Mortgage Interest Rates for Fixed Rate Mortgages*
Rates as of Friday, 30th October, 2009:
Loan limits to be extended through the end of 2010
Loan limits to be extended; the $729,750 GSE loan limit will be extended through the end of 2010, hoping to avoid any potential disruption in the mortgage market. Both chambers of Congress cleared the loan limit extension late Thursday as part of a continuing funding resolution. Obama will sign the continuing resolution (CR) shortly. The maximum $729,750 loan limit for Fannie Mae, Freddie Mac and Federal Housing Administration loans in high cost areas were due to expire at yearend, dropping to $625,500. The CR extends the higher loan limits through December 31, 2010. The CR also extends the nationwide $625,500 loan limit for FHA-insured reverse mortgages through December 2010.
Mortgage Interest Rates for Fixed Rate Mortgages*
Rates as of Friday, 30th October, 2009:
Mortgage Interest Rates for Fixed Rate Mortgages*
Rates as of Friday, 30th October, 2009:
Financial Reasons to Buy
There are a number of personal and emotional reasons to buy a home. But there are also some strong financial reasons to make the investment. Here are just a few of those reasons:
Increase Net Worth: Few things have a greater impact on net worth than owning a home. In a comparison of renters versus homeowners, the Federal Reserve Board of Consumer Finance found that the average net worth of renters was just $4,000 compared to homeowners at $184,400.
A Big Tax Deduction: One of the largest tax deductions available is the amount of interest paid on a mortgage. In fact, a $150,000 home at a 5.50% interest rate can add up to approximately $8,000 in first year's interest. This amounts to a significant savings – effectively reducing the amount of a homeowner's monthly mortgage payment.
Long-Term Appreciation: Over the last few years, home prices have corrected and become more affordable. While that's good news for potential buyers, it has overshadowed the long-term appreciation of a home's value. The reality is, despite market ups and downs between 1950 and 2002, US home prices appreciated at an annual growth rate of 4.8%. Even if you calculate a modest appreciation of 3%, a home purchased today for $150,000 will grow in value to $364,000 over 30 years.
In addition, don't forget that the government is offering an $8,000 tax credit for first-time buyers through November 30, 2009.
Increase Net Worth: Few things have a greater impact on net worth than owning a home. In a comparison of renters versus homeowners, the Federal Reserve Board of Consumer Finance found that the average net worth of renters was just $4,000 compared to homeowners at $184,400.
A Big Tax Deduction: One of the largest tax deductions available is the amount of interest paid on a mortgage. In fact, a $150,000 home at a 5.50% interest rate can add up to approximately $8,000 in first year's interest. This amounts to a significant savings – effectively reducing the amount of a homeowner's monthly mortgage payment.
Long-Term Appreciation: Over the last few years, home prices have corrected and become more affordable. While that's good news for potential buyers, it has overshadowed the long-term appreciation of a home's value. The reality is, despite market ups and downs between 1950 and 2002, US home prices appreciated at an annual growth rate of 4.8%. Even if you calculate a modest appreciation of 3%, a home purchased today for $150,000 will grow in value to $364,000 over 30 years.
In addition, don't forget that the government is offering an $8,000 tax credit for first-time buyers through November 30, 2009.
Home-Buyer Credit Is Focus of Inquiry
The Wall Street Journal - October 20th, 2009
WASHINGTON -- The Internal Revenue Service is examining more than 100,000 suspicious claims for the first-time home-buyer tax break, another sign of potential trouble for the soon-to-expire program.
The measure, adopted in February as part of the economic-stimulus bill, gives first-time buyers an $8,000 tax credit in an effort to boost sales and stimulate the moribund housing market. The program is set to end Nov. 30, but housing-industry leaders are lobbying Congress to extend it.
More than a million claims for the credit have been received so far, and housing-industry experts estimated that the credit has helped generate about 350,000 home sales that wouldn't otherwise have occurred. But some lawmakers and tax experts now say there is evidence that a significant number of the claims might prove to be unjustified, or even fraudulent.
