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5
Jan

CCL Market Update: 2014 a Strong Year for Stocks, Employment, Mortgage Rates

Happy New Year! Let’s catch up on holiday season economic data releases…

Manufacturing activity dipped slightly month-over-month to end 2014, although it was the 19th consecutive month that the sector logged an expansion. Orders dipped as companies anticipated the effects of lower energy prices, according to a Bloomberg News overview on the subject. Click here for more.

New jobless claims ticked up by 17,000 to 298,000 for the week ending December 27. The final 2014 four-week average of 290,750 is a healthy number, especially because 2014 opened with an average of 346,000.

And speaking of positive numbers from 2014, last year, payrolls added the most jobs since 1999… through 11 months. We will see just how many jobs 2014 added this Friday (January 9th) when the December employment report is released.

The S&P 500 opened 2015 with four-straight “losing” days, thus breaking a streak of 264 trading days without a four-day losing streak – the longest such streak in 87 years. We wrote that sentence as a mouthful on purpose: news networks can make a statistic out of anything to grab attention.

(In other words, don’t be alarmed by the news. This decline doesn’t mean we are in for bad times. Actually, analysts predict gains for stock indexes in 2015).

In general, stock indexes had a strong 2014. The S&P 500, for example, rose 11% in 2014, and reached several all-time record highs in December.

Loan Program News

Nothing major to report on the loan program front. As we discuss in the mortgage rate section below, interest rates dipped nicely to end 2014. Check out our website’s FAQ section to learn more about the rate lock, the floating rate lock, and “why mortgage rates move.”

If the issue keeping you for homeownership is downpayment, check out our “low down payment” guide and our “first-time home buyers” guide for qualification tricks (your down payment can be as low as 0%). Don’t disqualify yourself from the couch!

 

Mortgage Rate News

The 30-year fixed enters 2015 in the 3.75% to 4.00% range. All in all, 2014 was a great year for mortgage rates.

We speak about “mortgage rates” generally, but the actual rate that each borrower will obtain varies based on credit profile, down payment, desired out-of-pocket closing cost (buyers can pay more for a lower rate), loan program, lender used, and more.

Two quick methods used to track broad rate movement is the 10-year U.S. Treasury bond yield, and Freddy Mac’s 30-year fixed mortgage rate tracker.

When the 10-year yield drops, expect mortgage rates to improve. The 10-year Treasury bond yield began 2014 at 3.00%, dropped to 2.58% by July 1, and finished 2014 at 2.17%.

Freddie Mac’s weekly survey, meanwhile, tracks general on-the-ground rate movement across a portfolio of lenders. The 30-year fixed movement in 2014 can be seen below:

2014 30-year fixed Movement

Nice drop!

Another way to track rates, of course, is just to sign up for the CCL Rate Tracker. We will do the work for you! Email [email protected] the test “mortgage rate tracker” to receive an update every two weeks.

For a more specific rate quote, give us a call at 805.543.LOAN (the quote is free and honest!).

22
Dec

The Federal Funds Rate, Inflation, and the Short-Term Future for Mortgage Rates

The Federal Reserve expects the U.S. economy to grow at a pace of 2.6 to 3.0% in 2015, a “moderate pace” of expansion. The Fed also projects that the unemployment rate will drop to 5.2 to 5.3% in 2015, calling the growth of employment “solid.”

With the U.S. economy seemingly humming along – and with the future looking better and better – the urgent question for the housing industry goes something like this: “will the Fed support an increase in interest rates by raising the federal funds rate off its lowest level for the first time since 2008?”

First, some background.

The Federal Reserve aids the economy with “monetary policy.” One tool that the Fed uses to apply pressure is the “federal funds rate”, which is the interest rate that banks are charged to lend money to one another. In theory, a higher federal funds rate would make banks more reluctant to lend, while a lower interest rate encourages lending.

The Fed has held the federal funds rate at its lowest range since 2008, between 0.00% and 0.25%, in an effort to spur economic growth. This “accommodative monetary policy” is one reason why mortgage rates have dipped to their record low.

The federal funds rate trickles down to consumers, and effects the rate at which we all pay to borrow. Theoretically, a lower federal funds gives banks the ability to lend more money. With more money “supply”, the cost of lending drops.

The Fed can also influence “inflation” using the federal funds rate, and has targeted 2.0% as the healthy target. Even with the accommodative policy, the pace of inflation has been stubbornly resistant to an increase.

