Loudoun Mortgage Rate Round-Up – November 28, 2008

If you're a home buyer right now, you're loving life. Prices are down and mortgage rates have  plummeted over the last few weeks. The national average is back under 6 percent - 5.91 percent with .13 in discount and origination points, to be exact.

Locally, rates tend to be slightly better with the 30-year fixed rate mortgage being around 5.8 percent with .13 in points (as of Wednesday). But, one of my buyer clients was just quoted 5.875 with no points and no origination fee…on a "jumbo-conforming" loan (above $417,000). The fact that it's a jumbo-conforming loan at that rate with no points is huge! (Those types of loans usually cost .25 to .75 more in interest than "conforming loans")

The reason for the plumetting interest rates? The effect of the Fed bail-out and continued influx of money into the credit markets is finally being felt. The move on Tuesday by the Federal Reserve to buy $500 billion of mortgage-backed securities over the next year and a half also helped. In fact, immediately after the Federal Reserve made the announcement on Tuesday, rates fell to as low as 5.25 before coming back up to just below 6 percent.

A drop in rates is exactly what the Fed was aiming for. In its announcement, the Fed said,

"This action is being taken to reduce the cost and increase the availability of credit for the purchase of houses, which in turn should support housing markets and foster improved conditions in financial markets more generally."

If you're looking to buy real estate or refinance right now, you're sitting in a great seat when it comes to interest rates.

Source: Bankrate.com

Interest Rates Drop As Fast As They Rise

Just last week, interest rates took their biggest jump in 21 years. Today, they dropped almost as much as they rose last week - almost a 1/2 point. The national average for a 30-year fixed-rate mortgage (with no points) went from 6.74 percent to 6.32 percent.

Wondering why interest rates are so volatilite? Bankrate has a pretty good explanation as to why we're seeing these crazy swings in interest rates. Here's an excerpt:

Mortgage rates' volatile behavior is part of the credit crisis. There have been wide swings in various interest rates and bond yields in the last few months, and mortgages aren't immune.

Three events are combining to push down on mortgage rates this week. First, governments and central banks in North America and Europe have been trying to loosen lending among banks, so that banks then will become more willing to lend to businesses and consumers. This week, that effort began to show results, as interbank lending rates fell.

Second, stock prices have been falling. Investors respond by pulling some money out of the stock market and buying bonds, including mortgage-backed securities. As a result, bond yields fall — and mortgage rates follow.

Third, it becomes increasingly clear that the U.S. economy is in recession, and investors and economists are coming around to the idea that the recession will be deep and long-lasting. Interest rates tend to fall in recessions.

Several buyers I'm working with held off on putting an offer on a property because of the jump in rates last week, but are now ready to move forward due to the drop in rates. If you're a buyer who put things on hold last week as they they did, here's your chance to get back in near the same rate as a few weeks ago.

Mortgage Rate Round-Up – August 23, 2008

Rates dipped down for the second straight week despite the not-so-good news about inflation. Wholesale prices jumped 1.2 percent in July, much more than expected (and at the fastest pace since 1981). Normally, you would expect interest rates to rise on such news, but they didn't.

Despite the lower rates, mortgage applications fell to their lowest level in almost eight years. The Mortgage Bankers Association's index of loan applications was down 1.5 percent compared with the previous week, and was down 34.2 percent compared with the same week last year.

One thing to keep a close eye on is the Fannie/Freddie situation. Both suffered further losses to their stock prices especially after the Barron's article "The Endgame Nears for Fannie Freddie" was published August 18. Some say that a government takeover would lead to an increase in rates because of uncertainty regarding the transaction. Others say that a takeover would end the period of uncertainty, not start one, and the effect on rates would be minimal, if any. We'll have to wait and see…

Source: BankRate.com

***UPDATE: The Department of Veterans Affairs (VA) is raising their loan limits from $417,000 to as much as $729,000 in some areas. The increases are effective immediately under the Housing and Economic Recovery Act of 2008.

Mortgage Rate Round-Up – August 9, 2008

This week saw mortgage rates mixed. Here are the national figures:

• Conventional 30-year fixed-rate mortgage rates rose slightly to a national average of 6.74 percent
• Jumbo 30-year fixed-rate mortgage rates rose to a national average of 7.68 percent
• 15-year fixed-rate mortgage rose slightly to 6.27 percent
• 5/1 ARMs fell slightly to 6.32 percent
• 1-year ARMs fell slightly to 6.24 percent

Though rates didn’t move much at all, there’s some not-so-good news for borrowers. Fannie Mae announced this week that it will be doubling their "adverse market delivery charge" fee which will be passed on to borrowers.

Source: Bankrate.com

Mortgage Rate Round Up – June 21, 2008

Average rates on 30-year fixed mortgages in Northern Virginia fell slightly to 6.24 percent on Friday (basically even with last week). The mortgages in the survey had an average of 0.51 discount and origination points.

The highest rate on a 30-year fixed mortgage was found at two institutions that charged 7.000 percent. The lowest rate was found at four institutions that charged 5.750 percent. Six months ago, the average rate was 5.80 percent.

Source: Bankrate.com

Are You Waiting For The Higher Conforming Loan Limits To Hit Loudoun County?

Are you waiting for the higher conforming loan limits to hit Loudoun County before deciding to sell and/or buy?

Are you betting that the new limits in Loudoun County will be increased to $729,750?

Are you you hoping that the new limits will bring down the rates on "jumbo" loans?

Many buyers are waiting, betting and hoping while sitting on the sidelines. But are they waiting in vain and do they have a false sense of hope?

