December 6, 2011

 Optimism Creeps Into The Market

It is quite striking when you compare one week to the next in the financial markets. The 10 days before Thanksgiving were brutal. Stocks were diving, Europe was tipping into chaos and it looked like we were surely heading into another slowdown next quarter. We come back from the Thanksgiving Holiday and we are all brimming with optimism. What happened? Well, first there were very strong Black Friday and Cyber Monday sales reported. Last week we spoke about the importance of the Holiday shopping season with regard to the health of the economy. Next, the world's central banks decided to step up and provide more support for Europe, making it easier for cash-strapped nations to raise capital.

Finally, we had some positive economic reports released. This past week reports were released on consumer confidence, construction spending and manufacturing and all of these reports exceeded expectations. On top of these reports, the all-important employment releases were also positive. Though many will discount the significant drop in the unemployment rate from 9.0% to 8.6% on temporary factors, there is no doubt about the fact that the number is moving in the right direction from a peak of over 10.0% and the numbers added to payrolls last month were not spectacular, but solid. Bottom line, the markets liked what they saw and the stock market rebounded strongly. This will also help boost confidence and confidence is exactly what we need right now. Of course, it would be nice if we had at least a few months of this good news instead of the wild swings back and forth. The question will be -- how long will these record low rates hold if the good news continues?

The Markets. Rates were stable again at record lows in the past week, however positive economic releases had rates trending upward towards the end of the week. Freddie Mac announced that for the week ending December 8, 30-year fixed rates averaged 4.00%, up slightly from 3.98% the previous week. The average for 15-year fixed was stable at 3.30%. Adjustable rates were also stable, with the average for one-year adjustables decreasing slightly to 2.78% and five-year adjustables falling one tick to 2.90%. A year ago 30-year fixed rates were at 4.46%. Attributed to Frank Nothaft, Vice President and Chief Economist, Freddie Mac, "Rates were little changed this past week, with the average 30-year fixed-rate loan at or below 4.00 percent for the fifth consecutive week. This week the Federal Reserve released its latest Beige Book review of regional economic conditions, noting that the residential real estate market generally remained sluggish through the first half of the fourth quarter but that the economy expanded at a moderate pace in 11 of its 12 Districts. The extraordinarily low rates on home loans of the past month may provide a needed spur to housing activity. Economic data released this past week included the Conference Board's consumer confidence index, which had the largest jump in November since April 2003. More optimistic consumers, lower house prices, and bargain rates may have contributed to the 10.4 percent jump in pending home sales in October to the strongest pace since November 2010 and may bode well for future home sales." 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 December 2, 2011 

 On November 18, 2011, the President signed into law the Consolidated and Further Continuing Appropriations Act 2012. This law re-establishes the higher FHA loan limits in high-cost areas which expired October 1 of this year. Previously, the Economic Stimulus Act of 2008 set higher limits for conforming and FHA loans in high cost areas because of limited availability of jumbo mortgages in the wake of the financial crisis. Why is this important to present and prospective homeowners? In higher cost areas, while jumbo mortgages are now available again, they are not available with the low rates and low down payment requirements of FHA mortgages. For example, many jumbo programs require a 20% down payment and FHA only requires a 3.5% down payment. That is quite a difference for those whose mortgages are over the present conforming high-cost limit of $625,500. The extended FHA high-cost limits go up to $729,750. FHA is available for both purchasing a home and refinancing your present home. You must live in the property you purchase if you are using FHA. If you are thinking about purchasing a home or refinancing and you want to know if the new extended FHA loan limits could help you, please contact us.

Ultra-low interest rates mixed with stabilizing home prices continued to push housing affordability in the third quarter near its highest levels in more than two decades, according to the latest National Association of Home Builders Housing Opportunity Index. For the third quarter, 72.9 percent of all homes sold were affordable to families earning the national median income of $64,200, according to the index. This marks the 11th consecutive quarter that the affordability measure was above 70 percent; prior to this it rarely was above 60 percent. "With interest rates at historically low levels and markets across the country beginning to improve, home ownership is within reach of more households than it has been for nearly two decades," Bob Nielsen, chairman of the National Association of Home Builders, said in a statement. Source: National Association of Home Builders

There are several tax credits and deductions set to expire at the end of the year, and given the federal deficit problem, there's a good chance they won't be extended. If you want to take advantage of them, you need to act before Jan. 1, 2012. Here are a few that affect homeowners...

• Mortgage insurance premium deduction. If you itemize deductions, you may deduct the premiums you pay for mortgage insurance, just like you do mortgage interest. However, this deduction is phased out if your income exceeds certain levels. To qualify for the full deduction, a couple or a single taxpayer must have an adjusted gross income of $100,000 or less. The deduction is phased out completely if AGI exceeds $109,000. This deduction, which was first enacted for 2007, is scheduled to expire at the end of 2011. Thus, your payments are deductible only if you pay them during 2011; a payment after 2011 is not deductible.
• Home energy credit. First, any homeowner may qualify for an energy credit of up to $500. You can qualify for the credit if you purchase during 2011 solar panels to generate electricity or for water heating, or install wind energy equipment, a geothermal heat pump, or certain types of fuel cells to generate electricity. The credit is up to 30 percent of the amount you spend, up to the $500 limit. This credit is not available for purchases in 2012. Source: Inman News

All rights reserved.

If you would prefer not to receive email like this in the future,
please email DFisher@rapid-mortgage.net if you would like to be unsubscribed from this mailing.
All rights reserved.