Interest rates continue to set all-time lows, as Zillow reported its Mortgage Marketplace showed the average rate for a 30-year, fixed mortgage is currently 4.25%. The real estate information firm said the rate if down seven basis points from 4.32% the week earlier and at the lowest level since the report launched in April 2008. Zillow said the rate was as high as 4.35% on Saturday and hovered near 4.33% before falling to the current level Monday. The firm bases its rates on thousands of quotes submitted daily to anonymous borrowers through its website.

Rates in many large states fell, including double-digit drops in basis points in some states led by New Jersey’s decline to 4.13% from 4.28% previously. The rates for a 30-year, fixed mortgage in Florida, New York and Pennsylvania each fell 12 bps to 4.24%, 4.31% and 4.27% respectively. Meanwhile, rates in Colorado (to 4.35% from 4.29%) and Washington (to 4.36% from 4.29%) rose from the prior week. For 15-year fixed-rate mortgages, Zillow’s data showed a current interest rate of 3.73%, and five-year adjustable-rate mortgages are available at 3.13%, according to Zillow.

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Mortgage Apps Up

The Mortgage Bankers Association’s (MBA) Market Composite Index, a measure of mortgage loan application volume, increased 2.7% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 2.3% compared with the previous week. The Refinance Index increased 2.8% from the previous week and is at its highest level since May 1, 2009. The seasonally adjusted Purchase Index increased 1.8% from one week earlier. The unadjusted Purchase Index decreased 0.4% compared with the previous week and was 37.0% lower than the same week one year ago. “Refinancing activity picked up again last week, reaching new 15-month highs, as borrowers took advantage of even lower mortgage rates.

The drop in mortgage rates was in line with Treasury rates as the latest data continue to show weak economic growth and an exceptionally weak housing market,” said Michael Fratantoni, MBA’s Vice President of Research and Economics. “The sharp decline in MBA’s Purchase Application index in May had provided a clear leading indicator of the drops in new and existing home sales that were reported for June and July. Despite the slight increase in purchase activity in the past week, the continued low level of purchase applications indicates we are unlikely to see an increase in new home sales reported for August or existing home sales reported for September.” The four week moving average for the seasonally adjusted Market Index is up 5.2%.

The four week moving average is down 0.2% for the seasonally adjusted Purchase Index, while this average is up 6.3% for the Refinance Index. The refinance share of mortgage activity increased to 82.9% of total applications from 82.4% the previous week and is the highest refinance share observed since January 2009. The adjustable-rate mortgage (ARM) share of activity increased to 6.1% from 5.8% of total applications from the previous week.

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Mortgage Rates Hit Another Record Low

The national, 30-year fixed-mortgage rate (FRM) slightly decreased from a week earlier, setting a new record low average of 4.26%, according to the Zillow Mortgage Marketplace weekly update. This is down 0.03% from last week and 0.02% below the previous record low. Regionally, 30-year rates vary, but the majority of states witnessed a deflation. Most large states saw a decline in rates: California’s current rate of 4.28% is down from 4.3% last week; Texas’ at 4.23% is down from 4.28%, and Massachusetts’ at 4.26% is down from 4.27%.

Rates substantially decreased in New York to 4.24% from 4.31% and New Jersey to 4.19% from 4.27%. Rates increased in Washington to 4.33% from 4.29% as well as Colorado, up to 4.3% from 4.17%. Rates remained flat in Florida and Pennsylvania at 4.2% and 4.37%, respectively. Zillow reported the national average rate for 15-year fixed home loans remained flat at 3.82%, while the rate for a 5-1 adjustable-rate mortgage (ARM) is 3.29%. Zillow’s rates are based on real-time mortgage quotes from lenders registered with, but not exclusively bound to the company. The national average comes from thousands of daily quotes given to anonymous borrowers through their website. State averages are also available.

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MBA – refinances increase

The Mortgage Bankers Association’s (MBA) Market Composite Index, a measure of mortgage loan application volume, increased 4.9% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 4.5% compared with the previous week. The Refinance Index increased 5.7% from the previous week and is at its highest level since May 1, 2009. The seasonally adjusted Purchase Index increased 0.6% from one week earlier. The unadjusted Purchase Index decreased 1.1% compared with the previous week and was 38.8% lower than the same week one year ago. “The volume of refi applications last week was up 26% over their level four weeks ago. Mortgage rates dropped to their lowest level in the survey, going back to 1990, as incoming data continue to indicate that economic growth has slowed,” said Michael Fratantoni, MBA’s Vice President of Research and Economics.

