How Low Will Interest Rates Go?
By Charles TurnerI stuck my head into the office of Columbia Mortgage’s Shawn Headlee this afternoon. Mainly thinking of myself and that maybe a refinance might be worth investigating. It would be if we were not in a jumbo mortgage situation. He says that rates on jumbo mortgages (over $417,000) haven’t shifted much so no dice for me.
On the other hand, one of our clients that he is working on the loan for got a lower rate than previously locked for free! Things have changed drastically in the mortgage market in the last few days. The refi market may suddenly reappear. Too little too late? Won’t matter, market is toast? Just what the doctor ordered?
Last night KOIN ran a story featuring Rob Levy who is in Prudential Northwest Properties’ West Portland office as well. I think Rob paints an accurate portrayal of our market.
They compared Portland to Phoenix? KOIN must be smoking something good…
2.2 million to over 4 million people? Hardly a fair comparison.
Quote from Robert S, the mortgage broker:
“The Fed’s decision to cut rates–it really did catch a lot of people by surprise, but there’s never been currently a better time to look into your current situation and see if it does make sense.”
No time like the present: currently I am reading that and wondering if it does make sense. I mean should look at my situation yesterday? How about a few years from now? Is there any other time to look at my current situation?
My guess: Most of those “over 100 callers” looking to refinance had a recent rate adjustment, and they want to push the payment back down to what it was pre-adjustment.
My guess: Most of those “over 100 callers” looking to refinance had a recent rate adjustment, and they want to push the payment back down to what it was pre-adjustment.
Question is whether those 100 qualify to move out of an ARM into a fixed???
“Question is whether those 100 qualify to move out of an ARM into a fixed???”
The bigger question is whether or not they quality for any current financing, be it ARM or fixed!
Rates on conventional 30 year mortgages have been low for some time now, and most people who wanted to refi already have. We’ll see a re-emergence of the refi market only when and if the 30 year goes to 4.50. But when/if that happens you can just about kiss any hope of an economic recovery goodbye. The decision by the Fed to lower rates was disastrous and is only encourage more indebtedness. Assets are way way way overvalued across all classes, stocks, houses, commodities, etc.. Best thing the Fed could have done is to leave things alone and let the system purge itself.
Tiffany: totally agree. The Fed is trying to solve a debt problem by encouraging more indebtedness.
Charles mentioned that Jumbo rates haven’t come down. That’s because they’re not buyable by the GSEs. It really seems like the GSEs (fannie & freddie) are (and have been) distorting risk – who in their right mind would want to lend out money now for 30 years at 5.4%? In addition to the default risk, there’s interest rate risk. However, I suspect that there would be willing lenders at 7 or 8% – maybe the Fed should have raised rates if they want more lending?
TiP,
Thanks for answering the question I was going to ask about why “jumbo rates” haven’t come down!
Soon we’ll be right back to 2005 all over again! Bidding wars, 20% MONTHLY appreciation! I am so happy for the Turners! Here’s hoping they get to buy even more things to fill their lives!
From an AP article this morning:
“To address the mortgage crisis, the package raises the limit on Federal Housing Administration loans from $362,790 to as high as $729,750 in expensive areas, allowing more subprime mortgage holders to refinance into federally insured loans. To widen the availability of mortgages across the country, it also provides a one-year boost to the cap on loans that Fannie Mae and Freddie Mac can buy, from $417,000 up to $729,750 in high-cost markets.”
Not sure if Portland qualifies as a “high-cost market” or not.
Tamar: yes, they want to raise the conforming limit to over $700K. A really stupid move (even the director of OFHEO says it’s a very bad idea – OFHEO is the regulator charged with ensuring the safety and soundness of Fannie Mae and Freddie Mac.). But guess what: if the idiots in WashingtonDC really end up doing this it’ll mean less loans will be made overall. The GSEs have a finite amount of $$ to lend. If they start making bigger loans it means they’ll be making less loans. A $729K loan made in CA could have been 2 (or maybe even 3) loans made in Oregon and easily could have been 3 or 4 loans made in the MidWest. Maybe good for California and a few other high priced areas, but not so good for the rest of the country. Write your Senators and complain.
“Write your Senators and complain.”
I’m sure that will help.
Tiffany: I understand the skepticism, but in this case it just might help. Remember, every state has 2 Senators; Oregon has what, 3Million people? California has about 15X as many – but they’ve only got 2 Senators. This provision is primarily a bailout for Cali. If you can show a Senator from a state (other than CA) that this bailout for Cali actually could hurt their constituents then they might help remove that provision. Also remember that the bailout agreement was between Bush and House Dems. There’s a lot of CA and NY reps in the House. Things work a lot differently in the Senate. They’ll have to hash things out between the House and Senate to get something passed. If enough Senators decide raising the GSE conforming limit is a bad idea that can help get it killed (or at least lowered). Or, to look at it another way, a voter in Oregon has as much sway as a voter in CA when it comes to the Senate.
Sorry but no cigar for the housing bubble II.
KABOOOM!!!
Ben’s rate cut is failing. As credit collapses in CRE it will feedback into residential. If you are going to refi you’d better do it now because rates are going up.
Even worse it looks like the bond market is collapsing:
KAPOW!
Cascading cross-defaults are near inevitable.
Even if Ben lowers to zero only a fool would put earnest money down on an asset that is bound to depreciate enormously.
Se Renter – No kidding. You’ve got to have a few screws loose to buy in this market, especially in Portland, which is right at the beginning of its 20-30 percent price decline to come.
Tiffany,
You really think the market is overpriced & will be heading down 30%??? People love Portland & keep moving here. Doesn’t that keep the prices up?
Japan faced a similar real estate market situation that began many years ago. They lowered rates to as low as .1% where the rates stayed for 5+ years, and even today they are only up to .5%. Of course, this doesn’t mean you can get a mortgage at that rate
so if you can refinance at a substantially lower rate than you are paying, then it’s almost always a good idea.