Question of the week: Why do I need title insurance?
Answer: This is a common question I have been asked my whole career and it has come up in a few conversations lately as more first time buyers enter the market. Every buyer and seller in a real estate transaction sees charges for a title insurance policy, but few know what the purpose of the policy is, other than something gets insured. Is it necessary? Like all insurance, only if you need it and if you need it you will be very glad to have it; like auto or homeowner’s insurance.
Simply put title policies insure that things are what they are supposed to be. If you are buying a home the title policy is insuring that you are the rightful owner, that no one can come along later and claim ownership of your property. If you are a lender making a loan secured by real property the title policy insures that your lien has a certain priority on title and that the only liens against title are documented and disclosed. Title insurance covers any title issues that occur up to the date deeds are recorded when the policy is in effect, it does not cover any issues that occur after your transaction, those are covered by the next policy when you sell or refinance.
Throughout the years I have heard many complaints about the need for title insurance and the cost relative to what is being provided. Most title policies insure the work of those done before, why charge so much, is a common complaint. Another complaint is that title policy claims are so rare that the fee should be lower. Like the excellent driver who has no tickets or accidents on his record, most homeowners, particularly in areas where the housing stock is older and has transferred several times over the years with each transaction requiring a new title policy, the purchaser of title insurance wonders why the expense for insurance that likely will never be used. Then the excellent driver with the perfect record gets in a bad accident caused by an uninsured driver; how glad is she that she has quality auto insurance and has kept up the premiums?
When title insurance companies do pay claims they are usually very hefty, think tens or hundreds of thousands of dollars. Because of this most of the revenue title insurance companies collect do not go to paying claims, in fact the industry average is that only about 5% of premium revenue goes to claims compared with approximately 70% for auto insurance. Title insurance companies spend the bulk of their premium revenue on loss prevention, i.e. research.
What if the owner of your current home purchased the property eight years ago from a seller who had a lien against the property that was recorded improperly in the county records and that lender stepped forward to collect on your home and possibly force the sale? What if you purchased your home from a seller with an IRS tax lien that was unpaid? How about an estate that sold a property that was later challenged by an heir as being improper and a judge agrees? Each of these could be a very legitimate claim against a title policy that could lead to a very large payout for the title company.
Even more challenging for title companies today are bank foreclosures and short-sales. Lenders that hold seconds are finding out that some properties are transferring without their consent to pay off and are coming back to enforce their liens as unsatisfied. In such instances the title company that insured the sale and that all liens are satisfied would have to make restitution to the lien holder.
Title policy claims are rare because of the loss prevention that is performed by the title company during the escrow or settlement period to investigate the property. The seller, liens against title and other factors that may lead to a claim down the road are all investigated and verified. Unfortunately you will not know if the titles company, in particular the title officer, did a good job investigating the title until you find someone making a claim against your title. This is why it is critical to have a title officer who is experienced and knowledgeable. Over the years I have had perhaps three or four clients with a title claim. Easements for shared driveways, a piece of vacant land included in a sale that maybe wasn’t, power lines, even fences, have been issues that have cropped up.
Far more prevalent over the years, perhaps three to four times a year with increasing frequency in our recent markets with a lot of current bank controlled sales, are title issues that are discovered and corrected during escrow. Divorce settlements with a recalcitrant spouse, estate issues, private party second from a prior seller, occur once in a while. Of increasing frequency are the issues caused by the surge in foreclosures, which while lower than in prior years is still a good piece of the market. Your title policy premium pays for all the work done by the title company prior to closing so they can insure you are getting what you think you are getting, clear title. And if you discover later that you do not have clear title it is their obligation to pay to correct any claims that may arise later.
Are you absolutely certain there are no forgeries on deeds, unpaid liens, easements improperly recorded or illegal confiscations of title on the property you are buying?
Aren’t you glad you have title insurance?
Have a question? Ask me!
Remember, with Dennis it’s not just a mortgage, it’s your complete financial picture.
