Why Mortgage Rates Don't Look Like They're Coming Back Down Any Time Soon

Posted on February 15, 2008Filed under On Inflation Read the complete post or link to it
If you're shopping for mortgages right now, or are in the process of buying a home, this week was not your buddy.
In early-January -- right up until the surprise 0.750% cut to the Fed Funds Rate January 22 -- mortgage rates were the lowest that they'd been in three years.
At the time, market participants were fearful of an economic recession and mortgage rates moved lower with each added ounce of recessionary conviction.
Since that cut, though, and through every week since, the fears of recession are ceding to economic hope and recovery.
As a result, the recession-fueled drop in rates from early-2008 is getting ever-smaller in the economic rearview mirror.
Author's note: Eddie Vedder just doesn't look the same without those long, 1991 grunge rock bangs.
Here's a brief synopsis of what drove rates higher this week:
The economic stimulus package passes
A Federal Reserve president says recession won't happen
The World's most respected investor implied that the mortgage market is not so bad
Then, most importantly, it turns out that the American consumer is still spending after all.
Each of these four points show more economic health than Wall Street had expected. That has forced investors to reshuffle their investment portfolios.
The biggest loser through all of this is the bond market; over the past five days, 30-year fixed mortgage rates have increased by as much as 0.375%.
With more Fed speakers and key inflation/recession data coming down the pipe (or it is pike?) next week, expect the volatility to continue.
When in doubt about mortgage rates, stop shopping and start locking. There is very little good that can come from "waiting out the market".
Saving $50 a month won't change your life but wasting $50 a month will eat at you forever.

Bill Vourazeris
443-618-2880

12 Bullet Points That Matter To Every Home Buyer In America

Posted on July 8, 2008Filed under On Mortgage Approvals Read the complete post or link to it
Let's Start With The Conclusion
If you plan to buy a new home in 2008 or 2009, give a lot of thought to moving up your timeframe.
Mortgage approvals are about to get more scarce and more expensive for everyone.
The Supporting Evidence From The News
FHA is increasing its mortgage insurance premiums and up-front loan fees for a lot of borrowers
With IndyMac's demise, other banks should follow and Alt-A loans may go the way of Sub-Prime
Fannie and Freddie are in financial crisis again and may be forced to add mandatory loan fees for everyone
Banks are doing the unthinkable just to get suspect loans off their books
Wall Street is losing its appetite for "guaranteed" mortgage bonds
The Anecdotal Evidence From The Street
Lenders have slowed "common sense" exceptions. Meet the guidelines or else.
The new Fannie Mae guidelines are much tougher on high debt ratios
Wall Street is scared and rumors are floating about more bank failures
The Fed is laying the groundwork for another market intervention.
The Relevant Thoughts From A Guy Who Lives, Eats, And Breathes This Stuff
It's an election year so all we're going to hear from now until November is bad news about housing, and bad news about oil prices. That will weigh on Consumer Confidence and should negatively impact mortgage rates.
The purge of the Alt-A mortgage market has been a long time coming and now the window is closing. Don't get caught watching the paint dry.
It doesn't matter how good mortgage rates get if products keep disappearing.
Parting Wisdom
One reason why the markets have been so volatile is because -- about a year ago -- the financial models being used by the banks failed them. Losses followed and swaths of people got fired, but, in the end, lenders still have to lend -- it's what they do. The show must go on, after all.
So, despite the missing roadmap, the banks have still been trying to make it work. They're still issuing new loans to mortgage applicants and they're changing their business rules on-the-fly as market conditions warrant.
However, it's dangerous to drive without a roadmap. Every now and again, one of the mortgage lenders drives right off a cliff. And each time it happens, everybody else on the road slows down, and that trickles down from Wall Street all the way to Main Street.
Therefore, until the path gets more clear for the banks, life as a mortgage applicant should continue to toughen. It won't be easier to get a loan in 6 months than it is today so if you plan to buy "sometime soon", maybe "sometime soon" should be upgraded to "sometime sooner".
(Image courtesy: The Wall Street Journal)