"I am concerned about recent reports that there have been fraudulent schemes involving the credit," Rep. John Lewis (D., Ga.), chairman of a House Ways and Means oversight subcommittee, said in a statement. The subcommittee is planning a hearing on the problems on Thursday.
The IRS said it was investigating 167 "criminal schemes" involving the credit, according to the subcommittee. IRS officials on Monday declined to describe the suspected schemes or provide additional details.
At a recent hearing of a White House tax advisory panel, Bonnie Speedy, national director of AARP Tax-Aide, a volunteer service for low-income people, suggested that abuse of the home-purchase credit appeared to be widespread, in part because of relatively loose standards for claiming the credit.
The credit "has some fraud issues because it's not being done at the time of the sale," said Ms. Speedy. "People are filing for the home credit who don't have a right to file for it." Taxpayers don't have to file their claims as part of a real-estate transaction and instead can file or amend their income-tax returns to claim the credit.
An IRS spokesman said the agency "will vigorously pursue those who filed fraudulent claims" for the credit.
"The IRS recognizes that there is a potential for fraud whenever a new refundable tax credit … is put in place," agency spokesman Frank Keith said. "As we began implementing this credit in the days after the Recovery Act legislation was passed, we also identified the different types of potential fraud, and matched our compliance program to those abuses."
A spokesman for the National Association of Realtors, Lucien Salvant, said, "Any time there is a lot of money around, there is going to be people attracted to it with evil intent."
Housing-industry officials recently have stepped up their lobbying for an extension of the credit. In a letter to the Obama administration on Monday, the National Association of Realtors, the National Association of Home Builders and the Mortgage Bankers Association called for a 12-month extension of the credit. They also asked that the tax break be extended to all home buyers -- not just first-time purchasers -- and noted that they were urging Congress to expand its value.
"Our fragile economy is just beginning to show signs of recovery," the letter says. "We should not jeopardize that recovery by letting this tax credit expire."
Mr. Salvant said the industry groups weren't suggesting any changes to the credit policy aimed at diminishing possible fraud.
The idea of extending, or expanding, home buyers' tax credit has been met with skepticism from some lawmakers, who cite the potential costs and impact on the surging federal budget deficits.
One proposal by Sen. Johnny Isakson (R., Ga.) and others to extend the credit and make it available to all home buyers through June 2010 carries a price tag of about $16.7 billion. That proposal would raise the income ceiling for eligible home buyers to $150,000 per year for an individual and $300,000 for a couple. Currently the credit phases out for individuals earning more than $75,000 and married couples earning more than $150,000.
Ted Gayer, an economist at the Brookings Institution, a liberal think tank based in Washington, estimated that the current credit costs the government about $43,000 for each additional home sale it generates, because most of the two million or so home buyers expected to claim the credit would have bought a house anyway. Expanding the credit to all home buyers would raise the government's cost per additional home sale to more than $250,000, he said.
WASHINGTON -- The Internal Revenue Service is examining more than 100,000 suspicious claims for the first-time home-buyer tax break, another sign of potential trouble for the soon-to-expire program.
The measure, adopted in February as part of the economic-stimulus bill, gives first-time buyers an $8,000 tax credit in an effort to boost sales and stimulate the moribund housing market. The program is set to end Nov. 30, but housing-industry leaders are lobbying Congress to extend it.
More than a million claims for the credit have been received so far, and housing-industry experts estimated that the credit has helped generate about 350,000 home sales that wouldn't otherwise have occurred. But some lawmakers and tax experts now say there is evidence that a significant number of the claims might prove to be unjustified, or even fraudulent.
"I am concerned about recent reports that there have been fraudulent schemes involving the credit," Rep. John Lewis (D., Ga.), chairman of a House Ways and Means oversight subcommittee, said in a statement. The subcommittee is planning a hearing on the problems on Thursday.
The IRS said it was investigating 167 "criminal schemes" involving the credit, according to the subcommittee. IRS officials on Monday declined to describe the suspected schemes or provide additional details.
At a recent hearing of a White House tax advisory panel, Bonnie Speedy, national director of AARP Tax-Aide, a volunteer service for low-income people, suggested that abuse of the home-purchase credit appeared to be widespread, in part because of relatively loose standards for claiming the credit.