Russian President Vladimir Putin impacted mortgage rates this week. With investors moving their money into the safe haven of bonds and Mortgage Backed Securities (MBS) late last week following his sending Russian troops into Crimea we saw a positive effect in rates last Friday. With Putin calling tensions a bit and seeming to desire a democratic referendum in Crimea to let the people decide if they wish to more closely align with Russia than with the Ukrainian government in Kiev investors breathed a sigh of relief and money flowed back out of bonds putting upward pressure on mortgage rates.
Positive data was released Monday for personal income for January, showing incomes increased 0.3% for the month after being flat in December. Consumer spending also increased, 0.4%; as our economy is composed of 60-70% consumer spending this is good news for economic growth. A bit of a cloud on the silver lining however is that higher consumer spending was driven by an increase in purchases of services and not durable goods, in particular was a sharp spike in healthcare service expenditures as a result of the Affordable Care Act (aka Obamacare). If these expenditures were significantly higher than households had previously made for healthcare purchases in the past there can be a trickle down effect into other household purchases in the future creating a drag on the economy. Monday’s news being positive for the economy was not positive for mortgage rates.
A strong decline in initial filings for unemployment insurance also pressure on rates to increase. Following last week’s report of 348,000 claims, the Labor Department announced on Thursday that there were 323,000 claims filed last week. The break in the lousy weather through most of the country east of the Rockies had an impact on the positive direction for claims.
As it is the first Friday of every month the headline economic data is the employment report for the prior month. Expectations were for a lousy report, and while expectations were exceeded, the expectations were so low that a very mediocre report had a strong impact on mortgage rates. Headlining the report was the creation of 175,000 jobs in January, barely enough or just shy of keeping pace with new entries to the job market. Normally this news would cause rates to drop, however following the news last month of only 113,000 jobs created this was seen as positive. Of the jobs created 140,000 were in the private sector. The unemployment rate increased for the month from 6.6% to 6.7%. Of concern to me in the report was a reduction in average hours worked to 34.2 from 34.3. We have seen hours worked decline and it shows an increase in part-time employment as a percentage of the workforce. Overall the report should be neutral to positive for rates, however because of the low expectations built into the market prior to the report investors reacted by pulling out of bonds, pushing mortgage rates higher.
Rates for Friday March 7, 2014: With the economic data this week and a large drop in MBS prices today rates for the week are higher than last Friday. The economic data reinforces the Fed’s position of continuing to ease its Quantitative Easing policy of purchasing mortgages and US Treasuries. Rates have trended up this week, we could see a drift slightly higher before they level off again. If you are in the market for a mortgage it is wise to lock your rate and terms through your escrow period as soon as you are able.
FIXED RATE MORTGAGES AT COST OF 1.25 POINTS
30 year conforming 4.25% Up 0.125%
30 year high-balance conforming 4.50% Up 0.125%
30 year FHA 3.625% Up 0.125%
30 year FHA high-balance 3.875% Up 0.125%
Please note that these are base rates and adjustments may be added for condominiums, refinances, credit scores, loan to value, no impound account and period rate is locked. Rates are based on 20% down (3.5% for FHA) with 740 FICO score for purchase mortgages. **FHA rates have credits available for closing costs at these rates and higher.
A mobile version of the Weekly Rate & Market Update as I write this from the passenger seat of the Honda Odyssey while Leslie drives us northward to the Bay Area where we will be honoring Dad tomorrow with a memorial service. Dad travelled around the world and always said of the Golden State, “it is unique in its geography, geology and meteorology.” It is a great state and to have the opportunity to assist families purchase a small piece of it for their homes is a wonderful career that I have enjoyed for several decades. Driving through the local mountains, through the valley rich with agriculture, to the San Francisco Bay area with its hill and fantastic bay, reinforces Dad’s opinion of the state, it is truly magnificent.
Hope you have a great weekend, don’t forget to Spring Ahead with your clocks tomorrow night or you’ll be late for church!
Question of the week: Should we put less money down?
