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Archive for the 'Mortgage News' Category
Happy (that it's a) New Year!
2008 has thankfully come to an end. The real estate meltdown has finally hit the Bay Area – hard! I just tallied the announced layoffs by Bay Area companies with 75 or more employees since 9-1-08: 13,366 folks have been given pink slips, so far. And that doesn’t include all the layoffs at smaller companies, independent contractors, and the self-employed who are out of work. Yikes!
A Dec 31 Bloomberg News articleby Matthew Benjamin outlines just how nasty ’08 has been: worst job loss since WWII; worst stock market and housing market since the Depression; record setting Holiday spending slump; record volume of mortgage forclosures. He states, “The National Bureau of Economic Research this month determined the U.S. economy had been contracting for 12 months, already the longest downturn in a generation, with no end in sight.”
What’s the good news for 2009? Record low interest rates! Affordable home prices in the best neighborhoods (well, affordable for some, anyway).
Buyers: Here’s your chance – don’t miss it!
Sellers: You’d better price it right!
Mortgage Rates Rising – Buy Soon!
Today’s elections will determine the course of our country for the next 4 years, but we believe there is but one direction for mortgage rates.
The world economy is currently being flooded with paper currency to shorten the recession by stimulating spending. Although effective, this will certainly cause inflation and higher long-term interest rates.
It is our strong recommendation to all buyers (other than all-cash buyers) to buy before rates go up. Remember, mortgage rates have only been below 7% in 12 of the last 45 years. Rates were over 8% as recently as 2001.
Buy the best quality (good area, no issues) to minimize any short term downturn in the home’s value. And get a mortgage that has a minumum of 5 years of fixed interest rate.
Jeff Stricker
More Mortgage Problems Ahead
We can now add another wrinkle to the on-going mortgage mess. It seems that we are all impacted by it, in one way or another. The latest problem has to do with purchase money loans.
As if it weren’t hard enough to locate, negotiate, and beat out competing buyers for a good home in our area, now a buyer cannot be sure that their “pre-approved” loan is going to actually be there when it comes time to close escrow. Some lenders are now finding reasons, just prior to close of escrow, to call for another “review appraisal” or additional down payment money (due to “falling values in the Bay Area” – as if all Bay Area neighborhoods were falling in value! They’re not.).
The bottom line: A buyer cannot be sure they will be able to close escrow on time. This potentially puts the buyer’s deposit (usually 3% of the purchase price) at risk of loss, due to a breech of contract.
Advice to buyers: Allow more time (30 to 45 days) for close of escrow and be prepared to add to the down payment, if necessary.
Note: 2008 ½ yearly sales data and reports will be ready next week.
Steve TenBroeck
Interest Rates Could Rise
Will the Fed drop in interest rates equate to a drop in mortgage rates? Not necessarily. Lenders are primarily concerned with inflation. If they feel that a move increases the chance of inflation moving higher they may actually increase loan rates on a decrease by the Fed. That is exactly what happened when the Fed reduced rates by .75% last week.
Jeff Stricker
Buyers: Do Not Wait
Home buyers should not wait to see whether the conforming limit is raised from $417k to $725k in California. Although a conforming loan has a lower interest rate (about .75% currently) the increase to the limit is only a proposal at this time and may not be passed in Congress. If passed the increase may not take effect for 6-9 months as legislation moves forward very slowly in Congress. Lastly, one can obtain a no cost loan now and refinance into the lower rate later at no cost. Jeff Stricker