Freddie Mac Weekly Update:Mortgage Rates Ease Back a Little

30-year fixed-rate mortgage: Averaged 4.81 percent with an average 0.7 point for the week ending December 23, 2010, down from last week when it averaged 4.83 percent. Last year at this time, the 30-year FRM averaged 5.05 percent.

The 15-year fixed-rate mortgage: Averaged 4.15 percent with an average 0.7 point, down from last week when it averaged 4.17 percent. A year ago at this time, the 15-year FRM averaged 4.45 percent.

Five-year indexed hybrid adjustable-rate mortgages ARMs: Averaged 3.75 percent this week, with an average 0.6 point , down from last week when it averaged 3.77 percent. A year ago, the 5-year ARM averaged 4.40 percent.

One-year Treasury-indexed ARMs: A veraged 3.40 percent this week with an average 0.7 point, up from last week when it averaged 3.35 percent. At this time last year, the 1-year ARM averaged 4.38 percent.

Freddie Sayz
Attributed to Frank Nothaft, vice president and chief economist, Freddie Mac.
Mortgage rates were little changed this week following significant increases over the prior several weeks. Economic reports in December have suggested the economy began regaining momentum towards the end of the year, with consumer spending, industrial production and exports all posting solid gains. Treasury yields backed up as this stronger growth outlook caused an improvement in risk appetites and the likelihood of deflation to recede further.

Rates remain low, however, despite the recent rise, and are still well below where they began the year. Low mortgage rates are an important factor in housing affordability, which in October was the highest on record, according to the National Association of Realtors . These conditions are conducive to improving housing market conditions, and indeed, sales of existing single-family homes rose 6.7 percent in November to the strongest pace since June, according to the Realtors. In addition, the median sales price rose 1.2 percent over November 2009, which represented the first 12-month increase since August and largest gain since April. Finally, new construction on one-family homes in November rose to the strongest rate since April, based on figures released by the Census Bureau
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Rent vs Buy Today

NAR Existing Home Sales

Existing home sales which are completed transactions that include single-family, townhomes, condominiums and co-ops, rose 5.6% to a seasonally adjusted annual rate of 4.68 million in November, but are 27.9% below the cyclical peak of 6.49 million in November 2009, which was the initial deadline for the first-time buyer tax credit. Median existing single-family home prices rose year-over-year in 77 of 155 metropolitan areas and fell in 76 metro areas.

NAR Pending Sales

A forward-looking indicator, rose 10.4%  based on contracts signed in October from in September. The index remains 20.5% below a surge to a cyclical peak in October 2009, which was the highest level since May 2006.

Rent Vs Buy

The argument for affordability has a few key components. Price, cost of money and a comparison to a similar property rental.

Price
Home prices are running about 22% less than five years ago. Its hard to know when price has reached a point where willing buyers step up, but pending sales clearly point to a slowing trend.  The Commerce Dept. report showed that new home sales rose 5.5 percent to an annual rate of 290,000 in November from the revised October rate of  275,000.

Price will continue to decline and increase affordability. There are some that think a double dip is in progress and we will see continuede price declines through 2011 or 2012.

Cost of Money
Lower tax rates just extended for another two years may boost growth. Mortgage rates responded by increasing to a six  month high with rates up more than half a point in just the past month. NAR President Vicki Golder, points out: A decade ago, mortgage rates were almost double what they are today, and they’re about 1.5% lower than the peak of the housing boom....So still historically low.

Rates remain low and are still well below where they began the year. Low mortgage rates are an important factor affordability, which in October was the highest on record

Rent Comps
Rents increased for the second quarter in a row. Asking and effective rents increased by 0.5% and 0.6% respectively in the third quarter and vacancy rates dropped from 7.8% to 7.1% nationally.To summarize, price is dropping but cost of money is rising and so are rents. Most areas havent reached a balance between the cost of renting and the cost of buyi ng, probably the main arguement for home prices continuing to descend to meet a willing buyer.

Rule of thumb: Homes are probably fairly valued at about 15 times a year's rent. So, for example, if you're paying $15,000 a year to rent a place, think twice about buying a home that costs more than $225,000. Fifteen times is the historic average.

Your home is not a growth stock. You should look to justify multiples higher than 15 to 20 by considering personal needs, proximity to schools and transportation, your own cash flow situation and job security.

It would also be advisable to get a sense of what the property would likely rent for and see how far that rent would go towards paying the mortgage should you have to move. Home sales are slowing and if you find yourself a reluctant landlord, be sure you can carry the mortgage.

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Mortgage Bankers Weekly Update: Mortgage Applications Decrease

Mortgage Bankers Association for the week of  12/15/2010

Market Composite Index: (loan application volume)      decreased 2.3 percent on a seasonally adjusted basis from one week earlier.  On an unadjusted basis, the Index decreased 2.7 percent compared with the previous week.

Refinance Index: decreased 0.7 percent from the previous week. This is the fifth straight weekly decline for the Refinance Index. The seasonally adjusted Purchase Index decreased 5.0 percent from one week earlier.

