Mortgage Lender Atlanta » Mortgage Rates

Housing Starts Waaay Down

Jim Duffy — Wed, 18 Nov 2009 13:53:22 +0000

Housing Starts – or the number of new permits to build residential homes – was down last month by 10.6% over the month before. Economists generally expected housing starts to be up by 1.5%.

That’s a 12.1% swing to the downside from expectations. In other words, there is just not that much building going on out there. To be expected? Well, sure. But not quite that little building!

My take? I feel for the builders out there who are treading water, trying to stay afloat. That is a hardship for a lot of families. Having said that, I think it is generally a good thing that housing starts are so far down, because it helps focus the home buyers who are in the market on the existing inventory. And until that is gone, home prices will continue to be depressed – which is a good thing for home buyers, but we do hope to turn that trend at some point, and wading through the existing inventory of homes is the only way to help stabilize home prices.

But there is another reason why housing starts are so far down. In a lot of areas of the country – including metro Atlanta – a home buyer can purchase a home for less than the cost it would take to construct that home new. So, home builders simply cannot compete with the existing inventory without losing money.

What does that mean for rates? Well, if that were the only economic number this morning, then mortgage rates (i.e. bonds) would rally and rate would fall lower. Which will will likely see over the course of the day. However, CPI (Consumer Price Index) numbers also came out this morning, and they show consumer prices going up slightly, which is just slightly inflationary. And, as avid readers of this blog know all-too-well, inflation and bonds are like oil and water. They don’t mix.

Initially this morning rates are just slightly higher than yesterday, but overall the news is good for mortgage rates, and they will settle right back down to the lows we have seen over the past week and a half.

Bottom line: If you are a home buyer, you are in the cat bird seat right now. Take advantage.

Tough (Economic) Love

Jim Duffy — Wed, 25 Feb 2009 13:33:57 +0000

Peter Schiff wrote a compelling article spelling out the possible scenarios for the economy. I have linked to it above, and I hope you will go and read it. I think you will find it compelling; even if, in good Peter Schiff style, it is spelling out the worst scenarios and makes you shudder a bit.

After briefly recapping the subprime and credit implosions, and pointing fingers of blame where due, he asks if on a grander scale the US Government is not falsely propping up an economy of consumer excess? Then, if you accept that premise to be true, what would happen to immediately bring our economy to it’s knees – or put us on life support – if foreign governments stopped buying our debt in the form of bonds.

Well, admittedly it would not be pretty; and it would be painful.

But beyond Schiff’s facade of being Paul Revere in this whole economic mailaise, he, too, is an optimist. I think Schiff believes, as I do, in the American spirit which accepts adversity and grows stronger and flourishes from it.

If the worst in the economy is ahead of us, here’s what I would suggest:

Credit will tighten more. Right now if a borrower has decent credit, it is quite possible to get a very favorable rate on a home loan. That would change, largely due to the false lows in mortgage rates going away as the Fed would stop buying Mortgage Backed Securities.
Goods and services would escalate in price, due to inflation and the rapid constriction in free-flowing credit.
Many companies would simply have to shut down, and jobs would be lost.

If all of that happens, then there will be no more ‘keeping up with the Joneses’. Maybe we will focus on simpler pleasures in life, while shouldering the responsibility of rebuilding an economy based not of consumption, but on savings and industry. It would not happen overnight, but you would be surprised what a decade can do.

So, hope for the best and prepare for the worst. How? If you are in a position to purchase a home around Atlanta – do so now. Because home prices are down to the lowest levels in decades and long-term fixed mortgage rates are also at their lowest levels in decades. That will not last.

And, simplify your lifestyle. Cut back where needed in order to save and sock away more.

Peter Schiff would tell you to invest in Asian stocks. Fine. If you want, he probably has very good advice there. I say, there will be strong survivors in the US economy. More importantly, there will be new businesses and industries popping up, run by new entrepreneurs. Be nimble and ready to capitalize on those, as well.

No one said that being part of the greatest nation on Earth would be easy. Because a nation is made up of people, I believe that Americans will be just fine, and we will show our true colors as we – potentially – lead the world out of this recession and rebuild on a stronger, more solid economic footing.

