South Orange County Blog from Bob Phillips

Hilltop home views outrank water-front views four to one, C.A.R. luxury client survey finds

Vast majority of luxury home buyers purchased home as primary residence

Coto-overviewLOS ANGELES (May 8) – Even in a state with hundreds of miles of beautiful, sandy beaches, luxury home buyers in California preferred hilltop homes over ocean-front properties by a margin of four to one, according to the CALIFORNIA ASSOCIATION OF REALTORS®’ (C.A.R.) “2013 Luxury Real Estate Consumer Survey.”

Forty-one percent of buyers who bought luxury homes (homes priced above $1 million) last year, purchased a home with a hilltop view, compared to 10 percent who bought an ocean-front home.  Hilltop homes even outranked ocean-front homes and ocean-view homes combined (38 percent). Buyers also purchased luxury homes located near a golf course (16 percent), mountain area (12 percent), resort area (9 percent), lake-front (4 percent), and ski resort (1 percent).

The vast majority (79 percent) of luxury home buyers said they purchased the home as a primary residence.  Ten percent purchased the home as a vacation or second home. Nine percent purchased the home as an  investment or rental property, and two percent cited “other” reasons.

Additional findings from C.A.R.’s 2013 Luxury Real Estate Consumer Survey include:

• One-fourth of luxury home buyers said the main reason they purchased a home was because they wanted a larger home, compared to traditional buyers (23 percent) who said they were tired of renting as the primary reason for purchasing a home.

• With luxury home buyers usually being higher income earners, more than a third of all luxury buyers (35 percent) were able to pay all cash for their property, compared to 27 percent of traditional buyers, and 11 percent of first-time buyers.

• Luxury home buyers also made higher down payments (30 percent of the sale price) than traditional buyers (25 percent), and as a result had less difficulty in obtaining financing than traditional buyers. On a scale of 1 to 10, with 1 being “very easy” and 10 being “very difficult,” luxury home buyers rated acquiring financing difficulty at 3.7, compared to 8.6 for traditional buyers.

• While luxury home buyers spent less time looking for properties (five weeks) compared to traditional buyers (10 weeks), luxury buyers looked at more properties (10 properties) than traditional buyers (eight properties) before purchasing the home.

• Buyers of luxury properties tend to be more optimistic than traditional buyers, with more than seven in 10 (71 percent) luxury buyers saying they expected home prices to increase in one year, compared to 36 percent of traditional buyers.

• Luxury home buyers intended to keep the property for a median of 10 years, compared to six years for traditional buyers.

• Fifty-seven percent of luxury buyers were single, compared to 37 percent of traditional buyers who were single.

The Luxury Real Estate Consumer Survey was conducted via email to a random sample of REALTORS® statewide who worked with luxury home buyers. All eligible respondents closed escrow on their homes within the 12 months prior to November 2013.  The survey asked REALTORS® a series of questions regarding their last closed transaction with a luxury client.

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Tips For Maximizing Your Home’s Appraised Value

Tips For Maximizing Your Home's Appraised ValueA home appraisal is an independent opinion of your home’s value, performed by a licensed home appraiser. Appraisals are part of the traditional home purchase process, and lenders require them for most refinances, too.

Appraisers Are Trained Professionals

First, they derive a base for your home’s value based on the recent sales prices of homes that are comparable to yours in terms of bedrooms, bathrooms, style, and square footage.

Then, accounting for features and amenities that make your home different, the appraiser applies “adjustments” to that base value.

This methodology is called the “Sales Comparison” approach and the result is your home’s appraised value. It’s the most common appraisal method used by lenders.

As a homeowner , you can’t affect the sales prices of your home’s comparable properties, but you can help your appraiser understand how your home stands apart from these homes.

This, in turn, can affect your home’s adjustments, resulting in a higher appraised value. With home appraisals, every valuation dollar can matter.

