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.

Share and Enjoy:

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.

Share and Enjoy:

Home Mortgage Secrets » Mortgage Rates

Housing Market on The Road to Recovery?

Why Haven’t Mortgage Rates Dropped?