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Last week, the S&P/Case-Shiller Index showed home prices gaining 8.1 percent during the 12-month period ending January 2013, marking the largest year-over-year increases since the summer of 2006.
The Case-Shiller Index measures changes in home prices by tracking same-home sales throughout 20 housing markets nationwide; and the change in sales price from sale-to-sale.
Detached, single-family residences are used in the Case-Shiller Index methodology and data is for closed purchase transactions only.
All 20 Case Shiller Index Markets Show Growth
Between December 2012 and January 2013, home values rose in all 20 Case-Shiller Index markets, with previously-hard hit areas such as Phoenix, Arizona leading the national price recovery.
Another notable gainer was New York, which posted the first year-over-year increase following 28 straight months of negative annual returns.
The top three yearly “gainers” for as of January 2013 were:
- Phoenix, Arizona : +23.2 percent
- San Francisco, California : +17.5 percent
- Las Vegas, Nevada : +15.3 Percent
Other year-over-year double digit gainers in home value were Atlanta, Detroit, Los Angeles, Miami, and Minneapolis.
Broader Numbers Support Widespread Housing Recovery
These strong annual home value increases continue to support the overall housing recovery.
There have been year-over-year double digit increases in home building permits and new housing starts as of February 2013 as well.
And foreclosure filings have fallen to only three-fourths of their previous annual levels.
It should be noted, however, that the Case-Shiller Index is an imperfect gauge of home values.
First, as mentioned, the index tracks changes in the detached, single-family housing market only. It specifically ignores sales of condominiums, co-ops and multi-unit homes.
Second, the Case-Shiller Index data set is limited to just 20 U.S. cities. There are more than 3,000 cities nationwide, which illustrates that the Case-Shiller sample set is limited.
And, lastly, the home sale price data used for the Case-Shiller Index is nearly two months behind its release date, rendering its conclusions somewhat out-of-date.
That said, the Case-Shiller Index joins the bevy of home value trackers pointing to home price growth over the last year.
A good next step for getting up-to-date home values in the Minneapolis/St Paul area is to contact a qualified, licensed real estate professional.
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European Market Jitters Continue To Affect The US Economy
Mortgage rates fell last week as investor concerns over the European economy grew.
Fears of growing differences between wealthier European nations and European nations needing economic aid brought higher bond prices and lower mortgage rates.
Positive news for Cyprus came when an agreement for an EU bailout was reached, but strict terms indicate that Germany and other nations are growing less enthusiastic about bailing out the banks of EU nations with shaky economies.
Meanwhile, the Italian government has not been able to agree on a coalition government, which reduces the chances for economic reform in the EU's third largest country.
European trade with the U.S. could fall as the result of the EU's ongoing economic challenges; this in turn would likely reduce U.S. inflation, which is good for lower mortgage rates.
Low inflation could also prolong the Fed's commitment to its quantitative easing program that is designed to keep long term interest rates, including mortgage rates, lower.
Last Week's Economic News Quiet, No Major Surprises
On Tuesday, New Home Sales for February were released, and came in short of investor expectations of 420,000 home sales on an annual basis.
February's figure came in at 411,000 new homes sold as compared to January's revised reading of 431,000 new homes sold.
Winter weather conditions are one reason for the decline in new home sales, which was the largest decline since February of 2011.
The National Association of REALTORS® released its Pending Home Sales Index for February on Wednesday; pending home sales reflected the results for New Home Sales with a reading of -0.4 percent as compared to expectations of a 2.0 percent reading.
January's reading for Pending Home Sales was also higher at 4.5 percent.
Home prices and mortgage rates move according to supply and demand; if demand for homes falls, home prices are likely to do likewise as are mortgage rates.
But as demand for homes increases and prices rise, mortgage rates typically rise as well. Would-be buyers who have been waiting for their best deal may want to get into the housing market now, as strong signs of economic improvement are in play, but home prices and mortgage rates haven't yet gone through the roof.
In other economic news, Thursday's Jobless Claims Report fell short of Wall Street projections and came in at 357,000 new jobless claims against expectations of 340,000 new jobless claims.
The previous week's jobless claims came in at 336,000 new jobless claims.
Analysts typically view a four-week rolling average of jobless claims as a more accurate indicator for the economy as jobless claims can vary widely week-to-week.
Consumer Sentiment for March was released Friday and came in at 78.6 and exceeded expectations of 72.5 for March.
