Mortgage Interest Rates Went Up Again

Mortgage interest rates, as reported by Freddie Mac, have increased over the last several weeks. Freddie Mac, along with Fannie Mae, the Mortgage Bankers Association and the National Association of Realtors, is calling for mortgage rates to continue to rise over the next four quarters.

This has caused some purchasers to lament the fact they may no longer be able to get a rate below 4%. However, we must realize that current rates are still at historic lows.

Here is a chart showing the average mortgage interest rate over the last several decades.

 

Bottom Line

Though you may have missed getting the lowest mortgage rate ever offered, you can still get a better interest rate than your older brother or sister did ten years ago, a lower rate than your parents did twenty years ago, and a better rate than your grandparents did forty years ago.

 

 

Cindy Hallas Website Banners AFI 1170x400

3 Tips for Making your Dream of Buying a Home

Some Highlights:

  • Realtor.com recently shared “5 Habits to Start Now If You Hope to Buy a Home in 2017.”
  • Setting up an automatic savings plan that saves a small amount of every check is one of the best ways to save without thinking a lot about it.
  • Living within a budget now will help you save money for down payments and pay down other debts that might be holding you back.

Cindy Hallas Website Banners AFI 1170x400

Rising Rates- Rising Prices?

rising-rates-rising-house-price

There are some who are calling for a decrease in home prices should mortgage interest rates begin to rise rapidly. Intuitively, this makes sense as the cost of a home is determined by the price of the home, plus the cost of financing that home. If mortgage interest rates increase, fewer people will be able to buy, and logic says prices will fall if demand decreases.

However, history shows us that this has not been the case the last four times mortgage interest rates dramatically increased.

Here is a graph showing what actually happened:

rising-rates-history

Last week, in an article titled “Higher Rates Don’t Mean Lower House Prices After All, the Wall Street Journal revealed that a recent study by John Burns Real Estate Consulting Inc. found that:

“[P]rices weren’t especially sensitive to rising rates, particularly in the presence of other positive economic factors, such as strong job growth, rising wages and improving consumer confidence.”

Last week’s jobs report was strong and the Conference Board just reported that the Consumer Confidence Index was back to pre-recession levels.

Bottom Line

We will have to wait and see what happens as we move forward, but a decrease in home prices should rates go up is anything but guaranteed.

Cindy Hallas Website Banners AFI 1170x400

Mortgage Standards Easing TOO MUCH? NO!!

mortgage-standards-easing

There is no doubt that getting a mortgage is easier today than it was right after the housing crash a decade ago. However, the easing of credit availability has led to some questioning of whether or not we are headed for another housing crisis.

Let’s put everything into the proper perspective.

Mortgage Credit Availability Over the Last Three Years

Getting a home mortgage has definitely gotten easier over the last three years as evidenced by the Mortgage Credit Availability Index, issued by the Mortgage Bankers Association, in the following graph (the higher the index, the easier it is to get a mortgage):

mortgage-credit-availability

However, if we look further back at the index we see quite a different story.

Mortgage Credit Availability Today Compared to 2006

The graph below shows the index going back to 2004, and the first graph we showed you above is represented by the small, orange, triangular section all the way in the lower-right corner.

mortgage-credit-availability-historcial

As this visual easily illustrates, today’s index is nowhere near the levels it shot up to in 2006.

Bottom Line

Mortgage credit is definitely easing. However, we are not coming close to the lax standards that caused the housing crisis of last decade.

 

 

Cindy Hallas Website Banners AFI 1170x400

Baby Boomers on the Move

Baby-Boomers-S

According to a Merrill Lynch study, “an estimated 4.2 million retirees moved into a new home last year alone.” Two-thirds of retirees say that they are likely to move at least once during retirement.

As one participant in the study stated:

“In retirement, you have the chance to live anywhere you want. Or you can just stay where you are. There hasn’t been another time in life when we’ve had that kind of freedom.”

The top reason to relocate cited was “wanting to be closer to family” at 29%, a close second was “wanting to reduce home expenses” at 26%.

A recent Freddie Mac study found similar results, as “nearly 20 percent of Boomers said they would move closer to their grandchildren/children compared to 13 percent who said they would move to a warmer climate.”

Not Every Baby Boomer Downsizes

There is a common misconception that as retirees find themselves with fewer children at home, they will instantly desire a smaller home to maintain. While that may be the case for half of those surveyed, the study found that three in ten decide to actually upsize to a larger home.

Some choose to buy a home in a desirable destination with extra space for large family vacations, reunions, extended visits, or to allow other family members to move in with them. According to Merrill Lynch:

“Retirees often find their homes become places for family to come together and reconnect, particularly during holidays or summer vacations.”

Bottom Line

If your housing needs have changed, or are about to change, let’s get together to discuss your next steps.

