Reverse Mortgage Appraisal’s and Compliance
If you’re planning to apply for a reverse mortgage, your home’s value is probably the most important variable used to determine how much money you can get out of your home.
An official appraisal conducted by a licensed appraiser tells your prospective lender how much your home is worth, which helps them calculate how much your payout will be.
Here’s how the home appraisal process works:
Lenders have a list of appraisers they tend to work with, depending on the size, value and location of your home, the actual appraisal process can take between a couple of days and a couple of weeks.
As the borrower, you’re responsible for paying the appraiser. Most appraisals cost between $350 and $500, and you may have the option to pay for it up front or have it taken out of your reverse mortgage payout.
The official appraisal covers several things:
- Interior: An appraiser will take note of the size and style your home, the materials used in your cabinets, countertops and flooring, and any upgrades you might have made. For instance, carpet is standard. Hardwood is an upgrade. Oak kitchen cabinets are standard, and better wood like maple or cherry is an upgrade. Formica countertops are considered standard, but ceramic, granite, slate and marble are a plus.
- Structure: Your appraiser will also take into account your home’s air conditioning and heating, the electrical system, whether your basement is finished, the condition of your roof and attic, the size of your garage, your foundation, yard, and your proximity to water and sewer lines.
- Condition: Your appraiser will look at the condition of your home, see if you’ve remodeled and take measurements and pictures.
- Neighborhood: Information on your neighborhood, your town’s unemployment rate, gentrification and nearby residential and commercial properties also go esinto an appraisal, says Mark Marden of Marden Appraisal Services in Washington, D.C.
- Safety: Reverse Mortgage Paperwork is going to the Department of Housing and Urban Development may require more detailed information, including whether your home complies with certain HUD safety requirements, such as the presence of handrails by stairs. Some appraisers may charge more for this.
If your home does not comply with safety requirements, your appraisal amount may only be valid if you make certain repairs before you get a reverse mortgage.
At the bottom of the appraisal report, we’ll say the value is either as-is, or it’s subject to repairs and list all the repairs that need to be done for appraisal to be valid.
You’re planning to apply for a reverse mortgage, your home’s value is probably the most important variable used to determine how much money you can get out of your home.
An official appraisal conducted by a qualified appraiser tells your prospective lender how much your home is worth, which helps them calculate how much your payout will be.
Zillow May Not Be Ready For Prime Time
We have had a lot of feedback from readers about our first article about the Zillow.com website which was published here during the week of February 12. Nearly all of the writers were extremely negative about Zillow. For example: “This website is highly inaccurate. The values of the homes are not even close. A house valued at 380K will come back on Zillow as 212K. They have a serious database problem.” “It’s a very BASIC GUESS. It cannot ’see’ the house (if the house is) damaged by a storm or fire or anything else. It cannot ’see’ (if) the property is waterfront or has a spectacular view – or not – and compares (it) to only what’s close in proximity – or the property that is gutted on the inside. Hey, it is free so everyone can use it at their own risk. VERY misleading in many areas and only decent for ‘cookie cutter’ neighborhoods in disclosure states. You can trust it about as much as a pie in the sky.” “Fun with Zillow. Change the year your house was built. For some reason if your house was built in 2000 instead of say, 1956, it is worth a couple of hundred K less. At least mine was. Add a bedroom. 25k less. Two houses. Next door. Same sq footage, yard and house, 200k difference. Suffice to say, needs work. And in the short term will cost some poor sod who has to sell his house and has a bad zestimate a lot of money.” The bottom line seemed to be that readers felt we were much to kind to this new and highly hyped website. Well you didn’t give us a chance to finish. We tried to give Zillow a lot of leeway as it is a Beta site and is obviously evolving by the day. But there are definitely problems, the most obvious of which is that there is limited data available for much of the country or Zillow utilizes information which seems to bear a poor relationship to actual market value. At a later date, after giving Zillow a little more time to get its act together, we will look at metropolitan