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Houston Mortgage News

Easter weekend has passed and only two short months until the school year ends, that can only mean one thing – It’s home-buying season! From now until Labor Day the words that we will hear over and over, “What kind of mortgage rates do you have?” Everyone always wants the best mortgage rate and the way things are shaping up this home-buying season may coincide with one of the best mortgage rate eras we’ve ever had simultaneously.

Here are some bits and pieces of news that have affected mortgage rates in Houston now and will affect mortgage rates in Houston throughout the hot Houston summer -

Most domestic indicators suggested the economy is still on the recovery path, but that the picture is not as bright as it appeared four or five months ago. At this stage, all newsworthy items create ripples in the market, and that is exactly what happened last week. The market reached a new high on Monday when the ISM Manufacturing Index came in better than expected. But the release of the minutes from the FOMC meeting on Tuesday suggested a strong economic recovery ahead and suggested that the Fed would be less inclined to begin
another quantitative easing (QE3) program. This resulted in a 1 percent decline in stocks. In addition to this, concerns over European debt came up again after an increase in yields of Spain’s debt.

The bottom line with this piece of news is that as we have seen for months as stocks rally bonds sell-off causing mortgage rates to rise in Houston and throughout the state of Texas. On the other hand, when news comes out to have stocks falter there is rush to quality in bonds and mortgage rates decline. With the stock market severely overbought and the recover stalling we should see a rally in bonds that should drive mortgage rates lower this summer.

Another factor driving Houston mortgage rates down is the recent lackluster jobs report. The labor market did not look too strong last week, as only 120,000 payroll jobs were added in the month of March against expectations of 201,000. In addition, the private sector disappointed in jobs creation — as for the month of March only 121,000 private jobs were created versus expectations of 224,000.

We’ve said over and over it takes about 250,000 jobs created per month to drive real unemployment down. Until that happens don’t expect a big increase in Houston mortgage rates.

Posted in Mortgages, News, Real Estate | Tagged federal reserve, Houston, Mortgage | No Comments

FHA Raises Mortgage Credit Guidelines

Posted 43 days ago by Cary Cox

There are faster learners, average learners, and then there are slow learners. When it comes to mortgage lending local & regional banks are the fast learners, Fannie-Mae & Freddie-Mac are the average learners and FHA bless their heart they can barely stumble across the mortgage finish line.

Here is what I mean above, when the mortgage melt-down happened just last decade local & regional banks were the first to tighten their mortgage underwriting guidelines. They have to act fast because most of them are closely held and when they see mortgage defaults hurting their profits they react quickly. Why? It’s their money they are lending for mortgage transactions. When it’s your “skin in the game” you tend to make better decisions and make those decisions very quickly. So the local and regional banks were the first to make their mortgage underwriting guidelines more stringent.

Next to move toward a more secure mortgage underwriting environment were the mortgage giants Fannie-Mae and Freddie-Mac who at the time were publicly held companies. Thus, since they had shareholders in which to answer they upped their mortgage underwriting guidelines. Albeit too late as the government after the mortgage meltdown took over these two behemoths of the mortgage industry.

Finally you have FHA who issues government insured mortgages. Since they are neither privately or publicly held and funded with taxpayer money they have been the slowest to react to the need for more stringent mortgage underwriting guidelines to lessen the chance of future defaults on each mortgage they issue.

Need proof of how slowly this governmnet agency moves – just read the story in Bloomberg news where the United States taxpayers and for the most part that is you and I are going to have to now bailout FHA due to the non-performing or delinquent mortgage problem that has arisen from their slow reaction to raising their mortgage guidelines.

Here is what one economist in the article had to say about their issues:

“The FHA’s economic projections are surreal,” said Andrew Caplin, a New York University economics professor who has testified to Congress on the agency’s finances. “They must believe there will be very few readers in Congress able to critically review such a complex report.”

To help combat further mortgage default and future foreclosure issues from borrowers FHA is requiring that all disputed accounts on a credit card be paid in full or payment arrangements be made prior to closing on the mortgage.

