Austin Texas Real Estate Blog

Since mortgage interest rates have constantly kept themselves at approximately 5% for fixed rate mortgages, the idea of home refinance is attracting numerous homeowners. Refinancing to a lower rate would reduce your monthly mortgage payments. The present day economy and troubled real estate market pose a number of risks to the homeowners.

When the real estate market is down, you should always try to refinance your mortgage. If you’re facing problems with your adjustable rate, higher mortgage payments, reduced equity or lower income, then home refinance is a useful means to get rid of your anxieties. When property values are going down and lenders are making stricter guidelines, it becomes more difficult to take out a new loan. Hence, if you get the chance to refinance even in this market condition, you must not lose it by any means.

What is home refinance?

When you go for refinancing, your existing mortgage is substituted by another mortgage with more affordable loan terms. Since you’re taking out a new loan, you normally have to pay the following fees:

• Escrow fees
• Title insurance
• Points (optional)
• Lender fees
• Credit reporting fees
• Appraisal fees
• Any amount necessary to get your tax and insurance obligations current

What the importance of home refinance is in today’s real estate market?

Homeowners resort to refinancing for various reasons, but following are some of the most familiar ones why refinancing is important in the present day real estate market:

Refinancing helps you save money by reducing your interest rate

If the interest rate of your existing mortgage is more than the prevailing market rate, you would save by refinancing.

Refinancing can reduce monthly payments

Even though the interest rates do not go down, home refinance can reduce your monthly payments by beginning a new loan term. For instance, if you obtained a 30-year FRM for $300,000 10 years back, you might just owe around $250,000 at present. However, if you refinance it to another 30-year FRM for $250,000, then you have a complete 30 years to pay it back. It signifies that your monthly payment would be lower. Had you retained your previous loan, you would have paid it off in 20 years. The drawback of reducing your monthly payments is that you would end up paying more on interest.

Refinancing lets you switch loan types

If you have an ARM Adjustable Rate Mortgage, your monthly payment might go up when the rate is adjusted. You might need to shift to a fixed rate mortgage that has a steady payment.

Home refinance helps you receive cash

When you go for a cash-out refinance, you obtain a new mortgage for an amount which is higher than you owe on your existing mortgage. Subsequently, you walk off by taking the difference. A cash-out refinance is quite hard to obtain in recent times though several homeowners opted for cash-out refinancing to fund home improvements in the last one or two years. For getting a cash-out refinance, you should have substantial equity in your home since it is likely the bank wouldn’t lend you an amount which is higher than your home value.

Though most borrowers have a tendency towards keeping their existing mortgages, refinancing in a tough real estate market can better your financial condition in various ways.

Thanks to guest blogger: Peter Gomes!

Maybe you’ve been hearing about the new tax credit designed to give money back to buyers who help create jobs and turn the economy around by buying a new (to them) home.  Well, you’d have to be living under a rock not to have heard about it, but we digress. The first program was for first time buyers only. Now the program has been expanded and also includes move-up buyers who have owned their primary residence for 5 consecutive years. Unfortunately, there’s a ton more detail, but fortunately you can watch this video and get the gist!

Summary of Tax Credit Details:
The homebuyer tax credit expansion measure includes these provisions:
• Extends the $8,000 first time Homebuyers Tax Credit and creates a new $6,500 tax credit for homeowners buying a new home by July 1, 2010.
• Homebuyers with contracts as of April 30 qualify for the credit so long as they close the transaction within 60 days.
• The full credit is available to homebuyers with incomes of up to $125,000 for a single return or $225,000 for a joint return.
• Not available for homes costing over $800,000.
• Homebuyers who already own a home are only eligible if the home they are leaving has been used as a principal residence for five consecutive years in the last eight.
• Provides authority to the IRS to provide greater oversight while processing the return and requires that the taxpayer claiming the credit be 18 or older.
• Members of the military, military intelligence and foreign service who are on qualified extended official duty are not subject to the recapture fee and individuals who have been deployed overseas for 90 days or more in 2008 or 2009 can claim the credit through April 30, 2011.

If you want more information you can contact us or check out the Federal Housing Tax Credit website.

What Did Interest Rates Do This Week?

