Archive for the 'Mortgage Rates' Category
It’s all about inflation, at least lately. An occasional positive economic report casting doubts on the weakness of the economy underscored by Fed speak suggesting that inflation is public enemy number 1 has bond traders pulling out their hair. Rates have been steadily rising for the past week or two.
Bernanke spoke last night at a conference on inflation dynamics and downplayed economic concerns, rattling his saber instead at the prospect of food and energy-fueled inflation. His Dallas counterpart this morning echoed the concern, saying he would accept a weaker economy in exchange for a muzzled inflation.
Bond traders did not like the news. The Fannie Mae 5.5% coupon ended the day down over a point. Mortgage rates rose in response.
read comments (2)Agency Jumbo Pricing Finally Looks Attractive
In the past couple of weeks, mortgage rates associated with the increased conforming loan limits have fallen dramatically. Those rates, previously 100 basis points higher than traditional conforming loans, are now low enough to offer some relief of the type intended by the authors of the Economic Stimulus package. Housing Wire takes a deeper look into this for those who wish to check it out.
Overall, this relief may have occurred too late to help some Sacramento homeowners, where home values have declined so quickly that refinancing is now only a dream fading in the light of this new day. But for others, it may have arrived just in time.
Conforming rates have been flat, hovering around 6.10% at half a point according to Freddie Mac’s weekly survey. With a steepening yield curve, consumers can save shave a half point off their rate by taking a 5/1 ARM, but there aren’t many takers right now given the risk/return ratio.
Sacramento Mortgage Rates on the Rise
This week’s wholesale inflation numbers gave the markets a good scare. The beast is loose, and the Fed is trapped between trying to prop up a sagging economy and locking the inflation monster back in the closet.
Mortgage rates are on the rise, and if Bill Gross is correct about inflation being deliberately understated, this whole thing gets a lot worse before it gets better. Part of the blame lies with those who manipulate the figures, part of it rests with those of us “who have for so long now been willing to be entertained rather than informed.”
Gross strikes a dissonant chord, activating one of my personal rants as he writes,
We care more about whos going to be eliminated from this weeks American Idol than the deteriorating quality of our healthcare system. Alternative energy discussion takes a bleachers seat to the latest foibles of Lindsay Lohan or Britney Spears and then we wonder why gas is four bucks a gallon. We care as much as we always have €“ we just care about the wrong things: entertainment, as opposed to informed choices; trivia vs. hardcore ideological debate.
Amen. We have become a culture addicted to distraction. Wake up!
But I digress. Mortgage rates may well be resting at the base of a long climb. Declining home values make it ever more difficult to meet the equity requirements needed to refinance, and Congress is already hopelessly behind the curve with any relief for homeowners.
So, if you need to refinance your 3/1 or 5/1 ARM, do it now before values make it impossible. I know you have a year and a half left on the fixed rate, but in another 18 months you may just be one more homeowner who owes more than he owns. The promise of more bad economic news just isn’t going to have the usual helpful effect this time around.
And be sure to read the rest of Bill’s newsletter….
Sacramento Mortgage Rates: The Start of a Recovery?
I just received some statistics on the Sacramento County market that confirm what we in the Sacramento valley have been feeling: buyers have emerged like a dragonfly hatch and are swarming around a veritable feast of low-priced, bank-owned properties. Has Sacramento taken the worst of its lumps?
For April, new escrows rose 33%, and closed escrows skyrocketed by 35% from the previous month and 68% from the same time last year. But the number of new listings fell 30%, reducing the inventory level to 5.9 months from 8.3. To further underscore the market’s keen interest in foreclosures, 90% of April’s sales were under $400k, 85% under $350k. Activity is certainly on the rise. But how deep is the pool of buyers?
Is the Financial Crisis Over?
Lately, Wall Street murmurs suggest that the worst may be over for the financial crisis. This theory has found support in the March and April retail sales numbers. Sales, ex-auto, grew by 0.5% in April, faster that analysts’ expected, on the heels of a 0.4% gain in March. This week’s CPI figures will give further clues as to impending threat of inflation and whether the Fed will soon have to begin reversing the direction of interest rates.
However, there is a big question about whether the financial dislocation will disrupt employment, further reducing consumer spending at the same time that “import inflation” is redirecting consumer dollars from luxuries to necessities. Mohamed El-Erian from Pimco makes this point is his excellent article Why This Crisis Is Still Far From Finished.