The current reading also surpassed the prior reading of 71.8 percent. As consumers gain confidence in the economy, they are more likely to buy homes.
This week, the European Central Bank (ECB) meeting scheduled for Thursday and monthly Employment Data set for release Friday are among anticipated economic news events.
The National Association of REALTORS® released its monthly Existing Home Sales report on March 21 and gave investors and home sellers something to cheer about.
While February sales of existing homes didn't meet investor forecasts of 5.00 million homes sold on a seasonally adjusted annual basis, the actual number of existing (previously owned) homes came close at 4.98 million homes sold.
This number surpassed January's revised reading of 4.94 million homes sold by 0.8 percent.
Sales of existing homes comprise approximately 85 to 90 percent of homes sold in the U.S.
Investors watch existing home sales for evaluating housing markets and short-term economic trends related to home purchases such as goods and services associated with home ownership.
Existing Home Sales Up For 20 Consecutive Months
Existing home sales have increased by 10.2 percent as compared to 4.52 million existing home sales for February 2012, and have increased for 20 consecutive months.
A short supply of homes available for sale and better job prospects are creating more demand for homes.
In February, available homes increased to a 4.7 month supply of homes, which is up from January's 4.3 month supply of available homes, the lowest number since May of 2005.
With that said, current listed inventory of homes is 19.2 percent below last year's 6.4 month supply of available homes.
Increasing demand for existing homes also suggests growing competition between buyers for available homes.
Mortgage Rates Remain Near Historic Lows Increasing Affordability For Home Buyers
Getting pre-approved for a mortgage before making an offer on a Minneapolis home can help buyers, as sellers know that pre-approved buyers won't have potential delays related to the mortgage approval process.
The National Association of REALTORS® reports that the national median selling price for existing homes of all types was $173,600, which is up 11.6 percent year-over-year.
This suggests that potential homebuyers may want to act now as mortgage rates typically increase along with home prices.
Regional Average Selling Prices Show Positive Results For February
- Northeast: The median selling price was $238,800, 7.6 percent higher than for February 2012.
- Midwest: The median selling price was $129,900, which is 7.7 percent above the median selling price in February 2012.
- South: The median selling price was $150,500. This represents a 9.3 percent increase since February 2012.
- West: The median selling price was $237,700, a substantial increase of 22.7 percent over February 2012.
Multiple buyer bidding and limited inventory choices are fueling higher prices for existing homes, particularly in the West.
This is the strongest year-to-year rate of growth since November 2005, when existing home prices had increased by 12.9 percent as compared to the previous 12 months.
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The Federal Reserve's
statement after yesterday's Federal Open Market Committee (FOMC) meeting left no doubt as to the Fed's dual commitment to keeping long term interest rates down and encouraging economic growth.
No changes to the Fed's current bond-buying program were made during today's FOMC meeting.
The Fed's monthly purchase of $85 billion in bonds and MBS works by boosting bond prices, which typically helps with keeping mortgage rates lower.
The Fed reaffirmed its position that it will not withdraw or reduce monetary easing until the unemployment rate is substantially lower.
Unemployment Rate Improving Nationally
Fed predictions for the national unemployment rate improved; December's outlook for 2013 estimated the unemployment rate at between 7.4 to 7.7 percent; the Fed now expects unemployment rates of 7.3 to 7.5 percent by the end of this year.
February's jobs report likely influenced this revision as the unemployment rate fell from 7.8 to 7.7 percent.
The Fed notes that while employment rates are improving, they remain elevated which supports the Fed's decision not to modify its bond purchase program in the near term.
Lower unemployment rates suggest that more people will be financially prepared for buying homes or refinancing their existing mortgage loans, and the unemployment rate is also expected to fall due to growing numbers of baby boomers leaving the workforce.
Lower Inflation Rates Boost Consumer Purchasing Power
The Fed slightly revised its December forecast for 2013 economic growth of between 2.3 to 3.0 percent.
Now the Fed predicts economic growth to range between 2.3 and 2.8 percent in 2013, but negative influences including a higher payroll tax and government spending cuts are expected to slow the rate of economic growth.
Concerning inflation, the Fed expects an inflation rate of between 1.3 and 1.7 percent this year and for inflation to remain below 2 percent through 2015.
Lower inflation rates allow consumers more discretionary spending power, which can further boost the economy and improve consumer confidence in making big ticket purchases including homes and related items and services in Minnesota and around the country.
