homesmillbrae.com » Shaky Ground

How Does the Fed Help My House, My Mortgage?

Sat, 15 Sep 2012 11:04:44 +0000

For those of you who expected to wake up to a 30-year fixed rate mortgage below 3 percent, you may as well go back to sleep.

Yes, rates moved down, 0.125 percent, according to several sources, but that was not as low as some had predicted. Remember, we hit the low of 3.49 percent in July, but then we jumped back into the mid to high threes. (Read More: Fed Pulls Trigger, to Buy Mortgages in Effort to Lower Rates.)

“Short term, people who are thinking about moving really need to lock in,” says Craig Strent of Maryland-based Apex Home Loans. He is concerned that the strong consumer sentiment number that came in today could cause the Federal Reserve to pull back on its buying in the future. “When this thing turns, it’s going to be fast. Just pulling back a little sends a message,” adds Strent.

But others argue that the housing market is still on such shaky ground that that’s unlikely to happen. Mortgage applications to purchase a home have declined five of the last six months, according to Diane Swonk of Mesirow Financial.

“I think that this will be a trillion dollar commitment from the Fed,” said Swonk on CNBC’s “Squawk on the Street.” “Home values appreciating, that’s something very important in this economy getting more legs and moving forward more rapidly.” (You can watch the interview here.)

So say mortgage rates could dip lower than the latest record, perhaps to around 3.25 percent. How does that help me? Does it boost my home price? (Read More: Will Fed’s Mortgage Buying Juice the Housing Recovery?)

On the one hand, lower mortgage rates give potential buyers more purchasing power. “A 0.125 percent drop in rates adds 1.5 percent to your maximum purchase price (given all the other fees),” according to Dan Green at Waterstone Mortgage. “Assuming a mortgage payment of $1500, that’s the difference between $404,800 and $411,000-ish.” So that is how much more house you can buy. If people can buy more house, then perhaps home prices will rise.

But as we’ve noted so many times before, the great low rate doesn’t mean anything if you can’t qualify, if you don’t have the down payment or credit scores to get it.

“Instead, the underlying improvement in housing demand is still very reliant on cash buyers and investors,” notes Paul Diggle of Capital Economics, who does not believe mortgage rates will fall dramatically. “Admittedly, low bond yields and savings rates more generally are probably playing a part in the strength of investor demand for housing.”

Lower rates could cause a boost in refinances, but so many have already refied at record low rates that it would take a pretty large drop to lure more in, given the fees and hassle involved. And of course negative equity keeps millions of potential refinancers out of the game. The government’s refinance program for underwater borrowers (HARP) has helped over half a million borrowers get lower rates since the beginning of this year, but unless you have a Fannie Mae or Freddie Mac
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There is a push by Democrats in Congress to expand the government’s refi program, and lower mortgage rates could help more Republicans come on board, but that is unlikely to happen before election day. (Read More: Wealthiest Counties Rake In Government-Backed Mortgages)

“To ensure as many voters as possible can benefit from this, we believe there will be another push to enact HARP expansion legislation during the lame duck session that will start after the election,” says Jaret Seiberg of Guggenheim Partners. “Lower mortgage rates only matter if people can refinance and plow that extra cash into the economy. Given that as many as a quarter of borrowers may be underwater, the HARP is the way to translate the Federal Reserve’s effort into economic stimulus.”

It is hard to say now just how low rates will go and just who will be able to benefit from lower mortgage rates. In today’s tricky housing recovery, so dependent on investors and so sensitive to a still-swollen pipeline of foreclosed properties and delinquent loans, mortgage rates are just one piece of the recovery puzzle.

Sector Watch – Nation’s Biggest Mortgage Lenders:

Questions? Comments? And follow me on Twitter @Diana_Olick

Article source: http://www.cnbc.com/id/47260576?__source=RSS*blog*&par=RSS

Home prices fall in US, SF region

Thu, 01 Dec 2011 07:05:13 +0000

Home prices nationally and in the Bay Area fell more than expected in September and in the third quarter, according to a closely watched index. The continued declines show a still-struggling housing market that is unable to give a boost to the economy.

Nationally, residential real estate prices fell 3.9 percent in the three months ended in September compared with the same period last year, according to the SP/Case-Shiller Home Price Indices. Compared with a year ago, prices fell in 18 of the 20 metropolitan areas tracked by the index, including the San Francisco area, which was down 5.9 percent in the quarter compared with 2010.

“There is no significant momentum, no signs of the housing market contributing to the economy anytime soon,” said Maureen Maitland, vice president of SP Indices, which produces Case-Shiller. “The fact that so many markets were negative does cause us to pay attention. We are on very shaky ground.”

While some seasonal weakness is to be expected after the prime spring selling season, “weakness and negativity do not have to be synonymous,” she said.

In other words, while flat prices might not stir concern, the continued price declines do.

The San Francisco metropolitan area – which Case-Shiller defines as the counties of Alameda, Contra Costa, Marin, San Francisco and San Mateo – is actually among the better-performing regions, despite falling more than the national average.

“San Francisco (metro) has recovered 13 percent from its low in 2009,” Maitland said. “Since then, its prices have been largely increasing, although they have recently fallen down a bit on a year-over-year basis. But two years ago, when there was some recovery, San Francisco was one of the markets that was doing better than others.”

While the nation has undergone a “double dip” in which prices fell, recovered and then fell further, San Francisco has not, she said.

Case-Shiller tracks sales of the same single-family houses over time. It compares changes with a base value of 100, which represents values as of January 2000.

The San Francisco index is now 133.22, meaning that prices here are 33.22 percent above their year 2000 level. The region’s index peaked at 218.37 in May 2006 and hit a low of 117.74 in March 2009.

“Housing is struggling to get up off the mat everywhere,” said Jim Diffley, chief regional economist for IHS Global Insight. “The Bay Area in some ways has been more fortunate than its Sun Belt neighbors. Its economy is doing relatively better.”

IHS predicts that the California market is near bottom and that prices nationally may drop another 7 percent before turning around in mid-2012. “We may have a little further to fall in other parts of the country before we finally get some growth in 2012,” Diffley said.

Patrick Newport, U.S. economist for IHS, said the continued weakness in sales of existing homes bodes poorly for recovery in construction of new homes, typically a major source of job creation. The country is on track to build 600,000 new homes this year, compared with a normal market of 1.4 million new homes.

“This year is probably going to be the worst we’ve ever had for new-home sales and new-home starts,” he said. “Normally, in a recovery, housing is a key sector that gets the economy back on track. Building more homes creates more jobs and has a positive feedback loop.”

The only two regions where prices increased year-over-year were Detroit, where they had tumbled so drastically that they may have hit bottom, and Washington, D.C., where federal jobs buoy the local economy, Maitland said.

Prices nationally rose 0.1 percent in the third quarter compared with the second quarter, which means they were essentially flat.

E-mail Carolyn Said at csaid@sfchronicle.com.

This article appeared on page D – 1 of the San Francisco Chronicle

Article source: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2011/11/30/BUOG1M5MCG.DTL&type=business