Minnesota Real Estate Today Blog

MAY-2012 Newsletter Housing Trends

Bob Elliot — Fri, 25 May 2012 14:56:00 GMT

MAY-2012 Newsletter Housing Trends
Welcome to the most current Housing Trends eNewsletter. This eNewsletter is specially designed for you, with national and local housing information that you may find useful whether you’re in the market for a home, thinking about selling your home, or just interested in homeowner issues in general.

The Housing Trends eNewsletter contains the latest information from the National Association of REALTORS®, the U.S. Census Bureau and Realtor.org reports, videos, key market indicators and real estate sales statistics, a video message by a nationally recognized economist, maps, mortgage rates and calculators, consumer articles, plus local neighborhood information and more. Please click here to view the MAY-2012 Newsletter Housing Trends eNewsletter.

If you are interested in determining the value of your home, click the Home Evaluator link for a free evaluation report.

30-Year Fixed Rate Mortgage Rates Fall To 3.78% Nationwide

Bob Elliot — Fri, 25 May 2012 14:39:00 GMT

For the fifth consecutive week, conforming 30-year fixed rate mortgage rates have dropped to new all-time lows.

According to this week's Primary Mortgage Market Survey from Freddie Mac, "prime" mortgage applicants willing to pay 0.8 discount points plus closing costs can secure a mortgage rate of 3.78%, on average.

This is a small improvement in rate over last week when the average 30-year fixed rate mortgage rate was 3.79% with 0.7 discount points.

1 discount point is equal to 1 percent of your loan size.

Like everything in real estate, though, mortgage rates are local. Freddie Mac reports that the mortgage rates available to consumers varied by region.

Northeast Region : 3.78% with 0.7 discount points
West Region : 3.74% with 0.9 discount points
Southeast Region : 3.79% with 0.7 discount points
North Central Region : 3.83% with 0.6 discount points
Southwest Region : 3.81% with 0.7 discount points

North Central Region residents currently pay the lowest fees and get the highest rates. For residents of the West, it's the opposite. Everywhere, however,mortgage rates are down. As compared to one year ago, today's monthly carrying cost for a conforming, 30-year fixed rate mortgage is lower by $50 per $100,000 mortgaged, or $600 per year.

A $300,000 mortgage would save $1,800 annually.

Mortgage rates have been dropping because Wall Street remains concerned for the futures of Greece, Spain, Italy and the European Union. Several European nations are at-risk for a sovereign debt default and Greece remains a threat to leave the EU. To protect against potential loss, investors have been moving money away from risky holdings toward safer ones -- a class that includes U.S. mortgage-backed bonds.

As demand for the bonds rise, prices do, too. This leads mortgage rates lower and so long as economic uncertainty remains, mortgage rates are expected to stay low.

Low mortgage rates make this a good time to buy or refinance a home. Talk to your loan officer to review your mortgage options.

New Home Sales Rise For 7th Month Out Of 8

Bob Elliot — Thu, 24 May 2012 14:14:00 GMT

The April New Home Sales report suggests that the market for newly-built homes is as strong as the market for existing ones.

According to the U.S. Census Bureau, the number of new homes sold rose 3.3 percent in April to a seasonally-adjusted, annualized 343,000 units sold -- its second-highest reading since April 2010.

April 2010 marked the last month of that year's federal home buyer tax credit program.

April's New Home Sales data also marks the 7th of eight consecutive months during which the number of new homes sold climbed nationwide, a streak unequaled in recent history. During this period, the supply of new homes for sale has dropped 13%.

The complete new home inventory is down to 146,000 homes nationwide.

At the current pace of sales, home buyers in Minneapolis and across the county would exhaust the complete supply of newly-built homes in 5.1 months.

This, too, is a significant figure.

When home supplies fall below 6 months of inventory, it's widely believed to indicate a "seller's market" and there hasn't been more than 6 months of a new home supply since October 2011. This has placed upward pressure on new home prices and helps to explain why the average home sale price is up 9% from just 6 months ago.

