Posts Tagged ‘mortgage rates’

Mortgage that Matters: COULD RATES ACTUALLY GO LOWER?

By Rick Soukoulis | July 21st, 2010 0 Comments

The past several months seem to prove that you shouldn’t always trust conventional wisdom. Most recently, conventional wisdom was that in March, the Federal Reserve would have finished buying the $1.25 trillion in mortgage backed securities they were authorized to purchase, and when this heavy buying activity ended, mortgage rates would shoot up in April, May and June.

It was simple economics. If the Fed was in there every day buying up mortgage securities, this heavy buying would drive MBS prices up and rates would go down.

This did work, and the low rates were precisely what the Administration hoped would happen to get the housing market back on its feet.

The 800 pound gorilla was the fear of what would happen when all this buying activity by the Fed ended.

Basic economics would seem to indicate that rates would have gone up and perhaps significantly.

Even worse was what would happen when the Fed started selling these securities. If they were to dump even a few billion a day, the constant selling would drive MBS prices down and mortgage rates up.

Almost everyone predicted this scenario, and many housing economists thought it would be devastating to the housing markets.

But in an economy with so many moving parts, things often turn out differently than expected.

Rates not only didn’t go up, they’ve actually gone down, and this has huge implications.

With rates dropping toward 4.5%, we are seeing a whole new wave of refinancing, and many of these loans being refinanced are in mortgage securities owned by the Fed! As a result, this $1.25 trillion in MBS the Fed owns is gradually being paid off on its own. And the more people re-finance, the more will be paid down.

The implications of this are huge. If the $1.25 trillion pays down through refinance activity to, say, $750 billion, that could open up the Fed to buying another $500 billion to get back to the $1.25 trillion number.

If you think about it, a new round of Fed buying, as they replenish their holdings, could drive rates to a level no one could have ever dreamed of.

As hard as it is to imagine rates being as low as 4.5%, a new round of Fed purchases could drive rates to 4.0% or even lower.

As Yogi Berra once said, “Who’d have ever thunk it?”

Indeed.

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Intero Insider: Housing Starts Are Down? I’m Shocked. Or Not.

By Gino Blefari | June 22nd, 2010 0 Comments

Last week, the financial sector was up in arms about some seemingly surprising news. It seems that, in May, housing starts — the number of building permits that were pulled in order to start construction on new homes — were down.

With all of the homes that were purchased this spring, surely the troubles in the housing market were over. Right? In April, sales were positively booming! What on Earth could have happened to put a slowdown on things?

<Psst! Hey! The tax credit expired!>

Wait. What? What’s that you say? The tax credit expired? You mean that didn’t amp up the market and then keep it up? It wasn’t the answer to our economic recovery dreams?

No. It wasn’t.

In fact, I’ve been saying this for some time. For those who were able to take advantage, the Homebuyer Tax Credit was great. But while it gave the spring real estate market a much-needed boost, I have long theorized that the sales it produced were simply being borrowed from the future. People who had already planned to buy a home simply did so earlier.

Now that the credit is gone, the buyers have little incentive to make their decisions now.

There are far too many variables in play for buyers right now. Mortgage rates are in a constant state of flux, underwriting standards are tougher than ever, and a great many sellers are still living in Fantasy Land when it comes to their proposed list prices, so many buyers are simply choosing to sit tight and see what happens. There’s very little pressure on them.

“OK, then … so now what?”

First off, sellers need to get a handle on reality. If you need to sell your house, then understand the rules of the game. Pie-in-the-sky dreams of top-dollar prices and bidding wars will likely get you very little except mountains of frustration. Find a REALTOR in whom you have confidence. Listen to him (or her), for he/she understands the market as it is today.

Second, and most importantly, we must all exercise some patience. It took us some time to get ourselves into this morass of economic detritus, and it’s going to take some time to get out. There are no quick fixes.

