Mortgage Rates Sink to 4 1/2 Year Low

Rates on 30-year fixed rate U.S. mortgage loans fell last week to their lowest point since March of 2004, a more than four and a half year low, according to data from mortgage company Freddie Mac Thursday.

“Following the release of the November employment report, which showed the largest monthly decline in jobs since December 1974, bond yields fell slightly this week allowing fixed-rate mortgage rates room to ease back a little further,” said Frank Nothaft, Freddie Mac vice president and chief economist.

The 30-year fixed rate mortgage carried an average rate of 5.47 percent, excluding points, during the week ended December 11, a drop from 5.53 percent the previous week. At the same time last year, the average rate was 6.11 percent.

Rates on 15-year fixed rate loans also fell, declining to 5.20 percent from 5.33 percent the previous week. One year ago, the average rate on these loans was 5.78 percent. The last time the 15-year mortgage rate was that low was at the beginning of the year, during the week of February 7, 2008, when the average was 5.15 percent.

One-year Treasury-indexed adjustable rate mortgages had an average interest rate of 5.09 percent, an increase from 5.02 percent one week earlier. During the same week of 2007, the average one-year ARM rate was much higher at 5.50 percent.

Things in the mortgage arena remain unstable, leaving the future of interest rates equally volatile, according to Freddie Mac.

“The housing market still hangs in the balance, however,” commented Nothaft. “On a year-over-year basis, after rising in both August and September, pending existing home sales fell 1.0 percent in October, based on figures from the National Association of Realtors®. Meanwhile, conventional mortgage applications for home purchases over the week ending December 5th were up 2.0 percent from four weeks prior, but were still 51 percent below the same period last year, according to the Mortgage Bankers Association.”

3 News Stories Every Homeowner Should Know

During tough financial times, news is king. A simple announcement from the media can instantly send the financial and mortgage markets racing in either direction. As the financial markets continue to adjust to the credit crisis, current and potential homeowners will have to adjust and react immediately as well.

Headline #1: Mortgage Rates Plummet Thanks to the Fed
In late November, an announcement that the Federal Reserve and US Treasury would purchase up to $600 billion in asset-backed securities over the next year or so sent mortgage rates on many programs plunging below 6%. This is a bold step by our federal regulators towards a more stable economy. Not only will this increase the availability of credit, but it should help support the housing and financial markets as well. For new buyers and for homeowners looking to refinance, this is great news – especially borrowers with adjustable-rate mortgages.

Current Homeowners – those who have been on the fence about refinancing should investigate their options quickly. Remember, interest rates are incredibly volatile and extremely susceptible to news events that directly affect the economy, especially in today's marketplace. Whether you're looking to lower your interest rate or hoping to switch into another more stable program, applying now and locking in a lower rate will save you a lot of money. Make sure your mortgage professional has the knowledge and ability to access and follow the performance of mortgage-backed securities in order to get the best mortgage pricing available.

New and First-time Buyers – interest rates near historic lows, home prices at 2003-2004 levels in many markets, and a tax credit up to $7,500 for first-time buyers (anyone who hasn't owned a home in the last three years) all make for a great opportunity to purchase the home of your dreams at a major discount.

Cash-strapped Borrowers – low and no down-payment programs still exist through the government, including Federal Housing Administration (FHA), the Veterans Benefits Administration (VA), and the US Department of Agriculture (USDA).

For FHA loans, the down-payment requirement has increased this year, but it's still only 3.5% which isn't bad for a government-secured mortgage. With a VA loan, 100% financing is available to eligible veterans and, for non-vets, 100% financing is available in many communities through a loan guaranteed by the USDA. It's important to note that VA and USDA loans also do not require monthly mortgage insurance like FHA loans, creating even more savings for these special mortgages. If you're looking to take advantage of today's buyers' market, be sure to ask your mortgage professional about these special programs.

