As Homebuilder Confidence Stagnates, Deals Abound

Home builder confidence held firm this month, according to the National Association of Home Builders' monthly Housing Market Index. September's reading of 13 equaled a 17-month low.

The HMI is on a 1-100 scale. A value of 50 or better indicates "favorable conditions" for home builders.

Broken down, the Housing Market Index is actually a weighted composite of 3 separate surveys which measures current single-family sales; projected single-family sales; and foot traffic of prospective buyers.

None of the 3 September surveys improved from August:

• Single-Family Sales : 13 (unchanged from August)
• Projected Single-Family Sales : 18 (unchanged from August)
• Buyer Foot Traffic : 9 (from 10 in August)

Builder confidence is lower in 2010 than at any point in recorded history.

 

For home buyers , the drop in sentiment creates opportunity. With builders feeling "down", there's a greater likelihood for discounts and free upgrades. It can mean more house for your home buying money.

Plus, with the supply of both new and existing homes elevated, and foreclosures still hitting the market, conditions aren't soon likely to change.

Then, couple all that with all-time low mortgage rates and monthly housing payments look as affordable as ever.

If your plans call for buying a home in the early part of 2011, you may want to consider moving up your time frame. Today's market looks ripe for a good deal.

Case-Shiller Shows Slowing Growth In Home Prices... Two Months Ago

For the 17th straight month, the Case-Shiller Index reports that home values are rising across the United States. As compared to June, July's prices were up by 4 percent.

However, despite the improvement, July's Case-Shiller Index showed weaker as compared to prior months.

• In June, just 3 cities posted year-to-year reductions in home value. In July, 10 of 20 did.
• In June, just 1 city posted a month-to-month reduction in home value. In July, 7 of 20 did.

As a spokesperson for Case-Shiller said, values "crept forward" in July. But not that it matters -- the Case-Shiller Index is a better tool for economists than it is for homeowners. This is for 3 reasons.

First, the Case-Shiller Index is on a 60-day delay but real estate sales are based on prices today. A lot can change in 60 days, and it often does. Therefore, the Case-Shiller Index is a better snapshot of the former market than the current one.

Second, the Case-Shiller Index is geographically-limited. It tracks just 20 cities, ignoring some of the largest metropolitan areas in the country including Houston, Philadelphia, and San Jose. Smaller cities like Tampa are included.

And, lastly, national real estate data remains somewhat useless anyway. All real estate is local, rendering citywide statistics too broad to have any real meaning to an individual. To find out what's happening on a neighborhood-by-neighborhood level, you can't look to a national survey -- you have to look to a local real estate agent instead.

New Home Sales Unchanged In August; Market Stabilizing

Existing Home Sales rebounded last month after a lackluster July. New Home Sales data, by contrast, did not.

After an upward revision to July's data, New Home Sales remained unchanged at 288,000 units in August. It marks the second-lowest number of units sold in a month since 1963, the year government started its record-keeping.

At the current pace of sales, the newly-built home inventory would be depleted in 8.6 months.

The August New Home Sales was weaker-than-expected, but both Wall Street investors and Main Street economists are shrugging it off. The numbers were foreshadowed by weakening housing figures from earlier this summer.

For example:

1. Building Permits dropped between March and June
2. Housing Starts dropped between April and July
3. Homebuilder confidence continues to sag

Together, these three data points suggest that the market for new homes will be soft through at least this month.

With New Home Sales fading and colder months ahead, it may be an opportune time for home buyers to look at new construction. Builders are eager to move inventory and the cost of materials remains low.

Buying "new" may never be cheaper -- especially with mortgage rates as low as they are. The 0.750 percent drop in rates since January has shaved $188 off of a $200,000 mortgage's monthly cost. That's $2,250 per year in savings.

As home supplies dwindle and mortgage rates rise, finding "great deals" in new construction will undoubtedly get tougher. Take advantage of today's market conditions, combined with builder pessimism. It may be the right combination at the right time to get that new home for cheap.

What's Ahead For Mortgage Rates This Week : September 27, 2010

Mortgage markets improved last week as markets digested a bevy of data from the housing sector, plus the scheduled Federal Open Market Committee meeting. 