Fed Keeping Tabs On European Economic Issues
Fed officers are continuing to monitor economic developments in Europe, and expressed concerns that the situation remains fragile.
Commenting in a press conference held after the FOMC meeting, Fed Chair Ben Bernanke characterized economic issues in Cyprus as “difficult”, but said that the Fed doesn't expect these developments to have major impact on U.S. financial markets.
Its plan to keep short term interest rates near zero until unemployment rates reach 6.5 percent or the inflation rate exceeds 2.5 percent further support the Fed's plan to keep its monetary easing policy intact for the near term.
Unless unexpected or catastrophic events occur which would cause sudden or rapid economic changes, the Fed appears unlikely to announce major changes in its policy.
The National Association of Home Builders (NAHB) released its NAHB/Wells Fargo Housing Market Index for March on Monday.
The HMI measures builder confidence in the market for newly constructed single family homes.
A reading of 50 for the NAHB Housing Market Index (HMI) indicates that more builders are confident of housing market conditions for new single family homes than those who are not confident.
Home builder confidence fell for the third consecutive month with a two-point drop to a reading of 44 in March.
Several Factors Create New Home Bottleneck
An NAHB leader noted that several situations are causing a “bottleneck” in the supply of new homes as compared to those wanting to buy them:
- Low supply of developed lots available for new construction
- Rising costs for labor and materials
- Stricter mortgage credit requirements for homebuyers and lowball home appraisals. (These circumstances are typically caused by some mortgage lenders taking a conservative attitude toward risk management by tightening credit requirements and appraisers erring on the side of caution when valuing single family homes.)
Would-be buyers may find themselves stuck between a lack of buildable lots and ready building supply chains and lenders reluctant to risk mortgage defaults caused by lenient loan approvals.
Keep in mind that this only one perspective; if you're looking for a new home, don't give up.
Future Sales Confidence Creates Bright Spot
The HMI also measures builder confidence in three categories including current sales conditions, sales conditions within the next six months and the amount of foot traffic in new housing developments.
Confidence in current sales conditions dropped from 51 points in February to 47 points in March, but the news is not all bad.
Confidence in sale conditions for the next six months rose by one point from 50 to 51, and builder confidence in buyer foot traffic rose by three points to 35.
Foot traffic will likely increase as warmer weather arrives and the peak home buying season gains momentum.
Housing Market Conditions Vary By Region And Community
The three-month rolling average of builder confidence in four geographic regions of the U.S. showed mixed results for March.
The index reading for the Northeast had no change and remained at 39.
Index readings for the Midwest and Southeast declined by one point each to 47 and 46 respectively.
The March index reading for the West came in gaining four points to 58.
If you're ready to buy a home, check with a licensed real estate professional specializing in the area where you want to buy.
This is the best way to gain specific information on the Minneapolis area's market conditions and home prices.
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Last week's positive employment reports were good news for the economy, which typically causes mortgage rates to rise, but mortgage rates ended the week lower.
As of Thursday, Freddie Mac reports that the average mortgage rate for a 30-year fixed rate mortgage was 3.63 percent with borrowers paying their closing costs and 0.8 percent in discount points.
The average mortgage rate for a 15 year loan was 2.79 percent with borrowers paying their own closing costs and 0.8 percent in discount points.
Strong Retail Sales Show Consumer Confidence Improving
In other economic news, retail sales for February surpassed Wall Street expectations and grew by 1.1 percent against predictions of 0.5 percent and January's reading of 0.1 percent.
Retail sales account for 70 percent of the U.S. economy and growing retail sales are a strong indicator of economic recovery, which generally causes mortgage rates to rise as bond prices including Mortgage Backed Securities fall.
With this strength in the retail sector, it may be a good time to consider locking interest rates for purchase and refinance transactions.
Results of Treasury auctions held Tuesday, Wednesday and Thursday were mixed.
Tuesday's auction of 3-year notes saw average demand, Wednesday's auction of 10-year notes was strong, and Thursday's auction of 30-year bonds drew a weak response.
Financial Reporting Strong Across Multiple Indices
The Producer's Price Index (PPI) for February met expectations at 0.7 percent and exceeded January's level of 0.2 percent.
The Consumer Price Index (CPI) for February came in at 0.7 percent and exceeded expectations of 0.5 percent and January's reading of 0.0 percent.
The Core CPI, which excludes food and energy sectors, demonstrates the impact of high fuel prices on the CPI with its lower numbers.
