MARKET UPDATE - OCTOBER 2010

STILL UPSIDE DOWN – REFINANCE OPTIONS MAY NOW BE AVAILABLE


There are still no miracle government programs to solve most homeowner’s woes if you owe more than your home is worth; but you still may have some options.

Conventional Refinance: If you have a conventional mortgage (must be owned or guaranteed by Fannie Mae or Freddie Mac) without mortgage insurance, you may be able to refinance up to 125% of the home’s value. Owe more than 125%? With enough compensating factors (i.e. credit, assets, etc.), you may be able to get an appraisal waiver and slip into the 125% range you need to be in. Rates are slightly higher than a standard conventional loan, but with good credit, they are still quite low.

FHA Streamline Refinance: FHA streamlines do not require an appraisal. It does not matter how much you owe verses the value of the home. Anyone with a 5% interest rate or more should look into a streamline refinance. A streamline refinance allows the homeowner to lower their rate with little or no closing costs, and no appraisal. It will not solve your value issues, but it will lower your payment.

“Short’ Refinance: Starting September 7th, FHA will allow “short” refinances. The current first and second mortgage (if applicable) must agree to lower the amount owned to 115% of the property’s current value. The current mortgage(s) must be conventional, and can not be owned or guaranteed by Fannie Mae or Freddie Mac. The mortgage(s) can be negotiated down allowing the homeowner to lower the interest rate and/or improve the terms of the mortgage.

THE LONGEST RECESSION SINCE WORLD WAR II IS OVER – REALLY?

The National Bureau of Economic Research stated that the recession lasted 18 months and was officially over in June of 2009.

Things have been getting better, and for over a year? Did I miss the invite? Less than 10% of the jobs lost during the recession have returned (cnnfn.com). 27 states reported higher unemployment in August. Housing is still in crisis mode. Millions of people are out of work and can not provide for themselves. The economy is not retracting, but who is it expanding for? Statistically the recession may be over, but mainstream America sure doesn’t know it.

NEW HOMES SALES NEAR RECORD LOWS

“New home sales in August came in at an annual rate of 288,000, near record lows, the government says.” – cnnfn.com

AUGUST STATISTICS FOR ARIZONA HOME SALES

Short sales: 29% of all sales.
Median Home Price: $119,000
Closings in August: 7,358 (43% Cash / 28% Conventional / 25% FHA / 4% VA)
Historical:
Most homes sold: 06/2006
In June of 2006, 10,252 homes were sold with a median sales price of $250,000.
Least homes sold: 01/2008
In January of 2008, 2,912 homes were sold with a median sales price of $220,000.
As of 08/2010
In August of 2010, 7,358 homes were sold with a median sales price of $119,000.

Arizona home sales are only 30% off all time highs. Yes, only 30%. If you consider how out of control things were a few years ago; down only 30% is quite remarkable. First time homebuyers and investors are flooding the market. With the median home price now at $119,000, down from $220,000 just a few years ago, there are plenty of opportunities in the Arizona market.
- Statics from Fletcher Wilcox, Grand Canyon Title Agency

HOUSING IN RECOVERY – SLOWLY BUT SURELY

“Housing starts in August unexpectedly rose to their highest level in four months, the U.S. Commerce Department announced today. The 10.5% increase, reflecting a seasonally adjusted annual rate of 598,000 units, is the biggest rise in housing starts since last November.” – fortune.com

PROBLEMS WITH HOMWBUYER TAX CREDIT

“Nearly half of all Americans who claimed the first-time homebuyer tax credit on their 2009 tax returns will have to repay the government. According to a report from the Inspector General for Tax Administration, released to the public Thursday, about 950,000 of the nearly 1.8 million Americans who claimed the tax credit on their 2009 tax returns will have to return the money.”

“The confusion comes because homebuyers were eligible for two different credits, depending on when their homes were purchased. Those who bought properties during 2008 were to deduct, dollar for dollar, up to 10% of the home's purchase price or $7,500, whichever was less. The catch: The money was a no-interest loan that had to be repaid within 15 years.”

“It is also taking a look at all those deceased taxpayers who received credits. The inspector general reported that 1,326 single people listed as dead by the Social Security Administration claimed more than $10 million in credits. The IRS threw out 528 of those 1,326 claims, saving $4 million.” – cnnfn.com

CALIFONIA STABALIZES

California home prices have increased month after month for the past nine months. California home prices are up nearly 10.5% in the last year, landing the median home price at twice the national average. The median home price for California homes is now at $315,000.