FHA found out albeit much more slowly that some consumers use the trick of “disputing” deliquent accounts to temporarily improve their credit scores so they appear to be a better mortgage applicant than is their true credit/financial situation.

As the saying goes for FHA and their mortgage underwriting guideline improvements, “Better Late Than Never”.

Posted in Mortgages, News | Tagged Fannie-Mae, FHA, Freddie-Mac, Mortgage | No Comments

Always Read the Revised Numbers!

Posted 53 days ago by Cary Cox

There is a great article from Zillow that shows why you should alway look at the revised numbers and not rely on the “Headline Number” that is purely an estimate. We’ve been saying for almost a year on this mortgage blog that the housing market is not nearly as strong as the glowing press articles have attempted to portray it. Makes you wonder if they are politically motivated?

Economists expect home prices to fall 0.7 percent in 2012, which is more negative than their previous expectation of a 0.2 percent decline, according to the March 2012 Zillow® Home Price Expectations Survey, compiled from 104 responses by a diverse group of economists, real estate experts and investment and market strategists.

The survey, sponsored by leading real estate information marketplace Zillow, Inc. (NASDAQ: Z) and conducted by Pulsenomics LLC, is based on the projected path of the S&P/Case-Shiller U.S. National Home Price Index during the coming five years.

The March survey shows that economists expect U.S. home prices to begin to rise in 2013, although expectations for how much they would rise were tempered when compared to their responses in the December survey. For example, economists now predict home prices will rise 1.4 percent in 2013, compared to their previous prediction of 1.8 percent.

Year	Home Price Prediction Dec. 2011	Home Price Prediction March 2012
2012	-0.18%	-0.72%
2013	1.75%	1.39%
2014	2.71%	2.55%
2015	3.23%	3.18%
2016	3.32%	3.32%

“The fourth quarter drop in the national Case-Shiller Index was sharper than some expected and is the likely reason so many of the economists in the survey revised their forecasts downward,” said Zillow Chief Economist Stan Humphries. “Looking at the longer history of these forecasts by top economists, the bottom in home prices always seems just around the corner but never quite here. Conditions across the country vary considerably. Some markets have already hit bottom and are experiencing tight inventory and multiple offers, while foreclosures and negative equity continue to pull down the housing market in many other parts of the country.”

The economists surveyed varied widely in their expectations for 2012. The most optimistic[i] quartile of panelists predict a 1 percent increase, on average, in home prices during the full year, while the most pessimistic[ii] predict an average decline of 2.8 percent. Of the individual economists, the most bullish, Susan Sterne of Economic Analysis Associates Inc., predicts home prices will climb 5 percent during the year while Gary Shilling of A. Gary Shilling & Company, Inc. expects prices to fall 8 percent.

The March survey also queried the panelists about their views regarding recent housing policy statements by the Federal Reserve as well as the potential market impact of a large-scale, bulk sales program of foreclosed properties by the federal government.

“The majority of experts believe that implementation of a bulk sales program is a good idea, even though more than half indicated that it is at least somewhat likely that bulk sales will materially depress overall price levels in housing markets. However, 79 percent believe that a government bulk sales program will result in a shorter waiting period before the onset of a broad and sustained housing market recovery,” said Terry Loebs, founder of Pulsenomics.

Posted in News, Real Estate | Tagged federal reserve, home, real estate | No Comments

Houston Home Sales

Posted 59 days ago by Cary Cox

Have you ever heard the saying, “Thank your lucky stars you live in Texas”? Well when it comes to real estate values those words ring true compared to much of the rest of the country. Houston Home Sales data was released to HAR members earlier this morning. We’ll share the report with you now before it hits the mainstream media.

HOUSTON — (March 20, 2012) — February marked the ninth consecutive month of positive home sales across the greater Houston area, and properties sold at a brisk enough pace to drive housing inventory to its lowest level since December 2008. The month also saw the trademarks of a healthy real estate market continue to prevail—a decline in active property listings and rise in pending sales.

February sales of single-family homes soared 16.9 percent versus one year earlier, according to the latest monthly data prepared by the Houston Association of REALTORS® (HAR). That is the biggest sales boost since August 2011. A surge in sales among homes priced between $80,000 and $250,000 combined with flat sales in the luxury housing segment allowed the average and median price to retreat slightly.

