Las Vegas Undressed

Las Vegas Real Estate News

Photo courtesy of Sun West Custom Homes in Las Vegas.

The clock is ticking fast for first-time homebuyers. Borrowers are looking at the $8,000 tax credit and trying to make sure that they get it done in time. Here is the link to the article from Reuters.

Photo courtesy of Signature Custom Homes Las Vegas

In refernece to the article above; lets take a look at some of the problems that have been evolving in the appraisal industry. This is very much an issue for new homebuyers since it is taking so long to get appraisals done. Diana Olick, CNBC Real Estate Reporter, talks about how appraisers are threatening The real estate markets recovery.

Photo courtesy of Slade Development in Las Vegas.

Jann Swanson writing in the Mortgage Daily News comments on some stabilization in the housing market. She goes on to say “While the abundance of affordable foreclosure properties is a boon for many first-time homebuyers, I don’t believe we’ll see significant recovery until demand-side fundamentals improve, and more move-up and move-across buyers re-enter the market.” Here is the link to her article.

Photo courtesy of Signature Custom Homes in Las Vegas.

Here is a post from an associate of mine at Kenmore Undressed; Jim talks about some of the consequences of short sales. “The Ugly reality of Short Sales in Your Neighborhood.”

What Now for the Stock Market? Follow up

The stock market took another fall today; and breaking the 8240 level on the Dow Jones Inudstrial Average  could signal a further pull back in the markets and could actually help the mortgage market and rates.

I wanted to keep pace with what was happening in the markets; this is just commentary but worth considering. My last post mentioned Gary Savage and The Smart Money Tracker; his latest comments will bring furhter light to what may be unfolding. Remember, the Dow may be breaking down, however, the broader S & P Index is still holding ground.  

Here is a comment from Gary Savage:
 
“The bulls need 875 to hold. However we are so early in the daily cycle that it would probably take a miracle for this to not breakdown. Now here’s what I suspect is going to happen. Most of the shorts are going to cover at 875 looking for a bounce. Tell the truth, I know a big chunk of you are thinking along those lines.
 
Now maybe the market bounces at 875 and maybe it doesn’t. Either way I’m not going to lose my position this early in the cycle. First off if everyone is thinking along those same lines then no one is thinking. Where would I be if the market just slices right through that level and keeps on going and I did something stupid like losing my position on the chance that the market would bounce? As I said before, I really don’t want to make stupid mistakes anymore. Believe me, I’ve made enough stupid mistakes for 10 people in my first few years investing. I think I’m over my quota.”

Gary, is what his site is all about “common sense investing”. I hope you all understand the intent of these last few posts. This is just about trying to make you aware of some potential pitfalls; this is not investment advice.

Investing in the financial markets can involve considerable risk. Past performance is not necessarily an indication of future performance. The information included in The Smart Money Tracker and The SMT subscribers daily updates is prepared for educational purposes and is not a solicitation, or an offer to buy or sell any security or use any particular system. Information is based on historical research using data believed to be reliable, but there is no guarantee as to its accuracy. G.D.S L.L.C., nor Gary Savage, do not represent themselves as acting in the position of an investment adviser or investment manager for funds that are not under their direct control and fiduciary responsibility. GDS L.L.C., Gary Savage, will not provide you with personally tailored advice concerning the nature, potential, value or suitability of any particular security, portfolio or securities, transaction, investment strategy or other matter. From time to time, GDS L.L.C., Gary Savage, may hold positions in securities mentioned, but are under no obligation to hold such positions.

What Now for the Stock Market and Mortgage Rates?

I’m thinking that this is an important time to talk about the stock market and what may happen to mortgage rates. You should know that I spent 25 years in the financial services industry and that many people believed that I was a pretty good technician. Most financial advisors, fundamental or technical, get a good feel for the markets after having watched it for many years; only a few will give you the bad news in advance. Hope you had one of those?

On March 6th the Dow Jones Industrial average fell briefly below 6500; 6469 to be more precise. The high for 2009, on an intra-day basis, was on June 11th when the Dow hit 8877 very briefly. That 37% gain was one of the highest (bear market rally?) since the great depression.

A break below around 8240, Thursday’s close was at 8280, could very easily see the market retrace to the 7700 level. There is a worse scenario and I’ll deal with that later in this post.

