Colorado Mortgage Broker

On the first Friday of each month, the Bureau of Labor Statistics releases Non-Farm Payrolls data for the month prior. 

The data is more commonly called "the jobs report" and it's a major factor that influences Colorado mortgage rates. Especially today, considering the economy.

This is because, although it's believed that the recession of 2009 is over, there's emerging talk of new recession starting.

Support for the argument is mixed:

1. Job growth has been slow, but planned layoffs touch a 10-year low
2. Consumer confidence is down, but beating expectations
3. Consumer spending is weak, but not declining

In other words, the economy could go in either direction in the latter half of 2010 and the jobs market may be the key. More working Americans means more paychecks earned, more taxes paid, and more money spent; plus, the confidence to purchase a "big ticket" items such as a home.

Jobs growth can provide tremendous support for housing, too.

Today, though, jobs growth was "fair". According to the government, 54,000 jobs were lost in August, but that reflects the departure of 114,000 Census workers.  The private sector (i.e. non-government jobs), by contrast, added 67,000. 

In addition, net new jobs was revised higher for June and July by a total of 123,000.  That's a good-sized number, too.

Right now, Wall Street is reacting with enthusiasm, bidding up stocks at the expense of bonds -- including mortgage-backed bonds.  This is causing Colorado mortgage rates to rise.  Rates should be higher by about 1/8 percent this morning.

According to the Standard & Poors Case-Shiller Index, home values rose 5 percent in June versus the month prior, and 4 percent from a year earlier.  It's the 16th consecutive month in which Case-Shiller reported an increase in home values and the third straight month of outstanding results.

That said, homeowners and home buyers in Evergreen would do well to temper Case-Shiller enthusiasm. The June figures are issued on 60-day delay and, over the last 60 days, housing data has been lackluster at best.

• Existing Home Sales are down 27 percent
• New Home Sales are down 12 percent
• Homebuilder confidence is down

Stories like these highlight a key weakness of the Case-Shiller Index -- it's out of date as soon as it's published. Because of this, the Case-Shiller Index relevance to everyday Americans is muted. People don't buy homes in the "60 days ago" real estate market, after all.

June is ancient real estate history.

However, the Case-Shiller Index does have its place. As the most widely-followed, private-sector housing tracker, the index is used to help make policy decisions and to shape Wall Street's expectations of the economy. This means that a strong Case-Shiller reading can cause mortgage rates to rise, and a weak Case-Shiller reading can cause rates to fall.

Tuesday, mortgage rates fell.

The number of home resales plunged by 1.4 million units in July, according to the National Association of Realtors®' Existing Home Sales report.

It's a drop of 27 percent from June; single-family Home Sales in Colorado are at the report's lowest levels since May 1999.

Furthermore, because of the sharp drop in sales volume, home inventories are spiking.

Homes for sale nationwide fell just short of 4 million units in July and, at the current sales paces, it would take 12.5 months for the existing inventory to be absorbed.

Home supply was just 8.9 months in June.

For home sellers in Evergreen , the Existing Home Sales report is a bit of bad news.  Fewer sales and larger inventories put negotiation leverage in the hands of the buyers which, in turn, creates downward pressure on home prices.  It may also increase time-on-market.

For home buyers, however, the data is decidedly welcome. After a stimulus-driven spring buying season that favored sellers, the summer and early-fall market seem to favor buyers. More choices and more leverage is a positive.

It helps that home affordability is up, too. 

Although there's reports that home values are rising, their modest gains are more than countered by the ongoing rally in mortgage rates. Freddie Mac says that 30-year fixed rate mortgage rates are at their lowest levels in history and, at today's rates, every one-eighth drop in mortgage rates roughly offsets a 1.5% increase to home price.

Colorado Mortgage rates are down 0.75 percent since mid-April.

The tightening in mortgage-lending policies that characterized the last 3 years appears to be slowing.

According to the Federal Reserve's quarterly survey of senior bank loan officers, roughly 1 in 10 lenders added mortgage qualification hurdles between April and June. It's a huge departure from just 2 years ago when the mortgage industry was facing its first wave of challenges. 

During that period, eight in 10 lenders added hurdles.

For mortgage applicants in Denver , this quarter's Fed survey results signals that mortgage lending may have reached its limits of restriction.

Since 2007, mortgage guidelines have become increasingly restrictive. There's extra scrutiny on assets and tax returns; employment history is given more weight; loan purpose matters.  There's a bevy of traits that can stand between you and an approval that didn't exist a few years ago.

That said, lots of homeowners are still getting loans.

Verifiable income, good credit scores and equity are the "magic formula" and banks want to lend to good credit risks. And the best news for those that qualify is that mortgage rates are fantastic right now.

