Mortgage Business

The Report We Have Been Waiting For

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Friday’s employment report has given us three things we have been waiting for. First, this jobs report was relatively good after a string of disappointments over the winter. It tells us that at least part of the slowdown was definitely due to the weather — a question everyone has been asking. Secondly, the report contains another upward revision to the previous two months’ of data. There were actually 37,000 more jobs created in January and February when compared to last month’s release. That is a revision which we speculated could be coming. Finally, the economy has now recovered all of the millions of private sector jobs lost during the recession.

That is a lot of jobs to recover and represents a very significant milestone. The problem is, it took the economy four years “post recession” to regain the jobs lost. During the recession and afterwards, the population has been growing. As reported by CNN/Money, Heidi Shierholz, a labor economist at the Economic Policy Institute, estimates that we need an additional five thousand jobs to reach a healthy pre-recession labor market. That is a long way to go and Federal Reserve Chairwoman Yellen said as much in testimony to Congress just a few weeks ago. What this means is that the economy is indeed recovering, but still painfully slow. We need a few more years of this level of growth to become healthy or we need for the recovery to accelerate. There is another piece of good news here. The better jobs report did not cause another increase in interest rates — at least initially. Again, this is evidence that the markets believe we need even more good news.

Weekly Interest Rates Overview

 

Rates

The Markets. Rates were stable in the past week as we approached another jobs report, though they started trending upwards. Freddie Mac announced that for the week ending April 3, 30-year fixed rates increased slightly to 4.41% from 4.40% the week before. The average for 15-year loans rose to 3.47%. Adjustables were also up slightly with the average for one-year adjustables increasing to 2.45% and five-year adjustables rising to 3.12%. A year ago 30-year fixed rates were at 3.54%. Attributed to Frank Nothaft, vice president and chief economist, Freddie Mac — “Rates on home loans were little changed amid a week of light economic reports. Of the few releases, real GDP was revised up slightly to 2.6 percent growth in the fourth quarter of 2013. The private sector added an estimated 191,000 jobs in March, which followed an upward revision of 39,000 jobs in February according to the ADP Research Institute. Also, the Institute for Supply Management reported the manufacturing industry rebounded from a soft February but was still below market consensus.” Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.

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More couples these days are purchasing homes together before they marry, and some do not intend to marry at all. Unwed twosomes need to determine how to hold the title: whether the home will transfer to the surviving partner if the other dies, as joint tenants with the right of survivorship; or whether a percentage of ownership will pass to the beneficiary named in the will through a tenants-in-common arrangement. They also need to consider whether both or just one partner will sign the promissory note. If both sign it, they both could be pursued by the bank in the event of foreclosure; but if only one partner signs it because he or she has a job, better credit, and contributes more to the down payment and home loan, then he or she will be on the hook alone — regardless of how they hold the title. Taxes must be discussed as well, mainly with regard to whether the partners will divide the mortgage interest and property tax write-offs equally if the payments are not equally divided between the two of them. They also must consider what would happen if they break up after the home purchase. “I try to remind them that this is 100 percent business,” says Nanci Lieneck of Weichert Realtors in Ridgewood, N.J. “They are joint owners. Married or not, they will own a property, and you have to think of that in a business perspective.” Source: NorthJersey.com

Once at rock bottom, interest rates have ticked up slightly in recent months. Still, the prospect of refinancing a home loan remains attractive. Homeowners should analyze their situation to see if a refinance can improve their overall financial picture,” says Mike Fratantoni, vice president of research and economics at the Mortgage Bankers Association. Here are some reasons why you should refinance:

  • Pay off your loan early. Moving from a 30-year term to a 15-year term without a big jump in monthly payments could save you thousands in interest and build equity in your home faster.
  • Create more cash flow. Lower interest rates can create lower monthly payments, freeing up money to pay down debt or just to provide more wiggle room in the budget for other things.
  • Access home equity. On a cash-out refinance, you borrow more money than you owe on your current loan, and use the funds for purposes such as reducing other debt, remodeling your home or just recovering from a financial setback. As home values start to rise, there is some pent-up demand for a cash-out refinance to access the equity in the home for other purposes. Source: MBA

The condo market is on an upswing, but sales are still more than 30 percent short from its peak. From 2009 to 2013, condo sales increased more than 55 percent, while total existing home sales rose by 29 percent during that time period, according to National Association of Realtors® data. In comparison, during the boom years between 2001 and 2005, condo sales rose more than 50 percent and existing-home sales increased by 37 percent. While the share of condo sales to total existing-home sales is nearing pre-recession levels, the number of sales is still not at its peak, the CoStar Group notes. “Today’s condo market does not involve the irrational speculation of the mid-2000s, when renters fled apartments to get a share of the expanding home price pie,” CoStar Group reports. “A portion of the current sales are often to foreign investors in condo-rich markets like South Florida and to current home owners looking to downsize.” Source: CoStar Group

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