Houston is known for its hot weather, but days like today make it all worthwhile! No wonder our New Year season is always labeled as the kick start to the home buying season. Is it the crisp weather, or the sense of starting with a ‘clean slate’ that motivates buyers to put off buying until the Spring each year? Whatever the reason, this year I have surely seen an increase in buyers. And financing is definitely available! Take for example, the fact that I am in the office on a Saturday, and was last Saturday. In fact, after I wrote my newsletter to you last week (on Saturday!), I received 4 new referrals, all purchases, and had to come in Sunday. My husband has just resolved to the fact dishes and laundry are now on his honey do list! If your prospective buyer roster has not filled up yet, my prediction is that it will, and fast. So enjoy the silence. Use your time wisely to get recharged and organized.
What about these rates? With the Fed announcing this last week their plans to buy mortgage backed securities, a partial approval of the stimulus plan for the economy, and the news that national home sales ROSE 9% in December, you would think the rates would have gone down. Well, except these are different times. Unchartered territory. The stock market is manic (really). Nothing seems to make sense or follow basic economic principles anymore. After this weeks’ news, the bond market (where mortgages most closely relate) did not fare well, as yields , or rates, of bonds lowered because (1) the bailout plan shows flaws, and had not Republican support (2) The FED did not announce ‘specific’ plans for purchasing securities and ( c) 100,000 layoffs that were announced. So you see, the news is never good enough! Never specific enough!
Despite what you may hear, the government cannot directly control the rates . They can purchase the mortgage backed securities in an attempt to push the rates down, but what if that doesn’t work? What if ‘other’ pressures on the bond market cause their plan backfire? It could very well happen, and some critics of this strategy are anticipating it. So my point here is that borrowers (whether purchasing or refinancing) need to take what they can get NOW. Enjoy these low rates now. Waiting on the sidelines for 4.5% or lower, may be about as reasonable as me hoping to win the lottery tonight – when I didn’t even buy a ticket.
Saturday, January 31, 2009
Friday, January 23, 2009
Where are the 4.5% rates?
So where are the 4.5% rates, you are wondering? Your clients are asking, I am sure. They ask me too! Well, as you can see below, the rates are not far from that at 4.625%. But keep in mind, to get that, you MUST pay 1% origination fee (1% of the loan amount added to closing costs). If you want to ‘waive’ that fee, you can expect .625-.75% higher interest rate. That is a far cry from the .25% in the past. In other words, it makes sense to pay the 1% origination for many people, who expect to be in the home a long time. For those on a 6 year or less timeline, maybe not pay the point, and save your cash.
Why such a large spread between the 1 Origination and 0 Origination? I have heard several theories (a) lenders do not want to sell the higher coupons (rates), as they anticipate rates will go down, and their fallout will increase (b) they have been burned in the past paying originators the premiums on the back end, just to have early payoff in low rate markets, and (c) no one knows. I pick C! Does anyone really know?
Another rumor I have heard, is that some , if not all, of the big banks are losing money in their mortgage divisions. Big money. So they are hesitant to lower their rates because they are adding larger margins than in the past. To make it ‘worth it’ for them to stay in business. The margins from 03/04 when the rates were also at historic lows, and lenders could not print money fast enough, were turbulent times. Hiring frenzies, backlog in processing and fundings. The grass was not necessarily greener on the lenders’ side. Are they now remorseful and learning from their mistakes?
The FED meets this week for a 2 day meeting (Tuesday/Wednesday). For the first time, they will not consider lowering or increasing the rates. They will be concentrating instead on strategy to get the economy turned around.
On a personal front, I took my home off the market this week after 90 days. 27 showings and 4 offers later, we were just amazed at some of the offers (low) we were getting. So, since we don’t have to sell, we decided to stay put for now. I know, agents hate sellers like us. But as my article last week mentioned, the psychology (of buyers and sellers) must change in order for the market to get moving again. Even in Houston, a healthy, stable real estate market. As for me, I am stubborn, wanting a fair price for my house. A price that was there 1 year ago. Not willing to accept that the psychology of the CNN glued buyers are driving prices down. They think that all sellers are going bankrupt? No thanks, I would rather wait.
Have a great and prosperous week! Remember, we at Patriot Bank Mortgage are your trusted source in mortgage lending. We are here for you! Steadfast and strong.
Why such a large spread between the 1 Origination and 0 Origination? I have heard several theories (a) lenders do not want to sell the higher coupons (rates), as they anticipate rates will go down, and their fallout will increase (b) they have been burned in the past paying originators the premiums on the back end, just to have early payoff in low rate markets, and (c) no one knows. I pick C! Does anyone really know?
Another rumor I have heard, is that some , if not all, of the big banks are losing money in their mortgage divisions. Big money. So they are hesitant to lower their rates because they are adding larger margins than in the past. To make it ‘worth it’ for them to stay in business. The margins from 03/04 when the rates were also at historic lows, and lenders could not print money fast enough, were turbulent times. Hiring frenzies, backlog in processing and fundings. The grass was not necessarily greener on the lenders’ side. Are they now remorseful and learning from their mistakes?
The FED meets this week for a 2 day meeting (Tuesday/Wednesday). For the first time, they will not consider lowering or increasing the rates. They will be concentrating instead on strategy to get the economy turned around.
