The Bad Jobs Report Wasn’t All Bad — Colorado Mortgage Rates Fell
Despite the headlines, it’s important to remember that December’s jobs report wasn’t all bad news.
Sure, the economy shed 85,000 jobs last month and the Unemployment Rate failed to dip below 10%, but for home buyers and rate shoppers in Denver , the news was just fine.
The soft employment data led mortgage rates lower, making homes in Piney Creek, for example, more affordable for buyers.
There is two sides to every economic coin.
Since early-2008, the U.S workforce has been closely tied to home financing. As the economy slowed and jobs were lost, Wall Streeters pulled money from the risky stock markets and moved it to of the relative safety of bond markets, instead.
Safe haven buying led mortgage bond prices higher which, in turn, caused rates to fall. Mortgage Colorado rates fell to 6 all-time lows in 2009. In a related statistic, 4.2 million jobs were lost last year.
And this is why Friday’s non-farm payrolls report was so good for buyers.
See, in November, the economy added new jobs for the first time since 2007, housing looked strong, consumer confidence was growing. The safe haven buying reversed and mortgage rates took off. Analysts believed the nation’s economic turnaround was complete.
But now, after December’s jobs report returned to the red, Wall Street is forced to rethink its position. Safe haven buying is back and mortgage rates are lower because of it.
Over the next few months, expect a lot of this back-and-forth action in rates. In general, positive news for the economy will be met with higher Colorado mortgage rates and negative economic news will be met with lower mortgage rates. There will be exceptions, but the general rule should hold.
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What’s Ahead For Colorado Mortgage Rates This Week : January 11, 2010
Data was sparse through 2010′s first trading week last week, setting the stage for a week of momentum trading.
In up-and-down trading, Colorado mortgage pricing improved overall but the best rates of the week didn’t last long.
Denver Mortgage Rates improved Monday and Tuesday as an oversold market corrected itself to better price points. Then, in anticipation of the December jobs report, rates worsened Wednesday and Thursday. Friday, after the jobs report was released, pricing proceeded to carve out a huge range before settling unchanged.
On average, lenders issued new rate sheets every few hours last week. It was a difficult week to shop for mortgages in Colorado and elsewhere.
Unfortunately, this week doesn’t figure to be much better.
For the second straight week, the economic calendar is bare. Traders — like last week — will be forced to rely on “gut feel” to make their trades. That rarely bodes well for shoppers. Especially because traders are facing a mortgage market in the midst of a terrible losing streak.
Since reaching an all-time low December 1, 2009, 30-year Colorado fixed rate mortgages have worsened by 300 basis points, or 3 percent.
To a homeowner or rate shopper in Denver , the math of 300 basis points looks like this:
- 5 weeks ago, a 4.625 percent mortgage rate required 0 points
- Today, the same 4.625 percent mortgage rate requires 3 points
1 point is equal to 1 percent of your loan size.
Last month’s worsening is the worst 1-month deterioration in consumer mortgage rates from all of 2009.
If you’re hoping for rates to fall back to early-December levels, know that it is possible. For this week, here’s some things that could push rates in the right direction:
- 3 Fed members are speaking. Each mention of economic under-performance in 2010 will be good for rates.
- Retail Sales data is released Thursday. If the numbers are weak, mortgage rates should improve.
- Consumer confidence surveys are released Friday. Lower confidence levels should help rates fall.
Be ready to lock at a moment’s notice this week. Rates may rise or fall, but markets are positioned toward the former.That’s where momentum is pointing as of the Market Open today.
Keep an eye on rates and your loan officer on speed dial. Once the mortgage market starts breaking, it’s expected to break quickly.
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2010 Denver Colorado Metro Area- FHA Loan Limits Released
Colorado FHA home loans are federal assistance mortgages made by lenders, and backed by the government. The FHA doesn’t make loans to Colorado homeowners — it insures loans made to homeowners by federally-qualified lenders.