In back-and-forth trading, conforming mortgage rates in utah bottomed out Wednesday before rising through Friday's afternoon close. Rates still managed to eke out improvement on the week overall.

According to Freddie Mac, mortgage rates remain near their lowest levels of all time.

Despite low rates, however, rate shoppers are finding it a challenge to lock the "best price". This is because Wall Street is conflicted about the future of the U.S. economy and, as a result, mortgage pricing has been extra volatile.

For as much data that points to economic growth, there are numbers that suggest a pullback, too. Traders are undecided in either direction and mortgage pricing reflects it. It's not uncommon for mortgage rates to vary by as much as 3/8 percent in a given week.

This week, without much new data due for release, prepare for even swifter swings in rates. In the absence of "numbers", momentum- and trend-trading should amplify the market's normal drops and spikes.

A sampling of the week's economic data includes Tuesday's Consumer Confidence report and Case-Shiller Index, Thursday's Jobless Claims and Gross Domestic Product data, plus Friday's consumer income and spending figures.

Notably missing from the week's economic calendar is the jobs report which is typically issued on the first Friday each month. The release is delayed a week to October 8.

If you're still floating a mortgage rate or have yet to commit to a refinance, consider that mortgage rates are primed to rise. They've been falling for 22 weeks and when the market turns, it's expected to turn quickly.

Talk to your loan officer about your refinance options while mortgage rates are still low.

Existing Home Sales Rebound In August, Give Hope For Autumn

Sales of existing homes in recovered in August, perhaps the result of a post-tax credit normalization.

As compared to July, Existing Home Sales rose 8 percent in August, buoyed by falling interest rates and slow-to-rise home prices. There's lot of "good deals" out there and home buyers are taking advantage.

The housing gains are relative, however. August's total units sold barely crossed 4 million and still trails the average figures of the last few years by close to 1 million units.

Despite that, the August Existing Home Sales report can be considered a strong one. This is for several reasons:

1. Sales volume increased in August without tax credit or government intervention
2. Sales growth is not limited by geography. All 4 regions -- Northeast, Southeast, Midwest, and West -- showed improvement last month.
3. Repeat buyers are driving the market, representing 48 percent of sales, up from forty-three percent in July.

And, perhaps most important to the housing market market, the number of available home resales dropped by almost one full month last month.  At the current sales pace, the national inventory would be depleted in 11.6 months.

For home buyers, the data presents an interesting opportunity. With average mortgage rates rising from their best levels ever and home affordability cresting , this autumn may represent the turn-around point for the housing market nationwide.

If you're planning to move in early-2011, consider moving up your time frame.

Housing Starts Rise In August, But By Less Than The Headlines Report

The number of single-family Housing Starts rebounded in August, climbing 4 percent from July's 14-month low.

A "Housing Start" is defined as a home on which construction has started and the August increase represents 18,000 single-family units nationwide.

If you only read the headlines, however, you would think the data was stronger. This is because the Housing Starts data is actually a composite of 3 types of homes -- single-family, multi-family, and apartments -- but  the press tends to lump them all three together.

As a sampling, here are a some headlines on the story:

• US Stock Futures Rise After Housing Starts Surge (WSJ)
• Housing Starts At 4-Month High, Hint At Stability (Fox)
• Housing Starts Jump 10.5% In August (Marketwatch)

Now, it's not that the news is wrong, per se, it's just not necessarily relevant.  Few home buyers  are buying multi-family homes or entire apartment complexes. Most buy single-family and, for the first time since April, single-family starts are on the rise -- just not by as much as you'd believe from the papers.

Even still, we can't be entirely sure that the August Housing Starts data is accurate anyway.

A footnote in the Department of Commerce report shows that, although single-family starts are said to have increased 4 percent, the data's margin of error exceeds its actual measurement, meaning the data has "zero confidence".

In other words, starts may have dropped in August, but it's something we won't know for sure until revisions are made later this year.

Negotiating Tips

NEGOTIATING TIPS:

A good deal must be good for everyone!
If one side gets the short end of the stick, the deal won’t last.

It’s OK to lose a battle if you win the war!
Give in on some issues and you will create an atmosphere of cooperation rather than competition.

Keep it simple and be direct!

Digressions and discussion of issues that do not relate to the overall deal may wear down each side and make them less amicable.