Answer: Not everyone purchasing a new home needs to put the largest down payment possible into the purchase of their new home. For those who have some flexibility in qualifying and the ability to invest more than the minimum required down payment into their home taking some time to study the short and long term benefits of different loan amounts will ensure they make the best decision for their family.
Why would someone put less money down?
Most mortgage applicants, particularly home buyers, want a thirty year mortgage. Because of the way amortization over a thirty year period works the change in monthly payment from putting several thousand dollars less into the down payment is not very large. For instance let’s look at two buyers purchasing a new home for $500,000. Both can put $75,000 down, one does and the other decides to put $50,000 down. Both will have mortgage insurance, but one will have $25,000 still in the bank. What is the difference in monthly payments for 30 year fixed rate loan including MI payments:
Loan Amount: $425,000
Mortgage Principal/Interest: $2122/mo
PI + MI: $2274
Down payment: $75,000
Loan Amount: $450,000
Mortgage Principal/Interest: $2247/mo
PI + MI: $2468
Down payment: $50,000
As you can see, in Scenario A the borrower has lower MI payment and lower mortgage payment by $194 per month. The borrower in Scenario B spent $25,000 less in down payment. Who is better off? That is a personal decision but if you divide the $25,000 saved by Borrower B by the $194 per month saved by Borrower A it would take Borrower A 129 months, almost eleven years, for Borrower A to save the $25,000 in extra down payment. The question each borrower answers in this scenario is what positive purpose could I put $194 per month or $25,000 cash to in the long run. Can you use the $25,000 to pay off a credit card costing you $900 per month? Can you use the $194 to accelerate paying off a car or to offset your daughter’s travel softball team costs?
There are many reasons, recently we had a client who put less down than originally intended and paid off a large credit card saving hundreds of dollars per month, another couple used the excess funds to kick off their children’s 529 college accounts and we have had a single homebuyer put less down on her home purchase and several months later use the remainder of the funds she was going to use for down payment to purchase an investment property. Perhaps the home you are buying can benefit from extensive upgrading and rehabilitation, or some/all of your funds are a gift from mom and dad and you wish to not have them go as deep into their savings.
The line in the sand when it comes to down payment options is most often mortgage insurance (MI). Twenty percent down payment on conventional lending avoids the added costs of MI, but if you have less than twenty percent down taking some time to see the different cash down to payment options could benefit you in the long run. If you are putting more than twenty percent down you may find benefits as well in putting less money down.
As with most mortgage questions there is no clear cut definitive answer as to whether you should put less money down if you are able. Most of the answer is with your comfort level and what you feel is in the best interest of your family in the long run, more cash in the bank at closing or lower payments over a long period of time. To determine the best answer for your family however let me help you calculate the different options and payments and cash to close within your ability to qualify for your new home.
Market moving data on the economy came out this week. Early in the week a consumer confidence report came out that showed the overall confidence measure decline in February from January. However the data is somewhat mixed as the present situation confidence level increased to its highest level since the recovery started, but the expectations confidence level (or confidence in the future) dropped strongly. Markets reacted to the negative number boosting Mortgage Backed Securities (MBS), which is good for rates—higher MBS prices means lower rates.
A bright spot in home sales surprised the markets on Wednesday with new home sales surging in January to the highest annual rate since July 2008. With the disappointing existing home sales reports from January the new home sales expected to drop from December due to weather and buyer malaise. However lower prices and builder concessions brought buyers to market. Year over year prices of new homes have slid (slud? Bonus points to readers who can name the famous baseball player turned announcer who put slud into broadcasts) from double digit gains to 3.3%. The news is positive for housing markets and somewhat negative for mortgage rates.
Another mixed reports was durable goods orders (items that last longer than three years) in January. The overall number declined for the month, dragged down by transportation orders dropping over 5%, however taking out transportation showed a positive report for all other goods of 1.1% over December after falling almost two percent the prior month. The mixed report was generally shrugged off by the markets who instead reacted to….
