Posts Tagged Fed Funds rate
I hope everyone had a great holiday season and are adjusting well to returning to real life and work again. I’ve returned to work with incredible news for the new year. The Federal Government has started it’s $500 Billion purchase of Mortgage Backed Securities (MBS) which has spurred interest by investors in Mortgage Bonds and has driven the rates even lower than last week (which were pretty dang good). Analysts are saying that we could see some record low rates over the next three months.
In other news, the Board of Realtors has released November’s data for home sales in Utah. Sales overall in November were lower than November of 2007 and 74% of homes sold in Salt Lake City and surrounding areas were below $300,000. I feel this goes back to my theory that since there is no more stated income loans and borrowers must be able to document income and assets, that is all the majority of Utah borrowers can qualify for.
For instance, according to the Census Bureau’s income data (which is collected from the IRS) the median household income (the amount that 1/2 of people make less than and half make more than) is Utah is about $62,000 a year. This would qualify half of Utahan’s for a home of $243,000 or less.
This number is probably skewed a bit too, since those that sign the front of checks don’t report their income the same way as those who sign the back. Many business owners do not W-2 themselves, but rather file a Schedule C or K in which they work hard to minimize their taxable income by writing-off as much as they can, so their true take-home income from being a business owner is usually way understated. In reality they can afford a $500,000 home (or more), but they can only on paper prove they qualify for a home in the $300,000 price range or less.
So until HUD (who oversees lending guidelines for FHA, Fannie Mae and Freddie Mac) changes their guidelines for calculating self-employment income, I think we are going to see much of the same, with homes under $300,000 selling quickly and those over $300,000 staying on the market for longer periods of time.
If you are looking to refinance a home or purchase a new home, right now is the time, though. Rates are truly as low as they’ve been in over five years, and definitely the lowest they’ll be for a while. So don’t delay. Call me for a no-charge review of your current mortgage and if refinancing will benefit you. Also, if you are looking at a home, call me for a mortgage quote or to get you pre-approved for the loan.
For Salt Lake City, UT today’s average mortgage rates are as follows:
30-year fixed: 4.75%
15-year fixed: 4.625%
Conforming Jumbo 30-year fixed: 5.125%
FHA 30-year fixed: 5.00%
Today stocks are under selling pressure which has helped Mortgage Bonds improve slightly over even last week, driving mortgage interest rates even further down under last week’s incredibly low levels.
Ben Bernanke is talking about the Fed Rate dropping even further from it’s current 1.0% level, but he also warns that doing so may not do much to improve the economy. The rumor on the street is the Fed was talking about dropping it to 0%. I don’t think that will happen, but another 0.50% rate cut is probable.
Black Friday was a great shot in the arm for retailers with over 25,000,000 more shoppers visiting retail stores nationwide than in 2007. Sales were up 7.2%, but much of it is being accredited to deeper discounts than previously seen. But I don’t think the shoppers knew that until they got in the store. So I’m optimistic that it was a show of consumer confidence, if even just a brief one. We’ll see what the rest of the holiday season shapes-up like.
Mortgage Bonds are holding steady if not moving even slightly down down, so I recommend carefully floating and seeing what happens, especially if your closing a mortgage loan in Salt Lake City in the next 30 days. Salt Lake City has had some of the best rates nationwide for the past few weeks.
For Salt Lake City, UT today’s average mortgage rates are as follows:
30-year fixed: 5.250%
15-year fixed: 5.00%
Jumbo 30-year fixed: 5.375%
FHA 30-year fixed: 5.500%
Yesterday the Labor Department reported 240,000 American jobs lost in October, plus revised the September and October reports adding an additional 179,000 jobs lost during that period; giving us the highest unemployment rate since 1994: 6.5%. So far in 2008 we seen the elimination of 1.18 million jobs in the
Not that I hate to blow my own horn once in a while, but this is something I’ve been saying for quite some time now: the number one reason for the mortgage and credit crisis is not Adjustable Rate Mortgages (ARM) resetting, or loans being made to lower FICO score borrowers (I don’t think anyone buys a primary residence with the intention of not making payments and having to move again in a year), it’s the loss of jobs that has caused the current problems.
In a report done about 8 months ago by one of the major mortgage loan serving companies it was shown that the number one reason their borrowers were defaulting on their mortgage payment was “dramatic cut or total loss in monthly income” from the borrower losing their job, having their hours cut or from injury or illness that prevented them from working. The number two reason was divorce and adjusting interest rates on ARMs was less than 18% of all deliquencies. Why? Because the truth is that most ARMs are tied to the LIBOR index which is a full 2-point lower today than it was 18 months ago. So many ARMs actually went down in interest rate. Yes, some that were tied to other indexs went up, but the majority of ARMs are a margin over the LIBOR, and when it goes down so does the borrower’s interest rate.
So to fix the credit crises we first need to fix our unemployment crisis. If people have money to spend, they will. And most of all,they can make their house payment.
Moving-on. Stocks had their worse back-to-back days since Black Monday in 1987. And this may continue for awhile. Usually in this situation the Fed would cut the Fed Funds rate to spur investor spending, but with the target rate already at 1.00% there is nowhere for the Fed to go with it. But, as is the case, when Stocks suffer, Bonds thrive as investors run screaming from Stocks and move their money into more stable Bonds. And mortgage interest rates are based on Bonds, so as Bonds rally mortgage interest rates go down because the margin to investors is higher.
Mortgage Bonds are currently battling a strong ceiling of resistance, but should they break above the current levels it could spell some dramatic reductions in mortgage interest rates, especially here in Salt Lake City and throughout Utah, which is still one of the strongest real estate markets in the nation. So based on that I would recommend carefully floating right now.
For Salt Lake City, UT this morning’s mortgage rates are as follows:
30-year fixed: 6.00%
20-year fixed: 5.875%
15-year fixed: 5.625%
FHA 30-year fixed: 6.00%