BluefoxToday blog : October 2009

Mortgage loans that were labeled subprime just a few years ago were partly responsible for the notorious real estate bubble. When it burst and let all the air out, the subprime product quickly disappeared from the bloodied scene. Many housing observers warmed up their fingers over keyboards and wrote all these tearful obituaries, believing it would be gone for good. But guess what? It's now back.

This much-criticized mortgage segment has adopted a new backer, however. Subprime used to be pretty much exclusively conventional lenders' territory, until the recent thermonuclear event. With their exit a new player emerged to fill the void, Ginnie Mae, a wholly-owned government corporation created within HUD. Ginnie Mae is another adorable name in the mortgage arena, besides Fannie Mae and Freddie Mac.  

Ginnie Mae operates a little differently from its above-mentioned and better-known sister agencies. It guarantees investors timely payment of interest and principal on MBS, or mortgage-backed securities, supported by federally insured loans, meaning FHA, and federally guaranteed loans, in this case VA. The majority of its guarantees go to these two organizations. Ginnie Mae is not in the business of buying or selling loans or issuing MBS.

According to the Federal Reserve Bank of San Francisco, FHA mortgage lending has skyrocketed in the last several months, achieved with the Ginnie Mae's guarantees. In 2006 subprime paper accounted for about 20% of all home loans. Then its market share plunged to near zero and now it is climbing back up again. San Francisco Fed asserts that today mortgage borrowers nationwide with FICO scores under 660 command slightly over 20% of the market. In short, it's back to where it was only three years ago. That raises some eyebrows. And rightfully so.

FHA has flirted with trouble lately as mortgage loan losses are mounting. Sinking property values have a lot to do with this, as are the lenient underwriting guidelines FHA uses, in other words subprime lending, and the generally weak economy. As of right now it looks as if it doesn't need a government bailout, feared by many. If home prices stabilize soon across the board, it'll be safe.  

Las Vegas valley - including communities of Mountains Edge, Summerlin, Anthem, Henderson, Southern Highlands, Green Valley and North Las Vegas - has benefited greatly from FHA mortgages. Especially first-time home buyers have been using them and the nice tax credit to provide demand in an otherwise sluggish market. Without FHA the light at the end of the tunnel for Southern Nevada housing market would be just a tiny speck

It is apparent that an increasing amount of our country's financial power is being consolidated into the big four banks; Bank of America, Chase, Citibank and Wells Fargo making these guys absolutely To Big To Fail, what's next?

Will there be further consolidations... maybe big bank inspired elimination of mortgage brokers? 

Whoops, it's happening now unless you take action,  Big Banking Buddy FDIC is helping big banks eliminate one of their largest competitors leaving consumers with even fewer choices as early as 2010 unless you take immediate action.  Read how

For those of you who do not subscribe to the lending and real estate site Think Big Works Small you might enjoy their humorous take on banks to big to fail.  See Video

The Lakes September 2009 Real Estate Resale Market Report:

• Listings (10/15/2009):  49
• Under Contract (10/15/2009):  63
• Sold September 2009:  26
• Month's Inventory:  1.9

Since Last Month's Report:  Listings UP +10, Pendings DOWN -12, Sold UP +3

Why Las Vegas Pendings Aren't Selling

View Last Month's The Lakes Market Report Right Here!

For More Las Vegas Communities and Reports Click Here

Take a look at John's excellent post about reestablishing credit. Well worth your time.

Mountain's Edge September 2009 Real Estate Resale Market Report:

• Listings (10/15/2009):  159
• Under Contract (10/15/2009):  357
• Sold September 2009:  84
• Month's Inventory:  1.8

Since Last Month:  Listings are DOWN -17, Pendings are DOWN -2, Sales are UP +21

Last Month's Mountain's Edge Real Estate Market Report

Mountain's Edge is a newer community so many of the listings are short sales or bank owned.

If you are purchasing in a planned development, there may be a recreational facility, or one may be planned for the neighborhood. While such amenities are great, you must familiarize yourself with the facility, the management, and the documents pertaining to the facility. If the recreational package is planned but not yet constructed, find out what guarantees exist to insure construction. Builders and developers with the best of intentions sometimes get caught in adverse market conditions—such as the past two years—and find themselves short of cash. Good intentions will not construct a facility costing hundreds of thousands or even millions of dollars. Don’t base your purchase upon a wonderful facility that may never materialize. Talk to other homeowners and see if the projected date of completion has already been postponed.

It’s a good idea to speak to the president of the homeowner’s association if there is one is in place. Ask about repairs that may be planned or needed. Does the association have sufficient reserves to complete the work or will it be necessary to assess homeowners for needed funds. Such assessments are quite common and, in mandatory associations, participation is not optional. Associations have the power to place liens on any home where the homeowner refuses to pay and could even force the sale of a home to collect their fees.