** based on Freddie Mac weekly average survey **
30-yr Fixed – Slightly Lower
This Week:  4.91%
Last Week:  4.98%
1yr Ago:  6.14%

15-yr Fixed – Slightly Lower
This Week:  4.36%
Last Week:  4.40%
1yr Ago:  5.81%

Jumbo Fixed (Average 30-yr Fixed)
Last Week:  5.75%
Previous Week:  5.895%

Highlight of This Week’s Major Economic Reports

Trading activity in the bonds market, as well as the release of new economic data, was light during this holiday-shortened week.  One bright note, however, was that the government reported the latest unemployment benefit claims dropped by 12,000 last week, which conveys (in the past four weeks) the emergence of a slight improvement in the job market.  Of course, we’re still far from a full recovery in the labor sector, but we’ll take any good news we can get.

Additionally, the Fed just hit the $1 trillion milestone for its purchase of mortgage-backed securities.  This program has kept mortgage rates remarkably low throughout the year, and the Fed is committed to spending the full $1.25 trillion through the end of March 2010.  Once this program ends, all expectations are that mortgage rates will start to climb to more closely align with yields on US Treasuries.

What to Look for Next Week

Inflation and housing take center stage next week.  The latest Retail Sales figures are also due out, and it’s expected to post a slight gain from the previous month.

Short-Term Rate Outlook
Relatively Unchanged

Stay Informed:  What’s in the News

“Texas Cities Dominate List of Top Performers” from Milken Institute via Texas A&M RECON

Texas metros, led by number one Austin–Round Rock, claimed four of the top five spots and nine of the top 16 in the 2009 Milken Institute/Greenstreet Real Estate Partners Best-Performing Cities Index.

Also making the list were Killeen–Temple–Fort Hood (2), McAllen-Edinburg-Mission (4), Houston–Sugar Land–Baytown (5), San Antonio (11), Fort Worth–Arlington (12), Dallas-Plano-Irving (13), El Paso (14) and Corpus Christi (16).

Austin–Round Rock was the first metro to ever be ranked number one twice on the index, the last time being in 2000.

But it doesn’t stop there. Nine other Texas metros made the top 25 out of the 124 smallest metros that were studied.

Those were Midland (1), Longview (2), Tyler (4), Odessa (5), College Station–Bryan (14), Texarkana (17), Waco (18), Laredo (20) and Abilene (21).

Leaders in this year’s index, which ranks U.S. metros based on their ability to create and sustain jobs, are all metros that succeeded in avoiding the worst of economic declines driven by falling housing markets and job losses in manufacturing and global trade.

Regional economic factors also strongly influenced the rankings this year, with the oil and gas sector, technology and alternative energy providing stability among metros in Texas, North Carolina, Washington and Louisiana.

Another factor helping Texas metros move up in the rankings is the state’s favorable business climate and its ability to attract jobs and corporations away from higher-cost states.

“Economists See Fed Raising Rates Near Midterm Election” from The Wall Street Journal

Economists in the latest Wall Street Journal survey, on average, expect the Federal Reserve to raise interest rates around September 2010, a politically sensitive time considering midterm elections will be right around the corner and unemployment is forecast to still be over 9.5%.  The 52 surveyed economists—not all of whom answer every question—on average expect the unemployment rate to rise to 10.3% by the end of this year from its current 10.2%, and they expect it to stay above 9.5% through 2010. The respondents expect job growth to return over the next 12 months, but the forecast calls for an average of about 50,000 jobs to be added per month over that period. The economy needs to add about 100,000 jobs a month just to keep up with new entrants to the labor force.

“Foreclosures: ‘Tide may be turning’” from CNNMoney.com

Could the foreclosure plague be ending? Foreclosure filings were down 3% in October, the third consecutive month-over-month dip, according to RealtyTrac, the online seller of foreclosed homes. To be sure, foreclosure rates are still elevated from a year ago: They’re up 18% compared with October 2008. But the month-over-month decrease followed a 4% drop in filings during September and a 1% fall in August.

