Real Estate And Mortgage Blog

FED RAISES TARGET FOR FEDERAL FUNDS RATE TO 3.75 PERCENT

The Federal Reserve's Open Market Committee raised the target for the federal funds rate by 25 basis points to 3.75 percent on Tuesday, marking the 11th straight increase since June 2004. The federal funds target rate is the interest rate charged by banks when they borrow funds "overnight" from each other.

"The widespread devastation in the Gulf region, the associated dislocation of economic activity, and the boost to energy prices imply that spending, production, and employment will be set back in the near term," the Fed said in a prepared statement. "While these unfortunate developments have increased uncertainty about near-term economic performance, it is the Committee's view that they do not pose a more persistent threat. Rather, monetary policy accommodation, coupled with robust underlying growth in productivity, is providing ongoing support to economic activity." FED Press Release

C.A.R. EXPECTS SLIGHT COOLING IN HOME SALES NEXT YEAR

The rate of home price appreciation will moderate next year following four years of steep increases, while sales in 2006 will decline slightly from this year's record pace, according to C.A.R.'s "2006 Housing Market Forecast" released today. The forecast was presented during the C.A.R. Centennial REALTOR® EXPO, running from Sept. 20 - 22 at the San Diego Convention Center.

The median home price in California will increase 10 percent to $575,500 in 2006 compared with a projected median of $523,150 this year, while sales for 2006 are projected to reach 630,610 units, falling 2 percent compared with 2005. The double-digit gain in the median price of a home, which California has experienced for most of the past five years, will again be fueled by the continuing shortage of housing across much of the state, according to C.A.R. economists. California typically gains nearly 250,000 new households, yet only will build about 200,000 new housing units this year, creating a shortfall of about 50,000 units.

"The economic fundamentals at both the state and national level continue to support a strong housing market in the Golden State for the foreseeable future," said C.A.R. Vice President and Chief Economist Leslie Appleton-Young. "However, we also expect that the wave of new loan products that have flooded the market over the past several years have injected a higher level of risk into the market, while affordability barriers to homeownership will continue to push residents inland and even out of state." More Info from CAR.org

PENDING HOME SALES DECLINE

While the Pending Home Sales Index (PHSI) hit its fifth highest reading on record in July, pending home sales have declined slightly, according to a recent report by NAR. Based on the number of transactions that have signed contracts but are not yet closed, the PHSI gauges home sales activity for upcoming months, as sales typically close within one or two months of contract signing. In July, the PHSI fell 1 percent below June's revised reading of 126.4 to 125.1 and stood 3.5 percent higher than the PHSI one year earlier. An index of 100 or more generally indicates a high level of home sales activity.

On a regional basis, the South led the nation with the highest PHSI at 139.2, an 8.3 percent increase above July 2004. Pending home sales also increased in the West, where the index rose 4.7 percent to 127.5. In the Midwest and Northeast regions, the PHSI declined to 113.6 and 109.0, respectively. Full article on Realtor.com

Banks Allow Flood Victims To Hold Off From Making Mortgage Loan Payments (Finance Technology Network)

With tens of thousands of homeowners in four states displaced by Hurricane Katrina, some banks and finance companies are allowing customers to forgo monthly mortgage payments for 90 days without incurring late fees or other penalties. The Mortgage Bankers Association, an industry trade group, estimated that 360,000 single-family mortgages in the four states were affected by the hurricane and its floods. Full Report on Finance Technology.

Mortgage rates dip and could fall further

The impact of Hurricane Katrina on financial markets is likely to push down mortgage rates, Freddie Mac said Thursday. See News in Yahoo! BizJournal

Higher gas prices bring lower mortgage rates

It's hard to predict how the aftermath of Hurricane Katrina will affect mortgage rates and the housing industry. So far, there seems to be a trade-off: Higher prices at the gas pump result in lower mortgage rates. The benchmark 30-year fixed-rate mortgage fell 6 basis points to 5.80 percent, according to the Bankrate.com national survey of large lenders. The benchmark 15-year fixed-rate mortgage fell 4 basis points to 5.43 percent. The benchmark 5/1 adjustable-rate mortgage fell 6 basis points to 5.41 percent. Visit BankRate.com for full news report.

Mortgage Applications Down

The pace of mortgage applications slowed for the second consecutive week even as mortgage rates fell in August, according to the latest report by the Mortgage Bankers Association. The data comes a week after the National Association of Realtors showed that existing home sales have slowed and the Commerce Department indicated that while new home sales jumped in July, the median sales price of new homes fell for the third straight month. The reports suggest there could be some cooling in the otherwise robust housing market. More on Money Magazine.

Least Overprice Housing Market

Attention bargain hunters! If you want to buy in the most underpriced housing markets in the country, go southwest young man. Housing market remain hot or not? Where is the hardest hit? How hard will it hit? etc. Full article on Money

Why use a mortgage broker?

