November 14th Moorings Column

Hello and welcome to this week’s edition of Moorings, your source where local and national mortgage and real estate news meet. To start off, let’s look at interest rates. So far this week we are up only an eight of a percent for last week, so a client looking to refinance or purchase a home with a thirty year mortgage can expect an interest rate of 4.25%, up from 4.125% last week. If you are looking to pay off your home a bit faster, then a fifteen year mortgage may be the way to go with an interest rate of 3.5%.

While those rates are for conventional homes, I thought it might be good to also take a look at jumbo loan rates as well this week. Currently, a client looking to purchase a one million dollar home can expect to obtain a mortgage of 80% loan-to-value with an interest rate of 4.75%.  This is really an exceptionally good rate for a luxury home, especially considering we have seen these rates in the 6’s and 7’s in the past few years. Furthermore, your money is going to go a lot farther in today’s real estate market.  Looking back at 2005, a purchase price of one to two million dollars got you an average of four bedrooms and an average of around 3,500 square feet. In today’s market that same amount gets you an average of 4,000 square feet. Simply put, you are getting more for your money at a better interest rate in today’s real estate market.
In major financial news, the big story from last week is the resignation of Greece’s Prime Minister, which cleared the way for the creation of new economic rescue plans. The United States is not an island, and major financial issues across the world affect our economy in major ways, as the seesaw in the stock and bond markets last week exemplified.  Here at home, another story to watch came on the words from Fed Chairman Ben Bernanke, who stated that the Fed has “considerable latitude” to choose its long-term inflation goal. Although Bernanke didn’t elaborate on specifics, the gist of his comment is that the Fed may tolerate higher inflation for a period of time in an attempt to help the economy recover and improve the employment sector. Remember, the Fed has assumed the dual roles of controlling inflation as well as supporting  job creation.  While inflation remains close to the Fed’s target range, unemployment is nowhere near where the Fed would want to see it, which is between 5% and 6%. So it appears the Fed may make decisions in the future to improve employment, possibly at the  expense of inflation. This is important because inflation is the archenemy of Bonds and home loan rates. So any increase in inflation could negatively impact home loan rates.  I may have said this before, but there has never been a better time to buy in the history of real estate than right now, with home affordability and interest rates at an all-time low. So what are you waiting for?  Call me!  Well that’s it for this week, until next, Be Blessed and Numbers 6:24-26 be on you.