Homes are selling, and they're rising in price -- a trend that today's buyers should expect to continue through the summer and fall months.

Record-low mortgage rates have moved home affordability to an all-time high with home builders now reporting the highest levels of buyer foot traffic at any time since 2007. As builder confidence grows, buyers can expect to find fewer "great deals" -- especially as demand for homes outpaces supply.

If you're a home buyer in search of new construction, therefore, the best new construction "deals" of 2012 may be the ones you find today. By 2013, the deals may be gone.

Existing Home Sales Climb 3.4 Percent In April

Bob Elliot — Wed, 23 May 2012 13:45:00 GMT

Low mortgage rates are helping to make homes more affordable. It appears home buyers have taken notice.

According to the National Association of REALTORS®, Existing Home Sales rose 3.4% in April from the month prior, registering 4.62 million homes sold on a seasonally-adjusted, annualized basis.

An "existing home" is a home that's been previously occupied. April's sales volume represents a 10 percent jump from April of last year.

For buyers and sellers in St Paul , the April Existing Home Sales report supports the notion that the housing market may be improving; that the "bottom" occurred sometime in late-2011. Home values have been rising in many U.S. markets and home builders now report the highest levels of foot traffic through models since 2007.

Demand for U.S. housing is growing.

It also helps that home affordability is at an all-time high. Not in recorded history have this many homes for sale been affordable to buyers earning a moderate household income, on a percentage basis. Additionally, there is now a larger stock of homes from which buyers can choose.

In April, the number of homes for sale nationwide jumped 9.5 percent to 2.54 million -- the largest home resale inventory of the year.

At the current pace of sales, it would take 6.6 months for the complete home inventory to sell. Analysts consider a 6.0-month supply to be a market in balance. Anything less than a 6-month supply suggests a "buyer's market".

Home values peaked nationwide in April 2007. Since then, it's been an uneven recovery. Some markets came back quickly, while others did not. On a neighborhood-by-neighborhood basis, even, there's signifcant variance in how home values have fared.

In other words, although the April Existing Home Sales report indicates housing strength nationally, it's the local data that matters most to today's buyers and sellers. To get real-time real estate data for a particular street or area, talk with a local real estate agent. For Minnesota Real Estate Today

Home Affordability Reaches New High In Q1 2012

Bob Elliot — Tue, 22 May 2012 14:05:00 GMT

Falling mortgage rates and stagnant home prices are making a positive effect on home affordability nationwide. Never before in recorded history have so many homes been affordable to households earning a moderate annual income.

Last week, the National Association of Home Builders reported the Home Opportunity Index at 77.5 -- its highest reading of all-time. The index indicates that more than 3 of every 4 homes sold last quarter were affordable to households earning the national median income of $65,000.

Last quarter marks the 12th straight quarter -- dating back to 2009 -- in which the index surpassed 70. Prior to this run, the index had never crossed 70 even once.

That said, like most real estate statistics, the Home Affordability Index has a national purview. National data is of little value to homeowners in specific cities such as St Paul , or in specific neighborhoods.

Last quarter, home affordability varied by region.

In the Midwest, for example, affordability was highest. 7 of the top 10 most affordable markets nationwide were spread throughout Ohio, Michigan, Illinois and Indiana. The top two spots, however, went to an East Region town (Cumberland) and a Pacific Northwest Region city (Fairbanks, Alaska), respectively.

The top 5 most affordable cities for home buyers in Q1 2012 were:

Cumberland, MD (99.0%)
Fairbanks, AK (98.9%)
Wheeling, WV (97.0%)
Kokomo, IN (95.8%)
Indianapolis, IN (95.8%)

At #17, the Lakeland/Winter Haven, Florida area was the top-ranked South Region city last quarter.

By contrast, the Northeast Region and Southern California ranked among the least affordable housing markets -- again. Led by the New York-White Plains, NY-Wayne, NJ area, 8 of the 10 least affordable areas were in the Mid-Atlantic and California, and for the 16th consecutive quarter the New York metro area was ranked "Least Affordable".