areas where Zillow itself rates its performance well and compare its “Zestimates” and home descriptions to listing prices and other information available on real estate websites and newspaper open house ads. But, even as a Beta site and given that we didn’t have a lot of contacts in areas where Zillow gave itself multiple stars for data accuracy and availability, we did find some strange bits of information and data that was certainly not static. For example, Salt Lake City, Utah showed some very unusual numbers when first checked two weeks ago. A 13 room house in one of the city’s better neighborhood was sold by a relative in 1994 for around $320,000. She then bought a luxury condo in a high rise for $260,000. Salt Lake is not Las Vegas. Home values have accelerated lately, but have been flat for many years. When we first checked out the house and the condo last week they had a Zestimate of well over $1.5 million and $1.2 million respectively. Unfortunately we did not print out the information but called someone else who knew the area and who confirmed what we had seen. This person also checked on a nice three bedroom slab ranch she had once owned slightly south of the city and was speechless to see it Zestimated at over $3.7 million. A week later we rechecked all three of these properties and found that – whoops – there was no Zestimate on any of them and that the assessed values of these homes were a much more realistic at $280,000, $320,000 and $297,000. When we checked again today, all but the slab ranch had completely disappeared from the database. The most innacurate information on Zillow came from a close suburb of Washington, DC in northern Virginia. There a friend reported that her house and the house directly across the street were both Zestimated at $471,000. My friend’s house is a charming four bedroom, 2 bath early 20th Century craftsman style home in pristine condition. The kitchen was remodeled and a family room added some 20+ years ago and both kitchen and family room have all of the bells and whistles. The neighbor’s home was gutted and nearly doubled in size at least four years ago. My friend’s home is assessed at $692,000 and recent neighborhood sales ranged from $750,000 to $950,000. The house across the street has been valued by realtors at $1.2 million. The Zillow Zestimates bears no relationship to any of the real numbers she provided yet Zillow gives itself four stars for its accuracy in Northern Virginia, states that its data quantity – i.e. the availability of data elements – at “most” and ranks its Zestimates as coming within 10 percent of the actual selling price 70 percent of the time. This was substantially higher than the three stars, “most” and 66% ratings it gives itself in the Boston/New Hampshire/ Connecticut area which we found to be much more accurate. It is a shame that Zillow came on line before it was ready for prime time. The hype has been incredible – ABC’s Good Morning America featured it this week and, as we stated at the beginning, CNN, CNET, Motley Fool, USA Today, Business Week, and dozens of metro newspapers have given it a lot of free air or ink. Many people have visited the site, came away disappointed and may not bother to go back. Better that Zillow had all of their ducks in a row before going public. There is another website that is threatening to “revolutionize” real estate. While Redfin is geographically limited (to the Seattle area) it offers a new way of eliminating real estate agents from your life. This time the target is the buyer, the method is a sort-of auction, and we will take a look at it this week
http://www.mortgagenewsdaily.com/channels/12008/print.aspx :
http://www.mortgagenewsdaily.com/2242006_Zillow_Review.asp
Appraisal Management Companies Will Be Ready for New FHA Appraisal Rules: TAVMA
New Rules Will Prevent Appraiser Pressure and Protect First Time Buyers -
PITTSBURGH, Feb. 16 /PRNewswire/ — Title/Appraisal Vendor Management Association (TAVMA), the trade association that represents the nation’s largest appraisal management companies (AMCs), said today that its members are prepared to help lenders comply with the changes in appraisal ordering announced by the Federal Housing Administration (FHA) that went into effect February 15, 2010.
The new guidelines prohibit mortgage brokers from directly ordering appraisals for FHA loans. Earlier this year, Fannie Mae and Freddie Mac implemented a similar policy as part of their Home Valuation Code of Conduct (HVCC).
“Our members, the nation’s largest appraisal management companies, already have significant panels of FHA-certified appraisers,” said Jeff Schurman, Executive Director of TAVMA. “There are more than 51,000 FHA-approved appraisers nationwide and our five largest members currently work with over 20,000 of these FHA-approved appraisers. They’re prepared; the AMC industry is ready.”
