Mortgage markets worsened last week on better than expected economic data, causing mortgage rates to rise. Last week was the third consecutive week that mortgage rates moved higher and, since touching a multi-month low in early-October, conforming mortgage rates are up by about a half-percent.  It's likely rates will continue to rise, too.  That's because the same force that held rates down for so long is now the force pulling them up -- expectations for the U.S. economy. Over the last 6 months, it wasn't clear in what direction the country was headed.  The housing sector has been gaining in strength, but the rest of the economy has been a question mark. Last week put an end to some of those questions: Retail Sales posted stronger-than-expected results Consumer Sentiment matched Septemb... 10/19/2009

Here is the latest Orange County, California Housing Report from my friend Steven Thomas, the President of Altera Real Estate. Steven's report is the most comprehensive study of our local real estate market, and is an extremely up to date depiction of the market as it is today.  Enjoy. Orange County Housing Report: Two Polar Opposite Markets With Halloween fast approaching, the differences between the lower end and higher end Orange County housing market are SPOOKY. It is extremely ironic that the general public expects a really soft real estate market with a lot of inventory and that buyers get to call all of the shots. That is entirely not true for homes priced below $1 million with an expected market time of only 1.88 months. That translates to an incredibly HOT seller's market. That... 10/18/2009

The Myth called "The Shadow Inventory" of foreclosed properties. ( aka, "The alleged forthcoming Tsunami of foreclosures". ) For the past year or longer, there has been a veritable Tsunami of articles, warning us of a gigantic wave of foreclosures heading our way - destined to give us yet a further "crash" of real estate prices, both locally, here in Orange County, and Nationally.  The catalyst for this forthcoming wave is an alleged "Shadow Inventory" of properties, already foreclosed, but being warehoused by the lenders who took them back, in order to not flood the current real estate market with a doubling or tripling of properties, which would theoretically drive prices down even further than they've already gone. These articles were almost all based upon charts and graphs that had ... 10/17/2009

Mortgage rates are higher after the Federal Reserve released the internal notes of its September 22-23, 2009 meeting. Known as the "Fed Minutes", the report details the conversation and cross-currents that led to the Federal Reserve's decision to vote "unchanged" on the Fed Funds Rate after its last meeting. The Fed Minutes are the lengthy companion to the more famous, succinct post-meeting press release. As a comparison: Press Release: 383 words Minutes: 6934 words The extra level of details is a big deal because Wall Street is perpetually in search of clues about what the Federal Reserve is going to do next. In the past week, multiple Federal Reserve members hinted that the Fed Funds Rate may rise as early as April 2010.  Fed Chairman Ben Bernanke even alluded to it, too. The minutes ... 10/15/2009

When you own a home with a spouse or partner, the issue of what's mine, what's yours, and what's ours can be a divisive one. Each household has its own money management methodology and, according to financial talk-show host Suze Orman, most leave significant room for improvement. In this 4-minute piece aired on NBC's The Today Show, Orman talks about co-managing finances with topics including: How to determine how much money goes into a "personal" spending account versus a "family" spending account The importance of both parties taking an active role in bill-paying How to manage the money when one partner doesn't earn an income Being aware of money is the first step towards protecting it. 10/14/2009

Buoyed by a generous tax credit, affordable homes, and low mortgage rates, the Pending Home Sales Index posted its seventh consecutive monthly gain in August. It's the longest winning streak in the index's history and the highest reading in 2-1/2 years. It's also another signal that the housing market is in recovery. "Pending home sales" are a forward-looking indicator, measuring the number homes under contract to sell, but not yet closed.  Historically, 80% of homes under contract close within 60 days.  Most others close within 120 days. It's no wonder home values are rising in so many markets. Home buyers -- take note.  If you're plan to purchase a home between now and the New Year, expect that the recent run in pending sales will turn into run of closed sales which, in turn, should p... 10/05/2009

It's a sensational headline -- "The Sellers' Deadly Sins" -- but the message is clear.  Home sellers make mistakes that not only cost themselves thousands, but sometimes cost the sale, too. NBC's The Today Show lays it out cleanly in this 5-minute video: How to respond to an "insulting offer" How to handle the first purchase offer you receive What do when you can't leave your home for its Open House What room in the home should be kept the neatest But, be aware.  At the video's end, there's a piece of advice that may sound extremely self-serving coming from a real estate professional.  Don't let it turn you off.  The video's overall message is spot-on and the advice is real-world tested. Selling a home is a process. Make sure to do it properly. 10/02/2009

