While the analysts report that the Holiday shopping season has gotten off to a strong start, the news from Congress continues to stay front and center. The lame duck session is addressing the automatic budget cuts and tax increases that go into effect in January if an agreement is not reached. The changes would be so draconian that the media has nick-named these “the fiscal cliff.” The concern right now is whether the threat of the fiscal cliff is causing businesses not to hire and consumers not to spend. Thus far, the results from Black Friday and Cyber Monday seem to indicate that at least the public is not worried. We are not of a mind to believe that Congress will let us fall down a fiscal cliff.
We do understand that if they wait for the last minute — not unusual for Congress — and start the finger-pointing rhetoric, it could hurt the economy as we approach the Holidays. Thus far, Congress has been pretty cordial. It is as if the elections delivered a message to our representatives that we want them to work together. Keep in mind that even though we think either a temporary “kick the can down the road” or permanent solution will come out of the talks, that does not mean the economy will not be affected. Higher tax revenues, budget cuts and even changes in Medicare and Social Security are all on the table. You can’t cut a trillion dollar deficit without raising revenue and lowering spending. The lobbyists are busy protecting their clients’ interests such as social security and the mortgage tax deduction. We hope a balanced approach will emerge and a major potential stumbling block for the economic recovery will be removed. Meanwhile, this Friday look for the most unimportant employment report in a while. The data is expected to be skewed because of the effects of Hurricane Sandy.
The Markets. Rates were stable at record lows last week. Freddie Mac announced that for the week ending November 29, 30-year fixed rates rose slightly from 3.31% to 3.32%. The average for 15-year loans increased one tick to 2.64%. Adjustable rates were also stable with the average for one-year adjustables remaining at 2.56% and five-year adjustables decreasing slightly to 2.72%. A year ago 30-year fixed rates were at 4.00%. Attributed to Frank Nothaft, Vice President and Chief Economist, Freddie Mac, “Rates were virtually unchanged this week amid growing concerns around the fiscal cliff. Although low rates failed to boost new home sales in October, year-to-date sales are up 20 percent compared with 2011 volumes and there are growing signs of a turnaround in house prices. The S&P/Case-Shiller® national home price index (seasonally adjusted) rose 5.2 percent over the first three quarters of this year. In addition, all 20 of the city indices (seasonally adjusted) had positive growth over the first 9 months, led by a 17.9 percent increase in Phoenix. More recently, the Federal Reserve’s November 28th regional economic review, known as the Beige Book, noted that 10 of the 12 districts reported the market for single-family homes continued to improve leading into mid-November.” Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.
Current Indices For Adjustable Rate Mortgages
Updated November 30, 2012
| Daily Value | Monthly Value | |
| Nov 29 | October | |
| 6-month Treasury Security | 0.15% | 0.15% |
| 1-year Treasury Security | 0.18% | 0.18% |
| 3-year Treasury Security | 0.35% | 0.37% |
| 5-year Treasury Security | 0.63% | 0.71% |
| 10-year Treasury Security | 1.62% | 1.75% |
| 12-month LIBOR | 0.924% (Oct) | |
| 12-month MTA | 0.166% (Oct) | |
| 11th District Cost of Funds | 1.038% (Sept) | |
| Prime Rate | 3.25% |
Deep inside all of the information concerning the Federal Housing Administration lately, there is one underreported tidbit we want to point out. For those of you who currently have FHA-backed home loans and are looking into a streamlined refinance, the time to act is now. And here’s why. In its 2012 annual report, the U.S. Department of Housing and Urban Development announced it will reverse the original plan to cancel the mortgage insurance program for FHA loans, effective “sometime in 2013.” The effective date is dependent on when the loan is endorsed by HUD. With the FHA short on insurance funds, it is having to take measures to protect this program. Yes, we can expect that insurance premiums will increase soon, both upfront and annually. The FHA believes this will strengthen its capital position but not limit access to credit for qualified borrowers. But after a certain amount of time, the borrowers no longer need to pay insurance premiums, even though FHA-backing remains in force for the life of the loan. That’s going to end soon. “While FHA’s 100% insurance guarantee remained in effect for the 30-year life of a loan, borrowers were only required to pay premiums for less than ten years,” HUD said in a statement. “FHA has been left without premiums to cover losses on loans held beyond the period for which it collects premiums. This change will apply to new loans.” Currently, once the principal balance on your loan reaches 78% and you have made a minimum of 60 payments, you are free from paying the premium. New homebuyers who plan on using FHA for financing should expect to still see the insurance payments remain due on the loan until the house is sold or can be refinanced into a conventional mortgage. FHA Acting Commissioner Carol Galante addressed the changes, saying, “We will continue to take aggressive steps to protect FHA’s financial health while ensuring that FHA continues to perform its historic role of providing access to homeownership for underserved communities and supporting the housing market during tough economic times.” Source: HousingWire
Owners can take steps to avoid having their home appraised at a lower value than the asking price. “Taking the time to understand the areas that can positively influence your appraisal can help ward off the chances that your home will be appraised at a lower value than the asking price,” according to a recent article at Realty Times, which highlights ways sellers can prepare for an appraisal. Here are a few ways that home owners can hurt their appraisal, according to the piece.
- Leaving the home untidy. Having an unkept exterior or interior can cause an appraiser to decrease the value somewhat. Remind your sellers that curb appeal is also important for an appraisal. Overgrown bushes or an unkept home exterior could prompt an appraiser to take as much as 3 percent off the value, according to a CNNMoney article.
- Having incomplete remodeling projects. Don’t let home owners keep a remodeling project unfinished prior to an appraisal. If they must, make sure they include details of the complete project and when it is to be finished to the appraiser.
- Failing to list improvements or upgrades made to the home. Compile a list of upgrades and home improvements made to the home and provide it to the appraiser. While some items, like a new roof, may not help raise the appraised value, other items might. Source: Realty Times
New homes have been found to burn much faster than older homes due to a change in building materials the last decade. The increased use of prefabricated, lightweight construction materials in new-homes today has caused homes to burn and collapse faster than homes that use traditional solid-wood frame construction, firefighters and fire safety groups say. Yet, California and Maryland remain the only two states that require sprinklers to be installed in new homes. On the other hand, several state governments have enacted legislation in recent months forbidding cities from requiring sprinklers to be added to new homes. Several state governments have become outspoken critics against sprinkler systems added to new homes despite the move by the International Code Council, which develops national building codes, in 2009 voting in favor of fire sprinklers being added to all new one- and two-family homes. When the housing market started to soften, however, many lawmakers, lobbyists, and the building industry started to speak out against the installation of sprinklers in new homes. “When you start mandating a fire sprinkler system, you are going to price a lot of people out of these new homes,” Ned Munoz, vice president of regulatory affairs for the Texas Association of Home Builders, told Reuters. The Fire Protection Research Foundation found in 2008 that adding a sprinkler system to a new home would add about $3,864 onto a 2,400-square-foot home. However, Reuters reports that some insurance companies offer up to 10 percent discounts to policies when homes have fire sprinklers. With the increase in lightweight construction materials, fire experts say the sprinklers could save lives. But others argue that the decision to install fire sprinklers should be left with home owners, not a mandate among city or state governments. Source: Reuters
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