Refinances Decline

Refinances Decline as Rates Rise Overall, mortgage applications declined 3.5 percent last week on a seasonally adjusted basis, according to the Mortgage Bankers Association weekly survey, but the decrease was primarily in refinances because of rising interest rates.The seasonally adjusted purchase index actually increased 1.1 percent, the third gain in the last four weeks, while the refinance index fell 7.2 percent.On an unadjusted bases, the weekly mortgage index, which measures loan application volume, decreased 3.7 percent from the previous week, but was up 16.1 percent compared with the same week a year ago.Rising rates put refinancers in a wait-and-see mode. Here's a roundup of rate increases:
30-year fixed-rate mortgages increased to 5.38 percent from 5.17 percent
15-year fixed-rate mortgages increased to 4.71 percent from 4.60 percent
1-year ARMs increased to 6.71 percent from 6.67 percent.Source: Mortgage Bankers Association (08/12/2009)

Recession is over?

Economists Pronounce the Recession Over The majority of economists surveyed by the Wall Street Journal say the recession is over and Federal Reserve Chair Ben Bernanke deserves another term.Of the 47 economists the newspaper surveyed, 27 said the recession has ended and 11 predict another trough this month or next. The rest refused to commit. But they were nearly unanimous is saying that Bernanke should be rehired.Gross domestic product is expected to grow 2.4 percent in the third quarter at a seasonally adjusted annual rate. Economists were also heartened by a better-than-expected jobless report in July. Source: The Wall Street Journal, Phil Izzo (08/12/2009)

First-Time Buyers

Basic Features Appeal to First-Time Buyers First-time homebuyers are forcing home builders to think frugal by penny-pinching on upgrades.Nearly 50 percent of new homes sold in the first six months of 2009 cost less than $200,000, the largest share for the first six months of a year in five years. The average size of new homes fell to 2,065 square feet, the smallest since 2000.“The high end isn’t moving, so builders have to dumb-down their designs and put in Formica kitchens and the bare-bones carpeting,” says Brian Bethune, an economist at IHS Global Insight.The barebones approach is helping builders that focus on first-time buyers improve their profits. Standard Pacific Corp. has more than doubled its stock price and Meritage Homes Corp. is up 84 percent.Source: Bloomberg, Kathleen M. Howley and Daniel Taub (08/06/2009)

Rates Dip

Mortgage Rates Dip Slightly The 30-year fixed mortgage rate dropped to 5.22 percent during the week ended Aug. 6 from 5.25 percent the prior week, Freddie Mac reports. Over the same period, the 15-year fixed-mortgage rate slipped to 4.63 percent from 4.69 percent. As for adjustable-mortgage rates, the five-year fell to 4.73 percent from 4.75 percent, and the one-year dipped to 4.78 percent from 4.80 percent.Source: Los Angeles Times (08/07/09)

Entry Level Homes Size Shrink

KB Home and Others Shrink Entry-Level Homes
Home builders are shrinking the size of new homes to lower costs and attract first-time buyers.

The median home size had risen from 1,500 square feet in 1970 to a high of 2,302 in 2007. By the first quarter of 2009, median home sizes had dropped slightly to 2,239, according to the National Association of Home Builders.

One of the builders aggressively shrinking designs has been KB Home. It attributes its 59 percent increase in orders of new homes since the beginning of 2009 to the new smaller designs it debuted at the end of 2008.

Its new energy-efficient Open Series home designs start at 961 square feet with a base price of $89,999.

KB is cutting costs by reducing the size of bathrooms and hallways and designing homes so bathrooms and kitchens can all share the same plumbing systems. Its innovative plans result in 40 percent more useful living space, the company boasts.

Other companies that are building small, energy efficient homes include DR Horton, whose models start at 900 square feet and $99,000.

Source: Business Week, Prashant Gopal (07/29/2009)