After posting a strong September, the number of newly-built homes sold nationwide slipped in October.
Total units sold on an annual basis dropped by 25,000 from September; supplies of new homes climbed 0.7 months. Home supply is back to its rolling, 6-month average of 8.6 months.
Like everything else in real estate, however, the October’s New Home Sales results varied by location.
For example, except for the South, each U.S. region posted a loss. In the South, there was a 3 percent gain. This is statistically significant because more new homes are sold in the South than in all other U.S. regions combined.
In October, the South accounted for 58 percent of all homes sold.
The dip in New Home Sales did not surprise Wall Street. New Home Sales is closely correlated to Housing Starts, and Housing Starts fell in July and August. Furthermore, it seems home builders expected the dip and are brushing it off.
In a poll taken 2 weeks ago, builders reported higher confidence in housing, and their respective prospects for the future. Home builder confidence is at its highest point since June.
For buyers in Madeira , the effects of New Home Sales data are unknown. In a normal environment, falling sales volume and rising home supplies would help shift negotiation leverage away from the seller and toward the buyer, resulting in lower sales prices.
However, in this market, the “sellers” (i.e. home builders) are more confident about housing, and that offsets a buyer’s statistical edge.
With home prices stagnant and mortgage rates rising, therefore, the best “deals” may come between now and the New Year.
Preventative care will minimize your home repair costs and, at this time of year, it’s a good idea to sweep your home’s exterior for sign of air leaks and drafts around windows.
According to the U.S. Department of Energy, drafty windows can account for 30% of a home’s heat loss in winter so it’s best to find them, and seal them.
In this 4-minute video from the DIY Network, you’ll learn how to identify your home’s leaky windows, and how to seal them with caulk. The job requires a little bit of elbow grease, but it’s manageable for even the notice handyman.
Some of the tips include:
- How to use a lit candle to find windows that leak air
- How to remove existing caulk using caulk softener
- How to “push the bead” of caulk for proper application
The video concludes with a brief tutorial on setting your home’s programmable thermostat so, when taken with the window caulking exercise, homeowners in Cincinnati could stand to save a bundle on their winter heating bills.
The Federal Reserve released its November 2-3, 2010 meeting minutes Tuesday afternoon. Mortgage rates in Ohio have been on the move since.
The Fed Minutes is a comprehensive review of Federal Open Market Committee meetings; a detailed look at the debates and discussions that shape our country’s monetary policy. The report is published 3 weeks to-the-day after the FOMC adjourns.
Fed Minutes add depth to the briefer, more well-known “statement” to the markets which is issued upon adjournment. As a comparison:
If the Fed Statement is the executive summary, the Fed Minutes is the novel. And, the extra words matter.
When the Federal Reserve publishes its minutes, it gives clues about the groups next policy-making steps. For example, in November’s minutes, it’s revealed that the Fed discussed setting inflation targets for the economy; holding occasional policy briefings for the press; and, working to set yields on instruments such as the 10-year Treasury note.
In addition, the Federal Reserve acknowledged a video conference hosted October 15, the second such “unannounced” meeting of the year. The other was May 9, 2010.
Bond markets have not taken kindly to the Fed Minutes. The minutes show a propensity toward Fed “action”, most of which markets believe to be inflationary. Inflation leads to higher mortgage rates and that’s exactly what we’ve seen.
As compared to Tuesday morning, mortgage applicants in Mason are finding conforming and FHA mortgage rates to be higher by as much as 0.375 percent. In “real life” terms, assuming a 30-year term, that’s an extra $264 in annual mortgage payments per $100,000 borrowed.
If you’re still rate shopping, consider getting locked today. As a result of the recent shift, mortgage rates are now at a 4-month high.
After two months of surging sales, home resales fell by 100,000 units last month to 4.4 million homes nationwide.
October’s Existing Home Sales tally is slightly below the report’s 6-month rolling average, according to the National Association of REALTORS® — a time span which includes this year’s $8,000 federal home buyer tax credit’s tail end.
Housing statistics have been wildly inconsistent during that period.
For the future of Mason housing markets, though, it’s encouraging that first-time and investment property buyers were both outnumbered by “move-up” buyers; buyers that have sold their respective homes in favor of larger ones. It’s the move-up buyers that power housing.
In October, buyer profiles broke down as follows:
- First-time buyers : 32 percent of all buyers, unchanged from September
- Repeat home buyers : 49 percent of all buyers, down one tick from September
- Investors : 19 percent of all buyers, up one tick from September
As a point of comparison, first-timers represented 50 percent of all purchases in October 2009.