Based on the vociferous reaction to HVCC, Schurman said he expects that mortgage brokers, independent appraisers with strong business ties to brokers and realtors will again protest this change. “We expect that there will be significant push-back claiming that the rules will create bottlenecks, shift work to less-experienced appraisers and delay deals,” he continued.
AMCs currently provide approximately 60 percent of all appraisals used in the mortgage industry, and TAVMA’s 46 AMC members account for about 85% of this volume. More than 60,000 local appraisers currently work with AMCs.
Schurman added, “When you consider that more than 60 percent of the appraisers in the country work with AMCs, it stands to reason that AMCs will have a presence in virtually every market––including working on FHA transactions.”
About TAVMA
TAVMA, the Title/Appraisal Vendor Management Association, is a non-profit professional organization that represents more than 75 companies including 46 of the largest Appraisal Management Companies (AMCs) with combined market share of 85 percent of the AMC market. TAVMA promotes the vendor management industry and presents its members’ positions to government and media, protects its members’ rights to do business without unfair and anticompetitive legislation and regulations and provides useful information about issues impacting the real estate settlement services industry. For more information about the organization, visit the website at www.tavma.org.
SOURCE Title/Appraisal Vendor Management Association
RELATED LINKS
http://www.tavma.org
Important FHA notice for all mortgagees, 02/15/10 Implementation Date Will NOT Change for MLs 2009-28 and 2009-51
This is the HUD national homeownership center reference guide mailing list for real estate industry professionals that are interested in updates to HUD Mortgagee letters, notices and guidebooks, & FHA Housing Industry Training. Please visit our homepage at: http://www.hud.gov/offices/hsg/sfh/hsgsingle.cfm Servicing lenders can visit HUD’s National Servicing Center at: http://www.hud.gov/offices/hsg/sfh/nsc/nschome.cfm This list does not provide HudHome property listings.
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All-
Important FHA notice for all mortgagees: The February 15, 2010 Implementation Date Will NOT Change for Mortgagee Letters 2009-28 and 2009-51:
Implementation Date for New Requirements in ML 2009-28:
As indicated in the industry email of December 22, 2009, enactment of ML 2009-28 (Appraiser Independence) WILL be implemented February 15, 2010. ML 2009-28 (originally planned for a January 1, 2010 implementation) has two parts: a) prohibition of mortgage brokers and commission-based lender staff from the appraisal process, and b) appraiser selection in FHA Connection. The effective date for both sections of this guidance will take effect for all case numbers assigned on or after February 15, 2010. This extension has allowed FHA and lenders additional time to adjust systems to accommodate the changes. Detailed instructions on changes to FHA Connection will be issued in a new mortgagee letter, which was delayed due to federal offices being shut down the week of February the 8th and will be released the week of February 15th.
However, lenders will be able to secure a case number assignment in FHA Connection via the Case Number Assignment Screen without inputting the appraiser information. The Case Number Assignment Screen will no longer capture the assignment choice, license ID and assignment date. Instead, lenders will be required to enter all appraisal data, including the appraiser ID, in the Appraisal Logging Screen once the completed appraisal is received by the lender and prior to closing the loan.
Implementation Date for ML 2009-51:
ML 2009-51, Adoption of the Appraisal Update and/or Completion Report, states an effective date of January 1, 2010. The effective date was extended and will apply to all case numbers assigned on or after February 15, 2010. This extension provided additional time needed by FHA and lenders to adjust their systems to accommodate use of the form.
