Freddie Mac recently released the results of its Primary Mortgage Market Survey® (PMMS®), showing average fixed mortgage rates moving higher for the second consecutive week on stronger than expected data releases including the employment report for October. The 30-year fixed-rate mortgage is at its highest level since September 19, 2013, when it averaged 4.50 percent.

• 30-year fixed-rate mortgage (FRM) averaged 4.35 percent with an average 0.7 point for the week ending November 14, 2013, up from last week when it averaged 4.16 percent. A year ago at this time, the 30-year FRM averaged 3.34 percent.
• 15-year FRM this week averaged 3.35 percent with an average 0.7 point, up from last week when it averaged 3.27 percent. A year ago at this time, the 15-year FRM averaged 2.65 percent.
• 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.01 percent this week with an average 0.4 point, up from last week when it averaged 2.96 percent. A year ago, the 5-year ARM averaged 2.74 percent.
• 1-year Treasury-indexed ARM averaged 2.61 percent this week with an average 0.4 point, unchanged from last week. At this time last year, the 1-year ARM averaged 2.55 percent.

MBA’s Builder Application Survey data for October 2013 shows that mortgage applications for new home purchases increased by 11 percent relative to the previous month. This change does not include any adjustment for typical seasonal patterns.

By product type, conventional loans composed 67.5 percent of loan applications, FHA loans composed 17.8 percent, RHS/USDA loans composed 0.9 percent and VA loans composed 13.8 percent. The average loan size of new homes increased from $289,650 in September to $294,480 in October.

In Texas, Florida and California, the top three states by new home purchase application volume, mortgage applications for new home purchases increased over last month by 9.5 percent, 9.3 percent and 4.6 percent respectively.

As a homeowner, you obviously pay for your mortgage but as an investor, your tenant does. Equity build-up is a significant benefit of mortgaged rental property. As the investor collects rent and pays expenses, the principal amount of the loan is reduced which increases the equity in the property. Over time, the tenant pays for the property to the benefit of the investor.

Equity build-up occurs with normal amortization as the loan is paid down. It can be accelerated by making additional contributions to the principal each month along with the normal payment. Some investors consider this a good use of the cash flows because interest rates on savings accounts and certificates of deposits are much lower than their mortgage rate.

In the example below, is a hypothetical rental with a purchase price of $125,000 with 80% loan-to-value mortgage at 4.5% for 30 years compared to a 3.5% for 15 years. The acquisition costs were estimated at $3,000, the monthly rent is estimated at $1,250 and $4,800 for operating expenses.

Notice that both properties have a positive cash flow before tax. The cash on cash return is the revenue less expenses including debt service divided by the initial investment to acquire the property. The 15 year mortgage will obviously have a smaller cash flow and lower cash on cash but the equity build-up is significantly higher.

If the goal of the investor is to pay off the property to provide the highest possible cash flow at a later date, a shorter term mortgage with a lower interest rate will help them achieve that. A simple definition of an investment is to put away today so you’ll have more tomorrow. Sacrificing cash flow now, during an investor’s earning years, is a reasonable expectation to provide more cash flow in the future when it might be needed more.

Contact me if you’d like to explore rental property opportunities.

In an effort to improve the homeownership and financial planning outcomes of active duty service members and veterans, NeighborWorks America CEO Eileen Fitzgerald called upon nonprofit housing counselors and nonprofit financial capability coaches to increase their outreach and other marketing efforts to those who have chosen to serve their country in the armed forces.

A recent survey by NeighborWorks America found that homeownership is a major goal for veterans and their families. According to the survey, 92 percent of veterans said that homeownership was an important part of their American Dream. And by a nearly three-to-two margin (49 percent to 32 percent), veterans today feel prepared to buy a home.

Against this backdrop, Fitzgerald identified four reasons that service members and their qualified family members considering homeownership or financial planning should work with a housing counselor. These reasons included how taking advantage of nonprofit housing counseling and education could help reduce the significantly higher mortgage delinquency rate seen among borrowers with mortgages backed by a Department of Veterans Affairs guaranty.

Become familiar with the home buying process.

With home prices rising in nearly every market across the United States, and mortgage rates moving erratically, active duty service members, veterans and eligible spouses have the unique opportunity to purchase a home with a zero down payment because of the 100 percent borrowing ability enabled by a home loan backed by a Veterans Affairs guaranty.

Choosing a community is one of the most important factors for consumers as they consider buying a home, and research by the National Association of Realtors® has consistently revealed that Americans prefer walkable, mixed-use neighborhoods and shorter commutes.

According to NAR’s 2013 Community Preference Survey, 60 percent of respondents favor a neighborhood with a mix of houses and stores and other businesses that are easy to walk to, rather than neighborhoods that require more driving between home, work and recreation.

The survey findings indicate that while the size of the property does matter to consumers, they are willing to compromise size for a preferred neighborhood and less commuting. For example, although 52 percent of those surveyed prefer a single-family detached house with a large yard, 78 percent responded that the neighborhood is more important to them than the size of the house. Fifty-seven percent would forego a home with a larger yard if it meant a shorter commute to work, and 55 percent of respondents were willing to forego a home with larger yard if it meant they could live within walking distance of schools, stores and restaurants as opposed to having larger yard and needing to drive to get to schools, stores and restaurants.

