Coloraodo Mortgage Rate-Locking Strategy Ahead Of The Fed’s Meeting Today
The Federal Open Market Committee ends a scheduled, 2-day meeting today in Washington. It’s the first of 8 scheduled meetings for the policy-setting group in 2010.
The group adjourns at 2:15 PM ET.
As is customary, upon adjournment, the Fed will issue a press release to the markets recapping its views of the country’s current economic condition, and the outlook for the near-term future.
The post-meeting statements from the Fed are brief but comprehensive. And Wall Street eats them up. Every word, sentence and phrase is carefully disected in the hope of gaining an investment edge over other active traders.
It’s for this reason that Colorado mortgage rates tend to be jittery on days the FOMC adjourns. Wall Street is frantically rebalancing its bets.
Today should be no different.
The FOMC is expected to leave the Fed Funds Rate within its target range of 0.000-0.250 percent — the lowest it’s been in history. However, it’s what the Fed says Wednesday that will matter more than what it does.
After the Fed’s last meeting in December, it made several observations:
- The jobs market is getting “less worse”
- The housing sector is making improvements
- Financial markets are stabilizing further
The economy is gradually improving, the Fed told us, but there are still risks to the economy ahead. Furthermore, inflation remains in check.
As compared to December’s press release, today’s FOMC statement will be closely watched. If the Fed changes its verbiage in any way that alludes to strong growth and/or inflation in 2010, expect Colorado mortgage rates in Aurora to rise as Wall Street moves its money from bonds to stocks.
Conversely, reference to slower growth in 2010 should lead rates lower.
We can’t know what the Fed will say so if you’re floating a mortgage rate right now or wondering whether the time is right to lock, the safe approach would be to lock prior to 2:15 PM ET Wednesday. After that, what happens to rates is anyone’s guess.
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Colorado Existing Home Sales Plummet In December, But It Was Expected
Just one month after from blowing away Wall Street, December’s Colorado’s Existing Home Sales hit the skids, shedding nearly 17 percent and falling to a 4-month low.
Don’t be alarmed, though. The plunge was expected. And not just because Pending Home Sales cratered last month.
When November’s Existing Home Sales surged, it was clear to observers that an expiring $8,000 federal tax credit was the catalyst. At the time, the tax program was slated to expire November 30 and the looming deadline pushed a lot of would-be buyers in Aurora from a December time frame into November.
The expiration date has a cannibalizing effect on December’s sales figures. It was only later that Congress extended the tax credit to June 30, 2010.
So, with Colorado home sales plunging in December, it’s no surprise that home supplies rose for the first time in 9 months. Home Supply is calculating by dividing the number of homes for sale by the current sales pace.
The national housing supply now rests at 7.2 months.
Despite December’s Existing Home Sales report appearing shaky, it’s actually terrific new for home buyers in neighborhoods like Piney Creek, Colorado.
See, for the past few months, as housing has been improving, sellers nationwide have been bombarded by messages of “hot markets” and rising home prices by the media. Psychologically, a seller is more likely to hold firm on price if he believes the housing market is improving and now December’s data is deflating that argument.
This is why we say there’s always two sides to a housing story — the buyers’ side and the sellers’ side. And, usually, what’s good for one party is bad for the other. It’s what we’re seeing now.
Because of soft data like December’s Existing Home Sales, buyers may retake some negotiation leverage that’s been lost since Spring 2009, helping to improve home affordability and, perhaps, spur more sales.
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What’s Ahead For Colorado Mortgage Rates This Week : January 25, 2010
Conforming and Colorado FHA mortgage rates improved last week on the combination of weaker-than-expected economic data and new anti-banking rhetoric from the White House.
The S&P 500 shed nearly 4 percent in its worst weekly showing since October 2009 as all 10 sectors fell. As the money left stock markets, it made its way to bonds — including the mortgage-backed variety.
As a result, Colorado mortgage rates fell for the third straight week.
Since shedding 300 basis points in December, mortgage bond pricing has recovered a bit more than half of those losses. It’s helping with home affordability and opening new refinance opportunities in Denver and around the country.