Purchase Index:  decreased 8.6 percent compared with the previous week and was 16.6 percent lower than the same week one year ago

Refinance Share of Mortgage Activity: increased to 76.7 percent of total applications from 75.2 percent the previous week
  decreased to 5.5 percent from 5.6 percent of total applications from the previous week.

Arm Share: decreased to 5.6 percent from 5.7 percent of total applications from the previous week.

MBA outlook: (Excerpted from mbaa.org)

Treasury rates increased last week following news that lower tax rates could be extended for another two years, boosting growth prospects.  With this move, mortgage rates reached their highest level in more than six months, said Michael Fratantoni, MBAs Vice President of Research and Economics. Not surprisingly, with rates up more than half a percentage point over the past month, refinance activity has declined sharply.  Home purchase applications dropped this week following three weeks of increases, but remain near levels last seen in early May.
The percentage of loans on which foreclosure actions were started during the third quarter was 1.34 percent, up 23 basis points from last quarter and down eight basis points from one year ago. The percentage of loans in the foreclosure process at the end of the third quarter was 4.39 percent, down 18 basis points from the second quarter of 2010 and down eight basis points from one year ago. The seriously delinquent rate, the percentage of loans that are 90 days or more past due or in the process of foreclosure, was 8.70 percent, a decrease of 41 basis points from last quarter, and a decrease of 15 basis points from the third quarter of last year.
We expect that mortgage originations will decrease to $1.4 trillion in 2010 from a downwardly revised $2.0 trillion in 2009, previously estimated at $2.1 trillion. Total originations will then fall to $996 billion in 2011, the lowest level of originations since 1997. Purchase activity in 2010 will see a significant drop from 2009, although it was given a brief boost in the spring by the tax credit program, but start to recover in 2011. Refinance activity is currently being buoyed by mortgage rates that remain close to historical lows, but will fall in 2011 and 2012 as rates start to increase. Purchase originations will fall to $480 billion from $665 billion in 2009 and refinance originations will decrease to about $921 billion in 2010 from $1.3 trillion in 2009. We expect that the refinance share of originations should fall from 66 percent in 2010 to 37 percent in 2011, and then 26 percent in 2012.
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Freddie Mac Weekly Update: Mortgage Rates Continue to Climb

30-year fixed-rate mortgage: Averaged 4.83 percent with an average 0.7 point for the week ending December 16, 2010, up from last week when it averaged 4.61 percent. Last year at this time, the 30-year FRM averaged 4.94 percent.

The 15-year fixed-rate mortgage: Averaged 4.17 percent with an average 0.7 point, up from last week when it averaged 3.96 percent. A year ago at this time, the 15-year FRM averaged 4.38 percent.

Five-year indexed hybrid adjustable-rate mortgages ARMs: Averaged 3.77 percent this week, with an average 0.7 point, up from last week when it averaged 3.60 percent. A year ago, the 5-year ARM averaged 4.37 percent.

One-year Treasury-indexed ARMs: Averaged 3.35 percent this week with an average 0.7 point, up from last week when it averaged 3.27 percent. At this time last year, the 1-year ARM averaged 4.34 percent.

Freddie Sayz
Attributed to Frank Nothaft, vice president and chief economist, Freddie Mac.

Market concerns over stronger economic growth that, in the near term, could lead to an increase in inflation have sparked a rise in bond yields and mortgage rates have followed. For instance, the growth in retail sales excluding automobiles in November was twice that of the market consensus forecast. Industrial production showed the biggest gain in November since July, according to the Federal Reserve Board . And consumer sentiment, as measured by the Thomson Reuters/University of Michigan index, rose to a six month high in December. As a result, interest rates for 30 year fixed mortgages this week were the highest since the week of May 20th of this year.
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Multi Famiily Rentals Improve

The demographics

The multifamily sector is in recovery. According to Reis, net absorption in 3Q spiked, dropping the national vacancy rate from 7.8% to 7.1%, one of the largest quarterly drops on record.

Rents increased for the second quarter in a row. Asking and effective rents increased by 0.5% and 0.6% respectively in the third quarter over the previous quarter.

Renter demographics
Who Are They

People Needing Flexibility
Renting can provide more flexibility, greater convenience and lower costs than buying a home. As a result, certain households are more likely to rent than own, including young singles starting out, families relocating to a new metropolitan area, recent immigrants to the United States, and low-income household

In Transition
such as a change in job or marital status. For example, over 60 percent of households that moved in 2003 because of divorce or separation chose to live in a rented unit.

Relocating
For owners who are relocating, rental housing can be a good option if they expect to move again within a few years.

Immigrants
When birth rates among the native born population fell sharply after the baby boom, many feared that rental demand would drop off precipitously. But thanks to the strength of immigration, the number of renter households remained steady through the 1990s and early 2000s as foreign-born households supplemented the rental demand of native-born households. The arrival of young foreign-born households thus tempered the decline in renters aged 25–34 from 20 percent to 12 percent, and in renters aged 35–44 from 18 percent to 7 percent over the 1994–2004 period. Indeed, without these immigrants, the total number of renters would have fallen by more than 2 million (5 percent), rather than rising modestly by 100,000.

