Will mortgage rates go back down?

It feels like summer ! Not only is school out and the traffic is eased up, but it feels like summer! The glorious hot days dear to Houstonians are officially here. So are the home buyers! We continue to see contracts pending, and inventory lessening. Thank goodness! There are still, however, some appraisals that come back with inventory at a 6 mo + supply. To lenders, that means a ‘declining market’. And beware that if your listing is in such an area, the lender may have some additional conditions, or may not even do the loan at all. That’s right, declining markets are not favorable. The reason? If we foreclose, we don’t want large marketing times to get rid of it! It also signifies a trend downward in prices. No lender wants to be on the top end of the market. So encourage your sellers to consider all realistic offers. I suppose realistic is the main catch here. Who knows in these unprecedented times? There may be other reasons, but that is the main concern.

The First Time Homebuyer Credit – in all its glory, has to be the most confusing legislation there is right now. No one is clear on what, how or when. The latest rumor is that FHA will allow the moneys to advance for down payment. Part of it is true, but keep reading. Our representatives on Capitol Hill have no idea what has to happen to ‘advance’ a tax credit to a homeowner. Who will check if they are delinquent on any federal debt? Who will advance the money (a HUD memo states it has to be a ‘3rd party’, certainly not them). Ok, then who? Is it really a good idea to advance money anyway before its spent? Isn’t that what got us in this mess to begin with? And then, the legislation just last week changed yet again, and now FHA loan purchases can use the money ONLY toward closing costs, not down payment. Again, WHO will administer this money? No lender thus far has jumped on this idea. So the opportunity may be there for your buyers, but they need to settle to the fact they will get it upon filing 2009 return. Not too much to ask for free money!

Interest Rates – are still low! Maybe not the 4.5% of last month, but STILL historically, low! As compared to 2 weeks ago, almost up a full point! Why? Good news in the market. Could it be from the good news to investors that Angelo Muzilo has been charged with Fraud, and that gives them a ‘temporary’ feeling that the culprits are about to be caught? Or could it be that banks are to pay back tarp money? Or maybe the ‘come clean’ speech to Muslims by our President in Egypt last week. I would have thought that the unemployment doldrums would have shocked rates back down…but no such luck yet. Rates also have gone up due to positive indicators in the market. Words from our legislators and commander in chief like ‘not as bad as it was’, or ‘the recession end may be near’ ……those types of words allow investors in stocks to feel like buying. When they buy, investors pull money out of bonds. Then bond rates go up, as the price is down to attract buyers back into the bond market.

Will rates go back down? – THAT is the million dollar question. Who knows. But inflation and higher rates is INEVITABLE. Take my word. My advice? If your buyers are holding out for rates to come down, or purchase prices to come down, they may be missing the boat on living in the present. Our (primary) homes are where we raise our families and share time with loved ones. If it makes sense, do it. If not, wait. But hanging on for a false sense of reality may be missing the boat on opportunity that is right in front of them.