Mortgage bonds improved last week, pushing mortgage rates lower in California and nationwide.
Positive economic news and strong housing data was trumped by ongoing Fiscal Cliff discussions on Capitol Hill.
The “Fiscal Cliff” is meant to represent January 1, 2013 — the date on which mandatory spending cuts are enacted by Congress and on which tax rates increases for many U.S. taxpayers.
Some analysts believe that if these two events are to occur simultaneously, it would derail the current U.S. economic expansion and revert the economy back into recession. That concern has spurred a flight-to-quality which has benefited mortgage bonds and, therefore, U.S. mortgage rates.
For example, last week, Freddie Mac reported the average 30-year fixed rate mortgage rate at 3.35 percent nationwide for borrowers willing to pay an accompanying 0.7 discount points plus a full set of closing costs. This is a 0.02 percentage point reduction from the week prior.
The average 15-year fixed rate mortgage rate was unchanged last week at 2.66 percent for borrowers paying an accompanying 0.7 discount points plus closing costs.
In this holiday-shortened week, mortgage rates may fade again.
Congress convened over the weekend in order to discuss the impending Fiscal Cliff, and ways to avoid it. Talks have been ongoing since this year’s election yet it appears unlikely that the simultaneous expiration will be avoided.
How this would affect the economy is unknown but mortgage markets would witness an immediate boost of demand, leading South Orange County mortgage rates lower. Conventional, FHA and VA mortgage rates would all likely benefit.
And then, Wall Street will turn its attention to Friday’s December Non-Farm Payroll report.
Mortgage rates are expected to make big moves upon the report’s release. This is because, earlier this month, the Federal Reserve said it would begin raising the Fed Funds Rate only after the Unemployment Rate reaches 6.5 percent. Currently, the Unemployment Rate is 7.7 percent. If December’s jobless rate slips, moving closer to the Fed’s stated target, mortgage rates are expected to rise.
Similarly, if the Unemployment Rate rises, mortgage rates are expected to drop.
If you enjoy both history and fixing things, then you may have trouble driving by historic homes for sale in South Orange County without feeling the urge to buy and fix one up.
Before you do, however, you should know the three R’s of fixing historic homes — Restoration, Renovation, and Repair.
“Restoration” is the process of returning a home to its original state. Restoring historic homes often requires city and state permission. It’s essential that you check to see whether your home is listed in the National Register of Historic Places (NRHP); or, whether it’s located in a historic district. If either is true, there may be a specific set of rules to follow while renovating.
Restoration can be an expensive endeavor. For a home to keep its historic value, the materials used must match the home’s original materials, including furnishings. This can be costly because of antique value.
Renovating is less complicated and less restrictive as compared to restoring. However, via a renovation, a home often becomes a more “modern” living space, which can lower the home’s historic value. Be sure that your home is not listed in the NRHP or located in an historic district before beginning renovations.
Depending on size of the project(s), renovations can be expensive, too. However, it’s easier to find great deals on modern appliances as compared to the antique appliances required for a restoration.
Repairs are often less intensive than a restoration or renovation. For repair, be sure to use materials which fit the home’s character, which may include plaster walls and wooden floors, for example. Matching original materials is not important in the home repair process..
The cost of a repair project will depend on the size and volume of required repairs.
The differences between a restoration, renovation and repair of an historic home may be minor, but those small differences will change your costs, your timeline and your procedural red tape. Speak with an qualified architect if you’re unsure of your obligations as the owner of a historic home.
The U.S. housing market continues to make home price gains.
Earlier this week, the S&P/Case-Shiller Index showed home prices gaining 4.3 percent during the 12-month period ending October 2012, marking the largest one-year gain in home prices since May 2010.
The Case-Shiller Index measures changes in home prices by tracking same-home sales throughout 20 housing markets nationwide; and the change in sales price from sale-to-sale. Detached, single-family residences are used in the Case-Shiller Index methodology and data is for closed purchase transactions only.
Between October 2011 and October 2012, home values rose in 18 of the 20 Case-Shiller Index markets, with previously-hard hit areas such as Phoenix, Arizona leading the national price recovery.
The top three “gainers” for the 12 months ending October 2012 were :
- Phoenix, Arizona : +21.7 percent
- Detroit, Michigan : +10.0 percent
- Minneapolis, Minnesota : +9.2 Percent
Only Chicago and New York City posted annual home value depreciation. On average, homes lost -1.3% and -1.2% in value, respectively.
It should be noted, however, that the Case-Shiller Index is an imperfect gauge of home values
First, as mentioned, the index tracks changes in the detached, single-family housing market only. It specifically ignores sales of condominiums, co-ops and multi-unit homes.
