Refinance Home Loans are Up!

Take a look at this update on home loan mortgage rates and loan activity.  Refinance loans have increased with homeowners taking advantage of lower interest rates.  This information provides good advice for those starting the loan process.  I hope this is helpful! 

Bankrate.com
Mortgage refis surge
Holden Lewis

Mortgage rates went up this week from near-record lows as brokers and bankers scrambled to keep up with an influx of applications. – advertisement –

The benchmark 30-year fixed-rate mortgage rose 42 basis points to 5.84 percent, according to the Bankrate.com national survey of large lenders. A basis point is one-hundredth of 1 percentage point. The mortgages in this week’s survey had an average total of 0.39 discount and origination points. One year ago, the mortgage index was 6.31 percent; four weeks ago, it was 5.97 percent.

The benchmark 15-year fixed-rate mortgage rose 16 basis points to 5.46 percent. The benchmark 5/1 adjustable-rate mortgage rose 11 basis points to 5.95 percent.

Weekly national mortgage survey

Results of Bankrate.com’s Dec. 24, 2008, weekly national survey of large lenders and the effect on monthly payments for a $165,000 loan:

	30-year fixed	15-year fixed	5-year ARM
This week’s rate:	5.84%	5.46%	5.95%
Change from last week:	+0.42	+0.16	+0.11
Monthly payment:	$972.35	$1,344.69	$983.96
Change from last week:	+$43.76	+$13.95	+$11.60

Almost no one is getting an ARM nowadays. Adjustable-rate mortgages accounted for 1 in 125 loan applications last week, according to the Mortgage Bankers Association. Not only are initial rates on ARMs higher than those on fixed-rate mortgages, borrowers are wary of getting loans with rates that could rise in the future.

Last week’s surge in mortgage applications came mostly from homeowners who wanted to refinance their home loans. According to the MBA, overall applications were up 48 percent last week as refi applications grew almost 63 percent and purchase applications rose about 11 percent.

This refi boomlet isn’t on the scale of the long boom of 2003 and 2004, when almost everyone with a mortgage refinanced, and a lot of people refinanced more than once. But now there are fewer people in the mortgage business — and, therefore, fewer people to accept applications and process the loan paperwork.

As loan applications pile up on brokers’ and loan officers’ desks, it becomes important to make sure that your application gets moved along instead of languishing near the bottom of the stack of papers. That makes it important to get the paperwork in as quickly as possible. If the lender wants tax returns, deliver them fast. Cooperate with the appraiser by returning phone calls and being flexible with your schedule.

 

CAROL PERDEW
Prudential California Realty
(209) 239-7979
www.CentralValleyHomes.com

Fed Cuts Rates up to .25 Percent

U.S. News & World Report
6 Things to Know About the Fed Rate Cut
By Luke Mullins  

The Federal Reserve on Tuesday cut its federal funds target rate by more than three-quarters of a percentage point to a range of between 0 and .25 percent. The decision signals that Fed Chief Ben Bernanke is more concerned with the rapidly deteriorating economy–which has been mired in a recession since December of last year–that the prospect of stoking inflation. “Since the Committee’s last meeting, labor market conditions have deteriorated, and the available data indicate that consumer spending, business investment, and industrial production have declined,” the rate-setting Federal Open Market Committee said in its statement. “Financial markets remain quite strained and credit conditions tight.”

Here’s how the Fed’s actions affect you:   

1. Fixed mortgage rates: Today’s rate cut will have little if any impact on 30-year fixed mortgage rates, which are determined by factors that operate largely outside of the Federal Open Market Committee’s reach, says Keith Gumbinger of HSH Associates. “Any change in the rate has little to do with long-term mortgage rates,” he says. But in its statement the Fed said it could expand a recently announced program to buy up debt and mortgage-backed securities from Fannie Mae and Freddie Mac that has already driven mortgage rates down to a very attractive 5.28 percent, according to HSH Associates. It also reiterated that it was looking at the possibility of buying long-term Treasury bonds. Both of these announcements could work to bring rates even lower.

