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Archive for November 2011


Dow Jumps on Credit News

The Dow is up over 400 points today, after major central banks around the globe took action to ease the debt tension and make it easier for banks to borrow dollars when needed. In practice, this means that European banks have better access to dollar liquidity – something they haven’t had due to concern about the European debt issue and consequential exposure to potential losses. Economic technicalities aside, this action is an attempt to avoid the kind of major credit crunch we saw in 2008, which would restrict lending and investment and shrink the global economy.


Consumer Spending, New Home Sales and Rate Update

[We post a weekly column on local realtor Keith Byrd's Real Estate Blog in which we recap recent news of the economy, real estate, mortgage, and interest rates.  What follows is that column.]

In the spirit of the holiday season, we have a retail sales update, new home sales numbers, and a brief market recap.

Initial estimates of Black Friday sales suggest record numbers. ShopperTrak estimated sales on Black Friday at $11.4 billion, a record high, and up 6.6 percent from last year. For the weekend, sales were up 16.4 percent and totaled $52.5 billion according to the National Retail Federation (NRF), who cited a BIGresearch survey. According to the same company, individual shoppers spent $398.62 each, up from $365.23 last year. The NRF estimated that 226 million shoppers visited stores and websites over the weekend.

Even before the Black Friday numbers, third quarter consumer spending grew at 2.3 percent, its fastest pace of the year, according to the Commerce Department. Consumer spending accounts for 70 percent of the economy, and this improvement is seen as cause for optimism heading into the fourth quarter, which is the strongest retail season.

Consumer indebtedness fell slightly during the third quarter by $60 billion or 0.6 percent. Household debt now sits at $11.66 trillion nationally. The decline is due partially to a decrease in mortgage balances.

October saw a slight uptick in new home sales. According to the Commerce Department, new-home sales went up 1.3 percent last month to an annual rate of 307,000.  While positive, the number is well off of the 700,000 sales that economists suggest should be sold to maintain a healthy housing market. According to the National Association of Home Builders, each home built generates $90,000 in tax revenue and creates an average of three jobs for a year.

Overall, however, the picture for homebuilding looks bleak. Nationally, only 162,000 new homes went on sale in October – a record low.  Builders have stopped new projects due to low demand, difficulty in obtaining financing, and a surplus of existing homes on the market.

The market shot up today after a seven day rough stretch on news about possible European debt solutions and strong retail numbers. The Dow is up 291 points and the S&P 500 is up 33.88 points.

Last week, rates approached record lows, but with the positive market performance, they might be slightly less favorable to begin the week. The national average of the 30 year fixed is 4.02 percent (4.06 percent APR). The 15 year fixed sits at 3.38 percent (3.52 percent APR).

This week we will see numbers on home prices, consumer confidence, mortgage applications, pending home sales, and the employment situation. Check in with our Facebook and Blog for more updates throughout the week.


Super Committee Failure, Existing Home Sales Numbers, HARP II Unveiled

[We post a weekly column on local realtor Keith Byrd's Real Estate Blog in which we recap recent news of the economy, real estate, mortgage, and interest rates.  What follows is that column.]

We begin the week with bad news from the much hyped “super committee” that was created in an effort to cut the deficit. The committee, comprised of six democrats and six republicans, failed to find common ground on a package of at least $1.2 trillion in reduction over 10 years.

The expected failure of the committee coincided with a sharp drop in the market. The Dow fell 248.85 points, the Nasdaq fell 49.35 points, and the S&P 500 dropped 22.67 points. Part of the reason the market dropped was renewed concern about gridlock in Washington. There is worry that political positions are too entrenched and preempt the ability to solve problems.

We have a few real estate numbers for you this week.

From March 2010 to March 2011 a record low number of Americans moved. Just over 11 million people moved over this time, which is down from 12.5 million the previous year and well down from the peak of 46 million in 1984-85 (and this is with an even greater population). One interpretation of these numbers suggests that the immobility has been influenced by the housing market crash, which has left homeowners underwater and unable to move. A mobile citizenry can accelerate the economy, since moving has a number of costs associated with it.

Existing home sale rose 1.4 percent last month to a seasonally adjusted rate of 4.97 million. The number is still considered “depressed”, as economists suggest 6 million sales would be consistent with a healthy housing market. Inventories of existing homes for sale in October fell to their lowest rate since 2005, however this is still an 8 month excess.