The credit "has some fraud issues because it's not being done at the time of the sale," said Ms. Speedy. "People are filing for the home credit who don't have a right to file for it." Taxpayers don't have to file their claims as part of a real-estate transaction and instead can file or amend their income-tax returns to claim the credit.
An IRS spokesman said the agency "will vigorously pursue those who filed fraudulent claims" for the credit.
"The IRS recognizes that there is a potential for fraud whenever a new refundable tax credit … is put in place," agency spokesman Frank Keith said. "As we began implementing this credit in the days after the Recovery Act legislation was passed, we also identified the different types of potential fraud, and matched our compliance program to those abuses."
A spokesman for the National Association of Realtors, Lucien Salvant, said, "Any time there is a lot of money around, there is going to be people attracted to it with evil intent."
Housing-industry officials recently have stepped up their lobbying for an extension of the credit. In a letter to the Obama administration on Monday, the National Association of Realtors, the National Association of Home Builders and the Mortgage Bankers Association called for a 12-month extension of the credit. They also asked that the tax break be extended to all home buyers -- not just first-time purchasers -- and noted that they were urging Congress to expand its value.
"Our fragile economy is just beginning to show signs of recovery," the letter says. "We should not jeopardize that recovery by letting this tax credit expire."
Mr. Salvant said the industry groups weren't suggesting any changes to the credit policy aimed at diminishing possible fraud.
The idea of extending, or expanding, home buyers' tax credit has been met with skepticism from some lawmakers, who cite the potential costs and impact on the surging federal budget deficits.
One proposal by Sen. Johnny Isakson (R., Ga.) and others to extend the credit and make it available to all home buyers through June 2010 carries a price tag of about $16.7 billion. That proposal would raise the income ceiling for eligible home buyers to $150,000 per year for an individual and $300,000 for a couple. Currently the credit phases out for individuals earning more than $75,000 and married couples earning more than $150,000.
Ted Gayer, an economist at the Brookings Institution, a liberal think tank based in Washington, estimated that the current credit costs the government about $43,000 for each additional home sale it generates, because most of the two million or so home buyers expected to claim the credit would have bought a house anyway. Expanding the credit to all home buyers would raise the government's cost per additional home sale to more than $250,000, he said.
Mortgages under 5% are back in bloom
CNN - October 8, 2009
With one of the key measures below the benchmark for the second week in a row, would-be home buyers face the best rates since the spring.
NEW YORK (CNNMoney.com) -- The possibility of securing a mortgage rate below 5% has greatly improved in recent weeks, in a positive sign for would-be home buyers.
Home mortgage rates fell for the sixth straight week, according to two key measures, with one of them pointing to a sub-5% rate for the 30-year fixed loan for the second week in a row.
Freddie Mac's (FRE, Fortune 500) weekly report said the 30-year rate slipped to 4.87% for the week ended Thursday, the lowest since May. According to the mortgage backer, last week's rates stood at 4.94%.
Mortgage tracker Bankrate.com said the average 30-year fixed loan slipped to 5.22% from 5.25% the previous week. The 15-year fixed rate also fell, Bankrate said, to 4.6% from 4.64% the week before.
The 30-year rate is influenced by the benchmark 10-year note's yield, which moves in the opposite direction of its price. Treasury prices have risen over the past week as $78 billion worth of auctions received above-average demand.
"Another disappointing employment report had investors questioning the strength and sustainability of the economic rebound," the Bankrate report said. "The resulting uncertainty drove investors into the safety of government and mortgage-backed bonds."
"Not even a substantial auction of government debt has been enough to derail the streak of declining mortgage rates," the Bankrate report said.
Rates are returning to levels not seen since the spring when, in an effort to cap mortgage rates, the Federal Reserve began a campaign to buy back $300 billion in Treasurys. The Fed hoped that it would spark demand and keep yields -- and therefore, mortgage rates -- in check.
Mortgage rates fell as refinancings abounded. But those benefits seemed to wear off, as rates started on a tear in the summer. By June, the benchmark 10-year bond's yield had increased steadily to hover around 4%.
