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Lock An Instant 13% Savings On Your Monthly Mortgage Payment

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Mortgage payments down 13%

Falling mortgage rates make owning a home more affordable. Mortgage rates are directly tied to monthly mortgage payment so as mortgage rates drop, so does the cost of home-ownership.  

It’s a money-saving time to buy a home in Collegeville — or to refinance one. Mortgage rates have never been this low in history.

According to Freddie Mac, last week, the average 30-year fixed rate mortgage fell to 3.87% nationwide for borrowers willing to pay an accompanying 0.8 discount points plus closing costs. 0.8 discount points is a one-time closing cost equal to 0.8 percent of your loan size, or $800 per $100,000 borrowed.

This represents an incredible value as compared to February of last year. 

It was exactly one year ago that mortgage rates begin their long slide lower. On February 11, 2011, the 30-year fixed rate mortgage reached its peak for the year, reading 5.05% in Freddie Mac’s nationwide survey. If you are among the many U.S. households that bought or refinanced a home around that time, you could choose to replace your current home loan with a new one and save close to 13% on your monthly mortgage payment.

13 percent saved on your mortgage is a noteworthy statistic.

Look at this 30-year fixed rate mortgage payment comparison over the last 12 months :

  • February 2011 : $539.88 principal + interest per $100,000 borrowed
  • February 2012 : $469.95 principal + interest per $100,000 borrowed

Because of falling mortgage rates, a homeowner with a $250,000 30-year fixed rate mortgage would save at least $175 per month just by refinancing into a new loan at today’s mortgage rates. That’s $2,100 in savings per year. 

Even after accounting for discount points and closing costs, the “break-even point” on a mortgage like that can come relatively quickly.

We can’t predict mortgage rates so there’s no promise rates will stay like this forever. If you’re planning to buy a home or refinance one, the best way to keep your monthly payments down is to lock your rate while rates are still low.

The market looks ripe for that now. 

What’s Ahead For Mortgage Rates This Week : February 6, 2012

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Jobs growth pushes mortgage rates higherMortgage markets worsened last week as domestic job growth surprised Wall Street and the Eurozone moved yet one more step closer to reaching a lasting Greece sovereign debt solution.

Conforming mortgage rates in Pennsylvania rose on the news, although you wouldn’t know it from looking at Freddie Mac’s weekly mortgage rate survey.

According to Freddie Mac, the average 30-year fixed rate mortgage rate fell to 3.87% last week with 0.8 discount points due at closing, plus closing costs. 1 discount point is a fee equal to one percent of your loan size.

3.87% for a 30-year fixed rate mortgage is the official, all-time low for the weekly Freddie Mac survey, conducted since the 1970s. However, because Freddie Mac gathers its results on Monday and Tuesday only, by the time the survey results were released Thursday morning, mortgage rates were already rising off their lows.

Then, Friday morning, after January’s Non-Farm Payrolls data was released, mortgage rates surged.

The January jobs report exceeded expectations in nearly every fashion possible :

  • Economists expected to see 135,000 jobs created in January. The actual number was 243,000.
  • Economists expected to see the Unemployment Rate at 8.5% in January. The actual number was 8.3%.
  • Revisions added an additional 180,000 net new jobs to the original 2011 tally.

As compared to one year ago, there are 2.1 million more people employed in the U.S. workforce. Figures like this hint at a stronger national economy, and that tends to drive mortgage rates up.

This week, with little economic data due for release, mortgage rates are expected to move on momentum. Right now, that momentum is causing rates to rise.

If you’re shopping for a mortgage rate in King of Prussia and want to know if the time is right to lock, consider that it’s impossible to time a market bottom, but simple to spot a “good deal”.

Mortgage rates remain near historical lows — it’s a good time to lock one in. Call your lender today. 

Banks Start To Loosen Up In Underwriting

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FOMC senior loan officer survey 2011 Q4

After a half-decade of tightening mortgage guidelines, banks are starting to “loosen up”.