With That In Mind, Here Are A Few Tips For Maximizing Your Home’s Appraised Value:

  1. Be home for your appraisal so you can answer the appraiser’s question, if there are any.
  2. Mention any new roofing, flooring, HVAC, plumbing, or windows you’ve installed since purchase.
  3. Don’t mention projects or repairs you’re “about to undertake”. Appraisers don’t credit for unfinished projects.
  4. Make minor household fixes prior to the appraisal (e.g.; leaky sink, running toilet, peeling paint).
  5. Present a tidy home. This can contribute to a higher “overall condition” adjustment.

Lastly, schedule the appraisal for a time that is convenient for your entire household. An appraiser needs to see, measure, and take photos of every room in your home.

If a room’s door is closed because of a resting child, for example, the appraiser may need to schedule a second appointment to complete the appraisal, and that can raise your appraisal costs.

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Orange County Housing Report: Top 10 OC Housing Trends

Up to the minute real estate news from my favorite local ( O.C.) economist, Steven Thomas, of ReportsOnHousing.com

The Orange County housing market has been evolving, leaving many scratching their heads wondering where it’s headed. 

top-10-graphicThe Top 10 Housing Trends: the latest housing trends gives a definite sense how the market is developing. After dramatically appreciating throughout 2012 and most of 2013, this year has a completely different feel and has been unpredictable. To get a better sense where the market is currently at and where we are headed, it is best to take a closer look at the latest trends. Here’s a breakdown of the “Top 10” current Orange County housing trends:

  1. The active listing inventory is moving towards a long term average. After dropping unabated for 19 months beginning in mid-June 2011 through January 2013, the active inventory bounced around an anemic, historical low. In mid-March of last year, there were only 3,183 homes on the market. Today there are 6,667, more than double. We have not seen the inventory this high since March 2012, and there are no signs that the increase will slow anytime soon. It will probably tap out at around 8,000 homes in August before it starts to fall as homeowners throw in the towel with the transition into the Autumn Market. The inventory is rising on the backs of overzealous, overpriced sellers who will not achieve success until they are priced right.
  2. Homeowners with equity, “Equity Sellers,” dominate the Orange County real estate scene. For the past three months, equity sellers represented 94% of all closed sales. Distressed homes dominated Orange County real estate three years ago, but the real estate market has been in recovery mode ever since. With only 5% of all mortgage homes under water (it was over 20%) and with massive appreciation, more good ol’ fashioned homeowners have been encouraged to place their homes on the market.
  3. Distressed properties, both foreclosures and short sales, have only a small role in housing today. Distressed homes made up nearly 50% of the market three years ago. Banks had a chokehold on housing as they were in charge of all foreclosures and short sales required the bank’s approval to take less than what was owed. They have moved from the driver’s seat to the back of the bus, making up only 6% of closed sales today. Only 1% of all sales are foreclosures and 5% are short sales. For the first four months of this year, there were only 571 closed distressed sales compared to 1,944 a year ago, down a mind-blowing 71%. Two years ago there were 3,861.
  4. Total closed sales are down. So far this year there are 8,272 closed sales, down 12.6% from last year when there were 9,469. Sales have not been this low in three years. What’s changed? Distressed sales have dramatically dropped while the number of equity sellers is actually up by 2% compared to last year. The increase of equity sellers is just not enough to make up for the lack of foreclosures and short sales. It doesn’t help that many equity sellers start out grossly overpriced and often will not adjust their prices enough in order to successfully sale.
  5. Unrealistic, overzealous, overpriced sellers are back this year with a vengeance. Sellers were able to get away with overpricing their homes in 2012 and 2103. Values were low enough that buyers were willing to pay more than the last closed sale. That changed a year ago; new sellers reached for the stars and priced way above recent sales, buyers balked. What began last year has morphed into the dominating theme of 2014. Sellers are not getting away with overpricing so they are sitting on the market with no offers. As a result, the inventory has risen dramatically and buyers have a lot more homes to choose from.
  6. Buyers want to pay the Fair Market Value of a home. Now that home values have risen substantially from a couple of years ago, buyers are not eager to pay much more than recent closed sales, the Fair Market Value of a home. This explains why so many homes have been sitting on the market. Buyers are now willing to wait for the right home to hit the market at the right price. Homes that are priced in line with reality fly off the market; unfortunately, they are the exception to the rule.
  7. The expected market is rising. The expected market time takes into consideration the total inventory and current demand. A rise in inventory pulls the expected market time up. Stronger demand pushes the expected market time down. Demand has been a bit softer than last year and the listing inventory has been on the rise; thus, the expected market time has doubled since last year. Last year it was at 37 days compared to 74 days today. Anything below five months is a seller’s market, but that does not mean that sellers get to choose their sales price. As the inventory rises and demand slightly softens during the summer months, the expected market time will continue to increase.
  8. There are three distinct price ranges. The hottest market is homes priced below $1 million, 87% of closed sales in 2014. The expected market time is at 2 months. Last year these homes had upwards of 20 offers that were generated immediately after placing the For Sale sign in the yard. Today, when priced right, they can still generate multiple offers, just not nearly as many. The more unrealistic and higher the price, the fewer offers obtained. The next range is homes priced between $1 million to $2 million, 9% of all closed sales this year. The expected market time is 4.43 months, an ever-so-slight seller’s market. 5 months is equilibrium. The last price range is homes priced above $2 million. This price range makes up 11% of the active inventory, but only 3% of all closed sales. The expected market time for this luxury market is 9 months. This range marches to the beat of its own drum and sellers are very aware that it can take a long time to sale. Prices are a lot stickier and sellers are not quick to drop their asking price.
  9. Interest rates are flat. After the Federal Reserve announced that they were “tapering” their involvement in the secondary market, rates rose 1% overnight. Since then, rates have remained pretty steady bouncing around 4.5%. It is important for everybody to understand that even though rates have remained the same, there is tremendous pressure on rates to rise because of the amount of money that the United States has dumped into the system to get housing back on its feet. It is only a matter of time before interest rates rise beyond 5% and many people will be kicking themselves at the missed opportunity of cashing in on historically low rates.
  10. There are a lot of vacant homes on the market. One year ago there were 682 vacant homes on the market, representing 18% of all homes. Flash forward to today and there are 1,852 vacant homes, 28% of the active market. This increase is most likely due to the number of investors who have purchased, rehabilitated, and now are selling at a premium and profit. Many have been a bit overly optimistic in their numbers and after a while need to dial their expectations back a bit and reduce in order to sale.