Cindy Hallas Website Banners AFI 1170x400

Housing Help Build Family Wealth?

Wealth from home-

As the economy continues to improve, more and more Americans are seeing their personal financial situations also improving. Instead of just getting by, many are now beginning to save and find other ways to build their net worth. One way to dramatically increase their family wealth is through the acquisition of real estate.

For example, let’s assume a young couple purchased and closed on a $250,000 home in January. What will that home be worth five years down the road? 

Pulsenomics surveys a nationwide panel of over one hundred economists, real estate experts and investment & market strategists every quarter. They ask them to project how residential prices will appreciate over the next five years. According to their latest survey, here is how much value that $250,000 house will gain in the coming years.

homes values

Over a five-year period, that homeowner can build their home equity to over $40,000. And, in many cases, home equity is a large portion of a family’s overall net worth.

Bottom Line

If you are looking to better your family’s long-term financial situation, buying your dream home might be a great option.

 

Cindy Hallas Website Banners AFI 1170x400

Where Are Home Values Headed Over the Next 5 Years?

Where are home values moving towards by karen jones

Today, many real estate conversations center on housing prices and where they may be headed. That is why we like the Home Price Expectation Survey.

Every quarter, Pulsenomics surveys a nationwide panel of over one hundred economists, real estate experts and investment & market strategists about where they believe prices are headed over the next five years. They then average the projections of all 100+ experts into a single number.

The results of their latest survey:

Home values will appreciate by 4.0% over the course of 2016, 3.4% in 2017 and 3.0% in the next two years, and finally 2.8% in 2020 (as shown below). That means the average annual appreciation will be 3.2% over the next 5 years.

Project home values by karen jones

The prediction for cumulative appreciation slowed slightly from 25.0% to 24.7% by 2020. The experts making up the most bearish quartile of the survey are still projecting a cumulative appreciation of 9.9%.

culmative home values

Bottom Line

Individual opinions make headlines. We believe the survey is a fairer depiction of future values.

 

Cindy Hallas Website Banners AFI 1170x400

BREXIT: What’s the FIXIT for U.S. Home Buyers and Sellers?

Brexit

 

Now that much of the dust has settled and the panic has waned, let’s take a look at what impact Britain’s exit from the European Union may have on the U.S. housing market.

The most immediate impact of Brexit will be on mortgage interest rates. Interest rates have remained at historic lows for the last several years. Contrary to what many experts believed, rates have remained low throughout the first half of 2016.

Possible impact of Brexit on mortgage rates?

In a recent article, the Washington Post explained:

Brexit has spawned the recent bout of volatility in global financial markets. That has anxious investors scurrying for safety — and few assets are safer than U.S. Treasuries. High demand for government debt pulls down interest rates.

That all translates into ultra-low mortgage rates for American households. And with Britain voting for Brexit, they could go even lower.”

Now that much of the dust has settled and the panic has waned, let’s take a look at what impact Britain’s exit from the European Union may have on the U.S. housing market.

The most immediate impact of Brexit will be on mortgage interest rates. Interest rates have remained at historic lows for the last several years. Contrary to what many experts believed, rates have remained low throughout the first half of 2016.

Possible impact of Brexit on mortgage rates?

In a recent article, the Washington Post explained:

“Brexit has spawned the recent bout of volatility in global financial markets. That has anxious investors scurrying for safety — and few assets are safer than U.S. Treasuries. High demand for government debt pulls down interest rates.

That all translates into ultra-low mortgage rates for American households. And with Britain voting for Brexit, they could go even lower.”

However, the lower rates caused by Brexit may be short lived as Trulia Chief Economist Ralph McLaughlin pointed out in a recent post:

While the departure of the UK from the European Union has driven down the 10-year bond, and thus mortgage rates, we expect them to rebound later in the year as uncertainty over the economic consequences of the departure lifts.”

Bottom Line

Rates are already at historic lows. The UK’s exit from the EU almost certainly guarantees they will remain low (and possibly go lower) over the next few months. If you were thinking of buying your first home or trading up to the house of your dreams, this may be the time to act. The cost of money may never be better for a potential buyer.

Cindy Hallas Website Banners AFI 1170x400

Rates at History Low Since 1951

 

Rates at History Low Since 1951

The interest rates have been slashed again by the Federal Reserve.  Now the question is will the banks follow and reduce interest rates for mortgages?  This rate reduction is a step forward in the uphill battle to stave off a deep recession.  The dramatic rate reduction takes the cost of borrowing at a ALL TIME RECORD LOW since 1951!

And with the economy entering recession the base rate is expected to fall further next month.  The cut was widely expected but the bottom line is whether the banks will also pass on the cut.  If they do, it will be welcomed by businesses as it will reduce interest payments and if mortgage rates are also reduced, it will give people room to spend more on the higher purchase amount which will assist in making the economy go around.  When people spend more money, the economy moves.

