| | TODAY | YESTERDAY | CHANGE |
| 30 Yr FRM | 4.84 | 4.85 | -0.01% |
| 15 Yr FRM | 4.15 | 4.14 | 0.01% |
| FHA 30 Year | 4.70 | 4.72 | -0.02% |
| Jumbo 30 Year | 5.75 | 5.78 | -0.03% |
| 5/1 Yr ARM | 3.51 | 3.54 | -0.03% |
Tuesday, January 25, 2011
mortgage rates 1/25/2011
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No Correlation: The Fed Funds Rate And 30-Year Fixed Mortgage Rates
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The Fed Funds Rate ≠ Consumer Mortgage Rates
Adjectives play an important role in the English language -- they modify nouns. Because of adjectives, we can linguistically separate good movies from bad movies, rainy days from sunny days, and sore losers from lovable losers.Sometimes, adjectives are superfluous. For example, it's pretty clear that this blog is a mortgage blog so when yours truly writes something like "rates are lower", it's implied that I'm talking about mortgage rates.
I don't need to constantly say "mortgage rates".
Other times, however, omitting adjectives leads to misunderstandings. And it happens nearly every time the Federal Open Market Committee meets.
Here's why.
Explaining the FOMC In Layman Terms
The Federal Open Market Committee is a government group that makes monetary policy. It's job is akin to the gas-and-brake pedals on a car -- speed up or slow down the vehicle that is the U.S. economy.The FOMC has 12 members and is headed by Chairman Ben Bernanke.
8 times annually, the Fed gets together to discuss a host of economic issues and, when the meeting is done, the members vote on whether to raise, lower, or leave unchanged an interest rate called the Fed Funds Rate.
The Fed Funds Rate is the prescribed interest rate at which banks lend money to each other overnight.
Simplified, when the Fed Funds Rate is high, banks end up paying a lot of money in interest payments and are less inclined to borrow from one another, thereby slowing down the economy. When the Fed Funds Rate is low, borrowing is cheap, and the economy is spurred forward.
Because the Fed Funds Rate is directly related to Prime Rate, the basis of business and consumer borrowing, the FOMC's vote carries huge implications for the economy as a whole.
The FOMC Does Not Vote On Mortgage Rates
The FOMC starts a 2-day meeting today, adjourning at 2:15 PM ET Wednesday. The group is expected to leave the Fed Funds Rate unchanged within its current range of 0.000-0.250 percent. This is the lowest Fed Funds Rate is history; a level held since December 2008.The Fed has repeatedly said that the Fed Funds Rate will stay near zero for "an extended period" and, starting close to 2:30 PM ET tomorrow, the press will start reporting that the Fed voted to "leave rates unchanged".
And this brings us back to adjectives -- implied or otherwise.
The proper verbiage from the press would be "the Fed voted to leave the Fed Funds Rate unchanged today", but that's not how the headlines will read. They'll just say "rates".
This is a big deal only because most Americans don't know what the Federal Reserve's true scope is; they never learned what the Fed does for the country, or how it does it. It's the main reason why, in my experience, Americans tend to think that the Federal Reserve controls daily mortgage rates.
It doesn't. Not even close.
Comparing The Fed Funds Rate To Mortgage Rates
The FOMC doesn't control mortgage rates. As proof, check out the chart at top. If the Fed Funds Rate was tied to mortgage rates, the graph would be linear.The relationship between the Fed Funds Rate and the 30-year fixed rate mortgage is indirect, at best. The spread in rates has been as narrow as 1 percent and as wide as 5 percent in the last 10 years. There was even a period in the 1970s -- then again in the 1980s -- when the spread went negative; where mortgage rates were lower than the Fed Funds Rate.
Fundamentally, the two rates are different, too. The Fed Funds Rate is an overnight rate. The 30-year fixed mortgage is a long-term rate.
Borrowing money for 8 hours is different as compared to 263,000 hours.
Make A Mortgage Rate Lock Plan Ahead Of The FOMC
It's dangerous to float a mortgage rate ahead of the FOMC.Although Fed Funds Rate won't changed, there's always the chance that the Fed says something that causes mortgage rates to spike. It's happened in the past and it could happen again. One such example is from November 3, 2010 when the FOMC announced $600 billion in support of mortgage market. It sparked inflation fears and mortgage rates haven't been the same since.
Therefore, if you're shopping for a mortgage right now, or otherwise not locked in, talk to your loan officer in advance of the Fed's 2:15 P.M. ET announcement Wednesday. Rates may not rise, but then again, maybe they will. It stinks to be on the wrong side of that bet.
Or, if you don't have a loan officer, just send me an email with some bullet points about your loan. We work it from there together.
The Real American Idol – HOMEOWNERSHIP!
Posted: 25 Jan 2011 04:00 AM PST
Simon Cowell would have to be considered congenial compared to the critics of real estate in the last few years. But like the popular TV show, where the ultimate winner is not chosen by a select few but instead by the vote of the nation, homeownership again has proven to be the choice of the people. There have been numerous survey’s and polls done in the past 90 days that confirm this.
