Market Commentary and Rates ending June 27, 2014

Mortgage bond prices finished the week positive putting downward pressure on mortgage rates.  Housing data released early in the week was positive.  Both new and existing home sales were better than expected.  Gross Domestic Product (GDP), a summation of economic output, showed the US economy contracted 2.9% in Q1, 2014.  That was the worst contraction since 2009 and was blamed on the hard winter.  The Treasury auctions of 2,5 and 7-year notes showed tepid demand from investors, a worrisome trend if it were to continue.  The US counts on investors to fund the government’s deficit spending.  Lastly, the two reports on the consumer, confidence and the University of Michigan sentiment report, were better than expected.  Geopolitical issues had little effect on trade last week.  For the week, mortgage interest rates fell by about .125%.

Rate Improvements

While the future of the U.S. economy remains in question, there is no doubt that mortgage interest rates are historically very low. As the economy improves rates will rise.  Housing and consumer confidence data released last week were better than expected; however, GDP and income data was weak.  Weekly jobless claims are persistently above 300K, a sign the labor market is still under pressure. Remember, the Federal Reserve has been one of the largest purchasers of mortgage-backed securities in an effort to keep rates low and stabilize the housing market.  The Fed announced asset purchase reductions at the last several meetings.  Markets do not question if the Fed will continue this reduction.  However, there is great uncertainty as to the future of the U.S. economy.  Now is a great time to take advantage of mortgage interest rates at these exceptionally favorable levels to avoid future market volatility.

The bottom line is that now remains a great time to consider a home purchase or refinance, as home loan rates remain attractive compared to historical levels.

Let me know if you need a second opinion on a loan scenario or for immediate pre-qualifications. We look forward to working with you and your clients in any way necessary.

PROGRAM	(30 Day Lock)		Rate		APR		TREND
30 Year Fixed Conventional		4.000%		4.144%		ä
20 Year Fixed Conventional		3.875%		4.072%		ä
15 Year Fixed Conventional		3.125%		3.626%		ä
10 Year Fixed Conventional		2.875%		3.237%		ä
7/1 LIBOR ARM Conventional		3.125%		3.293%		ä
5/1 LIBOR ARM Conventional		2.750%		3.115%		ä
30 Year FHA/VA		3.750%		5.441%		´³
15 Year FHA/VA		2.875%		4.152%		ä
5/1 ARM FHA/VA		3.000%		4.364%		ä
30 Year USDA		3.750%		4.234%		ä
JUMBO $417,001+ (30 Day Lock)		Rate		APR		TREND
30 Year Fixed (up to $1 Million)		4.000%		4.126%		ä
15 Year Fixed (up to $1 Million)		3.375%		3.606%		ä
5/1 LIBOR ARM		2.750%		2.976%		´³
5/1 LIBOR ARM (Int Only)		2.875%		3.242%		´³
7/1 LIBOR ARM		3.125%		3.377%		´³

West Valley Cities - Growing in not out

Economic downturn caused the expansive growth of the West Valley to slow down. But as the economy recovers, the cities across this region is growing in not out.

A home furnishing company recently renovated and moved in to a large space near downtown Peoria that used to be occupied by Kmart. Tanger Outlets in Glendale will be adding 60,000 sq. ft. to its shopping center in Glendale.

This is what the city called infill where businesses renovates and reuse existing spaces and construct new buildings on a vacant land of existing developed land.

Commercial infill allows cities to optimize the use of their existing infrastructure, such as streets, schools and parks, and is a better use of resources for businesses and developers, said Mark Stapp, the executive director of the Master of Real Estate Development program at Arizona State University's W.P. Carey School of Business.

Tips for selling a home - Tips for sellers

The first thing that I think should be done when you decide to sell your home is to de-clutter your home. We accumulate a lot of junk in our home because we do not want to let go of our memories. The rule of thumb is when you have not used it for over a year, you probably don’t need it. Minimize the number of books in you bookcases. Pack up your knick knacks. A clean house makes it more appealing to the buyer. It will also make the house smell good.

Also buyers wants to look at cabinets and closets. Rearrange and organize your closets and cabinets. If your closet is overflowing, pack up some of your clothes and put it in storage. Same with your cabinets. Rearrange spice jars and grocery items in your pantry.

One of the tips that I have read and also taught in real estate school is to remove most of your personal items including toiletries. The purpose is so that the buyer can visualize themselves living in that house also lessens the buyer's distractions in looking at the features of the home. Someone also said not to do that because it losses the house personality. I think it is better to remove the personal items because the house should no longer have the owner's personality when the house is put in the market.