The real estate market will come back. It always does. It’s one of the few constants in our economy. In the meantime, let’s learn from our mistakes. Borrowing from Peter to pay Paul isn’t going to work. Let’s use our heads and work toward real recovery, real improvement.

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Mortgage that Matters: THE GREEK-AMERICAN AND OUR MORTGAGE MARKETS

By Rick Soukoulis | June 3rd, 2010 0 Comments

As a Greek-American, I have being watching the financial crisis and the upheaval it is creating in Greece with what I think is a different perspective than many other Americans have.  I want to share a perspective on what another Greek-American is dealing with and how his actions affect our mortgage market.

In the 1960’s a Greek economist named Andreas Papandreou was teaching economics at UC Berkeley. His American-born wife wanted to spend some time in her native country, and Andreas had the chance to be a visiting professor at Cal for several years.

The family lived in the Berkeley Hills, and their son, Georgie, played baseball with his neighbors, joined the Cub Scouts, and went to Cragmont Elementary School, one of Berkeley’s public schools.

He was a typical ten year old, carefree, living the life of an American boy, much like Tom Sawyer and every other kid.

Where is he today?

Today, he goes by George rather than Georgie, and today he has the worst job in the world: He’s the Prime Minister of Greece.  He’s often referred to in the press as The Beleaguered George Papandreou.

What’s going on over there, and why is it making the front pages with scary headlines?

Essentially, Greece ran huge deficits and is close to national bankruptcy. Like all governments, it finances itself partly by selling bonds, but their financial house is in such disorder that they might not be able to sell new bonds or refinance old ones.

Like individuals that accumulate too much debt, the Greek government is cutting expenses, but government workers are unhappy seeing their wages cut.  A general strike shut down Greek airports, tourist sites and public services and some 50,000 demonstrators marched against the planned public spending cuts and tax rises.  You’ve seen the violence on TV.

Because Greece is part of the Europeans Union (EU),  people are deeply concerned that their problems will spread to the rest of Europe. The global markets are very scared, and when this happens, nervous investors turn to the strongest currencies and deepest markets in what is referred to as a Flight to Quality.

This has meant global investors moving their money to the dollar, and in buying up U.S. Treasuries as a safe haven, bond prices have risen and rates have dropped.

What happens to Treasury bond rates almost immediately happens to mortgage rates, and you’ve already noticed how mortgage rates have dropped pretty significantly of late.

I don’t know if Greece will be kicked out of the EU or if they’ll solve their fiscal woes.

I do know that as long as there’s financial turmoil around the world, in Greece or elsewhere, people will turn to the U.S.

This should big a great summer selling season!

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Intero Insider: Reality Check!

By Gino Blefari | April 7th, 2010 0 Comments

Each time a glimmer of positive news about the real estate market shows its face, economists, real estate professionals, and politicians alike begin to shout, “We’re on our way back up! Nothing but blue skies ahead!”

While I remain hopeful, I think assertions like this are foolhardy and irresponsible.

Anyone who lives in the State of California, or who’s considered moving here, knows that the real estate market for the past several years has been pretty grim. As quickly as California’s home values increased through 2005, they have since fallen considerably due to the economic downturn, and foreclosures have run rampant.

Recently, some improvements have been noted. In the last S&P/Case-Shiller home price index, for example, home prices in California were shown to have strong gains. In Los Angeles, prices rose 1.8% in January. There were gains in San Diego of 0.9% and in San Francisco, the gain was 0.6%.

This is terrific news, make no mistake, but I suggest that a more cautious view be taken.

Here’s why.

Historically, spring home sales (and the spring market doesn’t wait til March to begin, I assure you) are the strongest of any throughout the year. Weather improves, making it more pleasant to look at homes, and people want to be able to buy a new home, so that they can move at the end of the school year, or what-have-you.

This year, we also have the Homebuyer’s Tax Credit driving more buyers into the marketplace. Add to this the fact that mortgage rates are still at rock-bottom levels, which have been made possible, in large part due to the Federal Government’s sizable activity in mortgage-backed securities, and the market for buyers is very, very attractive.