All of this is to say: to get a hint about when the Fed will raise the federal funds rate (and interest rates), take a look at inflation. Plummeting oil prices have caused the Fed to downgrade its inflation expectation to a range of 1.0% to 1.6% in 2015, a drop from 1.6% to 1.9% just three months earlier.

With inflation below 2.0%, the Fed says that it will continue to hold the federal funds rate at its lowest level “to support continued progress toward maximum employment and price stability.”

In its meeting statement, the Fed offered vague guidance about how long its stance could last, “It likely will be appropriate to maintain the 0 to 1/4 percent target range for the federal funds rate for a considerable time… especially if projected inflation continues to run below the Committee’s 2 percent longer-run goal.”

In other words, we are not in danger of an imminent rise. But there will be a time (2016?) when the Fed increases the funds rate, and mortgage rates will move up off such a historically low level.

 

Mortgage Rates

Last week, mortgage rates responded to the Fed’s meeting announcement with a mid-week dip. To begin the Christmas week, rates are slightly higher. Still, over the long term, mortgage rates are right around an 18-month low. With  uncertainty surrounding  slowing global economies, geopolitical turmoil, and (now) falling oil prices, we would expect some measure of stability when it comes to low rates in the near future.

Still, we have seen unexpected jumps in the past. Now is an excellent time to lock. Give us a call at 805.543.LOAN to lock in a low mortgage rate and benefit from the savings offered.

22
Dec

Mortgage Rate Update (December 22)

Mortgage rates inched up to begin the week, but are only slightly above 18-month lows. This will be our final rate update prior to Christmas. If you would like something a little more current, give us a call at 805.543.LOAN for more information.

Read more »

17
Dec

Mortgage Rate Update (December 17)

Mortgage rates are dropping fast! Give us a call at 805.543.LOAN to see how you can take advantage of the low-rate window.

Conventional Loan Programs 

30-year fixed, 15-year fixed, 30-year high balance

Conventional Rates copy

Specialty Loan Programs

FHA, FHA 203k, USDA, VA

FHA, VA, USDA Rates copy

Manufactured Home Loan Programs

FHA Manufactured, Conventional Manufactured

Manufactured Rates copy

Jumbo Loan Program

Jumbo ($700,000 loan amount)

Jumbo Rate copy

Rates Directly to Your Inbox!

If you would like to receive a more detailed Mortgage Rate report, you can subscribe to our “CCL Rate Tracker.” The CCL Rate Tracker follows 10 loan programs and publishes three rate options closest to 1 point, par, and 1 rebate for each program every two weeks and delivers the results in an email. To sign up, please email [email protected] with the text “Rate Tracker.”

Apply Online Today!

When you register for a Loan Center account, you can submit a loan application online and the sensitive information that you provide will be transmitted securely. Your account also enables you to easily modify your loan application and view the status of your loan. Any questions? Call us at 805.543.LOAN or email us here.

About the Loan Programs:

 

NOTE:

  • Mortgage rates assume purchase of a singe-family, detached, owner-occupied, residential property.
  • Mortgage rates assume borrower credit score of 760 and a Debt-to-Income ratio of 35%. Rates for conventional loan programs assume a loan-to-value of 80%.
  • Loan amount is $417,000 for all programs (appraised value of $522,000), except for the high balance ($561,200 loan and $722,000 value), and Jumbo ($700,000 loan and $1,000,000 value)
  • Mortgage rates and APR subject to change.
16
Dec

How Affordable is Real Estate in San Luis Obispo County?

Last week, we wrote about the demographics shift that could precipitate a period of healthy demand for real estate. The 20-24 and 25-29 age cohorts are now the largest in the United States. As these “millenials” graduate, advance in work, and start families, they will need housing, and the existing supply may not be able to cover demand. Will we see a construction boom? Could this boom be a significant U.S. economic driver?

This week, we bring this theme a little closer to home. Like the rest of the country, the San Luis Obispo County real estate market rose during the bubble years (+96% prices: 2001-2006), dipped mightily (-37% prices: 2007-2011), and then recovered energetically (+30% prices: 2011-2014).

Rising prices indicate a gratifyingly robust housing sector, but the diminished affordability hurts the very same young workers that we hope will drive the economy.