This week, though, mortgage rates could rise back up. There’s a lot going on.
First, on Monday, the December Existing Homes Sales report will be released. The report is expected to be extremely weak as compared to November. This is because of a combination of factors including:
- The initial tax credit expiration date of November 30, 2009
- Sharply rising mortgage rates throughout the month of December
- A general slowdown from the holidays and from the weather
Therefore, don’t be surprised by the newspaper headlines you see Tuesday morning.
Other data this week includes the Case-Shiller Index – a measure of home prices nationwide — and the New Home Sales report. The Case-Shiller Index has registered mild home price improvement over the past 8 months and its latest report is expected to show the same. New Home Sales should be similarly strong.
But, the biggest news of the week is the first Federal Open Market Committee meeting of 2010.
The Fed meets Tuesday and Wednesday this week and Wall Street will be watching closely. The Fed is not expected to change the Fed Funds Rate from its current target range of 0.000-0.250 percent, so, instead, markets will watching for the Fed’s post-meeting press release.
What the Fed says about the economy will be much more important that what it specifically does about the economy for now. If the Fed says the economy is growing as expected, look for mortgage rates to rise. Conversely, if the Fed says the economy is at risk, expect mortgage rates to fall.
The safest rate lock strategy this week is to lock your Colorado mortgage rate before the Fed’s 2:15 PM ET adjournment Wednesday. Rates will be bouncy all week, but once the Fed’s press release hits the wires, it’s anyone’s guess what will happen.
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Housing Permits Spike For The 2nd Straight Month in Colorado
A “Housing Start” is a privately-owned home on which construction has started. It’s an important gauge of housing health because it tracks new housing stock nationwide.
In December 2009, starts fell by nearly 7 percent.
The news is mildly disappointing but not too bad. The likely cause for the Colorado Housing Starts drop is December’s rough weather conditions. It’s tough to break ground when Mother Nature won’t coordinate and last month was especially hazardous in a lot of parts of the country.
More cheery, however, is that for the second straight month, Housing Permits exploded.
A housing permit is an certification from local government that authorizes construction. After posting a 7 percent gain in November, permits rose by another 8 percent in December.
It’s a signal that housing is, indeed, in recovery — despite the falling number of actual starts. More permits mean that builders plan to bring more Colorado homes on the market for what’s expected to be a very busy spring home-shopping season.
According to the Census Bureau, 82% of homes start construction within 60 days of permit-issuance. Therefore, Housing Starts should start rising soon anyway.
For Colorado home buyers, the news couldn’t be better.
With more homes coming online, competition among home sellers should increase, and that will suppress the rise in home prices in Aurora and nationwide.
It’s basic economics. When home supplies grow faster than home demand, prices fall.
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Spring 2010 FHA Guidelines Make Borrowing Tougher in Colorado
Securing an FHA mortgage in Colorado is about to get more expensive.
In a statement issued Wednesday, the Federal Housing Authority outlined policy changes to its mortgage assistance program. The shift is meant to both reduce the government group’s portfolio risk while strengthening its overall financials.
For consumers, the changes mean higher costs.
As listed in the official announcement, there are 3 major guideline updates for the FHA:
- Upfront mortgage insurance premiums are increasing to 2.25% from 1.75%
- Minimum down payments for applicants with sub-580 FICOs are rising to 10 percent
- Seller concessions are being limited to 3%, down from today’s allowable 6%
Furthermore, the FHA has appealed to Congress to raise an FHA borrowers’ monthly mortgage insurance premiums.
To read the FHA’s statement, it’s clear what the group is trying to balance. On one side, the FHA wants to provide affordable financing to families that need it. That’s its mission statement. On the other side, though, the FHA must manage the risk that comes with insuring lesser-quality Colorado loans.
To that end, the FHA is stepping up its enforcement of “bad lenders” in hopes of stopping problems where they start.
Also in its new policies, the FHA is introducing a “termination clause”. If banks or loan officers that produce more than their fair share of bad loans, they lose their right to originate FHA mortgages.
