THE MARKET IS STEADILY PICKING UP...NOW IS THE TIME TO BUY!

Mortgage rates drop to record low

March 26, 2009

Freddie Mac survey says mortgage rates fall to lowest in 38 years after Fed aids market

Mortgage finance giant Freddie Mac said Thursday that average rates on 30-year fixed-rate mortgages dropped to 4.85 percent this week, from 4.98 percent last week. It was the lowest in the history of Freddie Mac's survey, which dates back to 1971 and was down a full percentage point from a year ago.

• The previous record low of 4.96 percent was set in the week of Jan. 15. Rates fell after the Fed last week said it will pump $1.2 trillion into the economy in an effort to lower rates on mortgages and loosen credit.

  Rates on 30-year mortgages traditionally track yields on long-term government debt.

  Though the yield on the benchmark 10-year Treasury note initially plunged by about 0.5 percentage points after the Fed's move, lenders did not pass the entire drop on to borrowers. Bond yields rose after worries about what some saw as lackluster demand at a government debt auction Wednesday.

  "There was a honeymoon effect initially" after the central bank's announcement, said Greg McBride, senior financial analyst with Bankrate.com. "The reality of large government deficits and the need for substantial government borrowing is setting in with investors."

  Mortgage applications surged last week, mostly from borrowers looking to refinance and save money on their monthly payment. The Mortgage Bankers Association said Wednesday its weekly application index climbed more than 30 percent for the week ended March 20.

  Nearly 80 percent of applications came from borrowers seeking to refinance home loans at lower rates, rather than purchase homes.

  In Freddie Mac's survey, the average rate on a 15-year fixed-rate mortgage dropped to 4.58 percent this week, down from 4.61 percent last week.

  Rates on five-year, adjustable-rate mortgages fell to 4.96 percent, compared with 4.98 percent last week. Rates on one-year, adjustable-rate mortgages rose fell to 4.85 percent, from 4.91 percent.

  The rates do not include add-on fees known as points. The nationwide fee averaged 0.7 point last week for all mortgages in Freddie Mac's survey except for one-year adjustable mortgages, which had an average fee of 0.6 point.

• Here's What You Need To Know About The Fed's Surprise Attack On The Housing Crisis

  March 19, 2009

   

  And you thought 5 percent was a good rate? After already bringing mortgage rates down near 50-year lows, Fed Chief Ben Bernanke unleashed a surprise attack on the housing slump Wednesday by announcing aggressive steps that should make home loans even more attractive. Lower rates, of course, can help push timid buyers off the sidelines so they can mop up the excess inventory that's been driving down home prices. "This is a huge step forward," Ian Shepherdson of High Frequency Economics, wrote in a report shortly after the announcement.

   

   

• Here's what you need to know about the development:

1. What is the Fed doing? With the federal funds target rate--which is the Fed's conventional monetary policy weapon--already down to as low as zero percent, Bernanke has been forced to get more creative in his efforts to resolve the economic mess. To that end, the Fed announced two key steps Wednesday that should drive mortgage rates lower.

2. Fannie Mae and Freddie Mac assets: The Fed unveiled plans to buy up to an additional $750 billion of mortgage-backed securities backed by government-controlled entities such as Fannie Mae and Freddie Mac, on top of the $500 billion it already committed to purchasing. At the same time, the agency said it would as much as double--to up to $200 billion--its purchase of Fannie and Freddie debt. The moves will help to reduce Fannie and Freddie's financing costs, which should enable them to pass savings on to consumers in the form of lower interest rates. Today's announcement represents a significant expansion of the initial initiative announced last fall, which drove mortgage rates from 6.2 percent in mid-November to 5.2 percent in the week ending March 13, according to HSH.com.

3. Long term Treasury bonds: Meanwhile, the Fed said it would buy up to $300 billion in long-term Treasury bonds over the next six months. The announcement has already helped push yields on 10-year Treasury notes--which play a key role in mortgage rates--down sharply. This could also help lower mortgage rates.

4. How low will mortgage rates go? Nigel Gault, chief U.S. economist for IHS Global Insight, says 30-year fixed mortgage rates could drop to as low as 4.5 percent. But Keith Gumbinger of HSH.com, expects a more modest decline of between a quarter and a half of a percentage point from current levels. "I don't think we are going to have a plummet, but I do think it helps to support some downward pressure on rates," Gumbinger says.

5. So what does this mean for the housing market as a whole? Before today's developments, lower mortgage rates have benefited those looking to refinance more so than home buyers, said Guy Cecala, the publisher of Inside Mortgage Finance, in an interview that took place before the announcement. Cecala said that in the fourth quarter of 2008, 51 percent of mortgage originations were for loan refinancing, while 49 percent went toward home purchases. And although it hasn't closed yet, "there is no question [the refinancing share of mortgage originations] is going to be up near 60 percent for the first quarter," Cecala said.

Today's Fed move should further boost refinancing activity. "It's a huge positive for refinancing, because it means that everyone who hasn't done it is going to come in and do it," Gault says. But its impact on the housing market will be less profound, says Richard Moody of Mission Residential. It will help "very little," he says. That's because "the overriding factor [in the housing slump] is the labor market, and consumer confidence," he says. Even with lower mortgage rates, housing won't rebound without improvement on these fronts--and Moody doesn't expect that to occur anytime soon. "You can't make the argument that mortgage rates have been the impediment to home sales over the past several months," he says.

6. How can I qualify for these low rates? As banks jack up their lending standards in the face of higher delinquencies, not all borrowers will be able to get their hands on today's lowest cost of financing. To do so, most home buyers will need to have a FICO score of roughly 720 or higher, a down payment of at least 3.5 percent--although it could be significantly higher in certain markets--and documented income verification. To refinance, borrowers will need to meet similar credit score and income documentation requirements and have minimum of 10 percent equity in their homes, Moody says.