Just 31.5 percent of homes were affordable to households earning the area median income there, up from 25.2 percent six months ago.

The rankings for all 225 metro areas are available for download on the NAHB website.

10 Tips You Must Do To Stay Qualified When Buying a Home

Bob Elliot — Tue, 22 May 2012 13:58:00 GMT

10 Tips When Applying for a Mortgage Loan

1. Do not change jobs or become self-employed.

2. Do not buy a car, truck or van unless you plan to live in it.

3. Do not use your credit cards or let your payments fall behind.

4. Do not spend the money you have saved for your downpayment.

5. Do not buy furniture before you buy your house.

6. Do not originate any new inquiries on your credit report.

7. Do not make any large deposits into your bank account.

8. Do not change bank accounts.

9. Do not co-sign for anyone.

10. Do not purchase anything until after the closing.

America's 10 Richest Counties

Bob Elliot — Mon, 21 May 2012 15:15:00 GMT

There are 3,033 counties in the United States. Which 10 are the richest in terms of median household income? Not surprisingly, those near major economic centers rank high.

In a study based on household income estimates from the Census Bureau's American Community Survey, Loudoun County, Virginia captures the number one spot in America's Richest Counties.

Loudoun County is a Washington, D.C. suburb and is home to Dulles International Airport, as well as a well-educated workforce.

The complete Top 10 list of America's Richest Counties :

Loudoun County, Virginia ($115,574)
Falls Church City, Virginia ($114,409)
Fairfax County, Virginia ($105,416)
Los Alamos County, New Mexico ($103,643)
Howard County, Maryland ($103,273)
Hunterdon County, New Jersey ($100,980)
Douglas County, Colorado ($99,198)
Fairfax City, Virginia ($97,900)
Somerset County, New Jersey ($97,440)
Morris County, New Jersey ($96,747)

As a region, it's estimated that 40% of the Washington, D.C. metro area economy can be attributed to federal spending. This helps explain why Falls Church City, Virginia; Fairfax County, Virginia; and Howard County, Maryland all scored high on the list. It's also why Los Alamos ranked 4 -- the largest employer in Los Alamos is the Los Alamos National Laboratory, one of the largest science and technology institutes in the world.

The New Jersey counties are popular commuter areas for homeowners who work in New York City.

As a home buyer in Minneapolis , the wealth of particular area may matter to you, but it won't be the sole reason you purchase. You may have interest in a quality school district, or a vibrant nightlife, or a a high walkability factor, for example. Speak to your local real estate agent about the areas that matter most to you.

Is More Fed-Led Stimulus On Its Way?

Bob Elliot — Fri, 18 May 2012 13:54:00 GMT

The Federal Open Market Committee released its April 2012 meeting minutes this week, revealing a Federal Reserve in the ready in the event additional monetary stimulus is needed.

The Fed Minutes function much like the minutes from a business meeting; or, condominium association meeting, for example. It's a detailed review of the conversations and debates between FOMC members, and is typically published 3 weeks after a Federal Reserve meeting.

The Fed Minutes is a follow-up statement on the FOMC's more well-known, post-meeting press release. It's also much more lengthy.

Whereas the April 25, 2012 press release totaled 444 words, the Fed Minutes spanned 6,618.

Those extra words are important, too, because the detail offered within the Fed Minutes lends insight into how our nation's central bank views the U.S. economy, its strengths and weaknesses, and its threats.

From the Fed Minutes, some of the Fed's comments includes :

On employment : Unemployment may remain elevated through 2014
On housing : Tight underwriting is "holding down" the housing market
On rates : The Fed Funds Rate should remain low until late-2014

There was also substantial talk about Europe and its role in the U.S. economy. Notably, U.S. financial institutions have been actively reducing their European exposure to contain damage in the event of a full-blown economic crisis abroad.

This has had the net effect of lowering mortgage rates in Minnesota. Mortgage bonds often benefit from economic uncertainty.

