Positive Economic News Despite Wall Street Challenges

Although it may seem unbelievable, economists have some positive news despite the challenging week in Wall Street.

One of this is the chance of Americans with good credit ratings to obtain the best bargains in housing prices. In the latest survey of Freddie Mac, it showed that there has been a reduction in the average rate of 30-year fixed rate mortgages. Currently, it is only at 4.32%. Aside from this, home prices are even lower compared to the previous year. According to the S&P/Case Shriller 20-city composite, prices all over the country have become lower by 46.5%. Low mortgage rates and home prices will help more individuals and families afford their first home purchase. For those that already own a home, they can also benefit from low rates by refinancing their mortgages so that their monthly payments will become lower.

The impact of lower rates also extends to the retail industry. The data of the Commerce Department from the previous week shows that there is an increase of 0.5% in their July sales. This is one of their strongest numbers since March this year.

Moreover, another report from last week showed that state unemployment benefit claims declined by 7,000 resulting to only a total of 395,000. Although it seems high, this is still a better number than what most economists are expecting.

Also, a weaker dollar is a silver lining at this time. This means that U.S manufacturers can effectively and better challenge their competitors in countries with strong currencies.

Finally, there is no better news than oil price reduction. During the spring time, prices of oil and gasoline increased. Currently, the prices are more reasonable at around $85 per barrel. Compare this with the $114 high price that it reached several months ago. The lowering oil price is evidence that there is re-balancing in the economy. When oil is cheaper, gasoline is more affordable. This will help consumers save more money.

Related articles

• Freddie Mac’s Housing Outlook August 2011 (johnmurphyreports.com)
• Top Tips on getting a mortgage! (moneyexpert.com)

Why is it Time to Refinance? Is it the best time to get a Mortgage Refinance?

Interest rates on mortgages have continuously declined to reach its lowest level in recorded history. This is a strong proof that it is already the best time for homeowners to consider refinancing in order to generate some savings.

The rate for a 30-year fixed mortgage was at an average of 4.39% during the end of the Aug 4 week. Similarly, the rate for a 15 year fixed mortgage decreased to 3.54% despite the reduction in bond yields and signs that show a weaker economic standing than what is expected said the Primary Mortgage Market Survey of Freddie Mac.

The president of Metropolitan Boston Real Estate, Nebury Street brokerage, said that this is good news because this will serve as a motivation for anyone who is considering refinancing knowing that the low rates won’t stay very long.

Here are the possible savings that homeowners can generate: for a mortgage of $250,000 with 5% interest, they could save about $160 monthly and $2,020 yearly if they refinance the loan for 4.39%. These savings provide a guaranteed cash in the bank during these present times when traditional savings account have nearly zero percent in returns and the gyrations in the stock market have exhausted the investment accounts.

Bankrate.com’s senior financial analyst Greg McBride said that anybody who decides to refinance at these very low rates are sure beneficiaries of the economic concerns and Wall Street challenges.
The three lenders listed in Bankrate.com that offers 30 year fixed loans with less than 4.39% interest are AimLoan.com at 4.19%, Loan Depot at 4.25% and American Interbanc.com at 4.35%. All three are offered with zero points.

Albano said that even if the low rates are great news for most mortgage owners who pass the requirements of credit and equity to qualify for refinancing, potential buyers will still not leave the sidelines. He thinks that people who are observing the rates and decides that they are not ready to purchase at 4.5% will change their mind when the rates fall at 4.3%.

If you are looking to refinance your mortgage, then you may want to consider doing it soon. As you may know, last Friday, Standard and Poor’s downgraded US treasuries from AAA to AA+. This is the first time in history that the U.S. has had a downgrade.

Then, on Monday, Standard and Poors also downgraded Fannie Mae and Freddie Mac. While it is unclear as to the final effects of the downgrade, many financial experts are prediciting that the cost of money will go up, effectively raising interest rates.

If this happens, it could be problematic for an already sluggish economy,a nd could further depress the already lagging housing market. Higher interest rates would effectively make home ownership more expensive.

As for those with bad credit or poor credit, these changes could put you completely out of the market. While the agencies push to regain their credit ratings, they may be forced to be even more conservative with lending practices, and that would make credit or loans for people with bad credit almost out of reach.

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Related articles

• US debt downgrade could mean rate hikes for all (seattletimes.nwsource.com)
• S&P Downgrade Could Feed Home Buyer ‘Anxiety’ (blogs.wsj.com)
• Economy sends mortgage rates down to new 2011 lows (hsh.com)

Fixed mortgage rates remain unchanged while the average rate on a 30-year fixed loan stays close to 5%. According to Freddie Mac, the previous weeks have shown a rise in mortgage rates from 4.86 to 4.87%. In November of last year, it hit the lowest rate since the past 40 years of 4.17%. On the other hand, a 15-year fixed mortgage increased in average rate from 4.09% to 4.10%. Prior to this increase, the rate declined to 3.57% last November, the lowest since 1991.

