Moorings Column 10-29-12

Hello and welcome to this week’s edition of Moorings, your source where local and national mortgage and real estate news meet. Interest rates have remained unchanged from last week. This week, a client looking to purchase or refinance a home with a conventional thirty year fixed can expect an interest rate of around 3.625%. An FHA loan can be had for around 3.25%. As I have been saying for some times, these rates are truly some of the best I have ever seen and anyone who hasn’t taken advantage of them will definitely regret it when they eventually go back up.

In major news, after last week’s regularly scheduled meeting of the Federal Open Market Committee (FOMC), the Fed reaffirmed that its latest round of Bond buying (known as Quantitative Easing or QE3) would continue until our economy can stand on its own two feet. This means that the Fed reaffirmed that they will purchase $85 billion of Mortgage Bonds per month through the end of the year, and at least $40 billion per month thereafter until the labor market substantially improves.

The Fed acknowledged that inflation, in the short-run, has picked up due to higher energy prices. Remember that one of the goals of QE3 is to avoid deflation and actually create inflation. Hints of inflation can spook Bond investors–causing both Bonds and home loan rates (which are tied to Mortgage Bonds) to worsen–because inflation can reduce the value of fixed investments like Bonds. Though the Fed noted that longer-term inflation expectations are stable, this is one story to keep a close eye on in the coming weeks and months.

The quandary for the Fed is that all of the money printing through QE1 and QE2 has not boosted spending or demand (in economics they call it aggregate demand and aggregate spending), as evidenced by the anemic Gross Domestic Product (GDP) numbers we have seen of late. The advanced (first of three readings) of GDP for the third quarter of 2012 was reported last week at just 2.0%. But there was some good news last week, as New Home Sales jumped 5.7% in September from August and Durable Orders (orders for products lasting at least three years) rose more than expected.

So what does all of this mean for home loan rates? Renewed worries over the debt crisis in Europe (Spain in particular) will keep investors glued to the safe haven of the Bond markets for some time, benefiting home loan rates as a result. However, a continued rise in inflation is a real possibility–one that could have a negative impact on both Bonds and home loan rates. The upshot is that this is the chance of a lifetime to buy real estate: best prices in seven years, an incredible array of inventory, and the lowest interest rates in history! Well that’s all for now and until next week, Be Blessed and Numbers 6:24-26 be on you.

Moorings Column 09-17-12

Hello and welcome to this week’s edition of Moorings, your source where local and national mortgage and real estate news meet. As always, let’s first take a look at interest rates which have again remained unchanged from last week. A client looking to purchase or refinance a home with a conventional thirty year fixed rate mortgage can expect an interest rate of approximately 3.625%. If you are in the market for an FHA mortgage, that rate goes down to 3.375%, which is of course a great deal for someone who needs to put a little less money down on their home.

 

In major economic news, the Fed announced last Thursday another round of Quantitative Easing to help stimulate the economy. I often get asked what this is exactly, and the short answer is that it’s an unconventional monetary tool used by central banks to stimulate the economy. Normally when the economy is having difficulty, the Federal Reserve will simply reduce short-term interest rates in order to spur more lending and spending. However, right now the Fed has cut interest rates as low as they can go and the economy continues having difficulties. So their second option is to try quantitative easing. Since the Federal Reserve can essentially create money, it can buy assets such as long-term treasuries or mortgage-backed securities from commercial banks. This helps to inject funds into the United States economy and reduces long-term interest rates further. When long-term rates go down, investors are more likely to spend their own money.

 

So what did the Fed actually say and what are they going to do? Well they have announced that short-term interest rates will remain low until mid-2015. Secondly, the Fed will buy up to $40 billion worth of assets each month between now and the end of the year, but unlike the first two rounds of QE, this new round of purchases will be more open-ended. Essentially they are stating that they will keep buying assets as long as it is needed to shore up the US economy.

 

In local real estate news, I thought it would be worth mentioning that year-to-date there have been 2,417 properties sold in New Hanover County. During the same time period last year, there were only 1,920 properties sold.  This means that our county has seen a significant increase in closed sales this year. While I couldn’t say for sure, I would imagine that continued low interest rates and stabilized home prices have certainly helped this recovery along. Considering the amount of our local citizens who make their living based on the housing economy, this is good news indeed. Well that’s all for this week and until next week, Be Blessed and Numbers 6:24-26 be on you.