In addition, because several Fed members acknowledged a willingness to add new stimulus to the U.S. economy, mortgage markets are accounting for the possibility it could happen. It's unclear whether stimulus would be added after the Fed's next meeting, or at some point later in the year, or at all.

The FOMC has its next scheduled meeting June 19-20, 2012.

Single-Family Housing Starts Powers Ahead

Bob Elliot — Thu, 17 May 2012 14:34:00 GMT

The new construction housing market continues to improve.

One day after the National Association of Homebuilders reported a 5-year high in homebuilder confidence, the U.S. Census Bureau reports that single-family housing starts rose 2 percent for the second straight month last month.

In April, on a seasonally-adjusted, annualized basis, the government reports 492,000 single-family housing starts. A "housing start" is a home on which ground has broken.

In addition, March's single-family housing starts were revised higher. What was previously reported as a three percent loss was re-measured and changed to a 0.2% gain.

The April tally marks a six percent increase over the one-year moving average and, along with the March revision, suggests that the springtime housing market may have just been seasonal.

In March, a number of reports suggested a housing retreat :

Existing Home Sales slipped 3%
New Home Sales slipped 7%
Homebuilder Confidence fell 4 points

Since then, though, low mortgage rates and affordable home prices appear to have sustained the new construction market, which now appears poised for a strong 2012.

As one mark of proof, active buyers of newly-built homes in Minneapolis and nationwide are scheduling "model home" showings at the fastest pace since 2007. The burst of foot traffic high has builders upping their sales expectations for the next 6 months.

A scenario like this would normally lead new home prices higher, but the pressure for prices to rise may be offset by the amount of new home supply coming online.

In addition to a rise in Housing Starts, the Census Bureau also reports that, in April, the number of Building Permits for single-family homes rose 2 percent to move to its second-highest level since March 2010 -- the month preceding the end of the 2010 federal Home buyer tax credit.

86 percent of homes break ground within one month of permit issuance.

It's unclear whether housing is on a steady path higher, but there's a growing body of evidence that suggests the market bottom has already passed.

Homebuilder Confidence Moves To 5-Year High

Bob Elliot — Wed, 16 May 2012 13:48:00 GMT

Homebuilder Confidence is on the rise once again.

After a brief dip in April, the National Association of Homebuilders reports that the Housing Market Index rose 5 points in May to 29. The increase marks the sharpest climb in homebuilder confidence on a month-to-month basis in 10 years, and raises the index to a 5-year high.

The Housing Market Index is scored from 1-100. Readings above 50 indicate favorable conditions in the single-family new home market overall. Readings below 50 indicate poor conditions.

The HMI has not been above 50 since April 2006.

The Housing Market Index itself is a composite reading as opposed to a straight-up homebuilder survey. The published HMI figure is a compilation of the results of three specific questionnaires sent to NAHB members monthly.

The survey questions are basic :

How are market conditions for the sale of new homes today?
How are market conditions for the sale of new homes in 6 months?
How is prospective buyer foot traffic?

This month, builders are reporting strong improvement across all three surveyed areas. Current home sales are up 5 points; sales expectations for the next six months are up 3 points; and buyer foot traffic is up 5 points to its highest point since 2007.

With mortgage rates low and home prices suppressed, the market for new homes is gaining momentum, a conclusion supported by the New Home Sales report which shows rising sales volume and a shrinking new home inventory nationwide.

The basics of supply-and-demand portend higher new home prices later this year -- a potentially bad development for buyers of new homes in Minnesota and nationwide. With demand for new homes rising, builders may be less likely to make sale price concessions or to offer "upgrade packages" to buyers of new homes.

If you're shopping for new construction in or around Minneapolis , therefore, consider moving up your time frame. Home affordability is high today. It may not be tomorrow.

Home Affordability Getting A Springtime Boost From Greece

Bob Elliot — Tue, 15 May 2012 13:53:00 GMT

Home affordability is receiving a boost from across the Atlantic Ocean this spring.