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Thermostat Recall Due to Fire Hazard


White-Rodgers, a major thermostat provider, hasrecalled over 1 million thermostats in the United States and Canada due to a fire hazard caused by alkaline batteries leaking onto the thermostat’s circuit board. 
Which Thermostats are Subject to Recall? The digital thermostats are white with blue lighted screens and will have one of the following names printed on the front:
The thermostats have a battery door on the top, left-hand corner. There are three or four buttons to the right and three or four more buttons below the thermostat screen. 
Recalled thermostats do not show a battery icon on the left side of the blue lighted screen.
Only thermostats without a battery icon
are subject to recall.
What Should You Do?If you own one of these brands, check your thermostat for the battery icon on the left-hand side of the blue lighted screen. If the battery icon is not shown, contact White-Rodgers to receive a free repair or a replacement thermostat.

Consumer Contact:

Call White-Rodgers toll-free at (888) 624-1901 from
7 a.m. to 6 p.m. CT Monday through Friday—or visit their website at www.white-rodgers.com and click on the White-Rodgers 1F8x-04xx Thermostat Recall link found at the lower, left-hand corner of the homepage for more information.

Click here to access the full report from the United States Consumer Product Safety Commission.

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What’s Ahead For Mortgage Rates This Week – May 12, 2014

2014-03-03-_WhatsAheadThisWeekResults from a Federal Reserve survey of senior bank loan officers indicated that lenders have held the line on prime lending standards and have raised standards for sub-prime and non-traditional home loans.