The Federal Reserve conducts a quarterly survey of its member banks and, last quarter, not a single responding bank reported having tightened its mortgage guidelines for prime borrowers.

A “prime borrower” is defined as one with a well-documented credit history, high credit scores, and a low debt-to-income ratio.

53 banks responded to the Fed’s survey and none said that mortgage guidelines “tightened considerably” or “tightened somewhat” between September and December 2011; 50 said that guidelines remained “basicaly unchanged”; 3 said that guidelines “eased somewhat”.

Mortgage applicants sometimes remark that the mortgage approval process can be challenging. Last quarter’s Fed survey hints that looser standards are coming. 

Not since before the recession have banks lowered mortgage approval standards like this and it bodes well for this year’s Phoenixville  housing market. Real estate agents report that 1 in 3 home sale contracts fail with “declined mortgage applications” as a leading cause.

Looser mortgage lending standards should mean more home loan approvals for buyers, and fewer contract cancellations. This can spur the housing market forward.

Make note, though. “Looser standards” should not be confused with “irresponsible standards”. It remains more difficult to meet bank standards as compared to 5 years. Today’s underwriters are more conservative with respect to household income, overall assets and credit scores. 

Even as compared to one year ago:

  • Minimum credit score requirements are higher
  • Downpayment/equity requirements are larger
  • Maximum allowable debt-to-income ratios are lower

For buyers and refinancing households gaining approval, though, the reward is the lowest mortgage rates in a lifetime. Mortgage rates in Pennsylvania continue to fall, helping home affordability reach new highs.

If you’re in the market to buy a new home or refinance one, your timing is excellent.

Home Affordability Threatened By Friday’s Jobs Report

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3-month rolling average NFP

This week, once more, we find mortgage rates are on a downward trajectory. Conforming mortgage rates have returned to near all-time lows. After Friday morning’s Non-Farm Payrolls report, however, those low rates may come to an end.

It’s a risky time for Pennsylvania home buyers and would-be refinancers to be without a locked rate.

Each month, on the first Friday, the Bureau of Labor Statistics releases its Non-Farm Payrolls report for the month prior. More commonly called the “jobs report”, Non-Farm Payrolls provides a sector-by-sector employment breakdown, and the nation’s Unemployment Rate.

In December 2011, the government reported 200,000 net new jobs created, and an Unemployment Rate of 8.5%.

For January 2012, economists project 135,000 net new jobs with no change in the Unemployment Rate and, depending on how accurate those predictions are proved, FHA and conforming mortgage rates are subject to change. The monthly jobs reports tends to have an out-sized influence on the direction of daily mortgage rates.

The connection between jobs and mortgage rates is fairly direct.

Job growth is a key cog in the economic growth engine and mortgage rates change daily based on short- and long-term economic expectation. As more people join the workforce, economic expectations change; the economy tends to expand, breeding optimism among investment. When this occurs, it often spurs investment in the stock market, which tends to leads mortgage rates up.

In short, in a recovering economy, when job growth is strong, all things equal, mortgage rates rise. Home affordability suffers.

So, for today’s rate shoppers, Friday’s job report represents a risk. The economy has added jobs over 15 straight months, a streak that’s added 2.1 million people to the workforce. Although the jobs market remains weak and well off its peaks from last decade, a 15-month streak is worth watching. More jobs means more more income earned nationwide, more money spent by households, and more taxes collected by governments.

This items build a foundation for economic growth and Wall Street is watching.

If tomorrow’s Non-Farm Payrolls shows more jobs created than the estimated 135,000, mortgage rates are expected to rise. If the jobs figures falls short, mortgage rates should fall.

The Non-Farm Payrolls report is released at 8:30 AM ET.

Case-Shiller Index Says Detroit And Washington DC Lead The Market

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Case-Shiller Annual Change November 2011

Standard & Poors released its November 2011 Case-Shiller Index this week. The index measures the change in home prices from month-to-month, and year-to-year, in select U.S. cities.