Despite the decline in mortgage rates, home sales are not significantly improving. In fact, the latest homebuilder report from KB Home, a Los Angeles based company, showed a big decline in home orders for December to February. The company reported that there is a drop in their home orders by 32% compared to the previous year. Even the number of homes delivered also declined to 28%. This is also the case for Lennar wherein new orders decreased to 12% and home deliveries fell to 3%.

This decline in home sales and deliveries may be attributed to the reluctance of potential home buyers to move. This is because of stringent credit requirements, fear of unemployment and expectations for a further decline in home prices because of the rising number of foreclosed homes at the present time.

The average mortgage rates are calculated from the collected rates from different lenders all over the country every Monday to Wednesday of each week. This is calculated by Freddie Mac. The average mortgage rate of an adjustable rate for one year dropped to 3.22% from 3.26%. In the previous weeks, the rate fell to its lowest record since 1984 to almost 3.17%.

The calculation for mortgage rates excludes add-on fees or points. A point is equivalent to 1% of the total amount loaned. The average fee for a fixed loan of 30 years, 15 years and 1 year ARM is at 0.7 points according Freddie Mac’s survey. For a five year loan, the average fee is at 0.6 points.

Related articles

• Mortgage rates barely budge in latest week, stay below 5% (usatoday.com)
• 30-year fixed-rate mortgage ticks higher (marketwatch.com)

Freddie Mac reported a 30 year fixed-rate mortgage averaged 5.05% and the highest since its increase from a lowest record of 4.17%.

Economists say that rates have to increase more to squelch a housing market recovery and added that if they do that, the federal government would pull down the rates.

A mortgage researcher Keith Gumbinger says increase in interest rates is unwelcoming and not enough to kill purchases in the housing market.

Patrick Newport, an ISH Global Insight economist says that rates should be higher than 6% to discourage big amount of sales.

They are still lower in historical standards even if rates have increased rapidly. 30 year fixed loans have averaged 6.9% for the past 20 years and averaged a lower of 5.93% average for the past 10 years, Findlay says.

Fourth quarter home sales increased because of low rate and low home prices, according to the National Association of Realtors. It rose 15% from the third quarter. But when federal tax credits boosted its sales, they were 20% lower.

The NAR says that 78 out of 152 metropolitan areas were increased year-over-year for median prices just for single-family homes and it is expected by Newport that its prices were to drop further to turn around during middle of the year.

Other larger markets also posted good price gains because of the strong job growth. Median was increased to 8.1%, 4.2% and 4.1% year over year in Washington, D.C, The Boston region and Austin respectively.
Nar economist Lawrence Yun says that 2010 sales noticeably recovered. Yun expects that it will still manage to gain more despite the increase in rate that he predicts and probably will be 5.5% higher by the end of the year.

But Yun says that job creation will still decrease rates and still improve home sales.

On the other hand, Gumbinger says that refinancing activity will be affected when rates will be increased. According to Mortgage bankers Association 10 year treasury bonds are followed by mortgage rates, which have increased lately.

Related articles

• Will mortgage rates continue to rise this week? (hsh.com)
• Mortgage Default Rates (themortgagepot.com)

Mortgage rates are increasing to its highest level but the rise is not enough to disrupt the strengthening market of U.S. homes.

In February this year, a fixed rate mortgage for 30 years is estimated at 5.05%. This is the highest rate since the 2nd quarter of the previous year. This is also a sharp increase from a record low of 4.17% in the 4th quarter last year. However, this rise is not enough to end the recovering housing market according to most economists.

If the rates adversely affect the market, the federal government will surely find ways to pull down the interest rates. Patrick Newport, a global insight economist said that rates would have to increase to at least 6% to cause a decline in housing sales. But, the moment it reaches 5.5%, the government will surely take the necessary steps to control it from increasing further added Lending Tree’s chief economist Cameron Findlay.

Low interest rates in the 4th quarter of the past year contributed to the high sales reported by the National Realtors. Specifically, the sales increase by 15% from the third quarter of the same year. However, this figure is still below 20% than the previous year when the tax credits given by the federal government helped boost sales. Average prices of homes owned by single families increased annually in almost 78 of the 152 urban areas. But this is only a 0.2% increase all over the country. Newport further added that home prices will keep dropping and turn around in the middle of this year.

The increasing prices in the housing market may be attributed to the fact that there is a growth in jobs. Some cities that showed increasing rates include Boston, Washington and Austin. The rates grew by 4.2%, 8.1% and 4.1% respectively for each of these cities.

Related articles

• Rates rise on fixed-term mortgages (moneyville.ca)
• Is It Finally a Good Time to Buy a House Again? (dailyfinance.com)