Survey respondents represented 74 U.S. banks and 23 foreign banks. Survey respondents also said that demand for mortgage loans was lower; this could be an unintentional result of tight credit standards for mortgage loans.

Analysts said that tight credit requirements and less demand for home loans could mean more trouble for the housing industry.

Home Prices Rise In March, But At Slower Rate

The annual rate of increase for national home prices was 11.10 percent as compared to February’s 11.80 percent year-over-year rate of increase.

February’s reading was the fastest pace of home price growth in eight years, but March’s slower level of home price appreciation was the lowest month-to-month reading in three years. Fewer affordable homes were cited as a reason for slower growth in housing markets.

CoreLogic reported that home prices rose by 1.40 percent in March, and that Arkansas was the only state that posted a drop in home prices. Several states, including North Dakota and Texas, achieved new peaks in home prices due to strong job growth.

The slow-down in home price growth isn’t necessarily all bad news; analysts said that home prices could not continue to climb when household incomes aren’t keeping up.

Many first-time buyers have been sidelined with a combination of slow job growth, higher home prices and tight mortgage credit. CoreLogic reported that these factors contributed to their forecast for home prices to grow by about 6.70 percent in 2015.

Mortgage Rates Fall, Fed Chair Speaks

Freddie Mac reported lower average mortgage rates on Thursday. The rate for a 30-year fixed rate mortgage was 4.21 percent as compared to last week’s reading of 4.29 percent. Discount points dropped from 0.70 to 0.50 percent. The average rate for a 15-year mortgage was 3.32 percent and six basis points lower than the prior rate of 3.38 percent.

Discount points were unchanged at 0.60 percent. The rate for a 5/1 adjustable rate mortgage was unchanged at 3.05 percent, but discount points dropped from 0.50 to 0.40 percent.

Janet Yellin, chair of the Federal Reserve, spoke before the Senate Budget Committee on Thursday and said that the Fed can shrink its current balance sheet of $4.3 trillion by not reinvesting proceeds from its portfolio of maturing bonds.

This is directly connected to the Fed’s tapering of its quantitative easing (QE) program, which is currently at a level of $45 billion per month in mortgage backed securities (MBS) and treasury securities.

Some analysts believe that members of the Fed’s FOMC meeting discussed the end of QE in their last meeting, but this cannot be verified until the minutes of the meeting are released May 21.

The end of QE could cause higher mortgage rates as the program’s purpose is to hold down long-term interest rates.

Weekly Jobless claims fell to a new low of 319,000 against predictions for 325,000 new jobless claims and 345,000 new claims for the prior week. Seasonal anomalies caused by the Easter holiday and spring break schedules were cited as causes for ups and downs in new jobless claims in recent weeks.

What’s Next

This week’s scheduled economic news includes several consumer-related reports including Retail sales, Consumer Price Index, core CPI, Homebuilder’s Index, and Housing Starts.

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Vegetable Garden 101: Get The Kids Started On A Veggie Patch Project Today

Vegetable Garden 101: Get the Kids Started on a Veggie Patch Project TodayThinking about ways to engage your children in gardening and educational opportunities outside of the classroom?

Creating your very own veggie patch with them is a great way to help them develop interest in the wonderful hobby of gardening!

Growing a vegetable garden links together many concepts your children are learning about in school while teaching them the art of discipline, responsibility and delayed gratification. Here are some great tips on how to nurture this project with your children.

Choose Pick-And Eat-Vegetables

The joy of being able to eat the fruits of their labors straight out of the garden will be an amazing reward for children. Vegetables like snap peas and cherry tomatoes are great for this. A bonus is that pea seeds are big and easy for those tiny hands to plant if you are going to have your children involved in the garden from the very beginning.

Pick Fun Vegetables The Kids Can Use Later

Another great route when choosing what to plant is picking vegetables that children have a strong connection to. Pumpkins are a great example of this. Children will love to grow pumpkins because of the promise of carving a jack-o-lantern later in the year.

