Mortgage Window Shopping: Rates Have Been Volatile, But Get Ready, They May Fall Again

After a recent spike in mortgage interest rates, some consumers are wondering whether they’ve missed their chance to refinance into an ultra-low rate. In Freddie Mac’s weekly survey, rates recently fell from 5.81% to 5.53%, and it’s possible that rates could continue to fall. “Predicting interest rates is like predicting who is going to win the World Series in January,” said Guy Cecala, publisher of Inside Mortgage Finance. That said, he calls the recent spike “somewhat of an aberration,” and expects rates to continue to drift. Rates may have gone up because over the past month or two, “the economic skies have brightened somewhat,” Keith Gumbinger, vice president of HSH Associates, a publisher of consumer loan information, said in an e-mail, and the threat of “trillion-dollar budget deficits for the foreseeable future, the potential for significant inflation and few clues as to how the government might extricate itself from intrusions into markets” created a landscape that was not appealing to investors. But now, rates are retreating partly because inflation doesn’t seem as immediate a threat as investors feared, Cecala said. In his opinion, nothing fundamentally has changed in the economy over recent weeks to warrant the rate rise, yet he expects volatility through the remainder of the year as investors debate the economy’s health. “Realistically, I think that the rates will drift under 5% again. It may take a month, may take two months,” he said. In a statement, Bob Walters, chief economist of Quicken Loans, said: “Luckily, we have seen rates drop some this week, which should help many consumers breathe a little easier. But the fact remains, the government’s plan of purchasing mortgage-backed securities cannot go on indefinitely, and when it ends, we will most certainly see a spike in rates. The hope is that the Fed can keep rates low long enough to kick-start a housing recovery. Whether that will work remains to be seen.” (www.marketwatch.com)
MarketWatch (6/18/09); Amy Hoak

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Getting Transferred? Securing a Mortgage Could Be Harder

Reversing a long-standing policy, Fannie Mae no longer will permit mortgage applicants to count the income of “trailing spouses” toward the household income needed to qualify for a loan. A trailing spouse is one who joins his or her spouse or partner in a job-related move but who has yet to obtain employment in the new location. Traditionally, lenders have been willing to count at least some of the trailing spouse’s income in the old location toward the qualifying income needed to finance the new house. But under Fannie’s policy switch, no consideration will be given. If the main breadwinner’s income isn’t sufficient to handle the mortgage, the loan application will be rejected; only when the trailing spouse has documented income in the new location will it be counted. Jan Hatfield-Goldman, a vice president for Worldwide ERC, the international trade association representing the employee relocation industry, said Fannie’s decision “makes the current challenging relocation environment even more so.” Some couples will have to buy less house than they wanted to or rent for a long time. “If a couple must wait to purchase a new home until the spouse can find a new job, it could well cause some to reconsider” whether they want to make the job shift at all, she said. (www.washingtonpost.com)
Washington Post (6/20/09); Kenneth R. Harney

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New State Grants to Aid First-Time Home Buyers

The Maine State Housing Authority has announced it will provide cash to hundreds of home buyers, and possibly boost the overall housing market, too. The agency has launched its “Gift of Green” program, which will provide grants of up to $5,000 that first-time home buyers can put toward a downpayment, closing costs or escrow funds. In addition, the program will provide coupons worth up to $500 to pay for energy audits that could reveal ways to cut heating and cooling costs, saving home buyers more money in the long run. “A program at MaineHousing hasn’t generated this much excitement in a long time,” said Dale McCormick, authority director. McCormick said an average of about 2,500 Maine first-timers buy a house every year, although that number is likely down now because of credit-market turmoil and the uncertain economy. She said about 90% of first-time buyers would meet income and other eligibility requirements of the program. Gov. John Baldacci, on hand for the program’s announcement, said it will do more than help first-time buyers. “So much of our economy is based on housing,” Baldacci said. “To stimulate and get activity going in this sector will have a ripple impact,” on the economy as a whole. (www.pressherald.mainetoday.com)
Portland Press Herald, Maine Sunday Telegram (6/19/09); Edward D. Murphy

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Hovnanian Building Energy-Saving ‘House of the Future’

At its Jockey Club community in Oceanport, N.J., K. Hovnanian Homes is building a home that cuts energy costs by 40%. The goal is to do it without adding to the price of the home. The house, a research project, is being built in conjunction with the U.S. Department of Energy’s Building America program and the NAHB Research Center. The project looks at construction techniques, materials and features that K. Hovnanian can put into its production homes to make them more energy-efficient. Once completed, the research home will result in about $930 a year in savings in cooling, heating and water-heating costs over a home built in accordance with standard building codes, said Robert Hofmann, area vice president at K. Hovnanian Homes. New techniques will help reduce overall construction costs to keep the price of the home from rising with the improved efficiencies. For instance, the amount of heating and cooling needed in the house is cut by a third, said Jim Hoffner, Hovnanian’s implementation project manager. “While you are adding costs to the exterior walls of the home and other elements of the home, you’re able to reduce your costs as it relates to some of your heating and cooling equipment,” Hofmann said. The energy savings is expected to hit 41%, Hofmann said. The home will also have solar panels, which will cut electricity costs even more. The house will be completed around August and will eventually be put on the market for $620,000. (www.app.com)
Asbury Park Press (6/18/09); David P. Willis

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Jewel Box Homes Are Built Smaller, But Smarter

The current recession, the downturn in the housing market and the emphasis on energy efficiency are all playing into the “jewel box house” trend — small homes designed with top quality materials, upscale detailing and custom built-ins, according to architect Sarah Susanka, author of “The Not So Big House.” For the past two decades, dream homes have assumed McMansion proportions, says Stephen Gidus, co-owner of PSG Construction of Orlando. Now, “downsizing” is the new watchword. “Home owners are taking that portion of their budget that would have been used for larger living spaces, and using it for better details in smaller spaces,” says Gidus. The exterior of one such jewel-box home designed by Lucia Custom Home Designers and built by PSG Construction features the Craftsman styling popular in the early 20th century, complete with a recessed porch, tapered-box columns and fish-scale siding. The interior of the 2,300-square-foot home has a contemporary open floor plan, but is detailed with traditional Craftsman elements such as wood floors with inlaid tile, an oak staircase and a built-in, furniture-grade entertainment center surrounding the fireplace. (www.orlandosentinel.com)
Orlando Sentinel (6/19/09); Jean Patteson

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Flex Appeal: Floor Plans That Evolve With Life

Rare is the new-home builder these days who does not offer a “flex room” that can serve more than one purpose or can evolve as the buyer’s needs change. A combination of factors created this phenomenon, explains Bud Dietrich of Harold Forrest Dietrich Architects LLC in Deerfield, Ill. “People are staying in their houses longer instead of moving when the kids reach a certain age, the kids move out or when they develop a disability,” he says. “So they want their houses to change with them. They’re really thinking about how they use each room and how they will use it in the future.” Another contributing factor is the average new-home size, which quit growing in 2008 after a 35-year run, according to NAHB. “Instead of adding more square feet, and having a room for each purpose, as many of the houses of the 1990s did, buyers want their houses to be functional, with rooms that are multi-purpose,” says Dietrich. “The house should fit them like a glove, not like a coat that’s 10 sizes too big. People are asking themselves, ‘Why heat and cool 10,000 square feet when we are only going to live in 2,000?’ It’s silly.” (www.chicagotribune.com)
Chicago Tribune (6/19/09); Leslie Mann

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