Kiss 4% Mortgage Rates Goobye?

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Mortgage and Lending with First Time Buyer, Jumbo, VA, FHA, Construction, Renovation, and Reverse Certified NMLS 325344 | LO-0916110

Hello Friends,

Here is an article from Money.CNN.com that I thought might be worth posting. The fact is, rates will not stay as low as this history making trend has been. It is time for the fence sitter to make a decision on what exactly they are going to do. If you are a Realtor working with a client that isn't prequalified yet and they seem to be unsure of what to do, maybe because they are waiting for the elusive "bottom" to hit, it might be time to send them to your favorite Loan Officer. As a mortgage professional, it is our duty to explain the ins-and-outs of this crazy market we are in. Let's face it, an informed customer is an excellent customer. Good luck out there!!!

 

By Les Christie, staff writer

 

NEW YORK (CNNMoney.com) -- The era of near 4% mortgage rates has ended after a quick rate rise since early November. But some industry experts think that may be a good thing for the flagging housing market.

The average 30-year fixed mortgage rate has risen to 4.86% from 4.17%, according to Freddie Mac's weekly mortgage market survey. In the Bankrate.com weekly survey, the rate has risen to 5.02% -- crossing the 5% mark for the second time in three weeks -- after being as low as 4.42% as recently as early November.

Rates haven't been this high since May and forecasters now predict them to remain between 5% and 6% for all of 2011.

"You can kiss those record lows goodbye," said Greg McBride, chief economist for Bankrate.com.

Keith Gumbinger of HSH Associates, a provider of mortgage information said that the market reached a new plateau.

"I don't think we're going back to a 50-year low anytime soon without an economic collapse," he said. "Rates will probably never revisit those levels."

The increase will push mortgage payments higher for homebuyers. When rates rise from 4.25% to 5% it takes away about 9% of buying power, according to McBride.

"That's nothing to sneeze at," he said. "But it's still small relative to the steep drop in home prices over the past few years."

Good for the market?

Higher interest rates may even prove stimulating to the still quiet housing market in which sales volume and prices are scraping near their bottoms.

"The initial phase of an interest rate increase generally does not hurt markets," said Lawrence Yun, chief economist for the National Association of Realtors. "In fact, it can help."

The rapid rise introduces an element of urgency for potential homebuyers. They may now rush to buy before rates spurt even more.

The strength of the economic recovery will have far more impact on the housing market that this relatively modest increase in mortgage rates, according to Yun. If hiring gains momentum, housing markets should revive.

"If we add 2 million jobs as expected in 2011, and mortgage rates rise only moderately, we should see existing-home sales rise to a higher, sustainable volume," said Yun.

Gumbinger said that demand for homes may be tempered somewhat by the increased mortgage costs and so affect home prices a bit but theimproving job picture and better consumer confidence matter much more.

"If the other factors are aligned," he said, "interest rates are not a big thing."

The real mortgage challenge, according to Yun, is to increase the number of loan applicants winning approvals. Too many potential homebuyers are still finding it difficult to qualify for loans.

"The current mortgage market is a unique situation" he said. "It's less about rates than it is about underwriting standards, which are, in my opinion, still too stringent."

"If lenders return to more normal, safe underwriting standards for creditworthy buyers, there would be a bigger boost to the housing market and spillover benefits for the broader economy." To top of page

Here is the link to this article: http://money.cnn.com/2010/12/30/real_estate/mortgage_rate_spurt/index.htm

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Rainmaker
944,759
Ginger Harper
Coldwell Banker Sea Coast Advantage - Southport, NC
Your Southport~Oak Island Agent~Brunswick County!

This post was very informative. I think when the rate begin to rise....we will have buyers getting off of the fence and committing.

 

Jan 10, 2011 02:29 AM #1
Rainer
25,714
Jeff Lundquist
United Country Premier Real Estate - Annandale, MN
Jeff Lundquist

We cannot expect the rates to stay as low as they have been forever. Buyers need to get out and buy if they want to see an interest rate under 5%.

Jan 10, 2011 02:31 AM #2
Rainmaker
502,402
Vacation Rentals The Jeff Rickert Team
RE/MAX Property Specialists - Pocono Lake, PA
Poconos Vacation Rentals

When rates were 5% they said they would never go lower and then came 4% so wowwwwww nooooo.

Good luck in your area.

Much success to you in 2011.

Jan 10, 2011 02:31 AM #3
Rainer
40,184
Brian J. Bailey
First Time Buyer, Jumbo, VA, FHA, Construction, Renovation, and Reverse Certified - Paradise Valley, AZ
Senior Loan Officer

Yes Ginger, I agree. We had a false surge when the government implemented the First-Time Homebuyer Tax Credit. But let's look back, it didn't surge until the final months of the program. I guess we as human beings don't like to push forward unless there is urgency knocking at our backdoor. 

Brian

Jan 10, 2011 02:33 AM #4
Rainer
40,184
Brian J. Bailey
First Time Buyer, Jumbo, VA, FHA, Construction, Renovation, and Reverse Certified - Paradise Valley, AZ
Senior Loan Officer

How true you all are. I had a client that wanted to refi his primary. I could've got him in at 4.25% with no closing costs, only an appraisal. He waited for bottom, well, looking back that was the bottom. Not to mention refinancing all of his rental properties, he waited on that one too. Now my investor that would do up to 10 props for one individual stopped that program. He is now left with all of these homes at much higher rates AND some are ARMS. We can't force people to make a decision, all we can do is give the most sound advice possible. Good luck to you all.

Jan 10, 2011 02:37 AM #5
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Rainer
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Brian J. Bailey

Senior Loan Officer
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