Ensure Your Garden Is Conveniently Placed

One thing you don’t think about until you have kids is how to streamline your garden activities in a way that accommodates them. Convenience is critical when trying to manage children and do gardening at the same time. Go easy on yourself by placing your garden as close to a water source as possible.

Plant A Few Seeds That Will Grow Quickly

It is always nice to give children a bit of excitement right off the start. Lettuce is always good for this. It grows fairly quickly and will grab the interest of your children while they wait for the other plants to sprout.

Make Your Children Planting Assistants

Involving your kids in the planting is definitely a lot of work, but it really helps build their interest and education later on. Get them to hoe rows, dig holes, or water as you plant. This will help them connect all the processes together in their minds, and will keep the engaged later on.

Keep The Garden Front Of Mind

Make the garden an ongoing, continuous project that the children are involved in. Don’t let weeks go by before you bring the kids out to it again – they might get bored or develop other interests. Always look for opportunities to involve them in the work.

Plant A Colorful Garden

One of the easiest ways to get children excited about what is growing in the garden is to make it come alive with color. There are many different ways you can bring a splash of color to the garden. Choose a variety of lettuce, radishes, or squash to bring interesting and unique shapes, sizes and color to the garden!

Building a garden is a fun way to teach your children the value of hard work and perseverance, and to help them learn science! A garden can engage children and draw you all closer together as you work toward a common goal.

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The Magic Number: Does Your Credit Score Need To Be Above 720 To Apply For A Mortgage?

The Magic Number: Does Your Credit Score Need to Be Above 800 to Apply for a Mortgage?Over the course of a lifetime, financial development can lead to some wonderful opportunities. A person’s financial development and state of affairs is something that is particularly important when it comes to taking out a bank loan to further progress in life, and the largest loan most people will require is a mortgage for a home purchase.

Since the process of getting approved for a mortgage is heavily dependent on credit history and that three-digit credit score that reflects reliability as a borrower, you should always put forth practices to keep that number healthy and growing.

However, how much importance does a credit score hold? Does that magic, three-digit number need to be above 720 in order to get approved for a mortgage?

The FICO Score: The Magic Number That Counts

When you apply for a mortgage, you will have to provide certain information to your financial institution or mortgage broker. The mortgage specialist at your bank or mortgage broker will then pull your credit score and your credit report.

Fair, Isaac and Company is the scorekeeper of your FICO score, which ranges from 300 to 850, 850 being the highest of all scores, and 300 being the lowest.

Every person in the United States has three FICO scores from the three different credit-reporting bureaus. Up to 80 percent of financial lenders will use a borrower’s FICO score in order to approve a mortgage application and determine a suitable interest rate on the loan.

The 600 Range: Fair And Good Credit Mortgage Options

If your credit score isn’t perfect (ie. above the 800 mark), you need not worry too much. There are many options available for those with credit scores around 600, and, with many different financial lenders to consider, having a mortgage approved sometimes means persisting with an application to several different lenders before receiving a “yes.”

With a “fair” and “good” credit rating falling between 620 and 719, there are options available to get approved for a mortgage well under the perfect 800 mark.  An FHA loan is a type of mortgage loan that is insured by the US Federal Housing Administration, offering an option with more flexible qualification measures. For homebuyers with a credit score above 620, this is a viable and common option.

720 To Perfect: Under 800 And Still In Great Shape

The median credit score in the United States is 723, and anything above 720 is placed with the marker of “excellent credit.” Therefore, just because you may range just slightly above 720, which may feel miles away from a perfect 800, you’re likely in just as good of shape when it comes to getting approved for a mortgage. You can expect a mortgage approval with good interest rates if you have a credit score higher than 720.

Keeping an eye on your credit rating and understanding the measures that are used in determining your credit score will certainly help you maintain a good score. Of course, speaking with a professional and receiving expert advice is always recommended. I have a few lender reps I trust, who I would be happy to recommend.

