It has been an interesting past quarter monitoring the divergent pull of low (for now) interest rates and an improving economy versus stagnant unemployment and an unsettled housing market – and the interdependency of all.

Interest Rates The good news: Rates are still near historical lows. Jumbo Rates – The 30 year fixed is rising and falling nearly in lock step with its conforming brethren. With a solid credit score the rate is around 5.5% percent with 20% equity, or 80% loan to value.  Adjustable rates are naturally far lower. Conforming Loans – For qualified borrowers the 30 year fixed is very near 4.875%, the 5 year ARM rate is in the low to mid 3′s, and the 7 year ARM is in the high 3′s. Amortization:  Many people are switching to 15 and 20 year fixed rates that may be significantly lower than the 30 year rate.  They are finding that the monthly principal and interest payments with the low rates are not dramatically different from those they are paying on their current 30 year amortization. The interest savings over the life of the loan is substantial. Pricing: Although the typical difference in rate between a no closing cost mortgage and one that requires a client to pay closing costs is .25% – .5%, the current pricing environment often allows for a much narrower spread, .125% – .375%.  It is worth doing the break-even analysis to consider a no closing cost mortgage. The Housing Market The housing market is showing mixed signals, and is very conflicted.  December 2010 reflected a 12.3% increase in existing homes sales over November as buyers took advantage of bargains and low interest rates that prevailed in the fall.  However, according to the S&P/Case-Shiller Home Price Indices 19 of the 20 cities reported showed a loss in value averaging 1.24%, and 16 of the 20 cities showed a year over year loss from the prior November, with an average 20 city index loss of 1.6%.   The six months 20-city index showed an annual growth rate of 4.6%.  This has been tempered by November being the sixth consecutive month where the annual growth rates moderated from the prior month’s pace.  While the 20-city composite is 3.3% above its April, 2009 low, 9 of the cities have fallen below their April 2009 values.   It will be interesting to see if the 12% increase in home December home sales has a corresponding increase in home value.   While an improving economy will inspire consumer confidence, clouds hanging over the real estate market include continued unemployment, and foreclosures, which are not mutually independent.  It appears that many seller are of the opinion that if they wait, prices will go up, while buyer are the opposite thinking that if they wait, prices will go down. What the Market Means to You Purchases – It is still predominantly a buyer’s market. This gives you the opportunity to make an aggressive offer, and negotiate inspection items fairly but aggressively.  36% of the sales in December were distressed homes which include foreclosures and short sales.  If you are interested in making an offer on a short sale, I can help you. Refinances - If you have not refinanced in the last three months, it may be time to do so.  Many people missed out on the bottom of the market. You should always conduct an analysis to see if it is worthwhile to refinance.  If you have been reluctant to inquire due to your loan to value, mortgage insurance payments can be part of the analysis. Contact me - I am happy to help you navigate this market.