- Mortgage rates declined

August 9, 2007

Mortgage ratesdeclined again during the week ended August 2 according to the Weekly Mortgage Market Survey conducted by Freddie Mac and the week ended August 3 per the Weekly Mortgage Applications Survey released by the Mortgage Bankers Association.

FreddieMac's report indicted that the 30-year fixed-rate mortgage (FRM) decreased from 6.69 percent with 0.4 point to 6.68 percent with 0.3 point. This is 5 basis points higher than the 30-year interest rate one year ago.

The 15-year FRM declined 5 basis points to 6.32 percent with 0.3 point. Last week fees and points averaged 0.4. The rate is also 5 basis points higher than the same week in 2006.

The five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 6.29 percent this week, down from last week when it averaged 6.30 percent. Fees and points increased from 0.4 to 0.5. A year ago, the 5-year ARM averaged 6.27 percent.

One-year Treasury-indexed ARMs carried an average contract interest rate of 5.59 percent with 0.5 point. Last week it averaged 5.69 percent also with 0.5 point. At this time last year, the 1-year ARM averaged 5.69 percent.

Frank Nothaft, Freddie Mac vice president and chief economist speculated that "Market investors seeking safety from the subprime fallout bought Treasury securities, pushing bond yields down and allowing mortgage rates to drift a bit lower. Sales of new and existing homes fell in June, and prices continue to weaken, especially in the markets that had recorded the strongest gains over the past few years. There are early signs, however, that the market is stabilizing. As construction spending levels off, the drag on GDP growth will continue to diminish. Meanwhile, the 5 percent rise in pending home sales in June suggests that sales in July and August may reverse last month's decline."

PerhapsNothaft is reserving any comment on the brutal fallout in the subprime and alt-A markets, particularly the sudden demise of American Home Mortgage, for the Freddie Mac August forecast due out later on Wednesday. There certainly needs to be something said beyond the rather innocuous remark about investors seeking safety. In fact, it would be nice to know that the two GSE's which control so much of the residential purchasing in this country are doing some contingency planning in the midst of the current meltdown.

Meanwhile, some interesting figures have been released by the Mortgage Bankers Association which has announced that mortgage application activity increased 8.1 percent on a seasonally adjusted basis from the previous week and 7.7 percent when unadjusted. The activity is 18.0 percent higher than one year ago.

Ourfirst reaction on hearing about this relatively steep increase in applications was to wonder how many of the applications were approved, but Alex Baron, a housing analyst for the Agency Trading Group, speculated in a CNBC interview with Erin Burnett that this increase in applications is illusory because potential borrowers are filing multiple applications in the hope of finding a willing lender in the current credit crunched market.

Applications to refinance were also up, representing 39.9 percent of total applications activity compared to 39.4 the previous week. Applications for ARMS increased slightly to 22.5 percent from 22.3 the previous week.

MBA'ssurvey of rates also noted average decreases; the 30-year FRM averaged 6.41 percent with 1.62 points including the origination fee. Last week the 30-year averaged 6.50 with 1.66 points.

15-year fixed-rate mortgages decreased to 6.16 from 6.20 percent, with points decreasing to 1.18 from 1.30 while the average contract interest rate for one-year ARMs decreased to 5.69 from 5.73 percent, with points decreasing to 1.09 from 1.12. All rate figures are for 80 percent loan to value originations.

- Pending Home Sales:

A Little Good News In A Grim Time  August 3, 2007

We don't usually cover the monthly report on pending home sales issued by the National Association of Realtors® (NAR), concentrating instead on NAR and the Census Bureau's other reports on housing permits and starts and the completed sales of new and of existing homes. However, with good news in such short supply lately - perhaps the understatement of the year - it seems worth talking about the smidgen of sunshine that accompanied the pending sales report for June.

The Pending Home Sales Index, based on residential home contracts signed in June was 102.4, 5 percent higher than the downwardly revised May index of 97.5. The index was still lagging behind the 112.0 pace in June, 2006 by 8.6 percent, but the increase over May was the biggest jump in more than three year, since March 2004 pending sales were 6.1 percent higher than those in February 2004.