One thing too that I found helps in selling a home is staging. When you have an identical house and one has been staged and the other one is, which one will you choose to buy? Of course almost everyone will say the one House that is staged will sell first. You do not have to use expensive furnitures. You can even use the furnitures that you already have. Cost of staging can cost from $250.00 - $15,000. With regards to furniture it is best to minimize the number of furniture in the house to make the room more spacious. Re-painting the entire house with neutral color, also makes the house sell faster. Shampoing the carpet and making sure that the tiles are clean makes the house looks clean. The last thing that must be done when you are selling your house is to make sure that the kitchen sink is clean when you leave in the morning. Any plates or cups used in the morning for breakfast must be washed and put away. Bathrooms and bedrooms should be free of clutter.

It is harder to keep the house clean when you have kids. To minimize the rooms you have to clean everyday is to lessen the amount of room used especially bathrooms. Toys of kids should be put in a box so you can easily put them away. If the kids are older, train them on what they have to do every morning to keep the house clean. Also do not cook anything that will make the house smell. Odor is one of the worst thing that can make a buyer not buy a house.

Tips For Improving Your Credit

Getting the loan that suits your situation at the best possible price and terms makes homebuying easier and more affordable. Here are seven ways to boost your credit score so you can do just that.

1. Know your credit score

Credit scores range from 300 to 850, and the higher, the better. They’re based on whether you’ve paid personal loans, car loans, credit cards, and other debt in full and on time in the past. You’ll need a score of at least 620 to qualify for a home loan and 740 to get the best interest rates and terms. 

You’re entitled to a free copy of your credit report annually from each of the major credit-reporting bureaus, Equifax, Experian, and TransUnion. Access all three versions of your credit report at www.annualcreditreport.com. Review them to ensure the information is accurate.

2. Correct errors on your credit report

If you find mistakes on your credit report, write a letter to the credit-reporting agency explaining why you believe there’s an error. Send documents that support your case, and ask that the error be corrected or removed. Also write to the company, or debt collector, that reported the incorrect information to dispute the information, and ask to be copied on any materials sent to credit-reporting agencies.

3. Pay every bill on time

You may be surprised at the damage even a few late payments will have on your credit score. The easiest way to make a big difference in your credit score without altering your spending habits is to diligently pay all your bills on time. You’ll also save money because you’ll keep the money you’ve been spending on late fees. Credit card or mortgage companies probably won’t report minor late payments, those less than 30 days overdue, but you’ll still have to pay late fees.

4. Use credit carefully

Another good way to boost your credit score is to pay your credit card bills in full every month. If you can’t do that, pay as much over your required minimum payment as possible to begin whittling away the debt. Stop using your credit cards to keep your balances from increasing, and transfer balances from high-interest credit cards to lower-interest cards.

5. Take care with the length of your credit

Credit rating agencies also consider the length of your credit history. If you’ve had a credit card for a long time and managed it responsibly, that works in your favor. However, opening several new credit cards at once can lower the average age of your accounts, which pushes down your score. Likewise, closing credit card accounts lowers your available credit, so keep credit cards open even if you’re not using them.

6. Don’t use all the credit you’re offered

Credit scores are also based on how much credit you use compared with how much you’re offered. Using $1,000 of available credit will give you a lower score than having $1,000 of available credit and using $100 of it. Occasionally opening new lines of credit can boost your available credit, which also affects your score positively.

7. Be patient

It can take time for your credit score to climb once you’ve begun working to improve it. Keep at it because the more distance you put between your spotty payment history and your current good payment record, the less damage you’ll do to your credit score.

Consumer Confidence to New Homes Sales Return to 2008 Levels

Kent Hoover, Chief of Washington Bureau stated that we are back to where we were in 2008 as far as confidence level of consumer to new home sales.  This news is good for the economy.  The Conference Board Consumer Confidence index is 85.2 in June which is the highest level since January 2008.

Lynn Franco, director of economic indicators for the conference board stated that June's increase was due to improving current conditions, particularly consumer's assessment of business conditions.

May's sales rate was the highest in six years which is another sign of the improvement of the housing market condition. Inventory and average sales price also increased in May.

Sales of Existing Homes Jump in May

Kent Hoover of Washington Bureau Chief stated that sales of existing homes jumped nearly five percent in May which is the biggest monthly increase in nearly three years. Even though the May sales volume was lower by about five percent last year according to the National Association of Realtors, this report was still great news for the housing industry.

Home buyers are still benefiting from the slower price growth due to the increasing number of inventories since the beginning of this year. Sales are also helped by the improving job market and slight decline in mortgage rates. 

