5 Things to Think About When Looking for Your Dream Home

While on the hunt for a perfect home, it can be immensely helpful to create a wish list of sorts. This can help you and your real estate agent obtain a clear picture of what type of home would best suit you.
Some things to consider:
1. Move-in ready or fixer-upper?
Making a home “your own” can make fixer-uppers an attractive option, along with the lower cost. Making a mark on your new home via renovations. Take some time to think about what homeownership means to you, and whether you are interested in renovation.
2. Upgrades
Certain upgrades in a home, such as marble or granite counters, are often coveted by buyers. Consider what type of upgrades are important to you – energy-efficiency, professional grade appliances, luxury tiling? Make a list and show your Realtor.
3. The Yard
What type of backyard are you looking for, and how important is it to you? Think about low versus high maintenance yards, the amount of space you’d like, and what kind of yard would best suit your lifestyle.
4. Swimming Pools
For some homebuyers, having a swimming pool can be a dealbreaker. If this is something that you really desire in your dream home, make that clear to your real estate agent so that they can narrow the search for you.
5. Schools in the Area
Last but certainly not least, the quality of the schools in the area of a dream home should be an important thing to research. Ask your Realtor for information about schools in the area of your search, and comparisons between them. This information is easily obtained, and real estate agents will be more than happy to show you school scores and more. Also consider private schools, if that is an option for your family.

Condo Ownership Sensible in SF, San Jose and Oakland

The San Jose Mercury reported that data shows that buying condos, versus renting, makes financial sense in San Francisco, San Jose, and Oakland in this current market.

A study done by Trulia of the nation’s fifty largest cities focusing on rent-versus-buy price analysis revealed that these Bay Area cities, especially San Jose, ownership is less expensive.

They calculated a rent-to-buy ratio of cost, and any city with a rent-to-buy ratio of 15 or below means that it is less expensive to buy. San Jose’s ratio is 12-1.

Oakland and San Francisco, where renting is cheaper, can make more financial sense to buy depending on the situation. Oakland has a ratio of 16, and San Francisco 19.

To read more about the math behind the study, read the San Jose Mercury article here, or you can take a look at Trulia’s entire report of the fifty biggest cities in the country here.

This Week’s Market Commentary

There are only four relevant economic reports scheduled for release this week, but two of them are considered to be highly important to the financial and mortgage markets. Unlike many Mondays, the week kicks off with important data being posted today. The Institute for Supply Management (ISM) will post their manufacturing index for April late this morning.

This is one of the first important economic reports released each month and gives us an indication of manufacturer sentiment. A reading above 50 means that more surveyed trade executives felt business improved during the month than those who felt it had worsened. This points toward more manufacturing activity and could hurt bond prices, pushing mortgage rates higher. Analysts are expecting to see a reading of 59.7, which would be a decline from March’s level of sentiment. The lower the reading, the better the news for bonds and mortgage rates.

March’s Factory Orders data is Tuesday’s only relatively important data. It will be released at 10:00AM, giving us a measure of manufacturing sector strength. It is similar to last week’s Durable Goods Orders, except this report includes non-durable goods such as food and clothing. Generally, the market is more concerned with the durable goods orders like refrigerators and electronics than items such as cigarettes and toothpaste. This is why the Durable Goods report usually has more of an impact on the financial markets than the Factory Orders report does. Still, a noticeably smaller increase than the 1.9% that is expected could push mortgage rates slightly lower. But, a much larger increase in new orders could lead to slightly higher mortgage pricing Tuesday.

There are no relevant government reports or events scheduled for Wednesday, meaning non-economic factors such as stock prices will probably have the biggest influence on bond trading and mortgage rates that day. Generally speaking, a stock rally pulls funds from bonds, leading to bond selling and higher mortgage rates. However, stock selling makes bonds more appealing to investors. When the funds are shifted into bonds to escape the volatility in stocks, we often see mortgage rates move lower. If the major stock indexes remain calm Wednesday, mortgage rates should follow suit.

The Labor Department will release its 1st Quarter Productivity and Costs data early Thursday morning. This information helps us measure employee productivity in the workplace. High levels of productivity help allow low-inflationary economic growth. If employee productivity is rapidly rising, the bond market should react favorably. However, a decrease could cause bond prices to drop and mortgage rates to rise Thursday morning. It is expected to show a 1.0% increase in productivity.

Friday brings us the release of the almighty monthly Employment report, giving us April’s employment statistics. This is where we may see a huge rally or major sell-off in the bond market and potentially large changes in mortgage rates. The ideal situation for the bond and mortgage markets would be an increase in the unemployment rate and a much smaller number of payrolls added to the economy during the month than was expected.

Just how much of an improvement or worsening in rates depends on how much variance there is between forecasts and actual readings. This could turn out to be a wonderful day in the mortgage market, but it also carries risks of seeing mortgage rates move higher if the Labor Department posts stronger than expected readings. Current forecasts are calling for the unemployment rate to remain at 8.8% and that approximately 183,000 jobs were added during the month.

