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Economic News Week: November 25, 2012
SWBC Mortgage
Wednesday, November 28, 2012 • Posted November 29, 2012

The stock market closed at 13009.69 this past Friday, marking a 172.79 point jump because of news overseas and retail sales numbers from Black Friday. Stock traders were encouraged by positive economic news from Germany and China, two engines of global growth. Technology stocks soared after a few weeks of selling. Early reports from retailers suggested strong consumer spending on Black Friday, which in turn produced a jump in stocks. Friday’s numbers are going to be complicated by Thanksgiving Thursday evening sales that may have eaten away at Friday’s numbers. The true test will be the Retail Sales report for November when it is published next month. I would be very surprised to hear that the number was a negative one. A measure of leading economic numbers intended to predict future U.S. economic activity rose 0.2 percent in October, according to the Commerce Board. The index is intended to anticipate economic conditions 3 to 6 months out. Only a slight rise, this is an indicator that our economy is gradually improving. Other good news is that the number of folks seeking U.S. unemployment benefits fell sharply last week. Nationally, an increase in hiring helped lower unemployment in 37 states last month. The biggest job gains among states were in Texas and California. Finally, gas prices continue to drop, adding even a little more to consumer spending cash.

Real Estate, Mortgage Industry, and Other Economic News

Let the “Lights” begin! The San Antonio River walk was lit up as I have never seen before. Crowds gathered downtown to get in some Christmas cheer before having to head home from the Thanksgiving weekend. All across the Texas Hill Country, crowds were gathered as well. The Johnson City Courthouse was adorned as usual, as was Fredericksburg’s Plaza area. Locals and tourists alike were able to take it all in as the Christmas Season begins. If ever there was a time to for visitors to be impressed with Texas and our celebrations, it is now.

SAN ANTONIO--Low interest rates and strong consumer confidence continue to be the main drivers pushing up the San Antonio housing market, not to mention that Mayor Castro just returned from a trip overseas promoting San Antonio to foreign investors. In October, area existing home sales catapulted to 1654, a jump of nearly 20 percent compared with the same number last year, according to numbers from the San Antonio Board of Realtors. Nationally, U.S. sales of previously occupied homes rose solidly in October, helped by the improved job market and record low mortgage rates. Confidence among U.S. homebuilders unexpectedly rose in November to a six-year high, propelled by the biggest jump in new home sales in a decade, adding to signs the Real Estate market is improving.

AUSTIN (Austin Board of Realtors) – Last month, the city had its biggest year-over-year increase in single-family home sales since November 2009, according to a report released today by the Austin Board of Realtors (ABoR). According to the report, 1,960 single-family homes were sold in the Austin area in October 2012, 37 percent more than a year ago. The total dollar volume of single-family properties sold was about $543.5 million, or 51 percent higher than the same month last year. “This is a significant increase in sales volume, even for the Austin market, which has seen 17 straight months of increasing sales," said ABoR Chairman Leonard Guerrero. "The last time our market saw increases of this size was in 2009, just prior to the expiration of federal homebuyer tax credits. To see these results now without those types of external factors stimulating the market is very encouraging." The median price for Austin-area homes increased to $199,320 last month. That's 5 percent more than the same month in 2011. The market had 3.4 months of inventory in October 2012, which is 1.6 months less than October 2011 and the lowest inventory figure seen in Austin in the last decade. The market also had 3 percent more new listings, 20 percent fewer active listings, and 19 percent more pending sales last month than the year before. On average, homes spent 68 days on the market, a decrease of 14 days from one year prior.

When there are home sales numbers reported in the San Antonio/Austin markets as mentioned above, keep in mind the cities that sit right in between benefit as well. I have heard very encouraging sales numbers from Kerrville, Fredericksburg, Johnson City, Blanco, New Braunfels, and Bandera areas. I expect to hear even better news going into 2013.

Another record for mortgage rates. Mortgage buyer Freddie Mac said the average 30-year loan rate dipped to 3.31 percent, the lowest on record dating back to 1971. The 15-year fixed Mortgage rate dropped to 2.63%, also a record. These rates usually carry a 1% origination and/or discount point. The Texas Veterans Land Board Mortgage rate for Texas veterans who qualify was 2.91 percent for the 30- and 15-year terms. Texas vets who have a 30% service-related disability or more receive an extra .50% off, making the rate 2.41%. The VLB publishes its rates for the coming week every Friday at 5 pm.

Last week I talked about how important it is to use a local mortgage loan officer. This week I would like to briefly talk about how to qualify for a mortgage. I qualify this by saying that lenders are loaning money. They are just doing it better than in the past. There are no more stated income loans, which is what hurt the Mortgage and Real Estate industry, in my opinion. Currently, you have to qualify under stricter loan guidelines. 1) You must first have good credit. This in itself makes sense. Find out your credit score and what is reported in your credit file first, before wasting a realtor’s time or your own time for that matter, before shopping for a home. A 640 or higher FICO credit score is what most lenders look for. Getting pre-qualified should be your first priority. How do you do this? As I said last week, find a local mortgage loan officer and get them to guide you through the qualifying process. 2) Find out how much you may qualify for. Again, your loan officer will tell you this but only after having made calculations of your debt-to-income ratios. 3) Have money in the bank, at least enough to cover cash reserves for the next 3 to 6 months. Though some loan programs do not require this, I would hope borrowers can see the importance of having a safeguard such as this to protect their investment in case of a job loss or sickness. Cash reserves would be the principal and interest payments as well as homeowners insurance and taxes. You will have to have enough in the bank to cover closing costs/escrows as well. Sometimes a relative can gift you the funds. The seller can even pay for some of these costs if it is negotiated in the sales contract. There are 100 percent loan programs still out there. VA offers a 100 percent loan program for military veterans who qualify. There is also the USDA Rural Community Loan Program for folks wanting to move into rural communities that have a population of 20,000 or less. Check out the USDA website to see their guidelines and to see if the area you are looking at qualifies. Your loan officer or realtor should be able to tell you as well. Finally, (refer to #2) if you are commission-based or self-employed, expect even tighter guidelines. Underwriters will want to see full personal tax returns and corporate tax returns if applicable for the self-employed, in most cases to determine income. If you are planning on buying a home next year, you may want to consult your CPA before taking all the tax write-offs you can as underwriters have to make sure you are reporting enough income to support all your debt, including the new home payment. Of course, this is just a brief synopsis of how to qualify for a mortgage. I strongly suggest you get with a licensed and local mortgage loan officer and let them be your guide. Until next week, Happy Home Hunting!

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