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Archive for February, 2012
Economic Roundup: February 27, 2012
February 27, 2012
Marking the third gain in four months, existing-home sales rose in January, while inventories continued to improve as well, the National Association of REALTORS® reported last week.
Total sales of existing single-family homes, townhomes, condominiums and co-ops increased 4.3 percent to an annual rate of 4.57 million in January, outpacing analyst expectations of 4.5 million. January’s encouraging performance followed a downwardly revised 4.38 million-unit pace in December, and was 0.7 percent above January 2011′s 4.54 million pace (which was a spike in performance for that time).
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January’s strong performance was an indication that buyers are responding to very favorable market conditions, said NAR chief economist Lawrence Yun.
“The uptrend in home sales is in line with all of the underlying fundamentals — pent-up household formation, record-low mortgage interest rates, bargain home prices, sustained job creation and rising rents,” Yun said.
Housing inventory at the end of January fell 0.4 percent to 2.31 million existing homes available for sale, which represents a 6.1-month supply at the current sales pace, down from a 6.4-month supply in December. Total unsold listed inventory has trended down from a record 4.04 million in July 2007, and is 20.6 percent below a year ago.
Distressed homes — foreclosures and short sales which sell at deep discounts — accounted for 35 percent of January sales, up from 32 percent in December. The national median existing-home price for all housing types was $154,700 in January, which was down 2 percent from January 2011.
Investors purchased 23 percent of homes in January, up from 21 percent in December; they were also 23 percent of buyers in January 2011. First-time buyers rose to 33 percent of transactions in January from 31 percent in December; they were 29 percent in January 2011.
Meanwhile, in employment, initial claims for jobless benefits for the week ending February 18 were unchanged from the previous week’s revised figure of 351,000, the Employment and Training Administration reported last week. The four-week moving average was 359,000, a decrease of 7,000 from the previous week’s revised average of 366,000.
The Administration also reported that the total number of unemployed workers covered by insurance during the week ending February 11 was 3,392,000, a decrease of 52,000 from the preceding week’s revised level of 3,444,000. The four-week moving average was 3,453,250, a decrease of 43,750 from the preceding week’s revised average of 3,497,000.
This week’s slate of economic news releases picks back up starting tomorrow with January’s durable goods orders from the Census Bureau and February consumer confidence scores from the Conference Board. Wednesday, the Bureau of Economic Analysis releases its second estimate for Fourth Quarter 2011 gross domestic product.
Thursday sees initial jobless claims for last week from the Employment and Training Administration, and the Bureau of Economic Analysis will release personal income and spending totals for January. The week’s news wraps up that day with January construction spending from the Census Bureau, and new car and truck sales for February from the auto manufacturers.
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Get Ready to Refinance
February 21, 2012
Everything changes with time, and your home financing shouldn’t be any different. The home loan you selected when you bought your house 10, five or even one year ago may not fit your financial situation anymore.
 As we all know, your financial situation and the real estate market can change. Because our lives and the economy are not static, it’s important to reassess your home financing periodically to see if it is still the right plan for you and to see if there are ways for you to reduce your monthly payments, pay off your loan sooner or change to a loan type that works better for your current financial needs.
For many people refinancing is a great idea — even if you only bought your home in the past couple of years. Additionally, new programs have opened up the refinancing option to homeowners who may be underwater on their loans, allowing them to reap the benefits of a revised home financing program.
There are many different reasons why a homeowner may choose to refinance.
- Take advantage of historically low interest rates.
Interest rates haven’t been this low in 50 years. If you can get in now before they begin to climb, you can keep your monthly payments low and could even hold down the overall cost of your loan over the long haul.
- Ditch your adjustable-rate mortgage.
It could be your current loan is an ARM that will soon adjust upwards. Or, you might prefer the peace of mind offered by a fixed-rate mortgage.
- You have a Fannie- or Freddie-owned loan.
Even if you’re underwater on your home, you may qualify for a refinance under the HARP II program. With no LTV requirements, homes worth less than their mortgages can still get a refinance so the owners can take advantage of today’s market and reduce their monthly payments.*
- Get some cash.