Overall, I believe Friday will be the most important day of the week with the employment data being posted. It can easily erase the week’s accumulated gains or losses in mortgage rates if it shows any surprises. We may actually see a noticeable change in rates tomorrow also if the ISM index shows favorable or unfavorable results. The middle part of the week will likely be the calmest, but I still suggest proceeding cautiously if still floating an interest rate. This would be a good week to maintain contact with your mortgage professional if you have not locked a rate yet.

To read the most current market commentary, click here.

Four Ways to Spice Up an Open House

Open houses are a great way to meet potential clients, and showcasing the home in an attention-getting way can cement potential sellers’ confidence in the Realtor.

1. Take advantage of branding opportunities.

Water bottles on hot days with a custom label can be a great source of advertising. A picture of the house with contact information on the bottle is not only fun, but a way to keep both the home and the Realtor in the mind of the visitor after the open house.

2. Go beyond the basics with food.

You may have heard the age-old technique of baking cookies in the home to infuse it with the scent of homemade treats. However, food at an open house can be another way to stand out. It can encourage people to stay longer and strike up a conversation. Think outside the box – ice cream, chocolate fountains with strawberries, or lattes from an espresso machine.

3. Don’t forget the music.

Having music softly playing enhances the atmosphere and detracts from an empty feeling in the home and makes it more inviting. Soft jazz or other non-lyrical music can be played from an iPod and dock system. Have it centrally located so the music is heard throughout the home.

4. Consider the early evening

A recent Realtor Magazine article suggested holding open houses not only on Sundays, but during twilight hours. This way, people can visit the home directly after work, expanding the potential buyer pool.

The Power of Bona Fide Pre-Approval

While most mortgage lenders offer a form of “pre-approval” for a loan, Mortgage California is one of the few lenders anywhere that can do an actual fully underwritten loan pre-approval. With our banker and broker business model, pre-approvals for loans are not conditional on multiple minutiae of a transaction.

It is difficult to overestimate the power of a real loan pre-approval and its role in a successful real estate transaction. Pre-approvals make the seller of a house more comfortable about the offer, and in a competitive market, this can make all the difference.

According to Bay Area Realtor Larry Miller of Coldwell Banker, standard practice in the area is that a loan pre-approval accompanies the offer on a home. When the pre-approval comes from Mortgage California, he is able to give the seller complete confidence that the buyer is, in fact, qualified and the transaction will be able to close.  Not so with many other pre-approvals, which are not fully underwritten and thus are only worth the paper they’re printed on.

“If a seller is looking at two different offers, they can feel much more confident with the Mortgage California one,” said Miller.

The difference between the loan pre-approvals the real estate agent sees from other loan companies and from Mortgage California is the reliable commitment of the latter that the buyer does indeed qualify.

Looking over pre-approval letters from three diffferent companies, one of which being Mortgage California, Miller pointed out the extensive conditions on the other letters – one of which included more than eight conditions under which the”pre-approval” was not guaranteed.

“How much confidence can this give you?” asked Miller, in reference to the extensive conditions and lack of guarantees on one pre-approval letter.

A true pre-approval from Mortgage California gives homebuyers a huge competitive advantage when making an offer on a home, because sellers can be completely confident that the buyer is indeed able to purchase the home, speeding up the transaction and ensuring its success.

This Week’s Market Commentary

This week is extremely active with seven relevant economic reports in addition to another FOMC meeting and two fairly important Treasury auctions. The economic reports range from low importance to extremely high importance with the majority being in between those two.

There is relevant economic data being posted each day of the week, making it likely that we will see a fair amount of movement in mortgage pricing over the next several days.

March’s New Home Sales will be released late this morning. It gives us an indication of housing sector strength and mortgage credit demand, but is the week’s least important report. Unless it varies greatly from analysts’ forecasts, I am not expecting the data to cause much movement in mortgage rates. Analysts are currently forecasting a sizable increase in sales of newly constructed homes.

The Conference Board will post April’s Consumer Confidence Index (CCI) late Tuesday morning. This index is a key indicator of future spending by consumers. The group surveys 5000 consumers from across the country about their personal financial situations. If sentiment is strong or rising, it is believed that consumers are more apt to make large purchases in the near future. However, if they are concerned about issues such as job security and investments, they will probably delay making large purchases. The latter is better for the bond market and mortgage rates because the expected slowdown in spending would keep inflation and economic growth concerns to a minimum. But, a sizable increase could hurt the bond market, pushing mortgage rates higher Tuesday. It is expected to show a reading of 64.4, which would be an increase from March’s 63.4 reading. The lower the reading, the better the news for mortgage rates.

