30-Year Mortgage Rates Make New Lows, But Look Ready To Spike

No doubt you've heard that mortgage rates are low. They're lower than they've ever been in history.  The news is everywhere.

Just check out some of these headlines from the last 24 hours:

• Mortgage rates set new lows for the 6th straight week (Reuters)
• Mortgage rates fall again; 30-year fixed at 4.54% (Wall Street Journal)
• Mortgage rates hit another low : 4.54% (NPR)

Fixed mortgage rates are now down more than 1/2 percent from the start of the year, and 3/4 percent from just 1 year ago. The drop has dramatically improved home affordability for home buyers in Spokane while creating refinance opportunities for existing homeowners.

From a payment perspective, a conforming, 30-year fixed rate mortgage is now cheaper by $41.94 per month per $100,000 borrowed versus July 2009.

A homeowner with a $300,000 mortgage, therefore, is saving $45,295.20 over 30 years.

Low mortgage rates rarely last long and rates appear to have troughed. After a big downhill between April and July, they're now flat. This could mean rates have finished falling, or that they're gearing up for another drop lower. Either way, if you haven't talked to your real estate agent about home affordability, or your loan officer about refinancing, it may be time to make that call.

If today's market marks the end of low rates, rates are expected to rise quickly.

Falling Consumer Confidence Helps Drag Mortgage Rates Lower. For Now.

For the second consecutive month, U.S. consumer confidence is plunging. July's official reading is its lowest since July of last year and the figures run in stark contrast to just two months ago, when the index touched a multi-year high.

According to The Conference Board, July's figures are reflective of a more pessimistic consumer; one concerned about "business conditions and the labor market".

Falling confidence numbers are presumed to be poor for the economy. For homeowner and home buyers in Spokane , however, they can create opportunity.  Low confidence can influence the mortgage market in a positive manner, driving mortgage rates down.

Mortgage rates are already at their lowest levels of all-time.

The link between consumer confidence and everyday mortgage rates roots in consumer spending.

Consumer spending accounts for close to 70% of the overall U.S. economy so, the thought goes that, a less confident consumer is less likely to spend money, thereby retarding economic growth. This harms the stock markets and drives cash to bonds, including mortgage-backed bonds.

More bond demand leads bond prices to rise which, in turn, pushes mortgage rates lower.

The other side of lagging confidence is that Americans may be less likely to take new financial risks when they're feeling unsure, including buying a new home. This can then drag on the housing market, negatively impacting home prices across WA.

Falling home values can help buyers, harm sellers, and stymie would-be refinancers.

It's tough to predict how consumer confidence data will work its way through the economy, but in the near-term, it appears to be helping mortgage rates stay low. If you're floating a mortgage rate with your lender, or contemplating a refinance, the time may be right to lock in a rate.

Low rates can't last forever.

Thinking outside the Box for Buyers and Sellers

It's possible that I'm currently working with more Buyer Clients than I ever have within the past 5 years; while one of the reasons for that may be that my client and referral base continues to grow rapidly, I beleive the major reason this Stack of Buyer Client Files is soo big is because buyers are simply taking a very long time to decide to make an offer, my stack is just growing faster than my clients are purchasing.

What's the Hold-Up? Rates are Incredible, Market Compression has made some VERY nice homes now also AFFORDABLE and there is an impending risk of rates rising substantially...6, 7, 8% over the next few years.

Having observed and listened to my clients, it appears to me that most are really just feeling very uncertain of the future economy, their own job security and whether or not if they wait just a bit longer that prices will drop further.

I don't have a crystal ball, but I do know that if buyers are waiting for the market to hit the bottom, they'll only realize it's hit the bottom after they've missed it.

I spent much of the day yesterday thinking of ways that I can help both my Buyers and Sellers who are struggling in this market; here are a couple ideas.

For Buyers: Let's consider making an offer that gets you a Ridiculously Low Rate! It's similar to asking for the seller to pay for your closing costs, which is very common right now for most sellers to pay; this helps the buyer keep more of their savings on hand for unexpected repairs, home furnishings...blinds, you name it! I know many of you think buyers should have "More Skin in the Game", but let's face it, coming up with 7% of a purchase price for down payment and closing costs is not chump change with todays home prices.

So here's what I propose, let's make offers that request a Seller to purchase a 3/1 Rate Buy Down...it would be just like asking them to pay for your closing costs, except with today's current rates, it would substantially reduce your Rate and Monthly Payment over the 1st THREE YEARS of your 30 year fixed mortage.

Here's an example of what a 3/1 buy-down would do for a home purchase of $200,000 with a 3.5% down payment, assuming the current rate is a 4.75%.

This would cost a Seller Approximately $8,500...and likely worth it to get their home sold amongst a lot of competition.

1st year Rate: 1.75%, payment would be $598.56 plus Taxes and Ins.
2nd year Rate: 2.75%, payment would be $709.83 plus Taxes and Ins.
3rd year Rate: 3.75%, payment would be $826.95 plus Taxes and Ins.

Remaining 27 year Rate: 4.75%, payment would be $949.58 plus Taxes and Ins.

There's a chance we'd have to increase our offer price about $5,000 to get a seller to agree to this, but I bet there are a lot of sellers that would be more than willing to do this without having to increase our purchase price.

So worst case scenario, our purchase price is 5K more than maybe it could have been, which would mean your monthly payment is going to be a "whopping" $30 more a month, except your payment is cut nearly in half the first year and it allow you to comfortably grow into the payment over 3 years. I'm expect this would eliminate a lot of the fears of an uncertain economy.

More ideas for Sellers coming in my next blog.

Thanks for reading and following!

