Mortgage Rate and Market Recap for the Week of August 11th - August 17th, 2008
It may surprise some, but the national news of Russia’s invasion of Georgia really created movement in the market early last week. Mortgage rates worsened slightly on Monday, but luckily took a turn for the better for the ladder part of the week. This is just a quick reminder that you need to tune in to international stories like this if you want to understand why the markets are moving!
On Thursday, the Consumer Price Index (or CPI) came in higher than expected. In fact, it came in 5.6% higher than last year! That’s the highest year over year increase since 1991!! Surprisingly enough, mortgage rates continued to improve after this news! It just goes to show that if you’re only looking at one report and not the entire picture, it’s tough to predict where things are headed.
This was the question of the day on Thursday. The ‘why’ behind it was falling oil prices! With oil prices hitting $147/barrel in July, the market is happy to see oil back down to $113/barrel. Since Thursday’s report was a ‘lagging indicator’ being a month old, traders thought with the declining cost of oil - next months figures would look much better (or less bloody).
Each week, I put up an economic calendar of news coming out that following week. Here’s the results from last week:
(Click to Hugisize)
If you’re looking to purchase or refinance a home, it’s important to know what moves mortgage rates. There are normally two major things that impact the direction:
It’s been mentioned before, but as a common reminder - mortgage rates are only based on one thing. Mortgage Backed Securities (MBS). The only way you have access to these is through live bond quotes.
If you’re looking for specifically what mortgage rates are doing, I’d be happy to help with a custom rate quote. Each scenario is different (there are 27 different factors a mortgage rate is determined by). If you or someone you currently know are looking for a mortgage, I’m here to help!
Information without obligation. That’s my policy. If you like what you hear, my team would love to help!
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Often when a lender feels like they’re taking on more risk than they Fannie Mae and Freddie Mac are going to be adding ‘adverse market fees’ to thier mortgages. This isn’t the first time we’ve seen this happen. Back in March of this year, Fannie Mae added a .25% ‘adverse market fee’ to all mortgages. Ultimately this ‘fee’ was built into the interest rate. Often resulting in a .125% higher interest rate for a client.
The new announcement by Fannie Mae this week announces that the adverse market fee will be increasing from .25% to .50%.
According to Fannie Mae’s announcement, November 1st 2008 will be when they require that fee for delivery. What that means is most likely you’ll see this kick in starting 30-45 days before that (because of the term of the lock)
It’s been talked about before, but It doesn’t hurt to mention it again. Let’s address the chain (assuming 1 being the first in the food chian).
Mortgage money ultimately comes from Wall Street. From Wall Street it sells to GSE’s (Government Sponsored Enterprises) such as Fannie Mae and Freddie Mac. From here Fannie and Freddie build in their margin for profit. That margin is now being increased to compensate for the rising risk on mortgages. Ultimately the cost gets passed on to the borrower (YOU) and a higher interest rate is paid.
Before, mortgage rates were simply based on mortgage backed securities. Now, we’ve see additional fees added to mortgage rates. Not only is there a new adverse market fee, but there are also loan level price adjustments (LLPA’s) that are based on credit score. I’ll be covering that on another blog post.
I’ve been saying this for months now. Mortgage bacekd securities may be holding steady (relatively), but mortgage rates can still increase with these new fees. It’s going to continue to get worse before it gets better. If you’re waiting to hit the ‘bottom’ for home prices, you need to take into consideration the increasing borrowing cost.
We’re here to help you sort through the options. If you have any questions, don’t hesitate to ask!
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It’s not uncommon to be a property investor and be ‘unsure’ of what market rent is. Honestly, market rents can change as quickly as our housing market changes. I’ll let you process how crazy that could be….
When deciding how much to charge for rent, most investors are trying to weight out two (painfully obvious) concerns:
Yea, there are many other questions going through an investors mind. The main obstacle though is finding a happy medium between maximizing cash flow but also keeping the property rented out to a good tenant.
Believe it or not, there are a lot of resources online where you can do your ’shopping’ for comparable rents. I’ve found one in specific I’ll recommend:
Rent-O-Meter - This is a website designed to collect information while you’re searching for information. It’s been a great resource for myself and other investors I work with. I’ve also found it to be extremely point on in my market (I can’t say anything for others.. because I don’t rent outside of my market).
You’ll need the following information to get the comparable rents:
From there, you’ll get your results.