As CNBC Real Estate Reporter Diana Olick points out, when we break down those numbers, it becomes apparent that the majority of growth is occurring at the low end of price. Over the past year, home sales increased in the $0 – $100,000 range (24 percent), the $100,000 – $250,000 range (13 percent), and in the $250,000 – $500,000 range (just less than 1 percent).  Above $500,000, sales were down 9 percent.

Last week, Freddie and Fannie announced their HARP II guidelines in an effort to give responsible underwater homeowners an opportunity to refinance with today’s low rates. Of note, the 125 percent loan-to-value ceiling was eliminated; however borrowers with an LTV over 125 percent will not have an opportunity to refinance until March.  You can check out our BLOG POST for a more complete rundown of the program.

The 30-year fixed sits at a national average of 4.03 percent (4.07 percent APR) and the 15-year fixed sits at 3.38 percent (3.52 percent ARR).

As always, check in with our Facebook page and Blog for important mortgage news and market updates. Have an enjoyable Thanksgiving!


Mortgage Matters 11/19/11

GUEST: Wes Burke – Owner, Patterson Realty

Wes Burke joins Jason Grote to cover for an absent Dan Podesto. Jason and Wes talk Real Estate, the use of Realtors, the complications of APR, the use of the adjustable rate loan (ARM), and more.


HARP II Guidelines Released

Some weeks ago, we had a post on here about the announcement of the HARP II loan program, which would modify the first HARP program and broaden the base of eligibility for home refinance.  Last week, Fannie Mae and Freddie Mac released the official guidelines for the program. What follows is a review of the HARP program and a few of the specific changes that are expected to make a difference.

In 2005, the San Luis Obispo county median home price peaked at $581,305. Six years later, the median home price has fallen to $354,842. As home prices drop, a number of homeowners have found themselves owing more than their home is worth. Nationwide, 11 million home loans are underwater.

Meanwhile, interest rates have fallen to the lowest they have ever been. This drop has been a problem for homeowners that want to refinance to lower rates. Banks look at the loan-to-value (LTV) ratio when determining loan qualification and this has left a number of homeowners unable to refinance, even though they are current on payments.

Enter, HARP. The Federal government passed its Home Affordable Refinance Program in March 2009 to help responsible borrowers who were current on mortgage payments but could not refinance due to an underwater loan. HARP was expected to reach 5 million underwater borrowers, but only reached 894,000.

The FHA went back over the program to fix the issues, and recently made a number of changes in an attempt to address the problem. This is HARP II.

HARP II was reformed to be more effective than HARP I because it broadens the base of eligible borrowers by eliminating the loan-to-value ceiling of 125 percent, and incentivizes lenders to accept this base by relieving underwriting stress.

One important issue to make note of… for a LTV greater than 125 percent, refinancing will not be available until March of 2012.  For more information on your status here, give us a call at 805.543.LOAN.

The major change made to help lenders was to remove the representation and warrants requirement, which is a fancy way for saying that lenders have been responsible for mistakes during underwriting. This makes lenders reluctant to take the risk of underwriting an underwater loan, because in the case of a mistake, they must take on the cost.  In theory, by removing the reps and warrants rule, lenders will be more likely to underwrite loans with a high LTV.

HARP II is designed to help responsible borrowers refinance despite an underwater loan. Following are some program guidelines.



No mortgage delinquency in the past 6 months and only one in the past 12 months.

Eliminate loan-to-value ceiling. The previous maximum was 125 percent.

Must re-qualify if payment increases by more than 20 percent.

Borrower benefit requirement. Must reduce monthly payment, reduce interest rate, or reduce the loan amortization term.

Allows for refinancing for the purpose of reducing monthly principal and interest payment.


Rate Update

[We post a weekly column on local realtor Keith Byrd's Real Estate Blog in which we recap recent news of the economy, real estate, mortgage, and interest rates.  What follows is that column.]

Last week, the Central Coast Economic Forecast gave us some interesting numbers. San Luis Obispo County taxable sales are expected to grow 5.1 percent in 2012 and 5 percent the following year. Home sales are expected to grow 8.1 percent next year, and a total of 8.4 percent over the next two years. On the not so good side, the median home price in the county is forecast to remain flat over the next year, and then inch up over the next few years. On a national level, CoreLogic reported that home prices declined 4.1 percent from September of 2010.