All FHA Mortgagee Letters can be read online at: http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/
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Freddie Mac Alternatives to Foreclosure Training for Housing Counselors:
March 1, 2010 – Atlanta, Georgia. Seats are filling up fast so register soon for this course sponsored by Freddie Mac. This 1-day workshop provides housing counselors with an understanding about analyzing default situations to determine possible alternatives to foreclosure. It provides information about workout options (with an emphasis on short payoffs & mortgage modifications), applying Freddie Mac requirements, and exploring options that can help keep borrowers in their homes. Registration Required, No fee. For more info: http://www.freddiemac.com/ontrack/html/LearningCenter/ClassDescription.jsp?crsNum=ATFHC
Reminder from Freddie Mac to all Housing Counselors:
Freddie Mac requires signed written authorization from the borrower before they can communicate with Housing Counselor about any borrower’s case. 95% of the requests Freddie Mac receives from housing counselors do not contain the authorization. This delays response time on the case because Freddie Mac must have the authorization to continue. Please provide the signed written authorization when you first contact Freddie Mac about a borrower.
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RESPA Rule Seminar:
February 19, 2009 – New York, NY. RESPA Rule Seminar. Hosted by HUD’s Office of the Inspector General. Friday, 10:00 a.m. – 2:00 p.m. at the New York Federal Building, 26 Federal Plaza, New York, NY 10278-0068 (Duane Street Entrance), 6th floor Conference Room A & B. If you have any questions please call Migdalia Murati at: 973-776-7316 or David McCarraher at: 215-430-6627. Electronic Registration Required, no fee. Registration link is: http://www.hud.gov/emarc/index.cfm?fuseaction=emar.registerEvent&eventId=367&update=N
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HUD-FHA has new career opportunities for qualified individuals. Recently posted online is the position of:
Underwriter, Vacancy announcement 09-DEU-2010-0006z, (Orange County, CA)
The Vacancy Announcements are posted at www.usajobs.gov Please visit that website to view the announcements, additional information and to search for additional new HUD job listings. HUD-FHA also has job opportunities in other locations around the nation. Please bookmark and revisit www.usajobs.gov frequently to see the new jobs as they appear online. Application forms can be found at: http://www.usajobs.opm.gov/forms.asp
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Bulk subscriptions:
Some industry folks have asked, “How do I sign up my entire staff for FHA email updates?” It is easy… Just list your staff email addresses like this:
You can send in one email address or thousands. Email your list to: jerrold.h.mayer@hud.gov
If you have a mortgage or real estate industry friend who you want to subscribe to the national hoc reference guide mailing list, there are 3 other ways to sign up: 1. send them this link: http://www.hud.gov/offices/hsg/sfh/ref/hsgregst.cfm they can sign up for the email list there; or 2: forward them this email; or 3: Visit: http://www.usa.gov/ and subscribe at: http://apps.gsa.gov/FirstGovCommonSubscriptionService.php
To unsubscribe – go to: http://www.hud.gov/subscribe/index.cfm and click on “National Homeownership Center Reference Guide” and follow the unsubscribe instructions on that page.
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This is the FHA Single Family Housing listserv for real estate industry professionals that are interested in updates to Mortgagee letters, Notices, Guidebooks, Housing Counseling, FHA Reference Guide, Mortgage Limits, Career Opportunities, Grants, Contracting Opportunities & Housing Industry Training. Please visit us at: http://www.hud.gov/offices/hsg/sfh/hsgsingle.cfm
You can find a directory of states that are serviced by the four FHA Homeownership Centers (HOC) on the web at: http://www.hud.gov/offices/hsg/sfh/hoc/hsghocs.cfm
Servicing lenders can visit FHA’s National Servicing Center on-line at: http://www.hud.gov/offices/hsg/sfh/nsc/nschome.cfm
For FHA technical support, please contact the FHA Resource Center: http://www.fhaoutreach.gov/FHAFAQ/ Search our online knowledge base and find answers to our most commonly asked questions. Use “live help” to get on-line technical support. You can also get email technical support at: info@fhaoutreach.com or phone FHA toll-free between 8:00 a.m. and 8:00 p.m. ET (5:00 a.m. to 5:00 p.m. PT) at: (800) CALLFHA or (800) 225-5342. Call FHA TDD at: (877) TDD-2HUD (877) 833-2483).
