Market Analysis
(We
attempt to update this consumer comment section at least weekly and sometimes
more frequently should news warrant. But, there are times when we are on vacation
or there is other interference and an update is delayed. If you find that the
comment is out dated, please check back. We will do our best to remain as
current as possible in helping you determine the direction of long term
interest rates. Thank you!)
December 25, 2009
Happy Holidays!
If we are to believe the reports from Washington, the economy is on the mend and
the recession is over. They may not be interviewing the 40 million out-of-work
folks? Admittedly, Wall Street is doing well, the stock market, in spite of its
roller-coaster dailty up and down reporting is strong. Never-the-less, the
economy does seem to be improving in some sectors.
While the general economic news continues to improve there
are still plenty of questions regarding
home financing. The extension of the $8000 first time homebuyer tax credit and
the adoption of the $6500 tax credit for re-purchase buyers was expected to
stimulate home sales. The jury is still out but there are some signs that some
buyers are motivated by the tax credit. Critics suggest that some buyers will
buy now when they might have been better off waiting to purchase. Many still
consider the tax credits as a temporary fix for a still struggling housing
sector.
Unemployment figures improved although is is interesting how
the calculation occurs . . . the anticipation that unemployment picture is
improving because the loss of jobs over the past two months have been “less
than” expected. Critics indicate that the loss of jobs continue to be too high.
Surprisingly, consumer spending was fairly strong this
holiday season. Major snow storms through the middle and eastern parts of the nation resulted in the last minute
shopping expectations being substantially reduced. We won’t know until early
January how retail sales really performed. We do know that the reduction in
retailer’s inventories this year resulted in retailers not having to provide
the steep 80-90% discounts that were provided as incentives in 2008. It may
mean, however, that there will be less ofter Christmas buying?
As a part of the good news, bad news cycle we can report
that home interest rates surprisingly remain low, still under 5% as of this
writing. Rates have trended upward the past week but many anticipate that rates
will creep back down again following the holidays. These optimists point out
that economic bad news still dominates for most consumers.
Underwriting guidelines continue to change, with mostly
continued toughening of the rules. Credit score requirements continue to
tighten along with “risk based” pricing models continued in use. Lender risks
are constantly reassessed and changes made nearly daily. Loan-to-Value (LTV)
levels have reduced with 95% LTV conventional loans having been nearly phased
out as Private Mortgage Companies are reluctant to insure at that level. Even
FHA has announced the possibility of increasing down payment requirements along
with introducing risk based models after the first of the year.
Risk based pricing models are typically based upon the LTV,
the borrower’s credit scores and the type of property being acquired. FHA has
recently increased their lowest qualifying score from 620 to 640. Conventional
lenders now require a minimum 700 score or borrowers will have what are called
“hits” to their pricing, resulting in higher interest rates. Other “hits” can
occur if the LTV exceeds 80% or if someone wants to purchase an investment type
property.
The good news again is that FED chairman, Ben Bernanki, has
announced that it is likely that home mortgage interest rates will remain low
while the housing market attempts to rebound. While this is good news for those
planning to purchase, rates will inevitably increase sometime in the future.
Most predict low rates into mid year 2010 but expect rates to climb sometime
after that. Combined with the possible extended tax credit (noted above) this could
be a good time to consider a home purchase.
Home values in much of the nation are starting to see
minimal appreciation come back into the market. But, a buyer still needs to
seek good counsel regarding home values. The appraisal process remains impacted
by last May’s adoption of a new process called the Home Valuation Code of
Conduct (HVCC) which has resulted in higher costs to the consumer with
unpredictable results in home values. We have discussed this process previously
and anyone wishing to have a full detailed account of the new process may
contact us at Humboldt Home Loans and we will gladly provide the information.
Predicting the market with all of its conflicting
information is impossible. But, most pundits would encourage those who wish to
purchase a home should consider doing so within the next six months or so. For
those considering a refinance, the decisions require a bit more evaluation but
it may be advisable to have the calculations done to determine if a refi would
benefit you today. Waiting for rates to decline is not recommended as rates
have remained at near record lows for several months now.
The
final bit of good news . . . good real estate loans are available and are being
completed every day. Don’t let the bad news interfere with your moving ahead if
a purchase or refinance loan makes sense for you today. Call us today at
Humboldt Home Loans for a free consultation to determine your eligibility for a
home loan and for all of your real
estate finance information.
John Fesler 269-2318 Jody Harper 269-2304
See the section called “resources” at this website for more
information on:
-
Tax credit information in depth
-
Home Possible Information . . . still being touted as a
way to avoid foreclosure
-
New rules governing tax deductions for personal
residences retained as rentals
You may find several tip sheets (found in our "tip sheet" section
of this web site) interesting as you determine if you should proceed with
either a purchase or refinance transaction . . . check out "Never Been a Better Time
to Buy", "Refinancing" and "Locking the Interest Rate"..
Here are a few additional tip sheets of particular interest. You may view my
complete tip sheet table of contents by clicking below.