Find out what motivates the other side.

Find out what is on the other person’s “wish list.” Give them what they want and you will get what you want.

The best listener is the best negotiator.

Learn the other person’s needs by listening attentively. Take notes, use good eye contact, and convey positive body language.

Find ways to reach an agreement as early as you can.

Negative beginnings usually produce negative outcomes. Find ways to reach agreement and you will appear reasonable and sympathetic, which will set the stage for getting over the more thorny issues later.

A Simple Explanation Of The Federal Reserve Statement (September 21, 2010 Edition)

Today, in its 7th meeting of the year, the Federal Open Market Committee voted 9-to-1 to leave the Fed Funds Rate unchanged. 

The Fed Funds Rate remains at a historical low, within a Fed's target range of 0.000-0.250 percent.

In its press release, the FOMC said that the pace of economic recovery "has slowed" in recent months. Household spending is increasing but remains restrained by high levels of unemployment, falling home values, and restrictive credit.

For the second straight month, the Federal Reserve showed less economic optimism as compared to the prior year's worth of FOMC statements dating back to June 2009. However, the Fed still expects growth to be "modest in the near-term".

This outlook is consistent with recent research showing that the recession is over, and that growth has resumed -- albeit at a slower pace than what was originally expected.

The Fed also highlighted strengths in the economy:

1. Growth is ongoing on a national level
2. Inflation levels remain exceedingly low
3. Business spending is rising

As expected, the Fed re-affirmed its plan to hold the Fed Funds Rate near zero percent "for an extended period".

There were no surprises in the Fed’s statement so, as a result, the mortgage market's reaction to the release has been neutral. Mortgage rates in utah are thus far unchanged this afternoon.

The FOMC’s next meeting is a 2-day affair scheduled for November 2-3, 2010.

New Construction

Check out this link to a great CNN article about new construction.

The Federal Reserve Meets Today. Should You Lock Your Rate Before It Adjourns?

The Federal Open Market Committee adjourns from its 6th scheduled meeting of the year today, and 7th overall.

Upon adjournment, Federal Reserve Chairman Ben Bernanke will release a formal statement to the market. In it, the Fed is expected to announce "no change" to the Fed Funds Rate.

Currently, the Fed Funds Rate is within a target range of 0.000-0.250 percent.  It's been at this same level since December 2008.

Note that the Feds Funds Rate is not "a mortgage rate" -- nor is it a a consumer rate of any kind. The Fed Funds Rate is a rate that defines the cost of an overnight loan between banks. And, although the Fed Funds Rate has little direct consequence to everyday homeowners, it is the basis for Prime Rate, the interest rate on which most consumer cards are based, plus many business loans, too.

Therefore, because the Fed Funds Rate won't change today, neither will credit card rates.  Mortgage rates, however, are a different story.  Mortgage rates should change today -- regardless of what the Fed does.

It's more about what the Fed says.

In its statement, the Federal Reserve will highlight strengths and weaknesses in the economy, and threats to growth over the next few quarters. Depending on how Wall Street interprets these remarks, mortgage rates may rise or fall.

If the Fed's comments signal better-than-expected growth, bond markets should lose and mortgage rates should rise. Conversely, if the Fed's comments signal worse-than-expected growth, mortgage rates should fall.

If you're actively shopping for a mortgage, it may be prudent to lock your rate ahead of the Fed's announcement today. The Fed adjourns at 2:15 PM ET.  Call your loan officer to lock your rate.

The Fed meets 8 times annually.

Negotiating Your Contract

Know the market

Make sure your Realtor prepares a Comparative Market Analysis before you make an offer on a home. This analysis will give you a good idea about trends in the market, in your particular price range and the area in which you are currently looking. It will give you information such as the price per square foot, actual selling price vs. listing price, and how many homes are on the market in your price range. All of this information combined will help you determine how much bargaining power you will have when you are ready to make your offer. If the market is moving quickly, you may have to pay near-list, list, or above list price to get the property. If the market is moving slowly, you may be able to offer something below list price and have the seller meet you somewhere in the middle. The bottom line is this: What you offer and what the seller will accept depends on the strength of the market and the desperation of the seller.

