Rates Stop Climbing, With 30-Year Loans Falling to 5.38%

Here’s an interesting article from the Washington Post News Services Saturday, June 20, 2009

Rates for 30-year home loans fell back this week after soaring to the highest level in seven months the previous week.

The average rate for a 30-year fixed mortgage was 5.38 percent this week, down from 5.59 percent a week earlier, Freddie Mac said. Rates had risen for three consecutive weeks after yields on long-term government debt, which are closely tied to mortgages rates, climbed as investors worried that the huge surplus of government debt hitting the market could trigger inflation.

But data released Wednesday suggested that inflation remains largely in check, and the yield on the 10-year Treasury note fell from an eight-month high of 4.01 percent last week to 3.81 percent on Thursday.

Though there are signs that the troubled U.S. housing market is beginning to stabilize, higher rates could threaten or slow any recovery because consumers would be able to borrow less money and might decide to hold off on their purchases. The three-week run-up in rates ‘is starting to slow homebuyer demand, at least temporarily,’ Frank E. Nothaft, Freddie Mac’s chief economist, said in a statement. There are still signs that the housing market isn’t improving. U.S. home prices may fall another 14 percent before reaching a bottom as an increase in unemployment offsets lower prices, Deutsche Bank said in a report this week. ‘Getting the right level of rates is going to be a difficult process,’ said Scott Brown, chief economist at Raymond James & Associates in St. Petersburg, Fla. ‘We’re going to see some choppiness in the bond market.’

Mortgage applications for home purchases fell 3.5 percent for the week ending June 12, according to the Mortgage Bankers Association, while refinancing applications were down 23 percent from a week earlier. ‘You’re seeing the refi applications down substantially,’ Brown said. ‘You’re going to price a lot of people out of the market.’ The average rate on a 15-year, fixed-rate mortgage fell to 4.89 percent from 5.06 percent last week, according to Freddie Mac. Rates on five-year, adjustable-rate mortgages averaged 4.97 percent, down from 5.17 percent. Rates on one-year, adjustable-rate mortgages fell to 4.95 percent from 5.04 percent. Borrowers can reduce their interest rates by buying points, which each cost one percent of the loan amount. The nationwide average was 0.7 point last week for 30-year and 15-year mortgages and 0.6 point for five-year and one-year adjustable-rate loans.

New Listing You Need to See

3124 Laurel Street

Just Listed!  NOT a Short Sale or REO! A regular sale!

Inventory in North Park is at an all time low – there are very few homes currently available with good square footage and a great location.  Check out this new listing that is not complicated by a Short Sale or Foreclosure process.

Many original details remain in this Spanish style home including coved ceilings, built-ins, arched doorways, hardwood floors (under carpet), & wood burning fireplace! Great floor plan with large rooms. Large kitchen opens onto family room for modern living. Master Bath w/ sunken spa tub & stained glass windows. Make your cosmetic updates and create a wonderful family home. Rare opportunity for a home of this size, in Burlingame, at such a great price.

Tax Credit Can Be Used on Closing Costs

FHA-approved lenders were recently given the green light to develop bridge-loan products that would allow first-time buyers (anyone who has not owned a home in the last three years) to use the benefits of the federal tax credit ‘upfront.’

Under these HUD developments and guidance, FHA-approved lenders can develop bridge loans that buyers can use in different ways. Most notably, you could use it to help cover closing costs, possibly buy down your interest rate, or even offer more than the minimum 3.5 percent down, which would allow you to make a stronger offer-a key strategy in some markets where first time buyers are competing with investors in specific price ranges.

Note: HUD officials indicate that the loans can’t be used to cover the required minimum 3.5 percent down, only to supplement the down payment. In addition to this new development, there remain many state, local and non profit lender resources and programs for buyers needing help with the 3.5 percent down payment.

These new developments, combined with the (up to) $8,000 tax credit and the historically low prices and still low mortgage rates, make this an opportune time to buy. Call me for a free consultation to discuss your specific opportunities and situation. The tax credit is only good through 2009, so now is the time to take advantage and not get caught in the crunch toward the end of the year when procrastinating buyers will scramble to buy before the tax credit expires.