To find the FHA S/F Reference Guide on-line please visit: http://www.hud.gov/offices/hsg/sfh/ref/hsgrcont.cfm
Find out about FHA training by visiting our Events and Training calendar at: http://www.hud.gov/offices/hsg/sfh/events/events.cfm
Do you want to find out about current HUD Contracting Opportunities? To obtain a listing of the current opportunities please visit: http://www.hud.gov/offices/cpo/index.cfm
Do you want to find out about career opportunities at HUD? Visit: http://jobsearch.usajobs.gov/ Application forms can be found at: http://www.usajobs.opm.gov/forms.asp
Find out about grant opportunities by visiting HUD’s Funds Available website at: http://www.hud.gov/offices/adm/grants/fundsavail.cfm
For all FHA publications visit HudClips at http://www.hud.gov/offices/adm/hudclips/index.cfm You can order hardcopies at: http://www.hud.gov/offices/adm/dds/index.cfm
Do you need to find a FHA form? You can also find all FHA forms on the HUDClips website at: http://www.hud.gov/offices/adm/hudclips/forms/
For information on Presidentially Declared Disaster areas and to learn how HUD can help, please see: http://www.hud.gov/offices/hsg/sfh/nsc/disaster.cfm
or contact the National Servicing Center in Oklahoma City, 1-888-297-8685.
This list does not provide HudHome property listings. To see the latest list of all HudHomes nationwide please visit: http://www.hud.gov/homes/homesforsale.cfm
This list will often provide training opportunities and event announcements for non-profit and local government HUD partners. HUD does not endorse the organizations sponsoring linked websites, and we do not endorse the views they express or the products/services they or their community/business partners offer. For more information on HUD’s web policies please visit: http://www.hud.gov/assist/webpolicies.cfm
Thank you!!!
Understanding FHA Appraisal Compliance
FHA Appraisal Compliance is right around the corner FHA has made it very clear that they will not tolerate any lenders who do not comply 100% with FHA’s regulation. The key to success with the new appraisal changes is understanding what needs to be done and how to effectively manage the new appraisal process. FHA sent an announcement several months ago but has not provided very much follow-up or detailed as to exactly what needs to happen for a mortgage lender to be compliant with the upcoming changes
As of Feb 15, 2010 FHA Appraisal Regulations will do the following:
- Prohibits Loan Production Staff or anyone compensated with the closing of a loan from ordering an appraisal for both Conventional and FHA.
- FHA Stresses “Absolute lines of independence”
- Lenders will get sanctioned if appraisers names is not correct in FHA Connection. Appraisal on report must be the same in connection
- Timely Payment to appraisers (net 30).
- The appraiser will enjoy the freedom from any person to Provide ANY Estimate of value on the appraisal request verbally or e-mail.
- Established Appraiser Independence Hot-line.
- Provide appraiser written notice of a removal from a list or for any reduction of work.
- Forbid’s lender from ordering a second appraisal without putting both in the loan file.
- FHA prohibits “appraiser shopping” where lenders order more appraisals to assure :
1. The first appraisal contains material deficiencies as determined by the Direct Endorsement underwriter for the second lender.
2. The appraiser performing the first appraisal is on the second lender’s exclusionary list of appraisers.
3. Failure of the first lender to give a copy of the appraisal to the second lender in a timely manner would cause a delay in closing, posing potential harm to the borrower.
- In cases where a borrower has switched lenders, the first lender must, at the borrower’s request, transfer the case to the second lender. FHA does not need that the client name on the appraisal be changed when it is transferred to another lender.
About Coester Appraisal Group Headquartered in Gaithersburg, Maryland, Coester Appraisal group has provided quality real estate appraisals since 1970. Clients that depend on Coester’s appraisals, BPO’s, AVM’s and property valuation tools include banks, credit unions, mortgage companies, hedge funds, attorneys and government agencies. Their experienced staff provides a quality valuation completed in a timely manner with a correct estimation of market value. Each appraisal is manually reviewed by a staff appraiser for quality and compliance with lender’s underwriter guidance and is certified HVCC and USPAP compliant. For more information about the company and its services, please visit their website at http://www.coesterappraisals.com.
