Housing Starts Ease 0.7 Percent In June -- 7x Better Than The Headline Data

Single-family Housing Starts eased lower last month, falling by 0.7 percent from May, or 3,000 units nationwide.

A "housing start" is a home on which construction has started.

June's Housing Starts data is somewhat soft and may partially explain why home builder confidence dropped to its lowest level since April 2009, but for buyers and sellers in Albany , the Housing Starts report is not nearly as bad as headlines say.

This is because when the press reports on Housing Starts, it doesn't single out single-family homes. The press lumps every type of home into a single, giant reading. As a result, news outlets are reporting Housing Starts down 5 percent -- a somewhat misleading figure.

The 5 percent figure is actually a combination of 3 separate housing types:

1. Single-Family Housing Starts
2. Multi-Unit Housing Starts (2-4 Units)
3. Apartment Building Housing Starts (5 or more units)

But, single-family homes are what most Americans purchase. This is why the single-family starts data is more relevant than the combined figure commonly reported by the press. 2-4 units and apartment buildings are a different realm of buyer.

That said, though, we can't even be sure that June's Single-Family Housing Starts report is accurate. As noted in the Department of Commerce's press release, the data's margin of error is 10.7 percent which means the reported results are of "no confidence".

In other words, there is no statistical evidence to prove the actual change was different from zero.

If Housing Starts did, in fact, drop in June, it will help to reduce the Glenmont housing inventory, which will provide support for local home values. For home sellers, this could be good news. Fewer homes for sale means less competition for buyers.

Sagging Homebuilder Confidence Opens The Door For Good Deals

Builder confidence in the housing market slipped this month, according to the National Association of Homebuilders' monthly Housing Market Index.

The Housing Market Index is actually a weighted composite of 3 separate surveys. One measures current single-family sales; one measures projected single-family sales; and one measures traffic of prospective buyers.

All three surveys were down in July:

• Single-Family Sales : From 17 (June) to 15 (July)
• Single-Family Project : From 22 (June) to 21 (July)
• Buyer Foot Traffic : From 13 (June) to 10 (July)

The HMI's July reading of 14 puts confidence at its lowest point since April 2009.

For home buyers in Delmar , a drop in builder confidence could create an opportunity for negotiation.

Remember, it wasn't too long ago that most builders were flush with home inventory, unable to find willing buyers. To help move product at that time, builders dropped prices and offered incentives including free upgrades. If confidence continues to sag going forward, home purchase deals of that nature may return -- especially as the foreclosure market gets larger.

See, in the past, builders' main competition for buyers were the existing home sellers.  Today, builders compete with the existing home sellers and the banks with REO. 

It's a terrific time to be a home buyer, in other words -- sellers are fighting for you. It's no wonder sellers have little leverage anymore. Couple that with all-time low mortgage rates and affordability for homes is at an all-time high.

If you're planning to buy a home later this year, you may want to consider moving up your time frame. The market looks ripe for good deals this summer.

25 Cities In Which To Get A Bang For Your Homebuying Buck

Home affordability is at an all-time high. Home values are still in recovery while mortgage rates continue to make new lows. But where are homes the most affordable?

CNNMoney.com recently ran a piece titled "Where Homes Are Affordable", listing 25 communities around the U.S. in which median incomes are relatively high and median homes are relatively low.  It's a housing market "bank for your buck" list.

The top 10 cities as listed by the editors:

1. Deerfield Beach, FL
2. Lafayette, IN
3. San Antonio, TX
4. Deltona, FL
5. Spring, TX
6. Glendale, AZ
7. Avondale, AZ
8. Bolingbrook, IL
9. Fishers, IN
10. Des Moines, IA

Of the top 10, 2 picks are from the Southeast; 4 are from the Midwest; and 4 are from the Southwest.  2 are "major" cities and the rest are suburbs of bigger cities.  Lafayette stands lone as a college town.

The rest of CNNMoney.com's 25 cities follow a similar pattern -- larger suburbs geographically concentrated in the Midwest and Southwest. Surprisingly, though, New Jersey and Virginia do find themselves represented.  Even the expensive Eastern Seaboard has its good buys.

The Fed's June Minutes Keep Mortgage Rates In Rally-Mode

According to Freddie Mac, mortgage rates made new all-time lows this week and the good news is that rates look poised to fall even more.

Since the Federal Reserve's release of its June 2010 meeting minutes Wednesday, mortgage rates are dipping even more and one of the main reasons why is because of some choice Fed words.

If you've never seen a Fed Minutes release, it reads academic. The document is page after page of stats, facts and figures about the U.S. economy, accompanied by an in-depth recap of the intra-Fed member debates that shape the nation's monetary policy.

At 7,333 words, the June Fed Minutes is the unabridged version of the more well-known, post-meeting press release.  The corresponding press release was just 360 words.

As it turns out, Wall Street didn't like what it read in the minutes.  Specifically:

1. The Fed expects below normal growth through 2012
2. The Fed's outlook for employment has dipped
3. Credit conditions are easing only slowly

Furthermore, the Fed said its action may be needed if the economy were "to worsen appreciably".

Overall, the economic optimism the Fed displayed earlier this year appears to be waning. The economy is moving forward -- just not as quickly as expected.  That should bode well for mortgage rates and home shopping in Albany.