The Core CPI for February is 2.0 percent higher than for February 2012.
Upcoming Federal Reserve Meeting May Bring Interest Rate Changes
The Federal Reserve is not likely to modify its bond purchase program until the inflation rate reaches 2.5 percent.
Next week, the Federal Reserve will meet on Wednesday; investors will be waiting to see how the Fed responds to recent positive economic news in terms of potential changes to its bond purchase program, which is helping to keep mortgage rates lower.
As the deadline of March 27 for funding the Federal government approaches, investors will be following legislative talks to see how or if funding will be approved by the deadline.
Last week's jobs report -- a combination of the Department of Labor's Non-farm Payrolls Report and Unemployment Rate -- provided investors and job seekers with unexpected good news.
Job growth for February handily exceeded most economists expectations of 160,000 by adding 236,000 new jobs.
According to the Bureau of Labor Statistics, employment increased in business and professional services, construction and healthcare:
- Business and professional services added 73,000 jobs
- Construction added 48,000 jobs. Of these, 17,000 jobs were for residential construction.
- Healthcare added 32,000 jobs
Since September, construction employment has risen by 151,000. This increase in construction jobs may point to a strengthening in the home building sector.
Stronger home building numbers may lead to increasing home prices for sellers and property appreciation for home owners.
Strong Jobs Numbers Help Stock Market Rally, May Spur Higher Mortgage Rates
Retail has added 252,000 jobs over the past year. Hiring in retail suggests that consumers are spending more, which is a strong indicator of economic growth.
These figures demonstrate a trend toward economic recovery and added a last-minute boost to last week's stock market rally.
Rising stocks generally cause bond prices including MBS to fall and mortgage rates to rise.
The seasonally adjusted employee participation rate declined by 0.40 percent year over year; in February 2012, the seasonally adjusted was participation rate was 63.9 percent; in February 2012, the participation rate was 63.5 percent.
The Unemployment Rate for February came in at 7.7 percent; this was lower than Investor expectations of 7.8 percent and January's unemployment rate of 7.9 percent.
The seasonally adjusted unemployment rate has decreased by.60 percent from 8.3 percent in February 2012.
Unemployment Rate Lowest Since December 2008
Long-term unemployment of 27 weeks or more accounted for 40.2 percent of February's unemployed.
8 million workers are employed part time due to scheduling cutbacks or because they could not find full time work.
The Fed has benchmarked an unemployment rate of 6.5 percent as a sign of sufficient economic recovery that could allow the Fed to curtail its monetary easing program.
Given this perspective, the Unemployment Rate remains high, but appears to be declining gradually.
Economic indicators and recently climbing interest rates suggest that mortgage borrowers may want to lock in their best mortgage rates now.
The previous couple years' doom and gloom outlook is looking like it is turning more upbeat and robust for the rest of 2013.
Home Prices Climb Nearly 10% Over Past Year
In fact, a recently released report by CoreLogic stated that home prices were up 9.7 percent from one year previously.
That kind of increase is a very good sign that the momentum may be building for a strong real estate market this year.
Many other economic experts are predicting that things might be improving this year, including increases in both home prices and sales.
Here are some of the ways that these positive changes may impact home buyers and sellers this year.
Attractive Financing Options
Interest rates could remain at the lowest levels they have been in years, which can make purchasing a home more affordable.
More buyers will be competing for the homes that are available which could mean bidding wars on homes with more than one interested party.
Be sure to take this into consideration before making your offer, and have a licensed real estate professional representing you in your purchase negotiations.
Great Home Prices
Housing remains affordable in many areas of the country. Although home prices are rising, the cost of real estate is well below what it was ten years ago.
And For Sellers:
Marketing Is Vital
Working with a skilled property professional is imperative to ensure the best advertising and marketing for your listing.
Real estate agents have access to the Multiple Listing Service (MLS), which is where other agents and buyers look for properties that are listed and available for purchase.
Contract Negotiations Prevalent
Multiple offers will become more commonplace. Do your research on how to best handle contract negotiations.
Maximize Your Selling Price
Make sure you get the most for your home. Know what other properties are selling for in your neighborhood.
With the Minneapolis real estate market shifting, both buyers and sellers need to be aware of how the changes could affect them.
Whether you're looking for your dream house or wanting to get the highest return on your home for sale, a great next step would be speaking with a qualified real estate professional.