“5% of Americans Plan to Buy a Home Next Year” from CNBC.com

Just one in twenty Americans say they plan to buy a home within the next year, and they’re most likely to be 34 years old or younger and living in the South or West, according to a survey released Wednesday. Roughly a quarter of potential buyers said the No. 1 reason they would buy now is because prices have bottomed out. That reason topped bargain-priced foreclosures, worries about rising interest rates and a wide selection of homes.

“The Recession’s Over, but Not the Layoffs” from The New York Times

The Great Recession is over — not officially, but by popular acclaim — and in this accepted fact we are invited to take comfort, even as the unemployment rate last week rose into double digits for the first time in a quarter-century.  Experts have long assured us that economic life is governed by the business cycle, a repeating loop of downturn followed by expansion, as reliable as the seasons. In this context, worsening joblessness is like a punishing blizzard in April: Misery notwithstanding, the calendar promises spring.

“Texas Employment Feeling Pinch” from Texas A&M Real Estate Center

The Texas economy lost 292,700 nonfarm jobs from September 2008 to September 2009, an annual job loss of 2.8 percent.

Over the same period, the U.S. economy lost more than 5.7 million jobs, or 4.2 percent of its total nonfarm jobs.

The state’s seasonally adjusted unemployment rate rose from 5.1 percent in September 2008 to 8.2 percent in September 2009, while the U.S. rate rose from 6.2 percent to 9.8 percent during the same period.

Only three Texas industries (education and health services, other services, financial activities) and the government sector had more jobs in September 2009 than in September 2008. Eight other industries experienced net job losses over the same period.

Only one Texas metro area, McAllen-Edinburg-Mission, posted a positive employment growth rate from September 2008 to September 2009. Twenty-five metro areas had net job losses.

The state’s actual unemployment rate in September 2009 was 8.3 percent. Lubbock had the lowest unemployment rate followed by Amarillo, Midland, Abilene and College Station–Bryan.

Marie Funston | Sr. Mortgage Advisor | (512) 750-7270
9442 N Capital of Texas Hwy., Suite 1-600
Austin, TX 78759
Fax:  (512) 343-1224
Marie@austinmortgageadvisor.com

What Did Interest Rates Do This Week?
** based on Freddie Mac weekly average survey **

30-yr Fixed – Slightly Higher
This Week:  4.92%
Last Week:  4.87%
1yr Ago:  6.46%

15-yr Fixed – Slightly Higher
This Week:  4.37%
Last Week:  4.33%
1yr Ago:  6.14%

Jumbo Fixed
Average 30-yr Fixed:  5.895%

Highlight of This Week’s Major Economic Reports

Who would’ve thought a few months ago that we’d see the Dow top 10,000 again this year, but here we are at the beginning of the 4th quarter, and the stock market seems to be on a relentless drive, further fueling what is now the expectation of economic growth before the end of the year.  And, while money was being poured into the stock market, they were pulled out of the safe haven of US Treasuries, which has consequently caused the spike in interest rates.

Furthermore, recent readings on local market conditions across the country have revealed growing stability – and even some consistent improvement – the likes of which we haven’t seen in two years.  This supports the consensus that a technical end to the recession is looming near.  However, with unemployment still problematic and the issue of health care still unresolved, consumers aren’t feeling as upbeat as the numbers may convey.  As a result, consumer spending is still lagging with Retail Sales reporting a 1.5% slide last month.

What to Look for Next Week

More inflation reports and an updated peak at the housing market will headline next week’s economic calendar.  Inflation is expected to remain tame, while home sales are expected to post positive results, as first-time buyers flock to take advantage of the tax credit.

Short-Term Rate Outlook

Relatively Unchanged

Stay Informed:  What’s in the News
“When Will Recession End?” from Texas A&M Real Estate Center
Three things have to happen before the current recession can be declared ended. One is underway, said Dr. Mark Dotzour, chief economist for the Real Estate Center at Texas A&M University.

“I think the economy will begin to turn for the better once the health care and cap-and-trade issues are settled. Those two political debates are creating substantial uncertainty for business owners and investors,” he said.

The personal savings rate is the second trend to watch, said Dotzour.

“Over 70 percent of the U.S. economy is consumer spending,” he said. “When the savings rate finally levels out, consumer spending will start to increase again.”

