Mortgage Loan Terms

With interest rates on the rise it may be time for some of us to think about something other than that ever popular 30-year fixed loan. Here’s a comparison that may make your decision easier.

Why Higher Interest Rates Aren’t Scary

 

 

By Gino Blefari, President & CEO, Intero Real Estate Services, Inc.

To be clear: no one is advocating for higher interest rates. But we’re about to venture down a path of thinking about what the world looks like with rates that will be higher than the lows we’ve come to expect these past few years.

In today’s market, borrowers with 5% interest rates are running to refinance – and saving thousands of dollars in the process. When put in historical context, this is astonishing. Many of us have worked through markets with double-digit rates in decades past. 3.75% on a long-term mortgage did not exist.

But experience shows us markets are cyclical. There is a bottom. We all know it’s coming. And although the Fed hasn’t indicated it will sharply raise the key short-term rates that are tied to
mortgages any time soon, it will raise those rates at some point as the economy improves.
Maybe that’s not such a scary thing.

An article in CNNMoney this week argues why higher mortgage rates will help the housing
market rather than hurt it.

I think it depends on the market you’re talking about – as with all things real estate, generalizations are rarely unflappable.
But mortgage rates indeed have been rising – the latest average on the 30-year fixed was 3.63%, the highest its been since the week of August 23, according to Freddie Mac. Let’s think about what that means for current markets.

In many markets, recovery over the last year has turned to growth mode. In Silicon Valley, many of our local markets are already back at peak pre-recession levels. What’s driving it? Job growth and demand.

Sure, low rates have been great. But they’re not the sole driver.

In our markets and others including Washington, D.C. and several other California markets, the bigger obstacle would be in supply. There just aren’t enough homes on the market to serve new buyers or spur move-up activity from existing owners.

Upward movement in interest rates may actually incite even more demand in these markets as buyers start to feel pressure to move quickly. In these cases, higher rates may actually be an incentive that fuels market activity and growth.

We’ll find out soon enough how higher rates will impact our markets. In the meantime, if your credit is good it’s still incredibly cheap to borrow money for housing. If you want to take advantage, it’s time to get moving.

Home Prices Trending Up; Mortgage Rates Hit New Lows

By Gino Blefari, President & CEO, Intero Real Estate Services, Inc.

What better end to the year could housing ask for? Home sales and prices are up on average across markets. Inventory is low, but housing starts are up. Mortgage rates remain at rock bottom – and the Fed said at its meeting this month that it doesn’t anticipate raising rates any time soon.

The stars have aligned. The door to recovery is now wide open.

The September Home Price Index tracked by Lender Processing Services showed a 3.6% year-over-year increase since last September. In addition, the index rose 4.9% since the beginning of the year.
California and New York led the states with a 0.4% month-over-month increase, and Washington, D.C. led metros with a 0.6% increase from August. The largest monthly increases in the home price index took place in Arizona, Washington, D.C., Georgia, Delaware and Maryland, with Arizona holding the largest year-to-date increase at 14.4% since January.

In mortgage rates, we continue to see fantastic borrowing rates for home buyers. Average rates on a 30-year fixed-rate mortgage hit a new low of 3.31% last week, and average rates on a 15-year fixed-rate mortgage also hit a new record low of 2.63%, Freddie Mac said in its latest weekly report.

In its quest to use monetary policy to help the recovery, the Federal Reserve board indicated at its
November meeting that it would not be raising rates in the foreseeable future. In fact, Fed Chairman Ben Bernanke suggested that the Fed will keep trying to push down long-term interest rates through
2013.

As we enter 2013, inventory will be of concern in many markets that have struggled to keep up with demand. But things will be looking up next year in most markets. In fact, Daren Bloomquist of RealtyTrac said at a housing symposium in San Francisco this month that underwater homeowners are more likely to sell as prices rise next year, which will help inventory levels.

At the same symposium, Ken Rosen, an economics professor at UC Berkeley, declared housing is in recovery mode now and through next year, though he’s not anticipating a boom in sales.

Things to watch next year will be jobs and income levels, both of which have the strongest impact on housing than any other indicator.

The forecast, overall, is looking optimistic for real estate. Some markets, like ours here in Silicon Valley are already enjoying near-peak activity and pricing. Others are just starting to pull themselves up. Either way, 2013 is going to be a solid year for housing.

Real Estate Trifecta

Fixed mortgage rates touch new lows for 2011

Fixed mortgage rates fell this week to the lowest point of the year, offering incentives for homeowners to save money by refinancing their loans. Read the full Marcury News story...

Mortgage Bank Insights

Intero Real Estate Services, Inc. presents the The Intero Insider video series, a candid Q&A session on hot real estate topics with recognized real estate experts. This Insider brings you Rick Soukoulis, CEO of Western Bancorp's insight and projections on 2011 mortgage rates, the effects of the Japan crisis on our market and the potential after effects if the U.S. Government had shut down.