…Unemployment claims for the week which climbed to 384,000 filings last week. The four week average is higher than a month ago and the data does not show any improvement in the employment markets. With bits and pieces of positive economic news outside of labor reports and continued poor employment reports we have sufficient data to show that as we approach the five year anniversary of the recovery starting in June 2009 that we have a jobless recovery, or low income job recovery—neither of which is positive for overall economic health.
Revisions to GDP are no surprise. Today was the first revision to the initial 4th quarter Gross Domestic Product (GDP) figures announced last month. Readers of the Weekly Rate &Market Update may recall the government announced a somewhat healthy 3.2% growth in GDP for the last quarter of 2013, down from the 3rd quarter but still a good number. To no one’s surprise the initial revision of the GDP figures showed growth of only 2.4% for the quarter, down almost 1% from the initial estimate and over two and a half percent below 3rd quarter results. Normally this would cause a strong positive reaction for mortgages, however since the news was greatly anticipated there has been no reaction to the news.
Rates for Friday February 28, 2014: Mortgage Backed Securities climbed most of the week to the point that technical factors have resulted in a bit of a sell off today tempering gains. If the MBS markets can hold on today to stay above a technical level of resistance we could see continued moves upward next week, which means trending down for rates. Key word: “could.” Week over week rates drop a bit as MBS have trended up.
30 year conforming 4.125% Down 0.125%
30 year high-balance conforming 4.375% Flat
30 year FHA 3.50%** Flat
30 year FHA high-balance 3.75%** Flat
Please note that these are base rates and adjustments may be added for condominiums, refinances, credit scores, loan to value, no impound account and period rate is locked. Rates are based on 20% down (3.5% for FHA) with 740 FICO score for purchase mortgages. **FHA rates have credits available for closing costs at these rates and higher.
The Weekly Rate & Market Update this week is dedicated to my dad, Dana Leroy Smith, who passed away last Friday evening succumbing to pancreatic cancer that was diagnosed at Thanksgiving. Dad was a regular reader of the WR&MU, often passing along to his contacts if there was a particular Question of the Week or economic commentary he appreciated. I took a lot of joy when I would get an email from one of his friends commenting on my update.
Dad taught me how to read a stock page, how to work the backwards logic Hewlett-Packard calculator, what the price of a barrel of oil meant to the economy (he was a third generation fossil fuel guy) and how interest rates worked. Beyond the business and economic wisdom he shared, he more importantly showed me and my brother and sister, the importance of honesty (“I’d rather be honest and lose a friend then lie and keep one.”), integrity, generosity and friendship. I know that I am a better man, husband, father, friend and member of my community because of the lessons and example set forth by Dad through my lifetime.
I will miss him, but know I will always carry him and his lessons with me always. Proud to be his son.
Hope you have a great weekend, stay dry and enjoy the rain,
Question of the week: “What high school would I go to?”
Answer: Every week I ask my daughters if they have a question for me for the Weekly Rate & Market Update, usually met with classic teen/pre-teen ennui of a shrug and “Idonnaknow” or something silly like, “why do houses have roofs?” last night our eldest said, “What high school would I go to if we moved?”
Take out the “high” and ask simply “what school would I go to” and it is a question most kids probably ask their parents when told they are moving. Have moved in the middle of second and eighth grades (to different states) and after ninth grade (to another country) it was a question I asked myself and know the anxiousness of youngsters attending a new school due to a move by the family.
Every family will answer the question differently but none of the answers or conversations will be easy given the natural anxiety of leaving friends, having to be the new kid in school and having to make new friends.
If you are moving within a school district you can often keep your kids in their same schools to finish a year or their tenure at the school, but in some districts when your child moves onto the next school, i.e. elementary to middle or middle to high school, you then need to move to your “home school” which could cause separation from friends. In districts like Long Beach Unified where there is “school of choice” many students attend “new” middle or high schools out of their home school area and the kids can be part of this decision making a home move within the district somewhat easier.