7. What does that mean for me? Should I refinance now or hold off for a better rate? With rates poised to drop to even more attractive levels, fixed rate borrowers that meet the credit requirements should certainly consider refinancing now. (Refinancing, however, only make sense for borrowers who can obtain a large enough break in their interest rate to compensate for the fees associated with the process.) But since rates are expected to remain attractive for some time, there's no pressure to refinance immediately. Still, Moody points out that with home prices on the decline, borrowers who wait too long to refinance could find that they no longer have enough equity in their home to qualify. So you may be better off getting the process started sooner rather than later.

Likewise, homeowners with adjustable rate loans--who have likely seen their interest rate fall recently--should not feel compelled to act this very second. "There is not a gun to your head," Gumbinger says. However, borrowers with these products should keep close tabs on the market and look for an opportunity--perhaps now, perhaps in the coming months--to get into a more conservative, fixed-rate mortgage while rates remain low. "Do yourself a favor and prevent future disaster," Gumbinger says.
 

Source: US News and World Report

WHY SEATTLE IS STILL TOPS!Written by Bob Krulish

Earlier this year, Business Week's Prashant Gopal wrote and article titled "Some Cities Will Be Safer In A Recession." I'm going to summarize this article and share my thoughts on why they named Seattle as one of these cities.

As you can imagine, cities with a strong presence in health care, education, law, energy, and the government will do better in a downturn than those without. Why, because all of these items are considered by most of us as a necessity.

Government leaders are working to avoid a depression-or at least a late-1970s-level recession-but if things get really bad, some places will suffer more: states such as California, Florida, and Nevada that are buried under a growing mass of foreclosures, cities like New York and Chicago that have large numbers of financial sector jobs, and manufacturing towns like Detroit that are already suffering from weak sales of cars and other durable goods.

Other local economies, those dominated by stable industries, could be relatively well cushioned. In this article, Business Week looked at places where large portions of the population worked in anti-cyclical industries such as government, health care, education, agriculture, and legal services.

College Cushion

Colleges don't necessarily flourish in bad times, but they don't go out of business either. People tend to go back to school to learn marketable skills when unemployment is high, but alumni donations and state grants do tend to dwindle during recessions. Major cities with multiple college campuses benefit from this situation. Seattle, has multiple college campuses such as the University of Washington, Seattle University, Seattle Pacific University, City University and others.

Health Care

Even doctors and nurses feel the pinch in a recession because people without jobs or insurance tend to put off medical visits until it's absolutely necessary. But medical care is in demand in good times and bad. Seattle has many hospitals in the area, including:

Children's Hospital & Regional Medical Center

Children's Hospital and Medical Center is the premier pediatric referral center in the Pacific Northwest, with national prominence for its clinical expertise and affiliation with the University of Washington School of Medicine.

Harborview Medical Center

As the region's only Level 1 trauma center, Harborview's expert emergency and operating-room staff are available 24 hours a day. The University of Washington Burn Center at Harborview is nationally renowned for its advances in burn-care techniques.

Northwest Hospital

Northwest Hospital is a nonprofit hospital located in North Seattle. The Northwest Hospital Childbirth Center was the first in Seattle to provide labor, delivery, recovery and postpartum care in a single room.

Overlake Hospital Medical Center

Overlake Hospital Medical Center is a nonprofit, non-tax-supported community hospital offering a full range of advanced medical services. Overlake features the only level III trauma center on the greater Eastside, a childbirth center with special-care nursery for premature infants and an innovative postpartum follow-up program.

Swedish Medical Center

Swedish Medical Center isthe Northwest's largest, most comprehensive health care facility. Its flagship campus, located on Seattle's First Hill, is a regional referral center for several major specialties. Swedish's Ballard campus is a full-service, acute-care facility offering high-quality medical and surgical services to the surrounding community.

University of Washington Medical Center

Many consumer guides cite University of Washington Medical Center (UWMC) as one of the best hospitals in the country - one of the top 10, according to U.S. News & World Report's annual guide.Located on the UW campus, the 450-bed medical center provides comprehensive primary and specialty care.

Valley Medical Center

Valley Medical Cente rprovides a broad range of health care services to the individuals who live and work in South King County. The emergency department, designated a level III trauma center, is one of the busiest in the state, with crisis-intervention counselors available around the clock.

Virginia Mason Medical Center

Virginia Mason Medical Center consists of a downtown Seattle clinic and hospital, and a system of 7 medical clinics throughout western Washington, which offer comprehensive and personalized health care services. VirginiaMason has been a regional leader since 1920, and is consistently rankedamong the finest medical facilities in the United States.

Wow, that's a lot of health care and a lot of stable jobs.

Grocery Cushion

Farms and grocery stores tend to be relatively stable because even though people might not be able to afford restaurant food, they still need to eat. There are 206 stores in the Seattle Division of the grocer Safeway. QFC and Albertson's add as many to that total. And, despite scaling back new store openings after a third-quarter profit drop, Whole Foods Market is still going ahead with plans for two more Seattle-area stores, making the total number in the Seattle area seven.

Major Port Cushion

Seattle, is a major port and will continue to benefit from robust international trade as long as the dollar is weak.

Seattle at a glance

Share of jobs in strong industries: 37.6%

Number of workers: 331,186

Metro area unemployment rate: 5%

Agriculture jobs: 0.34%

Professional, Scientific, and Technical jobs (legal, accounting etc.): 12.24%

Education jobs: 10.02%

Health-care jobs: 11.49%

Public Administration (Government) jobs: 3.48%

If you live in Seattle, you are in a great place to buy your first home. Prices have come down, mortgage interest rates are at historic lows, and sellers are willing to pay for most if not all of your closing costs.