There is a lot happening in the mortgage industry today. This week U.S. mortgage rates edged slightly higher, veering away from all time lows that have held precedent lately. Total Mortgage Services wrote a great article on the rising mortgage rates and the article proves to be a great read for anyone interested in the mortgage industry. At the same time, Europe faces a large amount of economic instability, causing the mortgage industry to take a step back and be more cautious about writing loans. Bloomberg's report on the U.K. mortgage economy describes what is happening very well.
To sum up the two articles, mortgage rates in the united states are beginning to see an increase from their all time lows recently experience. Rates are increasing as lenders begin to see a recovery in the housing market. This recovery has been stimulated vigorously by low mortgage rates, as well as a loss of confidence in the stock market due to European woes. People are flocking to houses as an investment as opposed to keeping their money locked up on the stock market. This is a great sign for the mortgage and housing industry as it signals a return in confidence not seen since the crash of the housing market in 2008. But with rates increasing and still more economic distress to come, what is the best move to make?
Clearly in England for the banks the best move to make involves cutting the number of mortgage loans written. In the article by Bloomberg, the number of approved mortgage loans fell by 18% this past month. That number is staggering and comes on the tails of weak economic numbers and an overall negative outlook of the Eurozone economy. Clearly lenders in Europe foresee some turmoil in the housing market and have decreased their risk by writing less mortgage loans.
As for an individual living in the United States, rates are extremely low, housing prices still have not recovered fully, and the stock market is volatile. If you have the ability to invest in housing, now is the time to do it before the credit markets tighten up and the rates increase. There are many types of mortgage loans out their to satisfy any investment needs so really consider giving a housing investment a thorough look right now. I will inform you in another daily post if the situation changes.
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Monday, July 30, 2012
Thursday, July 26, 2012
Housing Recovery?
Mortgage Rates have fallen to a record low. USA Today wrote a great article about the effects that the low mortgage rates are having on the housing market. The idea is that low mortgage rates will be extremely beneficial to the economy in three ways.
The first way involves the refinancing portion. Refinancing to lower rates allows current homeowners to spend less money each month on their mortgage payment. This causes an effect where the homeowner has more disposable income, feels richer, then spends the money stimulating growth. In this aspect the low mortgage rates will be very beneficial to our economy as a whole.
The refinancing alone though will not influence the mortgage economy as much as the fact that low mortgage rates make investing in properties more profitable and allow people to buy and sell houses much more easily. Whenever houses are bought or sold it has a very influential effect on the economy because people invest money in fixing up there home. With more money to spend and increased real estate investment, the overall housing economy should see some growth. Remember that right now the housing market is at a relative bottom. So any growth at all is a huge positive, it signifies the emerging from a valley.
The third way low mortgage rates will benefit the economy involves stimulating the lending environment generating money for the banks and lenders that will be further put back into the economy. The cycle of lending needs to be continuous and ongoing in order for the economy to revert back to fully functioning. Without lending our economy will again come to a standstill.
In these ways all signs point to a recovering housing market. But let's take a look at some externals that will factor in. The jobs reports are bleak, the financial bailout did not work as intended, Europe is in financial chaos, and the middle east is in unrest.
If the jobs reports show high unemployment that means a lower number of people are in the total population of people able to buy a house. Without employment you cannot get a mortgage loan. This has a very negative effect on the mortgage and housing industry.
The financial bailout has cause the United States to be in a massive amount of debt. The only feasible move for the U.S. Government to make is to raise taxes to overcome the debt. The increased taxes will cause people to have less money and will cause the growth in the economy to slow.
Europe is in such unrest that financially every other country needs to be on guard against another recession because of how intrinsically linked our global financial markets are.
And finally the middle east, specifically Syria at the moment, is in unrest. With turmoil overseas the only option the United States have is increasing money spent on defense. This will affect other areas of the U.S. because less government investment will lead to crumbling infrastructure.
For now I would be very concerned with the housing recovery. Their are too many variables that could go very negatively.
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The first way involves the refinancing portion. Refinancing to lower rates allows current homeowners to spend less money each month on their mortgage payment. This causes an effect where the homeowner has more disposable income, feels richer, then spends the money stimulating growth. In this aspect the low mortgage rates will be very beneficial to our economy as a whole.
The refinancing alone though will not influence the mortgage economy as much as the fact that low mortgage rates make investing in properties more profitable and allow people to buy and sell houses much more easily. Whenever houses are bought or sold it has a very influential effect on the economy because people invest money in fixing up there home. With more money to spend and increased real estate investment, the overall housing economy should see some growth. Remember that right now the housing market is at a relative bottom. So any growth at all is a huge positive, it signifies the emerging from a valley.