Retirees Moving Back
 As the baby boom population ages and their children leave home, some will opt for moving out of their homes and into apartments that require less upkeep and allow them the freedom to do what they want.They fit into he category of lifestyle renters.  Not wanting or needing the cost and obligations of home ownership and choosing the mobility that comes with the lesser commitment of renting, expect a lot of retirees coming back into citys for ease of access to theater, larger communities of like interests and excitement not available in suburbs.

Echo Boomers
National Association of Housing Builders chief economist believes that 83 million echo boomers will enter residential renter market and lead the demand for apartment units over the next few years, approximately 3.2 million between 2010 and 2012. This demographic trend coupled with a strong immigration trends will drive apartment fundamentals. This housing crash happens in the formative years of this population. Will the bias towards home ownership still hold or will echo boomers, raised during this crises, hold a bias towards renting over ownership.

Its clear that rental property will have a brighter future and likely to recover first. The caveat here is that jobs will be a determining factor. If job growth is meager then echo boomers may stay home longer or double up as roommates.

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Freddie Mac Weekly Update: Bond Yields Rise and So Do Mortgage Rates

30-year fixed-rate mortgage: Averaged 4.61 percent with an average 0.7 point for the week ending December 9, 2010, up from last week when it averaged 4.46 percent. Last year at this time, the 30-year FRM averaged 4.81 percent.

The 15-year fixed-rate mortgage: Averaged 3.96 percent with an average 0.7 point, up from last week when it averaged 3.81 percent. A year ago at this time, the 15-year FRM averaged 4.32 percent. .

Five-year indexed hybrid adjustable-rate mortgages ARMs: Averaged 3.60 percent this week, with an average 0.6 point, up from last week when it averaged 3.49 percent. A year ago, the 5-year ARM averaged 4.26 percent.

One-year Treasury-indexed ARMs: Averaged 3.27 percent this week with an average 0.6 point, up from last week when it averaged 3.25 percent. At this time last year, the 1-year ARM averaged 4.24 percent.

Freddie Sayz

Attributed to Frank Nothaft, vice president and chief economist, Freddie Mac.

After Europe made strides in its debt situation, investors left the security of U.S. Treasury debt causing bond yields to rise and mortgage rates along with them.  Interest rates for 30 year fixed mortgages are now almost a half percentage point higher than the record low set in mid November, which for a $200,000 conventional loan amounts to $50 more in monthly payments.

Housing demand appears to be picking up recently. Existing pending sales jumped 10.4 percent in October to the strongest pace since April, according to the National Association of Realtors. More recently, mortgage applications for home purchases rose for the three consecutive weeks ending on December 3rd, representing a 17.7 percent increase and the strongest pace since the week of May 7th, based on figures released by the Mortgage Bankers Association

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Mortgage Bankers Weekly Update: Mortgage Applications Decrease

Mortgage Bankers Association for the week of  12/8/2010

Market Composite Index:(loan application volume)    decreased 0.9 percent on a seasonally adjusted basis from one week earlier.  On an unadjusted basis, the Index increased 22.8 percent compared with the previous week, which included the Thanksgiving Holiday

Refinance Index: decreased 1.4 percent from the previous week. This is the fourth weekly decrease for the Refinance Index which reached its lowest level since June 2010

Purchase Index:  increased 1.8 percent from one week earlier. This is the third weekly increase for the Purchase Index which reached its highest level since early May 2010. The unadjusted Purchase Index increased 21.3 percent compared with the previous week and was 12.0 percent lower than the same week one year ago. 
Refinance Share of Mortgage Activity: increased to 75.2 percent of total applications from 74.9 percent the previous week

Arm Share: decreased to 5.6 percent from 5.7 percent of total applications from the previous week. 

MBA outlook: (Excerpted from mbaa.org)

The delinquency rate for mortgage loans on one-to-four-unit residential properties decreased to a seasonally adjusted rate of 9.13 percent of all loans outstanding as of the end of the third quarter of 2010, a decrease of 72 basis points from the second quarter of 2010, and a decrease of 51 basis points from one year ago, according to the Mortgage Bankers Association’s (MBA) National Delinquency Survey.

The percentage of loans on which foreclosure actions were started during the third quarter was 1.34 percent, up 23 basis points from last quarter and down eight basis points from one year ago. The percentage of loans in the foreclosure process at the end of the third quarter was 4.39 percent, down 18 basis points from the second quarter of 2010 and down eight basis points from one year ago. The seriously delinquent rate, the percentage of loans that are 90 days or more past due or in the process of foreclosure, was 8.70 percent, a decrease of 41 basis points from last quarter, and a decrease of 15 basis points from the third quarter of last year.

We expect that mortgage originations will decrease to $1.4 trillion in 2010 from a downwardly revised $2.0 trillion in 2009, previously estimated at $2.1 trillion. Total originations will then fall to $996 billion in 2011, the lowest level of originations since 1997. Purchase activity in 2010 will see a significant drop from 2009, although it was given a brief boost in the spring by the tax credit program, but start to recover in 2011. Refinance activity is currently being buoyed by mortgage rates that remain close to historical lows, but will fall in 2011 and 2012 as rates start to increase. Purchase originations will fall to $480 billion from $665 billion in 2009 and refinance originations will decrease to about $921 billion in 2010 from $1.3 trillion in 2009. We expect that the refinance share of originations should fall from 66 percent in 2010 to 37 percent in 2011, and then 26 percent in 2012.