You could have credit card debt or another large expense that you wish to pay off. If this is the case, you might want to refinance and “cash out” a certain amount to cover this expense. In fact, cashing out a certain amount at a mortgage’s much lower rate to pay off a debt — say, a credit card — at a much higher rate often makes solid financial sense.
- Change to terms that better suit your current financial situation.
For instance, your current loan might be a 30-year, but you now find yourself in a financial position that lets you pay it off in 15 years. Opting for the shorter term loan will help you pay off your debt sooner and save significant money over the term of the loan. Likewise, you might find yourself in a position where your income has decreased and you wish to extend the term of the loan.
- See whether you can remove your private mortgage insurance.
PMI is required of borrowers who put down less than 20 percent on their home, and can cost anywhere from .25 percent to .75 percent of the loan value. In general, if you have a 22 percent equity position in your home, you will likely be able to remove your PMI, but be sure to check your state regulations as they vary widely. Look at comparable houses for sale in your neighborhood to help you gauge whether your equity has risen.
- Roll a second mortgage into one loan.
Again, this could mean significant savings for you over the long haul.
If you see yourself in any of these situations, you should give me a call so we can see if a refinance would benefit you.
Key Considerations
Whatever your reasons for wanting to refinance, there are a number of factors you’ll want to consider.
- Make sure that your current loan does not have a pre-payment penalty for refinancing. Such a penalty says that you cannot pay off your loan too early. If you have one in place, you’ll want to make sure you are outside that penalty phase (these typically last between one and five years).
- Look at whether or not the costs of a refinance are recouped by your lower rate. All loans have closing costs associated with them, and you want to make sure that whatever savings your new loan delivers will also be worth the closing costs.
- Ensure the savings over the long term make sense. Compare the overall cost of the new loan to the cost of the old loan. Take the remaining months of your existing loan and multiply them by your principal and interest payments and compare that product to the same calculation for the new loan. Is it lower? Is it higher? How large is the difference? Obviously the goal is to save money, but if a cash-out is involved, you’ll need to account for that.
- Factor in the tax deductions of the new loan in comparison to the old. Are they larger or smaller? By how much? The write-off for mortgage insurance means a lot to most households, so you want to make sure that the money you save on your mortgage won’t be undermined by a less advantageous tax position.**
When considering a refinance there is a lot of information to take into account, which is why it makes sense to sit down with a home financing expert to ensure you’re making the smartest financial decision you can.
I would love to help you make the most informed decision possible. Please contact me today!
*Freddie Mac and Fannie Mae have adopted changes to the Home Affordable Refinance Program (HARP) and you may be eligible to take advantage of these changes. If your mortgage is owned or guaranteed by either Freddie Mac or Fannie Mae, you may be eligible to refinance your mortgage under the enhanced and expanded provisions of HARP. You can determine whether your mortgage is owned by either Freddie Mac or Fannie Mae by checking the following websites: www.freddiemac.com/mymortgage or www.fanniemae.com/loanlookup. ** WJB is not a tax advisory firm. The information contained in this article is for informational purposes only and may not reflect current tax year rules and regulations. Consult your tax advisor or the IRS for current tax year rules, restrictions and regulations. 
Do You Make the Most of Your Loan Statement?
February 21, 2012
Every month, you receive a mortgage statement that reminds you to make your regular payment against your loan, but did you realize that it can serve as a strategic financial tool?
 It’s true. Whether you receive your statement via regular postal mail, or get your statement online, there are various pieces of information on it that can serve as useful intelligence for better managing your home financing, and help you make well-informed decisions about your loan.
Let’s take a look at four important pieces of information found on your statement each month:
1. Taxes.
As tax season approaches, you’ll want to review your property tax write-offs, but also use your statement to check that you aren’t paying too much. Many people have their property taxes paid via an escrow account attached to their home loan. The yearly property tax is put aside in the account and paid out per your local county assessor’s tax collection.
If you pay your property taxes through such an escrow, the year’s property tax total will be divided by 12 and bundled into your monthly mortgage payment. If your local real estate market has shifted, the figure being set aside for your property tax escrow could have shifted, as well. If the property tax fees on your payment stay the same while your home’s value changes, it might be time to have your home’s value reassessed.*
That said, there can be limitations placed on how much the assessors can adjust the value of your property each month, so make sure you familiarize yourself with your local regulations.
