Mortgage pricing is off of the lows from early January. The reason for this is simple, as the global economic downturn worsens more countries are issuing debt. This is forcing the TBILL investors to raise their yield requirement at auctions to keep the demand for our debt sufficient.
The U.S. government’s promise to purchase $500 billion of MBS by the end the 2nd quarter is the ONLY thing keeping mortgage rates down as evidenced by most institutions selling their current mortgage production immediately. This is a sign that the risk vs. return at current mortgage rates is not sufficient. Treasury is financing the MBS purchases with TBILL issuance so the rise in the yield of TBILLs (particularly the 10yr) is forcing the Treasury and GSEs to raise the yield at which they are purchasing mortgages, resulting in higher rates.
The two questions a potential borrower should consider are:
Will treasuries rally back to the record low yield levels we saw in early January?
Will the global economic slowdown turn around in the next 6 months?
If neither of these occur, then it is likely mortgage pricing will continue to slowly get worse. If you haven't done so, now is a great time to look at getting locked in.
Existing Home Sales - Rate Update
Good news is existing home sales were reported higher today than what previous was expected. This means many buyers who were on the fence decided to take advantage of lower rates and favorable home prices. This is definitely a step in the right direction.
Mortgage rates saw an uptick the end of last week. Rates for well qualified borrowers still remain in the low 5's on a 30 year fixed rate. The Federal Reserve will wrap up it's meeting this week. Most expect little to no movement in mortgage rates as a result.
Mortgage rates saw an uptick the end of last week. Rates for well qualified borrowers still remain in the low 5's on a 30 year fixed rate. The Federal Reserve will wrap up it's meeting this week. Most expect little to no movement in mortgage rates as a result.
Housing Still Sliding
Housing still sliding
But economists say mid-2009 will be the trough
By Steve Kerch, MarketWatch
Last Update: 3:45 PM ET 1/20/09
LAS VEGAS (MarketWatch) -- Housing will not look much better at the end of this year than it does now, but "we do expect '09 will be the bottom," the chief economist for the National Association of Home Builders said Tuesday.
David Crowe, speaking at the International Builders Show here, said housing starts are expected to fall nearly another 30% in 2009 and new-home sales will drop 14%. But he said he expects the trough of the market to occur sometime in the middle of the year.
"We should come out of 2009 on an upswing. It won't be strong, and we will still have home-price declines throughout the year, but it will be an upswing," he said.
Weighing heavily on housing market forecasts is the continued decline in employment. Frank Nothaft, chief economist for mortgage agency Freddie Mac, said he expects unemployment will jump to 8.7% by the end of 2009, up from 7.2% today. And that in turn will push mortgage delinquencies and foreclosures higher, adding to an already bloated supply of homes on the market.
"The single most important trigger event for delinquencies is unemployment," Nothaft said. "Clearly there will be more significant job losses over 2009 and that will contribute to delinquencies on loans of all types." Particularly troubling, he said, is that even prime borrowers with conventional, conforming fixed-rate loans are defaulting in higher numbers.
The job picture also dims consumer confidence, which is at or near historic lows, "making them afraid to go out and buy anything durable, and that certainly includes a home," Crowe said. That is making it difficult to work off the excess inventory of homes for sale.
Crowe estimates that 6.2 million homes are vacant and on the market, with about one-third of those homes being new construction. He said that represents about 1.5 million units above what would be an equilibrium rate for housing.
"And adding to that static supply is the continued number of homes going into foreclosure," he said.
Builders are making an effort to clear that supply, Crowe said, both by trimming housing starts and by cranking up incentives to move empty houses. A recent builder survey that asks about concessions being made found just 12% across the country saying they were offering nothing in the way of perks versus 50% who in 2003 said that.
Those concessions include price reductions and the addition of amenities at no cost. "Virtually all builders are doing something extra to move houses," he said.