The New and Improved First Time Home Buyer Tax Credit

Jim Duffy — Thu, 19 Feb 2009 01:14:55 +0000

Basically the tax credit for first-time home buyers went from $7500 to $8000, with the difference that the tax credit now does not have to be repaid at all. Before, it was to be repaid over a 15 year period.

Here is a link to information on the tax credit for first time home buyers.

It is effective for any home purchased between January 1, 2009 – December 1, 2009. And, the credit is equal to 10% of the purchase price of the home, up to a maximum of $8000. For informational purposes, the definition of a first time home buyer is anyone who has not purchased a home in the previous 3 years.

So, if you have been on the fence about buying your first home around Atlanta, this should be enough to push you over the edge. Home prices are at their lowest point in years, mortgage rates are at their lowest point in 37 years, and you get $8K tax credit for buying.

The market’s great. Jump in.

The Fed May Have Another Trick Up It’s Sleeve

Jim Duffy — Wed, 28 Jan 2009 14:12:34 +0000

The Meeting of the Federal Reserver Board will adjourn at 2:15pm today, and as is customary, Fed officials will speak. Normally, we have waited to see if the Fed will lower (or raise) interest rates, and both stock and bond investors respond accordingly. They cannot do that today, because the Fed Funds rates sits at .25%.

So, what can they do that will have any effect? Plenty. And from this article form Yahoo Finance page, it appears the Fed may begin to buy up other consumer debt securties, such as car notes, student loans and credit card debt-backed securities. Just like they are buying up Mortgage Backed Securities, which is what is causing mortgage rates to remain as low as they have. Sort of an artificial low.

The interesting this in the article cited above is that the Fed may buy up long-term Treasury securities.

Huh? Doesn’t that strike you as the the same as an average American paying off one credit card balance with a new credit card, to allow more room for spending on the original card? That was my first impression.

So, we will see. The thing to watch for in the Fed comments is a fear of increasing inflation. I do not expect that at all at the end of this meeting, but the mere mention of inflationary fears will send mortgage rates up. Anything else, should be good for rates. Should is the key there, since the Fed is treading into unchartered waters, and there is no telling how investors will respond.

Inflation is Coming. Do You Know What to Do?

Jim Duffy — Sun, 25 Jan 2009 23:07:11 +0000

I have been saying for several months on this blog that Big Inflation is coming. And even several readers have commented back that everything seems deflationary, and wonder if I am seeing the same economy that they are. And I am, but I am looking out a few more months.

Inflation, essentially, is caused by a money supply that outweighs the goods and services being offered for those dollars.

So, I happened upon this article, by Adam Hamilton, in which the author makes a very compelling case for the reasons that the inflation that is coming is going to be big and ugly. He almost argues that the CPI numbers that measure inflation may be being under-reported, on purpose. Interesting, and if that is the case, then that under-reporting will not be possible once the inflationary causes begin to hit main street. Here is a quote:

Inflationary expectations hurt the stock markets, and weak stock markets hurt the economy as the stock panic abundantly proved. Scared citizens are not only harder to rule over, but they won’t vote for politicians’ reelections and they won’t be able to shoulder as big of tax burden to pay for politicians’ grand spending plans.

And inflation just around the corner is not good for a populus that has a slowing economy. We have all read about (and hopefully not experienced) the growing job losses, and an anecdotal phenomenon that I am seeing, is a growing number of employees taking pay cuts instead of incurring layoffs. Interesting.

Preparing for Big Inflation

The author of the article that I cited above suggests some things to do to prepare for and ride out the coming inflationary period. For those, just read the article. He is an investment advisor, so his suggestions are geared toward stocks, commodities and other investments.

I, of course, am not an investment advisor. If anything, I could be called a debt advisor, since that is what I deal in – helping people set up and manage the largest indebtedness that most people will take on in their lifetimes.