For the third time in as many years, a weakening Eurozone is pushing May mortgage rates to new lows throughout Minnesota and nationwide.

The story centers in Greece and begins in 2010.

2 years ago, it was uncovered that successive Greece governments had purposefully misreported the nation-state's economic statistics in order to meet European Union standards. The fraudulent data had permitted Greek governments to spend beyond their means while hiding deficits from EU auditors.

The realization that Greece was heavy in debt with little means to repay its creditors resulted in a massive bailout from the IMF and the rest of the Eurozone nations. The terms for Greece said that, in order to receive its €110 billion aid package, Greece would be required to enact strict spending controls.

This is known as "austerity" and the deal was met with outrage by the Greek public. There's been general social unrest ever since and, on May 6 of this year, Greece held a special "early election" to elect all 300 members to its legislature.

No party won majority in the elections.

7 different groups garnered seats in the parliament last week with anti-austerity groups faring well. It's spurred concern that Greece will end its bid for fiscal restraint, and that Greece may choose to leave the 17-nation Eurozone.

The uncertainty surrounding Greece is helping U.S. mortgage rates to make new lows. As concerns mount for the future of Greece -- and the Eurozone, in general -- global investors seek safer markets for their money.

The U.S. mortgage-backed bond market is one such market.

With the implied backing of the U.S. government, mortgage-backed bonds are viewed as nearly risk-less and investors clamor for safety of principal during uncertain times. The boost in demand drives bond prices up and bond yields down, resulting in lower mortgage rates for home buyers and refinancing households of Minneapolis.

So long as Greece struggles to form its government and flirts with a sovereign debt default, mortgage rates should continue to face downward pressure. U.S. rates may not fall week after week, but analysts expect any rise in rates to be muted.

Mortgage Rates Make New All-Time Lows (Again)

Bob Elliot — Fri, 11 May 2012 14:09:00 GMT

Conforming mortgage rates continue to drop.

For the second straight week, the 30-year fixed rate mortgage fell to a new, all-time low nationwide. According to Freddie Mac's weekly mortgage rate survey, the average 30-year fixed rate mortgage rate dropped 1 basis point to 3.83% this week for borrowers willing to pay 0.7 discount points plus a full set of closing costs.

The 15-year fixed rate mortgage also set a mortgage rate record, registering 3.05% with an accompanying 0.7 discount plus closing costs.

Discount points are a one-time, up-front closing cost, based on loan size. 0.7 discount points is equal to 0.7% of the borrowed amount. A home buyer in Minneapolis opening a $200,000 mortgage and paying 0.7 discount points, therefore, would be subject to a one-time $1,400 fee paid at closing.

Borrowers wanting to avoid paying discount points can expect higher mortgage rates than Freddie Mac's reported national average.

Falling mortgage rates are nothing new throughout Minnesota. Since peaking in February 2011, mortgage rates of all types have been in steady decline. The 30-year fixed rate mortgage has shed 122 basis points since that date, falling from 5.05%; the 15-year fixed rate mortgage has shed 124 basis points, falling from 4.29%.

Low mortgage rates give today's home buyers additional purchasing power, stretching home affordability to new heights.

Low rates also help existing homeowners to lower monthly mortgage payments. For example, as compared to mortgage rates just 15 months ago, homeowners refinancing into today's 30-year fixed rate mortgage stand to save 13.4 percent on their respective mortgage payments.

A comparison :

February 2011 : $539.88 principal + interest per $100,000 borrowed
May 2012 : $467.67 principal + interest per $100,000 borrowed

A homeowner with a $300,000 mortgage at February 2011 30-year fixed rate mortgage rates would save $2,600 annually with a refinance to this week's low rates. Even accounting for discount points and closing costs, the "break-even point" on savings like that comes relatively quickly.

Mortgage rates can't be predicted so there's no guarantee of low rates forever. If today's rates meet your budget, consider locking something in. Speak with your loan officer about your options.

Improving Market Index!