Headline #2: Rescue Program Offers Hope for Homeowners
In Washington, federal rescue and stimulus packages have made headlines for most of 2008. The intent of these programs has been both to stabilize the credit markets and to encourage lending to companies and consumers alike.

For the majority of struggling homeowners, however, these programs offer little relief from declining home prices, increased living expenses, and decreasing incomes.

Legislation passed earlier this year did contain a well-intentioned lending program called Hope for Homeowners (H4H) designed to help homeowners behind on their payments or who owe more on their mortgage than their home is currently worth. The $300 billion program aimed to replace the consumer's old loan with a new one set at 90% of the current value of the home. Lenders would absorb the difference or loss. In return, the consumer would pay higher than normal FHA insurance premiums, agree to share the remaining 10% equity with the government, and to split future appreciation on the home. There are, of course, other restrictions on how the loan should be structured and who qualifies, so talk to your mortgage professional to see if this option is right for your individual goals and needs.

Also, be prepared for some hitches and delays when it comes to H4H. Unfortunately, the program as it stands today is deeply flawed, and may offer very little hope for many distressed homeowners as it is currently applied. The main problem with H4H is that the program was introduced to the marketplace without requiring full participation from lenders. In other words, it is completely voluntary, resulting in a program that just doesn't meet the needs and demands of the homeowners who need it the most.

The Department of Housing and Urban Development (HUD), however, recently made some changes to the program that go into effect in mid-December. These changes are designed to engage (though still not require) more lenders to participate. It's hard to say how these changes will enhance H4H, so be sure to investigate any and all options and alternatives available with your mortgage professional.

Headline #3: Loan Modification Offers Alternatives to Foreclosure
Loan Modification is another "voluntary" program designed to help homeowners facing foreclosure. A favorite of the media, this program seeks to change the terms of a mortgage, including a reduction in the interest rate (permanently and temporarily), an extension in the term of the loan, a reduction in the principal balance, or some combination of the three.

There are two ways a consumer can approach getting his or her mortgage modified. The first is to reach out to the lender directly, detailing the situation and waiting for the lender to offer a plan. The second is to employ a professional to handle the negotiations on his or her behalf. (September 2008).

The primary benefit to employing a professional to assist you with a modification is knowledge and experience. They know what they're doing. A loan modification company or consumer credit company is accustomed to working with lenders to obtain a successful modification. The key for you then is to work with someone skilled in obtaining the best modification for your needs. Be sure to get a referral from your real estate or mortgage professional, or at least someone you know who has successfully gone through the process themselves. Whatever you do, do not be afraid to ask for and check all references because, unfortunately, there are scammers out there looking to take advantage of desperate homeowners during this extremely vulnerable time in their lives.

This doesn't mean you won't pay for the services of a professional. The typical costs for employing a loan modification company could be in the range of $3,000 to $5,000 depending on your situation and if you employ a company to negotiate for you as well. Items that can impact the fee can be the number of loans you need modified and the company you select.

Choosing a consumer credit counseling company may not cost you anything, but the expertise of the people you work with and the outcome itself may not be equal to employing a company that is dedicated solely to mortgage modifications.

One key point to remember is that the lender, while often willing to work with you, always puts its own interests first. This means that, while the lender may be willing to work with you personally to avoid a more substantial loss on its part, the solution offered may not be the best possible scenario available to you. Keep in mind, with a loan modification, you are asking the lender to take a loss, and you can bet that the lender will always try its best to minimize these losses.

Whichever path you choose, timing is of the essence. If you're struggling to make your payments or you've already fallen behind a few months, this is not the time to bury your head in the sand. Communication is the key to your success. This means answering the phone calls and opening up the letters from lenders. It means getting on the phone and calling your lender's loss mitigation department and following any advice they offer.

Unfortunately, accurate statistics are not currently available on the success rate of homeowner-negotiated transactions versus those who utilized the services of paid professionals. The best advice we can offer is to find out the right course of action for your individual needs. You've already taken the first step. You've read this article and you've learned the basic steps you need to take to save your home. Don't wait until it's too late.

