Tuesday, March 31, 2015

Mortgage Interest Rates - The Crystal Ball

Today is the last day of Q1 in 2015. Before the year started, analysts expected mortgage interest rates to average around 4.1% - 4.4% for Q1. Here are those forecasts:

2015 Q1
2015 Q2
2015 Q3
2015 Q4
Fannie Mae
4.10%
4.20%
4.30%
4.40%
Freddie Mac
4.20%
4.50%
4.70%
5.00%
National Association of Realtors (NAR)
4.40%
4.70%
5.10%
5.40%
Mortgage Bankers Association (MBA)
4.40%
4.60%
5.00%
5.10%
Total Average
4.275%
4.500%
4.775%
4.975%

Fortunately, mortgage interest rates remained low throughout Q1 due to economic turmoil overseas. 2015 began with a strong move to the lowest rates seen since May of 2013. The catalyst was Europe and the introduction of European quantitative easing (QE). 
With European QE having now begun, we're on high alert for a big picture bounce in European economic data, sentiment, growth, and rates. The more it looks like such a bounce is taking hold, the greater the risk that domestic bond markets and mortgage rates will also experience a big bounce higher. There was a possibility that the bounce occurred in February, but European bonds got back to the task of improving in March. This has helped calm the domestic bond market's move toward higher rates.
While more immediate, bigger-picture disaster has been averted, it's still a highly uncertain time for global financial markets. On the one hand, some believe we're in the midst of a race among world central banks to devalue currencies and lower interest rates. Others believe that the global economy is turning a corner and rates will grind higher. That creates a lot of volatility, and volatility is bad for mortgage rates.
To sum this up, there is no magic “crystal ball” to predict mortgage interest rates. Today, the 30 year fixed mortgage is at 3.875%. Borrowers should take advantage of these low rates as mortgage interest rates are expected to rise barring domestic and non-domestic economic setbacks.

Wednesday, March 25, 2015

Buy vs Rent vs Live With Parents

Below is an article from CNN Money about buying vs renting vs living with parents. One of my kids moved back home after college to save money for buying a home.  Since paying rent can become a wealth trap, this decision helped him become financially independent and stable quicker.  By not throwing away money to rent, he was able to purchase a house with an FHA loan (3.5% down payment) about a year after moving in.  Now that he has moved out, we are both happy!


Only 13.2% of people aged 18 to 34 are homeowners, a record low number. An astonishing 31% of people aged 18 to 34 are still living with their parents. 

For graduates with student loans, living at home or with relatives is a smart strategy and the single most effective budget tool you have. It's actually a no-brainer: Why give 50% or more of your pay to a landlord when you can live at home rent-free and use that money to cut your debt, build your emergency fund and save up for a home. 
 
Assuming your finances are in good shape -- you are gainfully employed, have six months of savings in the bank and money for a down payment -- then the smartest money move you can make is buying a home now. Interest rates are rock bottom, but will start rising either late this year or next. 

Thursday, March 19, 2015

Oregon Top Moved-to State

Oregon is a phenomenal state to live in.  It might not be the hottest or driest state in the US, but it was the top moved to state in 2014 as reported by United Van Lines.  Oregon has a lot to offer for those looking to purchase a home, whether it's a primary residence or vacation home.  That's why it was #1 on the top moved-to states!  You can view their report here: http://www.unitedvanlines.com/about-united/news/movers-study-2014.

Here is their Top 5 moved-to states:
  1. Oregon
  2. South Carolina
  3. North Carolina
  4. Vermont
  5. Florida 
Here is their top 5 moved-from states:
  1. New Jersey
  2. New York
  3. Illinois
  4. North Dakota
  5. West Virginia
To add to this, the Wall Street Journal had an article earlier this week about Portland, Oregon being one of the best cities to retire in.  You can view this article here:


Tuesday, March 17, 2015

Rents Keep Rising at Fast Pace in Portland

Portland's Rents Rose at Nation's Sixth-fastest Rate

Rents in the Portland metropolitan area rose 20.45 percent over the last five years, giving the area the sixth-fastest rise in the nation, according to a new study from the National Association of Realtors.

Portland's low vacancy rates have helped fuel an apartment building boom. But many of the new units are entering the market at with rents above the median. A study by Zillow last month found that Portland-area rents rose 7 percent year over year, the seventh fastest rent rise in the country. The area's median rent was $1,587, Zillow said.

Units at the recently opened Grant Park Village apartments range from $1,194 for a studio to $2,619 for a three-bedroom unit, according to the project's website. At Hassalo on Eighth, studios will start at $1,008 and three-bedroom units will range up to $3,338. At Tupelo Alley on North Mississippi, listed rents range from $1,100 to $2,590.

Let's compare that studio for rent at about $1,200 per month.  What does $1,200 per month in rent equate to in home value with an FHA loan? 


The property taxes and hazard insurance used in these numbers was based on a factor of the sales price, .012 and .002 respectively.  