My advice, then. Take full advantage of these artificially low interest rates, and refinance the home. If you have unsecured debt such as credit cards, student loans or car loans, and you have the equity in your home to do so, then roll those debts into a new home loan in the high 4% to low 5% ranges, depending on how you qualify.

Then, get on that budget and savings plan that you have always talked about, even though it means cutting back a little on the nice things that you enjoy. And, if need be, do some things to bring in a little extra income.

But the refinance part, do it quickly. The reason is two-fold.

First, mortgage rates are artificially low right now, because the Fed is the main player buying Mortgage Backed Securities (MBS) – those bonds that drive the mortgage rates. They are planning on buying MBS through the end of June, 2009. Once they stop buying, watch for rates to take off like a missle.
And, second, when we do see inflation take hold, mortgage rates rise as bonds are shunned. The reason is that bonds and inflation mix like oil and water. They don’t. In fact they can’t, because by definition bonds offer a fixed rate of return on an investment. And that fixed rate, say 4%, is diluted more and more as inflation rises. If inflation is at 4%, then the real return on that 4% bond yield is…nothing. Right, inflation cancels the yield on the bond. So what if inflation hits 6%? Bonds are negative, and have to rise to compete.

So that’s it, two very real factors that will cause mortgage rates to rise in the near future. So if you want to see if you qualify to refinance your home, anywhere in Georgia, then call me or email me – jduffy at phoenixglobalmortgage.com, and let’s see what you can do.

Oh, and if you are in an adjustable rate mortgage (ARM) that will adjust in the next 12-24 months, you may be looking at the LIBOR (or other index your loan is tied to), and patting yourself on the back, looking at how much that rate is going to drop once it adjusts. You are right, for now.

But I suggest refinancing into a long-term fixed rate, now that rates are so low. The reason is that the most effective tool that the Fed has to combat inflation, once it takes hold, is to raise interest rates.

Although the LIBOR is not tied directly to the Fed Funds Rate, that will be rising, it does track that rate with a fair accuracy. Remember what Paul Voker did in the 70′s to reign in inflation? My parents’ generation is still talking about the double digit interest rates they bought their homes with. And we will have stories for our grandkids, before this is all over.

The Rate Roller Coaster

Jim Duffy — Thu, 22 Jan 2009 13:54:50 +0000

Rates have been rising somewhat dramitically over the past 7 days. But then, every time rates hit the lows, they have quickly shot up like a rocket, and tend to then float down like a feather. Be ready for a dip over the next few days.

Why? In news released this morning, housing starts stood at 550,000. Estimates were for starts to stand at 610,000. And that number caps the worst year for builders since 1959. In other news, weekly jobless claims stood at 589,000k, higher than estimates for a read of 548,000.

Remember, bad news for the economy usually causes a flight to safety, and bonds are the safe haven. Bonds, or Mortgage Backed Securities, rally, and mortgage rates drop.

If you are thinking of refinancing your home, or your second home in Georgia, let’s get the paperwork in, and lock on the dip in rates. You will be happy you did so, in hindsight.

Finally, the Fed is Buying

Jim Duffy — Wed, 31 Dec 2008 00:13:53 +0000

The Fed announced that it will begin to buy MBS in early January. Good news?

Well, yes, it is good news, and although that move is pretty much already priced into the market and rates are already low, it is also true that rates have risen since two weeks ago. So, we might see them float back down to the levels of two weeks ago.

And, it was at that point that I locked everyone I could. Since then, I have been taking refinance and purchase mortgage applications for people all around Atlanta, the state of Georgia and even neighboring states. But, I have been floating the rates, waiting on this event. So, by next week we will have a window to lock loans again.

Mortgage Rates Hit 37 Year Lows; Applications Hit 5 Year High

Jim Duffy — Wed, 24 Dec 2008 14:17:31 +0000

Source: Bloomberg

The Fed has been buying Mortgage Backed Securities (MBS) like we all know. And, the plan has worked. Mortgage rates, while still volatile, are bouncing around their all-time lows.

And I have been just as busy as everyone else, taking loan application for refinances and for purchase loans just about as fast as I can take them. I love it, I must admit.