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The Standard and Poor’s Case-Shiller Home Price Indices released February 26 show strong growth in the majority of 20 cities and corresponding metro areas tracked during 2012.
The S&P Case-Shiller Home Price Indices measure home prices nationally and locally by compiling data from individual indexes including a 10-City Composite Index, a 20-City Composite Index, and a 20-Metro Area Index that includes metro areas for each of the 20 cities used in the 20-City Composite.
Metro Areas Show Nearly Universal Growth
19 of 20 metro areas showed higher home prices in Q 4 2012 with the New York metro area showing a decrease in home prices; this could be due in part to the impact of Hurricane Sandy.
The Atlanta and Detroit metro areas saw Q4 2012 Atlanta home prices increase by 9.9 percent year-over year, while Detroit home prices rose by 13.6 percent as compared to Q4 2011.
Home prices in the Phoenix Metro area improved by 23 percent compared to Q4 2011 for the highest year-to-year increase of all metro areas in 2012.
The 10 and 20 city indices and national home price composite improved as well.
The 10 and 20-city composites have gained approximately 8 to 9 percent since reaching their most recent lows in March of 2012; current readings indicate that home values have returned to autumn 2003 levels, but remain about 30 percent lower than they were at their peaks in June and July 2006.
On a month-to-month basis, both the 10-and 20- city composite Indices returned to positive readings with each rising by 0.2 percent, which recovered last month's losses of 0.2 and 0.1 percent respectively.
The national home price composite is determined from information taken from the 9 geographic divisions established by the U.S. Census Bureau.
It rose by 7.3 percent year-to-year, but fell short of the Q3 2012 reading by 0.3 percent.
While some areas are still facing challenges, some cities and metro areas where home values declined the most are rebounding nicely.
All in all, it is quite apparent that the broad U.S. housing markets
U.S. Budget Stalemate, Italian Elections Stir Concerns
Mortgage rates were lower last week as investors sought safety in bonds in the wake of US legislators' failure to agree on budget cutbacks, and after Italy’s elections failed to reveal a leader committed to continuing economic reform.
When bond prices including Mortgage Backed Securities rise, mortgage rates typically fall.
While the March 1st deadline for passing budget cutbacks for the U.S. government passed without a resolution, emergency legislation passed last year will keep the government running until March 27.
If a budget is not passed by then, the federal government could face shutdown.
As it stands, $85 billion in cuts are scheduled over the next seven months, but this represents only about 2 percent of the federal budget.
Investor concerns are likely to rise if the March 27 deadline approaches without a resolution.
Italian Elections Influence Investor Sentiment
On Monday, Italian elections were held, but the results did not reveal a leader dedicated to continuing economic reforms necessary for stabilizing Italy's economy.
Another round of elections may be required to determine Italy's new leader.
There is deep conflict in Italy as citizens do not agree with the need for economic austerity measures.
As the Eurozone's third largest economy, Italy's division on future economic reforms raises two concerns for investors.
First, without a clear reform leader established in last week’s elections, Investors fear that austerity measures may be relaxed and increase Italy’s debt risk.
A less likely risk is that Italy may leave the EU if it cannot resolve its need for economic reforms with its citizens' wishes.
Upcoming Economic Releases
The coming week's scheduled economic releases include:
- Ongoing developments regarding the U.S. budget and aftermath of the Italian elections are expected to continue influencing U.S. financial markets.
- On Tuesday ISM Services Index for February will be released. Wednesday's news includes the Fed's Beige Book Report for March and Factory Orders for January.
- Thursday's scheduled economic news releases include Productivity and Trade Balance reports. Friday finishes the week's economic news with the Employment report, which includes job and unemployment data for February.
As spring approaches, demand for homes typically increases, which in turn may drive up home prices and mortgage rates.
Consider getting pre-approved for a mortgage and looking for your new home sooner than later.
For a local industry contact call: Bob Elliot 612 578 6162.
Home sales rose for the 11th consecutive month according to the National Association of REALTORS® Existing Home Sales Report for January.
This is the first time this has occurred since the period between July of 2005 and May of 2006.
National Average Home Price Up Over 12% Annually
The national average home price in January was $173,600, which is 12.3 percent higher than for January 2012.
Calculated on a seasonally-adjusted annual basis, Existing Home Sales data is compiled using completed sales of single family homes, condominium units and co-ops.
January's existing home sales rose by 0.4 percent to 4.92 million sales nationally as compared to December's revised annual rate of 4.90 million sales nationally.