As a result, homebuyers in Denver, Colorado should expect tougher FHA underwriting in 2010. Not because the FHA says so, necessarily, but because banks don’t want to do “bad loans”. Lenders are incented to turn down at-risk applicants and, already, we’re seeing examples of this. Despite FHA allowing 580 FICOs and lower, many banks have made 620 their minimum.
Some have other guideline overlays, too.
The FHA’s new guidelines don’t go into effect until spring. So, between now and then, the old guidelines will apply. Therefore, if you know you’re going to need an FHA home loan in the next few months, consider moving up your time-frame.
If nothing else, you’ll save some money at closing.
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There’s 100 Days Left To Claim Your Colorado Homebuyer Tax Credit
November 6, 2009, Congress voted to extend and expand the First-Time Home Buyer Tax Credit program. There’s 100 days left to claim it.
The expiration date of the up-to-$8,000 tax credit has been pushed forward to spring, requiring homebuyers in Denver, Colorado to be under contract for a home no later than April 30, 2010, and to be closed no later than June 30, 2010.
In addition, “move-up” buyers were also added to the program’s eligibility list meaning you don’t have to be a first-time home buyer to be eligible for the tax credit. If you’ve lived in your home for 5 of the last 8 years, you meet the IRS requirements.
Move-up buyers are capped at a total tax credit of $6,500.
The tax credit’s basic eligibility requirements remain the same:
- You can’t purchase the home from a parent, spouse, or child
- You can’t purchase the home from an entity in which they’re a majority owner
- You can’t acquire the home by gift or inheritance
- All parties to the purchase must meet eligibility requirements
The new law includes some notable updates, however.
First, the subject property’s sales price may not exceed $800,000. Colorado Homes sold for more than $800,000 are ineligible. And, also, household income thresholds have been raised to $125,000 for single-filers and $225,500 for joint-filers.
And lastly, don’t forget that the program is a true tax credit — not a deduction. This means that a tax filer who’s eligible for the full $8,00 credit and whose “normal” tax liability totals $5,000 would receive a $3,000 refund from the U.S. Treasury at tax time.
The complete list of qualifying criteria is posted on the IRS website. Review it with a tax professional to determine your eligibility. Then mark your calendar for April 30, 2010.
There’s just 100 days to go. Get Pre-Qualified today for your Colorado Home Loan
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What’s Ahead For Colorado Mortgage Rates This Week : January 19, 2010
Colorado Mortgage markets showed little conviction last week, carving out just a narrow trading channel. There was very little data on which for markets to move, leaving mortgage rates momentum-bound.
Luckily for rate shoppers, Colorado mortgage rate momentum was favorable. Rates were slightly lower Monday through Thursday before breaking downward Friday afternoon. Home shoppers in Highlands Ranch this past weekend caught a nice break.
Last week marked the second straight week in which Colorado mortgage rates fell.
This week, in holiday-shortened trading and with little economic data set for release, expect mortgage rates to again move on momentum. The biggest report of the week is Wednesday’s Producer Price Index.
Producer Price Index is important to mortgage rates because of its role in inflation. PPI is akin to a Cost of Living-type measurement, but for business. As business costs rise, the thought goes, it’s not long before consumer costs rise, too. Businesses eventually pass on costs, after all.
In this manner, a rising Producer Price Index can foreshadow rising consumer prices, and, therefore, inflation.
Inflation is awful for mortgage rates.
PPI expectations have revised downward this month, especially because last week’s data showed a deceleration in consumer prices nationwide. If PPI isn’t as weak as expected, mortgage rates will rise.
Other influential data this week includes Housing Starts, Consumer Confidence and Initial Jobless Claims.
So far, 2010 has been for mortgage rates in Colorado and around the country. If you’re in need of a rate lock, this week may be a good time to take one.
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RealtyTrac’s 2009 Foreclosure Report Gives Reason For Optimism
Like real estate, it appears that foreclosure activity is a local phenomenon, too.
As reported by RealtyTrac.com, more than half of all foreclosure-related activity in 2009 came from just 4 states:
- California
- Florida
- Arizona
- Illinois
More than 1.4 million filings made in 2009 are attributed to the above states. Furthermore, each ranks in the Top 10 for 2009 Foreclosures Per Capita.
