Home Mortgage Secrets

Mortgage Rates Are Rising

Jeff — Fri, 02 Apr 2010 14:59:46 +0000

The Federal Reserve’s program of buying mortgage backed securities in order to inject liquidity into the market and keep rates low, ended on March 31st. The anticipation of the end and now the actual loss of liquidity has had the expected impact on mortgage rates.

Rates have been climbing steadily since Thursday March 25th and have jumped again today for a total increase in the past week of .25%. That adds up to an increase of about $30 per month on a $200,000 loan. Not the end of the world but probably not the last of the increases to come.

Federal Reserve to Keep Rates Low

Jeff — Thu, 18 Mar 2010 14:09:41 +0000

Federal Reserve policymakers pledged to keep rates low for an “extended period”. This reiterates the phrase they’ve used for the past year. The Federal Reserve also said it would end, on schedule, its program of buying mortgage-backed bonds to help keep home loan rates low.

The big question is will the end of the Fed MBS buy back policy drive mortgage rates up due to the lower demand for the security. As the normal secondary market for mortgage bonds is virtually non existent, it remains to be seen what will happen to mortgage rates.

U.S. Housing Starts Fall

Jeff — Wed, 17 Mar 2010 13:41:52 +0000

U.S. housing starts fell about 5.9% to a seasonally adjusted annual rate of 575,000 in February as several massive snowstorms hit the East and South. New construction was down in the Northeast and South, but up in the Midwest and West.

Starts of single-family homes fell 0.6% to a 499,000 pace, while starts of large condos and apartment building plunged 43%. In the past year, starts of single-family homes are up 39%, while starts of multifamily units are down 41%. Building permits dropped 1.6% to 612,000 in February. Permits for single-family homes fell 0.2% to a 503,000 rate.

So is this good news or bad? Bad news for builders but good news for the housing market. There are way too many homes for sale and this housing market will not recover until we work off the existing supply. So why do we need more inventory?

Home Buyer Tax Credit Finalized

Jeff — Fri, 06 Nov 2009 21:32:17 +0000

The home buyer tax credit bill was signed today by President Obama. This bill extends the credit period until June 30, 2010 but homes must be in contract by April 30, 2010

The new bill provides for up to $8,000 credit for first time buyers and up to $6,500 for trade up buyers who have been in their current home for the last 5 years.

This extension should provide an early boost to the spring housing market which normally doesn’t start cooking until April. With the Feds Mortgage Bonds purchase program set to expire at the end of March, the time to buy will be the first quarter of next year. Once the Fed halts their purchase program, rates will must likely start to rise.

Home Buyer Tax Credit Extended

Jeff — Thu, 05 Nov 2009 21:22:03 +0000

Both the House of Representatives and the Senate have approved the extension of the $8,000 Home Buyer Tax Credit. Now it is on its way to President Obama’s desk for his signature.

This latest and probably last extension also raises the income limits to $125,000 for a single buyer and $225,000 for a couple. Also included in this bill is a $6,500 credit for trade up buyers as long as they have lived in their current home for at least 5 years.

You’ll need to be in contract by April 30, 2010 and must close by June 30, 2010.

Due to the fraudulent claims connected to the current bill some safeguards have been added to the claims procedure along with a prohibition on non-arms length transactions. Expect delays in receiving your refund as your claim is scrutinized and beware of buying from a relative. The non-arms length prohibition could complicate your claim.

Home Sales Continue to Increase

Jeff — Wed, 02 Sep 2009 14:58:35 +0000

The pace of home sales increased again last month. This is the sixth straight monthly increase this year and provides more fuel to the argument that the housing market has bottomed out.

Low interest rates, increased affordability and the $8,000 tax credit for first time buyers have provided the spark to ignite this stagnant market. Realtors report increased activity at open houses and bidding wars for some well priced properties.

While the inventory of unsold homes is still larger than normal, it is down from the lofty levels of 2008. The market is not red hot but momentum is clearly turning positive

Housing Market on The Road to Recovery?

Jeff — Wed, 03 Jun 2009 14:56:04 +0000

For the third month in a row, pending sales of existing homes rose. The rally in home sales were most likely due to record low mortgage rates and special incentives for first-time buyers. The pending home sales index rose 6.7% in April after a 3.2% increase in March, the National Association of Realtors (NAR) said. The index is up 3.2% above April 2008. The index is based on sales contracts on existing homes. The NAR reports on sales of existing homes once the sales close, usually six to eight weeks later.

The Northeast saw the biggest increase in April where pending sales jumped 32.6 percent from the previous month. Active home buyers have reported more competition for well priced homes than existed only 6 months ago.

Mortgage Applications Increase 48%

Jeff — Wed, 24 Dec 2008 16:08:45 +0000

The Mortgage Bankers Association’s index of applications to buy a home or refinance a loan rose 48% last week to the highest level since 2003. Is this good news? Well, yes and no.

No one ran out to buy a house last week just because rates dropped. Those smart home buyers were in the market already and were able to take advatage of the drop in rates when they were ready to apply for their mortgage. But the trend in rates is down and housing is more affordable so more people will start to enter the market which is good for the economy.

As far as the rest of those applications, most were from people who already applied to refinance or buy a home and had locked in a rate of about 6%. They just went out and made a new application for the same transaction so the net increase in loan applications will be 0. Many of the applications will also fall apart due to credit or appraisal issues so it remains to be seen how much new business will result from those applications.

Why Haven’t Mortgage Rates Dropped?

Jeff — Tue, 23 Dec 2008 20:12:18 +0000

The Federal Reserve cut the Discount Rate but mortgage rates have barely improved. The truth is the Fed has no control over mortgage rates. Mortgage rates are a function of the bond market and fluctuate just like stock prices. As investors buy and sell bonds, mortgage rates will change accordingly. Sometimes they will change 2 or 3 times in a single day if the market is particularly active.

Investors are still worried about the safety of mortgage bonds so more investor money is going into government backed treasury bills and treasury bonds. There is currently about a 300 basis point spread between the rate of 10 year treasury bills and the rate of mortgage backed securities. Normally this spread is about 150 basis points so the difference we are seeing today is evidence of investor fear.

Until stability returns to the housing market and investor confidence improves regarding mortgage backed securities, the Fed will be hard pressed to coax mortgage rates lower.