For the second month in a row, 18 of the 20 Case-Shiller real estate markets posted higher home values.  It's the 6th consecutive strong showing for the benchmark private-sector housing index. Combined with falling home supplies and rising sales figures, this month's Case-Shiller Index suggests that housing may have bottomed sometime earlier this year. It's cause for optimism. Even Case-Shiller respresentatives seem excited. In its press release, the publishers singled out the index's winning streak, commenting on the recent "stabilization in national real estate values". But, in that statement, we see the Case-Shiller Index's biggest flaw.  The index ipurports itself to be a national real estate metric but, in reality, there is no such thing as a national real estate market. All real ... 10/01/2009

The government's First-Time Home Buyer Tax Credit program expires November 30, 2009 -- a scant 60 days from today. Considering it can take up to 60 days to close on a home, first-time buyers have 2 weeks at most to find a home. Buyers not under contract by October 15 have little chance of meeting the November 30 deadline and, therefore, little chance of claiming the tax credit. This is especially true for purchases involving short sales and foreclosures. Congress passed the First-Time Homebuyer Tax Credit program as part of the 2009 economic stimulus plan.  IRS Form 5405 outlines the program criteria which include the following stipulations: Buyer may not have owned a "main home" in the past 36 months The home may not be purchased from a parent, spouse, or child Adjusted gross income fo... 10/01/2009

As reported by the National Association of REALTORS©, the number of Existing Home Sales dipped last month, ending the metric's 5-month winning streak. Newspaper headlines today are overwhelmingly negative on housing. You'd almost believe this year's housing recovery had ended.  That's hardly the case. See, the other side of the Existing Home Sales story is that -- while the number of units sold did fall by 3 percent -- the months of existing supply fell by nearly a year. To home buyers and home sellers, this is huge.  Home prices are based on supply and demand and with supplies plummeting, it means that home prices are poised to rise. Indeed, dwindling inventory isn't "news" to today's buyers.  Multiple offer situations have been common since the start of the summer and, should supplies... 09/25/2009

The Federal Open Market Committee voted to leave the Fed Funds Rate within its target range of 0.000-0.250 percent. It also reiterated plans to support the mortgage market to the tune of $1.5 trillion. In its press release, the FOMC noted that the U.S. economy is "picking up following its severe downturn" and that financial markets have "improved further". It's the second consecutive post-FOMC statement in which the Fed appears somewhat optimistic -- a signal that the recession will end soon, or has already ended. That said, the economy still has some soft spots and the Fed made a point to single them out.  Each poses a distinct threat to economic recovery. Ongoing job losses Sluggish income growth Tight credit conditions Also in its statement, the Fed confirmed its plan to hold the Fed... 09/23/2009

As reported by the government, home prices are rising nationwide, up 0.3 percent in July. Furthermore, versus November 2008, the Home Price Index has clawed back to unchanged. The housing market appears to be holding its own. However, we have to be careful about putting our full faith in the Federal Housing Finance Agency's data.  It's somewhat flawed. The Home Price Index is a national statistic and all real estate is local The Home Price Index's methodology specifically excludes key housing demographics As an obvious example, HPI only accounts for homes with Fannie Mae- or Freddie Mac-backed mortgage. Lately, the percentage of homes meeting that description is shrinking.  As FHA financing rises in popularity, Fannie and Freddie back far fewer loans than in the past.  Furthermore, the ... 09/23/2009

According to the country's home builders, the housing market is looking good. Each month, the National Association of Home Builders releases its Housing Market Index report, a survey geared at taking "the pulse of the single-family housing market". Respondents report on three facets of their business, each series weighted and averaged: How are market conditions today? How do market conditions look 6 months from now? How is the traffic of prospective buyers of new homes? For the 3rd straight month, the Housing Market Index improved.  It's now at its highest level since May 2008. The housing market has shown signs of life since March.  Both Existing Home Sales and New Homes Sales have soared and home values are up in a lot of towns.  Builders showing confidence is another positive signal.... 09/22/2009