Here’s where things get sticky.

The tax credit is set to expire in just a couple of weeks. The pressure to buy before it expires will be gone. Strike one. The Federal government is about to remove itself from the mortgage-backed securities game. Mortgage rates are going to rise. Strike two. There’s wide speculation that foreclosures are going to get worse before they get better (unfortunately). Strike three.

At Intero, we choose to stay level-headed. We choose to stay in the game that’s currently being played, not the one that may or may not come in the near future. We are hopeful that things will improve, but until they do, you need agents who are dealing with reality. You need agents who will tell you like it is. Agents who know the markets in which they work and live. Intero are those agents.

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Intero Insider: Closing The Door on 2009

By Gino Blefari | December 29th, 2009 0 Comments

The Holiday Season is approaching its end. Hopefully, you’ve been able to relax a bit and spend time with family, friends and the people whom you love most. The end of this season signals the rapidly-approaching end to yet another year. A year that most of us are more than ready to put behind us. We’re all looking forward to the promises of the new year. A fresh start. New possibilities. To 2010.

But let’s take a moment to reflect on the year that was 2009, and how it shaped us and our industry.

2009 was a year of change. A change in the way people shop for homes. A change in the way real estate professionals do business. A change in the way we look at things.

Certainly, the economy and its woes played a major role. While there are glimmers of light and signs of improvement on the horizon, rising unemployment (that will likely worsen a bit more before it gets better) and more stringent lending standards continued their stranglehold on the real estate industry.

Mortgage rates found themselves at all-time lows in 2009, but with underwriting restrictions and tightening standards, including tougher rules from places FHA, typically thought more “understanding”, very few people were able to qualify. With the Federal Government’s loan modification program, short sales and a flood of foreclosures with which to deal, banks are not likely to loosen these standards anytime soon.

Of course, the news wasn’t all bad.

With those foreclosures and short sales came some incredible opportunities for those looking to buy a home. For those with open minds and who were willing to exercise a little bit of patience, deals, the likes of which hadn’t been seen in decades, were ripe for the picking.

For those who were really lucky, those deals could be combined with what was (and will likely continue to be) one of the biggest stories in real estate: the Homebuyer Tax Credit. Recently expanded to include a far broader pool of buyers, the HBTC, in 2009, gave first-time homebuyers a credit of up to $8000 when they purchased a new home. For many, this credit was just the boost necessary to get them toward their share of the American Dream.

While 2009 saw nowhere near the panic and angst that riddled Wall Street and the entire real estate industry in 2008, it was a year of sobering news. A year of goodbyes to the old way of doing business. It was a year for real estate professionals to reevaluate their priorities. To rethink how they did things. It was a year of separating the wheat from the chaff, as many Realtors left the profession altogether. Those who dug in their heels, who opened their minds to new practices, who opted to help, rather than hinder, will rise to the top. They will reap the fruits of their labor.

As you’re making your resolutions for the New Year, think about where we’ve been. About how far we’ve come. Think about how you’ll do things differently. Think about the possibilities before you.

Yes, 2009 was a hard year.  But remember our theme for 2009 – “Adversity is your asset. Things turn out BEST for those who make the BEST of how things turn out.”…AND WE DID! So rather than looking back at 2009 as just a “tough year” let’s make it a year in which we have learned. A year that strengthened our resolve, and our collective character. 2010 is OUR time, now let’s go out and TAKE IT!

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Top 10 Silicon Valley Real Estate Trends for 2009

By Dawn Thomas | December 16th, 2009 0 Comments

As 2009 draws to a close – you’ll soon be reading lots of  top 10 lists for the movers, shakers, and trends of the year and the decade!   In the spirit of being just a little ahead of the crowd, here’s our list of the top Silicon Valley Real Estate trends of 2009:

1. Low Interest Rates – with More Strings –  Interest rates have been low this year, with periodic dips into historic record  ”low” territory.   These great rates, though, come with seemingly ever-changing requirements and conditions.  Selecting a great financing source who can get you great rates AND help you navigate through the process has never been more important.

