“Mortgage rates for 30-year loans in the U.S. declined to a nine-month low as concern grew that the nation’s economy is slowing. The average rate for a 30-year fixed loan dropped to 4.32 percent in the week ended today from 4.39 percent, according to Freddie Mac. The average 15-year fixed-loan rate fell to 3.5 percent, the lowest on record…”
∙ 30-Year Mortgage Rates Fall to 9-Month Low [Bloomberg]
∙ Numerology Nuts (And Everyone Else) Take Note [SocketSite]
and they should stay low for quite some time.
what was it, 2 years ago or so, that we talked out low interest rates artificially goosing the RE markets and once rates rose there would be renewed price pressure? now there is no end in site for record low interest rates, giving banks more time to clear the market via REO’s and short sales, as other homeowners continue to refi. so forget about any big moves down – this appears to be the new normal
for clarification, “forget about any big moves down” — you mean in housing prices?
I often talk about how I said this or that in the past… and this is one I got way wrong.
A few years ago (I don’t know, maybe 2007-8) I said that mortgages were likely at their historic lows and may not be that low in a generation.
Clearly 100% wrong. I did not anticipate that our govt would be as (what I consider) foolish as they have been using things like QE1 and QE2 to buy Treasuries as example.
now there is no end in site for record low interest rates, giving banks more time to clear the market via REO’s and short sales, as other homeowners continue to refi. so forget about any big moves down – this appears to be the new normal
I agree with some of this: that this huge volatility may be the “new normal” (I’ve used my paint-drying example many times, a different way of saying new normal). I agree that ZIRP forever is a gift to the banks, as is QE(infinity).
I’m not sure about refis… many people have already refi’d. those that haven’t are often those who don’t want to or can’t. Not sure we’ll see major refis unless credit is loosened somehow (a political decision).
Short sales/REO’s are a tricky thing right now given all the Fraud by the big banks, and also the fact that it would force the banks to take write downs that they can’t afford. it’s not interest rates that have slowed Short Sales/REO… it is accounting gimmicks (holding the assets on bank books at 100 cents on the dollar) and Fraud. (BofA can’t find correct documentation because it isn’t there… oops.). If the banks are successful at doing more short sales it will put pressure on the RE market. more supply…
Lastly, remember that a simplified way of looking at mortgage rates is that they are based on 10 yr Treasury rates PLUS a risk premium. thus, although 10 year rates look to be low for a while (if the Fed can keep control…) one could still see prolonged low 10 year rates but increased mortgage rates based on risk premia. I will not even bother to hypothesize on this since I’ve been catastrophically wrong on this. Thus, I’ll just put that thought out there. 🙂
All that said, even if I agree with all that hangemhi wrote, I’m not sure that I’d say there will be no big moves down when we are still in the midst of a global deleveraging/recession/possible depression. unemployed people won’t buy houses even if mortgage rates are 0%.
The last time we saw a panic flight to quality (Treasuries) was 2007. I wouldn’t say that housing did well during that time period. There is a reason that the long bond (30yr) is near 3.5% and the 10 year has plummeted to nearly 2%… and it’s not expectations of future economic strength.
We have turned Japanese. Hopefully that’s as bad as it gets.
Mortgage rates in many parts of Europe have been stuck under 4% for more than 5 years. Rates could get lower here too.
The simple fact I’ve come to realize over the years is that our govement is made up of average joe’s like you and me. They own homes and pay taxes. The concept of Of the people, By the people, For the people is mostly OK so long as you are in the same upper, upper-middle class of those controlling the majority of new laws being passed. So it sucks if you are low or middle class as no one is really looking out for your interests beyond basic freedoms and liberty. SO the system works and its also broken at the same time.
There is almost no question that the wealthy should be paying a higher tax rate and that the top 5-10% of earners should pay a higher % of taxes than the bottom tiers. And corporations / business should be paying more as well.
But those in power vote in self-preservation. Myself included. So there is no question that we will do everything in our power to smooth over the housing bubble. Everything. It’s not really in anyone’s interest to just blow it up. And it pretty much did blow up and there was a lot of pain. But keeping interest rates low will be the norm for a decade.
Oh, and rents in San Francisco are going up and rentals are flying off the shelf. I know a several folks looking at rentals now and it is insane. Here is an SF Gate article that is worth the read: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2011/08/11/MND91KLCIE.DTL
I was a bear from 2005-2009 and it was hard at times to watch the markets continue to fly. I’m no longer a bear, but I’m not a bull either. I think there are good homes / values out there. It may get a bit better, and buying is always risky, but at some point, most everyone wants to own their home / primary residence and you have to put a stake in the ground. And while a few folks sold at the top, and others refused to buy, those are the exceptions. So long as we have a healthy market where properties are trading at fair values things will be ok.
What ever did happen to the Inventory report?
“A few years ago (I don’t know, maybe 2007-8) I said that mortgages were likely at their historic lows and may not be that low in a generation.”
With just a few little changes you could have been spot on: “mortgages were likely at their historic lows and may remain this low for a generation.”
Welcome to the liquidity trap. There is just no way with the mounting debt and growing deficits that the government can afford interest rates to rise.
More option-arm awesomeness.
Yeah, I found it interesting that the Fed announced they weren’t planning on up’ing the overnight rate until at least mid-2013. The rate on my 5/1 arm adjusts in april 2012, so I should get at least two years of a ~3% interest only payment out of it. Should cut my mortgage payment in half.
