Residential foreclosures hit its highest level….

The number of new residential foreclosures hit its highest level of the year in July, while the active foreclosure inventory for the month actually dropped 3.1 percent from the June level, according to Foreclosure.com, a company that tracks foreclosure information.

There were 28,130 new residential foreclosures in July — a 4.95 percent increase over June and a 10 percent increase from July 2005. Michigan, Colorado and Ohio were among the states hardest hit..

The largest monthly increases in new foreclosure rates among states with more than 300 new foreclosures were recorded in Alabama (up 21.3 percent); Colorado (up 12.9 percent); Illinois (up 11.6 percent); Michigan (up 38 percent); Minnesota (up 31.1 percent); Missouri (up 48.2 percent); and Ohio (up 14.3 percent).

California’s new foreclosures dipped by 41 percent from June to July, while the active inventory increased by 7.3 percent.

Other large monthly percentage decreases in new foreclosures were found in North Carolina (down 14.3 percent); Pennsylvania (down 21.3 percent); and Texas (down 16.9 percent).

Fed takes a break from interest-rate hikes

Fed takes a break from interest-rate hikes
Federal funds rate stays put at 5.25%

The Federal Reserve on Tuesday ended two years of 17 consecutive increases in the federal funds rate, letting it stay put at 5.25 percent.

The Federal Open Market Committee may not be done raising interest rates to keep inflation in check, saying “some inflation risks remain.” But unemployment in July rose from 4.6 percent to 4.8 percent and economic growth slowed to 2.5 percent this spring, off by nearly half from the pace of the first three months of the year.

“Economic growth has moderated from its quite strong pace earlier this year, partly reflecting a gradual cooling of the housing market and the lagged effects of increases in interest rates and energy prices,” the committee said in a statement. Inflation risks remain, and “The extent and timing of any additional firming that may be needed to address these risks will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information.”
The decision to take a break from interest-rate hikes was expected, and long-term mortgage rates had already fallen to four-month lows in anticipation of the move. The 30-year fixed-rate average sank to 6.07 percent overnight, and the 15-year rate dipped to 5.78 percent.

Does Your Mortgage Professional Really Know the Industry?

Does Your Mortgage Professional Really Know the Industry?

I’m sure you’ll agree that a home mortgage is one of, if not the largest, financial investment a person will make in their lifetime. I’m sure you’ll also agree that given the importance of this investment you would want an industry professional who knows their industry! With that in mind here are a few questions to ask to assure yourself that the professional with whom you are talking has a handle on the industry and, directly, your best interests.

1. What are interest rates based on?
Mortgage interest rates are based on the yields of Mortgage Backed Securities or Mortgage Bonds. Bonds are bought and sold daily by large investors. Bond prices, just like stocks, fluctuate by the minute. If your mortgage person states that rates are based on Fed Funds rates, i.e. the Prime Rate or Treasury rates, they are dead wrong.

2. What’s the economic event that may cause interest rates to move?
Bond Markets are concerned with the pace of economic growth and inflation. Generally speaking mortgage bonds move opposite of the stock market. So as the stock market improves, mortgage bonds generally drop in price, bad for mortgage interest rates (increase).
The most important report is the Employment Report issued on the first Friday of every month by the Bureau of Labor Statistics. Stronger than expected employment growth would be bad for interest rates. A second report may be the Consumer Price Index issued monthly by the Bureau of Labor Statistics. Strong economic growth shifts money out of the bond market into stocks. This shift would cause bond prices to drop thus mortgage interest rates will rise.

3. When the Prime rate goes up, what happens with mortgage interest rates?
The Federal Reserve Bank only controls the Discount Rate and the Fed Funds Rate, components of the Prime Interest Rate. This is very different from mortgage rates. A mortgage rate can be in effect for 30-years, a rate that is set by the Fed can change from one day to another. The mortgage bond market controls mortgage interest rates. Very often mortgage rates travel in the opposite direction of the Prime Rate.