The median price for a single-family residential home in San Luis Obispo County was $480,000 through October, a rise of about 30% over 36 months.  In 2011, 39% of sold properties were “distressed” (foreclosure or short sale), but today that portion is just 6%. Through October of 2014, foreclosure properties were priced 35% lower than “normal” properties on average. Such deals are now much more difficult to find, and when something affordable does enter the market, multiple buyers queue to snap it up.

Zillow put together a fascinating graphic to visualize real estate market affordability for young first-time buyers. Zillow took the median income for ages 23- to 34, and assumed a 30-year fixed mortgage and a down payment of 5% (younger buyers often have less savings and so require a lower down payment.). How much of their income would this median, young first-timer need to pay to obtain an “affordable” home (defined as the lower 33% of for-sale homes)?

No surprise: it is less affordable for first-time buyers to purchase a home. On the national level, Zillow estimates that first-timers should expect to pay 17.4% of their income per monthly mortgage payment. The typical buyer could expect to pay 15.3% (“typical” is defined as a buyer with median income who purchases a median priced home with a standard 20% down payment).

Zillow’s nifty tool lets us take a look at the San Luis Obispo-Paso Robles area affordability as well. The picture is about as grim as you might expect. The first-time buyer with a (local) median income for ages 23-34 would need to commit 54.9% of income to get a mortgage, compared to 39.5% for repeat buyers. These numbers disqualify many people right off the bat.

So how do we make room for this young workforce in our growing economy?

 

New Developments

More housing supply should help. We have profiled local efforts to expand access to affordable workforce housing. A recent decision by the San Luis Obispo City Council appears to have cleared the way for a housing development out by the SLO airport. The good news is that everybody from local businesses, to developers, to government officials have identified a problem and are working to find solutions.

 

Mortgage Lending

Lending plays a significant part of the “affordability” conversation as well. Broadly speaking, mortgage lenders are relaxing their qualification standards, which will give more people the ability to afford a home loan.

One notable example: Fannie Mae recently reduced their down payment requirement for a conventional 30-year loan from 5% to 3%.

“The number one hurdle to homeownership is down payment: it takes folks a long time to save $100,000,” commented Central Coast Lending owner Jason Grote. “This program lowers that bar, making home ownership more attainable for more working class folks.”

Other low down payment programs exist (USDA, FHA), but USDA is restricted by geography and income, and the FHA loan builds in an expensive fee structure.

Education will also play an important roll. Potential buyers need to know their options. A recent report by NeighborWorks, a  nonprofit community development corporation, estimated that 70% of U.S. adults aren’t aware that down payment assistance is available. Programs like the Mortgage Credit Certificate (MCC), the CCL Workforce Housing loan (CCLWorks), and the California Homebuyers’ Down Payment Assistance Program (CHDAP) all offer price cuts and/or down payment assistance for first-time, middle-income home buyers.

For a more in-depth look about how first-time Central Coast buyers can better afford homeownership, read our guide here.

At Central Coast Lending, we have had great success qualifying all types of people. Our unique banker / broker hybrid model gives us flexibility to find the right loans for all types of financial situations. Give us a call at 805.543.LOAN for a completely free, honest, and confidential assessment of your finances, and find out what you can afford!

16
Dec

Mortgage Matters Radio: December 13 (NEW)

Guest: None.

Central Coast Lending Soundcloud (full episode downloads). December 13, 2014 (link to episode).

 

11
Dec

Mortgage Matters Radio: December 6 (NEW)

Guest: None.

Central Coast Lending Soundcloud (full episode downloads). December 6, 2014 (link to episode).

11
Dec

Mortgage Matters Radio: November 22 (NEW)

Guests: Chuck Stanley and Sandy Madison (Pismo Beach Century 21 Hometown Realty)

Central Coast Lending Soundcloud (full episode downloads). November 22, 2014 (link to episode).

11
Dec

Mortgage Rate Update (December 10)

Mortgage rates are dropping fast! Give us a call at 805.543.LOAN to see how you can take advantage of the low-rate window.

Conventional Loan Programs 

30-year fixed, 15-year fixed, 30-year high balance

Conventional Rates

Specialty Loan Programs

FHA, FHA 203k, USDA, VA

FHA, VA, USDA Rates

Manufactured Home Loan Programs

FHA Manufactured, Conventional Manufactured

Manufactured Rates

Jumbo Loan Program

Jumbo ($700,000 loan amount)

Jumbo Rate

Rates Directly to Your Inbox!