According to the data, for the second straight month, home values fell in 19 of the Case-Shiller Index’s 20 tracked markets. In addition, also for the second straight month, Phoenix, Arizona was the lone Case-Shiller-tracked city in which home values rose.

Overall, November’s Case-Shiller Index showed a 1 percent decrease in home values between October and November 2011, and a near-4 percent decrease between November 2010 and 2011, putting home values at roughly the same levels as 8 years ago. Don’t read too far into it, however.

The Case-Shiller Index, though widely-cited, remains widely-flawed.

As a buyer or seller , relying on the Case-Shiller Index for market research can lead you to improper conclusions. To understand the Case Shiller Index’s methodology is to understand why.

First, the Case-Shiller Index draws its data from a very limited geography.

There are more than 3,100 municipalities nationwide. The Case-Shiller Index tracks just 20 of them. And they’re not the 20 largest, either. Four of the Top 10 Most Populous U.S. Cities are excluded (Houston, Philadelphia, San Antonio, San Jose) whereas Minneapolis and Tampa are not.

Minneapolis is the 48th largest city in the United States. Tampa is #55.

Next, when Case-Shiller Index gathers its data from its 20 cities, it only includes the home sale data of single-family, detached homes. This means that sales of condominiums and multi-unit homes are specifically excluded from the index. There are some cities — Chicago and New York, for example — where condominium sales represent a large percentage of the overall market.

The Case-Shiller Index ignores that.

And, lastly, when the Case-Shiller Index is published, it’s published on a 60-day delay. Its data is not “current”, therefore, and does little to tell buyers and sellers of Collegeville and the country what’s happening in their home markets right this minute. Instead, the Case-Shiller Index tells us how the housing market looked two months ago.

If you’re active in the real estate market, either as a buyer or a seller, the Case-Shiller Index does you little good. For real-time data that actionable, speak to a real estate professional instead. It’s where you’ll find your best, most reliable and relevant information.

Supply Of New Homes At 6.1 Months Nationwide

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New Home Supply 2010-2011

New Home Sales slowed into the New Year but the market for newly-built homes remains strong. For home buyers in Pennsylvania and nationwide, December’s New Home Sales report is yet one more signal that the housing market recovery may be underway.

According to the Census Bureau, the number of new homes sold in December 2011 slipped 2 percent to 307,000 units on a seasonally-adjusted, annualized basis nationwide.

A “new home” is a home that is considered new construction; a home for which the buyer will be the first owner and tenant.

As compared to December 2010, last months’ sales volume fell seven percent. It’s a statistic that suggests housing market weakness. However, in looking at a different component of the New Home Sales report — the supply of homes for sale — we’re forced to reconsider.

At the current pace of sales, every new home for sale nationwide would be “sold” in a matter of 6.1 months. 

Economists believe that a 6.0-month supply defines a market in balance — anything quicker is termed a “seller’s market”. Statistics like that are enough to create urgency among today’s King of Prussia home buyers. 

Unfortunately, the Census Bureau’s data may be wrong.

Although December’s New Home Sales report shows sales down 2 percent, the government’s data was published with a ±13.2% margin of error. This means that the actual New Home Sales figure may have been as low as -15.2 percent, or as high as +11.2 percent. And, because the range of possible values includes both positive and negative numbers, the Census Bureau had no choice but to assign its December data “Zero Confidence”.

It will be a few months before final revisions are made to December New Home Sales data. Until then, therefore, buyers should take cues from the market-at-large and the market-at-large hints at recovery. One example of this is homebuilders showing more confidence in their product than at any time in the last 5 years.

If your plans for 2012 call for buying new construction, therefore, consider using this lull to “make a deal”. As the year progresses, the great values in housing may be gone.