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Black Knight: 1 in 10 Borrowers Underwater

An article by Colin Robins of DSNews.com, May 5th, 2014:

next-exit“In Black Knight Financial Services’ latest Mortgage Monitor Report, the company found that only one in ten Americans are still underwater, down from one in three in 2010. Overall, the company’s look at March data reflected a shifting landscape. As home prices have risen over the past two years, many distressed loans have worked their way through the system and the percentage of Americans with negative equity has declined considerably.

“Two years of relatively consecutive home price increases and a general decline in the number of distressed loans have contributed to a decreasing number of underwater borrowers,” said Kostya Gradushy, Black Knight’s manager of Loan Data and Customer Analytics.

“Looking at current combined loan-to-value (CLTV), we see that while four years ago 34 percent of borrowers were in negative equity positions, today that number has dropped to just about 10 percent of active mortgage loans,” Gradushy said.

Gradushy references the 10.1 percent negative equity average, but what states homeowners reside in paint a clearer picture of negative equity across the spectrum. Judicial states have a higher negative equity rate at 13.4 percent, compared to the 7.9 percent rate experienced in non-judicial states. ( California is usually a non-judicial state.)

Regardless, Gradushy notes that both judicial and non-judicial states have experienced declines. “Overall, nearly half of all borrowers today are both in positive equity positions and of strong credit quality—credit scores of 700 or above. Four years ago, that category of borrowers represented over a third of active mortgages,” Gradushy said.

The total delinquency rate is 5.37 percent, the lowest since October 2007 according to Black Knight. Month-over-month, delinquency rates have declined to 7.57 percent and are down yearly 16.29 percent in March.

The total U.S. foreclosure pre-sale inventory stands at 2.07 percent, the lowest figure since October 2008. Inventory rates are down 36.69 percent year-over-year.

Black Knight had more positive news in its Mortage Monitor Report: leading indicators, such as foreclosure starts, new problem loan percentage, 90-day defaults count, and 30 to 60 roll count are all down heading into the second quarter.

The company offered that the 2013 population of loans was “the best vintage on record,” but the statement belies the fact that higher credit restrictions severely hampered new originations for lower credit borrowers.

The top five states with the highest total non-current loans were Mississippi (13.4 percent), New Jersey (12.9 percent), Florida (12.1 percent), New York (11.1 percent), and Maine (10.6 percent).

Excluding Mississippi, the remaining four states are judicial states, suggesting the longer timelines required to resolve foreclosures are impacting non-current loan rates, depressing the market’s ability to quickly clear the remaining backlog in foreclosure pipeline.” ( End of Colin’s article.)

From Bob Phillips:   While foreclosure activity in South Orange County is WAY down, there are still a small number of home owners still struggling with their monthly payments, while not having enough equity in their homes to sell, under normal circumstances.  If you, or someone you know, is still struggling with their mortgage payments, with a loan that is higher than the value of their home, there are alternatives available.

You might be able to refinance to a lower rate and payment, or may be able to modify the loan to a lower amount, while also lowering your payments, or you might be able to do a short sale, to get out from under the weight of such a mortgage.  I am trained and experienced in helping find such solutions, and provide such assistance at NO cost to you.  If you are seeking a solution, drop me a line, or give me a call.  Chances are excellent that I can help.

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What’s Ahead For Mortgage Rates This Week – May 5, 2014

Whats-Ahead-Mortgage-Rates-4Last week’s economic news included several reports related to housing and mortgages. The NAR started the week on a positive note with its Pending Home Sales Index released Monday. Pending home sales in March were higher with an unexpected increase of 3.40 percent over February for an index reading of 97.40.

This is encouraging news for home sales that were severely affected by a hard winter in many areas, and suggests that as warmer weather approaches, home sales will pick up. Analysts do not expect the rapid rate of price appreciation seen in 2013. The Fed’s tapering of its “quantitative easing” program has caused mortgage rates to rise, and last year’s rapid run-up  of home prices has made affordability an issue in many areas.