Mortgage rates were down Wednesday afternoon and Thursday and remain historically low. All it would take to reverse rates, however, is a run of positive news on jobs, growth, and consumer spending.  Therefore, if you know you need to lock a mortgage rate in the near-term, it may be a good time to make the call. 

Lock your mortgage rate and move on.

Foreclosure Activity Slows Again In June 2010

313,841 foreclosure filings were made in June, according to foreclosure-tracking firm RealtyTrac. The figure represents a 3 percent drop from May and 7 percent drop from June of last year. However, foreclosure filings remain relatively high nationwide.

June marks the 16th straight month the filings topped 300,000. 1 in every 411 U.S. homes received some form of notice last month with foreclosure density varying wildly from state-to-state.

Like everything else in real estate, it seems, foreclosures are a local phenomenon.

The states with the highest foreclosures per capita were:

• Nevada : 1 foreclosure filing per 88 homes
• Florida : 1 foreclosure filing per 171 homes
• Arizona : 1 foreclosure filing per 189 homes

The states with the lowest foreclosures per capita were:

• Vermont : 1 foreclosure filing per 26,051 homes
• West Virgina : 1 foreclosure filing per 8,058 homes
• South Dakota : 1 foreclosure filing per 6,528 homes

Overall, 40 states beat the national Foreclosure Per Capita average and 10 states fell below. The sheer volume of REO, though, is creating interesting buying opportunities for first-timer buyers, move-up buyers, and real estate investors in Bethlehem.

Homes bought from banks are usually less expensive than non-foreclosure homes. This is one of the major reasons why distressed sales account for roughly 30 percent of all home resales. Less expensive, though, doesn't always mean "cheaper". Foreclosed homes are often sold as-is and may be defective or otherwise uninhabitable.

Making repairs to get these homes into "living condition" can be costly.

Therefore, if you're buying a foreclosed home, make sure you know what you're buying before you make your bid. Have a certified professional inspect the home to check for damage, and consider enlisting the help of a real estate agent to assist with negotiations and management of the contract.

The process of buying a foreclosed home is different from buying a typical resale. Make sure you do your homework.

Mandatory Loan Fees Keep Borrowers From Getting Their Absolute Lowest Rate

Conforming mortgage rates may be posting all-time lows this week, but that doesn't mean you'll be eligible for them. You may have already called your loan officer and found this out the hard way.

It's because of a federally-mandated mortgage-pricing scheme known as "loan-level pricing adjustments".

In effect since April 2009, loan-level pricing adjustments are changes to a loan's base rate and/or fee structure based on that loan's inherent risk to Wall Street. It's similar to auto insurance pricing adjustment in that a sports car, all things equal, will cost more to insure than a comparably-priced minivan.

More risk, more cost.

In mortgage lending, loan risk can be loosely grouped into 5 categories. Mortgage applications featuring any of the five traits are subject to price adjustments:

1. Credit Score (i.e. the borrower's FICO is below 740)
2. Property Type (i.e. the subject property is a multi-unit home)
3. Occupancy (i.e. the subject property is an investment home)
4. Structure (i.e. there is a subordinate/junior lien on title)
5. Equity (i.e. mortgage insurance is required by the lender)

Furthermore, loan-level pricing adjustments are cumulative.

A 3-unit investment home will face larger adjustments than an owner-occupied 3-unit home, for example. It's these adjustments that explain why you may not be eligible for the rates you see advertised online and in the newspapers -- your particular loan may be subject to this risk-based pricing that raises your mortgage rate and closing costs.

The government's loan-level pricing adjustment schedule is public information. See what your lender and how your loan quote is made at the Fannie Mae website. Or, if you find the charts confusing, just call or email your loan officer for help with interpretation.

Should You Refinance Your ARM, Or Let It Adjust Lower?

If your adjustable rate mortgage is due to adjust this year, don't go rushing to replace it just yet. Your soon-to-adjust mortgage rate may actually go lower. It's related to the math behind the ARM.

Conventional, adjustable-rate mortgages share a common life cycle:

1. There's a "starter period" in which the interest rate remains fixed
2. There's an initial adjustment period after the starter period called the "first adjustment"
3. There's a subsequent annual adjustment until the loan's term expires -- usually at Year 30.

The starter period will vary from 1 to 10 years, but at the point of first adjustment, conventional ARMs become the same. A homeowner's new, adjusted mortgage rate is determined by the sum of some constant, and a variable. The constant is most often 2.25% and the variable is most often the 12-month LIBOR.

As a formula, the math looks like this:

(Adjusted Mortgage Rates) = (12-Month LIBOR) + (2.250 Percent)

LIBOR is an acronym standing for London Interbank Offered Rate. It's the rate at which banks borrow money from each other and, lately, LIBOR has been low. As a result, adjusting mortgage rates have been low, too.

Last year, 5-year ARMs were adjusting to 6 percent or higher. Today, they're adjusting to 3.375%.

Based on the math, it may be wise to just let your ARM adjust this year. Or, depending on how long you plan to stay in your home, consider a refinance to a new ARM.  Starter rates on today's adjustable rate mortgages are exceptionally low , as are the rates for fixed rate loans.

Either way, talk to your loan officer about making a plan. With mortgage rates as low as they've ever been in history, homeowners have some interesting options. Just don't wait too long. LIBOR -- and mortgage rates in general -- are known to change quickly.