Tag Archives: mortgage rates

What Does A Trump Presidency Mean For Mortgage Rates?

dusty-computerTap tap tap. Is this thing on? It’s been a long time since I blogged with any regularity at all, but today seemed an appropriate day to dust things off and get back into the saddle. I was speaking to a group yesterday and was asked about the blog, where I was reminded that it had been far too long since I had done this blogging thing. So … let’s get back to this, shall we? Now’s as good a time as any.

There was a relatively significant event in the United States yesterday, one in which hundreds of millions of people, and every country in the world, was watching. Did you catch it? The 2016 Presidential Election was held, and Donald J. Trump has been named President-elect. Like it or not, we made our bed, so now we’ll lie in it. I was glued to the TV last night, watching every pundit talk about this and that, and wondering what this all means for the New River Valley real estate market going forward.

In elections past we’ve seen some market caution leading up to, and even after, the election. That’s not unusual, and not unexpected. It’s been the case the last elections I’ve seen as a practicing Realtor (2008, 2012, 2016), and it was something we knew was likely. This year, however, we saw almost right away that market futures started to fall, and they kept falling throughout the night – the markets did not like the uncertainty that a Trump presidency might bring. This wasn’t altogether unexpected … in the weeks and months leading up to the election, the markets had typically improved when Hillary Clinton was polling well, and it had typically fallen when Donald Trump was polling well. What was unexpected – to this hack, however – was how quickly it started to fall.

crazy-numbersAnd then the emails and texts started to come, from clients and casual observers. “What’s this mean for mortgage rates?” “Should I lock my refinance?” Since I’m a wealth of knowledge on this subject, I crunched the numbers and then asked a few mortgage lenders who really know what’s going on.

The general consensus among the lenders I talked to is that the market is going to be pretty volatile over the next few weeks. As one lender told me, “look – the bond market is tanking, and that moves inverse of mortgage rates, so they’re going to go up. It’s time to lock.” Another surmised that President Trump – that sounds REALLY weird to say – is likely to replace Fed Chairman Janet Yellen, who he’s said has been terrible at her job, with someone more aggressive. All of this is likely going to mean volatility for mortgage interest rates.

Moral of the story? If you plan on buying a home before Inauguration Day 2017, it might make sense for you to do it sooner than later – or at least lock your rate now. If you’ve read for any period of time you know I’m not prone to creating a lot of “the sky is falling” scenarios, but when it comes to what your monthly mortgage payment is going to be … well, it might cost a little more. The lenders I’ve spoken to today have been busy locking rates, and will likely continue to do so in the next several days. Failing to do so is going to mean your monthly payment is likely to rise as we deal with the uncertainty of exactly what a Trump presidency means for the economy as a whole, and the real estate market in the New River Valley in general.

These are interesting times.

Dusty keyboard.
Crazy numbers.

 

Sorry – Zillow is not accurate in Montgomery County

Much of the conversation with buyers lately has centered around what the market is going to do.  It seems everyone wants to know two things – (1) what’s the market going to do, and (2) when are rates going up?  At the risk of sounding flippant (and failing miserably, I’m sure), my response is usually “who cares?“. I mean, if you’re a serious buyer and the right house is on the market, in your price range, you buy it – right?  And with rates ranging somewhere between 3.87% and 4.63%, is 1/8th of a point going to make that much of a difference?  When you’re ready to buy, you buy – there’s no sense trying to time or “game” the market.

Dan Green, of The Mortgage Reports, decided to take it a step further today when he posted that a 1% change in mortgage rates means a significant change in what you can afford – proof that waiting and trying to time the market really can have a negative on what a person can afford.  It’s worth a read … and take this away:

Purchase price has less to do with home affordability than you think.

The real key to home affordability is mortgage rates.

Check out the chart – a 1% change in mortgage rates means a change of 10.75% in home affordability.  That’s significant.  While his purchase price numbers might be a little high for our area, the math still applies.  Let’s assume a sale price of $300000 – instead of a buyer being able to afford a $300000 home in Blacksburg, by waiting for that “perfect buy” they allow their purchasing power to fall by nearly 11%, resulting in being able to afford something for $267000.

Before you say “oh how said, they can still afford something for $267000”, don’t be fooled.  The numbers work across the board – by waiting and watching prices, trying to time the market and get the best deal on the market at its lowest point, and failing to watch mortgage reports, you ignore the one thing that applies to every mortgage loan in the market … rates.

