Usually the monthly Employment report is the main event of the week, but Fed Chief Bernanke stole the show. Following the theme of other Fed officials in recent weeks, Bernanke focused on inflation risks in multiple speeches, and his comments were unexpectedly direct. According to him, inflation expectations are a “significant concern.” He explained that the decline in the value of the dollar and the increase in the cost of energy were adding to inflationary pressures. Inflation is negative for mortgage investors, and mortgage rates rose for the fourth straight week due to increased concern.

At the end of a volatile week, investors were closely watching Friday’s important Employment report. The headline number came in right on target, with a loss of -49K jobs in May. The big surprise came from the change in the Unemployment Rate. Expected to rise slightly to 5.1% from 5.0% in April, it instead jumped to 5.5%, the highest level since October 2004. Economists attributed the spike to an unusually large influx of young adults entering the labor force to find summer jobs, so the reaction in the mortgage market was modest.

Compliments of Corey Phelps, Front Street Mortgage, (231) 360-7283, email: corey@frontstreetmtg.com

We are definitely in the full swing of the “seasonal” real estate market.  We have seen an increase in activity in purchases of first time home buyers and vacation home buyers (there are some great deals in both of these segments - actually in all segments!).   Interest rates remain low, sellers are willing to negotiate.  NOW IS THE TIME TO BUY.  For those of you that think we have not “hit the bottom of the market” - you are going to miss out!!  

Sold Market Analysis April 2008: 

Total Listed 638; Total Sold 161; Average List Price Sold $200,219; Average Sale Price Sold $186,473; Average Days on Market 161

This week, mortgage investors focused on the Fed, inflation, and oil prices. The week started off on a positive note, and mortgage rates fell on Monday and Tuesday. Even higher than expected levels of core inflation in Tuesday’s Producer Price Index had little impact. The atmosphere changed quickly on Wednesday, though, after the release of the FOMC minutes from the April 30 Fed meeting. In the minutes, the Fed lowered its forecast for economic growth in 2008, while raising the expected level of inflation. Also notable, Fed officials ruled out further rate cuts unless the outlook for the economy turns significantly worse. The Fed’s heightened inflation projections were bad news for mortgage markets, and rates ended the week a little higher.

Investors closely watched the continued climb in energy prices during the week. Rising energy prices are particularly bad for the stock market, while the impact on mortgage markets is less clear. In one sense, they act similar to a tax increase, since they result in less disposable income, and economic growth slows. An economist at a major investment bank pegged the added cost this year to US consumers and businesses at $300 billion, more than double the $130 billion in tax rebates being issued by the government. Normally a decline in economic activity reduces future inflationary pressures and is good for mortgage markets. In this case, however, higher energy prices are seen as adding to inflation by more than a slowing economy would reduce it.

In the housing sector, this week’s data was close to the expectations of investors. April Existing Home Sales fell slightly from March, while inventories of unsold homes rose to the highest level since June 1985. Separately, OFHEO, a government agency, announced that US home prices fell 3% during the first quarter compared to the same period one year ago. Prices fell in 43 states. Analysts suggested that the recent difficulty in obtaining jumbo mortgages has led to a smaller proportion of sales of more expensive homes, which has skewed the housing data somewhat lower.

Compliments of Corey Phelps, Front Street Mortgage, (231) 360-7283, email: corey@frontstreetmtg.com

Closing your home should be exciting, and once you understand the process and how it works, it can be.

Here you will find a list of costs commonly associated with closing on a home. Fees may vary depending on where you live, so be sure to talk to your lender, real estate agent, and settlement company for more specific information.

All closing costs must be listed on your Hud-1 settlement form, a document that is required to be filled out prior to finalizing the purchase of your home.

What are My Closing Costs?

In addition to the sales price of the home, there are a variety of costs associated with finalizing the transaction.

• Loan Fees-Direct Loan Costs: Most people need to obtain a mortgage loan to pay for their home. There are often fees associated with obtaining a loan such as: Loan Origination Fee - This fee covers the lender’s cost of obtaining financing and administration for your loan.  Loan Discount (sometimes referred to as points) - This is the onetime fee charged by the lender in order to give you a lower interest rate.  Appraisal Fees - Cost to obtain an estimate of what your home is really worth.  Credit Report Fee - Cost to run a credit report.  Lender Inspection Fees - Inspection the lender may require.  Mortgage Insurance Application Fee - Some lenders will waive this fee.  Assumption Fee - If you are taking over the existing mortgage.  Mortgage Broker Fee - Covers the cost of the services of a mortgage broker, if engaged by the borrower.  Mortgage brokers typically present the borrower’s application to a variety of funding sources before helping the borrower make their final selection.
• Real Estate Broker Commission/Fees.
• Items Required by the Lender to be paid in advance - Also called “Prepaids”, such as: Interest - for the month of the closing.  Mortgage Insurance Premium - If the loan is being federally insured or guaranteed.  Hazard Insurance Premium - Home Owners Insurance policy.  Flood Insurance - Depending on the location of your home, this may be required.
• Escrows/Impounds/Reserves - Property Taxes and Insurance due over the next year.
• Title and Closing Charges - These fees cover the administrative costs of a title search, title examination, issuance of the title commitment/binder and final title insurance policy(ies.)
• Recording/Government Filing Fees - Buying a home is not only a big investment, it is also a matter of public record. The property information and the loan information are required to be filed at the county courthouse or other local government recording office.
• Other, Miscellanious Charges - Such as survey fees or inspection fees

This information provided by Corporate Title, www.corporatetitle.com

Mortgage rates ended the week close to where they began the week, but the end result masked a lot of movement. The week began poorly for mortgage markets. Stronger than expected Retail Sales data and tough talk on inflation from Fed officials pushed mortgage rates higher on Monday and Tuesday. In particular, Tuesday’s Fed speakers suggested that the economy was beginning to recover - even if there is still a long way to go - and that inflation concerns have increased. The tide turned on Wednesday, however, when CPI, the most closely watched inflation report of the month, showed a lower than expected increase in inflation. Mortgage rates fell every day through the remainder of the week.