Case-Shiller Shows Home Price Improvement In 95% Of Cities

Standard & Poors released its Case-Shiller Index Tuesday. On a seasonally-adjusted basis, between April and May 2010, home prices rose in 19 of Case-Shiller's 20 tracked markets.  It's the second straight month of strong Case-Shiller findings.

Also, May's numbers are a mirror-image of February's. In February, 19 of 20 markets lost value.

In its press release, the Case-Shiller staff resisted calling May's data proof of a housing recovery, noting that home values remain flat as compared to October of last year. However, there are some noteworthy numbers in the Case-Shiller report.

1. 13 of the 20 tracked cities are showing home price improvement year-over-year
2. Foreclosure posterchlld San Diego has now shown 13 straight months of improvement
3. San Diego, San Francisco and Minneapolis are showing double-digit annual growth

These are all good signs for the housing market, but the Case-Shiller Index is not without its flaws. Most notably, the data is limited to just 20 cities nationwide -- and they're not even the 20 largest ones. 

Cities like Houston, Philadelphia, and San Jose are excluded from Case-Shiller, while cities like Tampa (#54) are not.

Another Case-Shiller flaw is that it reports on a 2-month delay.

Therefore, today is several days from the start of August but we're now reflecting on data from May. Given the speed at which the Spokane real estate market can change, May's data is almost ancient.  Today's values may be higher or lower than what Case-Shiller reports.

For home buyers, reports like the Case-Shiller Index may not be useful in making a "Buy or Not Buy" decision, but can aid in watching longer-term trends in housing.  For real-time data, talk to a real estate agent with access to local figures instead.

New Homes Sales Gain in June, But Gains Are Relative

After a down month in May, the sales of newly-built homes appears back on track.

As published by the Census Bureau, June's New Home Sales report showed:

1. A 24 percent sales volume increase from the month prior
2. A 2-month drop in the supply of newly-built home

There are now just 210,000 new homes for sale nationwide.

June's data is a major improvement over May, but it's possible that the true "new home market" may be softer than the statistics suggest.  This is for several reasons.

First, we're comparing June's sales data to the worst month in New Home Sales history.

In May, sales of new homes totaled just 267,000 units nationwide. That's one-quarter fewer sales than in the previous worst month in New Home Sales history. May's sales levels were awful by any measure but June's improvement to 330,000 units remains second-worst sales levels ever posted.

Second, although much improved, June's new home supply of 7.6 months is elevated versus the historical norm near 6.0 months.  The last year has averaged 7.7 months.

For buyers of new homes in Spokane , this combination of low sales volume and higher-than-normal inventory may be a positive.  It's the main reason why homebuilder confidence is reeling and the downturn has opened some doors for big discounts and deals. Free upgrades and closing cost credits can make a well-priced home even more attractive.

Plus, with mortgage rates at all-time lows and expected to rise, home affordability is may never be better.

How To Prevent Mercury Poisoning With CFL Light Bulbs

According to the EPA, if every household in America replaced one "traditional" bulb with an energy-saving compact fluorescent lamp (CFL) light bulb, it would result in $700 million in energy cost savings each year, plus a greenhouse gas savings equivalent to that of 800,000 automobiles.

They're expensive, but CFL bulbs tend to pay for themselves in less a year, and often last for several. It's no wonder they're so popular with homeowners in Spokane.  But, CFLs also come with health risks.

 

Namely, CFL bulbs contain mercury -- an average of 4 milligrams per bulb.

 

The mere presence of mercury doesn't make CFLs dangerous. It just means that you should exercise care when handling them, and take certain precautions when disposing of them.

The Environment Protection Agency offers some tips:

1. Screw/unscrew the bulb from the base and not the bulb to prevent breakage
2. Never force a CFL bulb into a light socket
3. When the bulb burns out, bring it to one of 3,106 recycling centers

The EPA website also give guidance for dealing with broken bulbs. Among the recommendations: Don’t wash mercury-covered clothing to prevent contaminating other clothing, too, and don't vacuum up the poison, either. There are special handling instructions to prevent poisoning yourself and others in your household.

The EPA's CFL safety PDF is 3 pages long and can be viewed on its Web site.

CFLs provide long-term energy and environment cost savings. And, with some common sense care, their risks to your health can be minimized.

Existing Home Sales Drop In June But Hint At Support For Higher Price Tiers

Consistent with most post-home buyer tax credit housing news, the National Association of Realtors® says Existing Home Sales eased lower last month.

An "existing home" is a home that cannot be considered new construction.

The 5 percent drop in sales from May to June was expected, but a closer look at the month's data reveals some interesting trends.

First, repeat buyers accounted for 44 percent of home resales in June, up from 40 percent in May. That's a healthy increase for just 4 weeks' time and the tax credit is a likely catalyst. First-timer buyers bought starter homes owned by former first-timers, who were then free to "move up" to larger, more expensive property.

Housing markets can be trickle-up and, not coincidentally, the jumbo/luxury housing market is now in the midst of rebound.

Second, June's "distressed sales" accounted for 32 percent of all home resales, up from 31 percent in May.

A figure like this hints at the large role foreclosures continue to play in a home buyer's home search strategy.  And why not? The National Association of Realtors® suggests that distressed homes are sold at a 15 percent discount.

Lastly, take note that home inventories are rising. June's 8.9 months of supply is the highest in 10 months. Excess supply leads home prices lower, all things equal.

Overall, the Existing Home Sales data from June is a mixed bag. There's support for the middle- and upper-price tiers, but a growing overhang of supply. The market looks favorable for buyers given low mortgage rates and strong negotiation leverage.