The third way low mortgage rates will benefit the economy involves stimulating the lending environment generating money for the banks and lenders that will be further put back into the economy. The cycle of lending needs to be continuous and ongoing in order for the economy to revert back to fully functioning. Without lending our economy will again come to a standstill.
In these ways all signs point to a recovering housing market. But let's take a look at some externals that will factor in. The jobs reports are bleak, the financial bailout did not work as intended, Europe is in financial chaos, and the middle east is in unrest.
If the jobs reports show high unemployment that means a lower number of people are in the total population of people able to buy a house. Without employment you cannot get a mortgage loan. This has a very negative effect on the mortgage and housing industry.
The financial bailout has cause the United States to be in a massive amount of debt. The only feasible move for the U.S. Government to make is to raise taxes to overcome the debt. The increased taxes will cause people to have less money and will cause the growth in the economy to slow.
Europe is in such unrest that financially every other country needs to be on guard against another recession because of how intrinsically linked our global financial markets are.
And finally the middle east, specifically Syria at the moment, is in unrest. With turmoil overseas the only option the United States have is increasing money spent on defense. This will affect other areas of the U.S. because less government investment will lead to crumbling infrastructure.
For now I would be very concerned with the housing recovery. Their are too many variables that could go very negatively.
For more information visit Swirv at Facebook and Google+ !
Wednesday, July 25, 2012
Backing up What I said Earlier about Mortgage Economy Slipping
Mortgage Economy Information
This article gives all the new home sales stats for the year past defined on July 25th, 2012.
Oddly enough, new home sales plummetted while median home sales prices also declined. Usually when home prices decline home sales go up, but with all the information about the current mortgage economy I blogged about earlier, this isn't a surprise. The big surprise comes from the fact that home supply is near a record low. Median prices of homes shouldn't be falling if demands for home is high from the low supply of homes. Right now all the financial data is pointing to some ill signs.
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This article gives all the new home sales stats for the year past defined on July 25th, 2012.
Oddly enough, new home sales plummetted while median home sales prices also declined. Usually when home prices decline home sales go up, but with all the information about the current mortgage economy I blogged about earlier, this isn't a surprise. The big surprise comes from the fact that home supply is near a record low. Median prices of homes shouldn't be falling if demands for home is high from the low supply of homes. Right now all the financial data is pointing to some ill signs.
Don't forget to visit Swirv on Facebook or Google+ !
Current Mortgage Economy
Bleak. The current mortgage economy is bleak. With consumer spending down across the board, decline in growth in China and a recession looming in Europe, the mortgage industry does not look like it will recover anytime soon. People can't afford to spend money buying houses at this point in time due to the negative strain recession will put on their income, as well as fear of loosing jobs due to the impeding economic recession. The housing market is up a little bit with home prices creeping higher, but overall the housing market still has not recovered from three or four years ago when prices were extremely inflated and the market crashed.
The mortgage bankers association is a great place to get all your current economic information related to mortgages. You can find the current monthly forecasts and outlooks at Mortgage Bankers Association.
Other good resources to find information at are my Swirv pages at Facebook and Google+ !
The mortgage bankers association is a great place to get all your current economic information related to mortgages. You can find the current monthly forecasts and outlooks at Mortgage Bankers Association.
Other good resources to find information at are my Swirv pages at Facebook and Google+ !
Tuesday, July 24, 2012
Flipping A House
Flipping a house is the process by which an investor purchases a house with the money obtained from a low interest mortgage loan, then subsequently sells the house quickly for a profit and repays the mortgage loan before taxes and interest accumulate. Flipping houses caused the mortgage failure of 2007 through 2008 due to the high number of mortgage loans being written to unqualified investors in hopes that they could make profits flipping houses.
Basically mortgage companies got greedy. Instead of writing safe stable loans to people interested in buying homes for the purpose of living in them and paying down the mortgage, they came up with all types of fancy loan modifications so that no money was needed as a down payment on the house. This caused a flurry of investment into houses, driving up the housing prices and generating a large amount of money for everyone involved. The problem came when the only people that were buying houses were people investing money into house flipping. This drove the price up so much it wasn't worth it for people to purchase homes to live in because they were overpriced. When millions of mortgage loans by investors were defaulted on, the mortgage industry collapsed. And thus the mortgage meltdown.
Now is flipping a house entirely bad? No. There is money to be made in the real estate market and right about now with the impending stock market crash due to the European crisis, right now might be the perfect time to invest your money in houses. With the economy slowing down there will be more demand for rental residences and the concurrent receding of the housing market and the stock market will not be equal. The housing market will decline much less than the stock market, strictly because it was already battered so heavily and has not recovered like the stock market has. So my advice to you? Use all your money to buy up cheap houses and convert them into rentals for a couple of years to pay off the mortgage payments, then flip them for some real money in a year or two. It will definitely be worth it.
