Monday, September 20, 2010

30yr Fixed 4.25%, 15 yr Fixed 3.75 both with 1% Origination

After rising for two weeks, mortgage rates moved a little lower this week. Slower than average economic growth and low inflation persuaded investors to purchase bonds, including mortgage-backed securities. Following three months of declines, mortgage rates appear to be settling into a range so far in September.

The most significant economic data released during the week was the monthly inflation reports. Rising inflation erodes the value of bonds and pushes mortgage rates higher. In the current economic environment, higher inflation is not a concern, and some investors are more worried about the risk of inflation falling too low. The Fed is generally most comfortable when core inflation is rising at an annual rate between 1.0% and 2.0%. In August, the core Consumer Price Index (CPI) increased at a low 0.9% annual rate. While this level is probably not low enough to prompt new action from the Fed, investors will be closely watching what the Fed has to say about inflation rates at next Tuesday's meeting.

Hearings began this week on the role of government in the housing market, including the future of Fannie Mae and Freddie Mac. The debate is expected to be lengthy, and the Obama administration has stated that it will produce a proposal in January. There is general agreement that government involvement has created a more liquid market for mortgages, which has resulted in lower mortgage rates. The early consensus is that there is an appropriate role for government in the housing market, but that proper safeguards must be established to reduce the future risk to taxpayers. In any case, changes are expected to be phased in gradually over a period of years.

The biggest story next week will be Tuesday's Fed meeting. No change in the fed funds rate is expected, but any surprises in the Fed's statement could have a large impact on mortgage rates. Also on Tuesday, Housing Starts will be released. Existing Home Sales will come out on Thursday, along with Leading Indicators.

Thank you Christian Johnson of Shelter Mortgage for sharing this information.

Saturday, September 18, 2010

This Month in Real Estate
September 2010
Market Update
The housing market was off to a rocky start as the second half of the year began. Much of the volatility, however, was anticipated and attributed to the now-expired tax credit. Despite softened sales this last month, home prices continued to gain -  thanks in part to record low jumbo loan rates, which are fueling more interest and activities in the higher end of the market.
Meanwhile, the economy still has a lot of ground to cover before achieving its full, sustainable recovery. Consumers, while remaining on the cautious side, have increased their spending, which is supported by a gradual improvement in income. The stagnant job market continues to be a cause for concern, but overall, financial conditions have improved.

For the first time in fourteen months, home sales fell below year-ago levels. Although the drop exceeded expectations, it is undoubtedly due to the expiration of the tax credit. Lawrence Yun, NAR chief economist, said, “given the rock-bottom mortgage interest rates and historically high housing affordability conditions, the pace of a sales recovery could pick up quickly, provided the economy consistently adds jobs.”

July’s median home price was virtually unchanged. Home values have been stable for the past 18 months due in part to the tax credit. Experts believe that home prices will continue to be stable going forward.

The total number of homes on the market remains stable but the number of months worth of inventory has jumped due to lower home sales and fewer buyers in the market. This represents a great opportunity for buyers who have not yet purchased or who are considering a second home or investment property. Important to note is that experts anticipate stable prices and do not expect this to be an ongoing trend.
Source: National Association of Realtors
Interest Rates
Mortgage rates continued to set new record lows in August, providing real savings in interest and monthly payment for buyers and refinancers. As economic activity picks up, rates will rise to keep inflation in check.

Rates as of September 2.
This Month's Video
Topics For Home Owners, Buyers & Sellers

Financial Reform

What it means for consumers
The Wall Street Reform and Consumer Protection Act was signed into law in late July.  Before the pains of the financial crisis were just a thing of the past, Congress passed the biggest financial reform measures since the Great Depression. While much of the bill covers Wall Street measures and regulations, there are several changes consumers should be aware of. The following are the top measures related to financing for consumers:
  1. Mortgages. Lenders must determine if borrowers will be able to meet monthly obligations including mortgage, taxes, insurance, and assessments. Borrowers of adjustable rate mortgages must qualify at the highest rate. Additionally, lenders won’t be able to incentivize mortgage brokers to make higher-rate or riskier loans.
  2. Credit Reports. All consumers will no longer have access to government-mandated free annual credit reports. Consumers who are denied a loan or who are not offered the best interest rate will receive free copies of their credit scores. Credit scores and reports will be available for purchase through a credit bureau or
  3. Credit and Debit Card Changes. Most notably, merchants may start incentivizing consumers to pay with cash, debit, or check. There may be changes to credit card rewards programs.
  4. Consumer Financial Protection Bureau. This new bureau will regulate consumer loans including mortgages, credit cards, student loans, payday loans, and check-cashing companies.  Auto loans and insurance lending will be excluded.

The government’s goal of creating safer and easier to understand lending practices is to benefit the long-term strength of the economy. 
For more information, see the following links:

    Local Lenders Rates

Consumers would be wise to do some shopping around for interest rates on mortgages.
Since the financial crisis began, many of the big banks consolidated and merged - Wells Fargo and Wachovia, for example - increasing the “big banks” combined market share. With fewer players in the game, rates don’t need to be as competitive as before the consolidation to get the same amount of business.
Smaller local or regional banks can offer significantly advantageous rates. Of course, each loan situation is different and depends on a variety of factors, but don’t forget due diligence – it could save big bucks in the long run.
Sources: The Wall Street Journal, USA Today,

Newsletter Contents
1. Market Update
2. Interest Rates
3. Video
4. Topics for Owners, Buyers & Sellers

Brought to you by KW Research. For additional graphs and details, please see the This Month in Real Estate PowerPoint Report. 
The opinions expressed in This Month in Real Estate are intended to supplement opinions on real estate expressed by local and national media, local real estate agents and other expert sources.  You should not treat any opinion expressed on This Month in Real Estate as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of opinion.  Keller Williams Realty, Inc., does not guarantee and is not responsible for the accuracy or completeness of information, and provides said information without warranties of any kind.  All information presented herein is intended and should be used for educational purposes only.  Nothing herein should be construed as investment advice.  You should always conduct your own research and due diligence and obtain professional advice before making any investment decision.  All investments involve some degree of risk.  Keller Williams Realty, Inc., will not be liable for any loss or damage caused by your reliance on information contained in This Month in Real Estate.