4. What’s happening in the market now and what do you see ahead?
There is sufficient market information on a daily basis that allows a mortgage professional to recognize trends. For instance, if the employment numbers are to be released tomorrow and you are not locked in to your interest rate for your new mortgage loan, it would be imperative to determine potential market direction to decide whether to lock or float your new loan rate. A response such as “Gosh, if I could predict the future I wouldn’t have to work for a living” would be a huge red flag that your mortgage professional is not engaged in their industry.

posted by Christos the Magnificent at 8:10 PM | 0 comments  

Thursday, June 29, 2006

Fed raises key interest rate to 5.25%

The Fed has raised the key interest rate by 0.250% again.

The last four months the continuing increase of interest rates has had adverse effect on the real estate market.

The Fed will continue to raise the key rate for a while.

You can still get a low interest loan, if you take the time to compare loan products in the market and identify one that fits your needs.

There is much advertising, with attractive come ons like 1% interest only payments for loans that the actual interest is 6.875%.

Here is the problem with this scenario.

The remaining payment interest of 5.875%, goes back to the original loan amount and you ending up having a higher loan amount, than the one you started (negative amortization).

If property values continue to rise the negative effect is small.

If property values level or decline, the effect can be devastating. One can have a larger loan amount than the value of the property (1990 era).

Time is of the essence as interest rates are rising.
People with variable interest rate loans are under pressure to meet their monthly payments.

An increase of 1% can increase the monthly payment easely $350 to $ 400 per month.

The increase is approximately $70 per hundred thousand. With the average loan amount of $400,000 in California, it can become a painful experience very fast.

That’s why you need to deal with a professional mortgage lender,who can analyze your individual situation and guide you through the process. We provide this service free to our clients every day and we hear horror stories from their experience elsewhere.

You can contact me at christosel@gmail.com

Internet in jeopardy as we know it

There is a movement by the big phone companies to control the Internet content and pricing.They are lobbying congress to crate laws that are in their favor.

Go to savetheinternet.com and voice your opinion, as they are gathering signatures from consumers that opposing the move of the phone companies.

Hello world!

Welcome to WordPress.com. This is your first post. Edit or delete it and start blogging!

114878424520353249

LA potholes

LA potholes

Hi – Has any one out there noticed the shape of the streets in LA? I was driving on Franklin the other day and I thought I would lose an axle from the potholes on the street. This is just one of many LA streets that have become grounds for off-road vehicle training rather than transportation arteries.

Has anybody else noticed? What can one do about it? Who can one talk or write to to solve this problem? I know that if I write to City Hell, I will get the standard answer “We are aware of the problem and we will fix it as soon as the voters approve a 14% sales tax increase” or something like that. Well, any ideas?

“We will either find a way, or make one.”

US Real Estate

US Real Estate

As you have noticed, interest rates are on an upward move and many variable interest loans are due for a rate increase.

That means that people will have to pay more each month for their mortgage payment.

On average, a one percent increase per hundred thousand dollars equals approximately eighty five dollars a month. That’s close to one thousand dollars a year times however many hundred thousands the loan amount is. It is not unusual to recognize a whopping four thousand dollar annual mortgage payment increase.

You probably have also noticed the reports that sales are on the decline and that can negatively effect home values.

The last three to four years, many people have mortgaged their houses up to ninety-five to one hundred percent of their value, with combined first mortgages and credit lines.

That can spell disaster in a hurry, especially if the house value declines, which is the next step following declining sales. This is already happening in some areas.

Can it be the Nineties all over again? Maybe not.

The Fed has indicated that there will be increasing interest rates to keep inflation under control, gold is in the 600s, the deficit is skyrocketing… in other words, the signs are not encouraging for the times to come.

I think the market will recover eventually, as it always has. People that have fixed rate mortgages and equity will be able to survive any fluctuation as they have in the past

“We will either find a way, or make one.”