Of course, real (accounting for inflation) mortgage rates are not particularly low at all – right in line with the ’00s. But since that is not obvious from looking at the rates themselves, it does make all us borrowers think we’ve gotten a great deal! (I just refi’ed a 10-yr at 3.15%, after a 15-yr refi a little over a year ago)
If I can get a 15 year mortgage for 3.5% with no points or closing costs, I will refi my current 4.375% 20 year (really 19 year now) into it.
I did the IRR calculation and it would be about a 7% tax free no risk return, which is pretty good in this environment.
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The Fed and Treasury will continue printing as much money as they need to, to avoid a deflationary trap. This is the right thing to do as to allow the money supply to contract would lead to a downward spiral which would make debt even harder to pay off, leading to more defaults, which would depress economic activity even further. It was this downward spiral which lead to the Great Depression. This way of reducing our debt: by inflating and deleveraging our way out probably takes just as long but is not as painful as the massive default way.
Of course there were other choices, using a more co-ordinated restructuring of the debt, the way the Swedes did in the 90’s, but for whatever reason this was not considered here. Probably because the political power of Wall Street is too strong. I am still holding out hope that we will eventually decide to restructure underwater mortgages, but this seems less likely with each passing day.
The banks, the consumer and non-financial companies are slowly deleveraging. The US government debt is higher, but not as much higher as the amount that has been paid down by other actors. But this is taking a long time and money will probably be cheap to borrow for an extended period. I am actually expecting another recession in 2013, when austerity budgets actually start to kick in, but not before then. A lot depends on the 2012 elections.
I need some advice on two homes I own. One has about $300,000 in equity and the other is upside down by $100,000. With the current rates being offered should I refinance and take out $100,000 from the equity property and throw it at the upside down property to make it qualify for refinancing? I currently have 30 year loans at 5.25% on one property and 6.25% on the other.
I largely agree with what hangemhi and ex SF-er wrote, but here’s what I don’t understand: QEII ended on schedule, acter that S&P happened to downgrade U.S. Treasuries and what is the result?
The yield on 10 year Treasuries is lower than it was in January. The 30 Year Fixed is now ≤ 4.35%.
The bond vigilantes are still as invisible as leprechauns. Granted there were unexpected factors affecting things, but still. If we’re taking bets as to whether or not “The Fed can keep control”, at least for the next two years, I’ll take Ben Bernanke over Bill Gross anytime.
i’ve been reading about MMT (modern monetary theory) at pragcap.com. new to me, maybe not to many of you but it explains a lot of the folly that is going on now and why QE hasn’t worked the way some thought it would.
anyway – my initial point was elaborated on well by NVJ, Eddy and others. but to clarify – i was speaking of RE values in general, not SF specific, and by “big moves” i was refering to RE not the stock market. RE may still go down, but expect the paint drying that exSFer refers to. and he makes my point with that too…. short sales and reo’s working thru the system are like paint drying…. but now that we know mortgage rates are unlikely to go anywhere any time soon, we have time for drying paint to dry. the new normal is slow and steady – and so i agree with Eddy’s advice – look for the deals, buy if you don’t want a landlord, and don’t expect appreciation or depreciation unless you buy it right or buy it wrong
should I refinance and take out $100,000 from the equity property and throw it at the upside down property to make it qualify for refinancing?
No.
Interest rates in Japan have been nearly zero for a long time. Housing prices still fell 80%.
The U.S. is not Japan. The U.S. bubble was but a blip compared to Japan’s. But if you would like to short the U.S. market anywhere near 80% I’ll happily take the other side of that trade
“I need some advice on two homes I own. One has about $300,000 in equity and the other is upside down by $100,000. With the current rates being offered should I refinance and take out $100,000 from the equity property and throw it at the upside down property to make it qualify for refinancing? I currently have 30 year loans at 5.25% on one property and 6.25% on the other.”
Perhaps. It depends on a number of things. What’s the loan amount on the two properties and what rates will you end up with on both properties. The underwriter will defintiely charge you a higher rate if you plan to take out cash. (I know some banks won’t even consider it.)
Let’s assume the loan amount is the same. If you can reduce your total interest rate from both properties from the current 11.5% (i.e. 5.25 + 6.25%) down to let’s say 10.25% (e.g. 5.5% + 4.75%) then by all means consider it. Particularly if your time horizon is beyond 18 months to break even on the associated transaction costs with the refinance.
A.T. & NVJ
Who do you consider trustworthy enough to refinance with?
It seems the big banks like WF & BoA don’t give the most aggressive rates and a bunch of unknown/small firms all have bad reputations when I do a search online.
My current situation: $465k mortgage on a 750k house @ 4.75%
Thanks
We used Wells Fargo. It may be true that they do not give the absolute lowest rates, but the rate was right in the ballpark with the best I had seen. We use WF for all our banking so there is some convenience factor in there too.
Some people in my office have gotten good rates through our credit union.
I got a good deal with Integrity First, a mortgage lender in San Diego. They are about as trustworthy as you would expect with a name like that but they have the best rates around and they understand super conforming mortgages.
I also like Patelco Credit Union: they have good rates and good customer service and won’t try to rip you off. They also understand the San Francisco market, since their HQ is here.
Your loan is small enough you should be able to work with anyone though. I personally only refinance if I can get a no points and no closing costs loan at an attractive rate but that is a decision you have to make for yourself. You will generally get a slightly better deal with mortgage brokers if you negotiate with them. It is always better to get at least two quotes.