Nationally, we had a few positive economic reports. Weekly jobless claims fell to 390,000, which is the fewest number since April. The four week average of claims fell to 400,000, which is also the lowest number since April.  There were more jobs posted in September (3.4 million) since August 2008.

Freddie Mac came out with Q3 loan statistics. Currently, the majority of loans are refinance.

-         Currently, 79 percent of all mortgage transactions are refinances.

-         82 percent of Q3 refinances were no cash-out transactions.

-         44 percent of those refinances maintained the approximate loan amount and 37 percent reduced the principal balance.

The 30 Year Fixed is at 3.875 percent (3.986 APR) and the 15 Year Fixed is at 3.250 percent (3.485).

Lastly, if you have been reading our posts here, you would have noticed that European debt problems have played a central factor in market volatility over the past days and months. If you want to learn more about this situation and the long-term outlook, head over to THIS article on CNBC. The article suggests that the debt problem could take 2 to 5 years to really unwind.

Follow along with the week’s major financial and real estate developments on our Facebook and Blog.


Mortgage Matters 11/12/11

GUEST: Scott Engle – President, Engle & Associates Insurance Brokers

Scott Engle joins Jason Grote and Dan Podesto for this episode of Mortgage Matters. Jason and Dan discuss the volatile bond market, positive trends in economic numbers, Fannie and Freddie, and more.  Scott joins in at 10:30 with helpful insurance tips. Listeners call in with questions.


Mortgage Matters 11/5/11

GUEST: Kara Blakeslee – Attorney and Financial Planner, Blakeslee & Blakeslee Wealth Management

Dan and Jason discuss job numbers, economic growth, and underwater mortgages. Kara Blakeslee talks wealth management, investment strategy, market trends, recession fears and more. Listeners call in with questions.


European Debt, Jobless Rate, Home Price, and Interest Rate Update

[We post a weekly column on local realtor Keith Byrd's Real Estate Blog in which we recap recent news of the economy, real estate, mortgage, and interest rates.  What follows is that column.]

Last week on Monday, the Dow ended October with a 9.5 percent gain.  By Tuesday, gains had been cut by over a quarter.  Stocks dropped 2.5 percent on November 1, prompted by Greece’s Prime Minister George Papandreou’s proposal to put the debt deal to a public referendum. Since then, Papandreou has backed down on this proposal, narrowly survived a parliamentary vote of confidence, and recently agreed to resign and help create a transitional administration before early elections can determine a new government. Now the markets have turned attention to concern over Italian debt.  All of this illustrates that the markets remain shaky and will continue to do so as long as we have uncertainty over the global economy. We continue to have windows of temporary optimism, but the whole picture remains uncertain.

On the home front, the private sector added 104,000 jobs in October, which marks the third month in a row of positive numbers. The 104,000 private sector growth was offset by a loss of 24,000 government jobs.  The positive month knocked the national unemployment rate down one-tenth of a percentage point to 9.0 percent.  Economists agree that a healthy rate of growth would be 150,000 a month, which would keep pace with new entrants into the job market.  Locally, unemployment fell to 9.5 percent in September (from 9.6 percent in August).

Interest rates have followed the peaks and valleys of the market. The sharp drop on November 1 corresponded with better rates than we had seen in a week.  To begin this week, we are looking at 3.750 percent for a 30 year fixed (3.957 percent APR) and 3.000 percent for a 15 year fixed (3.593 percent APR).

We have some important news on the home price front.  According to Fixerv, a financial analytics company, home values are expected to fall 3.6 percent by next June.  This drop would represent a new low of 35 percent below the 2006 peak in home prices.  As reported by Les Christie of CNN Money, Fixerv’s chief economist David Stiff noted that an expected increase in foreclosure activity and sustained high unemployment will account for the drop.  Should it happen, this home price dip would be the third we have seen since 2009.

We will be providing updates on the Europe debt situation, as well as October housing numbers as the week progresses. Check in with our Facebook and Blog to stay updated.


Mortgage Matters 10/29/11

GUEST: Tom Bordonaro Jr. – SLO County Tax Assessor

Dan and Jason recap the HARP 2.0 program announcement. Will the second version of the government-backed Home Affordable Refinance Program do a better job of helping responsible underwater homeowners with Feddie or Fannie loans refinance? Listeners call in with questions. In the second half of the show, San Luis Obispo County Tax Assessor Tom Bordonaro Jr. joins us to answer questions about local properties.