Housing Market and Mortgage News

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National average mortgage rates declined from the previous week to 4.72% in the latest Primary Mortgage Market Survey released weekly by Freddie Mac on June 10th.  Rates have recorded weekly declines in seven out of the past nine weeks.  Fixed mortgage rates are now just slightly higher than the all-time low of 4.71% set in December 2009.

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10 Big Impact Low Cost “Renovations”

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Do you have some—but not unlimited—cash for upgrades? Here are budget-minded enhancements to make your home stand out from the competition.


1. Tidy up kitchen cabinets.

“Potential buyers do open kitchen cabinets and look inside,” says Morrissey. “Home owners can add rollout organizing trays so when buyers peek in, they feel like there’s lots of room for their stuff.”

2. Add or replace tile.

“By retiling very inexpensively, you make a room look way cleaner that it was,” says Javier Zuluaga, owner of Home Repairs and Remodeling LLC in Tempe, Ariz. “Every city has stores that offer $1 to $2 tile, so home owners have to pay only for the low-cost tile and labor to replace a dated backsplash or add a new one. We also use inexpensive tile to upgrade bathrooms.”

3. Add a breakfast bar.

When a wall separates a kitchen from a family room, suggest cutting out an opening to create a breakfast bar. “In one home, there was a cutout in the wall between the kitchen and living room,” explains Matthew Quinn, a sales associate at Quinn’s Realty & Estate Services in Falls Church, Va., who handles estate and real estate sales for family members whose loved ones have passed away. “We left the structure of the cutout, added an oversized granite breakfast bar, and put chairs in front of it. That cost about $600.”

4. Install granite tile instead of a slab.

“Everybody is hot for granite kitchen countertops, but that can be a $5,000 upgrade,” says John Wilder, a general contractor and owner of Fence and Deck Doctor in New Castle, Ind. “Instead, home owners can put in 12-inch granite tiles for about $300 in materials and get very high impact for little money.”

5. Freshen up a bathroom without retiling.

“With a dated bathroom, I recommend putting in a new medicine cabinet for $100 to $150, light fixtures for about $100, a faucet for $50 to $75, and a vanity for $200 to $300,” says Wilder. “And instead of replacing the tile, the existing grout can be lightly scraped and regrouted, which leaves a haze that can be buffed out and will make the tile look brand new. Also install glass shower doors. A French door adds a lot of panache and elegance for $250, and people will notice the door, not the tile. With all that, you’ve done a bathroom remodel for $1,000 to $2,000.”

6. Freshen up the basement.

“If home owners have cement block or poured concrete walls in the basement, suggest they have a contractor fill in cracks with hydraulic cement and then paint with waterproofing paint,” recommends Wilder. “They can then add a top coat to add color. They can also paint the basement floor with a good floor paint, which spiffs it up. The basement may not be finished, but it’s no longer a damp dungeon.”

7. Add a room.

Look for large spaces that can be enclosed to create a new bedroom for just the price of creating a wall. “One time, we closed off a half-wall to an office and added a door to the other side of the room, thus creating another bedroom,” says Quinn. “That $400 procedure, which took a contractor one day, netted about $40,000 in the sales price.” Zuluaga has also added bedrooms inexpensively. “In a two-bedroom house, there was an archway that led to a third room that was used as a den,” he explains. “It had a dry bar where there would have been a closet, so we took out the dry bar and created a closet so the owners had a third bedroom.”

8. Spruce up cabinet fronts.

Suggest home owners update tired-looking kitchen cabinets. Reconditioning is the least expensive move for under $1,000. “If the wood is starting to look shabby from use or contaminants in the air, we take out the nicks and scratches, recondition it with oil, and put new hardware on,” explains Heidi Morrissey, vice president of marketing and sales at Kitchen Tune-Up in Aberdeen, S.D. For $1,500 to $4,000, owners can replace the cabinet doors and drawer fronts, and for $4,000 to $12,000, they can have all the cabinets refaced. “With refacing, owners can change the color of the cabinets by replacing the door and having a new skin put on the boxes,” says Morrissey. “If they have oak cabinets today, they can have cherry the next day.”

9. Replace light fixtures.

“In a foyer and in bathrooms and kitchens,” says Wilder, “replacing overhead light fixtures provides a lot of pop for a little money.” If the kitchen has track lighting, Zuluaga suggests the home owner spend $450 to $600 to have an electrician replace it with recessed canned lights on a dimmer switch to add ambience. For about $700, Zuluaga also suggests installing pendant lights over a kitchen island or peninsula.