“We are at a new 15 month high for the Refinance index. With rates this low, many borrowers who refinanced in the past two years may well have an incentive to refinance again, and this is likely increasing refi application activity.” The four week moving average for the seasonally adjusted Market Index is up 5.0%. The four week moving average is down 0.3% for the seasonally adjusted Purchase Index, while this average is up 6.2% for the Refinance Index. The refinance share of mortgage activity increased to 82.4% of total applications from 81.4% the previous week, which is the highest share observed since January 2009. The adjustable-rate mortgage (ARM) share of activity increased to 5.8% from 5.7% of total applications from the previous week.

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Buffett predicts housing recovery in 2011

The Oracle of Omaha, in his annual letter to shareholders of Berkshire Hathaway Inc., has written, “Within a year or so, residential housing problems should largely be behind us. Prices will remain far below ‘bubble’ levels, of course, but for every seller or lender hurt by this there will be a buyer who benefits.” The decline in the U.S. housing market has led to record foreclosures and an over-supply of housing. Buffett thinks it will take another year before housing demand catches up with supply. Buffett said reduction in new housing starts is the best way to reduce inventory overhang, and joked that the only other options are to destroy existing homes in a “tactic similar to the destruction of autos that occurred with the ‘cash-for-clunkers’ program” or “speed up householder formations by, say, encouraging teenagers to cohabit, a program not likely to suffer from a lack of volunteers.” Berkshire, which owns companies in the real-estate space, has suffered on account of the housing slump. Clayton Homes, the pre-fab housing company owned by Berkshire, saw a drop in profit by about 9% last year, while earnings at Shaw Industries, a carpet manufacturer, dropped 30%. Buffett decried the “punitive differential” in mortgage rates between factory-built homes and site-built homes. While buyers of site-built homes obtain a 30-year loan at a little over 5% on account of guarantees offered by Fannie Mae and Freddie Mac, buyers of homes built by Berkshire companies such as Clayton pay as high as 9% on their mortgage since “very few factory-built homes qualify for agency-insured mortgages.”

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Below is a report that indicates that the mortgage rates are starting to move up. It is predicted that by the end of the year the rates will be close to 6%.

Freddie Mac’s weekly survey put the average rate for a 30-year fixed-rate mortgage (FRM) at 5.01% with a 0.7 origination point for the week ending February 4, up from last week’s average rate of 4.98%. It’s the first week-over-week increase in 2010. A year ago, the 30-year FRM was 5.25%. Bankrate.com’s weekly survey of large banks and thrifts put the 30-year FRM at 5.15%, up from 5.13% last week. Freddie put the 15-year FRM at 4.4%, up from last week’s average rate of 4.39%, but still down from last year’s rate of 4.92%. Bankrate.com put the 15-year FRM at 4.55%, up from 4.54% last week. Freddie Mac vice president and chief economist Frank Nothaft said despite the increase, rates remain relatively stable amid other positive developments, including recent increases in pending home sales and mortgage applications. “Even more encouraging news came from the Federal Reserve’s Senior Loan Officer Opinion Survey, which reported that banks have generally stopped tightening standards on most types of loans in the fourth quarter of 2009, with commercial real estate as the exception,” Nothaft said. “However, banks have yet to unwind the tightening that occurred over the last two years. Moreover, substantially fewer banks expected credit quality to deteriorate over the coming year,” he added. Freddie said the five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 4.27%, up from last week’s rate of 4.25%. Last year, the five-year ARM averaged 5.26%. Bankrate.com’s average rate for five-year ARMs was 4.56%, up from 4.54% last week. Freddie’s survey of the one-year Treasury-indexed ARM put the average rate of 4.22%, down from last week’s rate of 4.29% and last year’s 4.92%.

Now is the time to buy a home! The mortgage rates are still at an all time low and the home prices are at there best. You still have time to take advantage of the $8000 and $6500 tax credit available to home buyers. If you are looking to buy a home in the Bonney Lake, Lake Tapps, Sumner, Puyallup, Buckley, Enumclaw or any of the surrounding Puget Sound areas, call me at 253-209-9701 and chances are I will be able to help you.

Do it now before this once in a lifetime perfect storm passes by!

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Yesterday, I attended the Windermere Kick-Off breakfast. The highlight for me was listening to real estate economist, Matthew Gardner. This proved to be very valuable since I do a lot of business in the Bonney Lake, Lake Tapps, Buckley, Puyallup, Sumner and surrounding areas and I want to stay current with the real estate market trend and home values.

Matthew provided a substantial amount of information about the economy and housing, and he was quite entertaining. He predicts rates will be 6% by year end. I have run some figures on payments, equity position and qualifying income based on his prediction.

Using a loan amount of $300,000, the principle & interest payment at 5% would be $1610.46 per month. At 6% the payment would be $1798.65, a difference of $188 per month. At the end of five years the loan balance with the 5% loan would be $275,486, and $279,163 with the 6% loan. If you take into account the monthly savings over five years plus the additional equity, your clients can save close to $15,000 by taking advantage of the low interest rates.