On a personal front, I took my home off the market this week after 90 days. 27 showings and 4 offers later, we were just amazed at some of the offers (low) we were getting. So, since we don’t have to sell, we decided to stay put for now. I know, agents hate sellers like us. But as my article last week mentioned, the psychology (of buyers and sellers) must change in order for the market to get moving again. Even in Houston, a healthy, stable real estate market. As for me, I am stubborn, wanting a fair price for my house. A price that was there 1 year ago. Not willing to accept that the psychology of the CNN glued buyers are driving prices down. They think that all sellers are going bankrupt? No thanks, I would rather wait.
Have a great and prosperous week! Remember, we at Patriot Bank Mortgage are your trusted source in mortgage lending. We are here for you! Steadfast and strong.
Friday, January 16, 2009
Houston's Economic Outlook for 2009
I wish you and yours the most prosperous year ever! This is my first newsletter in the new year. I have missed you all dearly. So let’s get on with it!
What a year end and new year it has been! I slaved all through Christmas, and ever since the new year (don’t feel sorry for me please, I welcomed it). December we issued a record number of approval letters- in my 14 year history as an originator! We had more purchase closings this January than ever as well. This tells me that the low rates are spurring activity. People are regaining confidence. Certainly there are some that are concerned about job stability and finances. That is a given. But rates are historically good! Who would not want to get a rate in the 4’s! So hang in there. I predict Q1 of 2009 will be vibrant.
Earlier in the week, I had the privilege of hearing Mike Inselmann speak. He is the President of Metro Studies http://www.metrostudy.com/corpwebsite/about/who.aspx . They are a housing market research firm . Mike is a household name to many lenders, realtors and builders. Each year he is almost right on his forecasts! In summary, this is what he predicts for 2009:
It’s not a buyer’s market. It’s not a seller’s market. It is balanced. We have 6-7 months of inventory, and 78 days on market. That is healthy!· The last quarter of 2008 we had a hurricane, an election, and the most horrible financial news in a matter of 6 weeks. So let’s agree to forget Q4 2008! Ok by me!· Texas is NUMBER 1 in job growth in the nation! The 5 top cities in Texas are all in the Top 20 for job growth in the nation, Houston being the leader, of course!· Houston housing GREW in 2008. However there was a shift – more rentals than ever before. Housing is not declining, it has just shifted. These people will need homes eventually· Houston will add jobs in 2009, but potentially not many. Energy and Healthcare will be important fuelers of the economy.· We had 29,000 home starts in 2008! That is a stable number! What is unstable are the gargantuan numbers we saw in 2006/2007. So the market has adjusted to normalcy.· Houston has the lowest appreciation market in the nation – 4.4% average. But look at us now! We are not seeing the ‘bubble ‘ effects of other markets .· In 2008 there were 12,000 foreclosures in Houston. There were 50,000 in 1987. Foreclosures are a given in any market. The numbers we see are normal for a market as large as ours. The takeaway from Mike’s talk, if you forget all the graphs and fancy numbers that only an economist can understand, is that it is really not as bad as it seems. Not in Houston anyway. TWO THINGS must happen for our market to turn around. (1) Psychology of buyers and sellers have to change, and (2) Credit must be available. The latter, credit, is available, but it is more difficult to obtain.
What a year end and new year it has been! I slaved all through Christmas, and ever since the new year (don’t feel sorry for me please, I welcomed it). December we issued a record number of approval letters- in my 14 year history as an originator! We had more purchase closings this January than ever as well. This tells me that the low rates are spurring activity. People are regaining confidence. Certainly there are some that are concerned about job stability and finances. That is a given. But rates are historically good! Who would not want to get a rate in the 4’s! So hang in there. I predict Q1 of 2009 will be vibrant.
Earlier in the week, I had the privilege of hearing Mike Inselmann speak. He is the President of Metro Studies http://www.metrostudy.com/corpwebsite/about/who.aspx . They are a housing market research firm . Mike is a household name to many lenders, realtors and builders. Each year he is almost right on his forecasts! In summary, this is what he predicts for 2009:
It’s not a buyer’s market. It’s not a seller’s market. It is balanced. We have 6-7 months of inventory, and 78 days on market. That is healthy!· The last quarter of 2008 we had a hurricane, an election, and the most horrible financial news in a matter of 6 weeks. So let’s agree to forget Q4 2008! Ok by me!· Texas is NUMBER 1 in job growth in the nation! The 5 top cities in Texas are all in the Top 20 for job growth in the nation, Houston being the leader, of course!· Houston housing GREW in 2008. However there was a shift – more rentals than ever before. Housing is not declining, it has just shifted. These people will need homes eventually· Houston will add jobs in 2009, but potentially not many. Energy and Healthcare will be important fuelers of the economy.· We had 29,000 home starts in 2008! That is a stable number! What is unstable are the gargantuan numbers we saw in 2006/2007. So the market has adjusted to normalcy.· Houston has the lowest appreciation market in the nation – 4.4% average. But look at us now! We are not seeing the ‘bubble ‘ effects of other markets .· In 2008 there were 12,000 foreclosures in Houston. There were 50,000 in 1987. Foreclosures are a given in any market. The numbers we see are normal for a market as large as ours. The takeaway from Mike’s talk, if you forget all the graphs and fancy numbers that only an economist can understand, is that it is really not as bad as it seems. Not in Houston anyway. TWO THINGS must happen for our market to turn around. (1) Psychology of buyers and sellers have to change, and (2) Credit must be available. The latter, credit, is available, but it is more difficult to obtain.
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