San Antonio Mortgage News

A strong Texas Economy

A Strong Texas Economy According to the Real Estate Center in College Station, Texas is fairing better than much of the nation with employment rates. Texas employment rates have increased by 2.4% over the past twelve month period while national employment rates have decreased by 0.1% over the same twelve month period. Additionally, Texas adjusted unemployment rates are sitting at 4.7% while adjusted national unemployment rates are a whole percentage point higher at 5.7%. Higher oil prices have helped contribute to these numbers as the mining industry in Texas has caused the highest number of new jobs in our state. Additional industries creating new jobs in Texas are professional and business services, construction, leisure and hospitality, education and health services, much of which you can see obvious growth within San Antonio itself. As we’ve talked about in previous blogs, there is still quite a bit of interest in San Antonio for many new businesses due to the infrastructure of our city. Increased employment rates mean more money in circulation which in turn means a higher confidence rate in our local economy. All of these factors help contribute to a quicker recovery in the local housing market and a more positive outlook for the months and years to come.

A Ray of Sunshine for Freddie and Fannie

After much speculation about a government intervention to take over Freddie Mac and Fannie Mae, this week gave us a surprise.  After a very bad year of losses, and even worse media coverage, the two stocks actually had a gain this week.  Fannie Mae opened this week at $4.54 and closed at $5.19 after a $1.30 loss last week.  Freddie Mac followed suit by gaining $0.67 after a $1.58 last week.  What changed?  One factor that contributed to the increase was that Freddie sold $2 billion in debt to investors late last week.  This caused some investors to believe that perhaps Freddie did have the ability to start to bail itself out.  Additionally, Jim Cramer of NBC news shared an opinion last week that now that oil prices have dropped the housing market will “fall in line.”  If only I had a crystal ball to see into the future and know exactly what was going to happen I could offer some reassurances of my own.  On the bright side many signs are pointing to a positive shift in the near future.  Luckily,

San Antonio

has held strong when much of the nation has fallen hard as stricter lending regulations have pushed many buyers out of the buying pool.  We all just have to exercise a little more patience as we wait for some of the surplus inventory to sell off before we can enjoy a real estate market with a little more normalcy. 

FHA Loans- The best option for Many buyers

A year to a year and a half ago if you had looked at my pending files you would have seen that a great majority of the loans I was doing were conventional loans and VA or Texas Veterans loans with little to nothing down.  Things have changed; both loan officers like me and real estate agents have had to become pros again at writing and closing FHA transactions.  Government insured loans such as FHA and VA loans are up 133.9% from a little over a year ago according to an article by Inman News last week.  Why?  As the mortgage industry started to tighten its lending requirements as a result of many lenders closing their doors and even more homeowners getting foreclosed on the down payment requirements for conventional loans increased as did the minimum credit score requirements.  The traditional idea of needing to have 20% down had been all but erased from the minds of not only industry professionals but most home buyers as well.  The difference between putting 3% down (as is minimally required with FHA loans) and putting 5% down (as required by Fannie Mae and Freddie Mac with conventional loans) became a huge sticking point for many home buyers.  It’s not necessarily a bad thing that down payment requirements have increased it’s just a change that we all have to get used to again.  Statistically the higher the down payment a buyer puts down the less likely they are to allow their home to go into foreclosure.  Even putting 3% down gives home buyers more of a sense of responsibility and dedication to ensuring that their monthly payments are paid and on time each month.  I believe that this shift will end up being a positive change when we look back in the next few years. 

The Ebb and Flow of the San Antonio Housing Market

A Local Market

The housing market is one of the most fluid industries that exist which helps explain why you can hardly ever watch an hour of the news without hearing how the market is doing.  Real estate markets often change due to major national events such as stock market shifts, interest rates, seasonal changes, housing/lending law changes etc.  However, perhaps more significantly, local economic changes can and do dramatically effect the housing market.  You have probably heard the saying “real estate is local” which becomes clearly evident when you look at a small bungalow in

Alamo

Heights

versus almost the exact same square footage and age home off of Vance Jackson in Dellview.  The $300,000 price difference proves the point that not only is real estate local to an individual state or city but it is also localized to a specific neighborhood and sometimes even street.

No Reason to Panic 

When AT&T announced it’s relocation of around 700 employees from the San Antonio area to Dallas, local newspapers and reporters started a flurry of panic regarding the negative impact this would have on the San Antonio housing market.  Although dumping a few hundred homes on the market in the same week is hardly ever a good thing, there are many additional factors to look at before we start to panic about dipping prices and adding to an already saturated supply of homes.  One of the first things to consider is that some of the primary areas of that these employees lived in (Alamo Heights, Olmos Park, Monte Vista, and Terrell Hills) do not typically have a great number of homes on the market and therefore will be able to recover quicker from a large market supply than would other areas of San Antonio. 

