Just a quick note to the real estate agents that read Bloodhound Blog: now would be a terrific time to have all of your buyers re-prequalified for a home.
Mortgage markets are suffering through an old-fashioned beatdown and some rates for some products are now sitting 0.750% higher than they were just 10 weeks ago.
The last 48 hours account for 0.250% of that increase.
Your buyer’s prequal from even two weeks ago is likely worthless.
As a real-life example, consider a client that can afford a $2,100 monthly mortgage payment and wants an amortizing loan.
- April 7: $350,000 loan size = $2,100 payment
- June 7: $310,000 loan size = $2,100 payment
That’s a $40,000 difference — poof!
(Image courtesy: American Museum of Natural History)
Robert Kerr says:
It’s amusing in an odd way, but every other day I see someone new predicting interest rates will fall soon, revitalizing their local market.
Maybe now some reality will set in. Rates aren’t going anywhere but up for the next 12 mos.
June 7, 2007 — 3:02 pm
Tom Johnson says:
I would give it 6 months at least. Usually the Fed loosens during an election year, but this will be our first post Greenspan presidential election. Bernanke is an unknown in this regard.
June 7, 2007 — 7:55 pm
Robert Kerr says:
Tom, that’s true but rates are still historically low, so prior election years are probably unreliable as a precedent.
The Fed has been consistent and unwavering on this issue. Checking inflation is the primary concern right now. Fuel, food and health care are driving the CPI pretty hard; I don’t expect a rate reduction until that pressure stops.
June 8, 2007 — 9:03 am
Anonymous says:
Interest rates are not as big of an issue to me as the price of the house. Realtors all the time use the notion of ‘payment’. “Gee Chris, if you wait for house prices to fall $50K, but rates go up .25 or .50, then your payment is the same.
Well, sure. But that is not how I do the math. All things in life are a cycle. Rates go up and rates go down (for example). I can always refinance my house in a few years to get the payment down (if I have a higher interest rate), but I cannot renegotiate the purchase price of the house to get my payment down.
So, to sum up…
If I have to pick between:
1. Higher home price now, with a lower interest rate.
or
2. Lower home price in 12 – 24 months, with a higher interest rate…
You do the math.
Love,
Chris
June 8, 2007 — 10:36 am
Russ Wallace says:
It is my understanding that the rates the Fed has control over have little bearing on what mortgage rates do. Instead, I am told it is the mortage bond market that is the “prevailing wind” that determines the movement of mortgage rates.
June 9, 2007 — 11:17 am