National sales of existing homes increased by 9.1 percent as compared to January 2012.
Regional Home Sales Support Housing Recovery
Regional home sales for January suggest more good news for housing markets. Seasonally- adjusted annual home sales rose in all regions of the U.S. except in the West, while median home prices rose for all regions.
Northeast: Home sales were up by 4.8 percent in January to 650,000 sales, which is 12.1 percent more homes sold than for January 2012. The median home price rose by 2.4 percent from January 2012 to $230,500.
Midwest: Annual home sales in January increased by 3.6 percent to 1.16 million; this is 17.2 percent higher than for January 2012. The median home price in the Midwest rose to $131,800, an increase of 8.6 percent as compared to January 2012.
South: Home sales were up by 1 percent to 1.96 million sales in January; this represents a 14.0 percent increase in annual sales as compared to one year ago. The average home price for the South was $152,100, an increase of 13.4 percent over January 2012.
West: Home sales fell by 5.7 percent to an annual rate of $1.15 million. This represents a 5.7 percent decrease in sales from one year ago. The median home price in January was $239,800 and was 26.6 percent above the region's median sale price for January 2012.
A falling inventory of homes for sale may be holding back buyers; the inventory of homes for sale fell to a 4.2 month supply from December's 4.5 month supply of homes. A 6-month supply of homes is considered average.
Home Prices May Rise Quickly
While the spring home buying season will likely see more homes come on the market in Minneapolis and the surrounding area , economists caution that home prices could rise faster than expected due to increasing demand. A seller's market could be in the making.
Mortgage rates also appear to be rising; now may be your best time for gaining the advantage of relatively low home prices and mortgage rates.
Learn more me Bob Elliot 612 578 6162 or email@example.com
A quiet past week in economic news caused mortgage rates to worsen slightly.
This week, however, will be packed with economic reports which may have an impact on interest rates going forward.
Freddie Mac reported that the average rate for a 30-year fixed rate mortgage rose by 3 basis points from 3.53 percent to 3.56 percent with borrowers paying 0.8 in discount points and all of their closing costs.
The average rate for a 15-year fixed rate mortgage was unchanged from last week at 2.77 percent with borrowers paying 0.8 in discount points and all of their closing costs.
In other economic news, the Consumer Price Index (CPI) for January fell slightly to 0.0 percent as compared to Wall Street expectations of 0.1 percent and December’s reading of 0.1 percent.
The Core CPI, which measures consumer prices exclusive of volatile food and energy sectors, was 0.3 percent for January and surpassed analyst expectations of 0.2 percent and December’s reading of 0.1 percent.
Inflation Remains Low
These readings remain well below the 2.5 percent inflation level cited by the Fed as cause for concern.
According to the Department of Commerce, Housing Starts for January fell to 890,000 from December’s 954,000 and below Wall Street projections of 910,000.
These seasonally adjusted and annualized numbers are obtained from a sample of 844 builders selected from 17,000 newly permitted building sites.
Falling construction rates could further affect low supplies of homes reported in some areas; as demand for homes increase, home prices and mortgage rates can be expected to rise.
Full Economic Calendar This Week
This week's economic news schedule is full; Treasury auctions are scheduled for Monday, Tuesday and Wednesday. New Home Sales will be released Tuesday.
Fed Chairman Ben Bernanke is set to testify before Congress on Tuesday and Wednesday.
Wednesday's news includes the Pending Home Sales Index and Durable Orders.
Thursday's news includes the preliminary GDP report for Q4 2012, the Chicago Purchasing Managers Index, and weekly jobless claims.
Friday brings Personal Income and Core Personal Expenditures (CPE).
Consumer Sentiment, the ISM Index and Construction Spending round out the week's economic news.
Have you heard the term Private Mortgage Insurance (PMI) when looking to finance real estate?
You may be wondering what PMI is and how you know when you need to purchase it.
These answers can be hard to find among all the real estate jargon you might be hearing lately.
Below is the short version of what you need to know.
What is Private Mortgage Insurance?
Private Mortgage Insurance is an insurance premium required by some lenders to offset the risk of a borrower defaulting on their home loan.
When you put down less than 20 percent of the real estate's purchase price, the lender will generally require that PMI is added to the loan.
It is usually added into the monthly mortgage payment until the equity position in the real estate reaches 20 percent. However, there may be other options available in your area.