The index has a baseline established in 2001, the first year pending sales were examined, based on the average of contract activity that year. That level was designated at 100 in the index. Coincidentally 2001 was also the first of five consecutive years when existing home sales set records.

The official NAR website states that annual changes in the index are more closely related to actual market performance than are month-to-month comparisons but as the relatively new index matures and seasonal adjustment factors are refined, the month-to-month comparisons will become more meaningful.

The Index increased 8.6 percent to 103.6 in the Western region in June but declined 5.5 percent year-over-year. In the Northeast the index was 96.0, 2.4 percent lower than last year but 3.1 percent higher than in May. The South had an index of 111.6 which was 4.7 percent above May figures but 12.7 percent below one year ago. The Midwest increased 3.5 percent to 92.5 but was 8.2 percent lower than June 2006.

Lawrence Yun, NAR senior economist, said that it was especially encouraging that all four regions saw increases. "However, it is too early to say if home sales have already passed bottom. Still, major declines in home sales are likely to have occurred already and further declines, if any, are likely to be modest given the accumulating pent-up demand."

The index is a leading indicator for the housing sector. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing. Pending sales for June will represent a subset of the actual sales of existing homes that close in July. NAR will release those sales figures near the end of this month.

- Knowledge is power

August, 2007

When it comes to choosing a home warranty provider Here are some important things to consider when comparing home warranty providers: Coverage: A good comprehensive home warranty contract will include the most important items such as: heating, cooling, plumbing, water heater, electrical and certain major built-in kitchen appliances. If you are presented with an unusually low price, odds are the contract is not including one or more of these items. In addition to the above items, HWA™ includes in certain base programs other items that have high frequency repair needs that might not be covered under other companies’ warranties, such as: Refrigerators, Washer and Dryers, Garage Door Systems, Whirlpool Bath Tubs, Exhaust & Ceiling Fans, Burglar and Fire Alarm Systems, Central Vacuums, and much more. Be wary of warranty company web sites trying to compare their coverage to other warranty providers’ coverage. Often, they only note the items that they do cover, while leaving out the items that others cover but that they themselves do not cover. Most often, the information about the competitor is incorrect. It is best to take the time and make your own comparisons. All good home warranty providers will have a simple easy to read web page illustrating all of the major items of coverage, as well as a sample contract so that you and your clients can read the fine print! Service & Service Technician Network: You want a warranty company whose core business is underwriting, selling and servicing home warranties. Be wary of warranty providers that don’t administer their own service requests. Remember, this is a “service contract”. Would your clients really want a contract from a Company that sells them a service contract, but does not administer and approve its customers’ service requests? We’ve all been saddled with call centers where the people answering your clients’ calls have no vested interest in retaining them as a customer. A home warranty company needs to have developed a reliable service technician network. The service network should be supported by best practices contracts, verification of certificates of insurance, assurance of the necessary and applicable licenses, etc. If a warranty company uses a 3rd party administrator, then it is likely utilizing the 3rd party administrator’s service technician network. How can you find out if a home warranty company administers its own service request? First, call and ask. If you suspect they are not being truthful, it may note in its contract if it out sources its service to a 3rd Party Administrator. HWA administers its own contracts. HWA also has developed a reliable service technician network, requiring the service companies to commit to a “best practices contract”, provide proof of insurance, and proper licensing where applicable. HWA tries to provide technicians local to your area. These technicians service you with the intent of earning your future business and keeping your clients as a customer for as long as they live in the area. HWA always provides your clients with the name, address, and phone number of the chosen service technician. We also provide them with an email description of the service request so that they and the technician receive the same consistent information. HWA also sends each customer an email survey for each service request. We utilize that information to make sure our customer service personnel are treating them right, and that the service technicians are performing to their satisfaction. Cost: Please remember - You get what you pay for. If a home warranty price seems extremely low, there’s usually a reason behind the low ball pricing. Check the coverage, check the service fee, check the limitations, and ask about how service requests will be handled. A good home warranty provider will allow payment by check, credit card, and/or automatic checking account debit. A good warranty provider will also allow the option of paying the balance all at once or in equal installments over 3 months. Multiple pay period fees should be accurately and prominently represented. Replacements: Like-replacements of appliances should be provided directly from major brand-name manufacturers such as GE, Carrier, etc. HWA™ purchases replacement equipment directly from such major manufacturers. Rust & Corrosion Limitations: Rust & Corrosion limitations should be no more than the first 30 days of the contract period (this often helps to minimize pre-existing/proper working order disputes). Be wary of a company that excludes rust & corrosion during the entire contract period. Less reliable warranty companies utilize this to reject claims during the entire warranty period.