The other states are Nevada, Utah, Georgia, Idaho, Michigan and Colorado.
Versus 2008, foreclosures are up 21 percent nationwide and that’s a big number, but a deeper look at RealtyTrac’s annual reports reveals a more positive undertone on the housing market.
- 40 states fell below the national Foreclosures Per Capita average in 2009
- Foreclosure activity fell on an annual basis in 10 states as compared to 2008
Foreclosures are still prevalent, though, and buying homes in foreclosure in Aurora continues to be big business. First-time buyers, move-up buyers, and real estate investors each are bidding aggressively.
Distressed homes account for one-third of home resale activity, according to an industry trade group.
That said, buying foreclosures can be tricky.
First, properties are often sold “as-is” and the cost of repairs may unwind the home’s status as a “value buy”. Furthermore, a lender may require specific fixes to be made prior to closing and that, too, costs money.
Second, buying a foreclosed home in Colorado isn’t as streamlined as buying a “normal” home. Closing on a foreclosure can be a 120-day process or longer. A 4-month time-frame may not fit your schedule.
And, third, finding foreclosures can be difficult. Despite the growth in foreclosure search engines, it still takes a good real estate agent to uncover the best homes at the best prices.
Read the complete foreclosure report and take a peek at RealtyTrac’s foreclosure heat maps. If you like what you see, talk to your real estate agent about what to do next.
There’s still good deals in the foreclosure market — you just have to know where to find them
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Retail Sales Dropped In December And Now So Are Mortgage Rates
Mortgage rates are dropping this morning on weaker-than-expected Retail Sales data from December. Lower rates means more bang for your home-buying buck.
Excluding motor vehicles and parts, December’s “ex-auto” sales receipts were down roughly $500 million from November. Analysts had expected receipts to grow.
The relevance of Retail Sales to home affordability isn’t obvious, but it’s definitely logical.
Retail Sales is directly related to consumer spending and consumer spending accounts for the majority of the U.S. economy. When consumer spending slows, the economy often does, too. It leads investors to seek out “safe” investments.
It’s the reason why stock markets often drop on weak economic data — stocks are among the riskiest investment classes available.
Conversely, the best place to find safety is in the market of government-backed bonds. This world includes products like U.S. Treasuries and many of the mortgage-backed bonds that help set mortgage rates for people in Denver. Weak economic data puts mortgage bonds in demand.
For rate shopper, this is good news. More demand for mortgage bonds causes mortgage rates to fall. Mortgage rates are lower this morning because Wall Street is shedding some risk.
December’s Retail Sales report closes out a year of generally-weak data. 2009 marks just the second time that Retail Sales fell year-over-year since the government started tracking it 40 years ago. The other year was 2008.
For home buyers in Highlands Ranch and around the country, though, today may represent an opportune time to lock a mortgage rate. Housing data is still improving and other economic indicators are showing strength. Soon, Wall Street will shift from a “safe” mentality and move toward risk.
When it does, mortgage rates will rise.
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10 Cities For Home Bargains
As the housing market improves across the country, certain cities are emerging as relative bargains. Some areas, like Miami, were hit hard by the recession, and other areas are buoyed by good school systems and strong labor markets.
In this 5-minute video from The Today Show, 10 cities are highlighted for their home prices. And they’re not “small towns”, either.
Among the featured cities:
- Miami, Florida
- Akron, Ohio
- Tuscon, Arizona
- Minneapolis, Minnesota
- Trenton, New Jersey
Now, this piece is about finding gems on a national scale. They exist locally here in Denver , too. You just need to know what to look for.
With Colorado mortgage rates low and tax credits available, it’s not likely that bargains will last.
That is why Colorado is a great to place to live. People like to be live close to where there is plenty to do. The Mountains are a perfect place to have fun!
Because of this our Home prices stay a-lot more stable than other parts of the country. This has always made for a great opportunity for Home Buyers and Home Sellers in the State of Colorado.
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