Now let’s consider what has been happening to the 10-Year Treasury Note. In the not too distant past you could track mortgage rates by looking at the 10-Year Note. That changed, for a time, when the Fed started buying Mortgage Back Securities. They have pledged to buy $1.25 trillion and they are halfway through that number. 

In February the 10-Year Treasury note hit a low of 2.038% and in June the high was 4.174%. That’s a 100% increase; pushed up by green shoots in the economy, a rising stock market, inflation fears, dollar weakness (foreigners don’t want to hold our bonds with a weak dollar) and thoughts that the Fed would tighten.

If you had great credit and very good equity in your home you could have gotten a refinance in February or March at about 4.375%; a couple of weeks ago it would have been around 5.5%, now it’s about 5%.   

What’s ahead? If the markets keep falling, oil prices continue dropping, the dollar remains neutral, and inflation fears calm then rates will go lower. I do not expect that we will see 2%; more like 3-3.2% on the 10-Year Note. This should translate into a 30-year fixed rate at about 4.625% – 4.75%; unless the Fed decides to buy a lot more mortgage backed securities.

My suggestion to those people who are looking to refinance or buy a home (first-time homebuyers in particular) is to get moving. The new appraisal laws are slowing the process down; just get the loan application started. You will then be in a position to move forward when you are ready!

I mentioned early in this post that things could get much worse. A friend of mine, Gary Savage, is an extremely astute advisor. I have tracked him over the last year and I’ve been very impressed with his read on the markets. I would like to hope that the market and the economy find a bottom in the next 4-6 months; that may not be the case.

Here is Gary’s read on current events. 

Click here

If you want more information about Gary Savage and his Smart Money Tracker services click here.  

Will Mortgage Rates Go Lower?

It is clear that the Fed is going to keep mortgage rates low for some period of time. In my last article I quoted Bill Gross (co-CEO at PIMCO Bond Fund): “I think at some point we’re going to see a 4.5% mortgage rate and the 10-year Treasury rate capped at some level,” he said. “When the Fed comes in to buy Treasurys that will be a big day.”

The Fed acted on March 18th! They stated that they intended to increase the purchase of Mortgage Backed Securities by up to $750 billion more and in addition they will buy up to $300 billion of longer term securities. The surprise in this announcement was that they will buy US Treasuries. The 10-Year Treasury Note fell immediately (See chart below).

While the Fed did not put a cap on the 10-Year Note; it is a big statement!

So are we at 4.5%?

Yes, very close. This morning I’m seeing 4.625% at par pricing.  The cost to buy down the rate to 4.5% would cost .375%  ($1,125 on a $300,000 Mortgage loan).  This pricing assumes high FICO scores and strong equity in your home.

Could rates go lower?

Lenders currently have a high backlog of business and they are not passing along all of the benefits of these lower rates. They have staffing issues and they are trying to make a few more dollars. Sound familiar?

The Mortgage News tab (at the top of this page) will link you to a number of articles that should answer most of your refinancing questions.

WHAT ABOUT THE STOCK MARKET?

The last time I commented on the Stock Market I indicated that I was looking for a potential move down to 6400; that happened in the first week of March. The market rallied back to over 7900 (23%) and now appears to be heading for a test of those lows over the next few weeks.

I don’t expect that we will see a V-shaped bottom in the Stock Market. Typically, markets tend to build bases. The Markets move sideways and there are a number of tests of the lows. Could we see lower valuations? The trend in the Stock Market is still down and I am a believer in trends. Let the trend be your friend, don’t fight it.

Stock Market Woes and Mortgage Rates

There is surely a lot to talk about! The the stock market is  now below the 7000 mark and the S & P sitting at 700. The Dow Jones closed today at 6763 down close to 300 points. I had been looking for the Dow to move to 6400 and hopefully we won’t see a lower number.

The above chart is a picture of the S & P 500; it seems to be breaking support and this is not a good thing. On the technical side we could see the S & P 500 move down to the low 600s and this would imply that the Dow Jones Industrial average could break 6000!

The point and figure chart that you see above would indicate a price objective of 600 according to my view. You’ll note that the bearish objective is 500 and I don’t yet feel that gloomy about the prospects for the country. We will surely have a blowout move downward that will scare everyone to death. That’s called a selling climax. Strangely enough that might be very welcome! Let’s just get it over with.