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Section 8 : An Owners Guide

Apartment Sector: The First One Out

This is the one real estate area that seems to be looking up. There is no question thatapartments really scream when it comes to actual performance and renewed investment confidence, says Hessam Nadji, managing director of research and advisory services at Marcus & Millichap. The apartments sector is leading the recovery. Nationally, apartment vacancies declined 20 basis points during the first half to reach 7.8%, setting the stage for rent growth.
Demographics: The rental sector is the one area that that is looking like its in a recovery. Residential housing was t was over built and overbought, while rental properties barely kept up with the demographics. Harvard studies indicate that if you couple the under 30 age group to new immigrants and retirees looking to move back to the city for convenience, as a whole they are a potential renter pool larger than the the boomer generation. That is huge!
Supply: Over 4.3 million loans are 90 days or more delinquent or in foreclosure. Moreover, the shadow inventory (chart) of REO properties, as well as distressed mortgages facing foreclosure, will take nearly three years to clear at the current sales rate, according to an S&P report. S&P analysts concluded that \many servicers will likely shift from mortgage modification to loan liquidation. Hopefully, the banks will distribute supply onto the market with an eye to price stability or at least an orderly decline. With that in mind expect supply to continue to increase and prices to continue to decline.
Jobs: The average number of days delinquent for loans in foreclosure is a record 492 days. Its pretty obvious that jobs are the main culprit now and the expectation is that unemployment will remain more or less constant for the next year. Apartments look better partly because they never participated in the building boom that homes experienced and supply to renter pool favors lower vacancy rates and higher rents.
Investor Psychology: The Census Bureau releases a Housing Tenure, which measures the balance between owner occupied and renter occupied housing units. Owner occupied units have been on the decline and the number of renter occupied units has soared to 34.% in 2009. Of course, jobs are highly correlated to rent and vacancy rates, so this should be seen as fragile and early recovery. Yet rent rates have been increasing and vacancy rates have been declining, even in this weak job market. I think there has been a shift in the investor psychology that benefits the rental property.
Politics of Housing: Congress had mandated that the GSE emphasize home purchases at the expense of rental property. The Congressional Budget Office reported, the government in 2009, devoted nearly four times as much to support homeownership.$230 billion for homes and about $60 billion for multi family property, helping fuel the bubble. It was a primary cause for so many bad decisions…..loose money always is. My guess is that GSE money flow will now favor rental property and affordable housing in particular. The new real estate opportunity is in rentals, they will be the first to recover.
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Freddie Mac Weekly Update: Mortgage Rates Stable

30-year fixed-rate mortgage: Averaged 4.40 percent with an average 0.8 point for the week ending November 24, 2010, up slightly from last week when it averaged 4.39 percent. Last year at this time, the 30-year FRM averaged 4.78 percent.

The 15-year fixed-rate mortgage: Averaged 3.77 percent with an average 0.7 point, up slightly from last week when it averaged 3.76 percent. A year ago at this time, the 15-year FRM averaged 4.29 percent.

Five-year indexed hybrid adjustable-rate mortgages ARMs: Averaged 3.45 percent this week, with an average 0.6 point, up from last week when it averaged 3.40 percent. A year ago, the 5-year ARM averaged 4.18 percent.

One-year Treasury-indexed ARMs: Average 0.6 point, down from last week when it averaged 3.26 percent. At this time last year, the 1-year ARM averaged 4.35 percent

Freddie Sayz
Attributed to Frank Nothaft, vice president and chief economist, Freddie Mac.
During a holiday shortened week, average mortgage rates were largely unchanged from the prior week. Growth in gross domestic product in the third quarter was revised up from the initial estimate to an annualized rate of 2.5 percent, as stronger consumer spending and exports supported the revision.

Homeowner balance sheets are also improving. Mortgage delinquency rates continued to move down in the third quarter, with the overall delinquency rate falling to 9.13 percent, the lowest since the first quarter of 2009. For the first time during the housing downturn, the overall delinquency rate is lower than it was a year earlier.

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Mortgage Bankers Weekly Update: Mortgage Purchase Applications Increase

Mortgage Bankers Association for the week of  11/24/2010

Market Composite Index: (loan application volume)     increased 2.1 percent on a seasonally adjusted basis from one week earlier.  On an unadjusted basis, the Index increased 1.1 percent compared with the previous week.
Refinance Index: decreased 1.0 percent from the previous week and is the lowest Refinance Index observed since the end of June. 
Purchase Index: increased 14.4 percent from one week earlier, which included Veterans Day. No adjustment was made for the holiday. On a seasonally adjusted basis, this is the highest Purchase Index recorded since the week ending May 7, 2010. The unadjusted Purchase Index increased 9.6 percent compared with the previous week and was 7.4 percent lower than the same week one year ago decreased to 78.6 percent of total applications from 80.3 percent the previous week.
Refinance Share of Mortgage Activity: decreased to 80.3 percent of total applications from 81.7 percent the previous week.