But moving out of a district or area can create challenges for the family centered on the stress of your children having to change schools. Having been in this position I know that eventually everything turns out okay. In my case I knew we were not moving back to our old school and because I did not fight the moves was able to more quickly make friends and integrate into the new schools.
Not all kids are wired that way so if you are going to be moving so you kids will be attending new schools do some research and get suggestions on how to communicate the move to your kids and steps you can take to minimize the stress and anxiety. Websites like Kidshealth.org have some good suggestions (Preparing your child for a move and What kids who are moving should do are just two examples), as well the counselor at your kids’ current and new schools may be of assistance.
Moving is very stressful even if it is down the street, add in transplanting your children to new schools and the stress level increases exponentially. Taking the steps early on and communicating with your kids openly should alleviate some of the stress and anxiety, but not all of it. Keep in mind the reason you are purchasing a new home is for a better life and opportunities for your family, in several years when you look back you will realize that the decision was the right one and worth the emotional turmoil just prior to and after your relocation.
Of course with texting, Instagram, SnapChat and Skype moving and leaving friends is a lot different today than 1975!
One more point on moving. Too often pets are forgotten about in all the chaos of packing, moving and unpacking. Prior to your move make sure you have new ID tags for your pets with your mobile phone numbers and new address imprinted on them. When you get to your new home immediately setup your pet’s bedding and toys so they know they have a place in the new place. Take them on a walk right away so they can smell who their new buddies will be and take frequent walks after you move in so they know their new neighborhood, their street and new home. This will also give you an opportunity to learn your neighborhood and meet your neighbors, especially those who regularly walk for exercise or walk their dogs.
Some important economic news this week that impacts mortgages and financial markets. A gauge of housing markets is new housing starts and permits pulled by builders. On Wednesday data was released that the cold weather in January impacted housing stars which were down 16% from December. Permits however are unaffected by weather and those too dropped in January from December reflecting a slow down by home builders in providing new housing for the market. This is an important look at sentiment for housing as builders do not want to build homes that will not sell, therefore by slowing down their permits they are indicating they feel less homes will be able to be absorbed by the market in the future. Generally this news would be positive for mortgage rates.
A major data point for economic activity was also released on Wednesday, the Producer Price Index, or PPI. The data is a bit of a challenge as the Bureau of Labor Statistics which releases the report has changed the components that produce the data and when the prices are calculated. In short the report now is dominated by services as opposed to manufactured goods and part and the price point has moved from Stage of Processing to Final Demand-Intermediate Demand, basically the end price for the seller. With the changes calculated PPI increased 0.2% for January over December and 1.2% from January of 2013. Both are tame increases in prices and do not create any expectations of high inflation in the near future. The report is generally favorable for mortgage rates.
Important but dull information came our way late on Wednesday with the release of the Federal Reserve Board’s meeting minutes (synopsis here for data/economic geeks like me). The primary news from the minutes showed some disagreement on the current tapering policy of the Fed as it slows its purchases of mortgages and federal debt by $10 billion per month and discussion on what variables are needed to begin to move the Fed Funds Rate upward from near zero. The Fed has been focused on employment for the past several years and now as the official unemployment rate nears 6.5%, which has been a Fed target, some Fed governors are now saying moves to tapering and when to increase the funds rate needs to shift from unemployment to broader performance of the economy and/or inflation. For years prior to the Great Recession inflation was the focus of the Fed, with the quick leap in unemployment beginning in 2008, it appears some of the veterans on the Fed board are looking to return their primary focus to inflation and broader economic performance. The minutes appear to be net neutral to me for mortgage rates but the market reacted negatively to the news.