2. Amortization.
When you make a payment against your home loan each month, you pay the same amount, but what that money goes toward changes over time. In your loan you have the principal amount, which is the amount you borrowed to finance the purchase of your home, and you have interest, which is the fee you are paying for borrowing that money.
When you first begin paying your loan, your payment goes predominately toward interest, but over time your monthly payment shifts increasingly toward principal. This process is amortization, and your statement shows how your loan is amortizing each month.
If you want to try to pay down your loan more quickly in order to gain additional equity in your loan, you can pay a little extra each month, or make an additional payment each year. Make sure to note on your payments that you wish these extra payments to be applied toward principal, and watch your progress on your statement.
3. Homeowner’s insurance.
Like your property taxes, many homeowners pay their homeowner’s insurance in monthly installments that are bundled into their loan payment. If you do this, make sure to monitor your loan statement to see if this amount increases or decreases, which would obviously reflect changes in your insurance rates.
Also, taking a moment to examine the amount you are paying provides you with an opportunity to mull over whether or not you need to alter your policy in any way.
4. Private mortgage insurance.
Borrowers are generally required to pay for private mortgage insurance (PMI) if their down payment is less than 20 percent of the sales price of their home. This means that the loan-to-value (LTV) ratio is more than 80 percent. Essentially, PMI is designed to protect the lender in cases where the borrower defaults on the loan.
In most cases when your current loan’s LTV falls to 78 percent or below, you no longer need to pay for PMI. So, if you pay PMI, watching the principal on your loan each month can help you keep track of when you may be able to cancel your PMI, which can save you a fair amount of money (which you could consider putting toward the principal, in fact).
Remember, your mortgage statement is more than just a reminder to make your payment — it’s a useful tool. If you’d like to learn more about how to strategically leverage the information on your loan statement, or if you have any other home financing questions, please contact me using the information on this email.
*WJB is not a tax advisory firm. The information contained in this article is for informational purposes only and may not reflect current tax year rules and regulations. Consult your tax advisor or the IRS for current tax year rules, restrictions and regulations.
Economic Roundup: February 20, 2012
February 20, 2012
Retail sales for January enjoyed a slight gain to $401.4 billion, an uptick of 0.4 percent from the previous month, the Census Bureau reported last week. More encouragingly, this was 5.8 percent higher than January 2011, and total sales for the November 2011 through January 2012 period were up 6.3 percent from the same period a year ago.
Looking at categories, January’s retail trade sales were up 0.4 percent from December 2011 and 5.5 percent above last year. Food services and drinking establishment sales were up 8.2 percent from January 2011 and building material sales were up 8.1 percent from last year.
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In fact, January retail sales pointed to growing underlying strength in the economy, given that core retail sales, which exclude auto, gasoline and building material sales, actually increased 0.7 percent, indicating increased consumption by Americans.
“[The] retail sales data are better than they look, but they don’t suggest that consumption growth is about to set the economic recovery alight,” wrote Paul Dales, an economist at Capital Economics, in a note to clients.
First-time claims for unemployment benefits placed in the week ending February 11 dropped to 348,000, a decrease of 13,000 from the previous week’s revised figure of 361,000, the Employment and Training Administration reported last week. The four-week moving average was 365,250, a decrease of 1,750 from the previous week’s revised average of 367,000.
The total number of insured unemployed workers during the week ending February 4 dropped to 3,426,000, a decrease of 100,000 from the preceding week’s revised level of 3,526,000, the Administration also reported. The four-week moving average was 3,492,500, a decrease of 8,250 from the preceding week’s revised average of 3,500,750.
Turning to real estate, building permits issued in January for construction of private housing ticked up to an annual rate of 676,000, which was 0.7 percent over December’s revised rate of 671,000, and 19 percent over the January 2011 estimate of 568,000, the Census Bureau and the Department of Housing and Urban Development reported last week. Permits for single-family homes issued in January were at a rate of 445,000; this is 0.9 percent above the revised December figure of 441,000.