10. Tech-up the garage.

“Sometimes we replace the garage door opener with a remote touchpad entry system,” says Zuluaga. “That costs about $425 and makes it look like a high-end system.”

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Thinking of That Remodel??

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Good News From Hanley Wood Market Review Dec. 11th

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Holiday Consumer Cheer
Consumers became more optimistic and loosened up their wallets in November which helped boost retail sales figures and consumer sentiment data released on Friday.  U.S. retail sales jumped 1.3% in November driven by a strong start to the holiday shopping season.  Retail sales in November posted its strongest monthly gain since August when retail sales surged 2.4% due to the government’s Cash for Clunkers program.  It will be important to watch December retail sales figures when they are released next month to see if there was sustained consumer activity throughout the holiday shopping season or if November retail sales were just boosted by bargain-hunters capitalizing on early holiday deals.  The University of Michigan/Reuters Index showed consumer sentiment increasing to its highest level since September which enforces the notion that consumer strength has reemerged.
Generally positive economic data provided support for stocks over the past week.  Although initial weekly unemployment claims reported a surprise increase on Thursday, most of the economic data released in a relatively quiet week have been good.  The Commerce Department reported on Thursday that the trade gap was narrowed to $32.9 billion in October due to a rise in exports which benefitted from a weaker dollar.  The broader S&P 500 index is on pace to close higher for the week, up a marginal 0.4% to 1,106 in early afternoon trading on Friday.

The Economy
The Commerce Department reported on Friday that November retail sales increased 1.3% which is the strongest increase in sales since August.  Retail sales also posted a 1.9% increase from November of last year which is its first year-over-year gain since August 2008.  Auto sales increased 1.6% while retail sales excluding automobile sales rose 1.2% which is its largest gain since January.
The University of Michigan/Reuters Index for consumer sentiment jumped 8.9% in December to a reading of 73.4 from 67.4 in November.  This is the highest reading for the index since September.  Consumer sentiment regarding the current economy increased to a reading of 79.1from 68.8, which is the highest it has been since April 2008.
Initial unemployment claims posted an unexpected rise this past week by 17,000 to a seasonally-adjusted figure of 474,000.  Initial weekly unemployment claims have fallen in the past five consecutive weeks before this week’s increase.

Housing Market
National average mortgage rates increased from the previous week to 4.81% in the latest Primary Mortgage Market Survey released weekly by Freddie Mac on December 10th.  This was the first weekly increase in average fixed-rates since the beginning of November.  Rates last week were at their lowest levels since Freddie Mac started the survey in 1971.  This is also the sixth straight week that fixed-rates have averaged lower than 5.0%.  In the week ending December 4th, the MBA’s seasonally-adjusted purchase index increased 4.0% from the previous week but was still down 16.3% compared to the same time last year.  This was the third consecutive weekly gain for purchase applications which have been unseasonably high due to the extended homebuyer tax credit and record-low mortgage rates.
New home sales rebounded in October after posting its first monthly decline since March in September.  Seasonally-adjusted new home sales increased 6.2% from the previous month to an annual rate of 430,000 units.  New home sales for the previous three months were also revised higher by 7,000 units.  The seasonally-adjusted annual rate of new home sales is at its highest levels since September 2008.
In October, the median new home price increased to $212,200 from an upwardly revised figure of $210,700 in September.  Median new home prices are up 0.7% from the previous month but still 0.5% lower than they were this time last year.  The median new home price has now recorded ten straight months of year-over-year declines.  Competition from lower priced existing homes along with foreclosures and short sales have dragged on new home prices.
In October, new home inventories declined to 240,000 from a September figure of 252,000 on a non-seasonally adjusted basis.  Seasonally-adjusted inventory of unsold new homes have declined for 30 straight months to 239,000 units.  Seasonally-adjusted months of new home inventory dropped to 6.7% in October which is the lowest it has been since December 2006.
Existing home sales in October jumped due to the anticipated expiration of the original homebuyer tax credit.  The seasonally-adjusted annual rate of total existing homes sold surged 10.1% in October to 6.1 million units.  Existing single-family home sales increased 9.7% from last month to 5,330,000 units while condo and co-op sales were up 13.2% from last month to 770,000 units.  Existing home sales are at their highest annual rate since March 2007.
The median existing home price in October declined to $173,100 from $176,000 in September.  This is the fourth straight month that existing home prices have declined and the lowest they have been since April.