“The Houston housing market continues to show welcomed strength at the end of February 2012,” said Wayne A. Stroman, HAR chairman and CEO of Stroman Realty. “In addition to all the positive indicators in HAR’s February report, Houston is reaping the benefits of great economic news in the form of more than 76,000 jobs created over the past year, according to the Texas Workforce Commission. It stands to reason that with new jobs being filled, these employees and their families will need housing.”

February’s single-family home median price—the figure at which half of the homes sold for more and half sold for less—dipped a fractional 0.7 percent year-over-year to $149,900. The average price fell 4.6 percent from February 2011 to $201,945.

Foreclosure property sales reported in the Multiple Listing Service (MLS) increased 21.1 percent year-over-year in February. Foreclosures comprised 23.2 percent of all property sales, which is consistent with the levels observed over the past 12 months. The median price of foreclosures in February was unchanged at $79,000.

February sales of all property types in Houston totaled 4,561, up 15.8 percent compared to February 2011. Total dollar volume for properties sold during the month rose 13.4 percent to $894 million versus $788 million one year earlier.

February Monthly Market Comparison

The month of February brought Houston’s overall housing market positive results when all sales categories are compared to February 2011. Total property sales and total dollar volume rose on a year-over-year basis. The median price declined less than one percent while the average price fell 4.6 percent.

Month-end pending sales for February totaled 3,445. That is up 13.5 percent from last year and suggests another month of positive sales when the March housing data are tallied. The number of available properties, or active listings, at the end of February declined 15.3 percent from February 2011 to 42,206. The inventory of single-family homes dropped to its lowest level since December 2008—5.6 months, compared to 7.3 months one year earlier. That means selling all the single-family homes on the market would take 5.6 months to complete based on the past year’s sales activity. The figure is better than the national inventory of single-family homes of 6.1 months reported by the National Association of REALTORSâ (NAR). These indicators all continue to reflect a healthy and balanced real estate marketplace for Houston.

Posted in News, Real Estate | Tagged foreclosure, home | No Comments

Houston Update on Mortgages

Posted 60 days ago by Cary Cox

Here is a quick update on where mortgages are now and likely headed over the near-term. Lots of great information as always by Lou Barnes of ratewatch.com

Long-term Treasurys and mortgage rates at last broke out of a half-year-long trading range centered on 2.00% for the 10-year T-note, and 4.00% for mortgages. Upward: 10s to 2.33% today, lowest-fee mortgages pushing 4.25%. Verdict first, then evidence: this move is not the start of a bigger one, and is likely to reverse.

Silly things have pushed this rate run to extreme: markets oooo’ed and ahhhh’ed at successful stress tests of 15 of 19 too-big-to-fail banks (the failure of four would crater our system, again); and inflation knee-jerks flipped at today’s 0.4% February CPI reading (the core at 0.1% is fine, gas prices compressing other spending and prices).

10-year Ts had for six months stayed tight to 2.00% because the Fed began to buy long Treasurys in Operation Twist, because Europe was on the edge of its own Lehman moment, and last fall the US appeared near new recession. Twist is still underway (and you can bet the Fed hates this mortgage rate rise), but a European banking collapse and new US recession are off the table.

One year ago the 10-year paid 3.75%, and mortgages cost just over 5.00%. The magnitude of European futility and risk came clear last August, 10s in one swell foop to 2.00%. We will have to wait for memoirs, but in early December the European banking system was only days away from failure, intercepted by the ECB’s December 8 Long Term Refinancing Operation, then insurance taken by LTRO2
last month.

Those last fall predicting US recession, the respected ECRI, especially, were dead wrong. But, have we now entered the even-longer-predicted self-sustaining recovery? No, but closer. There is a Churchill quote for every occasion, this in November 1942 after Britain’s first victory of WW II, El Alamein: “Now is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.”