Increased corporate profits are the third trend that must occur to bring the recession to an end. There is some indication that has already begun. The last three data points were all up. Rising profits lessen the urge for companies to lay off workers.

Research Economist Dr. Jim Gaines added that the increased corporate profits have come from reduced costs, not the kind that leads to expansion.

“Keep your eye on these three issues,” Dotzour said. “When they are resolved, the economy will begin to turn the corner.”

“Texas Cities Labor Away” from Texas A&M Real Estate Center
Four of the five best labor markets in the country are in Texas, according to a new study compiled by Portfolio.com.

Austin leads the way, followed by San Antonio. Houston ranks fourth and Dallas–Fort Worth fifth.

Landing at third is Baton Rouge.

All 100 metropolitan areas in the study, including those in Texas, have seen employment decline since last year. However, while 5 percent of the nation’s private-sector jobs have disappeared since June 2008, the collective decline for the ‘Texas Four’ has been 2.6 percent.

The Texas markets still have 589,500 more jobs than they did five years ago.

Portfolio.com used a nine-part formula to analyze employment trends in the nation’s 100 largest labor markets. The formula used midyear U.S. Bureau of Labor Statistics data for 2004–09, including unemployment rates and trends, and raw and percentage changes in private-sector employment.

Several years back real estate fraud was a major issue. This is often resulting in some form of mortgage fraud equaling potentially hundreds of thousands of dollars. This can be anything from falsified paystubs to elaborate schemes that include titles being altered to reflect a person other than the mortgage holder as the owner. This means the loan company does not have a record to track for the property. In the end this causes thousands of dollars in restitution and real estate costs.

There are many ways the local and federal government has established to prevent real estate fraud. None matter if you don’t know what the indicators are, or report it when and if you cross it. Here are the four most common forms of mortgage fraud to watch for:

• Appraisal Fraud: when a property value is misrepresented to achieve an inappropriate result.

• Flipping or double flip: This is when a home is purchased at value or under and rapidly resold to a new buyer, generally within 30 days or less, for a significant price hike. This can be as low as 30 percent and up to 50 more than they originally paid. When this is done, the first loan is generally concealed from the final buyer. That first loan generally defaults.

• Identity Theft: This can be as obvious as taking someone’s identification and applying for and getting a loan as that alias to something simple as an appraiser using the name of another person to add or alter value to a home. Typically this kind of fraud is not discovered until long after the loan paper has been finalized.

• Straw Buyers or Faux Buyers: This one is perplexing. A person or company offers an incentive to another person to purchase a home using their information to obtain the mortgage, however they title the mortgage and home title to a third party or themselves. In the end, the loan is written for one person, but held by another.

The last three years have seen sharp decline in the housing prices. Many of the declines have bottomed out markets and some local areas simply fell to the bottom and found they could go lower. Finally prices seem to be stabilizing across the board. What is good for the home buyer is the prices have stabilized on the lower end of the housing range. To this end, home buyers are coming back to the market place. This draw is being encouraged by low mortgage interest rates and an 8 thousand dollar tax credit that will expire at the end of November.

Starting in May of 2009 the Office of Federal Housing Enterprise Oversight (OFHEO) began to announce a steady increase in home prices over the previous month. It started with .09% and has continued to grow from there. One of the hardest declines was felt along the pacific coast, and recently they registered on the index with an increase of 2.7%.

An added benefit to the additional home sales is the improved price. At this point, reflecting on data released by the Department of Housing and Urban Development and the US Census Bureau, the increase is only 3.6% as of June 2009. These same resources have also identified an increase of new home sales by 11% the same month. This shows the foundation to a successful recovery period, which the United States housing market, is finally reaching.

Home Buyers find opportunity during the summer. As sellers realize that the warm weather is more accommodating to the moving process they put their homes on the market. This wonderful process enables a buyer to shop for the home they want, and will be happy in for years to come. This means now is the time to prepare to buy the home of your dreams.

To help in the process, take a few moments to review these 3 tips:

First things first, determine what it is about the home you’re in that is making you want to move. This will help you in your search. You will know what you are looking for so you can identify it clearly to your Realtor.

