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A Mortgage Rate Strategy Ahead Of Friday’s Jobs Report

October 6, 2011 by Jeff Cost

Estimated NFP results September 2009

Mortgage rates are prepped to make big moves in the next 36 hours. Is it time for you to call in your rate lock?

Friday, at 8:30 AM ET, the Bureau of Labor Statistics will release the Non-Farm Payrolls report for September. Issued monthly, the “jobs report” offers sector-by-sector job creation figures from the month prior, and reports on the national Unemployment Rate.

Last month, exactly zero net new jobs were created, the government said. This month, economists expect a net 60,000 new jobs created.

Depending on where the actual monthly figure falls, FHA and conforming mortgage rates in Columbus may be volatile. The jobs reports tends to have out-sized influence on the mortgage bond market.

The connection between the jobs market and the mortgage market is fairly straight-forward. As jobs go, so goes the economy. This is because more working Americans leads to a stronger economic base.

When more people work, consumer spending grows
When more people work, governments collect more taxes
When more people work, household savings increases

Each of these items are strengths to a recovering economy.

For rate shoppers, Friday’s job report could cause mortgage rates to rise — or fall. If the actual number of jobs created exceeded the 60,000 consensus estimate, look for mortgage rates to climb.

Conversely, if new jobs fell short of 60,000, expect that rates will drop.

Home affordability is at all-time highs because mortgage rates are at all-time lows. If you’re under contract for a home or looking to refinance, eliminate some of your interest rate risk. Lock ahead of Friday’s Non-Farm Payrolls release.

Get your rate lock in today.

Home Values Rose For the 4th Straight Month

October 5, 2011 by Jeff Cost

Home Price Index from April 2007 peak

The government is confirming what the private sector has already shown — home values are on the rise.

The Federal Home Finance Agency’s Home Price Index shows home values rose 0.8% in July.

July marks the fourth straight month that home values climbed and the FHFA’s Home Price Index is the latest in a series of “rising home values” reports — an encouraging trend for buyers and sellers in Louisville and nationwide.

Last week, the S&P Case-Shiller Index showed home value up nearly 1 percent in July. CoreLogic reached a similar conclusion.

Nationwide, values are back to their highest levels since November 2010. Clearly, the housing market in OH is moving in the right direction. Or is it?

Although the data from the government and from private firms such as CoreLogic is encouraging, it’s also flawed. As such, we have to be careful about the conclusions we draw from the data.

The flaws of Home Price Index are glaring :

Only homes backed by Fannie Mae or Freddie Mac are included in the index. In today’s market, because of the FHA’s popularity, that leaves 1 of 3 homes “uncounted”.
Only home resales are counted. New home sales are omitted entirely.
The data comes with a 60-day delay. The October market is different from July’s.

Despite these shortcomings, however, the Home Price Index remains relevant. It’s among the most through home valuation models and it’s often used by economists and policy-makers.

When the Home Price Index is rising, Wall Street and Capitol Hill take notice. For residents of “Main Street”, however, the data may not be as important. To get local, up-to-date market statistics in Florence, for example , talk with a professional real estate agent.

Since peaking in April 2007, the FHFA’s Home Price Index is off 17.6 percent.

Conforming Loan Limits Drop In High-Cost Areas

October 4, 2011 by Jeff Cost

Conforming Loan Limits lowered in 2011

For homeowners in high-cost areas nationwide, conforming and FHA loan limits have dropped by as much as 14 percent.

Effective October 1, 2011, the temporary mortgage loan limits that allowed for non-jumbo loan sizes of up to $729,750 are no longer.

$729,750 is above the “normal” loan limit of $417,000.

The elevated limits were put in place in 2008 as the economy and financial sector entered its crisis. At the time, there was little private money to serve buyers and would-be refinancers whose loan sizes exceeded Fannie Mae and Freddie Mac’s maximum $417,000 loan limits.

For most people whose loan sizes exceeded that threshold, mortgage financing was unavailable. There were no lenders to back the loan size.

This was of particular importance in places such as New York City, Los Angeles and Washington, D.C. where home prices routinely top $1 million. For people in these areas, unless they had a downpayment that could lower their respective loan sizes to $417,000 or lower, mortgages were mostly unavailable.

Congress recognized this and, as a result, gave Fannie Mae and Freddie Mac temportary authorization to purchase and securitize home loans of up to $729,750 in value, depending on where the subject property was located.

The program helped housing, leading Congress to pass more permanent, location-specific loan limits. Later that same year, Congress passed the Housing and Recovery Act of 2009 which, in part, made high-cost loan limit pricing permanent, albeit at $625,500.

The $729,750 temporary limits expired Friday, September 30, 2011. Today, the maximum allowable conforming loan size is $625,500.

If you live in a high-cost area, therefore, take note. Mortgage rates may be low, but the amount of loan for which you qualify may be less than you expect, and you may find yourself ineligible.

The complete list of high-cost areas is available online.

A Mortgage Rate Strategy Ahead Of Friday’s Jobs Report

Home Values Rose For the 4th Straight Month

Conforming Loan Limits Drop In High-Cost Areas

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