Several signals say that we are not yet in self-sustenance, the most important at the Fed. Many over-read a word in Wednesday’s post-meeting minutes: the substitution of “moderate” for “modest” as the modifier for economic growth. The replacement is accurate, but… modest. More important, the Fed stuck verbatim to its commitment to “exceptionally low levels for the federal funds rate at least through late 2014.”

Another marker: the small-business surveyor, NFIB, found another small improvement in its index of optimism. Although rising to the second-best level since 2007, it is no better than one year ago, and still below the bottom of every business downturn since 1982. The NFIB did confirm some small-biz participation in hiring.

And Europe is anything but over. Its banks protected, it has become a slow-roller, waiting to see what Club Med depressions do to local political stability and overall unity. The best long-term hope: an orderly demise of the euro, then short global recession.

Posted in Mortgages, News | Tagged Economy, mortgages | No Comments

Short Sales – Part I

Posted 64 days ago by Cary Cox

Short Sales are where lenders allow the sellers to sell the home for less than they owe on their mortgage balance without a foreclosure apparing on their credit report. Many buyers and sellers are finding out that “Short Sales” are anything but short when it comes in the amount of time needed to close on this real estate/mortgage transaction.

In fact the most recent polls of realtors nationwide conducted by LinkedIn Real Estate show the following times to close on Short Sales:

1. Only 9% close in less than forty-five day from start to finish or accepted offer to closing at the title company.

2. Only 18% of short sales close between 45-90 days or almost two to three times the amount of time to close on a normal mortgage transaction.

3. Only 30% of them close between 90-120 days or nearly four months to close on a home.

4. Finally ana amazing 42% don’t close for more than 120 days.

Basically the vast majority or 72% of short sales are taking 90 + days to close in political terms that is a super-majority of short sales take months and months to close at the title company. Why do you ask does it take so long to close a short sale transaction? Well there are a vast plethora of reasons why short sales take so much longer than the “traditional” purchase of a home that is not a short sale.

First, there is just a huge pool of short sales available in the marketplace due to the mortgage fiasco of the previous decade that has led to an almost thirty-percent decline in home values nationwide on averaage. Banks in the past have had very small departments to handle short sales as they were not very prevelant. Banks see this short sale “crisis” as a shorter-term problem and are not willing to spend the capital to create a huge department that they will not need longterm. Thus, there is just a huge backlog of short sales for banks to process with limited resources allocated for it.

Since there is a lot of material to cover on short sales and why they take so long we’ll make this a multi-part post ext time post we’ll look at the other

Posted in Mortgages, News, Real Estate | Tagged Mortgage, short sales | No Comments

Housing Turned the Corner?

Posted 67 days ago by Cary Cox

There are two things that are going to lead this economy to recovery – housing and jobs! Every end to a recession has been led by growth in the housing market. Why? It’s easy housing creates a huge “multiplier-effect” on the economy. For every dollar spent in housing it creates five dollars in the economy. It is the leading industry when it comes to this all-important multiplier effect. This effect in turn creates a multitude of jobs and without jobs there is no recovery.

Don’t let the “Headline” Economic numbers fool you. While some growth like the 226,000 jobs created last month per the Labor Department is better than no growth at all, we have to look at the productivity of the jobs as it relates to the worker. For example, the February job numbers show an anemic growth rate in wages, an almost negligible .01% That means that every-one’s wage went up by a whopping three cents per hour. Moreover, there was zero growth in hours worked. Is fewer hours worked with a paltry three cents an hour any way to sustain a viable economy. As it relates to housing do you think three cents an hour increase for average Joe will induce him to buy a home?

Despite what the pundits say the housing market has not “turned the corner”. Home prices continue to fall below the after-crash levels of 2008. In addition, the “Shadow Inventory” of foreclosed homes remains the same. We haven’t come close to putting a scratch in it much less a dent.

On top of that since we are in a global economy having the European Union mired in a recession with zero growth doesn’t bode well for a strong recovery to our housing market or economy. How bad is it? Well in Spain the unemployment rate is twenty-two percent (22%) and still rising. The most important age group for long-term growth 18-30 is at forty-fiver percent (45%) no jobs there means they cannot buy our products produced here.

