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Oysters and Other Challenges

September 20, 2010 By Leave a Comment

“He was a bold man that first ate an oyster.” Jonathan Swift

Many accidents are caused when children get into things they don’t understand. Electricity is one of those dangers. Precautions can help a lot. For example, did you know that you could insert an ordinary key ring through the holes in an electrical plug prong? That quick step will make it almost impossible for a child to insert the plug in a wall outlet. That’s easy, isn’t it? Of course, as children get older, they can outsmart this safety precaution.

As an adult, you’ve probably experienced a lot of challenging situations. Perhaps it was eating raw oysters. Or maybe rock-climbing. And today you may be tempted to try something dangerous like guessing about the value of your home. Or making improvements without analyzing how they will benefit (or cost) you.

Don’t take a chance. Visit my web site at www.JustinCartier.com for information on recent home sales, how to prepare your home for sale, or for an online market analysis. As a RE/MAX Broker I can offer you the most up-to-date information. Be safe at home and in your move, too. Call on me before you do anything hazardous to your financial well-being, won’t you? You’ll be glad you did!

Filed Under: Home Buying, Real Estate Market

What’s Ahead For Mortgage Rates This Week : September 20, 2010

September 20, 2010 By Leave a Comment

FOMC meets this weekMortgage markets were highly volatile, yet relatively unchanged last week in back-and-forth trading on Wall Street. Global investors are grappling with the state of U.S. economy and unable to discern whether it’s growing, or slowing.

As an real-world illustration, the government’s August Retail Sales report showed strong growth nationwide. However, in looking at a subset of that same data that accounted for rising gas prices, and excluded automotive-related sales, the results were far more tame.

In other words, despite the winning headlines, there was no clear conclusion in August’s Retail Sales.

As another example, consumer confidence dropped to its lowest level since August 2009, it was reported last week. Now, on most days, this statistic would lead mortgage rates lower, but the figures happened to be offset by improving employment report that suggests a looming jobs recovery.

Again, markets got confused and without clear direction, mortgage rates have been dancing.

Last week, conforming rates carved out a range close to 0.375 percent, making it difficult for Maine rate shoppers to zero-in on pricing. 30-year fixed rates worsened, 15-year fixed held steady, and ARMs improved overall.

This week, expect rates to be equally jumpy.  There’s a lot of housing data due for release and the Federal Open Market Committee is meeting.

  • Monday : Homebuilder Confidence Survey
  • Tuesday : Housing Starts, Building Permits, FOMC Meeting
  • Wednesday : FHFA Home Price Index
  • Thursday : Existing Home Sales
  • Friday : New Home Sales

That’s one housing-related release per day, and a Federal Reserve meeting to boot. Today’s low rates could be vanished by Friday. 

Therefore, if you haven’t already, it may be time to call your loan officer for a refinance. Rates could certainly fall further, but they’re looking more likely to rise.

Filed Under: Mortgage & Finance Tagged With: , ,

Rent A Home Or Buy A Home : The Case For Both Sides

September 17, 2010 By Leave a Comment

Is it better to rent a Belfast home, or to buy one? The answer may not be as clear-cut as you think. In this balanced, 3-minute joint interview from NBC’s The Today Show, you’ll hear the case for both sides.

From the pro-renting part of the talk, there’s valid points about the economic impact of low credit scores and/or no cash for downpayment, and the ongoing, annual cost of home maintenance — estimated at 2% of a home’s value.  Plus, renters have the ability to “follow a job” to a new town or region whereas a homeowner may be restricted, somewhat.

From the pro-purchase part, however, there’s excellent points that were made, too:

  • Mortgage rates are low and each 1% drop to rates equates to a 9% drop to home price
  • Buyers can zero in on a particular area with particular schools or walkability, for example, better than renters
  • A home can a piggybank over the long-term; a place for “forced savings” for families that want it

The segment then closes with 5 of the best cities in which to rent, and 5 of the best cities in which to buy.

Whether buying or renting, don’t try to go at it alone. There’s lot of resources online, and an email to a local real estate or mortgage pro can set you in the right direction.

Filed Under: Mortgage & Finance Tagged With:

Home Defaults Dropped For The 7th Month In A Row In August

September 16, 2010 By Leave a Comment

Foreclosures per capita, August 2010

According to foreclosure-tracking firm RealtyTrac, the number of foreclosure filings climbed 4 percent in August from the month prior. A foreclosure filing is defined as default notice, scheduled auction, or bank repossession.

Despite the number of filings surpassing 300,000 for the 18th straight month, RealtyTrac’s report shows some bright spots for housing.

  1. The number of default notices served per month fell for the 7th time this year
  2. Foreclosure activity in Nevada, the nation’s leading foreclosure state, is down 25% from last August
  3. Foreclosure activity has not materially increased since early-2009, pointing to a stabilization

In addition, each of the 10 leading metro areas for foreclosures posted year-over-year declines for the second month in a row.

But, perhaps, most important, is that mortgage lenders and servicers appear to be managing their REO more effectively, making properties available for sale at a measured pace as opposed to flooding markets with new homes.  As noted by RealtyTrac, the probable reason is “to prevent further erosion of home prices”.