The April Core Consumer Price Index (CPI) rose at a 2.3% annual rate, below the consensus forecast of 2.4%. So far, higher food and energy prices have not been passed through in a large way to the prices of other goods. The Fed has been emphasizing inflation fears for a couple of weeks, which has had a negative impact on mortgage markets, so the good news on inflation was a relief to many investors. The Fed is generally considered to be comfortable with Core CPI readings below 2.5%.

In the housing sector, this week’s news was mixed. Against a consensus forecast of 940K, April Housing Starts rose 8% to an annual rate of 1,032K units. Building Permits, a leading indicator of housing market activity, rose 5%, the first increase in in five months. The construction of single family homes remained weak, however. The strength in the Housing Starts report came from new apartment construction, which is extremely volatile on a monthly basis. Separately, the National Association of Realtors (NAR) reported that median home prices fell 8% during the first quarter from the same period one year ago. The chief economist of the NAR suggested that the data may be a little misleading, since a smaller percentage of high end homes were sold during the period due to the difficulty in obtaining jumbo mortgages. In addition, the results varied in different parts of the country. 100 out of 149 metropolitan areas saw price declines during the first quarter.

Compliments of Corey Phelps, Front Street Mortgage, (231) 360-7283, email: corey@frontstreetmtg.com

With little economic data on the schedule, the major economic story during the week was the continued rise in oil prices, which hit a new record high of $126 per barrel. Oil prices have nearly doubled since last summer. A major Wall Street investment bank issued a forecast this week that predicted a spike in oil prices to between $150 and $200 per barrel, possibly before the end of the year. The impact of rising oil prices on mortgage markets could be either positive or negative, depending on a couple of factors. Rising oil prices leads to higher prices for goods and services, and higher inflation usually leads to higher mortgage rates. On the other hand, higher energy costs slow economic activity, which serves to reduce inflationary pressures. In general, stock investors don’t like to see higher oil prices, while mortgage investors are less concerned. Mortgage rates fell a little during the week.

In the housing sector, the March Pending Home Sales index fell slightly from February, matching expectations. Pending Home Sales are a leading indicator of future housing market activity, so the next Existing and New Home Sales reports may show small declines. The National Association of Realtors (NAR) latest forecast predicted that conditions will remain soft for the first half of 2008, but that activity will pick up during the second half of the year.

Other significant news for the housing sector came out during the week as well. Fannie Mae announced that it will buy the new Jumbo Conforming mortgages for the same prices as those below the old conforming loan limit, which should make some larger mortgages more affordable. In addition, a $300 billion FHA housing loan guarantee program passed a vote in the House. More hurdles remain, as the program must be approved by the Senate and the President. If passed, this program will assist troubled borrowers in refinancing into a mortgage with more affordable terms, resulting in a reduction in the number of foreclosures.

Compliments of Corey Phelps, Front Street Mortgage, email: corey@frontstreetmtg.com, (231) 360-7283

• COST DOESN’T EQUAL VALUE. If you finished off your basement six months ago for $12,000,  said improvement doesn’t necessarily add $12,000 to value in the eyes of the buyer.
• PUT YOUR MONEY WHERE BUYERS WILL SEE IT. Examples of good returns might be a fresh coat of paint and sprucing up your front door and entry way. Don’t expect to get as good a return on insulation or new wiring (these fall under item #4)
• DON’T OVER IMPROVE! We see this happen all the time. The addition of a fifth bedroom to a house in a subdivision of 3-4 bedroom homes may not give you the return you would like. Use typical improvements for your area as a guide.
• MOST QUALITY HOME IMPROVMENTS CAUSE A PROPERTY TO SELL QUICKER BUT NOT NECESSARILY FOR MORE MONEY. A timely sale will lessen the carrying costs and stress. Don’t underestimate the overall value of “smart” improvements (i.e. updated wiring, new furnace, etc.) 

Comments from Fed Chief Bernanke and weaker than expected data from the job market painted a grim picture of current economic conditions. Slower economic growth generally leads to lower inflation, which is good news for mortgage markets, and mortgage rates dropped moderately during the week.

Wednesday, Bernanke testified before Congress. The focus was on the Bear Stearns rescue plan rather than current economic conditions, but he did outline the Fed’s latest economic outlook. While acknowledging that the economy is in the midst of a downturn, he suggested that the economy will strengthen in the second half of the year, and he expects that growth will be positive in 2009. He believes that Fed rate cuts and government stimulus packages will help lift the economy. He also predicted that inflation will moderate in future months.

Friday’s Employment report fell short of even Wall Street’s reduced expectations. Against a consensus forecast for a loss of -50K jobs, the economy lost -80K jobs in March, and the figures from prior months were revised lower by an additional -67K. This marked the worst monthly results since March 2003. Once again, the construction and manufacturing sectors performed poorly. Average Hourly Earnings, a proxy for wages, rose at the expected rate. Overall, even though the job market performed very poorly during the first quarter of 2008, the current Unemployment Rate of 5.1% is still reasonably low by historical standards, and the Fed thinks that a recovery is not too far away.

Post Provided by: Corey Phelps, Front Street Mortgage, corey@frontstreetmtg.com