Actual starts on construction of private housing initiated in January hit an annual rate of 699,000, which was 1.5 percent above December’s revised estimate of 689,000 and 9.9 percent higher than the January 2011 rate of 636,000. Starts on single-family homes in January declined to a rate of 508,000, which was 1 percent less than December’s revised rate of 513,000.
Completions of private housing in January were at a seasonally adjusted annual rate of 530,000, which was 12 percent below December’s revised estimate of 602,000, but 4.1 percent higher than the January 2011 rate of 509,000. Completions of single-family homes in January were at a rate of 389,000, which was 14.9 percent under December’s revised rate of 457,000.
Industrial production was unchanged from December to January, as a gain of 0.7 percent in manufacturing was offset by declines in mining and utilities for the month, the Federal Reserve reported last week. Looking at specific segments, the index for motor vehicles and parts jumped 6.8 percent and the index for other manufacturing industries increased 0.3 percent. The output of utilities fell 2.5 percent, as demand for heating was held down by temperatures that moved further above seasonal norms; the output of mines declined 1.8 percent.
This week sees an extremely light calendar of financial headlines due to the Presidents’ Day holiday, starting Wednesday with existing home sales for January form the National Association of REALTORS®. This is followed Thursday by initial jobless claims for last week from the Employment and Training Administration. The week closes with the University of Michigan’s consumer sentiment score for February and new home sales for January from the Census Bureau.
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Economic Roundup: February 13, 2012
February 13, 2012
Consumer credit saw a $19.3 billion jump in December to a total of $2.49 trillion for the year, according to last week’s news from the Federal Reserve. December’s outstanding consumer credit surged in December at a 9.3 percent annual rate, thanks mostly to strong car sales and growing demand for student loans, the Federal Reserve reported.
Consumer credit followed its current trend of seeing non-revolving credit, such as student loans, outpace revolving credit, such as credit cards. December’s revolving credit increased $2.8 billion from November, which represented a 4.1 percent gain. Meanwhile, non-revolving debt increased 11.8 percent in December, representing a $16.5 billion gain over November.
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“Consumers are willing to take on this debt because there is some increasing degree of confidence in the economy,” ClearView Economics LLC President Ken Mayland told the Bloomberg news service.
Turning to employment news, initial claims for jobless benefits posted during the week ending February 4 saw an encouraging drop to 358,000, a decrease of 15,000 from the previous week’s revised figure of 373,000, the Employment and Training Administration reported last week. The four-week moving average was 366,250, a decrease of 11,000 from the previous week’s revised average of 377,250.
The administration also reported that the total number of unemployed workers covered by jobless benefits increased to 3,515,000 during the week ending Jan. 28, a gain of 64,000 from the preceding week’s revised level of 3,451,000. The four-week moving average was 3,498,000, a decrease of 33,000 from the preceding week’s revised average of 3,531,000.
Wholesale inventories for December outpaced analysts’ expectations, according to last week’s report from the Census Bureau, which reported that inventories of merchant wholesalers were up $473.2 billion at the end of December, which represented a 1 percent increase over November’s revised level.
Meanwhile, sales of merchant wholesalers saw a 1.3 percent increase in December, up $413.1 billion from November’s revised level. This put the December inventories-to-sales ratio for merchant wholesalers at 1.15, which was similar to December 2010′s ratio of 1.16. That level of inventory could indicate continued economic expansion, Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities, told Bloomberg.
“There could be a significant need for further accumulation in the current quarter, especially if demand is firming,” he explained. “The need to restock inventories may actually be increasing.”
This week’s slate of financial headlines begins tomorrow with January retail sales data from the Census Bureau, which will also release January export and import prices and December business inventories.
On Wednesday, the Federal Reserve releases December industrial production and capacity utilization, which will be followed Thursday by initial jobless claims for last week from the Employment and Training Administration. Also on Thursday, the Census Bureau will release January housing starts and building permit figures, and the Bureau of Labor Statistics releases its January producer price index.
On Friday, the Bureau of Labor Statistics follows up with January’s consumer price Index. The week closes with January’s leading economic indicators from the Conference Board.
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Economic Roundup: February 6, 2012
February 6, 2012
The Labor Department released numbers Friday morning showing that the unemployment rate has dropped to 8.3 percent, the lowest since February 2009, while new jobs were created in January more quickly than they have been over the past nine months. Analysts consider this to be an indication of a strengthening economy.
