After a half-decade of tightening mortgage guidelines, banks are starting to “loosen up”.

The Federal Reserve conducts a quarterly survey of its member banks and, last quarter, not a single responding bank reported having tightened its mortgage guidelines for prime borrowers.  A “prime borrower” is defined as one with a well-documented credit history, high credit scores, and a low debt-to-income ratio.  53 banks responded to the Fed’s survey and none said that mortgage guidelines “tightened considerably” or “tightened somewhat” between September and December 2011; 50 said that guidelines remained “basicaly unchanged”; 3 said that guidelines “eased somewhat”.

Mortgage applicants sometimes remark that the mortgage approval process can be challenging.  Last quarter’s Fed survey hints that looser standards are coming.   Not since before the recession have banks lowered mortgage approval standards like this and it bodes well for this year’s Golden  housing market. Real estate agents report that 1 in 3 home sale contracts fail with “declined mortgage applications” as a leading cause.  Looser mortgage lending standards should mean more home loan approvals for buyers, and fewer contract cancellations.  This can spur the housing market forward.

This week, once more, we find mortgage rates are on a downward trajectory.  Conforming mortgage rates have returned to near all-time lows.  After this morning’s Non-Farm Payrolls report, however, those low rates may come to an end.

It’s a risky time for Colorado home buyers and would-be refinancers to be without a locked rate.  Each month, on the first Friday, the Bureau of Labor Statistics releases its Non-Farm Payrolls report for the month prior.  More commonly called the “jobs report”, Non-Farm Payrolls provides a sector-by-sector employment breakdown and the nation’s Unemployment Rate.  In December 2011, the government reported 200,000 net new jobs created, and an Unemployment Rate of 8.5%.

For January 2012, economists project 135,000 net new jobs with no change in the Unemployment Rate and, depending on how accurate those predictions are proved, FHA and conforming mortgage rates for homes in the Denver area are subject to change.  The monthly jobs reports tends to have an out-sized influence on the direction of daily mortgage rates.  The connection between jobs and mortgage rates is fairly direct.

What is Upside-Down Marketing?

One of the best ways to get more of what you want in life is to help others get more of what they want. This is “upside down marketing” in a nutshell. The normal business practice is to have a product or service, start looking for prospects, and make the sale. The normal way of doing business does not work as effectively as in the past. Let’s turn business upside down! You will not want to miss being inspired by Vickie Thomas, our keynote speaker, who will tell you about marketing in a new business climate.

Marketing ideas that will work today require you to create some new practices for the current business paradigm. In this workshop, you will learn about some marketing strategies that will separate you from the competition and give you the results you desire.

Time is running out to boost to your 2011 federal tax refund.  All you have to do is make your January 2012 mortgage payment while it’s still December.

It’s a simple tax strategy that works because of how mortgage interest is paid, and of how the U.S. tax code is written.  Different from rent which is paid for the month ahead (i.e. “you’re paying January’s rent”), mortgage payments are made only after mortgage interest has accrued (i.e. “you’re paying for money you’ve already borrowed from the bank”).  This is called “paying interest in arrears” and U.S. tax code states that the mortgage interest is tax-deductible in its year paid, subject to limitations.

By making the January 2012 mortgage payment in December 2011, homeowners who itemize their tax returns can apply their January mortgage payment’s interest portion to their 2011′s tax returns.  The alternative is to pay the mortgage on schedule and wait for April 15, 2013 to claim the credit.

Alaris Properties 2012 Vision Board

Recently, the team at Alaris Properties created a new vision board. We would like to share with you some of the things we have on the vision board so you can get to know us better and understand what we are creating. However, before I tell you about any item on the vision board, I would like to share our “Passion Statement.” It seems everyone has a vision statement and a mission statement. We do, and we love to communicate those. However, our Passion Statement helps us to stay focused on what is most important to us, as a company, as a team, and as individuals. Our Passion Statement is: “Fueled by Gratitude.” What that means for us is that we receive our motivation and have the most impact when we are in a place of gratitude: grateful for the incredible individuals we are privileged to assist, grateful for one another, even grateful for all the wonderful lesson we learn. We each believe that nothing occurs by accident. I have personally learned that focusing on gratitude helps me to stay positive in the face of great challenges. In fact, being in a place of gratitude helps me find solutions to the biggest challenges.

After a brief return to lower, pre-2009 levels, FHA loan limits have been restored.  As signed into law the later part of November this year, maximum FHA loan limits are — once again — as high as $729,750.