Recreational facilities can be a source of pleasure and relaxation, but, improperly funded or managed, can be a financial nightmare for unsuspecting homeowners. Check out the physical and financial condition of the facility where you wish to live.

The Housing Guru: The one source for all your housing questions

Silverado Ranch September 2009 Real Estate Resale Market Report (Homes For Sale, Pending, Sold):

• Listings (10/16/2009):  136
• Under Contract (10/16/2009):  282
• Sold September 2009:  69
• Month's Inventory:  2

Since last month:  Listings are UP +9, Under Contract NO CHANGE, Sales are UP +1

Read Last Month's Report Here

Housing prices have been in a free fall in most sectors of the nation for a long while, much longer than any real estate expert had predicted. When mortgage financing is hard to come by and supply far outpaces demand that's usually what will follow. The weak economy is also a major contributor to this. Lately, though, prices have begun to stabilize across the colorful map.

Southern Nevada - Las Vegas, Henderson, Green Valley, Summerlin, Southern Highlands, Pahrump, Mountains Edge and Mesquite among its communities - is a good example of that. The lower end of the marketplace is rather busy here as investors and first-time home buyers do their thing and pick up bargain properties. The statistics are somewhat slanted because of the proportionally high impact of this particular segment. The mid-range and upper end in Las Vegas are still quite soft due to lack of demand, as expected, and difficulties in securing home loan approvals.

In a housing study Goldman Sachs just published it says that home prices have been nationally steered higher by 5% on average on account of government incentives and interventions.The number can be debated until mouths foam, but the fact right now is that Washington is largely making the housing market what it is. Mortgage money is kept affordable by the Fed buying just about everything that has a mortgage bond stamp on it. Then there are all these home loan modification and rescue plans, with eye-catching acronyms, that most consumers are liable to lose track of. But regardless, they at least slow down the supply of homes being foreclosed and dropped on the already saturated marketplace. The first-time home buyer tax credit has given a nice boost to the demand side. And by the way, it looks as if a similar program will come out of Congress in a little bit to replace it.  

Las Vegas metropolitan area - as are many other markets throughout - is still grappling with many challenges in the mortgage and real estate arenas. It would be in much worse shape, though, without Uncle Sam's charity and efforts. Eventually it has to stand on its own again, and it will. It's already taking some wobbly steps using crutches toward that goal, but obviously needs more time to fully recover.  

Photo by RyanGWU82

The Mortgage Market Watch for the Week of October 26, 2009

Events Affecting the Mortgage Market This Week:

There are Treasury Note auctions scheduled for every day this week except Friday. However, the two Note auctions that are most likely to influence mortgage interest rates are the 5-Year Note auction on Wednesday and the 7-Year Note auction on Thursday. If these auctions are met with a strong demand, prices of mortgage backed securities may rise during afternoon trading on Wednesday and Thursday which in turn will lead to lower mortgage interest rates. But a lackluster demand may cause investors to sell mortgage backed securities which in turn will lead to higher mortgage interest rates. A week ago, the Treasury sold only $12 billion worth of 30-Year bonds. That auction didn't meet market expectations and caused a large increase in mortgage interest rates.

There are a number of quarterly earnings reports scheduled for release again this week that could affect the stock markets. If the earnings reports are good or better than expected, then you can expect traders to sell bonds and mortgage backed securities and move those funds into stocks. If, on the other hands, earnings reports are worse than expected, then you can expect traders to sell stocks and move those funds into bonds as a safe-haven.

Economic Reports to be Released This Week:

There are seven economic reports scheduled for release this week that could have an impact on the mortgage market, so expect a volatile week for mortgage interest rates.

Monday, October 26th:

• There are no economic reports scheduled for release today.

Tuesday, October 27th:

• Consumer Confidence Index (CCI) for October - this index is watched closely because consumer spending makes up two-thirds of the U.S. economy. This index gives us a measurement of consumer willingness to spend. It's expected to show a reading of 54.0, an increase from last month's reading of 53.1. Generally, retail sales follow consumer confidence. The higher the index reading, the more likely consumers are likely to make large purchases in the near future. If the index reading comes in higher than expected, we will likely see higher mortgage interest rates as prices of mortgage backed securities fall.

Wednesday, October 28th:

• Durable Goods Orders for September - posted by the Commerce Department, this report tracks orders at U.S. factories for big-ticket items which in turn gives us a measurement of manufacturing sector strength. Analysts are forecasting a 1.5% increase in new orders. If we see a larger than expected increase in orders, we will likely see higher mortgage interest rates as prices of mortgage backed securities fall.
  
  
• New Home Sales Report for September - this report is expected to show an increase in sales of new homes to an annualized rate of 440,000, up from 429,000 the previous month. However, this report usually has little or no impact on mortgage interest rates.

