August 2010

Chicago Illinois Mortgage Rates Week in Review for the Week Ending 08/28/2010

The biggest news this week on the housing front, was that existing home sales fell 27.2% in July. The June results were also downgraded, and now the inventory of unsold homes on the market is about a 12.5-month supply at the current rate of sales, up from an 8.9-month supply in June. A healthy real estate market usually has 6 months of supply or less.  New home sales also fell 12.4% for the month, to a level not seen since 1968. If you add in all the distressed homes that aren’t on the market, yet, this adds to the softness. Part of this picture is skewed, though. Housing is a mess, but part of the reason that sales are down now is because many of the buyers who would have normally bought in the last few months, already bought earlier in the year in order to take advantage of the…

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With Home Sales Down 27%, What Does This Say About the Chicago Area Housing Market?

This week the National Association of Realtors announced some grim news – existing home sales were off 27.2% in July, the worst reading in 15 years. Though this news is grim, it isn’t surprising. The real estate market has been hit hard and with employment high, it isn’t likely to turn around soon. But the numbers don’t tell the whole story. There are a couple of things to keep in mind that put this number into fuller context: First time home buyers bought in force earlier in the year to take advantage of the tax credit. So many buyers who would have otherwise been in the market now, have already bought. July’s numbers were worse than expected, but sales came in stronger earlier in the year.   Real estate is seasonal. Home sales usually peak in the Spring time, dip in the Summer and then there is usually a smaller…

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Chicago Illinois Mortgage Rates for the Week Ending 08/20/2010

The big story of this last week was volatility. Most of the reports last week gave weight to the slowing economy theory. Home starts declined again this week and are now down to the lowest number since 1968. This is still the overhang from the bursting of the housing bubble, and we won’t see a significant degree of new starts until the economy is on the upswing and a good portion of the extra housing units have been absorbed (make that homes are selling again). Weekly unemployment claims were up again, with nearly 500,000 new claims. This number is a whole lot better than the worst of the crisis, but the claims are growing again (mostly because government paid census workers are off their jobs), so this adds more doubts of a real recovery. Probably the most influential report released last week was the Philly Fed Business Outlook Survey. This…

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24 Million Home Owners have Mortgages With Rates Over 6%

Calculated Risk, one of my favorite financial blogs, found some interesting information released by the census bureau in the American Housing Survey. I found some surprising and interesting information in the report. Among the findings released are: There were 76.4 million owner occupied homes or housing units in 2009. Of these, 24.2 million, or 31.7% were owned free and clear with no mortgage. Of those who had mortgages, 26.8 million primary mortgages were originated in 2004 or earlier. 12.7 million primary mortgages were originated before 2000. 24.1 million primary mortgage, about a 1/3, had interest rates above 6%. This information is kind of mind boggling. With interest rates in the mid 4s, at all time lows, why would so many people not refinance their loans when rates are so much lower? Part of this of course is that it is harder to refinance now than it used to be. If…

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Fed Statement – Economy Slower, They Will Step in Lightly to Buy More Bonds – Low Rates Set to Continue

The big news in the Fed release yesterday was that they will keep the level of Fed holdings constant by reinvesting principal payments into new Treasuries and Mortgage Backed Securities. This isn’t the big tip of the scales like last year when they printed up more money to buy 1.25 trillion dollars of mortgage backed securities, which sent mortgage rates down new lows. This is more of a baby step, or to keep the scale analogy, they are putting their thumb on the scale to gently tip in the favor of more liquidity. This could be a just a little nudge for symbolic purposes, or it could be the first step toward a new round of aggressive Fed intervention. Either way, this is an acknowledgment that the economy is slowing and inflation is the least of our problems. In this statement the Fed is saying that they are ready and…

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Chicago Illinois Mortgage Rates Week in Review for the Week Ending 08/06/2010

The economic news released last week was mixed, but the Big Kahuna of reports, the employment report, came in worse than expected, and that trumps all the other news. On the good side, the ISM manufacturing index came in higher than expected showing that manufacturing activity has expanded in each of the last 12 months. The personal savings rater also increased for last month. On the negative side pending home sales came in low (not a real surprise since the summer is usually slow in the housing market and many borrowers moved up their buying to take advantage of the tax credit earlier in the year), and consumer confidence dipped again. But the number that really mattered was the employment report. On the surface this showed a loss of 131,000 jobs, in July, though after discounting the 143,000 temporary census jobs lost, the more accurate number was a gain of…

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Cash In Refinancing – Why Bringing in More Cash to Your Closing Could Save You More Money

The Cash/Out refinance has been a long time favorite of home owners who wanted to consolidate debt or take out home equity for other purposes. Being able to take equity out of your home has always been a big benefit of owning real estate, though it grew to an absurd degree during the bubble years. It’s not so easy to take cash out now. For one thing the standards have been raised and lenders now require more equity retained in the home. But the bigger issue is that with home values down, many home owners have lost equity, and many are upside down owing, more on their mortgages than their home is worth. This has led to the newest major trend in lending, the Cash/In Refinance. A cash/in refinance means you are coming to the closing table with extra money to pay down the mortgage so you can take advantage…

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FHA Changes are Coming Soon – Mortgage Insurance Rates Are About to Change

Since the bottom fell out of the housing market, FHA has become the best financing choice for a big slice of homebuyers and home owners (FHA makes up about 40% of the loans originated now). When all the private lenders dropped out of the market, and Fannie Mae and Freddie Mac tightened their guidelines and added big price hits, FHA stepped in to fill the gap. FHA is the only option for home buyers with low down payments (3.5% down, and this can all come from a gift) and though this is a fully underwritten loan, FHA is more forgiving of past credit mistakes if the underwriter can understand what happened, and why it won’t happen again. In many ways FHA has become the new conventional, and the financing terms work best even for many borrowers who could qualify for conventional financing. But all this success has come at a…

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Chicago Illinois Mortgage Rates Week in Review for the Week ending 07/30/2010

Mortgage Rates Drop to All Time Lows Mortgage rates are now at their best levels ever, or at least the best over the 50 years they have been tracking 30 year fixed rate mortgages. The general consensus now is that the economy, though still growing, is decelerating. The financial community is now seeing that this isn’t going to be a fast recovery, and with continued high unemployment, deflation, or more likely disinflation, is a bigger immediate worry than the fear of inflation. The big news last week was mostly bad – June new home sales were the worst on record, the GDP came in at a gain of 2.4%, lower than expected and about half the previous reading. For good news, the consumer confidence index came in slightly better than expected, though still off from the previous month’s reading. The stock indexes are still holding, and corporate profits are still…

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