2. Prime rate loans: The real impact of today’s cut will be felt by consumers with loans that are tied to the prime rate, a benchmark rate that typically moves in lock step with the federal funds rate. “The only place where you would see a concrete impact at the consumer level would be things that are directly tied to prime,” says Mike Larson, a real estate analyst at Weiss Research. Many home-equity lines of credit and certain credit cards with variable interest rates are tied to prime rate. As such, borrowers with these loans could see their interest rates decline.

3. Home-equity savings: Home-equity loans averaged 5.5 percent in October but dropped to 5.26 percent in November following the Fed’s half-point cut. Gumbinger says he expects average rates on home-equity lines of credit to experience similar declines this time around–but not everyone will be able to take advantage of them. That’s because many of the interest rates on these loans are already at their minimums, and are contractually prohibited to go any lower. So check the terms of your home-equity loan to see if you are eligible to cash in on the decline.

4. Target vs. effective: When credit markets are functioning normally, Fed rate cuts reduce banks’ cost of funding, which allows them to widen profit margins and pass along savings to consumers in the form of lower interest rates. But today’s credit conditions have changed all that. Although the Fed’s target rate stood at 1 percent before today’s cut, such funds were actually being traded in the market at much less than that–just 0.18 percent as of yesterday before the Fed’s action. Although the Fed can usually control the effective rate by buying and selling government securities, the credit crisis has eroded its ability to do so. “Any juice that you would get from a funds rate cut in a normally functioning market, you’re not really going to get that here,” Larson says. “It’s not going to lower the banking industry’s cost of funds, because the banking industry’s cost of funds is already below the target rate anyway.” That means that interest rates tied to the federal funds rate won’t decline as much as they otherwise would have.

5. Now what? Nariman Behravesh, chief economist at IHS Global Insight, expects rates to go all the way to zero in a matter of weeks. “The Fed has already cut the federal funds rate to 1 percent and is likely to take it all the way to zero by the end of January,” Behravesh said in a recent report, issued before today’s announcement. “Once the overnight rate is at zero, the Fed may have to engage in ‘quantitative easing’ [direct purchases of long-term Treasuries].” Even if it doesn’t bring rates all the way to zero, the Fed signaled Tuesday that it’s not about to push rates higher anytime soon. “The Committee anticipates that weak economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time,” the Fed said in the statement.

6. Expect more unexpectedness.

With only less than a quarter of a percentage point left to cut, look for the Fed to get even more creative in its efforts to revive the financial markets. New programs to support different corners of the credit market could certainly be introduced in 2009. “The Federal Reserve will continue to consider ways of using its balance sheet to further support credit markets and economic activity,” the Fed said in the statement.   

FOR MORE REAL ESTATE INFO GO TO www.CentralValleyHomes.com

 
CAROL PERDEW
Prudential California Realty
(209) 239-7979
www.CentralValleyHomes.com

Worst Market Showing Improvement

The hardest hit real estate market is California’s Central Valley. Many homeowners owing more than their home is worth are being forced into foreclosure. The inventory of home has dropped to a low level of a 2-3 month supply of available homes. The Central Valley may have felt the worst financial crises but very well may be the first to experience signs of recovery.

Safe Havens in Real Estate
Excerpt by Louis Jones

Worst Market

California Central Valley

12-month change in home values:
Merced: -42.3
Stockton: -40
Salinas: -38.7
Modesto: -37.9
Riverside: -36.8
Vallejo: -34.5

The market hit hardest by the housing bubble is the Central Valley in California, where aggressive development and price hiking has yielded more homes than jobs. Now many homeowners owe more than their house is worth and are being forced into default.

Still, it’s not all doom and gloom for the California housing market. The drop in home values has created an affordable market for first-time home buyers. And, on average, monthly sales have almost tripled from last year. Although the Valley has seen the worst of the crash, it may well be one of the first areas to recover.

Thanks,

CAROL PERDEW

(209) 239-7979
wwwCentralValleyHomes.com