Arm Share: share of activity remained constant at 5.3 percent of total applications.
MBA outlook: (Excerpted from mbaa.org)

The delinquency rate for mortgage loans on one-to-four-unit residential properties decreased to a seasonally adjusted rate of 9.13 percent of all loans outstanding as of the end of the third quarter of 2010, a decrease of 72 basis points from the second quarter of 2010, and a decrease of 51 basis points from one year ago, according to the Mortgage Bankers Associations (MBA) National Delinquency Survey.
The percentage of loans on which foreclosure actions were started during the third quarter was 1.34 percent, up 23 basis points from last quarter and down eight basis points from one year ago. The percentage of loans in the foreclosure process at the end of the third quarter was 4.39 percent, down 18 basis points from the second quarter of 2010 and down eight basis points from one year ago. The seriously delinquent rate, the percentage of loans that are 90 days or more past due or in the process of foreclosure, was 8.70 percent, a decrease of 41 basis points from last quarter, and a decrease of 15 basis points from the third quarter of last year.
We expect that mortgage originations will decrease to $1.4 trillion in 2010 from a downwardly revised $2.0 trillion in 2009, previously estimated at $2.1 trillion. Total originations will then fall to $996 billion in 2011, the lowest level of originations since 1997. Purchase activity in 2010 will see a significant drop from 2009, although it was given a brief boost in the spring by the tax credit program, but start to recover in 2011. Refinance activity is currently being buoyed by mortgage rates that remain close to historical lows, but will fall in 2011 and 2012 as rates start to increase. Purchase originations will fall to $480 billion from $665 billion in 2009 and refinance originations will decrease to about $921 billion in 2010 from $1.3 trillion in 2009. We expect that the refinance share of originations should fall from 66 percent in 2010 to 37 percent in 2011, and then 26 percent in 2012.


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Mortgage Bankers Weekly Update: Mortgage Applications Increase

Mortgage Bankers Association for the week of  10/27/2010

Market Composite Index:(loan application volume)    increased 3.2 percent on a seasonally adjusted basis from one week earlier.  On an unadjusted basis, the Index increased 3.1 percent compared with the previous week.
Refinance Index: increased 3.0 percent from the previous week.  The seasonally adjusted Purchase Index increased 3.9 percent from one week earlier. The unadjusted Purchase Index increased 3.5 percent compared with the previous week and was 30.3 percent lower than the same week one year ago. 

Purchase Index: The four week moving average is down 0.7 percent for the seasonally adjusted Purchase Index

Refinance Share of Mortgage Activity: decreased to 82.3 percent of total applications from 82.4 percent the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 5.3 percent from 5.8 percent of total applications the previous week. 
Arm Share: decreased to 5.3 percent from 5.8 percent of total applications the previous week. 

MBA outlook: (Excerpted from mbaa.org) 

We maintain our view that the most likely scenario is a continued pattern of tepid growth and no improvements in the unemployment rate until the second half of 2011, with a similarly slow recovery in the housing market.  We also recognize that the odds of a worse outcome, including a return to recession, are still relatively high, and this has kept rates lower than we had projected earlier in the year.  Many financial market participants are keenly attuned to any communication from Federal Reserve policymakers regarding a potential renewal of large-scale asset purchases.  The decision to reinvest funds from prepayments in the mortgage portfolio into longer term Treasury securities is best viewed as preventing an inadvertent tightening of policy, rather than a move to outright monetary stimulus. 
We predict that mortgage originations will decrease to $1.4 trillion in 2010 from an estimated $2.1 trillion in 2009. Purchase activity continues to be weak, although it was given a brief boost in the spring by the tax credit program, while refinance activity is being propped up by mortgage rates that remain close to historical lows, although there is less refinancing going on now than in previous periods of comparably low mortgage rates. Purchase originations will fall to $539 billion from $740 billion in 2009 and refinance originations will decrease to about $910 billion in 2010 from $1.4 trillion in 2009. This months originations estimates for 2010 forward were revised downwards to reflect the weaker July data for home sales and housing starts.   
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Freddie Mac Weekly Mortgage Update: Long-Term Mortgage Rates Rise Slightly

30-year fixed-rate mortgage:Averaged 4.21 percent with an average 0.8 point for the week ending October 21, 2010, up from last week when it averaged 4.19 percent. Last year at this time, the 30-year FRM averaged 5.00 percent.

The 15-year fixed-rate mortgage: Averaged 3.64 percent with an average 0.7 point , up from last week when it averaged 3.62 percent. A year ago at this time, the 15-year FRM averaged 4.43 percent.

Five-year indexed hybrid adjustable-rate mortgages ARMs: Averaged 3.45 percent this week, with an average 0.6 point , down from last week when it averaged 3.47 percent. A year ago, the 5-year ARM averaged 4.40 percent. The 5-year ARM has not been lower since Freddie Mac started tracking it in January 2005.

One-year Treasury-indexed ARMs: Aeraged 3.30 percent this week with an average 0.7 point, down from last week when it averaged 3.43 percent. At this time last year, the 1-year ARM averaged 4.54 percent. The 1-year ARM has not been lower since Freddie Mac started tracking it in January 1984.

Freddie Sayz
Attributed to Frank Nothaft, vice president and chief economist, Freddie Mac.

