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Tag: Mortgage Market (page 1 of 1)

March 3, 2011

Rage and Rates… a Tin Foil Hat Production

by

Real Estate Renaissance Man

Author website

I wrote the article below a couple of days ago for a blog on political and economic freedom.  I’m reprinting it here after enjoying some discussion on the matter with fellow Bloodhound and VA mortgage expert Brian Brady.  Besides it being a brilliant piece (of tin foil hat wearing rantings), the article does actually touch on an area that could be of great importance to our real estate buying clients:  mortgage rates.  You see (in an over-simplified explanation), when the world gets scared, money flows to safety.  Safety, at least for the time being, still resides in US bonds.  Though not always correlated, the interest rates on mortgages often travel in the same direction as those on bonds.  So if, for some crazy, unforseen reason, the world becomes a little apprehensive over the next 2 weeks, we might see mortgage rates drop.  The question is: when do you lock the rate for your client?  Well, if we knew the actual date this crazy, unforseen event may occur, we could watch closely and lock right up to the day before. Why the day before?  Because there are three possible outcomes to this disruptive event, and two of them are bad:

  1. It could turn out to be a tempest in a teapot, in which case money will quickly flow out of the bond market and interest rates will rise.  (Because of the inverse relationship between bond prices and interest rates, when people sell bonds the price drops and the rate rises… I see people’s eyes rolling back in their heads… moving on then);
  2. Or, things could go as bad or even worse than expected and oil prices shoot up (geographical hint), causing inflationary fears. Because inflation erodes fixed rate returns, bonds sell off and interest rates rise in response;
  3. Or, things could go as bad or even worse than expected adding to the already existing fear – oil prices be damned; in which case even more money flows to the safety of bonds and interest rates continue to drop.

As you can see, of the three scenarios, two give rise to higher interest rates making us heroes for locking our client’s rate before the event.  If, on the other hand, we find ourselves knee deep in the third Read more

June 14, 2010

The NAR Backs the FHA… Who’s Backing You?

by

Real Estate Renaissance Man

Author website
Late last week the House of Representatives passed H.R. 5072, the so-called FHA Reform Bill.  One of the major components of that bill (you can read the text of the bill here), raises the monthly insurance premium for all FHA buyers.  What does that mean to your bottom line?
 
Currently, the FHA monthly premium is .55% and the new legislation Congress is looking at will raise the premium a wopping 272% to 1.5%.  What does this mean to your buyer?  If they are at the limit of their eligibility on a $300,000 purchase price now, they would have to lower their interest rate by over 1.25% to still qualify for that house.  In other words, if the current market rate is 5.00%, it would have to drop to 3.75%!  If you think you might have trouble locating a lender who will do 30 year fixed loans at 3.75%, don’t worry; you can also lower their purchase price to bring them back into eligibility.  Their new price would only have to drop 10%!  A buyer looking at $300,000 today will be looking at $265,000 to $270.000 as soon as this bill passes. Does that change your market opportunities for the better… or the worse?
 
I understand why the NAR supports this, it keeps FHA alive and well, doing sub-prime loans for people who can’t afford to buy a home, which in turn keeps dues paying agents busy and coughing up their fair share.  But why do agents support it?  It’s going to have a devestating affect on your clients, and therefore on you.  Do you support it?  Have you let anybody know?
April 18, 2009

Mortgage Market Week in Review….

by

Mortgage Officer

Author website

Well it’s hard to believe, but another week has flown by.   Rather than spending a Saturday working on mortgage stuff and writing about mortgage stuff, I spent the day taking my 8 year old to a birthday party, cleaning out the garage and getting the pool ready for the season.  It was a good day for that.

But enough about me, it’s time to take a look at what’s happened in the financial markets this week.   Let’s look at a couple of key economic reports/financial news items:

Foreclosures – for the first three months of this year, many of the big banks and Fannie and Freddie had foreclosure moratoriums on.   What does that mean?   Basically that they stopped foreclosing on homes.  But, many of the big banks lifted the moratorium shortly after the 105% refi plan was announced and Fannie and Freddie lifted their ban on March 30.  The reports that I’ve read (and written about on Straight Talk About Mortgages ) show that foreclosures are spiking way up again.    What does that mean?  A couple of things: 1) Our inventory problems aren’t going to go away any time soon.   2) Bank earnings problems aren’t going to go away any time soon.

New Construction –Housing starts and permits both came in at pretty close to historical lows.   But frankly that’s not a horrible thing from a long term standpoint.   Let me explain: We have too much inventory.   In virtually all price ranges and virtually all markets, there are too many houses for sale.   So we don’t need builders building more houses right now because it adds to the inventory problems.    Also, we have a situation where in most markets, the number of foreclosures that are on the market is raising the discrepancy between the cost of existing homes and the cost of building a new home.  According to many of the developers who I’ve talked to, it’s almost impossible, in many markets, to sell a brand new home at a profit because of the pricing pressures.   So, until we can work through the inventory and also address the jobs issues Read more

August 1, 2008

Mortgage Market Week in Review

by

Mortgage Officer

Author website

Is it just me, or do Fridays keep coming around faster and faster? Maybe it’s because I’m so young!

Any way, it’s time for our “Mortgage Market Week in Review.” We’re going to focus on a couple of main topics for today:

Jobs – the ADP report came out on Wednesday and had some relatively positive news. That brought a lot of people in the markets thinking that the jobs report that came out this morning would be a lot more positive than the markets had been expecting. Well, we got to this morning and it came out “moderate.” The market had expected 70,000 losses and we only got 51000 losses. We had expected 5.6% unemployment and we got 5.7%. So, not too bad, but not too good either. However, I’ve read some technical analysis that said that due to some accounting regulations (known as the birth death of businesses adjustments) these numbers are probably overstating things to the positive. That means that next month, these numbers will probably get revised downward.

Losses – talk about missing a target here, wow. General Motors announced that they lost $15 billion this quarter. Think about it, that’s a lot of money. Even if you take out the “one time” expenses, that is still a LOT of money (like maybe $6 billion, I think the number was.) I read today that GM has now “eaten up” all of their profits that they have made since 1985. That means that a profit and loss statement for the last 23 years for General Motors would end up with a big fat $0. In addition to them, Deutsche Bank announce a 64% drop in profits and Merrill Lynch announced some staggeringly negative numbers too.

House prices made a lot of news this week. Alan Greenspan was talking about them and several others also made a lot of noise about what’s happening with house prices. Check out the chart here to give you a good flavor of the regionality of housing prices and how not all areas are seeing the same numbers.

The Housing Bill – Read more

July 3, 2008

Mortgage Market Week in Review

by

Mortgage Officer

Author website
Since it’s a long holiday weekend, I’m posting my week in review today rather than the usual Friday.   I hope you all have a chance to enjoy a lot of good family times, some good weather, some good fireworks and LOTS of good food!
How to best summarize this week?   Let’s put it this way, I could go on and on and on about the different economic reports that came out.   Car sales, employment numbers, stock prices, oil prices, bank stock values, earnings (or a lack of), writedowns, the list could go on and on and so would the length of this post!
Instead of doing that, I’m going to point you back to an update I wrote on June 11 that talks about the “battle” that is waging in the markets.   How’s the best way to say it?
A couple of weeks ago, the inflation fears were winning.
Now the credit fears and economic fears are winning the battle, quite decisively.
Have a good weekend!
Tom

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