Representation

Make sure that the person helping to negotiate your contract is on your side! Realtors have specific designations to let you know whom they actually represent. Your Realtor should explain these various designations to you before you enter into the process of finding a home. It is wise to make sure the agent that you are working with is a Buyer’s Agent, as your best interests will be at the heart of your Realtors’ contract suggestions.

Everything is negotiable

Price, closing date, personal items are all negotiable when buying a home. Trust your Realtor during this process. There are, however, some things you should keep in mind:

If you want a specific closing date and the seller wants another, perhaps 30 or 60 days apart, try to come to an agreement, but you may want to get something in return. Examine the contract with your Realtor and determine exactly what stays with the home and what doesn’t. Typically, the items that stay in the house are the items that are “built-in,” such as the dishwasher, garbage disposal, etc. If there are personal items in the home that you would like to have, discuss negotiating them as part of the contract. The refrigerator? The washer and dryer? The TV that fits perfectly into the custom entertainment center? What about the swing set in the back yard? Ask for it! Remember, if you ask for something and the seller agrees to it, he or she may expect something in return or even raise the sales price to include the item.

Be reasonable

Buying or selling a home can be a stressful event. During this time, there will be a lot of give and take. When negotiating an item in the contract, decide first if it is a “must have” or a “nice to have.” If it is a “must have,” then determine your walk-away point. If it is a “nice to have,” don’t spend a lot of your energy and the energy of your Realtor if you aren’t having any luck. Instead, focus your energy on the important items.

POINTS vs. NO POINTS

So you’re in the market for a mortgage. After hearing about all the options and products, your head is probably spinning. If that weren’t enough, after you select a mortgage program, you then have to decide whether to pay points, and how many.

So what are points, anyway? Points are basically prepaid interest. One point equals one percent of the mortgage amount. One point on a $200,000 mortgage is $2,000.

People are often tempted to pay points because it will reduce their interest rate. And why not? If it saves you money in the long run, then it must be good. But the reality is that it often doesn’t work out that way.

Let’s look at an example: You take on a $200,000 mortgage with a 30-year fixed-rate. Your lender offers 8 percent with no points, or 7.75 percent with one point, or 7.50 percent with two points, and so on.

Generally one point equals a quarter of a percentage point. It’s not a hard and fast rule, but it usually works out that way.

• The 8-percent/zero point option equates to a monthly mortgage payment of $1,467.
• The 7.75-percent/one point option equates to a $1,433 monthly payment, but with $2,000 paid up front.

So your choices are: save $2,000 now, or save $34 each month going forward.

It’s quite natural for you to make a few quick math calculations: $2,000 divided by $34 equals roughly 59. So 59 months (nearly five years) from now, the point you paid will pay for itself.

This is probably how some mortgage bankers will explain it to you. In turn, you might respond by saying: I plan to live here more than five years so the point makes sense. That can be a big mistake. Worse yet, it’s the kind of mistake that goes unnoticed. The simple calculation is flawed; that’s the whole problem. This is one case where simplicity isn’t good.

Here’s why: The question really boils down to how you can best use that $2,000. You can pay a point, you can invest it, you can pay down other debt, or you can put it toward a bigger down payment on your house. If you apply it toward the down payment, now you have a mortgage balance of $198,000.

This changes the original choice you were faced with above. Now the choice is: 

• The 8-percent/zero point option gets a monthly mortgage payment of $1,452 with the lower starting balance.  
• The 7.75-percent/one point option equates to a $1,433 monthly payment, but with $2,000 paid up front.

So now your choice is: put the $2,000 toward the down payment, or pay the point and save $19 each month going forward. When you do the quick math, you will divide $2,000 by $19 and come up with about 105 months or nearly nine years. This isn’t quite the no-brainer the previous decision was.

Time to Buy?

Here are a couple of charts that help show why now might be a great time to buy!

Click on the chart to see a larger view.

7 things you should NOT do when applying for a home loan!

This is a list of things to steer clear of when you are seeking to obtain financing for a home. The following items may prove to be a detriment when you wish to move forward with the loan process.

Don’t buy or lease an auto!
Lenders look carefully at your debt-to-income ratio. A large payment such as a car lease or purchase can greatly impact those ratios and prevent you from qualifying for a home loan.