What’s Ahead For Mortgage Rates This Week : January 30, 2012

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Net New Jobs, 2010-2011Mortgage markets improved last week as news from the Federal Reserve, the U.S. economy, and Europe combined to spur new demand for mortgage-backed bonds.

Conforming mortgage rates rallied from Wednesday through Friday’s close, ending the week near all-time lows set earlier this year.

Last week’s rally was sparked by the Federal Open Market Committee.

After its first meeting of the year, Chairman Ben Bernanke & Co. changed its projection for “exceptionally low rates” to at least late-2014. Previously, the Fed had said its benchmark Fed Funds Rate would remain low until 2013.

This, in conjunction with the Fed’s message that further economic stimulus may be coming, led Wall Street investors to increase their bets on mortgage bonds, pushing up prices and pushing down yields.

Lower yields means lower rates.

Mortgage rates were also helped lower by mixed data on the U.S. economy including weaker-than-expected housing reports, and another setback in the Greece sovereign debt negotiations.

Each time that Eurozone leaders have failed to reach an expected accord with Greece since 2010, mortgage rates have dropped. Last week was no different.

This week, with a large amount of U.S. economic data due for release and a high-profile summit among European Union leaders, mortgage rates are poised to move. Unfortunately, we can’t know in which direction.

Some of the news that will move markets include :

  • Monday : Personal Consumption Expenditures
  • Tuesday : Consumer Confidence; Case-Shiller Index
  • Wednesday : Construction Spending
  • Thursday : Weekly Jobless Claims
  • Friday : Non-Farm Payrolls;Factory Orders

Of all of the economic releases, Friday’s Non-Farm Payrolls has the most potential to move markets. More commonly called “the jobs report”, Non-Farm Payrolls details the monthly change in national employment and the national Unemployment Rate. 

Jobs are believed to be the key to U.S. economic recovery so strength in jobs should result in higher mortgage rates throughout Pennsylvania and the country.

Mortgage rates remain very low. If you’re nervous about mortgage rates rising this week or next, it’s as good of a time as any to lock your rate with a lender, and start moving toward closing.

Pending Home Sales Index Posts Second Best Month Since April 2010

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Pending Home Sales 2011

After 3 consecutive months of growth, the housing market appears to have eased a bit in December.

According to the National Association of REALTORS®, December’s Pending Home Sales Index slipped 4 percent from the month prior. The index measures the number of homes under contract to sell nationwide, but not yet sold.

Despite falling below its benchmark “100 value”, December’s Pending Home Sales Index is the reading’s second-highest value since April 2010 — the last month of last year’s home buyer tax credit program.

In other words, the housing market continues to show signs of improvement, propelled by low home prices and the cheapest mortgage rates of all-time.

Freddie Mac’s mortgage rate survey put the 30-year fixed rate mortgage at an average of 3.96% in December — a 75-basis point improvement from December 2010. This helps to make homes more affordable nationwide.

On a regional basis, December’s Pending Home Sales Index varied :

  • Northeast Region: -3.1 percent from November 2011
  • Midwest Region : +4.0 percent from November 2011 
  • South Region : -2.6 percent from November 2011
  • West Region : -11.0 percent from November 2011

But even regional data is only so helpful. Like everything in real estate, data must be local to be relevant.

Throughout the West Region, for example, the U.S. region in which pending home sales fell the most, several states must have performed better than the regional average. And, undoubtedly, there were cities, towns, and neighborhoods that experienced marked market growth.

Unfortunately, the Pending Home Sales Index can’t capture that data. Nor can it identify the markets in which home sales suffered.

For today’s Collegeville home buyers and sellers, therefore, it’s important to understand your local market and the drivers of local activity. Reports like the Pending Home Sales Index can paint a broad picture U.S. housing but for data that matters to you, you’ll want to look local.

For local real estate data, talk to an experienced real estate professional.

