How Iceland’s Volcanoes Are Helping Mortgage Rates Fall
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Mortgage rates and home affordability have improved lately, thanks to an unlikely ally — Mother Nature.
In the 7 days since Iceland’s Eyjafjallajökull erupted, ash clouds have grounded planes, disrupted businesses, and stranded exports in warehouses worldwide.
It’s a drag on commerce that’s spilled over onto Wall Street. As experts debate the potential for future seismic activity, traders are taking some of their investment risk off the table.
In trading circles, it’s called “safe haven buying”. When the market gets cloudy, investors often move their cash into relatively safe assets. This includes government-backed securities — mortgage-bonds among them.
Demand for bonds rise, pushing up prices and driving down rates.
Conforming and FHA mortgage rates in Indiana touched a 3-week low earlier this week.
Volcanic eruptions and like natural disasters remind us: mortgage rates change for all sorts of reasons. Some we can predict, most we cannot. There’s literally thousands of influences on the U.S. mortgage market.
If you’ve been shopping for a home or floating a mortgage rate, luck’s been on your side. Mortgage rates have fallen post-Eyjafjallajökull. However, as ash clouds dissipate and business resumes worldwide, investors will regain their collective appetite for risk and safe haven buying will reach its natural end.
When that happens, mortgage rates will rise.
Therefore, use the seismic uncertainty to your advantage. Consider locking your mortgage rate sooner rather than later — while rates are still low.
After a strong March showing and a surprise upward-revision for February, Housing Starts are, once again, trending better.
It’s yet another signal that the housing market in Fishers and nationwide is stabilized.
A Housing Start is a new home on which construction has started and, over the last 6 months, home builders are averaging one half-million starts per month.
This marks the highest 6-month average since 2008 and a reading one-fifth percent better from 12 months ago. Revisions to prior data have all been higher, too.
Even more interesting, though, is that the number of newly-issued building permits is exploding. Permits were up more than 5 percent last month and have climbed back to the levels of late-2008.
Housing permits are an important data point in housing because permits are precursors to actual housing starts. According to the Census Bureau, 82% of homes start construction within 60 days of permit-issuance.
Therefore, because March’s housing permits increased, we should expect Housing Starts to continue to rise into the early months of summer.
This, too, reflects well on housing because the federal home buyer tax credit won’t be in existence this summer. The simple fact the homes are being built now shows that housing is likely to expand even after the tax credit expires.
Non-military members must be under contract by April 30, 2010 and closed by June 30, 2010 in order to claim up to $8,000 in federal tax credits.
Fold-up speakers for your MP3 players? You better believe it. OrigAudio’s eco-friendly Fold-N-Play speakers let you take your favorite playlists on the road to your office, hotel rooms and the beach.
Made from recycled materials, the Fold-N-Play speakers and arrives in a similarly-recycled box. It’s two, flat pieces of cardboard with embedded speakers and an attached cable. There’s no batteries.
All you need is a headphone jack.
Follow the enclosed instructions to convert the speakers into 3-inch cubes of sound. Then, when you’re done, fold them back up and slip them into your laptop sleeve. The 1-watt sound won’t rival a home stereo system, but will outperform most internal laptop speaker sets.
The OrigAudio Fold-N-Play made Time Magazine’s list of 50 Best Inventions of 2009. It sells for $20 per set, or $80 for all 6 available styles.
Visit the OrigAudio website at http://origaudio.com.
It’s A Good Time To Look At Adjustable Rate Mortgages
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Each week, government-led Freddie Mac publishes a weekly mortgage rate survey based on data from 125 banks across the country. According to this week’s results, the relative rate of a 5-year ARM in Indiana is extremely low versus its 30-year fixed-rate cousin.
Consider this comparison:
- In April 2009, the two products ran neck-and-neck with respect to rates
- In April 2010, the two products are split by 0.99 percent
On a $200,000 home loan, that’s a difference of $117 per month to a mortgage payment.
