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More Sales, Less Inventory : Home Prices Headed Higher?

November 23, 2011 by Bob Elliot Leave a Comment

Existing Home Supply -- Oct 2011 - Oct 2011 The housing market continues to signal that a broad rebound is underway. In October, despite sparse home inventory, the number of properties sold increased 1.4% nationwide.

According to data from the National Association of REALTORS®, on a seasonally-adjusted, annualized basis, October Existing Home Sales gained 70,000 units as compared to September, registering 4.97 million existing homes sold overall.

An “existing home” is a home that has been previously occupied and, as compared to prior months, the stock of homes for sale is depleted. 

Just 3.3 million homes were listed for sale last month. This represents a 2 percent drop from September and marks the sparsest home resale inventory of 2011.

The current home supply would last 8.0 months at today’s sales pace — the fastest rate since January 2010. 

The real estate trade group’s report contained other noteworthy statistics, too :

  1. 34 percent of all sales were made to first-time buyers
  2. 29 percent of all sales were made with cash
  3. 28 percent of all sales were for foreclosed homes, or short sales

It also said that one-third of transactions “failed” as a result of homes not appraising for the purchase price; failure to achieve a mortgage approval; and, insurmountable home inspection issues.

This 33% failure rate is huge as compared to September 2011 (18%) and October 2010 (8%). It underscores the importance of getting pre-qualified to purchase, and of selecting a home “in good condition”.

For today’s St Paul home buyer, October’s Existing Home Sales may be a “buy signal”. Supplies are falling and sales are increasing. Elementary economics says home prices should begin rising, if they haven’t already.

Remember : The data we’re seeing is already 30 days old. Today’s market may be markedly improved already.

The good news is that mortgage rates remain low. Freddie Mac reports that the average 30-year fixed rate mortgage rate is 4.000% with 0.7 discount points, making homes as affordable as they’ve been in history.

With rising home values, you may end up paying more to purchase your new home, but at least you’ll pay less to finance it.

Filed Under: Housing Analysis Tagged With: Existing Home Sales, Existing Home Supply, NAR

Maximum FHA Loan Limits Restored To $729,750

November 22, 2011 by Bob Elliot Leave a Comment

FHA Loan Limits RestoredAfter a brief return to lower, pre-2009 levels, FHA loan limits have been restored. As signed into law last Friday, maximum FHA loan limits are — once again — as high as $729,750.

The move creates additional mortgage financing possibilities in more than 650 U.S. counties, and promises to increase the FHA’s mortgage market share, which has grown from 6% in 2007 to roughly 30% today.

The change in FHA loan limits also marks the first time that FHA loan limits exceed those of conventional mortgage-backers Fannie Mae and Freddie Mac.

Conventional loans remain capped at a maximum of $625,500.

For home buyers in Minneapolis/St Paul and nationwide, FHA-insured mortgage offer several advantages over comparable conventional loans, the most commonly cited of which is that FHA-insured loans require a down payment of just 3.5 percent.

FHA-insured mortgages carry other advantages, too, however.

First, FHA home loans are not subject to loan-level pricing adjustments (LLPA). This means that, all things equal, buyers and would-be refinancers with credit scores below 740; or, who live in multi-unit homes; or, who have high loan-to-values are not subject to additional loan fees as a conventional mortgage applicant might.

Second, after 6 months of on-time payments, FHA-backed homeowners are eligible for the FHA Streamline Refinance. The FHA Streamline Refinance is among the simplest loan products for which to qualify with no appraisal required. Even if you’re “underwater” on your mortgage, you can still be streamline-eligible.

And, lastly, at least in today’s market, FHA mortgage rates are below those of the conventional market.

The downside of FHA financing, however, is that all FHA mortgages require mortgage insurance and FHA mortgage rates are often higher versus a comparable conventional loan. This means that, although its mortgage rate may be lower, the payment for an FHA home loan may be higher as compared to a Fannie Mae mortgage with similar credit traits.

FHA loans aren’t always optimal, but with higher FHA loan limits, expect the FHA’s market share to increase.

Check your local FHA loan limit at the HUD website.

Filed Under: Mortgage Guidelines Tagged With: FHA, High-Cost Areas, Loan Limits

Using Home Generators? Here’s How To Stay Safe.

November 21, 2011 by Bob Elliot Leave a Comment

Carbon monoxide is an odorless, colorless, poisonous gas. It kills more 400 people die in their homes each year.

Carbon monoxide poisoning is especially common during periods of power outage. This is because homeowners throughout Minneapolis fire up their personal home power generators.

Home generators are a leading cause of poisoning by carbon monoxide and, in this 4-minute from NBC’s The Today Show, you’ll learn about home generators, how they operate, and the safety measures everyone homeowner should undertake.

A few basic home generator safety rules, as described in the interview, include :

  • Never modify a generator or its engine
  • Keep a 10-foot distance between the generator and your home
  • Always point the generator’s exhaust away from your home

Furthermore, make sure your home has an ample supply of carbon monoxide detectors, and that they’re operational.

One of the video’s highlights is clever illustration employing a vase of water and a dash of red dye. The demonstration shows just how few carbon monoxide particles are required to cause injury and/or death to a person in your household.

Therefore, if you own a home generator, take 4 minutes watch this video. Safety when home generators is paramount to your health.

Filed Under: Around The Home Tagged With: Home Safety, Power Generator, The Today Show

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