Existing home inventory declined for the third straight month in October, falling 3.67% to a preliminary 3,574,000 units from an upwardly revised 3,710,000 units in September.  This is the lowest level of existing home inventory on the market since January 2007.  Months of existing home inventory dropped significantly due to a jump in sales activity along with the drawdown in units for sale. At the current sales pace, there are 7.0 months of supply of existing homes on the market compared to 8.0 months in September.  The market is approaching the 5-6 months supply of inventory level that is considered typical in a healthy housing environment.
Pending home sales rose for the ninth straight month in October, according to the National Association of Realtors.  The trade group’s Pending Home Sales Index, which is a forward-looking indicator based on sales contracts in October, increased 3.7% to a reading of 114.1.  The index is at its highest levels since March 2006.

For market-level data and analysis please visit our website at http://www.hwmarketintelligence.com.

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Mortgages to Help Make Your Home Energy Efficient

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These Mortgages Are Efficient

If you’ve been putting off making energy-efficient upgrades to your home because you are worried about the cost and think you can’t afford them, now is the time to stop procrastinating and take advantage of the energy-efficient mortgage (EEM) program and a new tax credit for upgrades.

What Is an EEM?

>> An EEM helps home buyers or homeowners save money on utility bills by enabling them to finance the cost of adding energyefficiency features to new or existing homes as part of their Federal Housing Administration (FHA)-insured home purchase or refinancing mortgage.

EEMs are one of the most beneficial and under-utilized programs that a homeowner can capitalize on in today’s market. Although they have been around since the ’80s, their use receded when subprime loans took the stage, explains Jana Maddux, program manager for California Home Energy Efficiency Rating Services (CHEERS ® ). “This is the best kept industry secret.”

Why Now?

>> Recent developments make this the best time for homeowners to give serious thought to making the upgrades that will lower utility bills while increasing the value of the home. Earlier, the maximum amount the FHA allowed for upgrades was $8,000. That stipulation was recently modified, so now the maximum amount of the portion of the EEM for energy improvements is to be the lesser of 5 percent of the value of the property or:

115 percent of the median area price of a single family dwelling; or  150 percent of the conforming Freddie Mac limit.

Also, under the stimulus plan, upgrades are eligible for a tax credit of 30 percent of qualifying costs up to $1,500, but this is only through 2010.

Who Offers It and How Can You Qualify?

>> EEMs are sponsored by federally insured mortgage programs (FHA and Veterans Affairs) and the conventional secondary mortgage market (Fannie Mae and Freddie Mac). Lenders can offer conventional EEMs, FHA EEMs, or VA EEMs. For instance, anyone eligible for the FHA section 203(b) mortgage insurance can apply for an EEM, once the cost of improvements and estimated savings are determined by a home energy-rating system consultant.

The first step is to have a CHEERS® rater or another approved energy rater complete an analysis of your home and obtain a report, which you then submit to the lender. The main criterion is that your savings after upgrades should exceed their cost.

“The CHEERS® report will show the existing condition of the house after conducting several tests, all of which determine how much air leakage there is and the estimated savings and future utility bills after improvements are made,” Maddux says. Raters are independent, and some may also be able to coordinate the entire upgrade process for you, for a fee.

Which Upgrades Qualify?

>> Insulation, new furnaces, air-conditioning and heating units, dual-pane windows, duct system and air leakage repairs, water heaters, and lighting.

More Info:

ENERGY STAR: www.energystar.gov/

To find out more about the FHA requirements and search for EEMs: http://portal.hud.gov/.

For an FHA lender list: www.hud.gov/ll/code/llslcrit.cfm.

Padma Nagappan is a freelance real estate writer.

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New Rules for Appraisals

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Real estate appraisals aren’t new. Indeed, lenders have long required an appraiser’s opinion of a home’s value before they will approve a loan for a buyer to purchase that home. What is new, however, is that the rules that dictate how lenders order home appraisals have changed significantly this year.

The new rules, known as the Home Valuation Code of Conduct, or “HVCC,” became effective May 1, 2009, and apply to most, though not all, mortgages. The rules are in flux, and at press time, it appears HVCC will apply to most FHA loans, effective Jan. 1, 2010. At press time, HVCC did not apply to VA loans. The rules were intended to reduce appraisal fraud and help ensure that appraisers aren’t subjected to improper pressures to inflate the home’s value.

Accurate and credible appraisals are certainly a laudable goal, yet the new rules also have resulted in some unintended consequences.

Here’s what you need to know:

Slow and Low Appraisals

One such consequence has been that appraisals now may take up to a week longer to be ordered and completed. Consequently, if your home purchase contract includes an appraisal contingency, you may want to allow more time for the buyer to approve the appraisal and check off that contingency. Buyers should expect to pay as much as $100 more for an appraisal than may have been customary before the new rules became effective.