If you would like to receive a more detailed Mortgage Rate report, you can subscribe to our “CCL Rate Tracker.” The CCL Rate Tracker follows 10 loan programs and publishes three rate options closest to 1 point, par, and 1 rebate for each program every two weeks and delivers the results in an email. To sign up, please email [email protected] with the text “Rate Tracker.”

Apply Online Today!

When you register for a Loan Center account, you can submit a loan application online and the sensitive information that you provide will be transmitted securely. Your account also enables you to easily modify your loan application and view the status of your loan. Any questions? Call us at 805.543.LOAN or email us here.

About the Loan Programs:

 

NOTE:

  • Mortgage rates assume purchase of a singe-family, detached, owner-occupied, residential property.
  • Mortgage rates assume borrower credit score of 760 and a Debt-to-Income ratio of 35%. Rates for conventional loan programs assume a loan-to-value of 80%.
  • Loan amount is $417,000 for all programs (appraised value of $522,000), except for the high balance ($561,200 loan and $722,000 value), and Jumbo ($700,000 loan and $1,000,000 value)
  • Mortgage rates and APR subject to change.
9
Dec

The HomeStyle Mortgage: Affordable Financing for Home Improvements!

Central Coast Lending offers an affordable mortgage solution for potential owners to purchase and renovate a new home, or for existing owners to refinance and upgrade their current property.

The HomeStyle Mortgage allows homeowners to include financing for a whole swath of home improvement(s) in with their mortgage, including kitchen upgrades, bedroom and bathroom additions, structural repairs, energy efficiency changes, and cosmetic alterations.

 

New Home Purchase and Renovations

The California real state market can be very difficult for buyers, and our home County of San Luis Obispo is no different.

The median price of single-family homes sold in SLO County through October 2014 was $480,000. Bargains have been few and far between.

In 2011, 39% of sold single-family properties were “distressed” (foreclosure or short sale), but today that portion is just 6%. Through October of 2014, foreclosure properties were priced 35% lower than “normal” properties on average, but such deals are increasingly difficult to find.

The HomeStyle Mortgage program will allow buyers to expand their criteria to include more properties, because they can fold desired renovations into a single, affordable loan.

 

Refinance and “Move Up” in Your Own House

The refinance-and-renovate solution offers an olive branch to homeowners in San Luis Obispo County’s competitive real estate market. Over the past 36 months, the median home price has risen nearly 30%. As families grow and circumstances change, homeowners might want or need something different from their property. Rather than attempt to make the difficult “move up” to something new, the solution to your future might be right beneath your feet.

The HomeStyle Mortgage offers a conventional solution to the cash-flow problem. Owners can borrow on up to 50% of the as-completed value of the home. An estimated post-improvement $400,000 home, for example, would allow borrowers to earmark up to $200,000 for home improvements. The renovation loan will cover labor and materials, soft costs (architect fees, permits, licenses), and up to six months of mortgage payments should the owner vacate the property during renovation.

 

The HomeStyle Mortgage

Relative to other renovation financing options, the HomeStyle Mortgage typically offers more flexibility affordability, and ease-of-use (rather than, say, adding a second mortgage or paying a premium for the FHA 203k loan).

Special Features:

  • Finance multiple home improvement projects, and cover fees for architect, permits, and licenses.
  • More affordable than other home improvement loans (such as FHA 203k)
  • “Luxury” projects allowed (swimming pools, landscaping, etc). This isn’t the case with FHA 203k.
  • Primary, secondary, and investment homes allowed, including up to 4 units.

Guidelines:

  • 15-, 30-year fixed term
  • Adjustable rate available
  • Primary, secondary, investment homes allowed
  • 1 to 4 units allowed
  • Down payment as low as 5%
  • No mortgage insurance when loan-to-value is under 80%
  • Borrow up to 50% of the estimated post-improvement home value ($400,000 post-improvement value would offer $200,000 in financing).
  • Borrowers have 30 days to begin and 180 days to complete.

As with any loan program, there are a more nuanced details, possibilities  and qualification specifications. Give us a call at 805.543.LOAN for a free, honest, confidential assessment of the possibilities!

 


Central Coast Lending is a California mortgage broker and direct lender based on the Central Coast of California in San Luis Obispo County. Call us today at 805.543.LOAN or email us here to set up a free pre qualification. We are The Mortgage Experts: ask us anything!

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