American Attitudes About Homeownership is a new survey conducted by Harris Interactive for the National Association of Realtors. The findings of this survey combined with the findings of Fannie Mae’s November National Housing Survey and last week’s Gallup Poll paint a clear picture that the majority of Americans still value homeownership and believe in its benefits. In the latest survey, America’s belief in owning a home came through loud and clear.
Here are a few of the findings:
Homeowners and renters agree that owning a home is a positive choice. A majority of homeowners and a sizable percentage of renters agree or strongly agree that owning a home provides a healthy and stable environment for raising a family (87 percent among homeowners and 64 percent among renters), that it helps them meet long-term financial goals (77 percent among homeowners and 55 percent among renters) and it helps them realize the American Dream (70 percent among homeowners and 48 percent among renters).
Most homeowners (95 percent) and renters (72 percent) believe that over a period of several years, it makes more sense to own a home than to rent.
More than 8 in 10 homeowners (82 percent) and half of renters (50 percent) would prefer to buy a home if they had to move in the next six months. Furthermore, 78 percent of homeowners consider now a good time to buy as do 58 percent of renters.
Homeownership is viewed as a positive experience while less so for renting. Eighty-eight percent of current homeowners report that owning a home has been a positive or very positive experience. About half of renters (51 percent) consider their experience as positive or very positive.
Many renters aspire to homeownership. More than 6 in 10 renters are at least somewhat likely to purchase a home in the future and 24 percent indicate that they are extremely likely. Among young adult renters, 74 percent say they are likely to buy at some point in the future. About one-third (35 percent) of renters plan to purchase a home in the next 3 to 5 years (43 percent among young adult renters).
More about the non-financial benefits of homeownership
We have argued for some time that the benefits of homeownership are more than just financial. This survey addressed this point and reported:
A larger share of homeowners than renters describe their communities as safe and stable. Homeowners also report that they are more satisfied with their community and family life. While many factors contribute to a positive community environment, a large percentage of homeowners and renters believe a high rate of homeownership is one factor. Homeowners generally feel more connected to their communities, participate in community and civic activities more frequently and are more likely to know their neighbors well.
Bottom Line
Owning a home has both financial and social benefits for your family. Today, you can buy a home at a discounted price and at an historically low interest rate. Why wait?Monday, January 24, 2011
Keller Williams Realty Signs Deal with CitiMortgage to Provide Unique Money-Saving Benefits to Consumer
Keller Williams Realty Signs Deal with CitiMortgage
to Provide Unique Money-Saving Benefits to Consumers
to Provide Unique Money-Saving Benefits to Consumers
AUSTIN, TEXAS (January 24, 2010)–Keller Williams Realty, Inc. announced today that it has entered into an agreement with CitiMortgage to create a customized mortgage services program for the company’s offices across the United States. This type of agreement is the first of its kind for Keller Williams Realty and CitiMortgage.
CitiMortgage will now offer Keller Williams Realty clients reduced fees on jumbo loans, and as a part of the SureStart Pre-Approval® program, will not charge a pre-approval fee for Keller Williams agent’s buyers. As a part of CitiMortgage’s commitment to exceptional service, they also offer all Keller Williams borrowers an On Time Closing Guarantee of $1,500.
“Our goal is to ensure that our associates have access to the best resources possible so they can focus on their main priority-their client. We are confident that with five million mortgage customers, CitiMortgage has the experience and expertise to support our Market Centers and associates at the highest level possible," said Anthony Azar, director of strategic business alliances at Keller Williams Realty.
CitiMortgage will also support Keller Williams Realty in its efforts to help associates win more business. In addition, Market Centers will have the opportunity for an in-house mortgage representative, as well as a dedicated support and fulfillment team for Keller Williams associates and their clients.
“CitiMortgage was looking for a national realtor partner and after reviewing Keller Williams business model and culture, we realized this was a perfect fit for both companies," said Fred Bolstad, managing director of National Sales for CitiMortgage. “CitiMortgage can provide the strong training and tools their agents need to succeed. Our service-oriented national lending platform can help their customers realize the dream of home ownership in a more efficient and effective way."
###
About CitiMortgage:
CitiMortgage is headquartered in St. Louis and is a division of Citigroup. Citi, the leading global financial services company, has approximately 200 million customer accounts and does business in more than 160 countries and jurisdictions. Through Citicorp and Citi Holdings, Citi provides consumers, corporations, governments and institutions with a broad range of financial products and services, including consumer banking and credit, corporate and investment banking, securities brokerage, transaction services, and wealth management. Additional information may be found at www.citigroup.com or www.citi.com.
About Keller Williams Realty, Inc.:
Founded in 1983, Keller Williams Realty Inc. is the third-largest real estate franchise operation in the United States, with 690 offices and more than 80,000 associates in the United States and Canada. The company, which began franchising in 1990, has an agent-centric culture that emphasizes access to leading-edge education and promotes an economic model that rewards associates as stakeholders and partners. The company also provides specialized agents in luxury homes and commercial real estate properties. For more information, or to search for homes for sale visit Keller Williams Realty online at (www.kw.com).