WHAT ABOUT THE 4% – 4.5% 30 YEAR FIXED RATE MORTGAGE?

Bill Gross, co-CEO at PIMCO Bond Fund, still believes that we may see 4.5% mortgage rates. This guy is really good at what he does! I have followed him for a number of years; dating back to my days with UBS.

He believes that government action to support the economy and the housing market will force the issue. He believes that the government may choose to put a cap on Treasury rates to encourage investors to take more risks.

“I think at some point we’re going to see a 4.5 percent mortgage rate and the 10-year  Treasury rate capped at some level,” he said. “When the Fed comes in to buy Treasurys that will be a big day.”

Japan has had a banking crisis and real estate bubble that burst in 1991; you wonder why, we as a country,  could not have learned from this. I guess you could say it was greed and our politicians were on board as well. A combination that has proven to be quite a disaster!

Mortgage rates in Japan have moved between 2% and 3.5% for the last 12 years. Their fixed rate mortgages are typically 5 year and a 15 year fixed in duration. They also have variable rate mortgages.

Will we ever see those kind of rates? I seriously doubt that we will. The largest debtor nation in the world is just not going to be able to sell their debt at those levels. So, don’t get caught up on really low rates.

Most of you have great rates and probably don’t need to refinance even at these low levels. However, think about your cash needs; remodeling or funding the educational needs of your children. Wouldn’t it  be nice to finance those needs below 5%!

Remember, I’m here to answer any of your questions. I have a new phone number that you can reach me at: 702-666-7066.

GO DAWGS!

Will Mortgage Rates Get Even Better?

There has been a significant drop in mortgage rates over the last few months. In the past the Fed didn’t really have any control over mortgage rates; rates were determined by investors and the market (supply and demand). What has changed is that the Fed is now an investor with a very large checkbook (the Fed has indicated that they will spend up to $500 billion on mortgage backed securities). They have spent about 10% of that total.

Mortgage rates should be lower than they currently are and that is due to a number of factors. First, the lenders are trying to make more money off of these new refinances. While they have cut their rates they could do more; instead they are pocketing the premium for themselves.  Secondly, lenders seem to be holding back on their rates because they have such a hugh volume of business in their pipelines. Lastly, they have staffing problems; they don’t have enough people at the moment to handle much more business.

Hopefully rates will stay down for a period of time; one never really knows. The Fed’s purchases are acting as a backstop to rates; buying mortgage backed securities when they are attempting to sell off and bring us higher rates. Who would have thought that we would see mortgage rates this low. Back in early 2003 mortgage rates dropped to 6% and everyone was refinancing their homes. Mortgage rates were over 8% in 2000.

The Fed is attempting to re-inflate the mortgage market and it is working in the refinance market. Home buying should eventually get a kick start; however, this economy is making everyone very cautious in their spending and investing. The Foreclosure market is hurting everyone by adding supply to an already beaten up housing market. I have mentioned previously that the government may allow underwater homeowners to refinance to lower rates without an appraisal. This would entail loan modifications with the homeowner’s current lender. The benefit would be lower payments and improve the chances that these homeowners will not have to go into foreclosure. This type of loan modification, if approved, would only be for homeowners who have been paying their mortgage payments on time.

There’s never been a better time to review your current mortgage loan. There are many considerations that need to be made before you make a decision. I’m here to help you explore your alternatives.

Mark Clawson
702-351-7912
markvclawson@gmail.com

Rates Still Falling Get Ready to Refinance

This is the 10th consecutive week that the average rate on the 30 Year fixed rate mortgage has declined. We are starting to see rates stay below 5% and borrowers are taking action and refinancing.

IF YOUR REALLY SERIOUS ABOUT REFINANCING YOU NEED TO ACT NOW!

The Fed is impacting rates directly by purchasing $500 billion in mortgage backed securities issued by Fannie Mae, Freddie Mac and Ginnie Mae. Typically, in the past, the Fed has had little control over mortgage rates. This has changed with their massive involvement with Fannie Mae and Freddie Mac.

The sudden drop in rates that started last year has been great for borrowers wanting to do a cash-out refinance or to just get their mortgage payments lower. It also created some turmoil for the lenders and this could have some impact on your borrowing. Last year many borrowers broke their rate locks to go elsewhere. They could find much lower rates and who would argue with that! This created problems for some lenders and it may make borrowing process a little more difficult.