2. We’ve Got to Keep It Together For Longer – With the changing lending guidelines, it’s been taking longer for properties to close escrow and having a signed purchase contract did not automatically mean a closed escrow in 2009.   Having a black belt negotiator on your real estate team has been critical this year.

3. “Turn Key” is Hotter than Ever – A few years ago – buyers could purchase a property & count on some quick appreciation to pay for a remodel in just a little time.  Now – buyers can’t count on home appreciation to finance a remodel in the near term & are looking for great condition, move-in ready homes to buy  (as if location and condition ever go out of style in the world of real estate!).  On the other hand – for buyers seeking to purchase a property in a high-demand area like Palo Alto or Cupertino – it may pay to look for properties needing some work.  If you can see the potential in a fixer – you may have fewer competing bids from other potential buyers.

4. Buying a Silicon Valley Foreclosure is not as Easy As It Sounds - Some of the busiest agents in any real estate office are the ones listing “Real Estate Owned” or REO properties for the banks.    Buying one of these properties means navigating a maze of bank-specific requirements for making the offer, competing against multiple offers (some properties are getting 20, 30 or even 50 offers), and positioning your offer against “all cash” investors.  Finding a deal & making sure it stays a “good deal” through the process is not for the faint-of-heart!

5. No Shortage of Short Sales – over the course of 2009 – we continued to see properties listed for less than what is owed to the lender(s) – resulting in a short sale requiring lender(s) approval to go through.   We’re starting to see short sale listings where the lender has approved a short listing price – allowing the whole process to go smoother and quicker.

6. The Year of the First-Time Buyer – with more affordable home prices, the First Time Home Buyer Tax Credit, and sweet interest rates – many of the homes sold in 2009 went to first time home buyers.   In the final months of the year – we are starting to see more and more “move up” buyers rousing the mid and higher-end price points.  Welcome!  Please bring friends!   This is a trend we want to see continue & grow in 2010!

7. Deal Hunting in Palo Alto – Where’s the deal on a single family home in Palo Alto for less than $300,000?  The media in 2009 did a fantastic job of painting the picture of real estate in free fall, and we went through a period in the spring where every day brought Internet inquiries looking for the extraordinary deal in Palo Alto.  According to the MLS – the least expensive Palo Alto single family home sold so far in 2009 went for $703,000 for a 67 year old, 703 square foot cottage with foundation issues.

8. Your Home May Have a Bigger Electronic Footprint than You Do - Social media sites like Facebook and Twitter are 2009 Trendsetters above and beyond the world of buying and selling dirt.  In real estate, though,  the savvy home seller now ensures that their Real Estate agent is marketing  their property through multiple Internet channels.    Wouldn’t  you want 30 million visitors at your open house – especially the ones who can’t leave foot prints on your new carpet?

9. Welcome to California! – We are working with an increasing number of clients who are relocating to Silicon Valley for a new job.  It looks like both our job market and our real estate market are picking up!   Welcome!

10. Less to Pick From, More Competition – And finally, in many areas of Silicon Valley – we are seeing fewer homes on the market.    In fact, for Silicon Valley overall – more homes are “pending sale” than are actively for sale.  For buyers – this means that there are fewer homes to consider and more competition to get  your offer accepted. For sellers – it means that there are fewer competing properties.  This sets the stage for an even brighter 2010!

We wish you the best holiday season & look forward to serving you and your referrals in 2010!

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Mortgage Rates are the REAL Stars of the Show

By Gino Blefari | November 18th, 2009 0 Comments

Unless you’ve been living under a rock of late, you know that escaping discussion and news pertaining to the newly-revised, revamped and retooled Homebuyer Tax Credit has been next to impossible. True, it’s big news.