Now the central bank has less than $15 billion left to spend on its buyback program, which led some investors to worry that yields would soar again. So far, that's not the case.
On Wednesday, reports said Democratic congressional leaders were working to extend a $8,000 tax credit for first-time home buyers past the Nov. 30 expiration date and could even make it available to current homeowners who buy a new house.
Homeowners have received a boost from both the tax credit and the lower rates -- last year, the average 30-year fixed mortgage rate was 6.2%, according to Bankrate.
To translate the difference in mortgage rate into dollars, consider a $200,000 loan. At last year's rate of 6.2%, the monthly payment would be $1,224.94, or $124 higher than the monthly payment at the current rate.
The low rates helped mortgage applications surge by 16.4% last week, according to a separate report.
With one of the key measures below the benchmark for the second week in a row, would-be home buyers face the best rates since the spring.
NEW YORK (CNNMoney.com) -- The possibility of securing a mortgage rate below 5% has greatly improved in recent weeks, in a positive sign for would-be home buyers.
Home mortgage rates fell for the sixth straight week, according to two key measures, with one of them pointing to a sub-5% rate for the 30-year fixed loan for the second week in a row.
Freddie Mac's (FRE, Fortune 500) weekly report said the 30-year rate slipped to 4.87% for the week ended Thursday, the lowest since May. According to the mortgage backer, last week's rates stood at 4.94%.
Mortgage tracker Bankrate.com said the average 30-year fixed loan slipped to 5.22% from 5.25% the previous week. The 15-year fixed rate also fell, Bankrate said, to 4.6% from 4.64% the week before.
The 30-year rate is influenced by the benchmark 10-year note's yield, which moves in the opposite direction of its price. Treasury prices have risen over the past week as $78 billion worth of auctions received above-average demand.
"Another disappointing employment report had investors questioning the strength and sustainability of the economic rebound," the Bankrate report said. "The resulting uncertainty drove investors into the safety of government and mortgage-backed bonds."
"Not even a substantial auction of government debt has been enough to derail the streak of declining mortgage rates," the Bankrate report said.
Rates are returning to levels not seen since the spring when, in an effort to cap mortgage rates, the Federal Reserve began a campaign to buy back $300 billion in Treasurys. The Fed hoped that it would spark demand and keep yields -- and therefore, mortgage rates -- in check.
Mortgage rates fell as refinancings abounded. But those benefits seemed to wear off, as rates started on a tear in the summer. By June, the benchmark 10-year bond's yield had increased steadily to hover around 4%.
Now the central bank has less than $15 billion left to spend on its buyback program, which led some investors to worry that yields would soar again. So far, that's not the case.
On Wednesday, reports said Democratic congressional leaders were working to extend a $8,000 tax credit for first-time home buyers past the Nov. 30 expiration date and could even make it available to current homeowners who buy a new house.
Homeowners have received a boost from both the tax credit and the lower rates -- last year, the average 30-year fixed mortgage rate was 6.2%, according to Bankrate.
To translate the difference in mortgage rate into dollars, consider a $200,000 loan. At last year's rate of 6.2%, the monthly payment would be $1,224.94, or $124 higher than the monthly payment at the current rate.
The low rates helped mortgage applications surge by 16.4% last week, according to a separate report.
Market update & advice from our brokerage
Happy October 1st to all. Hard to believe that summer has passed and Halloween is around the corner.
The San Diego real estate market continues to be especially crazy in the lower price ranges while the higher ones languish until better financing options become available in the jumbo market.
• Current overall inventory of attached and detached homes (excluding land & mobiles) stands at 7,870 units, about 50% of the "normal" amount available.
• 5,449 detached homes are now on the market. During the last 30 days 2,117 went into new escrows and another 2,295 went "contingent" (short sales or bank owned properties with accepted offers awaiting approval from the lender(s). This means that a total of 4,412 detached properties went off the market in September. Dividing the total inventory of 5,449 by 4,412 means that we have a 1.24 month supply of detached homes. This means prices are rising. In my personal experience recently we have found ourselves competing with up to 25 buyers on the better properties. Buyers are often making insanely high offers hoping they can renegotiate the price if the appraisal comes in low but in many cases are finding the sellers refusing to accept appraisal contingencies or to lower prices.