Nice post, Dan, and thanks for doing the math.  If you’d like to get your own mortgage rate quote online, check out this link.

Why You Should Think About Refinancing – NOW

I’m not a lender. I don’t play one on TV, I didn’t stay at a Holiday Inn Express last night, and I’m not sending three easy payments of $19.99 to be a lender. But when I see low interest rates, I pay attention, because if I know where the low rates are than my clients are probably interested.

I wrote in the beginning of June about what I thought rates might do, but what do I know?  Then, I saw this on The Today Show:

I can tell you that last week, my wife and I contacted Brandon Nicely about the possibility of refinancing our loan.  But what do I know?

Visit msnbc.com for breaking news, world news, and news about the economy

Are You Broke Or Stupid?

The title of this post is a bit shocking, no?  I pulled it from an article posted at BusinessWeek.com last week entitled “If You Don’t Buy A House Now, You’re Stupid Or Broke“.  Do I believe you’re broke?  I hope not.  Do I believe you’re stupid?  No, although I’ve certainly been called worse.  Nevertheless, the title still makes you stand up and take notice.

30-year mortgage rate average

If you have a few moments I’d encourage you to read the whole article; Marc Roth talks about the historical lows that interest rates are at, and gives some insight into how they’ve arrived at these levels.  While I find the constant yelling “interest rates have never been lower, buy now!” a bit tiresome and insincere given the current economic climate, the truth is that they’ve never been lower, and Marc gives a good visualization of that.

Where the post really resonates though, is when you look at the true costs of a loan at today’s interest rates.  Check out the section beginning at “Loan Costs”:

We are at 5%. As you can see by the graph above, as the economy stabilizes, it is reasonable for us to see 30-year fixed rates climb to 6% within the foreseeable future and probably to a range of 7% to 8% when the economy is humming again.  If every quarter of a point is worth $12,000 per $200,000 borrowed, then each point is worth almost $50,000.

Let’s put that into perspective. You have a good stable job (yes, unemployment is at 10%, but another way of looking at that figure is that most of us have good stable jobs). You would like to own a $240,000 home. However, even though home prices have steadied, you may be thinking you can get another $5,000 or $10,000 discount if you wait (never mind the $8,500 or $6,500 tax credit due to run out next spring. Or you may be waiting for the news to tell you the economy is “more stable” and it’s safe to get back in the pool. In exchange for what you may think is prudence, you will risk paying $50,000 more per point in interest rate changes between now and the the time you decide you are ready to buy. And you are ignoring the fact that according to the Case-Shiller index, home prices in most regions have been trending back up for the last several  months.

If you are someone who is looking to buy or upgrade in the $350,000-to-$800,000 home price range, and many people out there are, then you’re borrowing $300,000 to $600,000.  At 7%, the $300,000 loan will cost just under $150,000 more over the lifetime, and the $600,000 loan an additional $300,000, if rates move up just 2% before you pull the trigger.

Am I suggesting everyone should buy a home right now?  Absolutely not, but it’s helpful to see what buying a home at today’s fixed rates (not a resetting ARM) will mean in dollars.  It’s also a good starting point for those planning on buying a home in the future, but not necessarily right now, as you can use his figures.

I can’t think of a clever way to end this post, and so I’ll just end it here.  Maybe some of those people were right when they called me stupid. 🙂

Why Do New River Valley Rates Change So Much?

Mike:  Why was I quoted a rate of 5% yesterday and 5.25% today? Do rates change that fast?

Brandon: Mike, Interest Rates change constantly, just like the stock market.  There are certain economic indicators, such as unemployment data, consumer price index, retail sales and consumer confidence, that effect interest rates.  A good rule of thumb is that, in most cases, you can watch the relationship between stocks and bonds.  When the economy is slow “bearish” investors move money out of stocks into bonds or mortgage backed securities, causing rates to decrease (or improve).  When the stock market is going up “bullish” investors move money out of bonds which is considered a safe investment, and back into the stock market.  As a result mortgage rates increase as the stock market increases.

Imagine that you had $1, and were deciding whether to hold on to it (no change) put in the stock market (help the stock market out) or put in the bond market (help rates out).  Once you do that someone is benefiting.  If you then put the money in the bond market and help rates improve but then take it back out there is a negative impact with bonds and rates increase.   That is what we are seeing now with money moving out of bonds, causing stocks to increase.  The government is still buying bonds to keep rates down but as we have said this will not last.