The Government must now pull every lever of influence to get banks lending. If that doesn’t work, radical measures will be needed straight away. The alternative is a wave of bankruptcy and redundancy.  The battle against deflation is on. Rates are set to fall further, and soon, as policymakers try to counteract the powerful contractionary forces at work in the economy.

However, it is unlikely that low interest rates alone will achieve the desired result and may continue to buy up mortgage and commercial debt, to free up lending and re-liquefy the financial system.

In terms of the property industry the cut was good news in one sense because it means that existing mortgage holders, whether commercial or residential, will be paying less if they are on a tracker or variable rate and this should have a positive impact on margins.  However it is critical that the banks start lending again and that is the problem because people cannot get any credit.

Credit is cheaper now as a consequence of the cut in interest rates but the lack of availability of funds is crippling the market at the moment and both confidence and credit need to return for people to buy and invest and for the industry to begin to return to normal.

The concern is that, despite interest rates being at an historic low, lenders are still being ultra- careful and looking at big deposits with high loan to value ratios not exceeding 70%.

Lenders are having to factor in the falling property prices at the moment and provide themselves with sufficient equity to act as a cushion so they don’t get their fingers burnt again.

While this is good news, these interest rate cuts aren’t helping the consumer yet as lenders aren’t passing on the savings and, until they do, we’re all still treading water.

There is a pent up demand of buyers out there who want to get on to the property market but are unable to because lenders have tightened up on their criteria. Until they adopt a more risk-based approach we will still see good lending being turned down.

There is no point in the Government forcing the banks to pass on the savings as they still need to rebuild their profit margins. Once they do this, we will start to see the real benefits of these measures as the banks will then have the confidence to lend to one another again.

This may not happen before Christmas but high hopes are for this to go in effect for the new year!

Loan Modification Program can be an alternative to Short Sale or Foreclosure

The economy and mortgage industry is still far from seeing the light at the end of the tunnel.  As far as the value of homes, as people continue to “let their homes go” and walk away from their mortgage, the values continue to drop drastically.

What many people do not understand, is they may be causing another problem instead of resolving the current issue at hand.  Many people who are upside down and overwhelmed with their current mortgage payment (due to adjusting ARMs, splitting household financing, lost jobs, or many other situations that affect the monthly income) may have options they are not aware of when it comes to saving their house, reducing monthly mortgage payments, reducing principle balance on current mortgage and preventing short sale or foreclosure.

When a person decides to settle for a short sale or foreclosure, many are not aware of the many consequences that are attached to these.  Income taxes may be attached to the difference in balance and amount they walk away from causing a huge amount owed to the IRS at the end of the year.  Also, the legal costs associated to either is HUGE for the lender in addition to the cost of losing money on the amount owed that the person never pays.  And of course, worse of all, the person loses their home and all the hard work put into making that house into their home.  Now that person is out of a home and will not have the option to purchase for a minimum of 4 years.  So that individual is now obligated to renting for the next 4 years.  These are just a few of the obvious consequences that occur with either a Short Sale or Foreclosure.

There is an alternative option that many are not aware of.  When in doubt, contact me or your mortgage provider for further details to understand all your options before causing another HUGE headache and problem.  Loan Modification programs are readily available to assist loan modification negotiations with your current mortgage company.  These professionals are specifically trained to renegotiate your mortgage payment.  With your current financial situation, they are able to leverage your situation and give your current lender the benefits of modifying your loan.  What many people do not understand is the lender has a HUGE incentive to keep you as a customer and keep you paying on your mortgage.  Many of the customer service representatives at the lenders are trained to turn you down when requesting assistance with modifying your loan.  However through a loan modification program, such as the one I have available, they know how to approach the lender.

There are many people who are candidates for a loan modification showing some time of hardship they are experiencing with their finances.  Here are a few examples:

  • divorce/separation
  • medical/death
  • income reduction
  • Adjusting rate mortgage increasing monthly payment
  • Here are a few benenfits of loan modifications which will reduce your monthly payment:
  • reduction in interest rate
  • conversion from interest only payment to fully amortized (now your mortgage payment will go towards paying a portion of the principle balance down)
  • forgiveness of past due amount
  • principle reduction
  • increase term to 40 or 50 year term

The initial consultation is free.  We take your initial application and financial information and have it reviewed by our loan modification company.  Once they review this, then they will determine whether or not you are a candidate.  At this point, you can decide if you want to move forward with the process which takes 4-6 weeks and it does cost money.  This is a money back guarantee program so if they are not successful with renegotiating your mortgage, they will refund the entire amount to you.  So, now the question is, are you a candidate and what are you willing to do to save your home for you and your family.

**Please be aware there are many different loan modification programs so be cautious with whom you do business with.

 

Cindy Hallas Website Banners AFI 1170x400