CHINA AND JAPAN CONTINUE TO HAVE AN APPITIETE FOR U.S. DEBT

“China resumed buying U.S. government bonds in July, but Japan bought more. Treasury said Thursday in its monthly international capital report that China, the biggest U.S. creditor, bought $3 billion worth of Treasury debt in July, bringing its total to $847 billion. The second-biggest lender to the United States, Japan, continues to close the gap with China. Japan expanded its purchases of U.S. bonds for the third straight month, adding $17 billion worth of Treasurys to its stash, now worth $821 billion.” – cnnfn.com

RATE WATCH

Mortgage Type     Interest Rate     APR

30 Year Fixed      3.875%            4.005%
15 Year Fixed      3.500%            3.729%
5/1 ARM             3.000%            3.018%

Interest rates as of 09/24/10. Conforming interest rates. Interest rates and APR based on loan amounts not to exceed $417,000. Loan to values not to exceed 80%. 720+ credit score. Owner occupied only. Purchase and rate in term refinances. Not all applicants will qualify. Call today for your individual scenario rate quote.

MARKET UPDATE - SEPTEMBER 2010

HOW LOW CAN THEY GO

Mortgage Type      Interest Rate      APR

30 Year Fixed       3.875%             4.005%
15 Year Fixed       3.500%             3.729%
5/1 ARM               3.000%              3.018%

Interest rates as of 09/01/10. Conforming interest rates. Interest rates and APR based on loan amounts not to exceed $417,000. Loan to values not to exceed 80%. 720+ credit score. Owner occupied only. Purchase and rate in term refinances. Not all applicants will qualify. Call today for your individual scenario rate quote.

FHA STREAMLINES CONTINUE TO SURGE

If you currently have an FHA mortgage with a rate of 5.000% or higher, you may be able to refinance with no appraisal, and little or no closing costs. The recent drop in interest rates have caused an influx of borrowers refinancing to take advantage of the FHA Streamline refinance option. Call today if you have an FHA mortgage at 5.000% or higher. 480-368-2000.

FHA NEEDS CASH

In an effort to increase cash reserves, FHA is modifying the upfront mortgage insurance premium and monthly mortgage insurance charge. Currently the upfront mortgage insurance premium is 2.25% of the loan amount, which is rolled into the base loan amount. The current monthly mortgage insurance fee is .55%, which is part of the monthly mortgage payment.

Effective October 4th, 2010, the upfront mortgage insurance premium will be reduced from 2.25% to 1.0%. The monthly mortgage insurance fee will be raised from .55% to .85% - .95%; which will vary based on certain risk factors of the file.

Below is an average effect the changes will have on borrowers payments after October 4th.

Loan Amount      Current Payment      New Payment      Annual Increase

$100,000             $563.92                      $582.58                $223.92
$200,000             $1,127.84                   $1,165.17             $447.96
$300,000             $1,691.76                   $1,747.76             $672.00
$400,000             $2,255.67                   $2,330.34             $896.04

*Numbers based on a 4.5% interest rate.

The changes to mortgage insurance is equal to an approximate 0.375% increase in interest rate.

This will impact some borrowers’ ability to purchase a property after October 4th, or help drive down home values further.

NATIONAL HOME PRICES UP FOR THE YEAR

“National home prices jumped a substantial 3.6% in the past year, according to the S&P/Case-Shiller Home Price Index released on Tuesday. Prices also climbed 4.4% in the second quarter compared with a 2.8% plunge in the first quarter.” – cnnfn.com

The tax credit is the largest contributing factor for the increase in home prices. Industry insiders predict that home prices will level off, and potentially see a decline in the coming months, now that the tax credit has expired, and employment is not dramatically improving. Without another stimulus from the Federal Government, the housing market will remain shaky for the foreseeable future.

HOME SALES TAKE A BEATING

Home sales hit a 15 year low.

“Existing home sales sank 27.2% in July, twice as much as analysts expected, to a seasonally adjusted annual rate of 3.83 million units. Much of that drop is attributed to the end of the $8,000 homebuyer tax credit.” – cnnfn.com

TAX CREDIT 2010 & DOWNPAYMENT ASSISTANCE

The housing market is on the slide, and there is no hope in the foreseeable future; but there are rumors of help on the way.

A new buzz is stirring about the possibility of a new Government tax credit for home buyers to once again kick start the housing market. Numbers are now surfacing, and it is apparent that the tax credit had a much bigger impact on housing than many critics of the tax credit claimed.

Did someone say “Downpayment Assistance?” H.R. 600 FHA Seller-Financed Downpayment Reform Act of 2009 is not dead; not yet. Downpayment assistance allowed the seller to contribute the buyer’s minimum downpayment on FHA mortgages and was eliminated a couple of years ago when there was a push for everyone to have “skin in the game.” Downpayment assistance allows borrowers to essentially purchase a home with no money down. With the current housing market sputtering to a standstill, downpayment assistance may be making a come back.

If either the tax credit or downpayment assistance resurfaces, the housing market will once again erupt with new buyers coming off the fence and out of the woodwork. Yes, it may just be a short term Band-Aid, but the Government will want to stop the bleeding before there is hemorrhaging.