By all accounts, Denver FHA home loans are surging in popularity.
- 2006, FHA insured 3.3% of all mortgages made
- Q2 2009, FHA insured 19.2% of all mortgages made
A major reason for the increase can be tied to guidelines.
As compared to its conforming mortgage cousins Fannie Mae and Freddie Mac, Colorado FHA home loans have lower down payment requirement and looser credit standards. The FHA allows down payments of 3.5 percent for homes in Aurora, Colorado and Fannie Mae and Freddie Mac do not, as an example.
Another reason is that FHA home loans aren’t subject to credit score fees the way that conforming mortgages are. Through Fannie or Freddie, a home buyer with a 650 FICO and 20% down is subject to 3% in risk fees. Via the FHA, the fee is zero, making FHA the better “deal”.
The FHA published its 2010 loan limits. There’s no change from 2009.
The base 2010 FHA loan limits are:
- 1-unit : $406,250
- 2-unit : $520,050
- 3-unit : $628,650
- 4-unit : $781,250
We say “base” because these loan limits don’t apply to all areas equally. Higher-cost regions get higher loan limits, based on typical home values. Homes in Los Angeles County, for example, can be FHA-insured up to $729,750 in 2010, and there are special exceptions made for Alaska and Hawaii.
The official FHA announcement included a complete, county-by-county FHA loan limit list. The first spreadsheet shows each county at or above the $729,750 maximum; the second list is everyone else.
If your home’s county is on neither list, use the “base” numbers above.
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Upon Closer Inspection, The Federal Reserve Isn’t 100% Positive About The Future Of The Economy
Both mortgage rates and home affordability took a turn for the better in Denver, Colorado Wednesday after the Federal Reserve released its December 15-16, 2009 meeting minutes.
The Fed Minutes is a follow-up piece to the post-FOMC meeting press release. But whereas the press release is succinct and to-the-point, the minutes are lengthy and often meandering.
As a comparison, December’s press release contained 535 words. December’s minutes had 6,260.
But these “extra words” aren’t superfluous. They’re actually very important to homeowners. Because the Federal Reserve’s internal debates help to shape Wall Street expectations, it doesn’t take much for those conversations to have a trickle-down effect on Main Street.
For example, after the December meeting, the Fed said that economic growth is steady, inflation is in check, and an orderly wind-down of mortgage market support was underway. A look at the minutes, though, showed some disconnect.
Some Fed members believe rising commodity prices could lead to stronger-than-expected, and others think that improvement is housing could be “undercut” by a pull-back in government stimulus.
Overall, the Fed appears optimistic about the economy, but not as optimistic as on December 16. Mortgage markets responded favorably to the minutes and mortgage pricing improved.
Although Colorado Mortgage rates remain higher as compared to early-December, pricing has been on a good run this week. If you’re under contract for a home in aurora, Colorado or just looking to refinance, now may be a good time to lock.
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Colorado Home Buyers Get A Green Light : Pending Home Sales Plunge In November
Just one month after touching a 3-year high, the National Association of Realtors® Pending Home Sales index plunged in November. A “pending” home sale is a home that is under contract to sell, but has yet to close.
The 16 percent drop marks the first retreat in Pending Home Sales since January of last year.
The weak Pending Home Sales data is an indication that Existing Home Sales data will be soft this month. This is because, historically, 80 percent of Pending Home Sales convert to “closed sales” within 60 days, and most of the rest close within 120.
With Pending Home Sales down, the Highlands Ranch housing market should lose some of its momentum. For today’s home buyers, this kind of slack can represent a terrific opportunity.
Home prices are a function of supply and demand; of buyers and sellers. When buyers outnumber sellers, competition leads to bidding wars, ultimately, and higher home prices overall. The imbalance can also create a sense of urgency that results in over-paying for a home.
When buyers are sparse, on the other hand, the psychology of real estate shifts.
