Eariler this week, the Federal Reserve released the minutes from its 2-day meeting which ended August 1, 2012. Since the release, mortgage rates have dropped.
The Fed Minutes are released on a schedule, three weeks after the FOMC adjourns from one of its 8 scheduled meetings of the year.
The Fed Minutes are meeting minutes; like you’d see after a corporation shareholder meeting, or after a condo board meeting. Specifically, the Fed Minutes details the conversations among Federal Reserve members which shape our nation’s economic policy.
The most recent Fed Minutes show a central bank closer to adding new market stimulus that previously believed.
At its last meeting, the Federal Reserve’s debate focused on the rate of economic growth and whether it was occurring too slowly to be long-lasting. The Fed appears to think so. Without a “substantial and sustainable strengthening” in the pace of economic expansion, it said, additional monetary stimulus would be “warranted fairly soon”.
Other notes from within the Fed Minutes included :
- On employment : Unemployment rates will “decline only slowly”
- On housing : The market appears “to have improved, somewhat”
- On inflation : Retail energy costs are keeping consumer prices low
However, the Fed expressed an “unusually high level of uncertainty” about its assessments owing to the ongoing European sovereign debt problems. “Spillovers” remain possible and default threats continue to weigh on markets.
The Federal Reserve’s next scheduled meeting is September 12-13, 2012.
Since the minutes were released — and for the first time this month — mortgage rates made a big move lower. This is in contrast to the rest of August through which mortgage rates have climbed steadily.
According to Freddie Mac, on August 1, the average 30-year fixed rate mortgage rate was 3.49% nationwide. Today, the rate is 3.66%. Between now and the Fed’s next policy-making meeting September 13, though, mortgage rates are subject to change. If today’s mortgage rates fit your budget, consider locking in.
Home resales climbed 2% last month as the housing market continues its measured, steady recovery.
According to the National Association of REALTORS®, Existing Home Sales rose to 4.47 million units in July on a seasonally-adjusted, annualized basis.
An “existing home” is a home that cannot be classified as new construction and, despite a reduction in the national homes inventory, the number of previously-occupied homes sold in July was higher by 10% as compared to one year ago.
The Existing Home Sales also reported the folliowing :
- First-time buyers accounted for 34% of all purchasers, down from 34% in June
- Real estate investors accounted for 16% of all purchasers, down from 19% in June
- Cash buyers accounted for 27% of all purchasers, down from 29% in June
In addition, the real estate trafde group reports that distressed sales accounted for a smaller percentage of the overall home resale market in July. Just 24% of home resales were for homes in various forms of foreclosure or short sale.
This is down one percent from June, and five percent from July 2011.
It also marks the smallest percentage of homes sold in “distressed” status since the trade group began to track such data 4 years ago.
Lastly, nationwide, the supply of homes for sale dropped to 6.5 months. At the current pace of sales, therefore, the complete U.S. home resale inventory would be sold by the end of Q1 2013.
There are now 2.40 million homes for sale — a 24% reduction from July 2011.
For today’s home buyers, the July Existing Home Sales report reinforces the notion that housing is in recovery and what the nation’s home builders have been saying since late-2011 — the next six months for housing will likely be strong. Growth may not be linear, but it figures to be consistent.
With home inventory low and mortgage rates the same, the home resale market looks ripe for good deals.
Mortgage rates have been on steady decline since the start of 2012 as uncertainty for the future of the Eurozone and questions about the soundness of the U.S. economy have led investors into mortgage bonds in droves, lowering the 30-year fixed rate mortgage to its lowest point in history.
But it’s not just mortgage rates that are down. Closing costs are, too.
According to Bankrate.com’s annual Mortgage Closing Cost Survey, the average mortgage applicant paid seven percent fewer closing costs in 2012 as compared to 2011, on average. The year prior, costs had increased thirty-seven percent, on average.
A “closing cost” is any fee paid in conjunction with a mortgage settlement that would not be payable if the home was financed with cash. Closing costs for purposes of the Bankrate.com survey include such items as underwriting fees and appraisal costs. County transfer stamps, where required, however, were not included.