The S&P Case-Shiller Home Price Index for February performed slightly better than expected with a seasonally-adjusted month-to-month reading of 0.80 percent. The expected reading was 0.70 percent.

The year-over-year reading fell short of January’s reading of 13.20 percent and the expected reading of 13.00 percent at 12.90 percent. Analysts noted the continuing trend of slowing momentum in home price growth, but seem confident that home prices will continue to increase over the spring months.

Fed Continues Tapering Of QE, Mortgage Rates Mixed

Wednesday brought the FOMC’s customary statement after its two-day meeting concluded. There were no surprises as the statement verified another monthly tapering of $10 billion from the Fed’s quantitative easing (QE) program of asset purchases.

The tapering was evenly divided with $5 billion less in MBS purchased and $5 billion less in treasury securities purchased. The ongoing tapering was seen as contributing to rising mortgage rates, but the Fed asserted that its asset purchases remain sufficient to dampen rapid increases in long-term interest rates, which include mortgage rates.

The Fed repeated its usual reminder that its decisions are not on a pre-set course and that the committee members would closely monitor economic and financial developments as guidance for future decisions.

Freddie Mac reported mixed results for mortgage rates on Thursday. Average rates rose by four basis points to 4.29 percent for a 30-year fixed rate mortgage with discount points of 0.70 percent.

The average rate for a 15-year fixed rate mortgage dropped by one basis point to 3.38 percent; discount points steady at 0.60 percent. The average rate for a 5/1 adjustable rate mortgage rose by two basis points to 3.05 percent; discount points dropped from 0.50 to 0.40 percent.

Weekly jobless claims made an unexpected jump to 344,000 as compared to the prior week’s revised figure of 329,000 jobless claims and an expected reading of 320,000 new jobless claims.

Analysts note that week-to-week figures continued to show volatility, but said that on balance, the rolling average for jobless claims appeared consistent with moderate growth in labor markets.

This Week

This week’s scheduled economic news shows no events related to housing and mortgages. Highlights include Fed Chair Janet Yellen’s appearance before the Joint Economic Committee in Washington, D.C. and the usual releases of mortgage rates and new jobless claims on Thursday.

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Zillow: Buying a Home Beats Renting After 2 Years

rent-versus-buy

An article by Colin Robins, of DSNews.com, May 1, 2014:

Zillow’s break-even horizon analysis came to an interesting conclusion: in half of U.S. metros, buying a home is a better financial decision than renting for buyers intending to stay in their home at least two years. The company’s analysis includes all costs associated with buying versus renting, including upfront payments, closing costs, anticipated monthly rent and mortgage payments, taxes, utilities, maintenance, and renovation costs.

The group also takes into account different asset streams associated with different housing situations. For example, a buyer’s home equity is factored into the final figure, while a renter’s ability to invest some of the money they would have spent on a purchase is factored into the final figure for comparison.

“Rents keep rising, and mortgage interest rates remain very low, which is helping to skew the rent vs. buy decision toward buying for those who can afford it. Many renters may ask themselves why renew a lease, when you can break even on the same home in less time in many areas,” said Zillow Chief Economist Dr. Stan Humphries.

“However, some renters still have to overcome significant hurdles before they can pull the trigger on homeownership. For those renters who can’t qualify for a mortgage or aren’t able to save enough for a down payment on a house, renting can be a more flexible, and often far less frustrating option,” Humphries added.

Metros with some of the shortest break-even times include Riverside, California (less than 1 year); Orlando, Florida (1 year); Tampa, Florida (1.1 years); and Miami-Fort Lauderdale, Florida (1.2 years).

Large metros with the longest break-even time include Washington, D.C. (4.2 years); Boston, Massachusetts (4 years); Phoenix, Arizona (3.3 years); San Diego, California (3.2 years); and both Minneapolis, Minnesota and Baltimore, Maryland (3.1 years).

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