Fixed Rate and Adjustable Rate mortgages continued their decline this week, hitting lows not seen since the early 1970′s when record keeping began. This is great news for homebuyer’s and those seeking to refinance their existing loans.
Originators and lock desks are swamped. Should we be excited by this news? On a personal level, it is good news.
On a Micro level, to paraphrase, all economics are local and therefore any savings realized by a consumer will likely help their pocketbook and spur savings or help meet obligations. This is great for the homeowner that can save $100 or more a month and not back up their loan term.
On a Macro level, interest rates are low because the economy is still in a very fragile state, unemployment is exceedingly high and under-employment is out of site. Home values are still very low and the despite goverment efforts, many consumers who would benefit from refinancing to a lower rate or payment, are unable to do so.
This leaves the few able to refinance. The typical borrowers able to refinance today are either old school Americans who owned their homes for many years, learned the discipline of not borrowing more than they could afford, and did not use their homes as ATM machines to access cash whenever needed. Or, fiscally responsible buyers, who knew that putting 20% down on a new home would get them the best rate, who did not wish to be house poor and bought what they could afford given their earnings and lifestyles. Those are all good things!!!
Unfortunately, there are not many of these borrowers left. Massive layoffs and the housing bust have greatly reduced the number of eligible borrowers.
For those still able to access their home equity lines, being able to procure a re-subordination agreement, is a great feat indeed! Many lenders will not resubordinate to a CLTV above 80% to protect themselves against further home value declines. This may be prudent business. Explain to me however, how one of these lenders will open a new home equity line to a CLTV of 95%, yet will only resubordinate an existing line to 80%.
Low interest rates can only spur so much economic activity. The downside is that with so much government stimulus, despite the Fed Reserves assurances, inflation in the next several years could be so severe that Americans standard of living will continue to drop, those on fixed income will see their buying power erode more quickly, and our children and grand-children will be faced with much higher taxes to off-set the spectacular budget deficits that we are currently running.
So folks, enjoy the low rates if you are able, and count yourself lucky. For everyone who can refinance, anectdotaly, I have at least 1 person who cannot. We need to get out of this economic mess, and get people working again. Because if unemployment does not improve soon, the housing market could erode even further as those long term unemployed walk away from their homes voluntarily or have them foreclosed, adding to an already large shadow inventory of bank owned properties.
I would welcome your comments and remember that low rates may not last long, so make sure you and your loved ones take advantage while they can!
For information on refinancing or purchasing a home please visit me at www.greenparkmortgage.com/davidgaffin. I will be happy to review rate and program options.
House votes to extend First Time homebuyer credit closing date
So, after about 14 phone calls to my Congressman, the House Majority Leader’s office, the Clerk of the House of Representative’s office, they finally listened. The House of Representatives has voted to extend the closing date for the first time home buyer tax credit until September 30, 2010.
Beginning last week I began my phone campaign to extend the closing date for the tax credit after the Senate approved an amendment, but not the bill to do just this.
I know others with a greater voice than me were doing the same. However, sometimes you have to get involved when your Government can do something easy and right.
As of last Friday, nothing was on the House agenda to extend the closing date. I called again yesterday, and again nothing was scheduled. So it was with a happy heart that I saw this on Boston.com.
The vote was 409-5 in favor. If I am not mistaken, that is bi-partisan support. So that’s the good news.
The bad news is that the Senate extension is tied to a bill that would extend Long Term Unemployment benefits. I wish that the closing date extension was not tied to something so controversial. I do not wish to debate the merits or costs of extending jobless benefits. I do want the Homebuyer’s extension to pass without delay.
I live each of my client’s transactions. To me buying a home, especially your first, is an incredible experience. Most times it can be a wonderful one. Occasionally, it can be more on the nightmarish side.
Given all of the changes in lending guidelines, appraisal value issues, etc., more and more deals are taking longer and are not as smooth as they have been even in the recent past.
Currently I have 2 deals for which the extension will make a big difference. One involved probate and one is a short sale. Through no fault of the buyer’s, these deals have been delayed. The borrower’s should not be penalized due to the delays of others. Hey, I wish I could have taken advantage of the program, but not in the cards. I do not be-grudge anyone trying to be a part of this.
Has the government spent too much money? That a topic for another post.
Your comments and insights are welcomed!