Job gains were seen across many industries. However, approximately 19.3 million people are still out of work or underemployed. Initial claims for the week ending Jan. 28 dropped to 367,000, a decrease of 12,000 from the previous week’s revised figure of 379,000, the Employment and Training Administration reported last week. The four-week moving average was 375,750, a decrease of 2,000 from the previous week’s revised average of 377,750.
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Personal income was up, with a modest average hourly wage increase of 4 cents, while spending was down in December, the Bureau of Economic Analysis reported last week. Incomes for the month posted an increase of $61.3 billion, or 0.5 percent. Disposable personal income (DPI) increased $47.1 billion, or 0.4 percent, and personal consumption expenditures (PCE) decreased $2.0 billion, or less than 0.1 percent. Real disposable income increased 0.3 percent in December, and real PCE decreased 0.1 percent.
Private wage and salary disbursements increased $29.1 billion in December. Looking at specific sectors, goods-producing industries’ payrolls increased $10.8 billion; manufacturing payrolls increased $7.4 billion; services-producing industries’ payrolls increased $18.3 billion; and government wage and salary disbursements increased $0.4 billion in December. Additionally, supplements to wages and salaries increased $3.6 billion in December.
The hope is that continued job gains will offset the slowdown in spending. “The pace of job growth in recent months, while still not satisfactory compared to most past cycles, at least seems sufficient to generate enough income growth to keep consumer spending moving ahead at a modest pace,” Joshua Shapiro, chief U.S. economist at MFR, told the Associated Press.
Turning to real estate, construction spending for December hit an annual rate of $816.4 billion, 1.5 percent higher than November’s revised estimate of $804.0 billion, the Census Bureau reported last week. The December figure is 4.3 percent above the December 2010 estimate of $782.9 billion. Looking at the full year, the value of construction in 2011 was $787.4 billion, 2 percent below the $803.6 billion spent in 2010.
Spending on private construction hit an adjusted annual rate of $529.7 billion, 2.1 percent above November’s revised estimate of $518.8 billion, with residential construction reaching an annual rate of $241.2 billion in December, which was 0.8 percent above November’s revised estimate of $239.4 billion.
The value of private construction in 2011 was $504.1 billion, 0.7 percent over the $500.6 billion spent in 2010. Residential construction in 2011 was $236.2 billion, 1.1 percent below the 2010 figure of $238.8 billion.
Auto manufacturers continued to see good news with January’s sales of cars and trucks in the United States hitting an annualized sales pace of 14.18 million vehicles, in comparison to December’s pace of 13.56 million units, according to last week’s update from auto industry watchers Autodata Corp. January’s sales pace was the highest rate since May 2008, with a total of 913,287 cars and trucks sold in the month.
Looking at the U.S. Big Three, Chrysler saw a 44 percent jump to 99,238 cars and trucks sold in January; Ford sales gained 7.3 percent, to 136,294 vehicles; and GM sales fell to 167,962 units. Meanwhile, after suffering a lasting impact on their manufacturing and distribution from Japan’s tsunami disaster, the Japanese manufacturers enjoyed U.S. sales gains in January, with Toyota posting a 7.5 percent increase, Honda seeing an 8.8 percent increase, and Hyundai Motor Co. reporting a 15 percent gain.
This week sees a moderate calendar of financial news, starting tomorrow with consumer credit figures for December from the Federal Reserve. On Thursday, the Employment and Training Administration releases initial jobless claims for last week, and the Census Bureau releases wholesale inventories for December. The Census Bureau continues on Friday with trade balance data for December, and the Treasury Department closes out the week with its January budget.
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© 2013 W.J. Bradley Mortgage Capital, LLC. 6465 Greenwood Plaza Blvd, Suite 500, Centennial, CO 80111 Phone #303-825-5670. NMLS ID 3233. Trade/service marks are the property of W.J. Bradley Mortgage Capital, LLC. This is not a commitment to lend. Restrictions apply. All rights reserved. Some products may not be available in all states. WJB is not acting on behalf of or at the direction of HUD/FHA or the federal government.