Like everything in real estate, closing costs vary by locale. There are some states in which closing costs tend to be high, and other states in which closing costs tend to be low.
The five states with the lowest closing costs for 2012, on average, are :
- Missouri : $3,006
- Kansas : $3,193
- Colorado : $3,199
- Iowa : $3,257
- Arkansas : $3,325
By contrast, the two most expensive states in which to close a mortgage this year are New York ($5,435) and Texas ($4,619). All figures assume a $200,000 loan size with 20 percent equity and excellent credit.
The good news is that, as a home buyer or refinancing household, you’re often not required to pay the closing costs which are itemized by your bank. When asked, many lenders will offer a low-closing cost or zero-closing cost option.
With low- and zero-closing cost programs, qualifying mortgage rates are raised by a small amount, which increases your monthly mortgage payment. Up-front settlement costs, however, are reduced or eliminated.
Opting for a low- or zero-closing cost mortgage is a trade-off between upfront costs and ongoing costs. Talk to your loan officer about your options to see which path is best for you.
View average closing costs for all 50 states at Bankrate.com.
The market for newly-built homes remains strong.
As reported by the U.S. Census Bureau, July featured 502,000 single-family housing starts nationwide on a seasonally-adjusted, annualized basis, marking the fourth straight month during which single-family starts posted north of one-half million.
The last time this milestone occurred was in the four months ending April 2010 — the last month of that year’s federal home buyer tax credit.
A “housing start” is a home on which construction has started and the rise in single-family housing starts is yet one more signal to buyers nationwide that the housing market has likely put its worst days behind it.
Home builders, it appears, agree with that sentiment.
Last week, the National Association of Homebuilders reported builder confidence to be at a 5-year high. Sales levels have been growing since January and builders expect the next six months to be blowout.
One of the main drivers of today’s new construction market is rising rental costs throughout many U.S. markets. It has helped to create an influx of new home buyers at a time when low mortgage rates have helped to keep new homes affordable.
As compared to one year ago, today’s home affordability is high.
- July 2011 : A $1,000 mortgage payment afforded a loan size of $196,200
- July 2012 : A $1,000 mortgage payment afforded a loan size of $223,000
That’s a 13.7% purchasing power increase in just twelve months — one reason why builders report buyer foot traffic through new construction at pre-recession levels.
The ability for buyers to access low downpayment mortgage programs is helping home sales, too.
The FHA offers a 3.5% down payment program and today’s home buyers are taking advantage. FHA mortgages now account for an estimated one-third of purchase money mortgages, and the VA and USDA are gaining market share, too, with their respective 100% financing program for certain qualified buyers.
With low rates, low downpayments and soon-to-rise home prices, it’s a good time to be a home buyer. If you’ve been shopping new construction, consider going under contract soon. As mortgage rates and prices rise, your personal home affordability falls.
For homeowners with hardwood flooring, a little bit of in-home water can do a whole lot of damage. Over prolonged periods of time, water can warp, buckle, and/or cup hardwood flooring, leading to an expensive and time-consuming repair process.
Not all warped woodwork requires replacement, though. Some warped floors can be fixed as a DIY project using nothing but a dehumidifier and time. The key is to identify — and rectify — the water damage issue quickly.
Your first step is to dry all water-damaged areas thoroughly.
Using absorbent towels, remove traces of moisture from the damaged floor’s surface. For standing water problems, use a water vacuum. If water entered the affected room by seeping through a wall, or falling through a ceiling, for example, make sure the water’s source has been identified and “plugged”.
Next, rent or buy a dehumidifier.
A dehumidifier is a small, household appliance meant to reduce humidity in the air. Dehumidifiers are often used for health reasons but, in the case of water-damaged flooring, a dehumidifier can help to extract water from wood planks, returning the wood to its original, non-warped form more quickly.
With the above steps completed, if the warping persists, plan to wait. It may take a week, a month, or longer, but — eventually — for all but the most damaged flooring, your hardwood will return to shape. Expect the process to happen more quickly during winter as the wood contracts in colder, drier air.
