Mortgage rates hit a 2014 low

NEW YORK (CNNMoney)

Mortgage interest rates hit their lowest levels for 2014 this week.

The average interest charged to borrowers for a 30-year, fixed rate loan fell to 4.21% from 4.29% last week, according to Freddie Mac's weekly mortgage rate report.

Rates have not been this low since the week of November 7, when they were at 4.16%.

The 15-year, fixed rate mortgage, a popular loan for homeowners refinancing existing mortgages, hit 3.32%, down from 3.38% last week.

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Global unrest and a weak U.S. economic recovery have kept rates low on U.S. Treasury bonds, which is used as the benchmark to set most consumer interest rates.

"Mortgage rates continued moving down following the decline in 10-year Treasury yields after a dismal report on real GDP growth in the first quarter," according to Freddie's chief economist Frank Nothaft.

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World events was a key factor.

"The effects of slower growth in China and the unstable situation in Ukraine are all contributing to the ongoing bid for Treasury debt, driving yields down and pulling mortgage rates down too," said Keith Gumbinger, vice president of HSH.com, a mortgage information firm.

It is, of course, good news for homebuyers. Payments on a $200,000 30-year, fixed-rate mortgage would be only $979 a month at a rate of 4.21%. Borrowers with rates closer to the historical norm of 6% would pay about $1,200 a month.

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But continuing strict lending standards has limited the positive impact of low rates on the housing market recovery, according to Lawrence Yun, chief economist for the National Association of Realtors.

"The low rates are very good for people with high credit scores," he said. "But credit is still very tight for borrowers with lower scores. Many people would like to buy, but can't obtain financing."

These low rates are still significantly up off the record low set in May 2013, when the 30-year hit a rock-bottom 3.35%. 

Flood insurance policies get a bailout

Live in a home rezoned as a flood risk? Flood insurance is now more affordable.

(Money Magazine)

Own a home in a flood-prone neighborhood? You've just caught a break.

Bowing to protests from homeowners and real estate agents, Congress in March scaled back big flood insurance premium increases passed in 2012 to shore up the federal program's finances.

The biggest winners: people in areas remapped as higher-risk flood zones over the years, who under the 2012 law faced dramatic rate spikes -- 10-fold hikes in some coastal areas.

The new law slows the escalations. Selling homes in flood zones will also get easier, since buyers can now retain preexisting rate subsidies.

The National Association of Realtors argued that the 2012 law, only parts of which have been implemented, has hindered home sales and depressed property values.

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If you've been hit by flood insurance hikes, consult your agent to see if you're due for revised rates or premium rebates, says Lynne McChristian of the Insurance Information Institute. 

Home prices cool in February

Of the 20 major cities covered by Case-Shiller, San Diego recorded the highest month-over-month gain, up 1%. Home prices were also up in Portland, Ore., Seattle, San Francisco, Los Angeles and Washington. The biggest loser was Cleveland, where prices dropped 1.6%.

Las Vegas had the biggest 12-month increase. Prices there were up 23.1% in February compared with a year earlier. San Francisco and San Diego also rang up big gains.

But overall, the housing market isn't doing as much as it has been to drive the economic recovery.

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"Five years into the recovery from the recession, the economy will need to look to gains in consumer spending and business investment more than housing," said David Blitzer, spokesman for S&P. "Long overdue activity in residential construction would be welcome, but is certainly not assured."

Prices are just one of the real estate market indicators that have been flagging lately, he adds.

NEW YORK (CNNMoney)

Home prices cooled off in February, according to the S&P/Case-Shiller home price index.

Prices were relatively unchanged compared to January. Compared to a year ago, prices rose 12.9%. That's down from an annual gain of 13.2% in January.

"Sales of both new and existing homes are flat to down," said Blitzer. "The recovery in housing starts is faltering. Home prices nationally have not made it back to 2005 [levels]. Mortgage interest rates, which jumped last May, are blamed by some analysts for the weakness. Others cite difficulties in qualifying for loans and concerns about consumer confidence. The result is less demand and fewer homes being built." 

Americans have fallen in love with real estate once again

FORTUNE -- As the real estate market recovers, so does America's faith in housing as an investment.

According to a Gallup poll released Thursday, a plurality of Americans now think of real estate as the "best" long-term investment, followed by gold, stocks and mutual funds, savings accounts/CDs, and bonds:

If one assumes "best" to mean the investment that offers the highest return, then Americans have things backwards. Real estate, on average actually returns very little when adjusted for inflation. Robert Shiller -- the economist famous for helping to create the widely cited Case-Shiller housing index puts it like this:

Home prices look remarkably stable when corrected for inflation. Over the 100 years ending in 1990 -- before the recent housing boom -- real home prices rose only 0.2 percent a year, on average. The smallness of that increase seems best explained by rising productivity in construction, which offset increasing costs of land and labor.

And since 1990, housing has continued to be a middling investment, when you take into account the bursting of the real estate bubble:

When adjusted for inflation, the average house has appreciated little since 1987. The picture looks a lot different for the other investments Gallup asked about it in its polls. The S&P 500, for instance, has produced an inflation-adjusted annual return of 6.32% since 1929, while investing in government debt would have returned roughly half that figure. Gold, interestingly enough, has performed pretty well on an inflation-adjusted basis, averaging a 4.12% return per year since the end of the Bretton-Woods monetary order in 1971.