The first thing you need to do is to determine if a refinance makes sense for you. Once that is determined, fill out the loan application and start the appraisal process. You need to be ready to act and some lenders may require you to be fully approved before you can lock your loan. This is not always a case but it is always better to be prepared. You may also find that you may have to pay for your appraisal in advance of your closing.

Larry Cragun, the founder of the NeighborhoodsUndressed Network recently wrote an article that addresses some of these issues.

Click RealEstateUndressed.com

Remember, your loan is unique, and some of these issues may not apply to you. Just giving you a heads up; it’s always better to be educated about the markets in advance. Give me a call at 702-351-7912 or just email me at markvclawson@gmail.com

Should I Refinance?

There is a real incentive to refinance in today’s market. Rates dropped substantially after the Federal Reserve took action to lower rates by purchasing billions of dollars worth of mortgages. Keep in mind that the banks have become extremely cautious on their lending and you need to do your homework. It’s still important to have a trusted advisor who is working in your best interest.

The Fed is doing every thing that they can to shore up the housing market. Lower rates can make housing more affordable and encourage home purchasing and refinancing. This potential upswing in home buying could start to reduce the number of bank owned homes that are in foreclosure. It is imperative that these homes be taken off the market. Bank owned homes sell at a discount to the market and put pressure on the general market value of all homes.

The current refinance market is only available for highly qualified borrowers. The applicant will need to show steady income and solid debt-to-income ratios. Most lenders will only loan up to 80% of the value of your home. This means that you need to have equity in your home. If you fall into this category you should have no problem refinancing your home.

The Problem – Home buyers who are underwater

The large majority of homeowners find themselves in this category. The region of the country, that you live in, is an important factor. Las Vegas has seen a tremendous drop off in home values due to aggressive building and the unrealistic home values of a few years ago.

James Lockhart, Federal Housing Agency Director, has indicated that they may consider waiving the appraisal requirement on refinances. This is an attempt to help those homeowners who find themselves underwater on their home values. This could allow homeowners, that are underwater, to refinance at lower rates. To qualify the homeowner would need to have been current with his mortgage payments. This could motivate people to stay in their homes rather than go through foreclosure. Seems sound to me. Why not reward those people who have been paying their mortgages in a timely fashion.

I understand how some people will complain about this type of action. However, everyone is impacted by foreclosures. Market values will continue to erode unless we remove this continuing threat to home values.

The decision to refinance has many considerations. You may have a high rate and not need to refinance.  If you have been paying on your mortgage for a number of years you may have only a little interest left on the loan. You will be paying mostly principal payments and the interest rate on your loan will not be an issue. Why start a new loan; makes no sense.

The decision to refinance requires you to consider a number of issues.

How long are you planning on staying in the home?

If you are not planning on staying in your home for long; the cost of a refinance may not make sense.

How much lower will your mortgage payments be?

Once this is determined; you can calculate the breakeven point of the transaction. This is the process of determining the costs associated with your loan and advantages of a lower payment.

What is the cost of the new loan?

There are always fees involved. A no-fee loan will typically have a higher interest rate than a loan with upfront fees. A higher rate is a cost that needs to be considered. The lender quotes a higher rate, on a no-fee loan, in order to pay the loan facilitator. Nothing is free.

How much equity do you have in your home?

Do you plan on doing a cash-out refinance?

Do you want to change the term of your loan?

Let’s say you want to change from a 30 year mortgage to a 15 year mortgage, what do you need to know? If your rate is currently low, the cost of a new loan may not make sense. You can just self-amortize your current loan so that it is paid off in 15 years. Simple, and there is no cost to you. The only exception would be if you wanted to do a cash-out refinance or if your rate was high enough that a change in rate would be helpful.

I hope you find this information to be useful, as always, you can call me or send an email if you need information specific to your needs.

HAPPY HOLIDAYS,

MARK CLAWSON

702-351-7912

markvclawson@gmail.com

Las Vegas Mortgage Loans – The Fed Continues to Make No Sense

The Fed is at it again and making no sense. Politics doesn’t mix with common sense and the Feds latest proposal makes little if any sense. The Fed is trying to put forth new regulations that will require Mortgage Brokers only NOT LENDERS  to disclose, before application, what the mortgage brokerage fee and rate on your loan will be.  This fee and or rate cannot change under the proposed changes to Reg Z,  commonly known as the Truth in Lending disclosure. 