Home sellers are keenly aware of foot traffic and requests for second and third showings. Without buyers, their homes can’t sell. They also note a lack of general feedback from the market.
It’s at this point that seller fear can creep in and it becomes a buyer’s best time to buy.
Based on November’s Pending Home Sales data, it’s clear that home sellers are in abundance right now. Home buyers have leverage.
It may not last.
With Colorado mortgage rates easing lower this week, the federal home buyer tax credit still in effect, and the Holiday Season officially over, buyers are getting back to business in Denver and everywhere.
Plus, with the tax credit deadline of April 30, 2010 fast approaching, buyer activity should increase over the next 4-6 weeks.
The market looks ripe for a buy but don’t rush it. Take your time and bid right. But when you’re ready, be ready — once the market momentum shifts back to sellers, you might lose all that leverage you built up through the winter.
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Looking At The 2010 Predictions For Housing Markets And Colorado Mortgage Rates
2010 is just a few days old and already the “experts” are making predictions for the year.
Housing calls and mortgage rate predictions run the gamut:
- Home prices will fall in 2010
- Home prices will rise in 2010
- Mortgage rates will rise in 2010
- Mortgage rates will rise by a lot in 2010
Given how varied their outlooks, it’s clear that the professionals have no better view of the future than the amateurs. An expert can make an educated guess, but it’s a guess nonetheless.
Last year, Wall Streeters predicted a 25% pullback in home prices. 12 months later, we know prices didn’t fall. Wall Street also predicted higher Colorado mortgage rates for 2009. That prediction was fulfilled.
There’s a lot of talk on CNBC and elsewhere about what’s coming in 2010. Before you take those predictions to the bank, just remember that analysts do a much better job interpreting data from the past than projecting it into the future.
The only thing that’s certain right now is that Colorado mortgage rates are historically low, the government is giving tax credits to qualified buyers, and there’s a lot of good “deals” in housing. Make the most of what’s out there today because it will take 12 months for us to look back and know which predictions were right and which were wrong.
Until then, predictions are just opinions and guesses.
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What’s Ahead For Mortgage Rates This Week : January 4, 2010
Mortgage markets were relatively flat last week during holiday-shortened trading. After starting the week with a Monday surge higher, mortgage rates settled down through Tuesday and remained somewhat flat into the early-close for New Year’s Eve.
However, as compared to the 4-month low posted post-Thanksgiving, conforming mortgage pricing has now worsened by more than 300 basis points. In English, that means that a December 1 Colorado mortgage rate quoted with zero points is available today at a cost of 3 points.
1 “point” is equal to 1 percent of how much you borrow.
If you were shopping for homes or rates last month, you no doubt noticed that pricing zoomed higher to close out 2009. How 2010 starts is anyone’s guess. This week will hold the answer.
It’s a week light with data, but heavy on importance. The biggest news comes Friday in the form of the December employment report.
Last month, the Unemployment Rate fell for just the second time in 2 years and net job gains nearly turned positive. Both points were bad for mortgage rates because a weak economy has helped keep rates down. Evidence of improvement, therefore — at least according to Wall Street — is reason for reversal.
This month, analysts expect a net job gain of zero. If they get it, the psychological effect of the data should cause stock markets to rise and mortgage markets to sink.
A worsening market is bad for rates.
Other data to watch this week is Tuesday’s Pending Home Sales report and Wednesday’s FOMC November Minutes release. Both can forcefully impact markets and rates.
Today is January 4 — there’s a lot of 2010 to go. However, that won’t stop Wall Street from trying to figure it out. As the stock market rises and falls this week, the bond market will likely be in tow. Abrupt movements mean changing mortgage rates and we’ll see more of our fair share of it over the next few weeks.
If you’re quoted a mortgage rate this week that fits your budget, consider locking it in. Rates may fall in 2010, or they may not. It’s a gamble on which you don’t want on the wrong side because when rates do rise, they’re likely to rise quickly.