Which Cities Will be Strongest During the Economic Crunch?

According to Bizjournals, they will be:

Las Vegas, NV
Raleigh, NC
Cape Coral-Fort Meyers, FL
Austin, TX
Phoenix, AZ
McAllen-Edinberg, TX
Houston, TX
Salt Lake City, UT
Wichita, KS
Charlotte, NC

Texas has three cities on the list and Austin is at #4. What Bizjournals looked at was four key indicators — population, private sector employment, per capita income and gross metropolitan product. Read the story here.

Market Update

September Austin real estate stats are below. Average and median prices are doing what they’ve been doing most of the year, which is treading water, trending down somewhat, but most notable is that the expired and withdrawns continue to rise, and for September moved past the 50% mark, meaning over half of the homes that departed the MLS in September did not sell.

Here is a quick summary of the September 2008 sales stats:

• Number of homes sold is down 14% (24% last month) from 1,763 Sep 2007 to 1,512 Sep 2008. (This represents a decrease in the slowing of sales)
• Average list prices in Austin were down 3.62% over the same month last year to $257,761.
• Average sold prices in Austin were down 3.65% over the same month last year to $248,026.
• Median sold price was flat at 0%, remaining at $185,000.
• Average List to Sold price about even with last year at 96.25%, down from 96.25% last year.
• Avg sold price per square foot is down 4.33% to $116 compared to $122 a year ago in Sept.
• Avg days on market is up 11 days (20%) from 56 last year to 67 this September.
• Median days on market is up 11 days (30%) from 37 days last year to 48 this year.
• Number of “Not Sold” (exp or withdrawn) is up 28% over the same month last year, to 53% of all removed listings.

So, while the numbers are trending downward, they continue to hold somewhat steady as a large amount of inventory simply goes away each month, leaving the homes that actually sell to paint a somewhat better picture of the market than the average seller experiences.

Austin Real Estate Sales Market Update for Sept 2008
Homes only (condos, duplexes, etc. not included) compiled from Austin MLS data
	Aug 2008	Sep 2008	Sep 2007	Yr % Change
# Sold	1837	1512	1763	-14.24%
Avg List	$269,807	$257,761	$267,445	-3.62%
Med List	$204,409	$189,900	$189,900	0.00%
Avg Sold	$259,500	$248,026	$257,414	-3.65%
Med Sold	$199,000	$185,000	$185,000	0.00%
Sold/List %	96.18%	96.22%	96.25%	-0.03%
Avg SQFT	2187	2131	2116	0.71%
Med SQFT	1986	1924	1942	-0.93%
Avg $ SQFT	$118.66	$116.39	$121.65	-4.33%
Avg DOM	63	67	56	19.64%
Median DOM	43	48	37	29.73%
# Expired	721	797	581	37.18%
# Withdrawn	857	891	660	35.00%
Not Sold	1578	1688	1241	36.02%
Not Sold %	46.21%	52.75%	41.31%	27.69%

Austin Continues to be Economic Top Performer Nationwide

The Austin Metro area ranks 4th among the country’s largest metropolitan areas on the Milken Institute and Greenstreet Real Estate Partners’ 2008 Best Performing Cities list. Texas as a whole did well, with Dallas, Houston, San Antonio, Killeen, and McAllen joining Austin in the top 25 of large metro areas. The top “small metro” area in the country was Midland TX.

Last year Austin ranked number 20 on the list. The list ranks cities according to metrics such as job creation and salary and technology growth.

Is there are correlation between the economic strength of a metro area and its real estate market? Of course there is. Absent the type of speculation that happened in cities like Merced California, a metro area must have solid job growth and positive net migration figures in order to generate the kind of market buyer demand that sustains or propels a real estate market.