• 2,421 attached properties are now on the market. 1,108 attached properties went into new escrows last month and 1,955 went "contingent". Combining these two numbers yields a 0.8 month supply of attached homes, obviously a seller's market with prices on the rise.
• Combining detached with attached homes shows us a total inventory of 7,870 properties with a total of 7,475 properties go pending and contingent, yielding a 1.05 month turnover rate for the overall market.
What does this mean? Simply put, buyers must be very aggressive both in terms of price and timing. Offers below the listed price often stand little chance and those asking for a longer closing period or other concessions are at a disadvantage. Unfortunately, FHA and VA buyers are also suffering as sellers lean towards offers with more cash invested and fewer demands by the agencies. Buyers can often expect to make offers on multiple properties at the top of their financial abilities. I have been advising my clients in many cases to lower their search price maximum so they can afford to overbid for a property and stay within their loan pre-approval limits. Low ball offers typically draw no response from sellers and it is a mistake to assume that San Diego real estate is the same as real estate in the rust belt. While it is true we have our own regional economic issues it is also true that real estate is highly local. It is not accurate to say that the average temperature is 75 degrees everywhere in the U.S. nor is it safe to say that real estate in depressed areas is the same as it is here. Our relative lack of buildable bulk land should contribute to the shortage of supply over the upcoming years.
This is an OUTSTANDING time, in my opinion, to make a real estate purchase that should look very good in a few years. Prices and interest rates will not stay this low forever so we should not lest this opportunity pass.
The San Diego real estate market continues to be especially crazy in the lower price ranges while the higher ones languish until better financing options become available in the jumbo market.
• Current overall inventory of attached and detached homes (excluding land & mobiles) stands at 7,870 units, about 50% of the "normal" amount available.
• 5,449 detached homes are now on the market. During the last 30 days 2,117 went into new escrows and another 2,295 went "contingent" (short sales or bank owned properties with accepted offers awaiting approval from the lender(s). This means that a total of 4,412 detached properties went off the market in September. Dividing the total inventory of 5,449 by 4,412 means that we have a 1.24 month supply of detached homes. This means prices are rising. In my personal experience recently we have found ourselves competing with up to 25 buyers on the better properties. Buyers are often making insanely high offers hoping they can renegotiate the price if the appraisal comes in low but in many cases are finding the sellers refusing to accept appraisal contingencies or to lower prices.
• 2,421 attached properties are now on the market. 1,108 attached properties went into new escrows last month and 1,955 went "contingent". Combining these two numbers yields a 0.8 month supply of attached homes, obviously a seller's market with prices on the rise.
• Combining detached with attached homes shows us a total inventory of 7,870 properties with a total of 7,475 properties go pending and contingent, yielding a 1.05 month turnover rate for the overall market.
What does this mean? Simply put, buyers must be very aggressive both in terms of price and timing. Offers below the listed price often stand little chance and those asking for a longer closing period or other concessions are at a disadvantage. Unfortunately, FHA and VA buyers are also suffering as sellers lean towards offers with more cash invested and fewer demands by the agencies. Buyers can often expect to make offers on multiple properties at the top of their financial abilities. I have been advising my clients in many cases to lower their search price maximum so they can afford to overbid for a property and stay within their loan pre-approval limits. Low ball offers typically draw no response from sellers and it is a mistake to assume that San Diego real estate is the same as real estate in the rust belt. While it is true we have our own regional economic issues it is also true that real estate is highly local. It is not accurate to say that the average temperature is 75 degrees everywhere in the U.S. nor is it safe to say that real estate in depressed areas is the same as it is here. Our relative lack of buildable bulk land should contribute to the shortage of supply over the upcoming years.
This is an OUTSTANDING time, in my opinion, to make a real estate purchase that should look very good in a few years. Prices and interest rates will not stay this low forever so we should not lest this opportunity pass.
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