Underwater Becomes An Official Word

Merriam-Webster Has Added The Word To Its Newest Edition

 Earlier this month, Merriam-Webster, publisher of the Collegiate Dictionary, announced the list of new entries it’s adding this year.

Photo via Huffington Post.

 In addition to the new meaning of “underwater” included this year, the new entries (and their definitions as written by Merriam-Webster) include:

• underwater — adj (1672) … 3: having, relating to, or being a mortgage loan for which more is owed than the property securing the loan is worth
• man cave — n (1992): a room or space (as in a basement) designed according to the taste of the man of the house to be used as his personal area for hobbies and leisure activities
• bucket list — n (2006): a list of things that one has not done before but wants to do before dying
• game changer — n (1993): a newly introduced element or factor that changes an existing situation or activity in a significant way
• toxic — adj (1664) … 4: relating to or being an asset that has lost so much value that it cannot be sold on the market

 In other words: “Adding a man cave is on my bucket list, but right now my home is so underwater it’s nearly toxic; until there’s a real game changer in the market, I’m stuck watching TV in the den.”

 For a slideshow of more of the new words, such as “aha moment,” “flexitarian,” and “earworm,” check out this post on Huffington Post.

Stricter Appraisals on Risky Mortgages

Proposed regulation would apply to “high-risk” mortgages only

Last week, federal regulators proposed rules that would require an actual physical inspection of the property before an appraisal could be submitted. This would prevent appraisals made on the fly purely on a cursory inspection of the home’s exterior and coming in too high.

Regulators ready to crack down on fraudulent home flipping

Although recent consumer consensus seems to be that appraisals are coming in too low and impeding home sales, the new regulation is aimed primarily at preventing fraudulent home flipping. By making higher-rate (“high-risk”) mortgages subject to an additional appraisal, regulators hope to minimize home-flipping cases where the appraisal of the property after improvements is too high and allows the flipper to sell at an unfounded price.

High-risk mortgage defined as 1.5 percentage points or more above average

The proposed regulations would apply only to loans where the interest rate is at least one and half percentage points more than the market average. While the regulations seem restrictive, they in fact apply only to a very small portion of the mortgage market. In 2010, loans meeting this criteria comprised just 3.2% of the mortgages written.

From The Wall Street Journal: Developments and CBS Money Watch.

Momentum Slows as Pending Home Sales Drop

Pending home sales down 1.4%

Month over month, contracts to purchase existing homes declined 1.4%, the second month-over-month drop in three months. The year-over-year trend, however, is in its fourteenth month of consecutive gains — demonstrated by the 80 metropolitan areas that made this month’s “Improving Markets Index,” which is compiled by the National Association of Homebuilders and First American.

Limited listings may be behind the decline

The chief economist of the National Association of Realtors (NAR), Lawrence Yun, commented that “buyer interest remains strong but fewer home listings mean fewer contract signing opportunities.” Single-family homes on the market in June went down 3% from their levels in May and a whopping 24% from June of last year, the biggest year-over-year decrease in more than 30 years. Slow processing of distressed properties along with homeowners unwilling to sell their home when the current value is so much less than what they paid are the primary causes.

Supply and demand pressures helping stabilize the market

As inventories go down, the low home prices and record-breaking low mortgage rates continue to drive demand, which means that many listings — those priced appropriately for the current market condition — are receiving multiple offers, allowing sellers more choice picking a buyer and the terms of the sale.

Via Realty Times and Greenwich Post and NAHB.

Three months of record low rates come to an end

Average rate for 30-year fixed up to 3.55%

The last week in July saw the average rate for a 30-year fixed drop to a historic low of 3.49 percent. Last week, Freddie Mac reported that the average rate had edged up to 3.55 percent — still significantly lower than August a year ago, when the average rate was 4.39 percent.

Year-over-year average rates still significantly lower

For the week ending, Freddie Mac reported these average rates:

• 30-year fixed-rate mortgages—
  • last week: average 3.55 percent
  • prior week: average of 3.49 percent
  • same time last year: 4.39 percent
• 15-year fixed-rate mortgages —
  • last week: average 2.83 percent
  • prior week: average of 2.80 percent
  • same time last year: 3.54 percent
• 5-year adjustable-rate mortgages —
  • last week: average 2.75 percent
  • prior week: average of 2.74 percent
  • same time last year: 3.18 percent
• 1-year ARMs —
  •  last week: average 2.70 percent
  • prior week: average of 2.71 percent
  • same time last year: 3.02 percent

Better than expected job numbers for July help push rates

July saw 163,000 jobs added, which was better than expected than the 100,000 jobs experts had anticipated. The first quarter of 2012 averaged 226,000 jobs per month — a rate that fell off sharply in the second quarter. From April to June, an average of just 75,000 jobs were added each month. Although the national unemployment rate rose from 8.2 percent to 8.3 percent, the job market numbers were enough to spark activity in the stock market and provide a gentle nudge to mortgage rates.