Minnesota Homes Today Local & National News

8-Fold Increase In “Improving Markets” Since September

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Improving Markets IndexThe economic recovery continues nationwide, but the recovery’s an uneven one.

Some metropolitan areas are faring very well this year, posting measurable gains in both employment and housing. Other metropolitan areas, by contrast, are struggling.

To help identify those markets in which growth is occurring, the National Association of Homebuilders created the Improving Market Index, a metric analyzing three separate, independently-collected data series “indicative of improving economic health”.

The IMI’s three collected data series are :

  1. Employment Growth (as published by the Bureau of Labor Statistics)
  2. Home Price Growth (as published by Freddie Mac)
  3. Single-Family Housing Growth (as published by the Census Bureau)

A metropolitan area is considered to be “improving” if all three indicators show growth at least six months after the respective area’s most recent trough, or “bottoming out”.

In May, there are exactly 100 U.S. markets that qualify for the NAHB’s Improving Market Index, down from 101 last month but higher by more than 800% from the reading in September 2011, the index’s inaugural release.

17 areas were added to the Improving Market Index list this month including Phoenix, Arizona; Ann Arbor, Michigan; and Bend, Oregon. 18 areas were removed from the May IMI.

83 metropolitan areas remained from April.

There is little actionable information in the Improving Markets Index but the report does a good job of highlighting how “real estate markets” can’t be summarized on a national level and remain relevant to everyday home buyers and sellers across Minnesota and nationwide. For example, Fort Collins, Colorado is listed as an Improving Market. However, Greeley, Colorado — located just 30 miles away — was just downgraded from the same list. 

Home values and economies vary by region, by state, by city, by neighborhood, and even by street.

The complete Improving Markets Index can be viewed at the NAHB website but for the best read of what’s happening in your neighborhood, talk to a local real estate agent.  See Individual Minnesota Cities Data

With LIBOR Low, You May Not Want to Rush To Refinance Your ARM

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Pending ARM Adjustment

Is your mortgage scheduled to adjust this season? You may want to let it. This year’s ARM-holding homeowners in Minnesota are finding out that an adjusting mortgage may be the simplest way to get access to today’s low mortgage rates — without paying the closing costs.

Currently, conventional adjustable-rate mortgages are adjusting to near 3.00 percent.

If your home is financed via an adjustable-rate mortgage, you’re likely cognizant of your loan’s life-cycle. At first, your ARM’s initial mortgage rate is agreed upon between you and your lender, a rate that both parties agree will remain in place from anywhere from one to 10 years, with periods of five and seven years being most common.

Then, after the initial “teaser rate” expires, the mortgage’s mortgage rate adjusts according to a pre-determined formula — one that’s also agreed upon at closing. The loan is then subject to an identical mortgage rate adjustment every 12 months thereafter until the loan is paid in full.

The most common conforming mortgage adjustment formula is to add 2.25 percent to the then-current 12-month LIBOR rate.

Today’s 12-month LIBOR is 1.05% so, as a real-life example, an adjustable-rate mortgage that’s leaving its teaser rate period this week would adjust to 3.30%.

If you’re a homeowner who took a 7-year ARM in 2005, or a 5-year ARM in 2007, your newly-adjusted mortgage rate should be roughly 2 percent lower than your initial teaser rate. On a $250,000 mortgage, a 2 percent mortgage rate reduction yields $298 in monthly savings.

Therefore, if you have an adjustable-rate mortgage that’s due to reset, you may not want to rush to refinance it. For at least one more year, you may benefit from low mortgage rates and low payments.

As for next year’s adjustment, however, that’s anyone’s guess.

Reverse Mortgages : Pros And Cons

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Despite several big-name banks pulling the product from their respective home loan offerings, reverse mortgages remain a popular mortgage choice among homeowners aged 62 or over.

A reverse mortgage is exactly what it sounds like — a mortgage in reverse. Rather than borrow a fixed amount of money then pay that loan balance down to zero as with a “forward” mortgage, a reverse mortgage starts at a given loan balance and works its way up as scheduled payments are added to the existing loan balance.

This 4-minute piece from NBC’s The Today Show highlights a few pros and cons of reverse mortgages, and the reasons why you may want to consider one, including :

  • No mortgage payments are ever due on your home
  • There is no credit check required for a reverse mortgage
  • There is no income requirement to qualify for a reverse mortgage

There are some basic qualification standards for the reverse mortgage program including a requirement that all borrowers on title must be 62 years of age or older; and that the subject property be a primary residence. Loan fees can also be higher than with a conventional-type mortgage.

If you meet the qualification standards, though, with a reverse mortgage, you have flexibility in how your home equity is distributed to you. You can receive a lump-sum payment, elect for monthly installments over time, create a line of credit, or a combination of all three. 

Like all mortgages, reverse mortgages are complex instruments. That’s one reason why all reverse mortgage borrowers are required to attend counseling — the government wants you to be certain that you understand the nuances of the reverse mortgage program.

Your lender will want you to understand the program, too.

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