But has the attention that’s been shone on the tax credit been keeping us all from focusing on the REAL stars of the real estate show? Is there something else that ought to have everyone’s tongues wagging?

In my opinion, YES.

Mortgage rates, my friends, are what should be driving traffic into the real estate market and are what will give today’s homebuyers (those who qualify for the tax credit and who don’t) a real incentive to buy.

Look at it this way: when given a credit of $8000, how will most people spend it? Will they save it? Likely not. Will it go toward bills? Maybe. The instinct for most Americans, however, is to spend. This is great for bolstering the economy, but from a personal perspective, it doesn’t help all that much.

Have you ever stopped to consider how much just a percentage point in a mortgage rate can save you over the life of a loan?

For the week ending 11/12/2009, Freddie Mac announced that mortgage rates had fallen to a staggering 4.91%. Not long ago, lenders were delighted to be able to offer a rate of 6.0% (still not anything at which to turn up one’s nose). In a side-by-side comparison, assuming a loan amount of $400,000, a mortgage with a 6% rate will feature a monthly payment of about $2398. The same mortgage at a rate of 4.91% has a monthly payment of $2125. That’s a savings of a little over $270 per month. Nothing to sneeze at, to be sure. Here’s where it gets really exciting, though. Over the course of a 30-year loan, that savings adds up to more than $98,000.

 Now THAT is something to get excited about.

Another great benefit of rates falling to record lows is that they give buyers more purchasing power. Less money going toward interest translates into more house for your money. When combined with home prices that, across the nation, are at levels not seen since the early 2000s, a buyer’s purchasing power is very strong, indeed.

If you’re unsure of the amount for which you might qualify, talk to your Intero agent about giving you a referral to an Intero Mortgage loan officer.

The Homebuyer Tax Credit is certainly newsworthy. But it shouldn’t be stealing center stage from the real stars. Mortgage rates and their record low levels are what should be making headlines.

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Intero Insider: It’s Not Yet Cured, But Real Estate’s Foundation Is Solidifying

By Gino Blefari | September 4th, 2009 0 Comments

Good news this week from mortgage giant Freddie Mac could be a positive sign for the real estate industry, and for the US Economy as a whole.

Let’s examine what they said.

In their Primary Mortgage Market Survey, Freddie Mac reports that rates for a 30-year fixed rate mortgage remain historically low (well over a full percentage point better than at this time last year). The news was much the same for both 15-year fixed-rate mortgages, as well as 1 and 5-year ARMs.

What does this mean, exactly?

Well, these low mortgage rates help to maintain affordability in the housing market, which is great news for buyers, sellers and Realtors alike. They can also, very likely, be credited to some degree with four consecutive months of rising home sales for both existing and new homes.

And with many showering accolades on The Federal Reserve Bank and their handling of mortgage rates, it doesn’t seem likely that they’ll be increasing much anytime soon.

Even still, it’s important for consumers to be vigilant with regard to choosing mortgage products and to weigh their options very, very carefully. There is far more to look at than just the annual percentage rate. Borrowers should ask themselves — or their lender — if it’s better for them to look at a lower rate, or to pay points. What will the implications be if (and when) they choose to refinance? When it comes to paying points, would it make more impact in their lives for them to take their liquid capital and invest in something else?

Bottom line: It’s critical borrowers examine their options closely and use a lender with whom they have trust and with whom they’re comfortable.

Other things for buyers to be aware of are that, nationally, home prices rose for the second month in a row. This is terrific news for the economy, but could signal that home prices might not decline much further. Also, any first-time homebuyers looking to take advantage of the Homebuyer Tax Credit need to remember that it only applies to homes purchased before December 1, 2009.

Point blank: if you’re in the market to buy a home, it would seem that now really is the time to do it.

The real estate markets have a long way to go before their foundations can, once again, be considered firm and strong, and the base for our nation’s economy. But we’re getting closer each and every day.

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