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Good Morning!

There can be some confusion in the minds of the average consumer about interest rates, especially as it relates to the Federal Open Market Committee, or FOMC, meetings. About every six weeks, the FOMC meets to discuss the current state of the economy with an eye toward the future. One important task is to monitor and adjust the cost of funds. In general, the “Fed” tries to keep inflation in check and in theory raise or lower the cost of funds. They do so by adjusting the Federal Funds rate and this is the rate that gets so much press each time the FOMC meets.

The Federal Funds rate is the rate banks can charge one another for short term lending. Short term as in overnight. Why does a bank need to borrow money on such a short notice? Banks are required to keep a certain amount of liquid capital, in other words “cash,” at the end of each business day. These funds are essentially demand funds. When a consumer wants to withdraw some cash either at the bank or at any automated teller, there needs to be cash available to meet those withdrawal requests. If the bank sees their reserves to meet these requests do not meet the reserve requirements, banks seek out a short term loan from another depository institution to meet the reserve requirements. This is what the Fed adjusts, the overnight lending rate. But the Fed doesn’t directly impact the everyday 30 year conforming fixed rate mortgage.

When lenders set their rates each day, they refer to a specific mortgage bond. For example, with a 30 year fixed conforming loan underwritten to Fannie Mae standards, the lender will review the current yield on the FNMA 30-yr 3.0 mortgage bond. Just like any bond, with the price of the bond goes up, the yield will fall. And when the price goes down, the yield will rise. Investors buy bonds, all types of bonds, as a safe place to park cash. When the economy appears to falter, investors can get a little skittish and pull some funds from the stock market and transfer those funds into bonds, including mortgage bonds. If on the other hand the economy is healthy and improving, the opposite will occur.

When the Fed makes an announcement at the end of their two-day meetings, investors are anxious to hear if the Fed raised, lowered or kept rates the same. If the Fed announces they decided to raise the cost of funds by 0.25%, it can tell investors the FOMC decided the economy is doing rather well but to hold of any potential inflation, it will raise the cost of funds that banks will pay for short term lending. It’s not a direct affect on mortgage rates, but definitely an indirect one.

Have an awesome week!

THIS WEEK'S HOT HOME LISTING!

825 SAND AVE

Price: $550,000    Beds: 3    Baths: 2    Sq Ft: 2344

Grand very well-maintained home! Light filled vaulted open layout w/ large windows & skylights. Living rm w/ gas fireplace opens to dining area. Office/bonus rm w/ exterior entrance & Shoji sliding dr/rm divider. Massive kitchen w/ cook island, pant...View this property >>

AND HERE'S YOUR MONDAY MORNING COFFEE!!

Mortgage Interest Rates Holding Steady and May Even Decline

by Galand Haas

Good Monday Morning!

Finally, some bright news for would-be homebuyers. Mortgage interest rates are holding steady and may even see a decline. This trend may help take heat off of a housing market that continues to be over priced for many buyers.

Borrowers saw a slight cool down in mortgage rates this week following last week’s seven-year high. The 30-year fixed-rate mortgage dipped for the first time after five consecutive weeks of increases, averaging 4.71 percent.

But the higher rates may be deterring some would-be home buyers. “The strength in the economy has failed to translate to gains in the housing market as higher mortgage rates have contributed to the decrease in home purchase applications, which are down from a year ago,” says Sam Khater, Freddie Mac’s chief economist. “With mortgage rates expected to track higher, it’s going to be a challenge for the housing market to regain momentum.”

Freddie Mac reports the following national averages with mortgage rates for the week ending Oct. 4:
(Scroll over interactive data chart)

30-year fixed-rate mortgages: averaged 4.71 percent, with an average 0.4 point, falling slightly from last week’s 4.72 percent average. Last year at this time, 30-year rates averaged 3.85 percent.

15-year fixed-rate mortgages: averaged 4.15 percent, with an average 0.4 point, decreasing from last week’s 4.16 percent average. A year ago, 15-year rates averaged 3.15 percent.

5-year hybrid adjustable-rate mortgages: averaged 4.01 percent, with an average 0.3 point, rising from last week’s 3.97 percent average. A year ago, 5-year ARMs averaged 3.18 percent.

Have an awesome week!

 

THIS WEEK'S HOT HOME LISTING!

6997 GLACIER DR

Price: $359,900    Beds: 4    Baths: 2 ½   Sq Ft: 2406

Completely remodeled! Fresh interior & exterior paint. All new carpet, vinyl wood floors, LED lights w/ Decora switches, heat pump, furnace, hot water heater. Large lower level bonus space (not included in SF) w/ lots of potential; could make a grea... View this property >>

 

AND HERE'S YOUR MONDAY MORNING COFFEE!!

Current Mortgage Interest Rates Will Be Short Lived

by Galand Haas

Good Morning!



The sky might be ready to fall in regards to mortgage interest rates. But for now, it is time to act if you have been considering a home purchase.  The home affordability that you have today is going to be short lived.

Consider this a gift to home buyers: Mortgage interest rates dipped to 3.78% this week, just in time for the spring housing market.

For people who are in the process of buying a house, our best advice is to lock in your rate now. “This is the last call before the bar closes at these historically low levels,” said Jonathan Smoke, chief economist at realtor.com®.

Currently, rates are low, but they are expected to rise. On Wednesday the Federal Reserve issued its first warning that rates will increase in the near term, because the economy has stabilized. The Fed has been propping up the economy by keeping rates at zero since late 2008, when the housing market collapsed. Now that employment is up, gas prices are low, and consumers are feeling more confident about the future, interest rates are sure to rise. Observers expect the Fed action to happen as early as June.

“From here, rates should go up more than down, which means affordability declines rapidly,” Smoke said. “It also means that navigating mortgage choices becomes simultaneously more important , but also more complex as higher rates would cause qualifications to be harder and some options will fall off the table.”

It goes to reason that as interest rates increase, affordability decreases. Home prices are rising and now that rates are indicated to follow suit, your buying power will not be as great as it once was. These are the waning days of remarkably low rates.

Have An Awesome Week!

THIS WEEKS HOT HOME LISTING!

775 N 8TH ST

Price: $155,000     Beds: 3     Baths: 1     Sq Ft: 1040

Charming ranch style home on dead end street. Features large windows for lots of natural light, wainscoting, laminate wood floors, well sized closets, all on 0.18 acre lot. Living room opens to dining room with slider to back. Master bedroom with ja...
View this property >>


AND HERE'S YOUR MONDAY MORNING COFFEE!!

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Photo of Galand Haas Team  Real Estate
Galand Haas Team
Keller Williams Realty Eugene and Springfield
2644 Suzanne Way
Eugene OR 97408
Direct: (541) 349-2620
Fax: 541-687-6411

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