Basically mortgage companies got greedy. Instead of writing safe stable loans to people interested in buying homes for the purpose of living in them and paying down the mortgage, they came up with all types of fancy loan modifications so that no money was needed as a down payment on the house. This caused a flurry of investment into houses, driving up the housing prices and generating a large amount of money for everyone involved. The problem came when the only people that were buying houses were people investing money into house flipping. This drove the price up so much it wasn't worth it for people to purchase homes to live in because they were overpriced. When millions of mortgage loans by investors were defaulted on, the mortgage industry collapsed. And thus the mortgage meltdown.
Now is flipping a house entirely bad? No. There is money to be made in the real estate market and right about now with the impending stock market crash due to the European crisis, right now might be the perfect time to invest your money in houses. With the economy slowing down there will be more demand for rental residences and the concurrent receding of the housing market and the stock market will not be equal. The housing market will decline much less than the stock market, strictly because it was already battered so heavily and has not recovered like the stock market has. So my advice to you? Use all your money to buy up cheap houses and convert them into rentals for a couple of years to pay off the mortgage payments, then flip them for some real money in a year or two. It will definitely be worth it.
Saturday, April 24, 2010
Average Rates for April 24, 2010
Here is an update on the average mortgage rates for Saturday, April 24, 2010. All of these average rates also have points associated with them averaging out to around 1 points per loan. For more information about points and rates please visit our mortgage info section.
30 Year Fixed = 4.93%
20 Year Fixed = 4.83%
15 Year Fixed = 4.36%
3/1 ARM = 3.69%
5/1 ARM = 3.65%
7/1 ARM = 3.92%
10/1 ARM = 4.42%
Home Equity Loan - 10 Year = 4.09%
Home Equity Loan - 15 Year = 4.75%
Prime Rate = 3.25%
1 Year T-Bill = .400%
6 Month LIBOR = .418%
12 Month LIBOR = .963%
*These rates are based on current lender averages and do not reflect official market values and depend entirely upon the borrowers specific fiscal situation.
Current Mortgage Climate
Currently our mortgage sector is in shambles and the government programs designed to fix the problem really just exacerbated it through mitigating the losses of the people whom made mistakes (banks) without providing regulations to force the capital to trickle down to the people who can no longer afford the high monthly payments they thought they previously could due to the bad economy. In capitalizing the banks without actually correcting the problem of massive foreclosures on bundled loans the fundamentals of the mortgage market have been allowed to decay further than at the height of the mortgage meltdown because it is no longer about earning money from honest practices (charging interest in return for the opportunity to own your own home) it is about making as much money as possible before flipping the bundled mortgages to some unlucky investor. The practices still unregulated by the government going on in the mortgage industry point to some extremely troubling signs. First of all, with the current economy being so shaky nobody can really precisely value homes. I personally feel they are still overinflated and we will see another re-correction downward of the housing market around the middle of 2010. This dip will be the direct result of not correcting the foreclosure rates currently experienced in the mortgage market compounded with the intense amount of lower income first time home buyers who rushed into buying homes because of the $8000 first time home buyer tax credit (which at the time of this writing will expire in one week.) The overall negative indicators of the current economy do not forebode well for the mortgage market.
How will this effect the financial sector and the specific economics of mortgages? First of all the big defining factor will be the FED, or Federal Reserve Board. The FED controls the rate at which lenders can themselves borrow money. The lower the rate the FED charges lenders, the lower the rate lenders charge borrowers and vice versa. The problem with the economic conditions we currently face involves the fact that in order to shore up their balance sheets and start recovering some of the money lost in the recession the FED really needs to raise rates. If the FED raises rates then the ability to get loans will greatly decrease. The mortgage brokers will no longer want to write loans to anybody without a superb credit rating and thusly the lower middle class and down won't have access to credit. So at this point (if the FED raises rates) we will still have a high number of foreclosures remaining from the previous housing bubble, the influx of foreclosures resulting from unqualified consumers greedy for the tax rebate, and yet again an extreme slowdown in the rate that mortgage lenders will write loans. The entire mortgage sector will experience turmoil resulting in a re-correction of the market to about 70% of current home values. If the FED takes the opposite approach and lowers rates then access to borrowing will be much more available but really will just perpetuate the cycle of writing newer bad loans to cover the older bad loans made before. At some point the mortgage industry needs to just chalk up the situation as a sunk cost and reformulate the basic purpose of mortgages. If greed continues to run rampant among financial institutions though we could be in for an extremely rough ride during the upcoming months.
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