Help is on the Way

          Just as SBC Communications, now AT&T, helped lift an unfavorable housing market in 1992 when they relocated their headquarters from St. Louis to San Antonio other local businesses are making decisions that will stimulate the San Antonio market and soften the blow of the 700 AT&T employees relocating from our area.  Rackspace Managed Hosting is continually recruiting employees to the area as Fort Sam Houston is planning on bringing in a few thousand personnel to the area. 

Additionally, a decision will be made on where to build a somewhat controversial bio-defense lab for the Department of Homeland Security. 

San Antonio

is one of the top six final sites in consideration.  This facility would create as many as 350 new jobs in the

San Antonio

area, further alleviating the market saturation caused by the AT&T move.  As stated in the San Antonio Business Journal’s article, “We have the right mix of resources, expertise, infrastructure, workforce and community support needed for the (facility) to succeed,” says Smith, a member of the House Homeland Security Committee.  “Not many cities can compete with that.”  Indeed,

San Antonio

has many features that continue relocation of large businesses to the area which gives further credence to the idea that real estate is local and locally . . . we’re going to be just fine. 

Fixed Rate Mortgages

According to Inman news rates on 30-year fixed-rate mortgages have fallen over the past week and are even down when compared to a year ago.  Rates are averaging 6.47% with an average 0.7 down in comparison with last week’s 6.52% which was also the rate one year ago.  15-year fixed-rate mortgages also show a similar trend at 6% with an average 0.7 point, in comparison with 6.07% last week and 6.18% a year ago. 

On the other hand, adjustable-rate mortgages (ARM’s) are averaging at 5.99% with an average 0.6 point currently while a week ago they were sitting at 6.02% and a year ago at 6.34%.

There are a lot of small shifts going on in the mortgage industry, stay tuned as we continue to watch the numbers and report back to you on what it all means.  

Interest Rates Forecast

INTEREST RATES

Last updated: Aug. 13, 2008

The Federal Reserve is warning about impending inflation, but a weak economy is likely to see interest rates unchanged into early 2009. Some members of the policy-setting Federal Open Market Committee want a rate hike sooner rather than later because they think inflation has been too high for too long. But Fed Chairman Ben Bernanke leads a majority that wants to wait a while longer, until credit markets are more stable and until the housing slump shows a clear sign of leveling off. So look for the Fed to hold the fed funds rate at 2%. In turn, banks will hold their prime lending rate at 5%. As for long-term rates, investors will continue to shy from risk and therefore buy U.S. bonds, which will help keep rates from rising too much. Still, inflation concerns will send the 10-year Treasury to about 4.25% by yearend. The 30-year fixed-rate mortgage will hang around 6.5%.

 

www.Kiplingerforcast.com

Financial markets this week could lower rates just a tad!

We have some big numbers coming out this week, with PPI, Building Permits and of course Housing Starts coming out tomorrow.  Treasuries and MBS markets are in a small rally mode since late last week, and a small improvement in rate is occurring,  however, let’s wait and see what the CBOT will do with the futures market after the aforementioned numbers come out.

It appears that there is a better than 75% chance that Fannie Mae and Freddie Mac will need in excess of 15 Billion to continue to operate.  The Fed has said that they will be there for them and I think this will further deteriorate the stock market which is always good for rates.  We are bounding up above the 50 day moving average which is proving to be a hard layer of Resistance to break through.  If we break through we will see a significant rate improvement.  Stay tuned for more as the story unfolds.

 

 

HR 3221 More Mortgage News for Seniors, Struggling Home owners and First Time Homebuyers

Aug. 14 (Bloomberg) -- First-time homebuyers, veterans, senior citizens and delinquent mortgage holders may benefit from the newly enacted housing bill. How well it will work may depend on regulators and your bank.

The Housing and Economic Recovery Act, intended to stem home foreclosures and spark sales, offers first-time buyers a tax credit of up to $7,500. It also extends protection to veterans facing foreclosure. As many as 400,000 borrowers on the brink of losing their homes may be eligible for a more affordable loan backed by the Federal Housing Administration.

``The bill, we hope, is the way to rescue some people,'' said Democratic Representative Barney Frank of Massachusetts, chairman of the House Financial Services Committee and one of the key negotiators behind the legislation. ``It's a way for the FHA to be the alternative lender for people so they don't have go to subprime lenders anymore.''

Refinancing into the new government-backed program requires your current lender's approval. If the home's value is less than the mortgage -- which real estate data provider Zillow.com estimates applies to nearly one-third of American borrowers who bought in the last five years -- the note's owner must also agree to reduce the amount owed on the house to 90 percent of its current appraised value.

If you owe $190,000 on a house that's only worth that much, the bank would have to agree to reduce the loan to $171,000, giving up $19,000 in principal, plus interest.

Answer to Foreclosures

The legislation is Congress's answer to U.S. foreclosures that may reach 2.5 million this year and next. Defaults among subprime borrowers with weak credit histories have helped flood the market with unsold houses and driven the median price lower for the first time since the Great Depression. Agencies that will implement the legislation are still working to understand it.