Although I’ve come to really like Rent-O-Meter, I’ve also found success with other techniques. Here are a few other favorites:
It’s not always easy to be an investor. However, with the right people and resources - it can be a pretty fun business to be a part of. Me and my team are always available for questions and if you need connected with someone, we can always help with that too!
As long as you take the time to examine what’s taking place in your local market, you’ll be able to make smart decisions and really avoid the ‘riskiness’ of real estate investment. At this point, hopefully it will be a simple calculated risk and you can move forward!
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Do you ever wonder how our real estate market is here in Des Moines? Unfortunately, we spend a lot of time listening to how rough things are in other cities around the country, but too often we don’t really consider what our real estate climate is like.
I’m a fan of having as much information available before I take action on any big decisions. I don’t know about you, but I think buying or selling a home is a pretty big deal.
As a blogger and mortgage professional, when I receive good information - I pass it on. Home listings and sales are an interesting set of information most of us don’t have super easy access to. Thankfully, I have a Realtor that hammers me with e-mails (Just kidding, I don’t mind them) on market updates and her opinion on where things are at.
As a mortgage professional, I cannot sell real estate. I can however help you connect with a Realtor. If you are looking for some answers, I’d be happy to introduce you to someone who can help! No question is silly or too off the wall.
I can also reach out to my connections throughout the country if you’re looking for real estate outside of Iowa. So please, feel free to contact us, we’d love to help!
Whether you’re looking to purchase, sell or refinance a home - this stuff matters. These statistics are compiled from the Multiple Listing Service and cover the Des Moines, Iowa residential real estate market.
With her permission, I post the facts here so you can come up with your very own market opinion. Here’s this week’s market commentary:
““As you can see active listings are down over 400 from where we were last year at this time. This shows that inventory is declining but our sales, on average, still aren’t where they were last year.” - Heather Barglof, RE/MAX Real Estate Concepts
(Click to Hugisize)
I really enjoy this chart because it gives a breakdown of:
This is a great chart. I’m not a Realtor and would never try to take the place of one. If you’re looking for statistics in your specific neighborhood (because your neighborhood is the only one that matters when you’re selling), I can help connect you with the right Realtor for the job!
If you’re a super cool person and have any market statistics you think our readers would find valuable, please feel free to contact me. If it’s relevant, It’ll show up here!
If you’re looking for my professional opinion or looking for a comment (press related), please contact me here.
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Mortgage Market and Rate Watch For Week of August 11th, 2008
There’s always a lot going on throughout the week. The good news is there are usually just a couple of things that are big market movers. The bad news is sometimes a report will come out that totally shifts things. Like last week when Fannie Mae announced they lost $2.3 Billion.
So, these are the two reports (If I had to pick) that will likely move the market this week:
I’ll be following things as they happen with live bond quotes and do what I can to keep everyone informed through Twitter. My clients always get the advice first, so I’ll try to filter though as quickly as I can.
(Click to Hugisize)
I’ll do my best to keep you posted throughout the week via Twitter. If you’re interested in finding out more about what effects mortgage rates and which direction they’re headed, feel free to follow me!
It’s important to recognize that advice is extremely valuable when looking for a mortgage. The right advice can literally save you thousands of dollars, while the wrong advice can cost you the same. Some mortgage professionals really don’t know what mortgage rates are based on, period. If you want to get the best deal, having a professional that can give you that type of advice is extremely important.
I provide this weekly news update because too often when we’re shopping around, we ask the wrong questions. The first thing you’ve got to have your antenna up on is economic news if you want to have any idea what direction rates are moving.
I get this question all too often. If I’m being fair.. and honest (which is my policy). I would be doing you a huge disservice to just quote a rate.
Truth be told, there are literally 27 different factors that go into a custom rate quote. There are also thousands of programs (constantly changing as well). It’s extremely important that you are educated on what is available and most importantly what is the best mortgage plan for you to personally implement.
It’s natural to have a list of questions. I’d love to help work through them with you and educate you on what you need to know about the mortgage process. I can help with everything from how to pre-qualified to what to do after closing (where I will continue working for you)!
It’s what we do, and it would be my honor to add you to our list of raving fan clients. If you’re currently looking for a mortgage loan or know someone that might have questions about one, please have them contact me. I’d be happy to assist them. It’s literally what I love doing! I promise to take great care.
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