Bob Elliot — Thu, 10 May 2012 14:09:00 GMT

The economic recovery continues nationwide, but the recovery's an uneven one.

Some metropolitan areas are faring very well this year, posting measurable gains in both employment and housing. Other metropolitan areas, by contrast, are struggling.

To help identify those markets in which growth is occurring, the National Association of Homebuilders created the Improving Market Index, a metric analyzing three separate, independently-collected data series "indicative of improving economic health".

The IMI's three collected data series are :

Employment Growth (as published by the Bureau of Labor Statistics)
Home Price Growth (as published by Freddie Mac)
Single-Family Housing Growth (as published by the Census Bureau)

A metropolitan area is considered to be "improving" if all three indicators show growth at least six months after the respective area's most recent trough, or "bottoming out".

In May, there are exactly 100 U.S. markets that qualify for the NAHB's Improving Market Index, down from 101 last month but higher by more than 800% from the reading in September 2011, the index's inaugural release.

17 areas were added to the Improving Market Index list this month including Phoenix, Arizona; Ann Arbor, Michigan; and Bend, Oregon. 18 areas were removed from the May IMI.

83 metropolitan areas remained from April.

There is little actionable information in the Improving Markets Index but the report does a good job of highlighting how "real estate markets" can't be summarized on a national level and remain relevant to everyday home buyers and sellers across Minnesota and nationwide. For example, Fort Collins, Colorado is listed as an Improving Market. However, Greeley, Colorado -- located just 30 miles away -- was just downgraded from the same list.

Home values and economies vary by region, by state, by city, by neighborhood, and even by street.

The complete Improving Markets Index can be viewed at the NAHB website but for the best read of what's happening in your neighborhood, talk to a local real estate agent. See Individual Minnesota Cities Data

With LIBOR Low, You May Not Want to Rush To Refinance Your ARM

Bob Elliot — Wed, 09 May 2012 13:44:00 GMT

Is your mortgage scheduled to adjust this season? You may want to let it. This year's ARM-holding homeowners in Minnesota are finding out that an adjusting mortgage may be the simplest way to get access to today's low mortgage rates -- without paying the closing costs.

Currently, conventional adjustable-rate mortgages are adjusting to near 3.00 percent.

If your home is financed via an adjustable-rate mortgage, you're likely cognizant of your loan's life-cycle. At first, your ARM's initial mortgage rate is agreed upon between you and your lender, a rate that both parties agree will remain in place from anywhere from one to 10 years, with periods of five and seven years being most common.

Then, after the initial "teaser rate" expires, the mortgage's mortgage rate adjusts according to a pre-determined formula -- one that's also agreed upon at closing. The loan is then subject to an identical mortgage rate adjustment every 12 months thereafter until the loan is paid in full.

The most common conforming mortgage adjustment formula is to add 2.25 percent to the then-current 12-month LIBOR rate.

Today's 12-month LIBOR is 1.05% so, as a real-life example, an adjustable-rate mortgage that's leaving its teaser rate period this week would adjust to 3.30%.

If you're a homeowner who took a 7-year ARM in 2005, or a 5-year ARM in 2007, your newly-adjusted mortgage rate should be roughly 2 percent lower than your initial teaser rate. On a $250,000 mortgage, a 2 percent mortgage rate reduction yields $298 in monthly savings.

Therefore, if you have an adjustable-rate mortgage that's due to reset, you may not want to rush to refinance it. For at least one more year, you may benefit from low mortgage rates and low payments.

As for next year's adjustment, however, that's anyone's guess.

BOA Borrowers! Don't Throw That Letter Away Up to $150,000 Principal Reduction

Bob Elliot — Tue, 08 May 2012 18:54:00 GMT

Executives at Bank of America say they will begin mailing 200,000 letters offering certain customers mortgage principal reduction. Eligible borrowers could get as much as $150,000 knocked off the balance of their mortgages. Source: CNBC Realty Check Diana Olick 5/8/2012 Click BOA Principal Reduction