Under the current law, PMI will be canceled automatically when you reach 22 percent equity in your home, if you are current on your payments.
If you aren't current, the lender may not be required to cancel the mortgage insurance because the loan is considered high-risk.
After getting caught up on your payments, the PMI will likely be cancelled. Any money that you have overpaid must be refunded to you within 45 days.
What if Your Real Estate Increases in Value?
With a conventional loan, it may take as many as 15 years of a 30-year loan to pay your balance down 20 percent making the minimum monthly payment.
But, if property values in your area rise, you might be able to cancel the PMI sooner.
Some lenders may be willing to consider the new value of your home to determine the equity in your home.
You may, however, be responsible for any fees, like an appraisal, that are incurred to assess the new value of your property.
In the end, private mortgage insurance is likely a good option if you can't afford a down payment of 20 percent of the purchase price.
Now May Be A Very Good Time To Take Action
With all of the activity happening the housing market, now may be the best time for you to purchase your new home.
A smart next move would be speaking with a qualified home financing professional to learn which programs and down payment options are available in the Minneapolis/St Paul area or contact me Bob Elliot 612 578 6162.
There is a lot of misleading and incorrect information about Minneapolis/St Paul real estate short sales.
Many people don't have a clear understanding of the purpose of short sales or how they actually work.
Essentially, a short sale is when one sells their home for less than the balance remaining on the mortgage attached to the property.
The proceeds from the sale are used to repay a pre-negotiated portion of the balance to settle the debt.
A short sale can be a solution for homeowners who really need to sell their home but owe more on the mortgage than the home is worth.
Understanding the short sale process can help make the most out of a real estate sale.
Here are some common myths and why they are false:
A short sale damages one's credit record as much as foreclosure
In many cases a short sale is less damaging to your credit record than a foreclosure. Some lenders may think that the short seller acted in a more responsible manner than simply walking away from the property.
Although the amount paid may have been less than the mortgage balance outstanding, the loan was settled with the lender. Opting for foreclosure is often seen as a lack of responsibility.
To qualify for a short sale one must be behind on payments
This might have been true in the past, but it’s not anymore.
You just need to be able to prove that you are in financial hardship, which could be due to death in the family, divorce, job loss, mortgage rate hike or even loss of property value.
After a short sale you can’t buy again for five to seven years
This may be true in some cases, but not all. In certain situations the waiting period can be reduced as low as two or three years before you are allowed to purchase another home.
It would be wise to speak with licensed real estate professional or home financing specialist to get the most current options in the marketplace.
Pass it on
These are just a few examples of commonly believed short sale myths. A clear understanding of the short sale and the benefits it can provide is important for financially strapped homeowners.
Feel free to pass this important information on to someone that you feel would benefit from it.
Many times real estate market experts point to the feelings of the nation's home builders as a bell-weather signalling the health of the housing sector.
This month's reading indicates that home builders are feeling pretty good.
The National Association of Home Builders / Wells Fargo Housing Market Index (HMI) for February changed by one point to 46 as compared to 47 for January's reading.
Over the last four months, HMI readings have stayed within a three-point range between 45 and 47, indicating a plateau after rising from 25 to 45 in 2012.
Housing Market Index Near Highest Levels Since 2006
The good news is that February's reading remains near the HMI's highest level since April 2006, when the HMI reading reached 51.
Some builders may be taking a wait-and-see stance in their confidence as high national unemployment rates and rising costs for building materials impact home buying ability and home prices.
Regional factors influencing builder confidence include difficulties in finding building sites and labor required for building new homes.
3 Important Categories Affect The Home Builders Index
The HMI is a seasonally-adjusted index comprised of three survey categories of home builder confidence.
Readings above 50 indicate that more builders are finding conditions good than bad within each category and overall:
- Builder confidence in current new single-family home sales fell by one point to 51 in February, but sustained a positive rating.
- Builder confidence in new single-family home sales over the next six months achieved a reading of 50 in February, up from 49 in January.
- Builder confidence in foot-traffic in new single-family homes fell by four points from 36 in January to 32 in February.
February results for four regional categories consist of 3-month moving averages for new home sales: the Northeast gained 3 points to 39, The West gained 4 points to 55, the Midwest fell 2 points to 48 and the South fell by 2 points to 47.
With demand for homes increasing, home prices and mortgage rates are likely to rise during spring and summer as warmer weather brings out more potential buyers.
Check with your real estate and mortgage professional for the most updated market details in your area.