The other issue that comes into play with higher rates is qualifying. Using the 5% rate plus taxes, insurance and MI, the qualifying income would be approximately $7023 per month. At 6%, the qualifying income goes up to $7650 per month. Another way to look at it is someone making $7023 per month can qualify for $300,000 at 5%, but only $268,500 at 6%. What a difference only one percentage point makes!

So if there was ever a good reason to get off the fence and start your home buying process, this is one of them. Not only are the mortgage rates at an all time low, so are the house prices. Contact me at 253-209-9701 and I will help find and negotiate a great home for you. As a marketing specialist I can help you sell your home fast and at market value.

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Understanding YSP & Par Rates

YSP or Yield Spread Premiums are perhaps one of the most misunderstood aspects to the average mortgage. Unfortunately, recent legislation designed to help consumers cut through the complex legal lingo only added to the confusion by differentiating between mortgage brokers versus banks and direct lenders when quoting YSP’s. According to federal law, banks and direct lenders that use their own money to fund the loan are not obligated to report the “overages” or SRP (the banking equivalent to YSP). On the other hand, mortgage brokers must report the Yield Spread Premium and may therefore, appear to be charging more. Since banks and lenders are not held to the same reporting standards, it is imperative for short sale investors to learn what questions to ask in order to obtain reliable rate quotes.

1. What is the Yield Spread Premium or Overage on the loan? If the Good Faith Estimate does not specifically indicate the YSP or overage it is important to request it in writing. Be sure to ask about BOTH the YSP AND Overage – remember, a lender using their own funding is not always required to disclose the YSP and in fact, because of the variation in terminology, they often claim not to have a YSP whatsoever…it’s legally okay because it is technically an overage not a YSP which is a term associated with mortgage brokers rather than banks. By asking about YSP and/or the Overage, you can better determine the premium paid on the loan. Remember, YSP is determined by the interest rate so it may fluctuate from day to day.

2. What is the Par Rate? The Par Rate is the absolute lowest interest rate available without purchasing discount points to buy down the interest rate. If a mortgage is being sold “at par”, the brokers do not get paid more for selling a more expensive mortgage so you will expect to see a higher up front origination or broker fee…after all, this is how they make their money. Keep in mind, the mortgage loan officer must make money somewhere so it will typically be included in either the YSP/overage, purchasing points etc…your job is to find the lowest possible combination of YSP/overage with a mortgage at/near Par for the lowest possible points. Because the YSP and par rates fluctuate daily based upon prevailing interest rates, it is impossible to determine the exact amount until you “lock-in” a rate however, it is possible to obtain a fair understanding of the total cost you can anticipate paying by doing business with any one specific provider.

Remember, most lenders expect to make at least $2,000 to $3,000 from originating an average sized loan (more in the case of significantly larger loans). Avoid lenders with excess charges or those that result in double or even triple typical fees. During the height of the real estate bubble it wasn’t uncommon to encounter lenders making thousands or even tens of thousands of dollars extra by packing excess fees, YSP and a plethora of fees into every mortgage…often the same lenders boasting ultra low up-front out of pocket costs. Run, don’t walk, away from these extreme practices and instead arm yourself with the power of information.

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Almost half a trillion dollars was wiped out this year through November as housing headed for a third straight annual decline. New foreclosures and higher mortgage rates in 2010 may hinder a rebound, the property data service said today in a statement.

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Freddie Mac’s weekly survey of average interest rates put the 30-year fixed-rate mortgage (FRM) at 4.83% with an average 0.7 points for the week ending Nov.12, down from the average rate of 4.91% the previous week. That’s a mere 5 basis points shy of Freddie Mac’s record low of 30-year FRM rates, reached twice in April this year. Last year, the rate was 6.04%. Freddie Mac put the 15-year FRM at 4.32% with an average 0.6 points, down from last week’s 4.4% and the lowest rate for the product since Freddie Mac began its 15-year FRM survey in 1991. A year ago, the average rate for the loan was 5.73%. Bankrate.com’s survey of large US banks and thrifts put the 30-year FRM at 5.06%, the lowest in the survey’s 24-year history and down 13 basis points from the previous week. The previous low on the Bankrate survey was 5.13% in April. Bankrate.com put the average rate for a 15-year FRM at 4.48%, down 13 basis points from the previous week. “Low fixed rates throughout the third quarter prompted an estimated $1.1 trillion in refinancing activity, saving homeowners about $10 billion in aggregate monthly payments over the first 12 months of their new loan,” said Freddie Mac vice president and chief economist Frank Nothaft. “Moreover, for the fourth consecutive quarter, more than 95% of prime borrowers who originally had an ARM selected a conventional fixed-rate mortgage in the third quarter of this year.”

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