1. According to preliminary reports, the new "jumbo conforming" loan limits would be somewhere around $547,500 in the Washington, DC metro area (including Loudoun County). Some executives and lawmakers say that it will be closer to $600K, if not a bit higher. But the majority believe the new limit in this area will not be the maximum amount of $729,750. (Click here for more on this)
2. The way that these new "jumbo conforming" loans are structured may actually increase the rates on those loans and/or current conforming loans under $417K. It could also potentially freeze up loan markets due to illiquidity. (Click here for more on this)
3. By the time Fannie, Freddie, Ginnie, SIFMA and everyone else involved work all this out, it could months, if not a year before we see this come to fruition. And who knows what the effects will be once we do.

So before you base your decision to buy and/or sell on the economic stimulus bill or the new loan limits, know that it’s far from being realized in the manner it was intended by anyone in Loudoun County. Remember…there is no magic pill, I mean bill that will "instantly save us all".

Mortgage Rates End Week Higher

Mortgage rates inched higher this week despite a lack of strong economic news, Freddie Mac reported yesterday.

The average rate on 30-year fixed-rate mortgages rose from 5.67 percent to 5.72 percent, and the average 15-year fixed mortgage rate jumped from 5.15 percent to 5.25 percent.

Points, the fees that lenders charge for loan processing expressed as a percent of the loan, averaged 0.4 on the 30- and 15-year loans.

"This week was relatively light on the number of economic data releases, which painted a mixed picture regarding the current state of the economy," Frank Nothaft, Freddie Mac vice president and chief economist, said in a prepared statement. "On a positive note, labor productivity rose higher than market forecasts in the fourth quarter of 2007 while gains in labor costs slowed."

Read more

Fed Makes Huge Drop in Rates!!!

In the face of a huge housing crisis that is threatening to drag down the entire economy, the Federal Reserver dropped the widely followed Fed Funds Rate .75.  This puts the Fed Funds Rate at 3.5o%.  The fear of a recession is obviously higher than the fear of inflation. 

This size adjustment was not anticipated by many.   Most people felt they would lower the rate by .25 or .50.  This was the first .75 point cut since October 1984.  With the stock markets around the world falling and our stock market deteriorating on the fear of a recession the Federal Reserve has decided to make decisive moves.

The timing of the rate cut was not anticipated either.  This was an emergency cut ahead of their regularly scheduled meeting. 

Will it keep us out of a recession?  Only time will tell.

T

Thursday Poll – Will the Fed Lower Rates?

Next Tuesday the Federal Reserve Open Market Committee will meet to discuss the economy.  It is widely anticipated that they will make a change to the Fed Funds Rate.  What do you think they will do?

How The Mortgage/Credit Crunch Affects You As A Home Seller or Buyer

If you’ve looked at any news pages online or picked up any newspaper recently, you know all about the subprime mortgage fiasco and how it’s caused investors to flee, money to dry up, the banks to inject money into Wall Street and the government to step in. But how does it really affect you as a home seller or home buyer here in Loudoun County, Virginia? To find out, let’s look at two real life scenarios that I ran across in the past 2 weeks:

1) I am representing sellers who have their town home up for sale. It was originally listed a few weeks ago at $449,900 and during that time, buyers that went through it said that it was just outside of their budget. This was based on the asking price and the interest rates (at that time), which came out to a certain monthly mortgage payment. The buyers asked that we let them know if/when the price was adjusted because they were very interested in the property, but just couldn’t afford that much.

Fast forward two weeks…

Based on market conditions and recent comps, we adjusted the price to $432,000 this past week. I immediately called the buyer’s agent to let her and her clients know of the new price and to see if her clients were still interested in the property. The buyer’s agent told me that due to the interest rates going up a quarter point the week prior, that her clients went from affording $430,000 to only affording up to $410,000.

The buyers lost $20,000 in purchase power and a chance to purchase the home they really liked while the sellers lost a potential buyer and sale and possibly, market value. All in just one week.

2) I am representing buyers who are looking to purchase their first home. We originally started our search almost a year ago, but something came up that made them put off purchasing a home until this month. Prior to searching last year, they spoke with a reputable lender and were approved for up to $360,000 based on their financials and the interest rates at that time. They spoke with the lender again two weeks ago and were told that the rates had gone up, but due to their financial situation improving since last year, they were approved up to $350,000. They weren’t thrilled, but they weren’t as upset as they would be shortly.

Fast forward two weeks…

Due to the interest rates going up almost a quarter point on conforming loans last week, they are now only approved to $340,000. They lost $10,000 in purchase power in one week.

But wait, it gets worst.

Due to the price points of town homes in Ashburn, the difference between a town home that is $350,000 and one that is $340,000 is huge.

• One car garage versus no garage
• Move in condition versus $5,000 to $10,000 in work and/or sweat equity
• New appliances versus original appliances
• 1700 square feet versus 1900 square feet
• Backs to common area versus backs to another town home
• More desireable location versus less desireable location (based on buyer feedback)

The list goes on. And yes. All for $10,000.

The buyers had their eye on a particular property and decided that they wanted to place an offer on it. After speaking with the lender and finding out that they could no longer afford to buy it, they were heartbroken. Every property they’ve seen since then (at the lower price point) is compared to the one they liked and now, they all "don’t work".

Though they will eventually get past it, it’s not fun to go through it for anyone. It hurts the buyers and the sellers whose homes the buyers saw and now "don’t work" because they’re stuck on the one they now can’t afford.

Well, it could be worse. According to some, there are consumers out there that may have been approved for a loan in the past, but may no longer be approved even if their financial situation stayed the same. Are you one of them?

Related Articles

Who Can’t Get A Mortgage Now – CNN Money

Mortgage Mania – Part 10, The Credit Crunch – 3 Oceans Real Estate

You Think The Subprime Mortgage Fall Out Won’t Affect You? Think Again – Loudoun Stats

Washington Mutual, National City and Now IndyMac – real/diaBlog

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