The Federal Open Market Committee starts a 2-day meeting today in Washington.  The scheduled get-together ends at 2:15 PM ET Wednesday after which the FOMC will issue a press release to the markets. Consider locking your mortgage in advance of the press release.  The FOMC meets 8 times annually and its adjournments are among the biggest market-movers of the year.  The Fed's post-meeting press release is a direct look into the mind of the Federal Reserve and Wall Street is looking for clues anywhere it can find them. After its August 2009 meeting, the FOMC said in its press release: Financial markets have improved, relative Household spending remains constrained Although weak, the economy is "leveling off" Since then, however, credit risks have lessened on Wall Street, consumer spending ... 09/22/2009

On the 1-year anniversary of the Lehman Brothers collapse, Fed Chairman Ben Bernanke said last Tuesday that the "recession is very likely over at this point".   His comments were supported by a Retail Sales report for August that was much better-than-expected. Equities improved on the day, mortgage markets worsened, and home affordability suffered.  The days of ultra-low mortgage rates may be coming to an end. Since last September, mortgage bonds markets have been in Rally Mode.  As the Financial Crisis of 2008 worsened, investors fled the relatively risky world of stocks and moved dollars into safer investments like cash and bonds -- including the mortgage-backed kind. Risk aversion is common when market uncertainty exists but last year's aversion was so strong that, by late-November, ... 09/21/2009

As downpayment requirements increase, anecdotally, home buyers are tapping 401(k) plans for extra cash. Classified as a "hardship withdrawal", loans against your retirement funds can be cheap and simple. There's no credit check or approval process There's only a small set of paperwork Money can be available in as little as a day But just because you can get access to your retirement money doesn't mean that you should.  401(k) withdrawals should only be made after careful consideration.  There are some serious negatives, specifically with respect to taxation.  If you open a 401(k) loan and don't repay according to the loan terms, the withdrawal ends up getting taxed as income, plus a 10 percent penalty for people under 59 1/2.  That's a stiff penalty. But, even if you do repay the loan o... 09/15/2009

Since 2007, mortgage lenders have clamped down in many areas of underwriting, but none more so than in the area of credit scoring. Minimum FICO levels are up 120 points or more and conforming mortgage lenders now levy large fees on borrowers whose scores are below 740. Keeping your credit scores high is a worthwhile goal, but it's not always easy to do -- especially when you don't know the ins-and-out of how the credit scoring system works. The Wall Street Journal wrote a terrific piece on credit scoring this week. It's full of helpful, relevant tips for home buyers, homeowners, and everyone else. Aside from covering the five basic components of a credit score -- shown at right -- the piece provides insightfukl advice on credit-related topics including: The difference between a "hard in... 09/10/2009

Volume figures to be light on Wall Street today as traders get a head start on Labor Day weekend.  It could make shopping for a mortgage a bona fide challenge. Expect rate volatility this morning and afternoon and, therefore, by extension, expect wild swings in the Home Affordability Index. As mortgage rates rise and fall, monthly mortgage payments do, too. The relationship between "vacation days" and mortgage rate volatility stems from 2 facts -- (1) Conforming mortgage rates are based on the price of mortgage-backed bonds, and (2) mortgage-backed bonds trade just like stocks.  You can't make a deal without matching a buyer and a seller at a specific price. With so many traders on vacation today, therefore, there are fewer opportunities to match buyers and sellers.  As a result, expect... 09/04/2009

There are two ways to boost your personal cash flow -- increase your income or reduce your spending. The former can be a challenge but the latter doesn't have to be.  The headline of the above video -- "Cut Your Spending By $500 Per Month" -- is somewhat sensational but the advice given during the video is spot-on.   From NBC's The Today Show, the 5-minute piece offers a half-dozen ways to reduce your cash outflows each month, including: How to negotiate a lower credit card interest rate Why it's important to go grocery shopping with "a list" How to "time" certain purchases like tires, linens, and clothing It also covers saving money on a family pet. It's often easier to save money than to make money. This video shows how easy it can be. 09/03/2009

In what's becoming a regular occurrence, housing data blew away economists expectations Tuesday. As reported by the National Association of Realtors®, the Pending Home Sales Index posted its 6th consecutive monthly gain in July. After a meteoric rise that started in January, the index is now at its highest levels in more than 2 years. A "pending home sale" is a home that is under contract to sell, but not yet closed.  It's not the same as an actual home sold, but data shows that nearly 80% of homes under contract close within 2 months and many more close in months 3 and 4. Home buyers -- take note.  When the Pending Home Sales Index is rising, it means that market activity has picked up.  This can lead to any one, or a combination, of the following: Multiple-offer situations Reduced neg... 09/02/2009