***Smart Financial Weekly Mortgage Update November 27, 2009***
Interest Rates
Market rates continued to stay below 5% and make buying a home very affordable. We are fast approaching the one year anniversary of mortgage rate in the low 5% range which compared with rates from recent years is actually mind boggling. At least one member of the Federal Reserve Board of Governors thinks the Fed should keep supporting mortgage rates well into 2010. So far his view is a minority one. Stay tuned.
When Rate
This Week 4.82
1 Month Ago 5.03
1 Year Ago 5.97
2 Years Ago 6.10
Note that actual market rates vary geographically and by lender, credit score and Loan to Value.
Source: Federal Reserve Statistical H.15.
Mortgage Industry Update
• FHA is getting tougher on condos. Guidelines for condo projects have become more restrictive and ALL current approved condo projects will have to be reapproved and recertified every two years (unless they were approved after October 1, 2008).
• Fannie Mae is rolling out its First Look initiative which was piloted in August. The program is designed to help ordinary home buyers compete with investors for Fannie Mae’s REO inventory. The program is available through a variety of national and local public organizations including Neighborhood Stabilization Plan (NSP) sources, HOME Investment Partnership Fund from HUD, Community Development Block Program, local housing trust funds and charitable foundation funds. First Looks offers lower deposits from potential owner occupants, an opportunity to renegotiate an accepted offer after getting an NSP appraisal and extra time for closing. To learn more contact publicentity_reosales@fanniemae.com or visit www.homepath.com.
• The first time home buyer credit may be an issue for FHA. The reason is that at the lower prices buyers have no money invested in the property and the data shows these buyers are more likely to default. FHA’s current cash reserves are at .53% well below the statutory minimum of 2%. It is estimated that its portfolio will have grown to one TRILLION dollars by the end of 2010. FHA is currently financing about 20% of new home purchases.
• Freddie Mac delinquency hit an all time high in third quarter of 3.54% on its $2.4 TRILLION single family portfolio.
Good News
• For the first time in 10 years credit card debt delinquency of 90 days or more was lower in the third quarter than in the second quarter reported Transunion.
• According to the NAR existing home sales for October increased 10.1% in October the biggest increase since February 2007.
• The NAR also reported that the median home price declined 7.1% in October and the median home price was $173,100. This decline in price was the smallest in over a year.
• Case Shiller survey results for third quarter showed housing prices up .3% short of forecast increase of .5%. This was fifth consecutive monthly increase. Year over year decline in value was 8.9%.
• Conference Board said consumer confidence was up slightly in November to 49.5 forecast was 47.7. The Board says that a score of 90 indicates the economy is on “solid footing”.
• Consumer spending was up .7% in October compared to down .6% in September.
• University of Michigan consumer sentiment survey for November was 67.4 forecast was for 67.
Statistics of Interest/Concern
• The National Association of Business Economists forecast GDP growth for 4th quarter 2009 at 3% and 3.2% for 2010. The biggest concern of the economists is the Federal budget deficit followed by unemployment.
• The government revised third quarter GDP downward from 3.5% to 2.8%.
• Commerce Department said durable goods were down .6% in October compared to forecast of up .5%.
• New home sales increased 6.2% in October while the median price declined by .5%. The number of homes available for sale declined for the fourth consecutive month to 6.7 months inventory.
Foreclosure Headlines
• First American CoreLogic says 10.7 million homeowners are upside down in their homes and another 2.3 million are within 5% of being upside down. Nevada leads the nation with 65% of homeowners under water Arizona is at 48%.
Job Market Headlines
• Weekly jobless claims declined to 466,000 the lowest level in 14 months and below forecast of 500,000.
• Four week moving average of weekly claims was 496,500 down slightly from the previous week.
• Continuing jobless claims were at 5.423 million down 190,000 from previous week.
Commentary/Observations
In its third quarter report the FDIC said the number of banks on its problem list increased to 552 the most since 1993. Also, the FDIC fund was $8.2 billion in the red the biggest deficit since 1991 (the number does include the $21.7 billion already set aside for anticipated failures). So far this year 124 banks have failed. Finally, loan balances at the nation’s banks declined 2.8% the largest decline since 1984.
According to ASU Realty Studies home prices in Scottsdale have declined 37% in October compared to a year ago and foreclosures were 28% of sales in the city with foreclosed condos at 33% of sales.
The Community Mortgage League of America warned in a letter to Congress that the risk retention provisions in the Restoring American Financial Stability Act will force many of their members out of business thereby increasing borrowing costs to consumers, limiting availability of affordable mortgages and reducing efforts to stabilize the housing market. They proposed less restrictive risk provisions.
If you have any mortgage or related questions I can be reached at (602) 803-9660 or by e-mail at burt@gosfm.com.
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