The growth in consumer credit is because people are accessing their credit-cards just to maintain there living standard – not the type of consumer spending that you see in a flourising economy. Realte that to housing – if you are “living off of your credit cards” are you going to purchase a home?

Posted in News | Tagged housing | No Comments

News Affecting Mortgage Rates

Posted 72 days ago by Cary Cox

This week there is lots of economic news that will affect mortgage rates and the bulk of that news will arrive to us on Friday. So here is quick post on what the items are and how they can affect mortgage rates in Houston, Austin, Dallas, San Antonio and throughout the state of Texas.

The big one when it comes to economic news affecting mortgage rates is the jobs number. Will we continue to add jobs? If so will it exceed the previous month’s growth and most importantly what kind of jobs are they? If the numbers continue to improve that is the one thing that can get the housing market moving again. let me repeat that, no jobs and no housing sector improvement. Jobs is the key driver to a housing recovery.

The consensus is for the unemployment rate to remain at 8.3% for political reasons I expect them to “hit” that number if not improve on it, but that’s another story.

Should an improvement in job creation occur expect mortgage rates to start to rise again. Of course that is predicated on better numbers. If they miss the mark which I feel is highly unlikely, it is the Department of Labor reporting in an election year and they want job security, I think mortgage rates will stay flat.

Other things affecting mortgage rates this week has been the lackluster growth of the global economies. Europe is at ZERO percent growth or basically a recession, China is now in single-digit growth, and we are limping along with sub 2.5% growth. These low growth rates are what caused the stock market to sell-off yesterday and caused mortgage rates to improve slightly.

We rely so much on Europe for our exports that sooner or later it will affect our GDP and job growth, expect these numbers AFTER the election.

So here is the big item to watch for good jobs report higher mortgage rates in the mid-term, lower jobs numbers mortgage rates to stay the same. In the longer term I see the world economy slowing-down which will cause rates some time later this year to retreat.

Remember it’s an election year.

Posted in Mortgages | Tagged Economy, Mortgage | No Comments

Economic & Political Uncertainty

Posted 75 days ago by Cary Cox

As usual Rate-Watch’s Lou Barnes is spot on with his political and economic analysis. We’re going nowhere fast.

The dominant economic/financial commentary has us in strengthening recovery, and a serious minority says we are near new recession. Both are correct and mistaken.

Begin at the very beginning, circa 1990, when the entrance of China into global markets began to undercut Western wages. We were still so rich that we didn’t notice. A dozen years ago we found it easy to borrow to maintain our standard of living, until the whole shebang hit the wall from Anaheim to Athens.

In the last five years the Fed and European Central Bank have prevented a collapse of the financial system, buying time until we get our affairs in order by other means, which we have not gotten around to. We are in Central Bank ICU, and all the beeping and hissing and hoses and lights and dials has us confused and forgetful about how we got here, and no, we’re not just going to hop out of bed and jog five miles. It is very good news that new unemployment claims have fallen near normal at 350,000 last week, but that is not the same as hiring (next Friday we get that).

Our twenty-year decline in real wages may have concluded, and maybe not; new jobs when they come may pay better, likely not.

Consumer confidence reached the highest level since March 2009, but it hasn’t been a fun three years.

Orders for durable goods had a terrific Nov-Dec, and then tanked 4% in January.

Auto sales had a terrible January and red-hot February.

The ISM manufacturing index was supposed to continue a positive run from January’s 54.1 and instead plunked to 52.4 in February.

January personal income rose a tepid .3%, and spending only .2%.

An astounding number of “analysts” see a housing recovery (NONE at the Fed). Case/Shiller’s newest home price index stone-dropped 3.8% in the last 90 days of 2011. CoreLogic reported yesterday that 27.8% of mortgaged households are under water or nearly so, no progress at all. Connecting the two stories in a miracle of arithmetic, falling prices create more underwater households. Got that, cheerleaders?

Nothing above describes self-sustaining recovery, or new recession. Just ICU. To escape — get our affairs in order by other means — requires our own concerted action by public policy. No part of our political process (except the Fed) got anything done last year, or the year before, or will this year.