Lastly, if your floors have been damaged as a result of heavy rains or water entering your home from the outside, consider a professional inspection to identify how and why the damage occurred. Your gutter may be clogged, for example, which can result in overflows which can damage your home’s foundation.
It can be labor-intensive to dry your wood floors. Compared to the cost of replacement, however, calling this a DIY can be sensible.
Mortgage rates keep on rising.
According to Freddie Mac’s weekly Primary Mortgage Market Survey, for the third straight week, the 30-year fixed rate mortgage rate rose, this time tacking on 3 basis points on a week-over-week basis to 3.62%, on average, nationwide. The 3.62% mortgage rate is available to mortgage applicants willing to pay 0.6 discount points plus a full set of closing costs.
Freddie Mac’s published mortgage rates are compiled from a 125-bank survey.
Looking back, it appears that national 30-year fixed rate mortgage rates bottomed at 3.49% in late-July. In the weeks leading up to that bottom, mortgage rates had dropped in 11 of 12 weeks. Since then, however, mortgage rate have increased steadily, climbing to a 7-week high, depending on where you live.
Mortgage rates vary by region. As reported by Freddie Mac, mortgage applicants in the South Region are currently paying the highest rates. Applicants in the North Central are paying the lowest.
- Northeast Region : 3.62% with 0.6 discount points
- West Region : 3.59% with 0.6 discount points
- Southeast Region : 3.68% with 0.6 discount points
- North Central Region : 3.58% with 0.6 discount points
- Southwest Region : 3.66% with 0.6 discount points
Mortgage rates don’t figure to drop in the coming weeks, either. The same forces that drove mortgage rates down between January-July of this year are the same ones that are driving rates up today — expectations for new Federal Reserve-led stimulus.
Earlier this year, the economy was stalling; growing slowly, but not convincingly. This led to Wall Street speculation for the Federal Reserve to implement a bond-buying program that would lead mortgage rates down, among other outcomes. The Fed repeated comments that it would do what is necessary to keep the economy on track only served to fuel such speculation.
Last month, however, at the Federal Open Market Committee, Ben Bernanke & Co. did not add new stimulus, and seemed content to take a “wait-and-see” approach with the economy. Since then, Europe appears to have put itself on-track and the U.S. economy has shown signs of expansion.
The August rise in rates is Wall Street reversing its bets; planning for no new stimulus at all.
Mortgage rates remain low, though. If you’ve yet to join this year’s refinance boom, or if you’re hunting for a home, consider locking something in. In a few weeks, mortgage rates may be higher still.
Home builder confidence rises again.
For August 2012, the National Association of Homebuilders reports the monthly Housing Market Index at 37 — an increase of more than 100% from one year ago and the highest HMI value since February 2007.
The Housing Market Index is an indicator of homebuilder confidence and when it reads 50 or better, the HMI suggests favorable conditions for home builders. Readings below 50 suggest unfavorable conditions for builders.
Despite the recent rise in home builder attitudes, however, the Housing Market Index remains mired below 50 where it’s been since April 2006.
For new construction home buyers , the HMI may offer insight into the market for new homes through the end of this year. This is because the NAHB Housing Market Index is a composite survey, meant to gauge builder sentiment in three specific areas — current business, future business, and buyer activity.
When all three fronts are rising, it points to an improving market for sellers (i.e. home builders). Unfortunately, though, what’s good for sellers can be damaging to buyers. Builders are less willing to make concessions on price or product when markets are getting stronger.
In August, home builders saw strength across all three categories :
- Current Single-Family Sales : 39 (+3 from July)
- Projected Single-Family Sales : 44 (+1 from July)
- Buyer Foot Traffic : 31 (+3 from July)
Especially noteworthy in the August HMI is that builders project more sales for the next six calendar months than they have projected at any time in the last 5 years. With mortgage rates at all-time lows and buyer foot traffic growing, it’s no wonder confidence is high.
When demand for homes is strong amid stagnant or falling supplies, home prices rise and that’s exactly what we’re seeing in many U.S. markets. It’s a good time to be a home buyer today, but market momentum appears to be shifting.
If you’re in the market for a newly-built home, therefore, the best “deal” may be the one you get today. Next year, your costs may be higher.