s upfront mortgage insurance premium requirements for Bay Area FHA Home Loans. Upfront Mortgage Insurance is the money that FHA collects at the time of closing a mortgage to insure the loan against default. Currently, this premium is 1.75% for most purchase and refinance transactions. However, effective April 5, 2010, FHA will collect an upfront mortgage insurance premium of 2.25 percent for purchase money and refinance transactions, including FHA-to-FHA streamlined refinance transactions. Below is the breakdown of FHA upfront mortgage insurance for different loan programs:
Purchase Money Mortgages and Full-Credit Qualifying Refinances = 2.25 percent
Streamline Refinances (all types) = 2.25 percent
HOPE for Homeowners (Delinquent Mortgagors) = 2.00 percent
Home Equity Conversion Mortgages (Also called Reverse Mortgages) = 2.00 percent
As a borrower, it means higher cost for you to take an FHA loan. However, FHA allows upfront mortgage insurance premium to be added to the loan amount. Hence the change in the policy wouldnt necessarily mean larger “cash to close” requirement.
Weekly dose of economy and mortgage market news that affects mortgage rates for San Jose Home buyers and Home owners.
The Week that was:
Economic data last week confirmed once again that inflation fears are way overblown; Dec CPI up just 0.1%. Factory use and industrial production improved again as the economy is bottoming, at least based on recent reports. Somewhat disturbing, and adding to last week’s bounce in rates; Dec retail sales were lower, down 0.3% in a month.
Consumers, the housing industry and the unemployment rate, now at a whopping 17% when discouraged workers are taken into account; not the building blocks for a sustained recovery.
Freddie Mac weekly Primary Mortgage Market Survey® reported 30-year fixed-rate mortgage (FRM) averaged 5.06 percent with an average 0.7 point for the week ending January 14, 2010, down from last week when it averaged 5.09 percent. Last year at this time, the 30-year FRM averaged 4.96 percent.
The 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 4.32 percent this week, with an average 0.6 point, down from last week when it averaged 4.44 percent. A year ago, the 5-year ARM averaged 5.25 percent.
The Week that will be:
Not much in the way of economic measurements this week; Dec housing starts and building permits and the Dec producer price index, prices on wholesale products, are the headliners this week.
As long as the outlook for economic recovery remains as solid as it is currently lower rates are highly unlikely. We suggest taking advantage of any further decline in rates.
Great news for First Time Home Buyers - FHA is eliminating the 90 day flipping rule for mortgages on San Francisco (SF) Bay Area homes. With certain exceptions, FHA currently prohibits insuring a mortgage on a home owned by the seller for less than 90 days. Currently such homes are mostly bought by investors with large down payments or an all cash transaction. Due to lack of financing options Bay Area First Time Home Buyers were not able to make offers on such homes.
This temporary waiver will give FHA borrowers access to a broader array of recently foreclosed properties. The policy change will permit buyers to use FHA-insured financing to purchase HUD-owned properties, bank-owned properties, or properties resold through private sales. This will allow homes to resell as quickly as possible, helping to stabilize real estate prices and to revitalize neighborhoods and communities.
HUD Secretary Shaun Donovan said - “As a result of the tightened credit market, FHA-insured mortgage financing is often the only means of financing available to potential homebuyers. FHA has an unprecedented opportunity to fulfill its mission by helping many homebuyers find affordable housing while contributing to neighborhood stabilization.”
In the final state of the state address of his gubernatorial career, Gov. Arnold Schwarzenegger proposed a second round of $10,000 first time home buyer tax credit. The previous tax credit depleted eight months before the deadline after benefiting almost 10,700 California home buyers. The Franchise Tax Board stopped taking new applications at the start of July, 2009.
What this means is if this proposal is indeed passed California First Time Home Buyers can potentially get $18,000 in Tax credits.
At a press conference in Fresno this is what the Governor has to say about the proposed Tax Credit: Altogether we want to put aside $200 million for these tax credits. Right now the inventory of new homes is at the lowest it has been since 1971 and that means, of course, now we create demand to build new homes and that’s exactly what we want to do. We want to get people off the fence and move them into homes.
Tax credit proposal if passed will have following highlights:
The Governor plans to set aside $200 million, twice the amount set aside last year. The credit will be offered on a first come first served basis till the fund is exhausted.
The tax credit will apply to buyers of new & existing homes. The last credit was only applicable to new homes.
The tax credit will be available only to first time home buyers.
The tax credit will be $10,000 or 5% of the purchase price whichever is lower.
Combined with historical low interest rates and 30%-40% dip in property prices, this could be once in a lifetime opportunity for a First Time Home Buyer to buy a home in California.
If you were considering buying your first home, contact me at 408.905.6261 or shashank@arcuslending.com and I will be glad to help you with your financing needs.
FHA today increased it’s upfront mortgage insurance premium requirements for Bay Area FHA Home Loans. Upfront Mortgage Insurance is the money that FHA collects at the time of closing a mortgage to insure the loan against default. Currently, this premium is 1.75% for most purchase and refinance transactions. However, effective April 5, 2010, FHA will collect an upfront mortgage insurance premium of 2.25 percent for purchase money and refinance transactions, including FHA-to-FHA streamlined refinance transactions. Below is the breakdown of FHA upfront mortgage insurance for different loan programs:
Great news for First Time Home Buyers - FHA is eliminating the 90 day flipping rule for mortgages on San Francisco (SF) Bay Area homes. With certain exceptions, FHA currently prohibits insuring a mortgage on a home owned by the seller for less than 90 days. Currently such homes are mostly bought by investors with large down payments or an all cash transaction. Due to lack of financing options Bay Area First Time Home Buyers were not able to make offers on such homes.
In the final state of the state address of his gubernatorial career, Gov. Arnold Schwarzenegger proposed a second round of $10,000 first time home buyer tax credit. The previous tax credit depleted eight months before the deadline after benefiting almost 10,700 California home buyers. The Franchise Tax Board stopped taking new applications at the start of July, 2009.
Shashank is the author of the blog. He is a mortgage broker/banker in San Jose, CA. He can be reached at shashank@arcuslending.com or 408.905.6261.