Don’t move assets from one bank account to another!
These transfers show up as new deposits and complicate the application process, as you must then disclose and document the source of funds for each new account. The lender can verify each account as it currently exists. You can consolidate your accounts later if you need to.

Don’t change jobs!
A new job may involve a probation period, which must be satisfied before income from the new job can be considered for qualifying purposes.

Don’t buy new furniture or major appliances for your “new home!”
If the new purchases increase the amount of debt you are responsible for on a monthly basis, there is the possibility this may disqualify you from getting the loan, or cut down on the available funds you need to meet closing costs.

Don’t run a TRW report on yourself!

This will show as an inquiry on your lender’s credit report. Inquiries must be explained in writing.

Don’t attempt to consolidate bills before speaking with your lender!
The lender can advise you if this needs to be done.

Don’t pack or ship information needed for the loan application!
Important paperwork such as W-2 forms, divorce decrees, and tax returns should not be sent with your household goods. Duplicate copies take weeks to obtain, and could stall the closing date on your transaction.

CNN Money - Tips for home buying

Here is a great link for tips for buying a home!

CNN Home Buying Tips!

Check out their info, it's great!

How to Improve Your Credit Score

A good credit score can mean the difference between a low mortgage rate with conventional financing and a restrictive, higher-rate loan. There are some simple but very important steps you can take to improve your credit.

• Look for any past due balances on the credit report and bring them current.

• Reduce all outstanding debt to as close to a zero balance as possible. If unable to pay all debt down, evenly distribute any remaining debt among open credit cards, or consider opening a new line and transferring some of the balances. Try to keep balances below 50% of available credit; below 30% would be even better. Do not close existing accounts.

• If married, keep separate credit cards. This provides flexibility in transferring some or all of the balances to one spouse to increase the credit score of the other. This provides the possibility of one spouse becoming the sole borrower and it does not change the ownership of the home.     

• Request an increase in available lines on cards to reduce debt ratio, but only if your credit card company can do that without a hard credit inquiry. 

• Pay off past dues and charge-offs within the last two years. Beyond two years, it will have no impact on your score if wiped out.  In fact, the act of paying it off can actually take your score down temporarily. 

• Request that creditors and credit bureaus delete any outstanding debt that is incorrectly charged to you or has yet to be cleared. They have an obligation to react within 30 days. If you choose to pay off an outstanding debt (less than two years old) mark the back of the check “accepting this check is evidence that the transaction is complete and this charge will be deleted from my credit.” You may be able to use the canceled check if the outstanding debt is not removed. 

Enlisting The Help Of An Experienced Realtor

• Few people enter the house-hunting process without the help of a real estate agent, and for good reason! A Realtor can provide valuable guidance from the search through negotiations, inspections and closing. With access to the computerized Multiple Listings Service (MLS), your agent can view all listings daily to give you a chance to view new home listings as they become available.
  
  
• Your agent will also have vital information regarding a specific neighborhood’s property value trend, demographics, quality of schools, and future residential, commercial and road construction. An experienced agent will have a good feel for a home’s true market value.
  
  
•  If you don’t have a Realtor, we will be happy to refer you to a highly experienced agent who specializes in the area you are seeking to purchase a home.
  
  
• Once you have found an agent you are comfortable with, your house hunting should proceed smoothly. A good real estate agent can quickly eliminate listings that do not meet your criteria, saving you time to look at more homes that do meet your specifications!

The Five Factors of Credit Scoring

There are five factors that impact consumer credit scores. They are listed here in order of importance:

Payment History has a 35% impact.  Paying debt on time and in full has a positive impact, and late payments, judgments and charge-offs have a negative impact.

Outstanding Credit Balances have a 30% impact. Debt ratio of outstanding balance to available credit is important.  Keeping that below 50% is wise and below 30% even wiser.  It is never a good idea to close an account; the debt ratio will go up and the number of seasoned lines will decrease. Pay outstanding debt down as close to zero as possible and evenly redistribute the remaining balance among the open lines. The increased interest incurred by moving a balance from a 0% card to a 23% card will be minimal relative to what the increased mortgage debt might be with a low credit score.  Hitting the maximums of available credit can be very negative. It may be worth calling and asking the credit company to increase your available credit to lower the debt ratio, provided they can do so without a hard credit inquiry. 