Adjustable-rate mortgages aren’t suitable for everyone, but they can be a terrific fit given your individual circumstance. For example, any one of the following scenarios could warrant a 5-year ARM:
- Buying a home with an intent to sell within 5 years
- Currently financed with a 30-year fixed mortgage with plans to sell within 5 years
- Interested in low payments and comfortable with longer-term interest rate and payment uncertainty
Additionally, homeowners with existing ARMs may want to refinance into a brand-new ARM, if only to extend the initial change date on the current note.
Before opting an ARM or a fixed, speak with your loan officer about how adjustable-rate mortgages work, and what longer-term risks may exist. The savings may be tempting, but there’s more to consider than just the payment.
Foreclosure filings rose close to 20 percent nationwide last month versus February, according to foreclosure-tracking firm RealtyTrac.com, and for the 13th straight month, total filings topped 300,000.
In addition, bank repossessions reached an all-time, quarterly record. Through the first three months of 2010, banks reclaimed more than 257,000 homes.
Nonetheless, 4 states dominated foreclosure activity nationwide.
California, Florida, Arizona and Georgia accounted for more than half of all bank repossessions. It’s a disproportionate distribution of foreclosures. Together, the 4 states represent just 23 percent of the overall U.S. population.
The RealtyTrac report revealed some other interesting statistics, too.
- Foreclosure activity was up in 40 out of 50 states last month
- Bank repossessions rose 9 percent versus the same quarter last year
- For the 13th straight quarter, Nevada topped the state foreclosure rate
Regardless of where you’re buying, foreclosures and REO are making a profound impact on pricing and product. Distressed homes are 35 percent of the overall resale market.
There’s excellent value in foreclosures out there if you know where to look, but keep these points in mind:
- Buying bank-owned homes can take 120 days to close or more. Be flexible.
- Foreclosures aren’t always listed for sale publicly. Some inventory is privately-held.
- Bank-owned homes are often sold “as is”. There may be defects that render the homes mortgage-ineligible.
The REO market can be different from the traditional “existing home” market. Therefore, if you have an interest in buying REO, be sure to talk with an experienced real estate agent first.
Why You Shouldn’t Schedule Your Closing For May 28, 2010
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The federal home buyer tax credit expires April 30 and the deadline is sparking a home sale surge. It figures to burden real estate, mortgage and title offices nationwide over the next 60 days so plan your closing date accordingly.
Especially because the last Friday in May is the Friday before Memorial Day.
Now, if the connection between the tax credit and Memorial Day is not immediately clear, think of your own office on a 3-day weekend’s Friday. Some of your colleagues take a half-day at work, others take the entire day off.
Office-wide, productivity drops.
The same is true in the real estate space. Offices are short-handed ahead of a holiday so, if you’re under contract for a home and plan to close in May, consider a closing date other than Friday May 28, 2010.
And meanwhile, with 6 weeks until Memorial Day, here’s some steps you can take today prepare for other people’s time off later.
- Notify your lender of your planned vacation time between now and your scheduled closing
- Purchase a homeowners insurance policy and prepay the first year. Send proof of payment to your lender.
- Have Power of Attorney forms lender-approved and signed by all parties in advance, if applicable
- Deposit gift monies and/or retirement fund withdrawals into an acceptable bank account, if applicable
- Schedule your final walk-through as far in advance as is realistic so there’s time to make “fixes”, if needed
- Have your closing funds ready at least 1 day in advance
The tax credit’s expiration is around the corner and as it gets closer, real estate-related businesses are taking on more work. Basic title and mortgage tasks are taking longer to complete and that should persist for a while.
Get ahead of the curve and beat your contract dates handily. Use the checklist above and be responsive to your lender’s requests.
And, if at all possible, avoid closing on the Friday before Memorial Day and even the Tuesday after — it’s when office staffs are at their smallest.
Not all home improvements are created equal. Especially if you’re looking for “resale value” back from your work.
An article from the Wall Street Journal lays it out cleanly. Function beats flash these days so be wary of where you spend.