March’s Durable Goods Orders will be released early Wednesday morning. This report gives us an indication of manufacturing sector strength by tracking orders for big-ticket items at U.S. factories. These are products that are expected to last three or more years, such as appliances and electronics. Current forecasts are calling for an increase in new orders of 1.9%. This would be a sign of manufacturing sector growth, but this data can be quite volatile from month-to-month. Therefore, a small variance between forecasts and the actual results will not heavily influence the markets or mortgage rates. A decline would be considered good news, while a large increase would indicate manufacturing sector strength. A sign of solid manufacturing growth could lead to higher mortgage rates Wednesday.

This week’s FOMC meeting will begin Tuesday but will not adjourn until Wednesday afternoon. It will likely adjourn with an announcement of no change to key short-term interest rates, but we may see some volatility in the markets following the 2:15 PM ET post-meeting statement. There appears to be more and more discussion about when the Fed will have to start raising key interest rates to prevent inflation from strengthening. If the statement gives any hint of when that may be, or there is a change in the regular canned portions of the statement, we could see a sizable change to mortgage rates Wednesday afternoon.

In addition to this week’s economic reports, there are two relatively important Treasury auctions that may also influence bond trading enough to affect mortgage rates. There will be an auction of 5-year Notes Wednesday and 7-year Notes on Thursday. Neither of these sales will directly impact mortgage pricing, but they can influence general bond market sentiment. If the sales go poorly, we could see broader selling in the bond market that leads to upward revisions to mortgage rates. However, strong sales usually make bonds more attractive to investors and bring more funds into bonds. The buying of bonds that follows usually translates into lower mortgage rates. Results of the sales will be posted at 1:00 PM ET each auction day, so look for any reaction to come during afternoon hours.

Thursday has the single most important data of the week. That would be the preliminary version of the 1st Quarter Gross Domestic Product (GDP). This is arguably the single most important report that we see on a regular basis. The GDP is the sum of all products and services produced in the U.S. and is considered to be the best measurement of economic growth or contraction. I expect this report to cause major movement in the financial markets Thursday and therefore the mortgage market also. Analysts are expecting it to show that the economy grew at an annual rate of 1.7%, which would be a sizable drop from the final quarter of last year. A smaller increase would be considered good news for mortgage rates. But, a stronger than expected reading would almost certainly cause stock prices to rise and bond prices to fall, leading to higher mortgage rates Thursday morning.

The week does not close quietly with three reports scheduled for Friday morning. March’s Personal Income & Outlays is the first of them, coming early Friday. It helps us measure consumers’ ability to spend and current spending habits, which is important to the mortgage market due to the influence that consumer spending-related data has on the financial markets. If a consumer’s income is rising, they are more likely to make additional purchases in the near future. This raises inflation concerns and has a negative impact on the bond market and mortgage rates. Current forecasts are calling for a 0.4% increase in the income reading and a 0.5% rise in spending. If we see smaller than expected readings, the bond market should open higher Friday morning, making an improvement to mortgage rates a good possibility.

The second report of the day is the 1st Quarter Employment Cost Index (ECI), which tracks employer costs for wages and benefits. This gives us a measurement of wage-inflation. If it shows a large increase, we may see wage inflation concerns cause the bond market to fall and mortgage rates to rise. A smaller than expected increase would be good news for the bond market and mortgage pricing. Current forecasts are showing a rise of 0.5%.

The last piece of a data is the University of Michigan’s update to their Index of Consumer Sentiment for April. This report gives us an indication of consumer sentiment. I don’t expect it to have a significant impact on bonds and mortgage pricing unless it varies greatly from forecasts. Current forecasts are calling for little change from the preliminary reading of 69.6. This means that surveyed consumers were just as optimistic about their own financial situations as they were earlier this month.

Overall, look for plenty of movement in the financial markets and mortgage rates several days this week. Wednesday will likely be the most important day of the week with the FOMC adjournment and the fairly important Durable Goods data, but we may also see noticeable changes to rates Thursday after the GDP is posted. If this week’s reports reveal weaker than expected economic conditions, the bond market should extend its rally and mortgage rates should fall for the week.

Homes Sales in Santa Clara Country Hit 4-Year High

This past March has seen the most home sales in Santa Clara and San Mateo counties in four years. According to an article in the San Jose Mercury, sales were up 4 and 5% in the respective counties since March last year.

However, prices remain lower in these counties. “The median price for a single-family home in Santa Clara County was $528,000, down 4 percent; the median sales price in San Mateo County was $595,000, down 15 percent from a year ago,” said the Mercury.

South Bay sales were greater than Bay Area sales as a whole, with a 1.9% increase in home sales.
Foreclosure sales made up 31.5 percent of Bay Area resale transactions. Short sales — at prices less than the value of the mortgage on a home — made up 17.6 percent of the market.

The president of Dataquick, which measured these results, said “The housing market has certainly moved well back from the abyss of two years ago… [but] The big issue continues to be mortgage financing, which is still problematic for many potential borrowers.”