• Mixed inflation signals kept fixed mortgage rates at bay this week. The headline producer price index jumped 0.4 percent between August and September, which was quadruple the market consensus, while the consumer price index fell below the market forecast. Rates on the traditional 1 year and 5 year hybrid ARMs eased to all time record lows.
• Meanwhile, the housing construction market is showing some signs of promise. New construction on one family homes rose 4.4 percent in September to the strongest pace since May. In addition, homebuilder confidence rose in October to the strongest level since June, according to the NAHB/Wells Fargo Housing Market Index .

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NARPM: Green Landlording Survey

Property Managers actively work on finding new ways to differentiate their services from the competition, we were interested to learn how many residential property managers see going green as a benefit.

Going Green
A small but growing demand from renters who are looking to live in an eco-friendly home is an excellent opportunity for property management companies to differentiate their rentals and stand out from the crowd.

Property Managers Are Going Paperless and Using Web-Based Technology
76% of all property managers are very interested in using less paper.  Moving towards a paperless office eliminates ink cartridges, hours of  filing, pricey bank checks, postage and  paper.

The use of web-based technology is also allowing property managers to make great improvements in their business productivity. The kinds of technology used in the office to reduce paper consumption according to a NARPM survey included:

1. Web-based Property Management Software: 48% of respondents take advantage of the mobility provided by web-based property management software.
2. Using Email: 88% of respondents to this survey said that using email for owner statements, reports, reduces paper costs and is fast.
3. Accepting Rent Online: A large number of property managers surveyed (50%) accept online rent payments, significantly reducing the time and cost associated with processing rent checks
4. Owners Portal: Almost half of the property managers surveyed (41%) report using an owner’s portal to communicate with owners and post statements and documentation.

It Will Help Tenant Retention
Attract Residents with Green Landlording
VOC Free Paint: VOCs are found in most household paint. These paints off-gas harmful compounds months after application. Opt for low or even zero VOC paints and You’ll appeal to potential tenants because its healthier

Water Conservation: Outfit new rentals with water conservation devices. Add low flow showerheads to your green arsenal. Add water aerators to all faucets and save even more.

Water Conservation: Install toilets that use less water. Water-saving toilets are now standard on all new construction due to a 1992 federal mandate for plumbing fixture manufacturers.Low-flow toilets,  use 1.6 gallons per flush of water or less, compared with older toilets that use 3.5 to 7.0 gpf.

Dimmers: Add dimmer switches and replace all light switches allowing the user to determine how much light they need, reducing the amount of energy used.

Programmable Thermostats: They will save a ton of energy.

Doing good can pay off if you let prospective tenants know you are thinking about their health. Produce a flier, market yourself as green. At this point, green alone wont make the sale or get the client. However, all things being equal, its a no brainer to choose the green owner manager.

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FHA Offers Short Refi Program For Underwater Homeowners

FHA Offers Short Refi Program For Underwater Homeowners In an effort to help responsible homeowners who owe more on their mortgage than the value of their property HUD adjusted its refinance program.  The changes will enable lenders to provide additional refinancing options to underwater homeowners. see chart

Starting September 7, 2010, FHA will offer some underwater non FHA borrowers the opportunity to qualify for a new FHA insured mortgage. Designed to meet its goal of stabilizing housing markets, by helping 3 to 4 million homeowners through 2012.

FHA provided some guidance

Participation in FHA's refinance program is voluntary and requires the consent of all lien holders. To be eligible for a new loan:

1. The homeowner must owe more on their mortgage than their home is worth and be current on their existing mortgage.
2. The homeowner must qualify for the new loan under standard FHA underwriting requirements and have a credit score equal to or greater than 500.
3 The property must be the homeowner's primary residence.
4. And the borrower's existing first lien holder must agree to write off at least 10% of their unpaid principal balance, bringing that borrower's combined loan-to-value ratio to no greater than 115%.
5.The existing loan to be refinanced must not be an FHA-insured loan, and the refinanced FHA-insured first mortgage must have a loan-to-value ratio of no more than 97.75 percent.

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Freddie Mac Weekly Mortgage Update: Long-Term Mortgage Rates Fall for the Ninth Week Out of Ten

30-year fixed-rate mortgage: Averaged 4.36 percent with an average 0.7 point for the week ending August 26, 2010, down from last week when it averaged 4.42 percent. Last year at this time, the 30-year FRM averaged 5.14 percent.

The 15-year fixed-rate mortgage: Averaged a record low of 3.86 percent with an average 0.6 point, down from last week when it averaged 3.90 percent. A year ago at this time, the 15-year FRM averaged 4.58 percent.

Five-year indexed hybrid adjustable-rate mortgages ARMs: Averaged 3.56 percent this week, with an average 0.6 point, unchanged from last week when it also averaged 3.56 percent. A year ago, the 5-year ARM averaged 4.67 percent.

One-year Treasury-indexed ARMs: Averaged 3.52 percent this week with an average 0.7 point, down slightly from last week when it also averaged 3.53 percent. At this time last year, the 1-year ARM averaged 4.69 percent.

Freddie Sayz
Attributed to Amy Crews Cutts, deputy chief economist, Freddie Mac.