The move creates additional mortgage financing possibilities in more than 650 U.S. counties, and promises to increase the FHA’s mortgage market share, which has grown from 6% in 2007 to roughly 30% today. The change in FHA loan limits also marks the first time that FHA loan limits exceed those of conventional mortgage-backers Fannie Mae and Freddie Mac. Conventional loans remain capped at a maximum of $625,500.

For home buyers in the Denver area and nationwide, FHA-insured mortgage offers several advantages over comparable conventional loans, the most commonly cited of which is that FHA-insured loans require a down payment of just 3.5 percent.  FHA-insured mortgages carry other advantages as well.

A conforming mortgage is one that, literally, conforms to the mortgage guidelines as set forth by Fannie Mae and Freddie Mac. Conforming mortgage guidelines are Fannie’s and Freddie’s eligibility standards; an underwriter’s series of check-boxes to determine whether a given loan should be approved. Among the many traits of a conforming mortgage is “loan size”.

Each year, the government re-assesses its maximum allowable loan size based on “typical” housing costs nationwide.  Loans that fall at or below this amount meet conforming mortgage guidelines.  Loans in excess of this limit are known as “jumbo” loans.

Between 1980 and 2006, as home values increased, conforming loan limits did too, rising from $93,750 to $417,000.  Since 2006, however, despite falling home prices in many U.S. markets, the conforming loan limit has held steady.  This will remain true for 2012 as well. In 2012, for the 7th straight year, the national single-family conforming mortgage loan limit will remain at $417,000.

Tuesday, the Federal Open Market Committee voted to leave the Fed Funds Rate unchanged within its current target range of 0.000-0.250 percent.  The vote was nearly unanimous for the second straight month.  Just one FOMC member dissented in the vote, favoring additional policy stimulus beyond what the Federal Reserve currently provides.

In its press release, the Federal Reserve said that the the U.S. economy is improving, noting that since its November 2011 meeting, the economy has been “expanding moderately”.  The Fed also added that domestic growth is occurring despite some “apparent slowing in global growth” — a nod to ongoing uncertainty within the Eurozone.  The Federal Reserve expects a moderate pace of growth over the next few quarters, and believes that the jobs market will continue to improve, but slowly.

Other potential soft spots within the economy include:  

1. A slowdown in business investment
2. A “depressed” housing market
3. Strains in global financial markets

Home improvement projects are booming, expected to cross $110 billion in total volume this quarter.  Unlike in recent years, however, the projects aren’t helping to create much new home equity.

According to Remodeling Magazine’s Cost vs Value Report 2011-2012, for each home improvement dollar spent in 2012, homeowners can expect to recoup just 58 cents in home equity. This figure is down sharply from 2005, when the cost-to-value ratio was 87 percent. 

Today’s Colorado homeowners get a much smaller payoff on their home improvement projects.  If you’re planning to remodel/update in preparation for sale, consider the following projects, each of which carries a high cost-to-value ratio. From Remodeling Magazine’s “Mid-Range Project” list :

• Steel Entry Door Replacement:  Cost, $1,238; Recoup, 73.0%
• Attic Bedroom:  Cost, $50,184; Recoup, 72.5%
• Minor Kitchen Remodel:  Cost, $19,588; Recoup, 72.1%
• Garage Door Replacement:  Cost, $1,512; Recoup, 71.9%
• Wood Deck Addition:  Cost, $10,350; Recoup 70.1%

If you plan to buy new construction in the Denver area sometime in 2012, don’t expect today’s low prices.  Like everything in housing of late, the market for newly-built homes appears to be stabilizing and, in some markets, improving.

As foreshadowed by this month’s strong Homebuilder Confidence survey, the Census Bureau reports that the number of new homes sold rose to a 6-month high in October, climbing to 307,000 units on a seasonally-adjusted, annualized basis. A “new home” is a home that is new construction in which no one has lived.  It’s the opposite of an “existing home” in which someone has lived.

Home buyers are comparing new construction to home resales and liking what they see.  At the current sales pace, the nation’s complete new home inventory would now be depleted in just 6.3 months.  This marks the lowest home supply since April 2010 — the last month of the last year’s federal homebuyer tax credit. By building only to meet new demand, builders are keeping home supplies in check, and home prices stable.  They’ve also found a niche market – 80% of homes sold last month sold for less than $300,000.

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