Mortgage Relief, Refinance Advice and Opinions, and More…

Let’s Look at the News of the Week and Hot Tops Related to You.  Information taken from the NAR’s most recent economic report.

Mortgage Relief Plans

• President Obama will announce plans on how homeowners will be able to modify mortgages to more manageable plans. This plan will lessen foreclosures and lower inventory, which in turn will help stabilize home prices.
• The President is tapping into $50 to $75 billion in TARP funds to help homeowners modify distressed mortgages.
• There are roughly 7 to 9 million underwater homeowners who have consistently been making mortgage payments on time. The mortgage relief should ideally be expanded to include these homeowners in order to change the incentive structure of not wanting to turn in the keys from being underwater.
• It is unclear if TARP funds will be applied to lower mortgage rates for all consumers. Low mortgage rates will permit more Americans to improve household finances through refinances and bring more buyers back into the market, which will help absorb inventory and quickly stabilize home prices. People will view this broader plan as an equal opportunity program rather than a targeted plan where some may benefit and others do not.

Mortgage Applications

• Mortgage applications for refinance soared with a 64 percent rise last week after some pull back in the prior week. Applications for home purchase also rose but at a modest 9 percent.
• The refinance index of 4472 would correspond to the highest level in the past 12 months aside from the surge experienced in December and January. The purchase index of 257 is on the low side, with activity down by more than 40 percent from February 2008. The rapid fall in applications for a new home purchase is contributing to the decline. The decline in existing home sales has been less severe so it is a bit fuzzy as to why the purchase index has fallen by so much from one year ago.
• This mortgage survey data should be read with care. Many brokers have exited the business or have been consolidated into larger firms. That makes the interpretation of the data less reliable than in the past.

Housing Starts

• Housing starts fell to the lowest ever mark since the data series began in 1950s. Total starts of 466,000 annualized pace in January were down by 56 percent from one year ago. The single-family unit starts were 347,000, down 54 percent.
• In 2005 at the height of the boom, housing starts reached 2.1 million.
• Housing permits, forerunner for starts, also fell implying more declines in housing starts in the upcoming months.
• Falling new home construction is a needed adjustment in the current environment. Inventories of homes for sale are high and this must come down in order for home prices to begin stabilizing.

What does today’s data mean for consumers?

• Everyone needs to check to see if they qualify for re-modifying their home loan(s).  Even if you had done so in the past year, there may be low to “no” closing cost ways in the marketplace to still save hundreds if not thousands off your current loan.
• Home values could begin to stabilize in the second half of the year. Lessening preventable foreclosures and expected rising demand from first-time buyers (due to $8,000 tax credit) will help lower inventory to about 8 months supply in the second half. Good news for Sellers who are looking for more of a balanced market and possible bad news for Buyers who are still looking for a deal.

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