Thursday, October 29th:

• Preliminary Reading of the 3rd Quarter Gross Domestic Product (GDP) - the GDP is considered to be the benchmark measurement of economic growth because it is the sum of all goods and services produced in the U.S. As such, the report is likely to have a major impact on the financial and mortgage markets. Analysts predict the report will show a 3.0% increase in the GDP, much higher than the 0.7% decrease the following month. A larger than expected increase in the GDP most likely will lead to higher mortgage interest rates as prices of mortgage backed securities fall.
  
  
• Jobless Claims - New claims for unemployment are tabulated each week to show the number of individuals who filed for unemployment insurance for the first time. Analysts are predicting that 525,000 new claims for unemployment will have been filed last week. With a decreasing trend in the filing of new claims for unemployment, this suggests that the labor market is improving. However, this data is usually not considered to be very important to the mortgage market.
  
  
• Fed's MBS Purchase Program - The results of this week's purchases of mortgage backed securities by the Feds will be released in the afternoon. As of last Thursday, the Feds have purchased over $959 billion in mortgage backed securities this year. The Feds plan on purchasing up to $1.25 trillion in mortgage backed securities through March 31st.

Friday, October 30th:

• 3rd Quarter Employment Cost Index (ECI) - this index tracks employer costs for salaries and benefits. It is expected to show an increase in costs of 0.5%. A larger than expected increase in the ECI will raise concerns about wage inflation and most likely will lead to higher mortgage interest rates as prices of mortgage backed securities fall.
  
  
• Personal Income and Outlays Report for September - this index is also watched closely because consumer spending makes up two-thirds of the U.S. economy. This data gives us an indication of the consumer's ability to spend and as well as their current spending habits. A rising income indicates that consumers have more money to spend and makes economic growth more of a possibility. Analysts are expecting to see no change in income, and a 0.5% decline in outlays. If the index comes in as or worse than expected, most likely we'll see lower mortgage interest rates as prices of mortgage backed securities rise.
  
  
• Update to University of Michigan's Index of Consumer Sentiment - analysts expect the index to rise slightly to 70.0, up this month's preliminary reading of 69.4. This index is moderately important because consumer sentiment is directly related to the strength of consumer spending. Because consumer spending makes up two-thirds of the U.S. economy, any related data will have an impact on the mortgage market.

How do Economic Data Releases Affect Mortgage Interest Rates?

One of the most important things for you to know when deciding when to lock in the interest rate on your mortgage is knowing what economic data is going to be released - and when - and how it may impact the mortgage market and mortgage interest rates.

While an in depth review of an economic event can help you make an informed decision, understanding the nuances of a release can't help you if you don't know when it's happening. Economic data releases are important because they provide a snapshot of what's happening in the economy. They also provide a foreshadowing of any upcoming market volatility. It's just as important to know when these data releases are happening as knowing what effect these releases can have on the mortgage market.

The chart below shows the price trend of the FNMA 30-Year 4.5% coupon over the past 30 days:

Recent Activity in Mortgage Backed Securities:

Remember - as the prices of mortgage backed securities goes down, the yields go up - and so do mortgage interest rates. Conversely, as the prices of mortgage backed securities goes up, the yields come down - and mortgage interest rates come down with it.

Mortgage Interest Rate Outlook:

Moderate to High Volatility. Overall, most likely it will be an active - and volatile - week for the mortgage market and mortgage interest rates. While Monday may be the quietest day of the week, expect some volatility in mortgage interest rates the rest of the week. The most volatile day of the week most likely will be Thursday with the release of the preliminary 3rd Quarter GDP and the results of the 7-Year Note auction.

The corporate earnings reports can also have an impact on the mortgage market and mortgage interest rates every day this week. If we see a significant rally or sell-off in the stock markets on any particular day, it may end up bringing us the biggest single day change in mortgage pricing.

There is strong evidence that the worst of the economic recession is behind us. If you have not yet locked in your mortgage interest rate, please proceed with caution and maintain contact with your mortgage professional.

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	Lew Corcoran, Sr. Mortgage Consultant Reverse Mortgages / FHA Loans / VA Loans USDA Rural Development Loans on Cape Cod and in Massachusetts Save on closing costs when you apply for a mortgage online ActiveRain Blog / Localism Mortgage Rate Forecast / New England Properties

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Las Vegas Area October 15, 2009 Active Listings by Type

• REO:  2144 (21%)
• Short Sale:  4591 (44%)
• All Other:  3636 (35%)

September 2009 Sales by Type:

• REO:  2869 (69%)
• Short Sale:  592 (14%)
• Other:  707 (17%)

This is just a guide for consumers to see what types of properties are closing vs what is listed.  Currently we have the most closes in the REO sector and the least inventory in the REO sector and it is an extreme seller's market.

Click here to see last month's Listing and Sales Type Report

Click here to view the most recent stats (scroll to bottom)