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Thursday, Dec. 14
Posted 1 p.m. EST
DEDUCTIBLE MORTGAGE INSURANCE:
As threatened, I have written an article about the new law that
bestows tax
deductibility on mortgage insurance. The front-page headline
isn't as accurate as I would like, because the deduction applies
not only to private mortgage insurance (PMI), but to government-sponsored
mortgage insurance (FHA, VA, Rural Housing).
I want to get word out about
this law, because there's a refinancing boomlet going on right now,
and some folks would benefit by waiting and closing the loan in
January instead of closing this month. Some homeowners are refinancing
to avoid payment shock when their adjustable-rate mortgages reset
for the first time. Those who still haven't reached 20 percent equity
should compare piggybacks with tax-deductible mortgage insurance.
If they're refinancing into a fixed-rate loan and plan to stay in
the house for five years or more, it's probably cheaper in the long
run to get mortgage insurance.
A reporter interviewed me yesterday and asked if I
was biased in favor of either piggybacks or mortgage insurance.
I told her that I'm biased in favor of considering all options --
and I fear that a lot of lenders, brokers and borrowers don't even
consider mortgage insurance anymore. They made up their minds three
years ago that piggybacks are always cheaper, and haven't reconsidered
that conclusion in light of higher short-term interest rates. Now
that mortgage insurance is tax deductible, you're foolish to not
consider it if you have less than 20 percent equity.
MILLION-DOLLAR TRAILER:
There is a mobile home park here in Palm Beach County, called Briny
Breezes. It's its own town. It's right on the water, bordered on
one side by the Atlantic and the other side by the Intracoastal
Waterway. It has 488 units.
A developer has
offered $510 million for the whole shebang. The average owner
will get more than a million dollars. The Palm Beach Post quotes
a woman who bought her unit two years ago for $66,000.
ALMOST FORGOT -- RATES:
Sorry, but mortgage
rates rose this week. First time since the week before Halloween.
It looks like they might be edging higher today, as
the yield on the 10-year Treasury is up a basis point, to 4.59 percent.
Thursday, Nov. 30
Posted 4:30 p.m. EST
THEY KEEP FALLING:
Mortgage
rates fell for the fifth week in a row. The 30-year fixed averaged
6.17 percent this week, its lowest level since January.
And bond yields are even
lower today, implying that mortgage rates have dropped even lower,
too. The yield on the 10-year Treasury was 4.46 percent this afternoon,
down from Wednesday's 4.51 percent.
HIRING AN AGENT: Let's
say you live in a buyer's market. A really bad one, like where I
live, with a five-year supply of houses on the market. You want
to hire an agent who will get that house sold before you grow old.
Read my article today, six
keys to finding an agent.
PRICES UP?: OFHEO,
a government agency whose name is too long to type (AGAWNITLTT), says house
prices went up in the third quarter. The agency says prices
nationally went up 7.7 percent in the 12 months that ended in September.
SANGUINE POOCH: Not
long ago, I stumbled upon a strange blog about Arizona real estate
called Bloodhoundblog. Now it has turned into a group blog with
a broader geographic reach. It remains strange.
The weird thing about Bloodhoundblog is that the bloggers
seem so angry and unhappy. I check it every few days out of morbid curiosity, like a kid exploring a burned-out house in
the neighborhood.
Read this
post and see what I mean. On the surface, the guy seems awfully
impressed with himself. But I think he's crying for help.
I hope I'm not stirring up an ant's nest. Then again,
I sorta hope I am. Sorta. Kinda.
FREE CREDIT REPORTS:
Lew Sichelman, unlike the Bloodhoundblog gang, always seems happy.
He's great fun to be around, and he's one of the best real estate
writers around, him and Ken Harney of The Washington Post. This
article of his isn't a gut-buster, but it's important -- it
tells you how to get your annual free credit report.
Tuesday, Nov. 28
Posted 4:30 p.m. EST
DOWN JUST A LITTLE:
Treasury yields have fallen a bit today, thanks partly to a decline
in consumer confidence and the continuing rise in housing inventories.
When consumers are feeling
glum during the holiday season, and when home buyers are sitting
back, waiting for house prices to fall even further, you have the
conditions for a gradual decrease in interest rates. And that's
what happened.
In
the 11 days since I last posted (busy, then some time off), the yield on the 10-year
Treasury has dropped 14 basis points -- about an eighth of a percentage point.