Environmental upgrades such as home insulation and energy-efficient steel entry doors are recovering a much greater percentage of their cost these days than major remodels including kitchens or bathrooms. This is especially true for homes that are already “over-improved” relative to the neighborhood.
Upgrading the biggest and best homes on the block can be a losing proposition.
The article’s findings include data from groups such as the National Association of Home Builders, Remodeling Magazine, and Consumer Reports. It lists the following home improvements among its top “paybacks”:
- Steel entry door replacement : 129% cost recovery
- Wood deck addition : 81% cost recovery
- Vinyl-replacement window : 77% cost recovery
Energy-efficiency projects also recoup costs monthly in the form of lower heating and cooling bills.
Remodeling Magazine says a larger number of homeowners will remodel their homes in 2010 with less emphasis on upgrading kitchens and bathrooms, and more emphasis on adding new rooms. From an appraisal perspective, this is a terrific way to increase your home’s value — especially if your home’s bed/bath count lags your neighbors.
Before starting a home improvement project, regardless of whether your goal is increase resale value, talk with a real estate agent about other homes in the area and how they’re built. At worst, you’ll gather some ideas you can work into your plan. At best, you’ll keep yourself from over-improving.
How To Keep Your Kitchen Knives Sharp
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If you own kitchen knives, you better keep them honed. That’s because a dull knife blade not only slows you down in the kitchen, but it can be more dangerous than its ready-to-cut counterpart, too.
In this brief, 2-minute video, you’ll learn how to use a knife steel to keep your kitchen cutlery in top form.
Among the tips:
- Hold your knife at a 20-degree angle to the steel for maximum effect
- 10 swipes per side is sufficient to keep the blade straight
- Mid-range knife steels are the best choice for most kitchens
Most knife steels don’t actually sharpen knives. Instead, they straighten the microscopic teeth that make the knives work. And that’s okay. Just remember use the steel every time you use your knife.
It’s Time To Re-Approve Your Pre-Approval
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As the federal home buyer tax credit nears its April 30 end-date, there’s a lot of would-be home buyers in Carmel still working to get under contract.
A piece of advice for all of them : If your pre-qualification and/or pre-approval letter is more than 8 weeks old, it would be prudent to have your lender “re-pre-approve” you. Mortgage guidelines have been in flux and your original lender letter may now be invalid.
For example, over the past half-dozen months, the majority of mortgage lenders have reduced their risk tolerance with respect to:
- Maximum debt-to-income ratios
- Minimum allowable credit scores
- Calculation of “assets in reserve”
For buyers of condominiums and co-ops, even the subject property itself is coming under tougher scrutiny.
Today’s mortgage applicants need to be a complete package. It takes more than just good income and credit to get approved anymore and today’s buyers should revisit their qualifications. What passed underwriting in January may not pass in May.
Being pro-active brings other advantages, too. If a mortgage re-pre-approval does unearth an issue, it’ll be easier for every party to the transaction to address and correct it up-front versus trying to clean up a mess once a home’s already under contract.
Talk to your agent and your loan officer about your pre-qualification/pre-approval letter before you bid on a home.
Taxes are due April 15 and if you’re among the millions of Americans who wait until the last week to file, here’s a video interview that could help you reduce your federal tax liability.
Originally broadcast by NBC’s The Today Show, the 4-minute piece reviews various tax credits and deductions, plus some recent tax law changes. A few of the topics covered include:
- Tax filers receiving larger “personal exemptions” in 2009 versus 2008
- Unemployment income recipients being required pay taxes beyond the first $2,400 received
- The “first time” home buyer credit being extended to non-first time home buyers for up to $6,500
The interview also talks about how taking a parent, child or other family member into your home may change your tax filing status and reduce your tax liability.
Even if you’ve filed your taxes already, watch the video above. You may find that you missed a potential deduction. If that’s the case, consider filing an amended return with the IRS to recapture the credits you left on the table. Most times, the benefits of re-filing will outweigh the costs of doing it.
Be sure to talk with your tax professional for personal tax advice.