Thursday continued pertinent information with the weekly release of initial unemployment claims, which dropped 3000 from the prior week to 336,000 claims, continuing claims and the four week average of initial claims both rose. Since last week is also the sample week for the Department of Labor’s monthly employment report it appears that report could be more favorable than the prior months’ with the 1% dip in initial claims from the prior week. Also released on Thursday was the Consumer Price Index for January, also known as inflation. The data showed only a 0.1% increase in prices, lower than the 0.2% in December and year over year prices increased only 1.6%. This tame inflation environment gives support to those in the Fed who favor continuing very low interest rates beyond the 6.5% unemployment marker previously set as the low rates have not had a significant impact on prices to consumers. Energy costs dropped dramatically in January after rising sharply in December, a relief to those east of the Rockies buying home heating fuel. The news is positive for mortgage rates.
Finally Friday gave us one last bit of substantial news with existing home sales. Nationally sales of existing homes in January dropped 5.5% from December and were down 5.5% from January 2013. While weather no doubt had some part in the decline, but also factoring in are the same components that have led to slowing in housing markets since May: higher interest rates and higher prices. Prices nationally for existing homes were up 10.7% in January from the prior year. This news is somewhat positive for mortgage rates as slower home sales means slower demand which means a drag on the economy which means lower rates in a fundamental economic model.
Rates for Friday February 21, 2014: After several weeks of a slow progression upward for Mortgage Backed Securities (MBS) starting last week we have seen a bit of a sideways/downward trend putting pressure on higher rates. Most of the moves have been technical in nature as economic data indicates flat or slightly lower rates. Week over week from last Friday rates are flat due to a rally today on the CPI news pulling us even after rates rising most of the short week.
30 year conforming 4.25% Flat
30 year FHA 3.50% Flat
30 year FHA high-balance 3.75% Flat
Please note that these are base rates and adjustments may be added for condominiums, refinances, credit scores, loan to value, no impound account and period rate is locked. Rates are based on 20% down (3.5% for FHA) with 740 FICO score for purchase mortgages.
Anyone buy any mattresses or cars this week? I find it interesting that the Presidents Day sales seem to be mostly for those two consumer items. What I find even more interesting is the contents of Abraham Lincoln’s pockets on the night he was assassinated. Not surprising was a pocket knife and spectacles (two pair), what is surprising is a Confederate bill… a Five Dollar bill nonetheless! Yes, the man whose portrait would later be on the United States five dollar bill was carrying a five dollar bill when he was shot but Confederate sympathizer. The ironies and surprises of history always intrigue me.
Hope you have a great weekend,
Question of the week: I’m doing my taxes, what is deductible from my transaction last year?
Answer: I am not a Certified Public Accountant, nor a professional tax preparer. Depending on your situation the following items may be deductible when you file your taxes:
· Mortgage Interest
· Origination/Discount Points
· Mortgage Insurance Premiums
· Property Taxes
Each of these is subject to not being eligible for deductions depending on the nature of your transaction (purchase, cash-out refinance, home improvements, etc) and your income.
My standard answer to this question was answered in the first sentence; I am not a tax professional. I have a hard enough time trying to keep up with the changes Congress, the Fed, HUD, DRE, Fannie Mae or other government agencies have regulated, I certainly have not been able to keep up with all the changes in the state and federal tax codes these past few years.
I can tell you this, if you purchased, sold or refinanced property last year I strongly advise you to take copy of the HUD-1 closing statement from your escrow documents to a professional tax preparer or CPA. S/He will be able to assist you in maximizing your deductions while staying out of trouble with the IRS and State Franchise Tax Board.
If you need a recommendation for a tax preparer do not hesitate to contact me.
The Coasters provide the theme for this week’s biggest economic news. Yes, it was Yellen and Congress doing their version of “Yakety Yak” as the new Fed Chief gave her first testimony to Congress. The bond markets on Tuesday were incredibly volatile as investors reacted to Yellen’s remarks. As she indicated basically no change in the Fed’s unwinding of its asset purchasing program known as Quantitative Easing, Mortgage Backed Securities (MBS) whipsawed throughout the day. We had fourteen market alerts on the day, alerts triggered when the MBS market moves one way or another by 15 basis points or more; most days we have no alerts and a highly volatile is considered getting three or four. In the end Yellen told us nothing new but the traders certainly did well with their commissions as investors bought and sold in tremendous runs throughout the day.
