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Archive for May, 2010

Housing Starts Rise In April, Exerting Downward Pressure On Home Prices

Thursday, May 20th, 2010

housing starts 201004 Housing Starts Rise In April, Exerting Downward Pressure On Home Prices

Single-family Housing Starts rose by 55,000 last month, suggesting ample housing stock from which Salt Lake can choose this summer.

The report is a slightly larger read than what economists had expected.

Furthermore, for the first time since June 2009, Housing Starts appears to have broken away from its half-million unit plateau. 593,000 new homes were started in April.

Ordinarily, both Wall Street and Main Street would celebrate a strong housing sector report like this, but the Department of Commerce’s press release also held two cautionary notes.

The first point of caution is a mathematical one.  Although single-family starts increased by 10.2 percent, the survey had a Margin of Error of 10.7 percent. This means that Housing Starts may have fallen by 0.5 percent and the report is statistically worthless.

The second point of caution is tied to Building Permits, a complementary data point in the same Department of Commerce report.  In April, Building Permits fell by almost 11 percent with a tiny Margin of Error of less than 2%.  This tells us that builders are pulling back — a sign of low housing market confidence

According to the Census Bureau, 82% of homes start construction within 60 days of permit-issuance. Housing Starts, therefore, should ease though June and July.

Home prices are based on housing’s supply and demand.  For the next few months, supply should elevate, helping prices remain suppressed, after which, supply should dwindle.

The best time to buy a home, therefore, may be now.  As the summer months come to close, we may find that buyers vastly outweigh sellers.

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The Fed’s April Minutes Push Mortgage Rates Even Lower

Thursday, May 20th, 2010

fomc minutes 201004 The Feds April Minutes Push Mortgage Rates Even Lower

After starting the day in the red, mortgage rates rebounded Wednesday afternoon after the Federal Reserve released its April 27-28, 2010 meeting minutes.

It’s good news for home buyers and would-be refinancers in Salt Lake.  Mortgage rates continue to troll along multi-year lows.

“Fed Minutes” are lengthy, detailed recaps of Federal Open Market Committee meetings, not unlike the minutes you’d see after a corporate conference, or condo association gathering. The Federal Reserve publishes Fed Minutes 3 weeks after each respective FOMC get-together.

The Fed meets 8 times annually.

Because of the minutes’ content and density, it’s of tremendous value to Wall Street and investors.  Fed Minutes provide a glimpse into the conversations and debates that shape the country’s monetary policy.

The broad scope of the published meeting minutes are in sharp contrast to the more well-known, post-meeting press release which reads more like a policy summary.

And the extra words matter.

Here’s some of what the Fed discussed last month:

  • On Greece : A crisis in Greece could slow U.S. domestic growth
  • On housing : Despite government support, growth appears to have stalled
  • On its mortgage buyback program : There’s little reason to sell mortgage bonds right now

When the markets saw the Fed Minutes, what had been a down day for bond markets turned positive. The less-than-sunny outlook for the near-term U.S. economy sparked bond sales, pushing prices higher.

Mortgage rates move opposite mortgage bond prices.

Wall Street is always in search of clues from inside the Fed about what’s next for the economy and post-FOMC minutes usually give good fodder.  April’s meeting was no different.

For now, mortgage rates remain near all-time lows but once the Eurozone issues are settled, rates are likely to rise. If you haven’t locked a mortgage rate, your window may be closing.  Once the economy is turning around for certain, mortgage bonds will be among the first of the casualties.

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Values Still Falling In SLC…(Let’s Look A Little Deeper)

Tuesday, May 18th, 2010

Board of directors message: Median home prices are on the rise in most metropolitan areas surveyed by the National Association of Realtors. In fact, 91 out of 152 U.S. metropolitan statistical areas showed higher median existing single-family home prices in this year’s first quarter compared to the first quarter of 2009. However, Salt Lake City ranked in the bottom 10 areas with the largest home price declines. In Salt Lake, home prices fell 11.4 percent in the first quarter compared to the same quarter last year. Salt Lake’s falling home prices will continue throughout 2010, but should stabilize in 2011, according to a report commissioned earlier this year by the Salt Lake Board of Realtors and conducted by Jim Wood, director of the University of Utah’s Business of Economic and Business Research. In that report, Wood said that Salt Lake home prices would fall another 3 percent to 5 percent in 2010. The falling home prices have attracted more first-time buyers and have led to more home sales. In the six months ended March 31, single-family home sales in Salt Lake County increased 33 percent (4,181 home sales compared to 3,151 sales a year ago). And according to Wood, single-family home sales could reach as many as 10,000 units sold in 2010 in Salt Lake County, a nearly 10 percent increase compared to home sales in 2009.

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Your Mortgage Approval Isn’t Final Until It’s Funded

Monday, May 17th, 2010

approval not final Your Mortgage Approval Isnt Final Until Its FundedA mortgage approval is never final until it’s funded.

A host of things can “go wrong” while your home loan is underway. Some are in your control, many more are not.  And just being aware of some potential pitfalls could help save your loan down the road, and your peace of mind today.

MSN Money ran a summary piece on the topic titled “10 Things That Can Kill A Home Loan“.

It’s an excellent article because, unlike most “get approved” articles that advise against things like buying a car before closing, or opening a bunch of new credit cards, the MSN Money piece addresses more uncommon factors that can lead to a similar loan turndown.

For example, a home may be unfundable if it’s unsuitable for human habitation — a condition you may not discover until after a thorough home inspection’s been made. Broken windows, lack of plumbing, and/or major foundation damage are all deal-breakers with a lender.

Either fix the home prior to closing, or don’t close at all.

Homes in “declining markets” have danger spots, too. Especially for conforming mortgage applicants with less than 20% equity.

Because of how private mortgage insurers operate, some homes carry tougher, ZIP code-based PMI eligibility requirements. As a mortgage applicant, it’s important to understand this because you may be PMI-eligible in one neighborhood, but not in another.

There’s others ways in which a mortgage approval can go bad, too:

  • You’re self-employed and your income was lower last year versus the year prior
  • Your tax return shows large amounts of unreimbursed employee expenses
  • You failed to return required paperwork to the lender within a reasonable time frame

Mortgage approvals are delicate and, despite an improving economy, lenders still operate with caution. Talk with your real estate agent and your loan officer and put together a game plan.

The best way to beat the mortgage system is to know the rules before you start to play.

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