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December 9, 2008
The numbers coming out of the markets are absolutely extraordinary. How about gas at $1.70 per gallon just a few months after it was over $4.00 per gallon? How about the loss of over a half a million jobs in one month? In addition, the government looks to be spending about $1 trillion dollars to save the economy from recession. That may include a target rate 4.5% for some purchase loans. The numbers are virtually mind-numbing. These numbers also let us know that it does not make sense to predict what will happen in the future. For example, could a real estate rebound take place in a few months instead of a few years because of lower rates? Our advice is not to even try to predict the future. Right now rates are as low as they have ever been for fixed-rate home loans. Many are thinking about lowering the rate on their loans. Should you wait? If you purchased a stock at $5 a share and it moved to $8, should you sell now or wait until it moves higher? Of course, if you wait, the stock could go right back down. You just can’t predict the future. Many would be advised to take their profits now based upon where rates are today. At the least, everyone in that position should be making application now so you can react quickly to any favorable moves in the market. If rates go much lower, lenders are sure to get back-up trying to keep up with the demand.
Current Indices For Adjustable Rate Mortgages
Housing consultancy Global Insight reports that nationwide, housing prices are now 3.8 percent undervalued, based on total market value. It says values fell at a faster pace in the third quarter after stabilizing earlier in the year. According to Global Insight’s calculations, prices are now 6.5 percent below their 2007 peak. They fell at a 6.9 percent annual pace affecting 241 of the 330 metropolitan areas analyzed by Global Insight. That’s up from 150 metro areas affected in the second quarter. Contraction is most severe in the Southeast and Southwest with only the Pacific Northwest remaining overvalued, Global Insight says. Home prices fell more than 10 percent in the third quarter in nine central California communities. The Central Valley communities of Merced, Stockton, and Modesto have seen property values fall to less than half their 2005 value. Twenty-nine metro areas in California, Florida, and Nevada – at one time among the most overvalued – have seen price declines in excess of 30 percent. Similar steep price drops are occurring in Michigan, northeast Ohio, the southern metro areas from Charlotte to Atlanta, as well as in New England. "Weak economic conditions and wary consumers continue to hold the housing market back. Source: Global Insight |
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Extraordinary Numbers 
The Markets. Rates fell precipitously in the past week. Freddie Mac announced that for the week ending December 3, 30-year fixed rates averaged 5.53%, down from 5.97% the week before. The average for 15-year fixed fell to 5.33%. Adjustables fell as well with the average for one-year adjustables decreasing to 5.02% and five-year adjustables falling to 5.77%. A year ago 30-year fixed rates were at 5.97%. "After Federal Reserve actions to increase liquidity in the mortgage market, interest rates for fixed loans took a dive," said Frank Nothaft, Freddie Mac vice president and chief economist. "This week’s decline was the largest since the week of November 27th, 1981, and 30-year fixed rates are now almost a full percentage point lower since the last week in October. The recent plunge in rates contributed to the nearly 150 percent jump in conventional home loan applications over the Thanksgiving week, led by almost a 300 percent surge in refis, according to the Mortgage Bankers Association. Roughly three out of four applications were for refi transactions, up from around half during the prior week."
If you’re struggling to see a silver lining in the beaten-down real estate market, consider this one: It may be a rotten moment to sell your house, but if you’ve postponed a much needed renovation project on your home - replacing a rotting deck, repairing a leaky roof or updating an antiquated bathroom - now just might be the best time in years to tackle that task. The reason: Costs are starting to drop - in some cases, sharply - on everything from building materials to contractors’ fees as the economy weakens and housing prices tumble In fact, consumer spending on home improvements is off by 12% since peaking last year, according to Harvard’s Joint Center for Housing Studies - and that works to the advantage of anyone willing and able to remodel now. "It’s hard for homeowners to think about spending on their houses when real estate values are falling," says Kermit Baker, a senior research fellow at Harvard who tracks remodeling trends. "But with contractors hungrier for business, you’ll be able to negotiate better prices, win other concessions and hire better-quality contractors than you could a year or two ago." Overall, experts say, you can expect to save at least 10% on the cost of a renovation and possibly a lot more, depending on where you live and the project you choose. And if prices on many remodeling materials continue to decline as projected over the next few months, the cost of home improvements should fall even further. Yet another benefit: Putting money into needed repairs and updates now should help your home maintain its value even as other house prices keep falling. Source: Money Magazine