``There is every reason for this not to work,'' said Susan Wachter, a real estate professor at the University of Pennsylvania's Wharton School in Philadelphia and a former assistant HUD secretary under President Bill Clinton. ``On every side there are logistic problems.''

Borrowers who wish to refinance into cheaper FHA-backed loans will pay a fee of 3 percent of the loan amount at closing, either in cash or rolled into the mortgage. An additional insurance premium of 1.5 percent a year will be built into the borrower's monthly payment.

Anyone who obtained a mortgage after Jan. 1 or whose mortgage payment is less than 31 percent of their gross monthly income won't qualify, according to the FHA Web site. The maximum loan will be $550,440, according to the FHA.

Incentive

For mortgage owners such as JPMorgan Chase & Co. and Bank of America Corp., the incentive lies in trading loans that might otherwise go to foreclosure for a smaller, more likely payoff, said Tom Kelly, spokesman for JPMorgan, which holds about $60 billion in first mortgages.

``The owner of a loan or a package of loans has to say `Okay, I would rather have a known dollar amount for this loan and be done with it,' '' Kelly said. ``There is a lot of number crunching involved and a lot of judgment.''

Participating homeowners must also share half of any future property appreciation with the FHA.

Unlike some state and federal programs, borrowers currently behind in their payments will be eligible, said Heather Wong, a spokeswoman for Frank.

Tax Credit

The program takes affect Oct. 1, 2008, and expires Sept. 30, 2011.

The legislation also increases the maximum FHA mortgage amount on other new loans to $625,500 for homes in the nation's most expensive markets. The limit is tied to an area's median home price.

In addition to the foreclosure prevention provisions, the new law offers a one-time tax credit of up to $7,500 for first- time homebuyers.

``That's a pretty big impetus,'' Kelly said.

It's not exactly free money, rather an interest-free, 15-year loan. The homeowner would repay 1/15th of the amount to the government each year, $500 if they qualify for the full $7,500.

No single borrower with an adjusted gross income of more than $95,000 or married couple that makes more than $170,000 will be eligible, said Eric Smith, spokesman for the Internal Revenue Service.

``This makes the IRS the lender of last resort,'' said Robert Strauss, an economics and public policy professor at Carnegie Mellon University in Pittsburgh who has advised the U.S. Treasury and Congress on taxes.

Misunderstanding

``There is going to be a lot of misunderstanding later on,'' Strauss said. ``What's going to happen is that people are not going to pay it back.''

Veterans are also helped by the new law, which lengthens the time a lender must wait to foreclose on a service member's house from three months to nine. Lenders to military personnel with adjustable-rate mortgages will have to wait an extra year to raise the minimum monthly payments.

Senior citizens interested in reverse mortgages will now find fees capped at a maximum of $6,000. The FHA is also in the process of establishing a new maximum loan limit for reverse mortgages, which allow people 62 and over to tap their home equity through a lump-sum payment, periodic checks, a line of credit, or a combination.

To contact the reporter on this story: Sharon L. Lynch in New York at sllynch@bloomberg.net

Two for Tuesdays

Hello everyone, This is the "Two for Tuesdays" version of the San Antonio Mortgage News Blog.

Good news for homebuilder stocks

A good sign for buyers and sellers alike is that major builders in the U.S. are starting to purchase land.  Is the housing slump coming to an end.  I think we have hit bottom and will start to see a rise in activity in Mortgage loan originations as well as our local real estate market.  Check out www.realtor.org

 

In recent publications like www.Forbes.com and www.moneymagazine.com San Antonio has been listed in the top 10 if not top 5 places to live and work.  Texas has been listed as the number state for industry as well.  Our real estate market remains positive and home sellers and buyers are still getting a fair price on each side of the transaction.  I have been personally involved in transactions that have been negotiated in as short as 1 week from listing the sellers home with multiple offers as well as back up offers. 

 

Mortgage rates remain at historical lows and the fed has left bank rates alone until there next FOMC meeting in September.  Yes we are still loaning money!

 

Lennar Homes has purchased $165 Million and KB Homes have purchased over $400 million just recently. 

 

Daily Real Estate News  |  August 12, 2008

Home Builders' Stocks Surge

Monday was the best day for homebuilders’ stocks in a long time.

Several builders’ stocks were up by at least 5 percent, with Beazer Homes USA Inc. rising 23.7 percent.

Shares of Hovnanian Enterprises Inc. rose about 8.6 percent. Lennar Corp. rose about 7.2 percent and KB Home’s shares rose 8.5 percent.

Centex Corp. was up 6.2 percent, Toll Brother rose 5.9 percent, D.R. Horton Inc. climbed 5.6 percent, and Pulte Homes increased 5.6 percent.

Source: The Associated Press (08/11/08)