For Oakley home buyers, October’s Existing Home Sales report is neither weak nor strong. It signals that, with mortgage rates low and home affordability high, housing may be reaching some form of balance. Because — although home sales are down — home supplies are down, too.
We can infer that buyers outnumber sellers, but probably not by much. In most areas, negotiation leverage is still up for grabs.
At the current pace of sales, the complete housing stock would be depleted in 10.6 months.
Black Friday is 3 days away. It’s the official start of the 2010 Holiday Shopping Season.
Sales are expected to top $111 billion this year and, already, businesses are vying for shoppers and their dollars. Newspaper circulars are getting larger, and in-store discounting is more prevalent.
But one discount that shoppers should think twice about is the popular “Open A Charge Card, Save 20%” promotion. The short-term savings may be tempting, but the long-term costs may be huge.
It’s because of how credit scores work.
According to myFICO.com, “new credit” accounts for 85 out of 850 possible credit scoring points, with new credit defined by such traits as:
- Number of recently opened accounts
- Number of recent credit inquiries
- Time since recent credit inquiries
- Proportion of new accounts to all accounts
These traits are negatives against a FICO score so with each new, in-store credit card application, a person’s credit score will fall. The fall will be especially pronounced for persons lacking credit “depth”, or who have made a disproportionately large number of new credit applications recently.
For soon-to-be homeowners, or would-be refinancers in Mason , credit scores are worth keeping high. This is because credit scores change the mortgage rates and/or loan fees for which an applicant is eligible.
As an illustration, assuming 20% equity on a $200,000 conforming loan:
- 740 FICO : No added loan costs
- 720 FICO : 0.250% increase in loan costs, or $500
- 700 FICO : 0.750% increase in loan costs, or $1,500
- 680 FICO : 1.500% increase in loan costs, or $3,000
- 660 FICO : 2.500% increase in loan costs, or $5,000
It’s expensive to have a low credit score — more expensive than the money saved by opening a card at the mall, anyway.
That said, if you know you won’t need your credit for a mortgage within the next 6 months, the risk of applying for in-store credit cards is likely small. But if you’ll need your FICO soon, consider paying for your gifts full price.
According to the United States Fire Administration, in 2008, there were an estimated 378,200 in-home fires. Combined, these fires caused $8 billion in property damage and killed 2,600 people.
Unfortunately, many of affected homes did have smoke detectors installed, but the devices were faulty either because of dead batteries, or because the smoke detector had reached the end of its useful life.
This is why it’s so important to test your home’s smoke detectors at least once annually.
Here’s how to test a smoke detector:
- Ask a family member or friend to walk to the farthest point of the home from the detector.
- Push and hold the testing button to activate the alarm. Usually, this takes 5 seconds.
- Confirm with the family member or friend that the alarm was audible from his/her location.
And there’s an additional step worth taking.
Just because the smoke detector’s alarm works doesn’t mean that the actual smoke detector works. For less than $15, therefore, you may want to buy a “smoke test” from Amazon to confirm whether your detector is faulty. The smoke test simulates a real fire so, if the detector fails to sound when it’s tested, it’s time to replace the entire smoke detector unit.
2,000 residential fires occur on Thanksgiving Day each year — most of them related to cooking. Before Thursday, make sure your smoke detectors are working. You don’t want your home to be Fire #2001.
Rock-bottom mortgage rates may be gone for good. This week’s Freddie Mac Primary Mortgage Market Survey shows in numbers what Ohio rate shoppers have learned the hard way — mortgage rates are spiking.
During the 7-day period ending November 18, the average 30-year, conforming fixed rate mortgage jumped to 4.39 percent, an increase of 0.22% from the week prior.
And it’s not just rates that are soaring. The average number of points charged to consumers increased to 0.9 percent last week. For most of the year, that cost had been 0.7 percent.
One “point” is equal to 1 percent of your loan size.
With the sudden rise in mortgage rates, we have to question whether the Refi Boom is ending. Between April and early-November, conforming mortgage rates dropped more than a full percentage point and, during that time, a lot of Cincinnati homeowners capitalized on the market. Refinance activity was strong; rates cut new lows each week.
Today, however, Wall Street sentiment is different. There’s a growing concern for the future of the U.S. dollar, and that’s making mortgage bonds less attractive to investors. As demand drops, so does the underlying bond’s price which, in turn, causes mortgage rates to rise.