If location doesn't matter, seems like a no-brainer when comparing a home mortgage to a studio rental.  If a downpayment is the big obstacle, remember that FHA allows gift funds from a relative to cover the full downpayment, closing costs, and prepaids.
  
Happy St. Patrick's Day!

This post is for information purposes only and is not an advertisement to extend customer credit as defined by Section 12 CFR 1026.2 Regulation Z. Program rates, terms and conditions are subject to change at any time.

Tuesday, March 10, 2015

Credit Report Changes Coming

Great news!  The three major credit reporting agencies (CRAs) announced on Monday the most radical change to credit reporting in decades.  This reform is designed to help protect borrowers, provide better accuracy of information, increase the fairness and efficacy of complaint resolution, and decrease the harm done to credit histories due to medical debts.

In the mortgage industry, credit scores and the information that is reported in credit reports are very important as it can affect the:
  • Interest rate
  • Loan program or structure
  • Homeowners insurance premiums
  • Mortgage insurance premiums (if applicable)
All these factors play a part in determining what a borrower can qualify for.  These changes will help improve credit scores as a 2012 study by the Federal Trade Commission reported that 26% of participants found at least one potentially material error in their credit report and 13% received a higher credit score after successfully disputing an error.

There are four main areas that this agreement aims to reform:
  • Improving the Dispute Resolution Process
    • The agreement requires that CRAs have specifically trained employees (currently a fully automated process) review all documentation submitted by consumers claiming that incorrect information belonging to other consumers has been mixed into their files or that they are the victim of fraud or identity theft.
  • Medical Debt
    • Medical debt constitutes over half of all collection items on credit reports and often results from insurance-coverage delays or disputes.  Under the new agreement CRAs must institute a 180-day waiting period before medical debt is included in a credit report.  In addition, while delinquencies ordinarily remain on credit reports even after a debt has been paid, the CRAs will remove all medical debts from a consumer's credit report once the debt is paid by insurance.
  • Increasing Visibility and Frequency of Free Credit Reports
    • The agreement requires the CRAs to include a prominently-labeled hyperlink to the AnnualCredit Report.com website on the CRAs' homepages.  Consumers will also now be entitled to receive a second free report each year if they successfully dispute an item on their report in order to verify the accuracy of the correction.  
  • Furnisher Monitoring
    • The agreement requires the three CRAs to create a National Credit Reporting Working Group that will develop a set of best practices and policies to enhance the CRAs' furnisher monitoring and data accuracy.  This group will develop metrics for analyzing furnisher data, including: the number of disputes related to particular furnishers or categories of furnishers; furnishers' rate of response to disputes; and dispute outcomes.
Some of these changes could be in place within six months but other changes could take up to three years to implement.  The important this is the CRAs are taking a leap forward in improving the accuracy of information reported and the process of disputing errors.  This will ultimately lead to higher credit scores, which leads to better interest rates and a higher qualifying loan amount.

For more information, please visit: Mortgage News Daily

Friday, March 6, 2015

January Appreciation in Oregon

Corelogic recently released its January Home Price Index report which tracks home appreciation on a state level.  On average, Oregon home values were up 0.6% between December of 2014 and January of 2015 which is good news for homeowners.  Here is what Corelogic has reported over the last 13 months for Oregon:

Date
Month over Month Appreciation*
Jan-14
1.30%
Feb-14
1.50%
Mar-14
1.60%
Apr-14
1.80%
May-14
1.00%
Jun-14
1.20%
Jul-14
1.00%
Aug-14
0.10%
Sep-14
-0.20%
Oct-14
0.30%
Nov-14
0.40%
Dec-14
-0.20%
Jan-15
0.60%

If you bought a home at $200,000 in January of 2014, your home value may now be close to $219,000 as shown in the below example.
Average Appreciation in Oregon
 Data Provided by CoreLogic*


Date
Home Value
Month over Month Appreciation*
Additional Value this Month
Additional Value since January 2014

Jan-14
 $        200,000
1.30%

                       -  

Feb-14
 $        203,000
1.50%
 $        3,000
 $             3,000

Mar-14
 $        206,248
1.60%
 $        3,248
 $             6,248

Apr-14
 $        209,960
1.80%
 $        3,712
 $             9,960

May-14
 $        212,060
1.00%
 $        2,100
 $           12,060

Jun-14
 $        214,605
1.20%
 $        2,545
 $           14,605

Jul-14
 $        216,751
1.00%
 $        2,146
 $           16,751

Aug-14
 $        216,968
0.10%
 $           217
 $           16,968

Sep-14
 $        216,534
-0.20%
 $         (434)
 $           16,534

Oct-14
 $        217,183
0.30%
 $           650
 $           17,183

Nov-14
 $        218,052
0.40%
 $           869
 $           18,052

Dec-14
 $        217,616
-0.20%
 $         (436)
 $           17,616

Jan-15
 $        218,922
0.60%
 $        1,306
 $           18,922