Phone 888-485-1999
FHA Appraisal Compliance, right around the corner
Coester Appraisal Group a nationwide appraisal management company is stressing the urgency of mortgage lenders taking a proactive approach to adopting FHA appraisal compliance guidelines set to take effect Feb 15, 2010. The appraisal company which is known for it’s excellence service as well as commitment to appraisal quality with an 100% guaranteed appraisal is concerned the mortgage community is not prepared for the switch. Task Force Manager Jerry White was quoted as saying “we have been getting ready for the switch for several months, and we have proactively approached our clients and vendors about ensuring they are ready for the switch come Feb,15. We are trained and ready to deliver for our clients and the mortgage community as a whole. We have prepared by having every FHA Roster appraiser signed up with us as well as offered training on our convertible appraisal product and FHA platform”.
This news should come as a relief for the mortgage community as FHA commissioner Dave Stephens who originally hired Coesters’ operations manager Frank Novak into the business over 20 years ago has made it very clear that “Any lender who refuses to comply with FHA requirements will simply no longer enjoy the privilege of participating in FHA programs”. Stephens which has already sanctioned several mortgage lenders for non prudent lending practices is positioned to take on a similar stance when it comes to appraisal compliance. The time is now to get your appraisals in order and prepare for one of the biggest switches in the mortgage industry.
About Coester Appraisal Group Headquartered in Gaithersburg, Maryland, Coester Appraisal group has been providing quality real estate appraisals since 1970. Clients that depend on Coester’s appraisals, BPO’s, AVM’s and property valuation tools include banks, credit unions, mortgage companies, hedge funds, attorneys and government agencies. Their experienced staff provides a quality valuation completed in a timely manner with a correct estimation of market value. Each appraisal is manually reviewed by a staff appraiser for quality and compliance with lender’s underwriter guidelines and is certified HVCC and USPAP compliant. For additional information about the company and its services, please visit their website at http://www.coesterappraisals.com.
Phone 888-485-1999
‘FED’s Say NO to BPO’ – Updated Appraisal Newscast.
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Census Bureau: 130.6 Million Housing Units in the US; 18.9 Million are Vacant
by Adam Quinones:
The Census Bureau today released the Report on Residential Vacancies and Homeownership. This data covered fourth quarter 2009.
From the release…
* National vacancy rates in the fourth quarter 2009 were 10.7 percent for rental housing and 2.7 percent for homeowner housing.
* The rental vacancy rate was higher than the fourth quarter 2008 rate (10.1 percent) and not statistically different from the rate last quarter (11.1 percent).
* For homeowner vacancies, the current rate was not statistically different from the fourth quarter 2008 rate (2.9 percent) or from the rate last quarter (2.6 percent).
* The homeownership rate at 67.2 percent for the current quarter was not statistically different from the fourth quarter 2008 rate (67.5 percent), but it was lower than last quarter’s rate (67.6 percent).
HOUSING VACANCY AND HOME OWNERSHIP DEFINITIONS
Housing Unit. A housing unit is a house, an apartment, a group of rooms, or a single room occupied or intended for occupancy as separate living quarters. For vacant units, the criteria of separateness and direct access are applied to the intended occupants whenever possible.
The householder refers to the person (or one of the persons) in whose name the housing unit is owned or rented or, if there is no such person, any adult member, excluding roomers, boarders, or paid employees.
Vacant Housing Units. A housing unit is vacant if no one is living in it at the time of the interview, unless its occupants are only temporarily absent. No mention of how a homeowner waiting on an eviction is applied to this data.
At the end of the fourth quarter of 2009, there were 130.58 million housing units in the US. Compare that to the end of 2008 when there were 129.45 million. This is a one year increase of 1.14 million (+0.88%) total housing units. Of total inventory, 85.5 percent or 111.71 million housing units were occupied. 75.04 million, or 57.5 percent, were owner occupied and 36.67 million, or 28.1 percent, were rented. 18.88 million of 130.58 million housing units were vacant (make sure you read the definition above). This is 14.5% of total housing units.