According to Freddie Mac, mortgage rates are as low as they've been in history.

So, if you're among the many wondering if now is the right time to buy a home -- or refinance one -- remember that, although mortgage guidelines likely won't get worse, mortgage rates probably will.

Foreclosure filings rose 4 percent nationwide last month versus June, according to foreclosure-tracking firm RealtyTrac.com. For the 17th straight month, total filings topped 300,000.

A foreclosure filing is defined as default notice, scheduled auction, or bank repossession.

As with most months, just a handful of states dominated foreclosure activity nationwide.

• California : 14.9 percent of all activity
• Florida : 11.6 percent of all activity
• Arizona : 6.4 percent of all activity
• Michigan : 6.2 percent of all activity
• Georgia : 6.1 percent of all activity
• Texas : 4.9 percent of all activity

Together, these 6 states represent just 30 percent of the overall U.S. population.

The other 44 states (and Washington D.C.) were home to the remaining 49.0%.

Despite this imbalance, though, in all markets, foreclosures and REO are making a profound impact on pricing and product. "Distressed" homes now represent 32 percent of the overall resale market nationwide, according to the National Association of Realtors®.

Buying a foreclosed home can make for a terrific "deal", but buying in the REO market is decidedly different from buying a non-foreclosed property.

As 3 examples:

1. Buying bank-owned homes can take 120 days to close.
2. Foreclosures aren't always listed for sale publicly. Some inventory is privately-held.
3. Bank-owned homes are often sold "as is". There may be defects that render the homes mortgage-ineligible.

If you have an interest in buying REO, consider talking with a real estate agent first. Even the negotiation process is different as compared to a non-distressed sale. It helps to have an experienced professional representing your interests.

In an article this week by James Pethokoukis of Reuters, An August Surprise From Obama?, Mr. Pethokoukis outlines a rumored plan by the Obama administration to bail out the millions of home owners who are under water on their homes through the Making Home Affordable Refinance program. 

The plan, supposedly set to initiate just in time for the fall elections, would influence Fannie Mae and Freddie Mac to forgive a portion of home owner mortgage debt that is in excess of the home's appraised value.

If you are a home owner that is in that situation and reading this article, you are probably rejoicing.  Left with few options, this may be the bailout you have been waiting for.

That being said, and I usually don't get political, the timing of this plan is interesting with the current administration losing popularity and the fall elections looming.  Although such a plan will undoubtedly help millions in the short-term, what are the long term effects of yet another bailout?

If you aren't familiar with John Mauldin, his take on the proposed plan is a good one in my opinion, and his newsletter is a good read each week.  Here is an excerpt:

"I hope this is just a rumor. Seriously. You want to tax renters (about 35% of us) to help pay for mortgages for people who entered knowingly into a business transaction that sadly did not end well? I truly feel sorry for them. I have several very good (and responsible) friends who are in trouble, and I understand the issues. They just bought at the wrong time. But what about my investment in a start-up that failed? People who are behind on credit cards? If you bought a new car, you are underwater the moment you drive the car off the lot. Help for those? Where does it end? Hundreds of billions of debt that our children will have to pay? Say it ain't so, Joe. You can read the whole blog if you have adult beverages or blood-pressure medicine nearby."

These continued bailouts are great in the short term, but must be re-paid eventually and will burden future generations.  It's the "pay now vs pay later" argument.  What will be the long-term effect of another trillion-dollar bailout like this?

Standard & Poors released its Case-Shiller Index Tuesday. On a seasonally-adjusted basis, between April and May 2010, home prices rose in 19 of Case-Shiller's 20 tracked markets.  It's the second straight month of strong Case-Shiller findings.  Denver, Colorado home values were among the markets that saw improvements

Also, May's numbers are a mirror-image of February's. In February, 19 of 20 markets lost value.

In its press release, the Case-Shiller staff resisted calling May's data proof of a housing recovery, noting that home values remain flat as compared to October of last year. However, there are some noteworthy numbers in the Case-Shiller report.

1. 13 of the 20 tracked cities are showing home price improvement year-over-year
2. Foreclosure posterchlld San Diego has now shown 13 straight months of improvement
3. San Diego, San Francisco and Minneapolis are showing double-digit annual growth

These are all good signs for the housing market, but the Case-Shiller Index is not without its flaws. Most notably, the data is limited to just 20 cities nationwide -- and they're not even the 20 largest ones. 

Cities like Houston, Philadelphia, and San Jose are excluded from Case-Shiller, while cities like Tampa (#54) are not.

Another Case-Shiller flaw is that it reports on a 2-month delay.