Second, the Case-Shiller Index data set is limited to just 20 U.S. cities. There are more than 3,000 cities nationwide, which illustrates that the Case-Shiller sample set is limited.
And, lastly, the home sale price data used for the Case-Shiller Index is nearly two months behind its release date, rendering its conclusions somewhat out-of-date.
That said, the Case-Shiller Index joins the bevy of home value trackers pointing to home price growth over the last year. The Federal Housing Finance Agency (FHFA), for example, reported similar home price growth with its October 2012 House Price Index (HPI).
Home values rose 0.5 percent between September and October 2012 nationwide, the FHFA said, and climbed 5.6 percent during the 12 months ending October 2012.
Economists attribute increasing home prices to higher buyer demand, record-low mortgage rates and the gradual improvement of the U.S. economy.
A simple way to save money is to improve your home’s energy efficiency rating. For example, South Orange County homeowners can save up to 9 percent per year on water heating costs simply by installing a water heater jacket.
Water heater jackets are easy to install. Here’s how you do it :
First, before you go shopping, check whether your water heater is a gas model, or an electric one. Then, write down your water heater model number. Most water heater jackets list compatible water heater models on their respective packaging. Look for jackets with a value of “R-8”.
Then, as you start your project, be sure to turn the water heater off.
Water heater jackets are pre-cut to make installation simple. Remove the outer packaging and separate the jacket’s pre-cut pieces. There will likely be a top, a body and belts. You’ll want to have plenty of duct tape on hand, too.
Next, shape the top of the water heater jacket to fit your appliance. Trim around the pipes which enter the water heater, then tape the areas closed. This will form a strong seal.
Tape the top edges down to the side(s) of the water heater.
Then, take the body of the water heater jacket and wrap it around your water heater’s mid-section. Have the belts ready and secure them, taking care that the belts don’t push the insulation down more than one-quarter of its thickness.
Lastly, outline the access plate with a pencil on the insulation exterior, and use scissors or a knife to cut the insulation out. Tape the edges to avoid fraying and set the water heater to a temperate no higher than 130 degrees.
Note that outfitting a gas water heaters with jackets can be more complicated than with electric water heaters because of construction. If your water heater is a gas model, consider hiring a professional to handle your installation.
Mortgage markets worsened last week amid ongoing discussions budget and tax conversations in Washington, D.C., and the release of key housing and economic data.
Mortgage rates climbed in California and nationwide.
Freddie Mac reported the average 30-year fixed rate mortgage rate at 3.37 percent nationwide for borrowers willing to pay an accompanying 0.7 discount points at closing, plus closing costs — an increase of 0.05 percentage points from the week prior.
The average 15-year fixed rate mortgage rate was listed at 2.65 percent nationwide with an accompanying 0.7 discount points plus a full set of closing costs.
With certain government funding and tax reductions set to expire December 31, legislators appear unlikely to avoid what’s been called the “Fiscal Cliff”. Some economists believe that reaching January 1 with no agreement in place will set the economy in to recession.
Mortgage rates tend to improve on “negative” news for the economy, which partially explains why mortgage rates made a small comeback late in the week.
In other news, according the National Association of REALTORS®, Existing Home Sales reached their highest point since November 2009, climbing to 5.04 million homes sold on a seasonally-adjusted, annualized basis. In addition, the real estate trade group reports that the Existing Home Supply has dropped to 4.8 months — a figure firmly suggesting a “seller’s market”.
Separately, the Commerce Department reported single-family housing starts rising, too; down 4.1 percent in November but up nearly 23 percent as compared to November 2011.
This week, Fiscal Cliff discussions are likely to dominate mortgage markets. The trading week will be holiday-shortened and volume will be lighter-than-normal. This may lead to volatile pricing and rapid interest rate movements.
Markets close early Monday and remain closed through Tuesday. Wednesday, markets re-open with no new data set for release. Then, Thursday, scheduled economic news events resume Thursday with New Home Sales, Jobless Claims and Consumer Confidence due.
Friday, the Pending Home Sales Index is released.
Single-family housing starts took a small step back in November.
According to the monthly Housing Starts report from the U.S. Department of Commerce, single-family housing starts tallied 565,000 in November 2012 on a seasonally-adjusted, annualized basis. This marks a 4 percent decline from October, but is more than 100,000 higher than the count from 12 months ago.
Clearly, the nation’s new home construction market is expanding.
On a regional basis, single-family housing starts have been strongest in the Midwest; and Hurricane Sandy appears to have affected the number of starts across the Northeast.