• Existing home sales plunged 27 percent in July, while new homes fell 12%  to a new all-time record low, which led to some market concerns that the housing market may slow the economic recovery. As a result, long-term bond yields fell to the lowest levels since January 2009, allowing fixed mortgage rates to ease to new record lows this week.
  
• Much of the slowdown in sales, however, was expected due to the recently expired homebuyer tax programs, which pulled through future home purchases into the first half of the year. For instance, average existing home sales over the first seven months of 2010 were nearly 8 percent higher than over the same period a year ago.
• Moreover, house prices still appear to be stabilizing. Nationally, house prices rose 0.9 percent on a seasonally-adjusted basis during the second quarter of this year this year after 11 consecutive quarterly declines, according to the Federal Housing Finance Agencys purchase only index. Eight of the nine census regions experienced positive gains, compared to none in the first quarter
  
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Mortgage Bankers Weekly Update: Mortgage Refinance Applications Continue to Increase

Mortgage Bankers Association for the week of  08/25/2010

Market Composite Index: (loan application volume)   increased 4.9 percent on a seasonally adjusted basis from one week earlier.  On an unadjusted basis, the Index increased 4.5 percent compared with the previous week.

Refinance Index: increased 5.7 percent from the previous week and is at its highest level since May 1, 2009. The seasonally adjusted Purchase Index increased 0.6 percent from one week earlier.

Purchase Index: decreased 1.1 percent compared with the previous week and was 38.8 percent lower than the same week one year ago.

Refinance Share of Mortgage Activity: increased to 82.4 percent of total applications from 81.4 percent the previous week, which is the highest share observed since January 2009.

Arm Share: increased to 5.8 percent from 5.7 percent of total applications from the previous week.

MBA outlook: (Excerpted from mbaa.org)

Existing home sales in June declined 5.1 percent to a seasonally adjusted annual rate of 5.37 million units from 5.66 million in May, and are 9.8 percent higher than in June of last year. Single family home sales fell 5.6 percent to 4.70 million units in June from 4.98 million units in May, and are 8.5 percent above the pace in June 2009. For both total existing home sales and single family home sales, the monthly decrease was the largest since January this year.

We predict that mortgage originations will decrease to $1.5 trillion in 2010 from an estimated $2.1 trillion in 2009. Purchase activity continues to be weak, while refinance activity is being propped up by mortgage rates that are close to historical lows, although there is much less refinancing going on now than in previous periods of  comparably low mortgage rates. Purchase originations will fall to $576 billion from $750 billion in 2009 and refinance originations will decrease to about $900 billion in 2010 from $1.2 trillion in 2009.


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The Stock Market Looks At Real Estate

Well, we all have heard the bad news, housing sales down again, hugely - 23% in the quarter. NAR reports that sales are at their lowest since the sales series launched in 1999, and single family sales are at the lowest level since May of 1995. And it doesnt look much better in the near term either. Pending sales, a forward indicator of market activity, dropped 30% based on contracts signed on May and is almost 16% the May 09 numbers.

These reports are always about today. The stock market, however, is considered a discount mechanism. It trys to look into the future...to look past a problem and try to determine value and opportunity. So I wanted to see what the stock market had to say about these dismal numbers.

Heres What the Stock Market Says About Real Estate

Its all About What You Focus On.

Its not without its losers, but the sector rallied on this news! In fact demand for homes sold has been relatively strong given real market conditions. see chart Even in the face of foreclosures, underwater borrowers and unemployment and the future of Fannie Mae and Freddie Mac. Why?

Affordability
Stock market investors are looking at whats next and they see affordability. Home prices have declined to levels beginning to look affordable. Certainly painful for millions, but its how markets cycle. When prices get silly, they have to rationalize before an intelligent buyer will enter.

Supply
The builders have not been putting up much new stock for quite a while and today I noticed the builder stocks were up. Lennar did a deal worth 3 billion with the FDIC to buy bank loans and Toll Brothers swings to profit today. All of this in spite of a huge inventory overhang, perhaps the largest on record. see chart

Cheap Money
The cost of many is also very low and part of the affordability issue. Average rates on 30-year fixed-rate mortgages are hovering around 5%.

Demographics
Investors are hoping demographics and population growth can also take up the slack.

Why the S&P Real Estate REIT index is up from a one year low of $73.85 to over $105 today. We have more to work through and the near and mid term are rocky but the economy is still expected to recover and homes still sell.

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Freddie Mac Weekly Mortgage Update: 30-Year, Mortgages Continue to Inch Downward

30-year fixed-rate mortgage: Averaged 4.42 percent with an average 0.7 point for the week ending August 19, 2010, down from last week when it averaged 4.44 percent. Last year at this time, the 30-year FRM averaged 5.12 percent.

The 15-year fixed-rate mortgage: Averaged a record low of 3.90 percent with an average 0.6 point, down from last week when it averaged 3.92 percent. A year ago at this time, the 15-year FRM averaged 4.56 percent.

Five-year indexed hybrid adjustable-rate mortgages ARMs: Averaged 3.56 percent this week, with an average 0.6 point, unchanged from last week when it also averaged 3.56 percent. A year ago, the 5-year ARM averaged 4.57 percent.