Of vacant homes:
* 14.25 million were for rent
* 2.09 million were for sale only
* 7.69 million were “other” Many foreclosures will be in the “other” category, because they are neither for sale or for rent – they are still in the foreclosure process and tied up in legal proceedings, or being held off the market until the legal owner of the property decides what to do.
In addition, it is possible the unit could be undergoing repair for future use. Also included in the “vacant other” category are units “for occasional use” and units “temporarily occupied by persons with usual residence elsewhere”, both of which may contain foreclosures. Foreclosures could also be included in the seasonal category, depending on the specific situation. The South had the highest vacancy rates. The rental vacancy in that region was 13.7 percent compared to 13.1 percent in 2008. The rate in the Northeast was the lowest at 7.2 percent but this was an increase over the 6.3 percent reported a year earlier. The homeowner vacancy was also highest in the South at 2.9 percent but this was down slightly from 3.1 percent in 2008. The Northeast had the lowest in this category as well; 1.9 percent compared to 2.2 percent a year earlier. Ownership is highest among those 65 years of age and over; 80.2 percent are homeowners. The percentage of homeownership declines with each younger age category. Ownership among people under 35 is only 40.4 percent. As might be expected it was also highest among those households with the highest incomes. Where family income was greater than or equal to the median family income the ownership rate was 81.8 percent. This was lower than the 82.9 percent in this category in 2008.
Personal Income, Expenditures Rises Modestly
Kan, Joel
Personal income increased by 0.4 percent, disposable personal income increased by 0.4 percent and personal consumption expenditures increased by 0.2 percent in December, the Bureau of Economic Analysis reported yesterday.
December data built on November’s increases, when personal income increased by 0.5 percent, DPI increased by 0.5 percent and PCE increased by 0.7 percent, based on revised estimates.
Real disposable income increased by 0.3 percent in December, matching November’s increase, while real PCE increased by 0.1 percent in December, compared to an increase of 0.4 percent in November.
Personal savings as a percentage of disposable personal income stood at 4.8 percent in December, compared to 4.5 percent in November. The December saving rate brings the fourth quarter average to 4.6 percent. Coupled with the 5.4 percent and 4.5 percent saving rates seen in the second and third quarter of 2009, respectively, this is the first time since the late 1990s that we have seen three consecutive quarters of a personal saving rate above 4 percent.
Real DPI–adjusted to remove price changes–increased by 0.3 percent in December, the same as in November.
Real PCE–adjusted to remove price changes–increased by 0.1 percent in December, compared to an increase of 0.4 percent in November, propped up by purchases of services and durable goods. Purchases of services in December increased by 0.4 percent, in contrast to a decrease of less than 0.1 percent in November. Purchases of durable goods increased 0.2 percent, compared to an increase of 2.3 percent in November, while purchases of nondurable goods in December decreased by 0.8 percent, compared to an increase of 1.0 percent the previous month.
The price index for PCE increased by 0.1 percent in December, compared to an increase of 0.3 percent in November. The PCE price index excluding food and energy, sometimes known as the Core PCE price index, increased by 0.1 percent compared to an increase of less than 0.1 percent in November.
Private wage and salary disbursements increased by $6.3 billion in December, compared to an increase of $25.1 billion in November. Goods-producing industries’ payrolls decreased by $5.2 billion compared to an increase of $2.9 billion the previous month. Manufacturing payrolls decreased by $2.2 billion in December, compared to an increase of $3.5 billion last month, and remained close to the historical low seen in June 2009. In contrast, services-producing industries’ payrolls increased for the ninth consecutive month, increasing by $11.5 billion, compared to an increase of $22.3 billion last month. Government wage and salary disbursements increased by $2.9 billion, compared to an increase of $1.8 billion.
(Joel Kan is associate director of research and business development with the Mortgage Bankers Association. He can be reached at jkan@mortgagebankers.org.)