Home prices will continue their slide in 2009 and may well keep falling into 2010, said David Berson, chief economist for mortgage insurer PMI Corp. The company's winter forecast shows that of the top 50 U.S. metropolitan areas more than half have a 50% or greater risk of seeing lower home prices two years from now as they do today. In some hard hit markets such as Las Vegas, that risk is about 90%, he said.
Good mortgage rates, if you can get them
If there is any good news for housing, it comes from mortgage rates, which are at historic lows and not expected to move up. But mortgage credit is not nearly as available as it was in the housing boom as lenders tightened underwriting standards throughout the last year, Nothaft said.
"If you have a down payment or home equity, a good credit score, full-doc underwriting and a conforming loan balance [meaning it is under the Fannie Mae and Freddie Mac limit of $417,000 or $615,000 in high-cost areas] - if you meet those four criteria then you have no problem getting mortgage credit," he said. "But if you only meet three out of four, your mortgage is going to be much more expensive, if you can get a loan at all."
But economists say mid-2009 will be the trough
By Steve Kerch, MarketWatch
Last Update: 3:45 PM ET 1/20/09
LAS VEGAS (MarketWatch) -- Housing will not look much better at the end of this year than it does now, but "we do expect '09 will be the bottom," the chief economist for the National Association of Home Builders said Tuesday.
David Crowe, speaking at the International Builders Show here, said housing starts are expected to fall nearly another 30% in 2009 and new-home sales will drop 14%. But he said he expects the trough of the market to occur sometime in the middle of the year.
"We should come out of 2009 on an upswing. It won't be strong, and we will still have home-price declines throughout the year, but it will be an upswing," he said.
Weighing heavily on housing market forecasts is the continued decline in employment. Frank Nothaft, chief economist for mortgage agency Freddie Mac, said he expects unemployment will jump to 8.7% by the end of 2009, up from 7.2% today. And that in turn will push mortgage delinquencies and foreclosures higher, adding to an already bloated supply of homes on the market.
"The single most important trigger event for delinquencies is unemployment," Nothaft said. "Clearly there will be more significant job losses over 2009 and that will contribute to delinquencies on loans of all types." Particularly troubling, he said, is that even prime borrowers with conventional, conforming fixed-rate loans are defaulting in higher numbers.
The job picture also dims consumer confidence, which is at or near historic lows, "making them afraid to go out and buy anything durable, and that certainly includes a home," Crowe said. That is making it difficult to work off the excess inventory of homes for sale.
Crowe estimates that 6.2 million homes are vacant and on the market, with about one-third of those homes being new construction. He said that represents about 1.5 million units above what would be an equilibrium rate for housing.
"And adding to that static supply is the continued number of homes going into foreclosure," he said.
Builders are making an effort to clear that supply, Crowe said, both by trimming housing starts and by cranking up incentives to move empty houses. A recent builder survey that asks about concessions being made found just 12% across the country saying they were offering nothing in the way of perks versus 50% who in 2003 said that.
Those concessions include price reductions and the addition of amenities at no cost. "Virtually all builders are doing something extra to move houses," he said.
Home prices will continue their slide in 2009 and may well keep falling into 2010, said David Berson, chief economist for mortgage insurer PMI Corp. The company's winter forecast shows that of the top 50 U.S. metropolitan areas more than half have a 50% or greater risk of seeing lower home prices two years from now as they do today. In some hard hit markets such as Las Vegas, that risk is about 90%, he said.
Good mortgage rates, if you can get them
If there is any good news for housing, it comes from mortgage rates, which are at historic lows and not expected to move up. But mortgage credit is not nearly as available as it was in the housing boom as lenders tightened underwriting standards throughout the last year, Nothaft said.
"If you have a down payment or home equity, a good credit score, full-doc underwriting and a conforming loan balance [meaning it is under the Fannie Mae and Freddie Mac limit of $417,000 or $615,000 in high-cost areas] - if you meet those four criteria then you have no problem getting mortgage credit," he said. "But if you only meet three out of four, your mortgage is going to be much more expensive, if you can get a loan at all."