Another consequence has been that appraisers have become more conservative in their home valuations. In some cases, the appraiser may even believe the home is worth less than the agreed-upon sales price.

If that happens, you should understand that the appraised value of a property isn’t necessarily the same as the market value since the appraisal is done for the purposes of the buyer’s loan, not the home sale. You also should be aware that if the appraised value is lower than the sales price, the buyer may choose to exit the transaction through the appraisal contingency or the buyer and seller may want to renegotiate the sales price.

A so-called “low appraisal” technically can be appealed; however, such appeals rarely result in a higher valuation.

The rules that established HVCC required that an Independent Valuation Protection Institute be established to maintain the integrity of HVCC. Appraisers can contact the Independent Valuation Protection Institute if they feel pressured, threatened, or bribed into situations that compromise their independent valuation(s) and compliance with HVCC. Consumers also can contact this institute; however, at press time, this institution was not established and an interim process for handling complaints has not been established. (www.independentvaluation-protection-institute.org/).

Buyers and sellers are both well advised to discuss the implications of these new rules with their REALTOR ® .

Learn More

Home Valuation Code of Conduct: www.freddiemac.com/singlefamily/pdf/122308_valuationcodeofconduct.pdf

• Freddie Mac HVCC Fact Sheet: www.freddiemac.com/singlefamily/home_valuation.html

• Federal Housing Finance Agency HVCC Notice: www.fhfa.gov/webfiles/14611/ hvcc_NOTICE_7_22_09F.pdf

• NATIONAL ASSOCIATION OF REALTORS® HVCC Resources: www.realtor. org/government_affairs/gapublic/gses_hvcc_announced

• California Office of Real Estate Appraisers: www.orea.ca.gov/

Marcie Geffner is a freelance real estate writer.

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Promising Financial News From Last Week

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Stocks Swell on Monetary Promises
Last weekend, the G20 stated that they would continue to support global economies which caused stocks to jump earlier in the week.  The G20 finance ministers said they would maintain their current plan to stimulate their respective economies with emergency support initiatives although many nations are already recovering.  The plan to keep pumping money into the global system in order to spark growth is seen as a positive sign for businesses by most equity markets, and shows the commitment of the world’s largest economies to the current monetary policy strategy.
The Dow Jones Industrial Average was up roughly 1% in early afternoon trading on Friday, reaching its highest levels since October 2008.  Positive earnings reports and lower crude oil prices helped to offset weaker economic data on Friday. The Crude December contract was down about 0.4% at $76.67/barrel in the early afternoon.  Some cause for caution still remains, with the University of Michigan/Reuters consumer sentiment index declining from last month, which raises concern about the consumer side of the economic recovery and the prospects for retailers in the upcoming holiday shopping season.
Investors continue to hedge against inflation and devaluation of the U.S. Dollar by driving up the price of precious metals.  The price of gold is up over 25% while the price of silver has jumped nearly 60% since the beginning of the year.  Gold prices traded slightly higher on Friday afternoon to $1,116/ounce.
While precious metals are a traditional place to park capital to offset expected inflation by institutional investors, the current sustained plateau of demand seems broader based of late, with a larger amount of physical metal purchases by new investors both in the U.S. and abroad.  Additionally, the recent purchase of 200 metric tons of gold by India’s central bank from the IMF, along with the large Canadian miner Barrick Gold painfully unwinding its massive book of hedges, both suggest that the price of gold will likely continue to rise in the near term.

The Economy
The University of Michigan/Reuters consumer sentiment index fell to a reading of 66.0 from 70.6 in October.  This is the second straight month that the reading has declined which sparks concern as to whether U.S. consumers are onboard with the supposedly ongoing recovery.  Rising unemployment and weak wage growth has crimped the U.S. consumer which may hurt holiday shopping this year.
Initial unemployment claims continued to decline this week which gives optimism that things are stabilizing on the labor front.  The Labor Department reported on Thursday that initial claims for unemployment insurance fell by 12,000 to 502,000 in the week ending November 7 which is the lowest since January.

Housing Market
National average mortgage rates declined from the previous week to 4.91% in the latest Primary Mortgage Market Survey released weekly by Freddie Mac on November 12th.  This is the second straight week that mortgage rates have declined and the lowest they have been in a month.  Fixed mortgage rates continue to sit at historically low levels.  In the week ending November 6th, the MBA’s seasonally-adjusted purchase index dropped 11.3% from the previous week and was down 22.4% compared to the same time last year.  This is the fifth straight week that purchase applications have declined and the lowest the purchase index has been since late December 2000.

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