Therefore, today is several days from the start of August but we're now reflecting on data from May. Given the speed at which the Denver real estate market can change, May's data is almost ancient.  Today's values may be higher or lower than what Case-Shiller reports.

For Colorado home buyers, reports like the Case-Shiller Index may not be useful in making a "Buy or Not Buy" decision, but can aid in watching longer-term trends in housing.  For real-time data, talk to a Colorado real estate agent with access to local figures instead.

Single-family Housing Starts eased lower last month, falling by 0.7 percent from May, or 3,000 units nationwide.

A "housing start" is a home on which construction has started.

June's Housing Starts data is somewhat soft and may partially explain why home builder confidence dropped to its lowest level since April 2009, but for Colorado Home Buyers and sellers in, the Housing Starts report is not nearly as bad as headlines say.

This is because when the press reports on Housing Starts, it doesn't single out single-family homes. The press lumps every type of home into a single, giant reading. As a result, news outlets are reporting Housing Starts down 5 percent -- a somewhat misleading figure.

The 5 percent figure is actually a combination of 3 separate housing types:

1. Single-Family Housing Starts
2. Multi-Unit Housing Starts (2-4 Units)
3. Apartment Building Housing Starts (5 or more units)

But, single-family homes are what most Americans purchase. This is why the single-family starts data is more relevant than the combined figure commonly reported by the press. 2-4 units and apartment buildings are a different realm of buyer.

That said, though, we can't even be sure that June's Single-Family Housing Starts report is accurate. As noted in the Department of Commerce's press release, the data's margin of error is 10.7 percent which means the reported results are of "no confidence".

In other words, there is no statistical evidence to prove the actual change was different from zero.

If Housing Starts did, in fact, drop in June, it will help to reduce the housing inventory, which will provide support for Colorado Home Values. For home sellers, this could be good news. Fewer homes for sale means less competition for Colorado Home Buyers.

One thing is for sure, Colorado Homes can be purchased at great value right now, with Colorado Mortgage Rates at historic lows, and values deflated by the poor economy.

Home Buyer Tax Credit Deadline Extension to September 30th - by RJ Baxter

The government is proposing a Federal Home Buyer Tax Credit Deadline Extension to September 30th, 2010 according to rumors that are swirling this morning. 

The extension would allow those who are already under contract to close by September 30th in order to obtain the credit.  However, it is likely the extension will not allow home buyers to make new offers on homes.  The Home Buyer Tax Credit Deadline Extension would only accommodate those who are already under contract and beginning to worry about meeting the current June 30th deadline.

The proposal was introduced by Sen. Harry Reid of Nevada, Sen. Johnny Isaakson of Georgia, and Sen. Chris Dodd of Connecticut.  The Senators argue that the Home Buyer Tax Credit Deadline Extensionis mainly to accommodate short sales which traditionally take longer to close than "normal" transactions.  It is not surprising that Reid is one of the backers of the extension, with short sales accounting for over 25% of home sales in Nevada currently.

"The first time homebuyer tax credit was very popular and successful in Nevada," Reid said. "In addition to making it easier for thousands of Nevadans to purchase their first home, it helped reduce the sitting inventory of homes. By extending the transaction deadline, we can ensure that everyone taking advantage of this credit can complete the purchase of their new home."

The proposed Home Buyer Tax Credit Deadline Extension will be voted on soon and would be welcome for home buyers who are worried about meeting the current June 30th deadline, short sale or not.

RJ Baxter Becomes Newest Zillow Author with Mortgages Unzipped Blog Team

RJ Baxterhas joined the blogging team of Zillow's Mortgages Unzipped blog.  The blog features a core group of experienced and top producing mortgage professionals who collaborate on Zillow's platform to provide timely mortgage advice and information to consumers.

With over 5 years of blogging experience, RJ Baxter brings a new voice to Mortgages Unzipped.  He has been blogging on his own platforms such as his personal mortgage website, www.rjbaxter.com, and other industry websites.  RJ Baxter recently joined ActiveRain and has focused on the ActiveRain medium as his primary blogging website in 2010.

Originally from Iowa, RJ Baxter received a degree in English from the University of Iowa, one of the premier writing colleges in the country.  He has utilized his background in writing to help educate consumers on the mortgage process and communicate timely mortgage news and product information.

Check out RJ Baxter 's contributions to Mortgages Unzipped by visiting the blog:  RJ Baxter Mortgages Unzipped

RJ Baxter is the Branch Manager of First Mortgage Corp in Evergreen, Colorado and can be reached at the following:

27902 Meadow Drive, Suite 120

Evergreen, CO 80439

303-670-0137