In September, interest rates on conventional mortgages used to purchase newly built homes increased for the fourth month in a row, according to data released today by the Federal Housing Finance Agency (FHFA).

During the month, the average contract interest rate increased by 10 basis points to 4.30 percent, while initial fees increased to 1.14 percent (from an average of 1.06 percent the previous month). The combination drove FHFA’s key measure of the average effective interest rate on new home loans (which amortizes the initial fees and incorporates them into the rate) up by 11 basis points to 4.44 percent—the highest it’s been since July of 2011 (the month prior to a substantial 36 basis point drop).

The FHFA release also includes data on loan size and house prices, and the averages on both for newly built homes declined in September. The average price of a new home purchased with a conventional mortgage declined by $11,900 to $388,500. (The average price depends on the mix of new homes purchased with conventional loans during a particular month, in addition to anything that may be happening to house prices in general.) The average amount of the loans showed an even more pronounced decline of $13,500, taking it down to $294,800.

As lawmakers debate how best to reform the secondary mortgage finance market, they must ensure that any new system retains access to safe, secure and affordable sources of mortgage capital for creditworthy consumers in all market conditions or risk a major disruption to the economy, warned the National Association of REALTORS® recently in testimony before the Senate Committee on Banking, Housing and Urban Affairs.

On behalf of the leading advocate for homeownership and housing issues, NAR President Gary Thomas recommended essential reforms to the current housing finance structure that will benefit consumers.

“REALTORS® support a stable secondary mortgage market with strong, reasonable lending standards and access to credit. We believe that the current system can be transitioned into a marketplace that is bound by an explicit government guarantee and a sustained flow of private capital while protecting taxpayers from unnecessary risk,” says Thomas. “We fear that without the government’s backing, the only mortgage products available in the secondary market for the average homebuyer would not be aligned with their best interests.”

NAR supports the bipartisan “Housing Finance Reform and Taxpayer Protection Act of 2013,” which provides for an explicit government guarantee and includes many of the elements outlined in the association’s principles for secondary mortgage finance reform that NAR presented to the administration in early 2011.

When you’re buying or selling, the obvious source to get your real estate question answered is your agent but where do you go the rest of the time? As a homeowner for many years to come, you’ll need reliable help and solid suggestions.

Our business goal is to have a select group of our friends and past customers who consider us their lifelong real estate professional. We want to earn that trusted position so they’ll enthusiastically refer their friends to us. Our plan to achieve this is simply to help these people with all of their real estate needs not just when they buy or sell but for all the years in between.

Throughout the year, we offer reminders and suggestions by email and social media that benefit your homeowner experience. When we find good articles to help you be a better homeowner, we’ll pass them along. You’ll discover new ways to maintain your property, minimize expenses and manage debt and risk.

We want to be your “Go-To” person for everything to do with real estate. If we don’t have the answer you need, we’ll point you in the right direction to find it.

We’re here for you and your friends…now and in the future. Please let us know how we can help you.

A new study showed that not everyone would be wary of living in a haunted home. Realtor.com® recently released the results of its Haunted Housing Report, which ran on realtor.com® from Sept. 25 to Oct. 1 and explored consumer sentiments around their perceptions of “haunted” real estate. Survey results from nearly 1,400 respondents reveal consumer thresholds for purchasing haunted houses for sale, past experiences with spooky homes, popular “warning signs” of a haunted home, expected discounts when buying “perceived” haunted houses for sale and intolerable scary occurrences.

“Survey data reveals that while the majority of consumers are open to purchasing a haunted home, many buyers conduct their own research on a home’s history to be aware of any weird incidences,” says Alison Schwartz, VP of corporate communications for Move. “Data also finds that while some respondents are willing to purchase a haunted home at a discounted price, many say levitating objects, ghost sightings and seeing objects move from one place to another would deter them from purchasing a home.”

Sentiment regarding a haunted home purchase:

• 26 percent of respondents indicated that they would consider purchasing a haunted house for sale;
• 36 percent shared that they might consider a haunted home purchase;
• 38 percent revealed that they would not consider a haunted home purchase.

September housing numbers revealed home prices are still slowly rising, which is great news for housing. However, existing-home sales fell 1.9 percent, and many in the industry are worried that this could be signaling a potential turn for the housing market and its recovery, especially in light of the recent government shutdown, which will surely impact October's numbers.

According to Don Frommeyer, president of the Association of Mortgage Professionals (NAMB), the slowing rate of purchase cannot be attributed directly to mortgage rates and for most, it’s still an ideal time to buy.

“There are a lot of factors that play into the affordability of houses that potential home owners should consider before house hunting,” says Frommeyer. “With higher home prices, stagnant or barely rising salaries and rising mortgage rates coupled with the government shutdown and debt ceiling panic, some were scared away from the housing market and economy in general. However, compared to the last five years we’re still seeing great qualities for purchasing real estate.”

In addition, there are signs that interest rates will be decreasing or holding steady in the coming months. “After speculation of drastic cuts in bond purchasing, last month’s announcement from the Federal Reserve to not lower its amount of monthly bond purchases was welcomed by the mortgage industry,” continues Frommeyer. “The strategic move keeps interest rates low and helps continue to attract buyers to the housing market.”

For more information, visit www.namb.org.