One-year Treasury-indexed ARMs: Average 0.7 point, unchanged from last week when it also averaged 3.53 percent. At this time last year, the 1-year ARM averaged 4.69 percent.

Freddie Sayz

The housing market is in a lull following the expiration of the homebuyer tax credits. Single-family starts fell for the third straight month in July to an annual pace of 432,000 homes, the fewest since May 2009. In addition, homebuilder confidence fell for the third consecutive month in August to the lowest since March 2009, according to the NAHB/Wells Fargo Housing Opportunity Index . Even confidence among realtors was at a 16-month low in June, according to the National Association of Realtors

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Mortgage Bankers Weekly Update: Refinance Activity Increases to Highest Level Since May 2009

Mortgage Bankers Association for the week of  08/18/2010

Market Composite Index: (loan application volume)   increased 13.0 percent on a seasonally adjusted basis from one week earlier.  On an unadjusted basis, the Index increased 12.4 percent compared with the previous week.

Refinance Index:  increased 17.1 percent from the previous week and was the highest Refinance Index observed in the survey since the week ending May 15, 2009

Purchase Index: decreased 3.4 percent from one week earlier.

Refinance Share of Mortgage Activity: increased to 81.4 percent of total applications from 78.1 percent the previous week, which is the highest refinance share observed since January 2009.

Arm Share: decreased to 5.7 percent from 5.9 percent of total applications from the previous week.

MBA outlook: (Excerpted from mbaa.org)

Existing home sales in June declined 5.1 percent to a seasonally adjusted annual rate of 5.37 million units from 5.66 million in May, and are 9.8 percent higher than in June of last year. Single family home sales fell 5.6 percent to 4.70 million units in June from 4.98 million units in May, and are 8.5 percent above the pace in June 2009. For both total existing home sales and single family home sales, the monthly decrease was the largest since January this year.

We predict that mortgage originations will fall to $1.48 trillion in 2010 from an estimated $2.1 trillion in 2009.  Purchase originations will decrease 7 percent to $686 billion, as home prices continue to fall and the boost from the homebuyer tax credits wane.  Refinance originations will fall by about 42 percent to $797 billion in 2010.  We continue to mark up our refinance origination forecast given that mortgage rates have continued to remain close to historical lows.

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The Rental Sector Is Looking Up

June vacancy rates in the largest 64 markets in the country averaged 6.6%, down from 8.2% at the end of 2009, according to MPF Research. We certainly see the increase in rental demand in 2010, and it's been a little more, frankly, than most apartment experts had anticipated," said Mark Obrinsky, chief economist for the National Multi Housing Council.

This may be the brightest sector and only strong story in a dismal market. There is a real sense of confidence building in the rental sector based on a few strong factors not present in the rest of the housing market. Apartments never had the build out boom that homes did. High unemployment among echo boomers will keep a lid on  rentals catering to the 25-34 year olds in the short term. The echo-boom generation, almost 80 million strong, along with a large immigration trend and retirees coming into the city, coupled with a drastic pullback in housing construction, points to strong rent growth starting in 2011, notes Marcus and Millichap. Quite a rental pool indeed!

Reis reports a widespread consensus that there will be a supply shortage of multifamily rentals as early as next year. This constrained supply may lead to robust rent growth. The leading indicator for housing has to be jobs. A lack of job creation will keep echo boomers at home longer or doubling up in roommate situations. Retirees coming to the city from the burbs, may no be able to sell or rent and so will have to remain in large homes. The optimists would see this as a staging area for real growth in 2011-2012. However, for the long haul investor/owner its simply a matter of time before an expanding economy unleashes the powerful demographic trio waiting in the wings.

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Freddie Mac Weekly Mortgage Update: Mortgage Rates Down Again

30-year fixed-rate mortgage: Averaged 4.49 percent with an average 0.7 point for the week ending August 5, 2010, down from last week when it averaged 4.54 percent. Last year at this time, the 30-year FRM averaged 5.22 percent.

The 15-year fixed-rate mortgage: Averaged a record low of 3.95 percent with an average 0.6 point, down from last week when it averaged 4.00 percent. A year ago at this time, the 15-year FRM averaged 4.63 percent.

Five-year indexed hybrid adjustable-rate mortgages ARMs: Averaged 3.63 percent this week, with an average 0.6 point, down from last week when it averaged 3.76 percent. A year ago, the 5-year ARM averaged 4.73 percent.

One-year Treasury-indexed ARMs: Averaged 3.55 percent this week with an average 0.7 point, down from last week when it averaged 3.64 percent. At this time last year, the 1-year ARM averaged 4.78 percent

Freddie Sayz

And yet again, interest rates for fixed-rate mortgages and now the hybrid 5-year ARM fell to all-time record lows this week following the second quarter GDP release . Annual revisions cut the cumulative GDP growth in half over the past three years ending in the first quarter of 2010 from 1.4 percent to 0.6 percent. This reduces inflationary pressures and allows longer-term rates room to ease.

More recently, housing investment picked up in the second quarter of this year as the homebuyer tax credit spurred new and existing sales and low mortgage rates encouraged remodeling. Fixed residential investment added 0.6 percentage points to second quarter real GDP growth following two quarters of decline

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