While most people I speak with I am able to help, there is a small percentage of Atlanta area borrowers who, when we go through the loan application, decide to hold off on locking in their rate, on an intuition that mortgage rates will drop further still. When I ask what makes them think such, the response is some form of “I just feel like they will go down further”, or “it’s a gut instinct”.

My advice? Remember that the bond market determines mortgage rates; and there are real economic forces that move bonds up or down. Those market forces have gotten a big help to push rates downward from the Strong Arm of the Fed, buying MBS. Even though their buying is ongoing, that has now been factored into the pricing of Mortgage Backed Securities. Going forward, we will see all the traditional influences on MBS begin to take more prominence, and even out the market. And, yes, market sentiment regarding the economy will weigh in.

Remember, there is one 800-lb. gorilla that will possibly step into the market in early January, as the SEC meets to consider revising the current Mark-to-Market rules. And if they do revise the rule, it will bode very well for stocks, but mortgage rates will rise. Click here to spend 7 minutes watching the video explaining this one in more detail.

So, if you are around Atlanta and looking to refinance your mortgage, lock in on any dip in rates, and count your blessings. It is too easy to get caught up in greed and miss the whole party…i.e. to be coveteous of the absolute lowest rate, and not lock at all, only to wake one morning in the not-too-distant future and find you missed the lows by a whole point or more. Missing by .125% will not make nor break any homeowners. Missing by 1.5%…well that could break the bank. So, get the apps in and lock on any dip, is my best advice.

Is it Time to Refinance?

Jim Duffy — Mon, 22 Dec 2008 11:46:14 +0000

The stories are all over the news, including this one from the Associated Press, that mortgage rates are low.

How low? Well, depending on where you look, anywhere from 37 year lows to All-time lows. I can tell you that from a raw rate standpoint, they are at all-time lows.

So, should you refinance now? The philosopher in me would answer that with one definitive word: Distinguo. (i.e. It depends)

First question to ask yourself – Can you refinance? Many people’s homes are underwater. They owe more than the home is currently worth. If that is your circumstance, then another set of options are available to you outlined in the post that I linked to above. That is, unless you are in an FHA mortgage loan, in which case you can do a Streamlined FHA refinance. Call me and I will walk through how that is done. And, that is a great topic for another post.

Assuming you can refinance, the Second question is, should you? In the simplest form, three things determine whether you should refinance your Atlanta mortgage, or not:

What is your Loan-to-Value? We’ve determined that you do not owe more on the home than it is worth. Now, sometimes higher loan to values carry slightly higher interest rates. Again, for FHA loans, that is not the case. For conventional, if can be.
What is your credit score? Lower credit scores now carry with them either higher discount points to get the best rate, or higher interest rates with no points. This is true of conventional loans, read Fannie and Freddie products. It is substantially less so with FHA loans.
How long will you be in your home? If you are planning on selling in the early Spring, then a refinance won’t make any sense. If not, then the length of time you will likely be in the home matters. If this is it, the last home you will ever buy and you plan to die happily in it, then look at refinancing into the lowest rate possible, paying full closing costs (but I am still not a fan of paying points). If you will be there a while, but know you will be moving on down the road at some point, then I would recommend a slightly higher rate, but low or no closing costs. Why eat up your equity with fees, when you will still be saving a lot each month with a lower rate, and keep the equity in your home.

There are several ways to weigh this. And, other questions, like should you pull cash out and consolidate debt into the new mortgage. That is an option as well. And a good one to consider if that is your circumstance, because of the rising inflation that is just around the corner. Take advantage of the low rates to prepare to weather the storm.

This Refinance Boat May Leave Port Soon – Board Now

Jim Duffy — Sun, 14 Dec 2008 21:18:43 +0000

30 year mortgage rates ended Friday close to 4.75%. A bit higher for lower credit scores or higher loan-to-values, of course, but still in the low 5′s. Good, by any measure. But, watch this video, and you will see why these rates could be history in early January – and why stocks may be headed up at the same time.

Bottom line: If you are considering refinancing your conventional or FHA loan on your Georgia home, call or email and let’s lock right away.