Buy-sell patterns like this are common. The speed at which they’re changing is not. Mortgage lenders can barely keep up with the volatility, issuing up to 4 separate rate sheets in a day.
Therefore, if you’re shopping for mortgage rates, or wondering whether it’s finally time to join the Refi Boom, the time to lock is now. Mortgage rates should remain volatile through the New Year, at least. At what level they’ll be then, though, is anyone’s guess.
Newspaper stories can be misleading sometimes — especially with respect to real estate. We saw a terrific example of this Wednesday.
A “Housing Start” is a privately-owned home on which construction has started and, according to the Commerce Department’s October 2010 data, Housing Starts data dropped by nearly 12 percent as compared to September.
The media jumped on the story, and its negative implications for the housing market overall.
A sampling of the headlines included:
- Housing Starts Plunge: Market’s ‘Pulse is Faint’ (WSJ)
- Housing Starts Tumble (Reuters)
- Housing Starts Sink 11.7 Percent In October (NPR)
Although factually correct, the headlines are misleading. Yes, Housing Starts fell sharply in October, but if we strip out the volatile “5 or more units” portion of the data — a grouping that includes apartment buildings and condominiums — Housing Starts only fell 1 percent.
That’s a big difference. Especially because most new construction buyers in Madeira and around the country don’t purchase entire condo buildings. They buy single-family residences.
As an illustration, 84% of October’s Housing Starts were single-family homes. The remaining starts were multi-units.
This is why the headlines don’t tell the whole story. The market that matters most to buyers — the single-family market — gets completely glossed over. The Housing Starts reading wasn’t nearly as awful as the papers would have you believe. Furthermore, it’s never mentioned that single-family Housing Permits climbed 1 percent last month, either.
According to the Census Bureau, 82% of homes start construction within 60 days of permit-issuance. Therefore, we can expect December’s starts to be higher, too.
Homebuilder confidence is higher for the third straight month this month.
According to the National Association of Home Builders/Wells Fargo Housing Market Index, a combination of shrinking new home inventory plus higher-quality foot traffic is boosting builder optimism.
November’s confidence reading of 16 is the highest since June 2010. The Housing Market Index is now above its 3-year trendline, too.
The purpose of the Housing Market Index is to measure “the pulse of the single-family housing market”. The survey is sent to home builders in Kentucky and around the country, asking them to report on their business.
The survey is 3 questions:
- How are market conditions today?
- How do market conditions look 6 months from now?
- How is the prospective traffic of new buyers for new homes?
Responses are then collected, and seasonally-weighted.
Of course, it’s no surprise that builder confidence is rising. The sales of new homes spiked in September, and the jobs market is moving in the right direction. Additionally, low mortgage rates help to attract new buyers, too. Altogether, the outlook in the New Home market is as rosy as it’s been in months.
The downside for new home buyers in Mason , though, is that, because of their optimism, builders may be unwilling to offer free upgrades or other discounts. Certainly not with sales are expected to return to “federal tax credit” levels, anyway.
Therefore, if you’re in the market for a new home, or expect to be “buying new” in early-2011, you may want to move up your time-frame. Not only are low mortgage rates not likely to last, but neither are low home prices.
If consumer spending is a key to economic recovery, the nation is on its way.
Monday, the Census Bureau released national Retail Sales figures for October and, for the second straight month, the data surged past expectation. Last month’s retail figures jumped 1.2 percent — the largest monthly jump since March — as total sales receipts climbed to a 2-year high.
Consumer confidence is rising, too. Though still below the long-term trend, confidence in the future up-ticked in October.
The current confidence reading is now double the low-point from February 2009.
It’s no surprise that both Retail Sales and Consumer Confidence are higher. They correlate in a common-sense-type manner. When consumers are more confident in the economy, they’re more likely to spend their money. This, in turn, leads to more purchases and rising retail receipts.
Unfortunately, for home buyers and rate shoppers in Madeira , it also leads to rising mortgage rates.
Because consumer spending accounts for two-thirds of the economy, spending growth leads to economic growth. But it’s been a lack of growth that’s kept mortgage rates this low.
When the growth starts, the low rates end. It’s why mortgage rates have added as much as 1/2 percent over the past 10 days. Consider the recent “good news”:
- Retail Sales made a 2-year high in October
- Existing and New Home Sales showed big improvement in September
- Jobs growth returned in October
The days of 4 percent, 30-year fixed rate mortgages may be nearing its end. If you’re still floating a mortgage rate or thinking of buying or refinancing, consider the impact of rising rates on your budget.
The time to act may be sooner than you had planned.