Good Morning,
I’m still in a state of boredom with no hockey, but thankfully the Bears only have one bye week per season. Did you happen to see the guy jump from 22 miles above the earth? I heard it took him 7 years to prepare for that…incredible. Let’s get to the news:
On today's call: Markets, Housing, What is my rate?, Interest Rates
The stock markets are up today thanks to a positive retail sales report for September. This is a good sign for some investors, as stocked logged their worst weekly drop in four months last week, with all three major averages falling more than two percent. Most of the recently reported economic data still points to a slow recovery, but there’s no real short-term lifts on the horizon, like the boost received after QE3. Shares in the European markets increased as a result of Germany stating that Greece will not default. Sounds like good news to me, although Greece is still contemplating leaving the Euro. It shouldn’t be long now before the pending election starts to take hold of investor sentiment. At this point there’s no clear-cut front-runner and with such different views on economic policy, we could see some big market swings shortly.
In housing, there was some good news this morning in regards to foreclosures. In today’s RealtyTrac’s US Foreclosure Market Report, foreclosure activity fell to the lowest level since July, 2007, dropping a full 7% from August. What’s even better is that this is the ninth consecutive quarter where overall foreclosure activity dropped. The areas of the country that have the most foreclosure filings are, not surprisingly, those where unemployment is the highest. In the week ahead, we’ll be looking at the Housing Starts results on Wednesday. This figure is expected to rise again, as home builders have seen increased business since the second quarter of this year. If builders are building and people are getting approved, this is a good sign that the housing market is on its way to a (sloooow) recovery.
Quoting an interest rate these days is much different than it was five years ago. Then, I could find out the program you wanted and get your credit score and that was about all I needed. Now, thanks to many pricing adjusters (risk factors) from Fannie Mae, determining a final rate takes some time. The credit score still matters, of course, but so does the loan-to-value. Then we need to account for other things like property location, property type, occupancy type, number of units, etc. So someone putting 20% down on a condo most likely won’t get a better rate than someone putting down 25% on a single family home. Keep in mind that every loan scenario is different so just because you got a certain rate, doesn’t mean your neighbor can (or can’t). Rates on government loans are much less restrictive in terms of risk factors. And they’re not credit score driven either. Remember that the riskier your loan is to Fannie Mae, the higher the rate will be. What is risky? It could be a lot of things but some of the basics are: less than 20% down on a condo, longer-term loans (that’s why a 30 year has a higher rate than a 15 year), multi-units, non-owner occupied, etc. Lastly, pay attention not just to the rate in advertisements, but also the APR. I heard a radio ad for Quicken Loans the other day and they were saying 3.375% on a 30 year fixed with an APR of 3.814%. Since people only want to hear the first number, they don’t recognize that the loan includes at least two points!
Interest rates are holding steady after dropping slightly due to last week’s stock selloff. The 30 year fixed is hovering in the low-to-mid 3% range and the 15 year is under 3% in most cases. We don’t expect many changes this week so use this info as a benchmark until next week’s call. If you need a rate quote, please don’t hesitate to contact me.
Thank you again....have a great week!
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