Credit History has a 15% impact. The length of time a particular credit line has been opened is important.  A seasoned borrower is stronger. 

Type of Credit has a 10% impact.  A mix of auto loans, credit cards and mortgages is positive, rather than a concentration in credit cards only. 

Inquiries have a 10% impact.  Hard inquiries for credit will negatively impact the score.  Auto and mortgage inquiries receive special treatment and 20 inquiries can be made in a 14-day period for auto or mortgage and will be treated as only 1 inquiry.  The maximum number of inquiries that will reduce the score is 10. Any inquiries beyond that [11+] in a six -month period will have no further impact on the borrower.  Each hard inquiry can cost 2-50 points on a credit score.

Tips to get your loan approved!

What is important to lenders?

These tips will help you better manage some key aspects of your finances so that you can get your loan approved.

Not every applicant is approved for a home loan the first time he or she applies. For a variety of reasons, even after a lot of hard work, sometimes a loan just can’t be approved. It may have to do with the applicant’s credit or savings history, employment stability, debt structure, or the value of the home. The good news is that a denial is merely a detour, not a roadblock. Purchasing a home takes planning, discipline and hard work! Follow these tips and with our assistance, home ownership is not out of reach.

Establish a consistent record of paying bills on time.
Before making a loan the size of a home loan, most lenders will want to review how you have handled your credit in the past. This includes all credit accounts, including utilities, revolving debt (credit cards, etc.), and installment debt (car loans, student loans, etc.). It is critical for you to bring all overdue bills up to date immediately and begin paying them on time in a consistent manner.

Establish a consistent record of steady employment.

Lenders are more likely to look favorably on an applicant who has been in the same (or similar) line of work for generally two or more years. If you have been working steadily for less than two or more years, expect the lender to ask why. There are many acceptable reasons, including:

·  You recently finished school, vocational training, or left the military;

·  Your work is typically seasonal and gaps in employment are customary to the industry;

·  You may have been laid off from your job; or

·  Frequent employment changes are normal in your line of work (sales, contract work, etc.), but you have been consistently employed and maintained a consistent level of income over the past 2 years.

You may want to pay off some debt to lower your debt-to-income ratio.

This step will make it easier to qualify for a mortgage loan if your debt ratio is high. Chances are good that if you’re already paying rent, making a mortgage payment will be a smooth transition. Along with the mortgage payment, you’re also responsible for real estate taxes and insurance, and if required, mortgage insurance and homeowners dues. Work with us to determine the monthly payment you can afford based on your income and the standard debt-to-income ratio guidelines.

Establish a consistent savings pattern.

Saving money for a down payment, and still having enough reserves left over to cover two months of expenses in the event of an emergency, is typically the most challenging part of buying a home. While sometimes it is difficult, this is a necessary step to ensure you are financially ready to take the plunge into home ownership. Our goal is to help you meet your short-term and long-term financial objectives. We’ll help you evaluate exactly when the right time is for you to buy, in order to help you build a secure financial future.

Rate Shopping

Most people will check the Internet or pick up the newspaper to look up current interest rates. What you see isn’t always what you get. Unfortunately, there are many ways to get hurt when shopping for the best rate:

Short Pricing – It is not necessary for lenders to state the “lock-in” duration when advertising a rate, so while a rate may sound good, it may not allow enough time for you to close on your loan. Most people don’t ask how long the quoted rate is guaranteed for – so make sure you do!

Low Ball Pricing – Some companies will lure you into a mortgage application with promises of low rate only to have the rate changes for the worse just before closing. They may tell you your rate has expired, the program is no longer available or even delay the closing to break the lock. It is just as important to shop rates as it is to shop for a reputable lender.

Products – With all the different products and options available, borrowers need a good mortgage professional to help them choose the program that will best suit their needs and goals. After all, a mortgage is typically the largest financial transaction people make in their lifetime.

It is far more costly to get the best rate on the wrong product than it is to get a competitive rate on the right program for you.

Welcome!

Welcome to the Future Home Buyers of America, your resource for all you need to know when buying a home.  Whether your looking to buy a new home now, or in a few years from now, start here to find out all you need to know about the home buying process.  From financing, to Realtors, to moving vans, this is your one stop source.