Freddie Mac Average Rates
If your like me, you are sick of seeing all of the online advertising offering interest rates that practically nobody can qualify for. A legitimate source for info on average rates in the country can be found at www.freddiemac.com.
Freddie Mac is one of the biggest buyers of home loans in the country with Fannie Mae. They publish a weekly survey that shows what the average rate was in the country and the points associated with it.
This is a legitimate source of information, unlike others that allow any advertiser willing to pay to publish any crazy, inaccurate rate they want (in particular bankrate.com)
Freddie Mac is one of the biggest buyers of home loans in the country with Fannie Mae. They publish a weekly survey that shows what the average rate was in the country and the points associated with it.
This is a legitimate source of information, unlike others that allow any advertiser willing to pay to publish any crazy, inaccurate rate they want (in particular bankrate.com)
Unemployment Report - Rates Unchanged
While jobless rates have continued to climb, this mornings jobless report was as expected. This means mortgage rates remain unchanged from yesterday. Rates are great. Waiting for even lower rates may result in a missed opportunity. Have a great weekend!
Market Remains Attractive
Mortgage bond pricing remains attractive with rates at all time lows. Check out the audio section below for answers to common questions about refinancing. If you haven't done so already, now is a great time to get your application in as soon as possible.
Thanks for your patience as we work thru the large influx of recent applications.
Thanks for your patience as we work thru the large influx of recent applications.
New Audio Broadcast - Your Questions Answered
It's no surprise, lenders in the mortgage business are extremely busy and are working thru a large influx of mortgage applications. In an attempt to get information to you quickly and to answer many questions you might have, I have put together the following voice broadcast for you. I hope this information is helpful to you. Don't hesitate to let us know if you have any questions or concerns.
Mortgage Rates Still Favorable
Mortgage rates looked slightly better today thanks to the fact that the Fed starting buying mortgage backed securities yesterday. Yesterdays bond market saw a strong rally pushing mortgage rates lower than yesterday. As with most rallies, they can be short lived. Today mortgage bonds are flat to down slightly for the day.
Rates continue to look good, now is a great time to look at refinancing before rates change. If you haven't done so already, I suggest you get your application in as soon as possible.
On a related note, several lenders have started to increase rates even though the market has moved favorably. Simply put, the slower housing market caused many lenders to cut staff and they are now under staffed to deal with the large influx.
While we did not decrease our staff, like other lenders we are struggling to return inquiries as timely as possible. I appreciate your patience and encourage you to complete an online application to aid us in quickly processing your loan.
Rates continue to look good, now is a great time to look at refinancing before rates change. If you haven't done so already, I suggest you get your application in as soon as possible.
On a related note, several lenders have started to increase rates even though the market has moved favorably. Simply put, the slower housing market caused many lenders to cut staff and they are now under staffed to deal with the large influx.
While we did not decrease our staff, like other lenders we are struggling to return inquiries as timely as possible. I appreciate your patience and encourage you to complete an online application to aid us in quickly processing your loan.
Fed Starts Buying Mortgage Bonds
Today the New York Federal Reserve Bank started buying mortgage backed paper. This translates favorably for consumers as it helped to push bond prices up which translates into lower mortgage rates. In addition, minutes from the recent Federal Reserve meeting show the Fed is still concerned about the economy and is dilligently working to fight off a depression.
All of todays news translates into mortgage pricing looking better. Rallies like this have been short lived. If you haven't done so already, now is a good time to get your application in so we can get moving for you.
If you have an application already in, we are dilligently working to touch base with everyone as quickly as possible. We appreciate your patience and look forward to speaking with you soon.
All of todays news translates into mortgage pricing looking better. Rallies like this have been short lived. If you haven't done so already, now is a good time to get your application in so we can get moving for you.
If you have an application already in, we are dilligently working to touch base with everyone as quickly as possible. We appreciate your patience and look forward to speaking with you soon.
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