If you break down the Gallup data into income groups, the answers are even more revealing. For one, wealthy Americans are more likely to pick stocks as the best investment than any other income group. This makes sense, as investing in the stock market is -- as the above data shows -- the best way to become wealthy.

Secondly, it appears as if people are likely to say investments they own are the "best." According to the Gallup report:

Upper-income Americans are much more likely to say real estate and stocks are the best investment, possibly because of their experience with these types of investments. Upper-income Americans are most likely to say they own their home, at 87%, followed by middle (66%) and lower-income Americans (36%). Gallup found that homeowners (33%) are slightly more likely than renters (24%) to say real estate is the best choice for long-term investments.

So wealthy Americans are the most likely to understand that stocks provide the best chance for a higher return, but they are also not free of the tendency to think that the thing they are doing (in this case, owning a home) is the intelligent thing to do.

Of course, this analysis takes for granted the idea that "best" necessarily means the investment that is most likely to make you the most money. There are, of course, other reasons why people might decide to invest in real estate. While it theoretically might make sense for an investor to rent his home and plow the money he saves on taxes, mortgage interest, and maintenance into the stock market, such a strategy might not work in the real world. First of all, people have limited time: They're going to spend a lot of energy choosing a good place to live, and might not also have the time to wisely manage securities investments too. Secondly, owning a home is a great way to force yourself to save money, as each mortgage payment is something you have to make, lest you risk losing your home.

Either way, if you decide to put your extra cash into real estate for these reasons, you should be aware that this is the reason you're doing it. As long as you don't expect your home to make you a lot of money on an inflation-adjusted basis, invest away.

Nearly 2 million homeowners no longer 'seriously' underwater

Surging home prices have helped nearly two million homeowners get back above water on their mortgages over the past year.

During the first quarter, 9.1 million, or 17%, of homeowners were seriously underwater on their home, meaning their debt exceeded the home's value by 25% or more, according to RealtyTrac. That's down from 10.9 million, or 26%, of all properties a year earlier.

States with the highest percentage of seriously underwater homes included Nevada, Florida and Illinois.

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RealtyTrac also found that fewer properties in foreclosure are underwater.

"Because of rising home prices, many of the homeowners in the foreclosure process -- more than a third -- actually have positive equity. That will enable some of them to avoid foreclosure," said Daren Blomquist, a vice president for RealtyTrac.

These homeowners could leverage the home's value to either refinance or sell their home. "But many distressed homeowners with equity may not realize they have it and in some cases have vacated the property already, assuming that their foreclosure is inevitable," he said.

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Metro areas where more than half of the foreclosures actually have positive equity include Denver, Boston, Minneapolis, Houston and Washington, D.C.

RealtyTrac also reported that the number of "equity-rich" homeowners, those with 50% or more equity in their home, grew to 9.9 million in the first quarter. That represents 19% of all mortgaged homes.

These equity-rich homeowners could help further lift the housing market, said Blomquist. They could trade up for bigger and more expensive homes and put their old homes up for sale -- opening up much needed housing for first-time buyers and those on tighter budgets.

Metro areas with the most equity-rich homes included San Jose, Calif., Honolulu, San Francisco, Poughkeepsie, N.Y. and Los Angeles, RealtyTrac reported. 

Detroit to auction vacant homes online. Starting bid: $1,000

In its ongoing battle to fight blight and boost home values, Detroit is launching a website where it will auction off vacant homes that were seized in tax foreclosures.

BuildingDetroit.org launched Monday with 15 home listings that will start getting auctioned off on May 5. One property will be auctioned each day, with the opening bid starting at just $1,000. But there's a catch: Winning bidders must quickly rehabilitate the home and have someone living in it within six months or else they will lose the house and their money.

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"We are moving aggressively to take these abandoned homes and get families living in them again," said Detroit's Mayor Mike Duggan on Monday. "Knowing that other people are going to be buying and fixing up the other vacant homes at the same time will make it a lot easier for them to make that commitment."

Many of Detroit's neighborhoods were hit hard during the foreclosure crisis and have yet to recover as the city struggles to get out of bankruptcy. The city currently owns 16,000 vacant homes as a result of tax lien foreclosures, in which homeowners failed to pay their property taxes and other municipal fees.

"People have walked away from great homes in their neighborhood because they thought their block had no future. Well, they left too soon," city council president Brenda Jones said in a statement.

Sales are only open to Michigan residents and companies with no prior building code or blight violations or tax foreclosures.

Winning bidders will have to act quickly, though. They'll have to come up with a 10% down payment within 72 hours; close and make a full payment within 60 days if the purchase price is less than $20,000 or within 90 days if it's more than $20,000.

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Rehab must also begin within 30 days after taking possession and buyers must submit reconstruction plans with the Detroit Land Bank Authority, which is overseeing the program. And they must have someone living in the building within six months. Failure to meet the deadlines will result in forfeiture of the property.

"We are not looking for speculators" said Land Bank chairwoman Erica Ward Gerson. "If you're not going to act diligently to fix up the house, you'll lose the house and your money."

An open house will be held on April 27 so bidders can look inside all 15 homes currently on the website, according to city councilman Andre Spivey.

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Twelve of the homes to be auctioned are in the East English Village neighborhood. The first home to go on the block is a 1,400 square-foot, brick Colonial with three bedrooms andone and half baths that was built in 1941. The buyer will have to install a new furnace and water heater.

"We're going to fix up entire neighborhoods at once," said Duggan. "It's important that everyone who buys one of these houses is serious about getting them rehabbed and occupied."