Looking For the Big “Mo”

momentumIt is all about momentum. For the last couple of years we have had an economic recovery of sorts. But anyone can tell you that the recovery has been lacking spark as it seems like every year the recovery hits a mini-slump. Last year the slump hit as we approached mid-year and the European debt crisis worsened. The economy bounced back from this mini-slump but it slowed the momentum of the recovery over the year. Yes, momentum. We want the recovery to gain the big “mo,” which of course stands for momentum. Momentum is what will enable us to shift into a higher gear. The question is–are we headed into another lackadaisical recovery year or are we going to gain this elusive momentum?
There are still potential speed bumps out there such as Europe and our own government’s mishandling of every financial deadline. On the other hand, other speed bumps seem to be smaller. For example, last year you heard about the massive shadow inventory of homes about to be foreclosed upon. Last year we also demonstrated that an improving real estate market will absorb this inventory. The pace of new home starts reported for December on Thursday tells us that we finished the year with momentum in place with regard to the housing markets. Every speed bump removed or lowered enables us to move faster. Our reading of economic growth for the 4th quarter due next week should be interesting in this regard. If growth was decent while the threat of the fiscal cliff hovered over the economy, this could mean that momentum is being achieved. What we would like is to be moving downhill for a while. It is tough to slow down when you are moving downhill.

The Markets. Rates were stable in the past week, but moved higher towards the end of the week. Freddie Mac announced that for the week ending January 17, 30-year fixed rates fell from 3.40% to 3.38%. The average for 15-year loans remained at 2.66%. Adjustable rates were also stable, with the average for one-year adjustables decreasing to 2.57% and five-year adjustables remaining at 2.67%. A year ago 30-year fixed rates were at 3.88%. Attributed to Frank Nothaft, Vice President and Chief Economist, Freddie Mac, “Rates were flat to down a little this week amid reports that inflation remains contained. The overall producer price index rose 0.1 percent between November and December, below the market consensus forecast, and the consumer price index was unchanged. For the year as a whole, consumer prices rose just 1.7 percent in 2012, almost half that of 2011’s increase of 3.0 percent.” 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 January 18, 2013
Daily Value Monthly Value
Jan 17 December
6-month Treasury Security 0.11% 0.12%
1-year Treasury Security 0.14% 0.16%
3-year Treasury Security 0.39% 0.35%
5-year Treasury Security 0.79% 0.70%
10-year Treasury Security 1.89% 1.72%
12-month LIBOR 0.849% (Dec)
12-month MTA 0.175% (Dec)
11th District Cost of Funds 1.000% (Nov)
Prime Rate 3.25%

With 11 months of data reported, 2012 will go down as a record year for favorable housing affordability conditions, and a great year for buyers who could get a home loan, according to the National Association of Realtors (NAR). NAR’s national Housing Affordability Index stood at 198.2 in November, based on the relationship between median home price, median family income and average interest rate. The higher the index, the greater the household purchasing power; record keeping began in 1970. An index of 100 is defined as the point where a median-income household has exactly enough income to qualify for the purchase of a median-priced existing single-family home, assuming a 20 percent down payment and 25 percent of gross income devoted to mortgage principal and interest payments. For first-time buyers making small down payments, the affordability levels are relatively lower. For all of 2012, NAR projects the housing affordability index to be a record high 194, up from 186 in 2011, which was the previous record. November’s reading was 2.5 index points below October, but up 1.5 index points from a year earlier. NAR projects the housing affordability index to average 160 during 2013, which means on a national basis that a median-income family would have 160 percent of the income needed to purchase a median-priced existing single-family home. Conditions vary widely, with the highest buying power in the Midwest. Even in the West, where the regional index is lower, they typical family is well positioned in most markets. Source: National Association of Realtors
The lower inventory of homes for-sale could bode well for the job market, according to a recent article written by Robert Dietz, an economist with the National Association of Home Builders, in U.S. News & World Report. “More jobs in the broader economy fuels more housing demand, and with more housing demand comes more jobs in the housing sector, especially in construction, an industry still languishing in the wake of the bust,” according to the article. Every new home built keeps, on average, three people employed full-time for a year. Therefore, Dietz estimates that if single-family housing starts rise from 530,000 this year to 640,000 in 2013, housing could generate more than 300,000 jobs for the economy next year. As builders get more confident about the housing market, they will ramp up construction. And rising home prices lately from low housing inventories is helping to increase their confidence. The existing-home inventory has decreased 47 percent as of October 2012 from its peak in July 2007, according to National Association of Realtors data. Source: US News & World Report
You have gotten approved for a home loan and now you are just waiting to make it to the closing table. Make sure you don’t throw your loan approval into jeopardy by making one of these common mistakes–
• Making a big purchase. Avoid making major purchases, like buying a new car or furniture, until after you close on the home. Big purchases could change the your debt-to-income ratio that the lender used to approve the buyer’s home loan and could throw the approval into jeopardy.
• Opening new credit. Now isn’t the time to open up any new credit cards.
• Missing any payments. Home buyers need to be extra vigilant about paying all their bills on time, even if they’re disputing one.
• Cashing out. Avoid any transfers of large sums of money between your bank accounts or making any undocumented deposits — both of which could send up “red flags” to your lender. Source: Realty Times

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