For home sellers, it’s a welcome development.

Foreclosures have had a hand in falling home values in Maine and across the country. And, although it’s self-serving for banks to meter the release of homes under ownership, everyday homeowners benefit, too.  Fewer homes on the market helps to provide a floor for Bangor housing values.

If you have an interest in buying foreclosed homes, be sure to talk with a real estate agent first. The process of buying a home from a bank is different from buying from “a person”. Having the help of a professional should work to your benefit.

Filed Under: Mortgage & Finance Tagged With: ,

More Rentals=More Investors

September 15, 2010 By Leave a Comment

Call Justin CartierA wave of media-fueled messages against homeownership is gaining momentum in the U.S. For instance, Barron’s ran a major story headlined “Renter Nation” in late July, USA Today jumped in with several front page articles in August, and Time magazine’s Sept. 6 cover offered “Rethinking Homeownership: Why owning a home may no longer make economic sense.” 

Though owning remains the best option for most people, the national homeownership rate is indeed declining and will probably fall to a percentage in the low 60s (from the 2006 high of 69 percent) when all is said and done. But that doesn’t mean no one will own these homes; it only means the occupants won’t. 

Millions of properties will become rentals in the next few years, and this will have a significant impact on the market. Investors already represent almost 20 percent of buyers, and that number is likely to grow – especially as more and more individual entrepreneurs get into the game, looking to create cash flow by buying a rental property or two in their own communities.

Filed Under: Home Buying, Real Estate Investing, Real Estate Market

Home Affordability Gets A Boost From Weak Back-to-School Retail Receipts

September 15, 2010 By Leave a Comment

Retail Sales (September 2008 - August 2010)The recent rise in mortgage rates was slowed this week after the government released its Retail Sales report for August.

Prior to Tuesday, mortgage rates had been spiking across Maine on the resurgent hope for U.S. economic recovery. The sentiment shift was rooted in reports including the Pending Home Sales Index and Initial Jobless Claims, both of which showed surprising strength last week.

August’s Retail Sales, though, after removing motor vehicles, auto parts and gasoline sales, failed to maintain the momentum. Its figures were actually in-line with expectations — it’s just that expectations weren’t all that high.

Wall Street now wonders whether the weak Back-to-School shopping season will trend forward into the holidays.

The doubt spells good news for mortgage rates and home affordability.

Because Retail Sales is tied to consumer spending and consumer spending accounts for two-thirds of the economy, a weak reading tends to drag down stock markets and pump up bonds, and when bonds are in demand, mortgage rates fall.

This is exactly what happened Tuesday. The soft Retail Sales data eased stock markets down, and generated new demand for mortgage bonds. This demand caused bond prices to rise, which, in turn, caused mortgage rates to fall.

Mortgage rates did not cut new lows this week, but they’re very, very close.

With mortgage rates at historical lows, it’s an excellent time to look at a refinance, or gauge what financing a new home would cost. Low rates like this can’t last forever.

Filed Under: Mortgage & Finance Tagged With: , ,

The Math Of Choosing A Great Closing Date

September 14, 2010 By Leave a Comment

Closing dates and rate locksWant a lower mortgage rate on your upcoming Bangor home buy? Think about moving up the closing date.

The reason is rooted in “rate locks”, a bank’s guarantee to honor a specific mortgage rate for a specific, finite period of time. Rate locks allow home buyers to reserve mortgage rates today even though their respective closings may be scheduled as far as a year into the future.

A rate lock is a contract. No matter what the “current market rate” is at the time of closing, the bank will honor the terms of the original rate lock.

It would be like making an agreement to buy Microsoft stock at a specific price 60 days from now. No matter what the price, you already know what you’re paying for it.

In this sense, rate locks are predictions about the future and, meanwhile, as we all know, the future can be a challenge to forecast. Lenders know this, too, of course, so it’s easy to understand why longer rate locks tend to be more expensive than shorter ones.

The longer the rate lock, the more risk to the bank.

To compensate for this “time risk”, therefore, lenders typically step-up pricing for rate lock guarantees as lock period lengthen.

  • 15-day rate lock : The best of all pricing
  • 30-day rate lock : 1/8 percent extra cost versus the 15-day rate lock
  • 45-day rate lock : 1/4 percent extra cost versus the 15-day rate lock
  • 60-day rate lock : 3/8 percent extra cost versus the 15-day rate lock

One percent of “extra cost” is defined as one percent of the borrowed amount.

Now, this incremental price chart is just a rough guideline; exact spreads vary from lender-to-lender. Overall, however, it’s fairly close.

That’s why it’s important to manage your closing date vis-a-vis your mortgage rate. Closing in 30 days versus 31 can save you an eighth-percent in closing costs. Assuming a loan size of $200,000, that’s $2,500 saved.

So, when negotiating a closing date on a contract, keep in mind the math of mortgage rate locks. The shorter its length, the more money you might save.

Filed Under: Mortgage & Finance Tagged With: ,

What’s Ahead For Mortgage Rates This Week : September 13, 2010

September 13, 2010 By Leave a Comment

Refi Boom endingA shift in Wall Street sentiment caused mortgage markets to worsen last week. There wasn’t much in the way of new data, but the numbers that did hit the street helped quell fears of a double-dip recession.