As you may know Collen McGrath and myself work for a Mortgage Broker in Las Vegas and in the State of Washington.

Below you will find our individual comments regarding this proposed change:

Comments by Mark Clawson:

Dear Sir or Madam,

I find it incredulous that you have chosen to allow lenders to continue to non-disclose their fees. Isn’t non-disclosure, on the part of lenders, what has caused this mortgage mess that we know have on our hands.  Did the lenders disclose how they were packaging their collaterilized debt obligations? Why place your confidence in the lenders and not the many mortgage brokers who chose not to provide loans to unquailifed borrowers?

In many cases, loan officers working for mortgage brokers, actually helped to avoid an even worse mortgage crisis.

The proposed re-vamp of Reg Z where the broker is required to provide the consumer with a “precise” dollar estimate of fees the broker will charge is not well thought out. How can you know the borrowers situation without taking a loan application. 

It is through the “precise” accumulation of client data that you are then able to provide the client with a “precise” estimate of fees. I understand the intent but let’s get real. You can’t provide good information to the client without good input from the client.  Shouldn’t lessons of the past guide how we approach the future in dealing with the client?  

Let’s not let politics dictate changes. What ever happened to common sense?

Comments from Colleen Jane McGrath:

Dear Sir or Madam,

I am writing to express my comments on the proposed Reg Z changes now currently being considered. As a preface, you should know that I was in the business when Reg Z first became a law many years ago (at the urging of Senator Proxmire if my memory serves me well).  I tell you this so you have some indication of the years of experience I have in the mortgage industry.

For my first twenty six years in the mortgage business, I worked as a mortgage banker for various companies, primarily bank owned. As an originator I was encouraged to get “overages” to increase my income as well as that of the bank.  However, when I became a broker, I was able to use yield spread premiums to offset buyers costs, AND I was able to offer my customer a better rate that he could obtain from a bank.

The differentiation between lenders and brokers has become blurred over the years because, unlike in the past, lenders now package and sell their loans and most often times do not retain the servicing. When the loan is originated by the lender they know in advance what investor they are delivering the loan to for purchase. In essense acting as a broker.

However, lenders, unlike brokers ARE NOT REQUIRED TO DISCLOSE their total compensation. Why is that? How can the consumer be fully served if full disclosure is not required by both lenders and brokers alike? Moreover, how does the consumer know that he is indeed doing business with a lender versus a broker?

There have been several studies which show, on an overall average, that the consumer fares better when dealing with a broker versus lender. Are these studies not being taken into consideration when debating the matter at hand?

The most egregious part of the proposed re-vamp of Reg Z is the requirement for the broker to provide the consumer with a “precise” dollar estimate of fees the broker will charge, especially in light of all of the recent changes in the Secondary Market.   It is impossible to provide the consumer with a precise estimate when so many factors can impact the pricing such as:

Credit Scores

Loan to Value

The Income and Financial Statement of the consumer/borrower themselves as it relates to program, fees and rates they will be eligble for when making application.

In essence, the very items needed to make a determination on how best to help the consumer cannot be obtained in advance under the proposed changes. In a time when consumers need more avenues for financing, these proposed changes will constrict those avenues in essence hurting the consumer even more.

Las Vegas Mortgage Rates – Local Lender

I must admit that the mortgage market is getting very crazy and unpredictable. So do we need to be celebrating with a glass of wine and a nice dinner? You can be the judge.

Two weeks ago the thirty year fixed rate mortgage had a note rate of 5.875% and today it is 5.5%. This is good. However, the 3 Year Adjustable Rate Mortgage has gone from a note rate of 4% to 5.625%. This is not good. You can view all of todays conforming rates by clicking here.

My thinking is not nessarily supported in fact, however, I will give you my best read. Long term mortgage rates are pegged, somewhat, to long term Treasury Notes or Bonds. Short term rates don’t have such a mechanism at work. Bankers are having a hard time finding Wall Street investors for their ARM products and with little demand the rates are moving upward. I believe there is concern about home values in the short term. Prices are falling and there is concern about the borrower losing equity in their home. Without a pricing mechanism in place fear is coming into play.

For now, ARM Products for mortgage loans don’t look very appealing. The rates are higher than fixed rate mortgages.