This is an election year. Oh, boy. By mid-year 2011, Mr. Obama had lost by 2:1 the confidence of the independents who put him into office. Then, Tea Party misbehavior in the budget battle, and six months’ revelation of the Republican underbelly in all its nomination-season glory, and independents now favor Mr. Obama 2:1. Still,

Mr. Obama sees the world through a golden haze of self-congratulation. Saved the country from Depression II. (The Fed had that done before you sat down). Now uses Ron Reagan’s “America is back!” (Pardon, sir; but back where, exactly?) Hard Lefties are a pain: Nanny-State intrusion, and grabbing at wallets not their own. But, from William Jennings Bryan forward, given a choice between a guy with too-bright eyes and a special pipeline to the Almighty, and anybody else, we’ll take anybody.

The doubtlessly capable Romney lacks the charm of Richie Rich and will have to drag a Hard-Rightie ball-and-chain wherever he goes, even though they hate him. We are a democracy, and the next nine months’ circus will be about us.

Foolish partisanship among candidates is a reflection of us. Candidates who will not speak to real issues in authentic ways… they won’t until their focus groups and polling say we want them to.

There is nothing wrong with our system, just us, and our refusal thus far to acknowledge that twenty years ago the world moved on without us. Compete in the world, and live within our means: if we look interested in that discussion, there is no telling what competition of ideas might break out among candidates.

Posted in News | Tagged Economy | No Comments

First-Time Home Market Heating-Up

Posted 78 days ago by Cary Cox

Bill Fisher of ratewatch.com gives us some good news on the purchase market front and the economy.

This morning, the latest Pending Home Sale Report was released by the National Association of Realtors, which reported the highest index reading since April 2010. Buyers, you’ll recall, were hustling to take advantage of the soon-to-sunset homebuyer tax credit in 2010, so today’s reading is perhaps even more significant than it at first appears to be.

The figures seem to want us to realize that the real estate recovery has really gained traction and, though it still hasn’t pushed itself into high gear, it is moving ahead consistently at this point, and not treating us to much of the familiar go-and-slow of the recent past. Still, the solid 2% gain for January was as high as it was partly because the December data was revised down. But the gains are real: The Index is 8% higher for January 2012 than it was in January 2011.

This suggests improving sales volume for existing homes. More sales, perhaps, for new homes as well, though sales in this sector remain flat, lagging well behind improvements among existing home sales. The effect of rising numbers of real estate sales include a reinforcement of improving buyer psychology.

Thus, rising sales—assuming the increases don’t slip below the radar screens of potential buyers—tend to beget further increases to sales volume. Lawrence Yun, chief economist and economic cheerleader for the NAR, asserted that “job gains, high affordability and rising rents are hopefully pushing the market into what appears to be a sustained housing recovery.”

And this last point deserves further exploration. Rents are rising at an noticeably rapid rate in many of our nation’s real estate markets. According to Labor Department data, unadjusted for inflation, residential rents rose by 2.4% nationwide over the past year. One significant problem: Construction of new rentals units fell off dramatically in recent years, so that in many neighborhoods there just aren’t enough units available to meet the growing demand.

A meaningful source of demand for rental units is the “shadow market” about which we hear so much. Friends and relatives hunkered down in shared homes—empty nests refilled with members of the family—and people in the resulting overstuffed houses have been waiting rather impatiently for the chance to move into their own homes. (Most likely, the patience their hosts—often parents—has been challenged equally.)

Thus, there is a large pent-up demand for rentals, and few such homes and apartments have been constructed for several years to meet that demand. Some analysts suggest this rising demand for rentals may be the harbinger of a new trend in which rentals become more desirable than they were in the past.

I think instead that it is a harbinger of an improving market for real estate sales. G. Ronald Witten, a consulting firm, has computed that about 60% of recent job gains have gone to people who are 20 to 34. Many of these will be first-time buyers when they tire of having neighbors making the upstairs floors creak and playing their televisions too loud.

The American Dream, in other words, is far from dead. So it is reasonably likely that real estate sales will continue to move higher for the foreseeable future. No wonder major investment groups are buying up both rentals and the equity shares of big builders.

Posted in News | Tagged Economy, home | No Comments