As for hard economic data that typically move markets, Thursday brought us retail sales for January and initial unemployment claims for the prior week. Retail sales came in well below expectations, dropping 0.4% in January after dropping 0.1% in December. There is some element of the poor weather in January for much of the country in the data, but that was built into expectations of a 0.1% drop. The data provides basis for expectations of a further revision down of 4th Quarter 2013 GDP and a soft number for 1st Quarter GDP data if things don’t pick up in February and March. Jobless claims continue a slow rise from week to week with 339,000 filing initial claims last week. The four week average is up 3,500 to 336,750 per week. The data supports the poor monthly reports we have been getting from the Labor Department and also are an indicator for less than stellar GDP numbers in the coming months. While not good news for the economy, overall poor economic news—or not good economic news, favors lower mortgage rates.
In housing news, Dataquick released home sale data for Southern California this week. For the six county Southern California market home sales dropped for the fourth consecutive month and total sales were down 9.9% from January 2013 and the lowest number of sales for January in four years. Prices also declined month to month dropping 3.8% from December and are at May 2013 levels, though year over year prices are up 18.4% from January 2013 to a median price of $380,000. Is this a trend or a soft spot before the market firms back up? May 2013 has become a line in the data as that was when mortgage rates bounced hard off the bottom and prices were at a post-crash peak. Housing is an integral part of the economy and has been a primary factor in GDP growth since the end of the recession in June 2009. How housing markets trend going forward will have a very large impact on economic and employment recovery.
Rates for Friday February 14, 2014: Mortgage Backed Securities broke through a trading channel to the downside this week, signaling a trend to higher rates. Rates have edged up a little bit from last Friday, breaking a four week string of flat rates for conforming mortgages. We have upward pressure on rates so anyone floating should be doing so with great caution.
30 year high-balance conforming 4.375% Up 0.125%
Happy Valentine’s Day to all the sweethearts, and aren’t we all someone’s? Thankfully I have a great sweetheart and we are celebrating our 20th Valentine’s Day together—what a wonderful set of decades for me! (I trust she will say the same!) Tonight we will be celebrating with a dozen or so teen and pre-teen girls over for a birthday sleepover—I wonder if they will want to watch my James Bond anthology?
Here is a brief history of Valentine’s Day with some interesting background. Leslie, don’t worry I will not be sacrificing any goats or the dog and hitting you with the hides!
Enjoy the romance and your week,
Question of the week: Why would anyone looking to purchase a home doing it on a rainy day?
Answer: After having no rain for several weeks (months?) in Southern California a rainy day or weekend is the best time to shop for a home! The rain we are experiencing locally this week is a rarity, as local residents know we are in a drought and can go many months between rain storms. It is not uncommon for someone to purchase home in March or April and not experience any rain until October or later. And then when it does finally rain they discover that their home may not be entirely waterproof.
Previewing potential new homes during rain storms allows potential buyers to see leaky roofs, porches, windows or doors. Walking the exterior of the property you can see where rain water pools; is it against the house where it can cause erosion, are huge puddles of water flooding a ventilation area for the foundation? Are there adequate gutters and downspouts? Even a new roof may have problems that do not manifest for many months due to lack of rain. I recall several years ago our church had put on a new roof, several months later when the first rains came after the roof was put on there were leaks that needed repair. Think about if this was the home you had purchased last year, you too have gone many, many months without the opportunity to see how weatherproof it is. My advice, if you are looking to purchase a new home do not put off looking just because the weather outside is inclement, in fact call your agent and make an appointment to go look at houses because it is raining!
Another busy week for economic data. While most of the attention all week has been focused on today’s employment report for January, several meaningful releases came out earlier in the week that impact markets and mortgage rates. The week started with disappointing data on manufacturing in the United States. What is known as the ISM Manufacturing Index showed a sharp decline in new orders, in fact one of the largest monthly declines on record. Coupled with production and employment in the sector showing significant slowing the overall index reports weakening in domestic manufacturing. This sent markets moving as stocks tumbling and bonds climbing.