Brandon Nicely

_______________________________________________________________

Brandon is a branch partner at Alcova Mortgage.  He enjoys doing his taxes, firewalking and competitive eating, but not necessarily in that order.  You can reach him at brandon@alcovamortgage.com, or 877-552-7150.

How To Calculate Your Monthly Payment

Ever wanted to know how to calculate your monthly payment?  Well, Dan Green has provided four great formulas for calculating things like principal and interest payments, or how much you’ve paid in interest in a given month or year.  You can see his whole post here, but I’ve put a quick screenshot of the principal and interest formula below.

Principal and Interest Payments

Remember that the resulting number only calculates principal and interest, and that it doesn’t take into account taxes or insurance, or auxiliary fees like HOA fees.  To determine taxes and insurance, take whatever those amounts are and divide by 12, and add that to the resulting number.  That’s it!

Thanks, Dan, for posting these.

What Do Mortgage Rates Do In The Summer?

thermometerAccording to Dan Green of TheMortgageReports.com, they go up.

I’d heard someone once say that gas prices often reflect what’s going to happen with mortgage rates, and Dan not only reiterated the same, but why.  It’s an interesting correlation, and one I’ll be watching more in the future.

They – gas prices OR mortgage rates – don’t seem to be cooling off anytime soon, so there just might be something to the idea.

But Marianne Lane of Coldwell Banker Mortgage says she’s seen the opposite effect in the last 15 years, that often rates in July and December are lower than they have been at other times of the year.

Your takeaway?  Buy when you’re ready to buy.  Rates are out of our control as buyers, so when you’re ready to buy, talk to your agent, get preapproved, and start shopping.

Are Interest Rates Good?

It seems I keep getting asked “how low are interest rates right now?“, and I keep getting quizzical looks when I respond:

The lowest they’ve ever been.”  Well, the lowest they’ve been in 30 years.  I’m serious.

The Virginia Association of REALTORS put the following graphic together, with information from Freddie Mac:

Graph of interest rates

You can download the whole PDF here – http://www.varealtor.com/LowRates.

Like a lot of you, I find the line “there has never been a better time to buy” a bit insincere, when so much is being made of what’s negative in the housing market.  Nevertheless, the truth is that rates are the lowest they’ve been in 30 years, and if it makes sense for YOU then it’s a good time to buy.

Lowest Mortgage Rates In 30 Years? We Shall See …

I received a text message this afternoon from a reader who wrote, "Just saw on ticker that mort rates areTicker
lowest in 30 years
".  Since I haven’t written anything on MORTality rates on the blog (other than this odd little story), I’m assuming he meant MORTgage rates.

It’s true, mortgage rates are low this week as a result in part of the market decline.  But the lowest in 30 years?  I’d be surprised if it’s true, below is a recap of the annual average of 30-year fixed rate mortgages, dating back to 1977.  We’ll use 5.5% as your current average since that’s what Mark Weddle was quoting last week.  You can see the entire month-by-month breakdown here.  So, is the claim true?  Let’s see:

  • Average of 5.84% in 2004
    • 5.45% in March of that year
  • Average of 5.83% in 2003
    • 5.23% in June of that year

This_close_man5.23% is the lowest I can find in over 30 years, and that’s happened within the last five years.  Impressive.  So is he right, are these the lowest rates we’ve seen in 30 years? 

Pretty darn close.

Just for "fun", the highest rate was 17.60% in February 1982.  I can’t imagine.

Buying A Home? PLEASE READ THIS POST!

My Twitter feed has been dinging all morning.  Emails have come flying in.  What’s the news?

Well, the Federal Reserve cut the short-term interest rates by 3/4 of a percent this morning.  It’s the biggest cut they’ve made in more than almost 20 years, and they set up an emergency meeting to do so.  Stocks have been taking a dive this morning, which is going to push up investment in bonds and, subsequently, real estate. 

This is going to impact you if you’re buying a home, because as short-term rates DECREASE, long-term rates (for things like mortgages) increase.  It’s being bantered about that we may see long-term rates hit 2002 and 2003 lows, but it’s likely too early to make that call.

Consider locking a rate today if you are buying a home in the next three months.  Call me at 540-998-4731 and I can help walk you through the process, it’s VERY easy.