Finding the best Realtor who can accommodate your needs is the next tip. You will need to do some research, as there are multiple thousands of registered Realtor in the area. You will want a dedicated Realtor, much like you find with the award winning Affinity Properties Team. A dedicated Realtor will search for a home that fits your description, not just what they have on the market in the office. They will put your needs and desires first and foremost. This means you get what you want, need and can grow with.

The last tip relates to your budget and financing. Evaluate what you have to spend on the process, closing budget, down payment etc., and take that to your finance company of choice. Have a pre-qualification letter in hand before you start searching. It will help guide you toward your budgeted home of choice. If you have a home to sell, you can have a contingency clause written into any sales agreement, and financing agreement.

By using these great tips together you will be on the best track to find your new home.

It is no secret that the housing market has suffered a great many blows over the last several years. Austin has seen its share of woes, as well, though overall it has done much better than many other areas in the country. Last year brought somewhat less demand than supply, causing homes to sit on the market longer. According to recent projections for 2009, the home supply is less than 6 months, which is still considered a stable market. The national average is almost a full year. Average home prices have also remained fairly stable in Austin. This area never saw the housing bubble that comparable cities have experienced, making the area less affected by the recession.

There are many factors that create a decent housing market. Austin has them all. While the nation is struggling with astounding job loss and a skyrocketing unemployment rate, the city of Austin has maintained an almost nonexistent unemployment rate. Jobs are still available here, drawing more buyers to the area. Home appreciation rates here are above 5%, according to the report, putting Austin in the lead nationally for this. Interest rates on loans are at their lowest right now, making it easy for a credit approved buyer to purchase a home.

Even before the recession was formally recognized, Austin was seen as having one of the strongest local economies in the country. While there is expected to be a slowdown in job growth in 2009, Austin is still expected to fare much better overall. Home values and prices will remain decent in this area.

Now that you’ve reached your golden years, you’ve started thinking differently than you did when you were 40. Your needs and wants are not what they once were. You aren’t working; you’re retired, and so you need a little more money. What can you do?

You can obtain a reverse mortgage.

A reverse mortgage is exactly what it sounds like. Rather than putting money into the equity of your home, you take it out of your home. You get a loan based on the property’s worth, and then you get an income based on that. Should the value of your house fall below the value of the loan, you don’t have to worry. You can’t be evicted or forced to sell. The house is yours until you decide to leave. Once you do leave, payments on the loan will begin – either by you or by your heirs. However, any extra funds will be left to your heirs making the payments not too difficult.

To qualify for a reverse mortgage, you and any co-borrowers must be at least 62 years of age. The current mortgage must either have a very low balance or be paid off entirely. And you must live on the property. A reverse mortgage only applies to an owner-occupied house, be it a traditional single family home, an FHA approved condo or a two-four unit dwelling. The equity will be determined again by age, the value of your home and the loan limit for your county.

A reverse mortgage is an excellent possibility as something that could supplement your Social Security income or retirement savings. If you’re in need of a little extra funding, talk to a broker about going backwards with a mortgage.

Refinancing has its draw. If you have an adjustable rate mortgage, you can refinance and switch to a fixed rate mortgage, guaranteeing you the same level of payment every month. Or if you have an adjustable rate mortgage and simply want to switch to a loan with lower interest rates, refinancing will enable you to do that as well. And of course, if interest rates have suddenly dropped, refinancing will help you save a little money, which in this economy, is exactly what you want.

But how do you know if refinancing is the right choice?
You do the math. There’s no quick way to assess a situation and determine if refinancing will benefit it. You can’t choose an interest rate and decide that when the rates hit that number you’ll refinance. It simply won’t work, because refinancing is a complicated situation that depends the length of time you’ve had the current mortgage, how long you plan to have the new one and what other cost-cutting opportunities are available.

To determine whether or not you should refinance, first talk to some lenders. Get their numbers and details, so you know what you’re working with as you proceed. Then, find some way to calculate those numbers. Real Estate sites, such as thefool.com, offer calculators that tell you what to plug in where and give you real answers to your unique questions. Your main goal is to find out what the closing costs will be and how much you’ll save once you refinance. If the numbers work out in your favor, by all means, refinance. If they don’t, they don’t, and you can be relieved that you didn’t make a mistake based on a falling interest rate.