What a Mortgage Broker Does? Why Go to a Broker? What a Borrower Should Know? How the Broker Makes Money? How to Prevent Hidden Charges? The full article will be available on the Web for a limited time:
(c) 2005 Charlotte.com and wire service sources. All Rights Reserved.

Picking mortgage is part of overall financial plan

Picking mortgage is part of overall financial planSo you're ready to buy a home. Let's focus on first things first: Be sure that you have a good overview of your financial health -- and don't think of your mortgage separately.
The full article will be available on the Web for a limited time: (c) 2005 MercuryNews.com and wire service sources. All Rights Reserved.

CALIFORNIANS SPEND HIGHER PROPORTION OF INCOME ON HOUSING

In California, more than 40 percent of households with mortgages spend more than 30 percent of their incomes on housing costs, a higher share than in any other state, according to a recent study by the Public Policy Institute of California. Titled "California's Newest Homeowners: Affording the Unaffordable", the report examines the state's latest trends in homeownership as well as the characteristics of homebuyers. In addition to higher loan-to-income ratios, many Californians have migrated to lower-cost inland areas.

Though the U.S. Dept. of Housing and Urban Development recommends that a household spend no more than 30 percent of its income on housing costs, approximately 50 percent of recent homebuyers in the Golden State exceed this threshold and 20 percent of recent homebuyers pay more than half of their income on housing costs, according to the study. Among the state's recent homeowners with low or moderate incomes, one-third spend more than 50 percent on housing. Full Report

BUILDER CONFIDENCE DECLINES IN AUGUST

The high cost of land, a shortage of lots for homebuilding and rising mortgage rates all contributed to a decline in the confidence level of the nation's homebuilders this month, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI). Following July's reading of 70, the seasonally adjusted HMI decreased three points to 67 in August. The HMI has remained within a 67 to 72 confidence range since April 2004; an HMI above 50 indicates that more builders view sales conditions as good versus poor.

Two of the HMI's three components decreased in August. The component measuring current sales fell four points to 72, while the confidence gauge for the traffic of prospective buyers declined five points to 50. The component measuring future sales remained unchanged at 77. Regionally, homebuilders in the West remain the most confident, with an overall seasonally adjusted HMI of 85. News Details

U.S. Home Prices Not Like Japan's in 1980s

With U.S. housing prices staying strong in many parts of the country, some analysts are comparing the appreciation trend to similar growth in Japan in the late 1980s, when a property bubble formed and eventually burst. But most analysts aren't sure that's a good comparison.

More than 10 years after the Japanese slowdown, land prices are still on the decline; and banks have just recently begun to pull out of a land-related, bad-loans crisis.

Although both Japanese and U.S. property industry growth are tied to low interest rates, economists note that there are some significant differences between Japan's plight and the U.S. market, including that the real trouble overseas came from commercial-land speculation.

While speculation in the American market is beginning to pick up, analysts say, there has not been a major land-grab by corporations. Additionally, Japan's residential prices skyrocketed faster and higher than in the U.S.

Source: Wall Street Journal (07/11/05); Moffett, Sebastian
Article from Realtor.org.

NAR Boosts Home Sales Forecast

The NATIONAL ASSOCIATION OF REALTORS® has again raised its forecast for the housing sector, with both existing- and new-home sales on pace to set an even bigger all-time record in 2005.

Existing-home sales are expected to rise 2.8 percent to 6.97 million this year; last month, the association was expecting 6.89 million sales—the record was 6.78 million in 2004.

New-home sales should increase 3.2 percent to 1.24 million in 2005, also a record. Total housing starts—single-family and multifamily—are forecast to grow by 5 percent to 2.05 million units, the second highest on record; the peak was 2.36 million in 1972. This year is seen to be a record for single-family construction, with 1.68 million homes started. For more analysis, visit Realtor.org.

C.A.R. MID-YEAR HOUSING MARKET FORECAST: RECORD SALES IN 2005

Existing single-family home sales will reach a record 633,490 units in 2005, a 1.4 percent increase from the previous year's record pace of 624,740 units, according to C.A.R.'s mid-year housing market forecast. The median price also will hit a record $523,150 this year, increasing 16 percent from 2004's record $450,990. C.A.R. also projected that the state's Housing Affordability Index in 2005 will decline to 16 percent, compared with 20 percent last year.

"While the economic fundamentals for the state -- population, job and income growth -- have not changed since the forecast we prepared in October 2004, interest rates are expected to finish the year lower than we anticipated," said C.A.R. Vice President and Chief Economist Leslie Appleton-Young. "We now expect the 30-year, fixed mortgage interest rate to be at 5.9 percent, with the one-year adjustable rate mortgage at 4.4 percent."