 

Moorings Column 10-08-12

Hello and welcome to this week’s edition of Moorings, your source where local and national mortgage and real estate news meet. Interest rates have risen slightly from last week to an average of 3.625% for a conventional thirty year fixed. FHA rates have remained incredibly low though, staying at 3.25% for a thirty year fixed loan. Obtaining a loan like this does still require 3.5% down payment and monthly mortgage insurance, but your monthly principal and interest payment on a $200,000 loan would be only $870. That is really quite amazing. Add in your monthly taxes, insurance and mortgage insurance and your estimated total monthly payment would be approximately $1,300.  That is not at all a bad payment for a $200,000 mortgage. As always though, keep in mind that approval is not automatic and is subject to adequate credit scores, income, employment history and other factors.

 

In major economic news, last week, the Jobs Report for September was released, but the numbers may not be as clear as they seem. Read on for details and what they mean for home loan rates. The Labor Department’s Jobs Report showed that 114,000 new jobs were created in September, with 104,000 private sector job gains and 10,000 government job gains. While this number was lower than expectations, the job numbers for July and August were revised much higher. But perhaps the biggest news in the report is that the unemployment rate came in at 7.8%, falling by a whopping 0.3% from Augusts 8.1% reading. This represents the lowest unemployment rate since January 2009.

 

On balance, Septembers Jobs Report confirms that our economy is producing 125,000 to 140,000 jobs per month. While that may sound good, those numbers are not high enough to keep up with immigration and population growth. The ongoing weakness in the labor market is one of the major reasons why the Fed announced another round of Bond buying (known as Quantitative Easing or QE3) on September 13, saying they will provide this stimulus to our economy until the labor market is well into recovery.

 

So what does all of this mean for home loan rates? Another reason the Fed enacted QE3and they are buying such large amounts of Mortgage Bonds each month is to keep home loan rates (which are tied to Mortgage Bonds) near record lows. The Fed hopes this will help strengthen our housing market and economy overall. However, as the labor market and economy start to improve and if inflation heats up, Bonds could face some selling pressure which could impact home loan rates negatively as a result. The bottom line is that now is a great time to consider a home purchase or refinance, as home loan rates remain near historic lows! Well that’s all for this week and until next week, Be Blessed and Numbers 6:24-26 be on you.

Moorings Column 10-01-12

Hello and welcome to this week’s edition of Moorings, your source where local and national mortgage and real estate news meet. As we do each week, let’s first take a look at interest rates and any movement from last week. Currently, a client who is looking to purchase or refinance a home with a conventional thirty year fixed rate mortgage can expect an interest rate of 3.5%. A client looking at an FHA loan of up to 96.5% loan-to-value ratio can expect a rate of 3.25%.  Once again, these are truly some of the lowest mortgage rates I have ever seen in the business and will likely be the lowest we ever see, and now is a great time to buy or refinance a home!

 

In major economic news, last week the final reading of GDP for the second quarter was reported at an anemic 1.3%. This was after a sizable downward revision to previous estimates and this is significant because GDP is the broadest measure of economic activity. In addition, Durable Goods Orders (i.e. orders for products like furniture and computers that are designed to last for an extended period of time) came in shockingly low. Figures like these speak to the improvement needed in our economy, and are a big reason why the Fed announced its latest round of Bond buying (known as Quantitative Easing or QE3) on September 13.

 

There was some surprisingly good news last week, as Initial Jobless Claims came in at 359,000, much better than expected and the best reading since late July. One of the main objectives of QE3 is to promote job growth, which is essential for our economy to grow. Time will tell if QE3 and this money injection into the economy will spark economic growth and lower unemployment or if it will devalue the U.S. Dollar, raise commodity and asset prices like Stocks, and heighten inflation fears. On the flip side of that, negative economic news like the GDP Report and Durable Goods Orders often causes investors to move their money out of risky investments like Stocks and into safer investments like Bonds, including Mortgage Bonds (which home loan rates are based on). ). That’s why home loan rates often improve when our economy is struggling. In addition, investors also tend to move their money into safe investments like our Bonds during times of global uncertainty, such as last week’s strikes in Greece and riots in Spain. These two factors and the Feds QE3 Mortgage Bond purchases are the main reasons that Bonds and home loan rates have improved of late. Well that’s all for this week and until next week, Be Blessed and Numbers 6:24-26 be on you.