Remember, Texas had a soft economy and no real estate price run up during the early/mid 2000’s, and Texas had a relatively low percentage of sub-prime loans, compared to the areas in the U.S. that saw crazy real estate appreciation during those same years. Those 4 years of zero appreciation in Austin from 2001 through most of 2005 are looking pretty good in retrospect. Bleeding out 30,000+ jobs in 2002/2003 was tough medicine back then, but makes for a healthier economy today.

Let’s take a look at some of the cities on the list compared to the real estate markets they are experiencing.

According to the list of top 25 appreciating real estate markets in the U.S. as presented at the Housing Predictor website, Austin ranks number 6 for projected appreciation for 2008, with 4% being the predicted appreciation.

As of July 31, 2008, our median value in Austin was up 4.32% for single family homes, but the average sales price is up only 0.44%. Nevertheless, Austin is hanging in tough relative to most of the country.

Forbes list of the 10 worst real estate markets in 2008 includes Stockton CA, Las Vegas NV, Bakersfield CA, Santa Ana-Anaheim CA, Los Angeles-Long Beach CA, Miami-Miami Beach FL, Sarasota-Bradenton FL, Oakland CA, Fresno CA and Fort Lauderdale FL. How many of the aforementioned 10 cities with the worst real estate market are listed in the 2008 Best Performing Cities list? None. Zero. How many are listed in the top 50? One - Fresno at number 47.

I guess this isn’t a news flash. People know this, right? As job growth and population growth go, so goes the real estate market? Well, actually most buyers don’t know this. If they did, they would act as if they knew it. Instead, there are a lot of worried buyers on the sidelines in Austin at present, passing up interest rates in the 5’s and a reasonably good buyer’s market, in favor of the belief that the Austin real estate market is a bubble waiting to burst. It’s not. Austin is in a slowdown in some areas and price ranges, but overall, Austin is enjoying a real estate market and an economy that most of the country would gladly trade for at present. Buyers that know this are out there making good purchase decisions.

New Austin and Travis County Floodplain

The city of Austin has sent out letters to people who either own or rent property in a floodplain or are within 150 feet of a floodplain. If you think you may be in a floodplain, but are not sure, click www.cityofaustin.org/watershed/flood.htm and click the interactive map. You can also contact your insurance agent to find out.

The letter goes on to state that FEMA began updating floodplain maps for Austin and Travis County in 2003. The updated maps show changes in the floodplain. There are more properties at risk of flooding than was previously thought.

The new floodplain goes live September 26th. If you think you are in the new floodplain, contact your insurance agent ASAP. You should get flood insurance prior to the release of the new maps as you may get a lower rate than after the change takes place.

Austin Real Estate - Current Review

1) Austin real estate home prices are still very robust. While overall Austin home prices are down 1% when comparing August 2008 to August 2007, prices are up 27% since the market peak in the year 2000 from $90 per square foot to over $122 per square foot in 2008.
2) Home sellers in Austin who price their home aggressively are getting deals done. The median list price for homes pending sale in Austin are 1% lower than the median sold price in Austin. This is opposed to the fact that the median list price for all homes available for sale in Austin are priced 16% higher than Austin’s median sold price. Homes listed aggressively are getting contracts.
3) With the benefit of time and patience, the aggressive buyer can often find a good deal on a purchase. Sold homes in Austin through August of 2008 are sitting on the market 28% longer than the same time period during 2008. Home prices have dipped by 1% in August 2008 compared to August 2007. These statistics combined with the credit crunch, which is making it harder for people to refinance their loan and/or harder to secure a new loan to purchase a home, results in increased home sales competition and therefore better deals. Drastically reduced gas prices could have the opposite effect so consider taking advantage of this current market trend.

Selling competitively and buying aggressively is my current recommendation to home buyers and sellers in Austin. Don’t be afraid of taking less on your home sale. Statistics show that getting a home sold fast will most likely result in getting more for your home than pricing it high and reducing the price incrementally. Prices are still robust and will still result in a significant gain for many sellers. Furthermore, there is opportunity to get a deal on your purchase so long as you have time on your side.