As compared to one year ago:
- Northeast Region : Housing starts down 19% on an annual basis
- Midwest Region : Housing starts up 40% on an annual basis
- South Region : Housing starts up 24% on an annual basis
- West Region : Housing starts up 33% on an annual basis
It’s expected that new construction growth will continue into 2013, too. This is because the Department of Commerce report also showed Building Permits mostly unchanged for November at 565,000 units on a seasonally-adjusted annualized basis.
As compared to November 2011, this marks a 25% increase. Permits for multi-family homes are up 17%, too.
There are more building permits being issued today that at any time in the last 4 years.
For home buyers, this may be good news. Rising permits and housing starts suggests a more healthy U.S. economy, but it also means that home supplies may not be as tight throughout the next few months.
Overly-tight home supplies in some U.S. markets have contributed to rapidly rising home values. With more construction and larger home inventories, home prices may rise in 2013 less slowly.
The good news, though, is the mortgage rates in South Orange County remain near all-time lows and low- and no-downpayment mortgage programs are abundant. For today’s home buyer, there are plenty of affordable ways to purchase a home.
Talk with your real estate agent and your loan officer to see which plan works best for you.
The National Association of Home Builders (NAHB) released its Housing Market Index (HMI), showing another monthly gain — its ninth in a row.
The HMI — a gauge of homebuilder confidence — rose 1 point to 47 in December 2012, lifting the index to its highest levels since April 2006.
Readings under 50 indicate unfavorable housing conditions for builders. Readings over 50 signal “good” conditions. Coincidentally, the last time that the HMI read above 50 was April 2006, too.
The Housing Market Index is based on a survey which the NAHB sends to its members. The survey asks the nation’s builders to rate the current housing market conditions.
In December, home builders reported gains in two of the three areas surveyed:
- Current Single-Family Sales: 51 (+2 from November 2012)
- Projected Single-Family Sales: 51 (-1 from November 2012)
- Buyer Foot Traffic: 36 (+1 from November 2012)
It’s noteworthy that buyer foot traffic has climbed over nine straight months and is now at it’s highest reported level in nearly 7 years. Low mortgage rates and rising home prices throughout South Orange County have compelled today’s renters and existing homeowners to consider their home buying options.
This was none more apparent that in the Northeast Region in which builder confidence grew twelve points to 42. The Midwest Region also showed a strong improvement, climbing 2 points to 53. The West and South regions fell slightly between November and December.
For today’s buyers, rising builder confidence may be a signal that home prices are headed higher. Confident home sellers — including the nation’s builders — are less likely to make price concessions into an improving market, or may be less likely to offer free upgrades to buyers.
Therefore, if you are in the market for a newly-built home, consider that you may get the best “deal” by acting sooner rather than later. Mortgage rates are rising and home prices are, too. Six months from now, your costs of homeownership may be higher.
Foreclosure-tracker RealtyTrac reports falling foreclosure sales nationwide as banks get better at selling homes via short sale.
In its Q3 2012 report, RealtyTrac says that 193,059 homes in some stage of foreclosure were sold, accounting for 19% of all residential home sales. In addition, pre-foreclosure sales — also known as “short sales” — climbed 22% on a year-over-year basis.
For the first time since 2007, the number of short sales outnumbered the number of homes sold in foreclosure over three consecutive quarters.
The average price of a short sale home fell by 5 percent as compared to a year ago which may reflect an eagerness on the part of mortgage lenders to dispose of distressed properties before they fall into foreclosure. Foreclosures can increase a lender’s losses, and foreclosed properties be expensive to manage.
Compare the average Q3 2012 sale price of a home in short sale versus one in foreclosure :
- Average sale price of a residential property in short sale : $191,025
- Average sale price of a residential property in foreclosure : $161,954
It’s not just the higher home sale prices that have pushing banks to settle on short sales, either. Short sales are less costly, too. Foreclosing on a home requires banks to pay court costs, among other fees, and which positions the short sale outcome as a clear winner for many banks.
For homebuyers in California , the banking industry’s shift toward short sales is welcome news.
Buying a short sale has been a notoriously slow process with a lack of defined timeline. As banks improve their distressed sales division, they’re getting faster and more efficient. This makes it “easier” for a buyer to buy a home in short sale.
However, don’t buy a short sale without the help of an experienced, licensed real estate professional.
The negotiation process is different for a short sale than with a “traditional” home purchase. Time lines are different, responsibilities are different, and purchase contract language may be different, too. The same is true for buying a foreclosure.