Today the 10-year yield has fallen 4 basis points, to 4.5 percent. On Oct. 23,
it was 4.83 percent. STALE HOUSES:
The National Association of Realtors released its report of October existing home
sales today, and spun some bad news as good news. "Sales of existing homes
held steady with a modest gain last month, another indicator that the housing
market is transitioning into a more normal market in contrast with unsustainable
activity last year," the NAR said in a news release. Total
existing-home sales rose 0.5 percent compared to September. But that's probably
the least relevant statistic. Here's a more pertinent one: Sales this October
were 11.5 percent below sales in October 2005. Homes were sold at a seasonally
adjusted annual rate of 6.24 million units this October. Quoth
David Lereah, the Realtors' chief economist: "The present level of home sales
demonstrates some confidence in the market, but sales are lower than sustainable
due to psychological factors." Does that mean he thinks
people are crazy for not buying more houses? The Realtors'
president, Pat Vredevoogd Combs, says, "sellers are cutting their price enough
to encourage sales." Whether you consider that good or bad news depends on
whether you're trying to buy or sell. That brings up the issue
of prices. Half of the homes that were resold in October cost more than $221,000,
compared to a median price of $229,000 in October 2005. That's a 3.5 percent decline
in prices. Bad news if you're selling, and sort-of-good, sort-of-bad news if you're
a buyer. Why the ambiguity? Because if prices are falling, why not wait? Even
if you're eager to own your own house for the first time, you're reluctantly thinking
that maybe it would be better to wait a while. The most important
stat has to do with inventories. At the end of October, there were 3.85 million
homes available for resale. At the current sales pace, it would take 7.4 months
to sell those houses. A 7.4-month inventory is definitely a buyer's market. Economist
Joel Naroff says: "The housing market is far from the bottom, not with the
incredibly high inventory of unsold homes. Sellers will have to overcome their
state of denial and start dropping prices even more to clear this market. And
once that happens, we will then have to convince buyers that prices have stopped
falling. We are a long way from that point." JUMBO
SITS STILL: The conforming mortgage limit -- the dividing line between
conforming mortgages and jumbo loans -- will remain unchanged in 2007, the feds
announced today. It will stay $417,000 for a single-family house. My article about
it will be posted on Bankrate on Wednesday morning, if you're burning to know
all the dirty details.
Friday,
Nov. 17
Posted 11:45
a.m. EST
BOUNCING
AROUND: Treasury yields have gone up, down, up, up,
down this week. That makes today a down. The yield on the 10-year Treasury is
4.64 percent this morning, down from Thursday's 4.66 percent closing yield. It's
up 6 basis points compared to last Friday.
Yields have dropped because housing construction dropped
off a cliff in October. Home construction is down 27 percent from a year ago.
The ripple effects can slow other sectors of the economy, making inflation less
of a concern. When the prospects of inflation drop, so do bond yields and long-term
mortgage rates. CREDIT SCORE FOLLIES:
A Bankrate reader named Chantale tells financial advice columnist Dr. Don that
TransUnion and Experian now sell
only the new VantageScore, which is on a different scale than the FICO score
that mortgage lenders use. Chantale's middle VantageScore was 668. Now,
if you mistakenly believe that the VantageScore and FICO score are on the same
scale, a 668 isn't bad. You can qualify for a par-rate loan with that score. But
Vantage and FICO are on different scales. They're like Celsius and Fahrenheit.
When Chantale paid for her credit scores, it was like she phoned someone and asked
the temperature outside, and was told it's 50 degrees. So she donned a sweater,
stepped outside and discovered too late that it was 50 degrees Celsius. That's
122 degrees Fahrenheit. Not sweater weather. Chantale's middle
FICO score was 574, which puts her into higher-rate subprime territory. Have
you run into this discrepancy when applying for a mortgage? If so, gimme a jingle
at hlewis@bankrate.com. MILTON
FRIEDMAN: Economist Milton Friedman died Thursday. "Friedman won the
Nobel prize in economics in 1976 for his path-breaking work that served as an
effective counterweight to the other economic colossus of the century, John Maynard
Keynes," Rex Nutting writes.
Keynes offered ideas that helped lift us out of the Great
Depression, and Friedman offered ideas that dropped us out of the stagflation
era of the 1970s. Friedman wielded a huge influence on Alan Greenspan, and his
monetary philosophy is accepted by the members of the Federal Reserve's rate-setting
committee. Friedman is practically synonymous with the University
of Chicago's influential economics department. A professor there writes this
affectionate appreciation in The New York Times. Jonathan
J. Miller unearths a wonderful exchange
Friedman had with an interviewer in which the economist said: "Housing and
Urban Development has done a enormous amount of harm. My god, if you think of
the way in which they've destroyed parts of cities under the rubric of eliminating
slums." Was he ever right about that! This neighborhood
in Toledo looks rather desolate now, but you should have seen it in the early
1990s, when it looked much worse -- a huge expanse of overgrown lots, with houses
here and there, like trees on the Great Plains. It had been a vibrant, if poor,
neighborhood until the early 1970s, when bulldozers mowed everything down in the
name of urban renewal. Government planning at its most arrogant.
A couple of blogs let readers memorialize (and criticize)
Friedman in the comments: Berkeley economics professor Brad
DeLong and economists and "Freakonomics"
authors Steven D. Levitt and Stephen J. Dubner. All interesting
reading. I would classify Levitt and Dubner as ardent admirers of
Friedman's and DeLong as more of a skeptic. But I'm unsure whether
they would accept those simplistic characterizations unchallenged.
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