Conforming mortgage rates rose between Monday-Friday for the first time since June, and mortgage-backed securities have now lost ground on six of the last 7 trading days. 

During this period, conforming mortgage rates in Maine have risen by as much as 0.375 percent. 

Mortgage rates for FHA-insured home loans are higher, too.

Remember, concern for the future of the U.S. economy was a major catalyst for low rates this summer. The drop in rates, which began in April on weaker-than-expected data, accelerated through July and August on record-low home sales and a stalled jobs market.

Lately, though, these concerns are turning to hope.

The growing optimism is putting the Refi Boom at risk. To be sure, it’s been a rough two weeks to shop for a mortgage. 

This week may figure no better. In addition to the Retail Sales data, there’s key inflation data due both Thursday and Friday, plus, two consumer confidence reports are set for release.  If the overall numbers point to an “improving economy”, mortgage rates will likely rise again this week. 

Momentum is moving in that direction, certainly.

If your looking for the right time to lock a rate, now may be the time. Mortgage rates are off their best levels of all-time, but still quite low. There’s lot of savings out there for homeowners who qualify.

Filed Under: Mortgage & Finance Tagged With: , ,

Your ARM Is Adjusting Lower. Is There A Downside To Letting It?

September 10, 2010 By Leave a Comment

Pending ARM adjustment based on LIBOR

When adjustable-rate mortgages are on the verge of adjusting, a common concern among homeowners is that their mortgage rates will adjust higher.

Well, this year, because of the math of how ARMs adjust, homeowners in Houlton and around the country are seeing that mortgage rates on ARMs can sometimes adjust lower, too.

Adjusting conforming mortgages are adjusting to as low as 3 percent.

As a quick review, here’s the timeline for most conforming adjustable-rate mortgages:

  1. There’s a “starter period” in which the interest rate remains fixed. This can range from 1-10 years.
  2. There’s a rate change after the starter period. It’s called the “first adjustment”.
  3. Subsequent, annual adjustments follow until the loan “ends”. This is usually after Year 30.

The adjustments each year are based on a math formula that’s included in the contract with your lender. It’s surprisingly basic.  Each year, your new, adjusted mortgage rate is equal to the sum of some constant — usually 2.25 percent — and some variable.  The variable is most commonly equal to the 12-month LIBOR.

As a formula, the math looks like this:

(Adjusted Mortgage Rates) = (12-Month LIBOR) + (2.250 Percent)

LIBOR is an acronym standing for London Interbank Offered Rate. It’s an interest rate at which banks borrow money from each other — very similar to our Fed Funds Rate here in the United States. And also like our Fed Funds Rate, LIBOR has been low lately.

As a result, adjusting mortgage rates have been low, too.

In 2009, 5-year ARMs adjusted to 6 percent or higher. Today, ARMs are adjusting to 3.000%.

Based on the math, you may want to let your ARM adjust with the market year. Or, if you plan to keep your home long-term and have concerns about adjustments in 2011 and beyond, it may be a good time to open a new ARM.  The same forces that are driving down LIBOR and helping to keep mortgage rates low overall, too.

Consider talking to your loan officer and making a plan. With mortgage rates as low as they’ve been in history, most homeowners have options.  Just don’t wait too long. LIBOR — and mortgage rates in general — are known to change quickly.

Filed Under: Mortgage & Finance Tagged With: , ,

Which Model Is More Accurate : The Case-Shiller Index Or The Home Price Index?

September 9, 2010 By Leave a Comment

Home Price Index from April 2007 peak

The private-sector Case-Shiller Index reported home values up 5 percent nationwide in June. The government’s own Home Price Index, however, reached a different conclusion.

According to the Federal Home Finance Agency, month-to-month home values fell 0.3 percent in June, and values are down by 1.7 percent from June 2009.

So, as a home buyer and/or homeowner in Houlton , by which valuation model should you make your bets?  Perhaps neither. 

This is because both the Case-Shiller Index and the Home Price have inherent methodology flaws, the most glaring of which is their respective sample sets. 

The Case-Shiller sample set, for example, comes from just 20 cities across the country — and they’re not even the 20 most populated cities. Together, the Case-Shiller cities represent just 9 percent of the overall U.S. population. 

That’s hardly representative of the housing stock overall.

By comparison, the Home Price Index tracks home sales everywhere — every city in every state — but it specifically excludes certain properties.  The Home Price Index does not track sales of homes for which the financing comes from agencies other than Fannie Mae or Freddie Mac. This means that as FHA loans grow in popularity, the pool of Home Price Index-eligible homes is reducing. 

The HPI ignores homes backed by “jumbo” loans, too.

Therefore, the “right” model for home values cannot come from national data at all — it can only come locally. Neither Case-Shiller nor the government has the tools to get as granular as a neighborhood. A real estate agent in the area does, however.

The best way to get a pulse for what’s happening in markets right now is to talk to somebody with good data.

Filed Under: Mortgage & Finance Tagged With: , ,
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