- How To Get The Best Price In A Slowing Market

August, 2007

Reports across the country suggest that real estate in most areas of the country is no longer appreciating at the rates seen in the past few years. In fact, the National Association of Realtors reports that nationwide August existing home prices were actually down 1.7 percent from a year earlier. None of this is terrible or awful unless you bought last year and must now sell. Those who have owned for a few years are well ahead in most communities. Consider that in 2000, according to the National Association of Realtors, the typical existing home sold for $111,800 versus $225,000 in August. So, what's the best approach to selling in today's market? Consider these five core points. 1. Buyers are scarce relative to home supply. While sellers have called the shots for the past few years, that's no longer the case in most markets. No problem -- adjust. Make your home the most attractive, best priced property in the neighborhood. While pre-market prep could have been ignored in the recent past, today you have to paint, clean-up and repair before offering a home for sale. An MLS photo that shows a home with a lousy roof is evidence of a property that likely will not sell quickly or at full price. 2. Remember that cash is still an issue. While home prices may have slipped a touch, real estate continues to be hugely expensive for most buyers, especially first-timers who lack equity from a prior sale. Rather than reducing prices, offer to pay for buyer closing costs, thus lowering out-of-pocket purchaser cash requirements. 3. Choose the right broker. When comparing local brokers, look for such markers as recent success in your neighborhood, a high level of local activity and professional education. In a slow market picking the right listing broker becomes especially important. Why? Because a broker with a strong local history is known and respected: If he or she offers a property at a given price that value is likely to be accepted as at least within the realm of reason. As an example, last year we sold a property that was unlike virtually all nearby properties in terms of size (smaller house), lot (much bigger) and age (older than most). In other words, not an easy house to sell because there were no practical comparables. The broker -- who had sold properties worth some $200 million in neighborhood real estate over the years -- suggested a sale price which turned out to be exactly on target. Alternatively, let's say we used a less experienced broker, someone who was not an authority figure. The property might have sold for less because another broker might have been less credible. In effect, one of the values of using an experienced listing broker is to readily establish believable prices and terms, an important matter in a buyer's market. 4. Numbers Count. Real estate sales are a by-product of exposure. If the odds of selling a home are 100 to one, if it takes 100 inquiries and visits to sell a property, then the quicker you get those inquires the better. No less important, if you can get more than 100 inquiries the odds of getting a top price and terms improve. This means that when considering a listing broker you need to review the marketing plan with care. What, exactly is the broker going to do in terms of advertising, open houses, MLS placements, online marketing, broker relations, etc? Remember that the marketing plan which works for one property may not work for another. Plans need to be specific to local markets, to particular homes and for current market conditions. The thinking that seemed so good last year may be inappropriate this year. 5. It's a business deal. With some frequency I see homes priced for reasons that won't work: • The property must sell for this price because I need $400,000 for the next home. The truth: Prices are established by the marketplace, not seller needs. • Similar homes in a different neighborhood command a particular price, therefore my house should sell at the same price. The truth: What happens elsewhere is irrelevant. What happens in the immediate neighborhood is what counts. • The Flombacks got $800,00 for their home so I should be getting at least that much. The truth: This is not about the Flombacks and should not be about seller ego. The real issue is about bricks and mortar. The Flombacks may have an objectively better house. • The buyer's offer requires that we leave the washer and dryer -- it's an insult. The truth: Homes reflect our psychological identity, who we are, our social status, etc. But the marketplace reflects supply and demand. Leaving a washer and dryer may be a lot cheaper than not getting a sale for months on end. • This home would have sold for $500,000 last August and we will not accept a lower price. The truth: It's not last August. It's now and the marketplace reflects current supply and demand. Sellers can be successful in any market so go forth and market -- but do it right.