A Simple Explanation Of The Federal Reserve Statement (January 25, 2012)

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Putting the FOMC statement in plain EnglishWednesday, the Federal Reserve’s Federal Open Market Committee voted to leave the Fed Funds Rate unchanged within its current target range of 0.000-0.250 percent.

The Fed Funds Rate has been near zero percent since December 2008.

For the third consecutive month, the Fed Funds Rate vote was nearly unanimous. Just one FOMC member dissented in the 9-1 vote, objecting only to the language used in the Fed’s official statement.

In its press release, the Federal Reserve noted that the the U.S. economy has “expanding moderately” since its last meeting in December 2011, adding that the growth is occurring despite “slowing in global growth” — a reference to ongoing economic uncertainty within the Eurozone.

The Federal Reserve expects moderate economic expansion through the next few quarters but is wary of “strains” from global financial markets, and these three threats to the U.S. economy :  

  1. The housing sector remains “depressed”
  2. The unemployment rate remains “elevated”
  3. Fixed business investment has “slowed”

On the positive side, the FOMC said that household spending is rising and inflation remains in-check. The group also believes that employment will gradually improve nationwide going forward.

The Federal Reserve neither introduced new economic stimulus, nor discontinued existing market programs.

Immediately following the FOMC’s statement, mortgage markets rallied, pressuring mortgage rates to fall in and around Collegeville. 

Mortgage rates remain near all-time lows and, for homeowners willing to pay points plus closing costs, conventional, 30-year fixed rate mortgages can be locked at below 4 percent. If you’re in the process of buying or refinancing a home in Pennsylvania , it’s a good time to lock a mortgage rate with your lender.

The FOMC’s next scheduled meeting is a one-day event slated for March 13, 2012.

The Federal Reserve Meets Today : Mortgage Rates Expected To Move

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Interest rate difference between 30-year fixed and Fed Funds Rate 2000-2012

The Federal Open Market Committee adjourns from a scheduled 2-day meeting today, its first of 8 scheduled meetings this year.

The FOMC is a designated, rotating, 12-person committee within the Federal Reserve, led by Federal Reserve Chairman Ben Bernanke. Members of the FOMC sub-committee are the voting members of the Federal Reserve; the ones that ultimately determine U.S. monetary policy.

The most well-known Federal Reserve monetary policy tool is the central bank’s Fed Funds Rate. The Fed Funds Rate is the prescribed interest rate at which banks borrow money from each other for a period of one night. 

The Fed Funds Rate can only be changed by FOMC vote.

For home buyers and would-be refinancing households in Collegeville , it’s important to recognize that the Fed Funds Rate is an interest rate separate and distinct from “mortgage rates”. Mortgage rates are not voted upon by the Federal Reserve. Rather, mortgage rates are based on the price of mortgage-backed bonds, a security bought and sold among investors.

Historically, there is little correlation between the Fed Funds Rates and 30-year fixed rate mortgage rates throughout Pennsylvania. Going back 20 years, the benchmark rates have been separated by as much as 5.29% and have been as near as 0.52%. 

The spread has even gone negative, most recently in 1979 and 1981 — a period marked by high inflation.

Today, the separation between the Fed Funds Rate and the average, 30-year fixed rate mortgage rate is roughly 3.60%. Beginning at 12:30 PM ET, however, that spread is expected to change. The FOMC will make its statement to the press at that time, and will release its quarterly forecast to the markets.

As Wall Street reacts to the Fed’s press release and projections, mortgage rates will move.

Investors expect the Fed to vote the Fed Funds Rate unchanged from its current range near 0.000 percent, but are unsure of how the Fed will characterize the U.S. economy. If the Fed speaks optimistically on the economy, stock markets should rise and mortgage bonds should fall, driving mortgage rates higher.

Conversely, if the Fed shows concern for future economic growth, mortgage rates should drop. Either way, today figures to be volatile one for mortgage markets. 

When mortgage markets get volatile, the safe play as a rate shopper is to lock your mortgage rate immediately. There too much risk in floating.