Another issue facing the housing market is that 27% of buyers in May were first time home buyers.  Steve Brown, NAR President, mentioned that this percentage will improve if mortgage rates stay stable and number of inventories improves.

Many potential homebuyers don't realize they don't need a big down payment

Many potential first time home buyers overestimate the size of the down payment required to finance a purchase of a home, according to Christina Boyle, Executive of Fannie Mae. On average, consumers believe they need 11 to 15 percent in equity to buy a home, Boyle said, citing figures from a Zelman & Associates survey of renters and people who live in the homes of others. There are several programs out there that will help first time home buyers with downpayment assistance.

1. NSP Stabilization Program - This federally funded Neighborhood Stabilization Program (NSP) enables eligible applicants to realize homeownership by offering newly built or remodeled homes for purchase in established Phoenix neighborhoods, while providing monetary incentives to assist with down payment and closing costs.

2. Matthew Hensen Homeownership Program - Designed to assist eligible first time home buyers wth the purchase of an affordable home in Phoenix. This program provides a deferred payment loan of $8,500.00 to assist with down payment and buyer's closing cost. This program is administered by Community Housing Resources of Arizona.

3. Home in 5 Program - The Home in 5 Program offers 5% of the loan amount towards your down payment in Maricopa County only. Income limitations and debt ratio limitations apply. You do not need to be a First-Time Homebuyer but must meet minimum FICO score requirements and FHA guidelines. Maximum purchase price shall not to exceed $300,000.

4. Maricopa County Home Assistance Program - This program is designed to provide home loan assistance for home purchases in Maricopa County. It is administered by Maricopa County Human Services Department (MCHSD) and provides up to $14,999 in assistance to qualified homebuyers paying for down payment and reasonable closing costs. The Home buyer assistance loans are zero-percent interest, deferred-payment, forgivable after a 5-year term, and are secured with a second lien. The homebuyer must bring 1% of $1,000 minimum of borrower’s own funds.

5. 0.5% Down Payment FHA Loan Program - First time home buyers in Arizona can buy a home with 0.5% down payment. 96.5% max LTV and 99.5% max CLTV. 

There are many program out there that will help first time home buyers. Consult with your lenders for the availability of the above mentioned programs..

How Much Home Can You Afford

The first thing you need to do is to figure out how much you can afford to spend each month.  The first step is to break down the cost of purchasing a home and home ownership that you need to budget for.

Cost for purchasing a home will be the earnest money, down payment, appraisal fee, inspection fee, and closing costs.  Earnest money is the money deposited to an escrow account when an offer is accepted by the seller.  Down payment is what is required by the lender for the type of loan you applied for.  Closing costs include loan origination fees, discount points, title searches, title insurance, taxes, HOA transfer fees, credit report charges and different inspections and more.  Typical closing costs are 2 - 5% of the purchase price of a home

Home ownership costs includes mortgage insurance, monthly HOA fees, taxes, homeowners insurance, and maintenance, repairs and general upkeep. Some loans require mortgage insurance such as FHA loan and conventional loans with a down payment of less than 20%.  The FHA will have an MMI (monthly mortgage insurance) for the life of the loan unless you refinance.  General upkeep includes the utilities such as gas, water, electric, telephone, internet and cable TV.  

City's Walkability Drives Real Estate Values

City's walkability drives real estate values as reported by Diana Olick of NBC News.  The new generation who are environmentally conscious are the ones that likes car sharing, bike riding, improved rapid transit and teleworking.  These new generation are called the millenials, which are also know as millenial generation or generation Y.  Researches and commentators use birth years ranging from the early 1980s to the early 2000s.

This generation likes the grocery, shops, restaurants, offices and other amenities to be walking distance to where they live. Walkability also drives real estate recovery. Values of homes have also increased much higher and faster in these neighborhoods.

Phoenix Area Home Prices to Remain Steady

As reported by Fox-Phoenix, the researchers from Arizona State University say that the Arizona market has rebounded but the prices will not shift higher or lower which will be good for the homebuyers.

The researchers also stated that median price is just below $205,000.00 and that is 13% higher for the same period last year.

Renting also continues to be the alternative to purchasing homes since so many residents still are ineligible for home loans or are not interested in purchasing homes.

Mortgage Rates Increases for 2nd Straight Week

The mortgage rates have increased over the past week according to Freddie Mac.  The increase is due to the rise in Treasury yields which represents investors’ optimism.  The average rate for a 30 yr mortgage is 4.20 which ended June 12, 2014 and 4.14 from previous week. 

Even though mortgage rate has increased, rates are still low and the application for mortgages increased during May. Refinancing has also increased.  This is a good sign since the confidence of people is still good for the real estate market.