Markets can’t sustain rates like this in an expanding economy.
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Home Prices On The Rise, Says The October Home Price Index Report
More positive signals from housing — home values are still on the rise.
According to the Federal Housing Finance Agency, after posting its first quarterly increase since 2007 this past September, the Home Price Index rose by another 0.6 percent in October.
Prices are up in 4 of the last six months.
But before we take the stats to the proverbial bank, it’s important that we recognize the Home Price Index for its shortcomings.
- HPI only accounts for homes with mortgages backed by Fannie Mae or Freddie Mac
- HPI only accounts for re-sold homes — newly-built homes are excluded
- HPI aggregates national data whereas real estate markets are local phenomena
On a broad scale, the Home Price Index can be useful, but it doesn’t specifically apply to Aurora or any specific U.S. market. For that, analysts tend to turn to the Case-Shiller Index, a privately-produced report that assesses home values in 20 cities nationwide.
The good news for home sellers in Piney Creek, Colorado is that Case-Shiller’s most recent report corroborates the government’s conclusion — home values are creeping back.
Home buyers should pay attention. When public and private sector data is in accord, markets tend to go along and, looking back, housing likely bottomed in February 2009. Since then, home sales are up, home supplies are down, and values have increased in most U.S. markets. Furthermore, so long as mortgage rates remain low and government stimulus is in place, the trend should continue through at least the first quarter of 2010.
If you’re on the fence about buying a home right now, or wondering about timing, consider your options vis-a-vis today’s market. Into the new year, homes won’t likely be as cheap to buy, nor to finance.
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Moving To A New City? Check The Local Cost Of Living First.
It’s not only the real estate markets that differ from town to town — the Cost of Living does, too.
Insurance costs, tax bills and just plain, day-to-day living will dent a household budget differently depending on where that household is. It can be a nerve-wracking fact for families moving from Colorado across state borders.
As an aid for the budget-aware, www.benyost.com keeps a Cost of Living Comparison Calculator on its website. The calculator asks 3 questions: (1) Where do you live now, (2) To where you are moving, and (3) What is your salary. It then spits out a detailed, 58-item cost comparison list between the two cities.
Some of the key costs compared include:
- Everyday groceries
- Energy bills
- Routine healthcare
- Home ownership
- Clothes
- Sporting goods
- Commuting
The Cost of Living Comparison Calculator is thorough, with data culled from the ACCRA. You’ll be surprised at how granular the list can get. On the ACCRA website, you can buy a similar report for $5.
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What’s Ahead For Mortgage Rates This Week : December 28, 2009
Mortgage markets made a 4-day losing streak last week on thin holiday volume and overall economic optimism. It was awful news for rate shoppers in Colorado because Colorado mortgage rates were higher every day last week.
The holiday-shortened week marked the third out of 4 during which rates worsened and last week’s action happened to be especially harsh. Monday’s action was the worst for rates since July, for example.
Tuesday’s was only slightly less worse.
Today, conforming, 30-year fixed mortgage rates have reached at a 15-week high — well off the lows set in early-December.
Normally, when Colorado mortgage markets worsen this badly, this quickly, it’s because of strong economic data, or growing inflationary expectations. Last week saw neither.
- Existing Home Sales showed strength, but was offset by New Home Sales
- 3rd Quarter GDP showed the economy growing at a slower-than-expected pace
- Inflationary data wasn’t as high as was expected
Furthermore, consumer confidence didn’t rise as planned.
And yet — stock markets gained. All 10 sectors improved and they did so at the expense of mortgage bonds.
This week is again holiday-shortened so expect the same low-volume, high-volatility trading as last week. There’s few data releases save for Tuesday’s Case-Shiller Index. Therefore, watch for momentum trading in either direction.
Markets close early Thursday and re-open Monday, January 4, 2010. If you need to lock a rate, make sure of your loan officer’s hours.
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