Distressed Inventory to Step Out of the Shadows
Posted: 24 Jan 2011 04:00 AM PST
We are beginning 2011 with much more positive news about real estate than we have had in several years. The pending sales numbers (houses going into contract) have been climbing for several months. Last month’s Existing Homes Sales Report from the National Association of Realtors showed an increase of over 12%. Demand definitely seems to be increasing. Does that mean prices will begin to appreciate? Probably not. Though buyers have finally come out of hiding and started to purchase homes again, an increased inventory of distressed properties is also emerging from the shadows. These houses will impact prices.
Prices are determined not by demand alone but instead by the relationship of demand to the supply of inventory available. We are talking about the ‘shadow inventory’ of homes that will come to market at discounted prices when they are sold as short sales or foreclosures. This inventory has swelled to several million units.
When will this begin and what impact will it have on prices?
Over the last year, banks have been slowly releasing this inventory to the market being careful not to release too great a number in fear of driving down house values even further. Over 25% of all sales in 2010 involved a distressed property. The numbers increased as the year went on with 33% of all sales in November being in this category. In December, that number jumped to 36%! It now seems that banks are preparing to increase the flow of such properties to the market.
Last month, CNBC reported on economist Nouriel Roubini’s predictions on this issue:
“There has been an effective moratorium on foreclosure,” said Roubini.
And the beginning of the end of that moratorium means more housing supply is about to become available on the market.
“The shadow inventory of not-yet-foreclosed homes—due to the moratorium—will surge in the next year,” Roubini says.
Bank of America said:
…it resumed foreclosure sales in most states that have a non-judicial process, but the bank won’t restart sales in judicial states until sometime in the first quarter.
And Housing Wire reported last week that Fannie Mae “directed its mortgage servicers to delay scheduled foreclosure sales 45 days” for borrowers trying to get assistance through certain government programs.
What impact will this have on prices? Wells Fargo projected that house prices will drop 8% by mid-year. Fannie Mae and Bank of America have also predicted price depreciation for the first half of 2011.
Should I wait to purchase?
Not necessarily. Remember, sellers should sell now before prices do begin to fall. However, as a purchaser, you should look at cost. With interest rates on the rise, waiting may result in a higher monthly mortgage payment even with a lower sales price.
As a good example, Mr. Roubini, who was mentioned above, just sold his home and upgraded to a more expensive residence. Get counsel from a mortgage professional before you consider delaying a purchase.
Bottom Line
If you are looking to sell, you probably want to do it before this ‘surge’ of discounted competition comes to market.Sunday, January 23, 2011
Owners and Renters Agree: Owning a Home Is a Smart Decisio
Owners and Renters Agree: Owning a Home Is a Smart Decision
The American Attitudes About Homeownership survey found that in today’s challenging economy, 95% of owners and 72% of renters believe that over a period of several years, it makes more sense to own a home. In addition, an overwhelming majority of homeowners are happy with their decision to own a home—93% of owners surveyed would buy again.
“Homeowners and renters agree that homeownership benefits individuals and families, strengthens our communities, and is integral to our nation’s economy,” said NAR President Ron Phipps, broker-president of Phipps Realty in Warwick, R.I. “The results of this survey illustrate just how important issues related to homeownership are to people in this country.”
The survey uncovered some differences between homeowners and renters, as well. While more than half of owners are “very” or “extremely” satisfied with the overall quality of their family life, only one-third of renters report the same levels of satisfaction. Similarly, 43% of homeowners are very/extremely satisfied with their community life, compared with 30% of renters.
A majority of renters—63%—said it was at least somewhat likely that they would purchase a home at some point in the future. Among this group, young adults (18-29 years old) have the strongest aspirations for homeownership; only 8% of young adults said that it was “not at all likely” that they would purchase a home at some point in the future.
In today’s market, many aspiring homeowners are faced with worries about job security and creditworthiness. Among renters who are very or extremely likely to buy a home in the future, three out of five consider confidence in job security and creditworthiness to be an obstacle. One point of agreement between renters and homeowners was support of the mortgage interest deduction (MID). Seventy-four percent of owners and 62% of renters say it’s “extremely” or “very” important that the MID remain in place.
“At a time when the middle class is under increasing economic pressures, both homeowners and renters agree that the mortgage interest deduction should not be targeted for change,” said Phipps. “Given strong public support of and aspirations toward owning a home, we need to keep policies in place that support and encourage responsible, sustainable homeownership for our future.”
This survey was conducted online within the U.S. and fielded October 6-20, 2010. A total of 3,793 adults 18 and older were surveyed, including 1,880 home owners, 1,115 renters, and 798 young adults. All samples came from the Harris Poll online database and were weighted for age, sex, race/ethnicity, education, region and household income to be representative of the U.S. general population of adults 18 and older. Propensity score weighting was also used to adjust for respondents’ propensity to be online.
For more information, visit www.realtor.org.
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