As far as mortgage rates are concerned, don’t bet on lower rates any time soon. The “Treasury bubble” will certainly burst if investors begin to feel like the storm has passed. But if the economy gets worse, mortgage rates will remain high to keep MBS investors in the game. Keep your seatbelt fastened; it’s going to be a bumpy ride.
FHA Secure, Alonso Quixano, and Windmills
When FHA Secure was announced by the Bush Administration back in August of 2007, the FHA folks were perplexed. I know because I called them. First of all, FHA had already been doing unlimited CLTV refinances for a couple of years. Second, you didn’t have to be in default on your mortgage to qualify. And third, nobody had any idea what the hell the administration was talking about.
Those familiar with the Cervantes classic Don Quixote will remember Alonso Quixano, the county gentleman who descends into fantasy and reconstructs a farcical reality in which he fights unwinnable battles with imaginary enemies. The familiar phrase “tilting at windmills” has become iconic for the persistent pursuit of futile endeavors.
Still With Me?
Watching the administration and Alphonso Jackson of HUD descend into their own farcical reality has been disappointing. Like the great novel’s second half, the tale of FHA Secure appears to have evolved into a deliberate deception most painful to those for whom FHA Secure initially appeared to offer some hope.
Peter Berg, whose terrific watch dog blog FHA Mortgage Guide keeps close tabs on FHA financing, brings forth the disappointing reality of the statistics vs. the claims, as reported by HUD itself.
Despite the hundreds of thousands of homeowners Jackson claims to have helped (you will note that the these numbers are always in reference to FHA loans in general), “the glaring failure of the FHASecure program,” as Berg points out in his recent post FHA Mortgages at Mid-Year: Real Numbers Comes Out, is that “just 1,729 delinquent conventional borrowers have been helped in a period of six months.”
That’s a far cry from from the spin.
Sacramento mortgage rates shot up to 6.24% this week from 5.5% during the week of January 24th, according to Freddie Mac’s weekly rate survey. Most people are still under the impression that the Fed adjusts mortgage rates or that mortgage rates move in lock step with Fed cuts. In recent weeks, Sacramento mortgage rates have done exactly the opposite. The market is a bit better this morning on news of flat consumer spending and lower consumer sentiment.
Nehemiah Gets The Cold Shoulder
I wrote about combining FHA + Nehemiah: a Path to 103% Financing a few weeks ago. It’s one of only a couple ways left to structure 100% financing. Several title insurance companies and at least one wholesale bank announced this week that they will disassociate themselves from deals where the Nehemiah program is being used. Nehemiah has survived numerous challenges in its non-profit status over the years, and it has another court test approaching. Are these companies are putting some distance between themselves and what will be hind-sighted as yet another contributor to the meltdown?
New Conforming Loan Limits
As the deadline approaches for HUD’s assessment of median prices, hopes fade for any meaningful increase in Sacramento conforming loan limits. According to my sources, Sacramento will be designated as a “high cost” area, but with median prices somewhere in the low $300k range, the formula may yield only a small increase, if any. Higher limits could unlock S.F. Bay Area markets and send more relocations our way to absorb inventory in the upper prices range.
Okay, time to get back on track. I am still recovering from the hacking that took down Lending Clarity and many other Tomato blogs. More than that, Ive just been extremely busy pre-qualifying home buyers. Prices in many areas of the Sacramento real estate market have bounced off a hard floor and pent-up demand has buyers fighting it out once again over well-priced properties, often bidding prices up in the process.
Meanwhile, mortgage rates have been locked in a narrow range since the beginning of the year. Freddie Macs Complication of Weekly Survey releases for 2008 shows this well. For most of this year, rates have stayed within a whisper of 6%. The weekly average belies the incredible daily volatility we have experienced.
The Treasury Bubble
With corporate earnings reporting the past couple of weeks, things looked bad. Its just that they werent as bad as everyone expected, so that made them look good, well, in a relative sort of way. And despite a plunge in consumer confidence to the lowest level in 26 years, the last round of corporate write-downs have caused a lot of economists and Wall Street pundits to wonder whether the worst is over.
If it is, and if the investors who fled to the safety of bonds, especially Treasuries, sell off suddenly, expect interest rates to rise. Expectations for another 50 basis point Fed cut next week have already evaporated, and even hopes for 25 basis points are fading. With renewed inflation concerns on the table, higher mortgage rates could be just around the corner. That would not be a big help right now as we struggle back to our feet.