Wednesday, June 5, 2013

It has Happened!! Mortgage Rates are UP

Not what you wanted to hear!!

   With the Summer home buying season getting into full swing,
    higher interest rates is not what the buyers or sellers had hoped
    to see. 

    As I have stated in numerous post and on my Facebook page,
    there was no place to go but up for the rates!!

    Yet, as you read Jim's Mortgage Matters, now is the  time to act
     as the rates have moved but there will be more pressure on them

     With home prices recovering, buyers need to act.  Sellers need
      to act to list their home to give the buyers a house to buy...and
      of course, but their own new home....see how the domino
      affect will improve the market.

      Read and enjoy! 

       Agree with the analysis? 

                Are you thinking of making the move??

           Let me know!

Keeping you updated on the market! For the week of 
June 3, 2013

The New Buzzword in Town
Mortgage rates have been on a tear lately, and by that we mean they've been rising at a precipitous pace. The rise in the 30-year lending rate has been particularly steep.
Many markets are seeing the highest lending rates of 2013. Other markets are seeing the highest rates over the past 12 months. So what's going on; why the dramatic increase?
Most market commentators point to the Federal Reserve, and when they point to the Fed they frequently invoke the word “tapering,” which refers to the Fed withdrawing from the mortgage-backed securities (MBS) market. Over the past couple months, the Fed's MBS purchases have declined modestly. At the same time, a growing cadre (though still a small minority) of Federal Reserve bank presidents have expressed the need for the Fed to cease purchasing MBS.
The market's reaction has been to sell fixed-income investments, which has caused yields to rise, including the yields of MBS. Because mortgages are the source assets in MBS, it's only natural that mortgage rates have also risen.
Rising rates have taken some steam out of the refinance market. After two sharp weekly declines, refinance applications fell another 12% nationally last week, according to the Mortgage Bankers Association. Refinance activity is the lowest it has been all year.
Purchase application activity has shown more resilience. After falling moderately in the prior two weeks, purchase applications rose 3% in the latest reported week. The fact that purchase activity hasn't been muted by rising rates is reflective of strong housing demand and a strengthening economy.
In the days before the Federal Reserve was active in the mortgage market, rising rates would spark an increase in activity for fear of rates moving higher still. Today, many market watchers expect a rate increase to be followed by a pullback, believing the Fed will again intervene to reverse a rising trend.
Those who head for the sidelines when rates rise might be on to something. To be sure, we believe that higher rates are in our future, but not necessarily in our immediate future. In other words, the thesis behind “tapering” could be overdone; it's not that the Fed is withdrawing from the MBS market, it's that there were simply fewer MBS for the Fed to buy.
We say that because we experienced a lull in mortgage loan originations in March; fewer mortgages means fewer MBS the Fed could buy. But in April, we saw a burst of refinances. Many of these loans will have closed in May, which will lead to more MBS coming to market, and more MBS the Fed could buy.
In short, we're not sold on “tapering” as the Fed's new de facto monetary policy. We need to see a couple months of evidence before jumping on the bandwagon. So don't be surprised if lending rates reverse course and revert to lower ground in coming weeks.
Date and Time
Construction Spending
Mon., June 3,
10:00 am, ET
Important. Residential real estate spending continues to drive overall spending growth.
Mortgage Applications
Wed., June 5,
7:00 am, ET
Important. Strong housing demand has lifted purchase activity despite rising rates.
(1st Quarter 2013)
Wed., June 5,
8:30 am, ET
Moderately Important. Rising productivity will lead to higher wage and salary growth.
Employment Situation
Fri., June 7,
8:30 am, ET
Unemployment Rate: 7.5%
Payrolls: 180,000 (Increase)
Very Important. Another month of strong job growth will temper support for the Federal Reserve's low interest rate policies.
Tread a Little More Carefully
During the depths of the housing sell off, when the market was mired in misery, we were one of the few voices of hope. Back then, we were convinced the market would recover and that the prices that prevailed offered exceptional opportunity. Fortunately, we were right on both accounts.
We're still bullish on housing; plenty of opportunities still abound. That said, not all markets offer the same opportunities: some markets are good values, others less so.
We know that many Realtors and agents are active in housing on their own behalf. Renting, rehabbing, and flipping are natural outgrowths of selling. After all, it's rationally worthwhile to take advantage of unique insight and information.
It's also worthwhile to know who's in the market. We've noted in past issues the influx of institutional investor money that has entered residential rental real estate. The large hedge fund Blackstone alone has spent $4.5 billion to buy over 26,000 single-family homes to rent.
The large influx of money has driven up home prices in some markets to the point where value is tenuous, which has prompted some money to leave. Bruce Rose, CEO of Carrington Holding Co., was among the first investors to put institutional money into single-family rentals, but now he's reversing course because rising prices have lowered returns to the point where the risk is no longer justified in the markets where he operates.
The point we want to emphasis is that value matters (it always has), and that a growing number of markets today offer fewer values compared to what was offered in the recent past.
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