Causing a rather busy day for traders on Wednesday was the ADP employment report for January that showed an increase of 175,000 jobs in the private sector in January. Recall last month the ADP report showed an increase of 238,000 private sector jobs in December and two days later the Department of Labor report of only 87,000 jobs. The ADP January report is still significantly below its December report and concerns investors about the ability of the economy to sustain growth in employment through the year.
Thursday continued the employment data as the weekly jobless claims were released and showed some improvement from the prior week’s initial claims with 331,000 filing for unemployment insurance, down 20,000 from the prior week. While the week to week decline is good news, less than good news is the lack of improvement in the number of people receiving continuing payments. The four week trend for continuing claims is rising and is 100,000 more than the average one month ago.
Today is the big number though with the monthly employment report from the Labor Department. While not as disappointing as last month’s report, today’s report on the employment situation in January was not good. Far below expectations of an increase of 181,000 jobs in January, the economy added a net increase of only 113,000. Combined with December’s 75,000 job increase and the two months do not reach the monthly average for the past year of 194,000 jobs gained per month. Some glimmering spots in the report were the drop in the unemployment rate to 6.6% due to people going back to work, prior reductions were primarily due to people leaving the labor force, gains in construction and private service jobs were stronger than prior months. One other positive aspect of the report, in my view, was the loss of 29,000 government jobs, fewer government jobs means less of a burden on private sector workers to support those jobs. The private sector added 144,000 jobs for the month, well below what is needed to absorb new entries to the job market.
The week was bookended by economic data that creates concern for economic growth for the start of 2014. Weakness in the manufacturing sector and continued lack of strength in employment when added to last week’s data on slowing home sales points to an economy that has been unable to fire on all cylinders and have momentum for steady and solid growth across multiple sectors. This news is overall good for those desiring mortgages rates to remain very low for a prolonged period, or see another decline in the near future, but is not good for our overall economy and economic recovery.
Rates for Friday February 7, 2014: Recent economic news could put a delay in the Federal Reserve pulling back on its QE asset purchases, meaning more money for more time into mortgages. Week over week mortgages about flat from last Friday thanks to a surge in prices (rates down) on Monday with slow deterioration through the week until today’s news. Rates have been very stable for the last several weeks, they could probably be a bit lower given how the mortgage markets have moved, but stability is welcomed.
30 year conforming 4.125% Flat
30 year high-balance conforming 4.25% Flat
Well I nailed that prediction. As I thought Nebraska-Omaha wiped out IUPUI on the road last week 99-77. Oh, that other prediction about the football game? Yes, I missed that by many points but who was paying attention anyway?
The world comes together this week in Sochi for the Winter Olympics. A peek into another culture as reports are made on the host city and country and we learn about countries such as Timor-Leste, Andorra and Moldova. There are 98 gold medals awarded to competitors in events well known, figure skating, downhill skiing, and less well known to most Americans, such as the biathlon which combines cross-country skiing and riflery. For those missing a little action with football season being finished can make watching at home more interesting with these odds on all sports at the Olympics, who knew that Darya Domracheva is the overwhelming favorite in the women’s 7.5km biathlon sprint? For me I think 8 to 1 odds for Maxim Vylegzhanin to win the mens 50km Mass Start Cross Country event is pretty enticing.
Enjoy the games and your week,
Dennis C. Smith, California Bureau of Real Estate Broker #00966315; NMLS #296660
Stratis Financial Corporation, California Dept. of Real Estate Broker #01269597; NMLS #238166
Contact Us | Dennis' Bio | Testimonials | Truth-In-Lending Disclosure Explained | New Good Faith Estimate | Social Media | Tell a Friend | Home | Loan App Checklist | Site Map | Loan Application | Mortgage Calculators | Customer Login | Are You Pre-Approved? | Daily Rate Lock Advisory | My Blog