The typical rate on a 30-year fixed mortgage fell this week to 4.39%, the lowest level since November, according to home finance giant Freddie Mac, while other popular loans were at all-time lows in Freddie's weekly survey of lenders.
While that's welcome news for anyone willing and able to buy or refinance a home, the cause is the sputtering economy, which had investors bailing out of stocks and seeking protection in U.S. Treasury securities.
That trend drove the yield on the 10-year Treasury note to 2.58% Thursday morning -- it had been above 3.7% in February -- and home lending rates followed suit.
FRE-sign-AP-Pablo Martinez Monsivais "The first half of this year was the worst six-month period since the economic recovery began in June 2009," Freddie Mac economist Frank Nothaft said.
He noted that consumer spending fell 0.2% in June, the first decline since September 2009.
The record lows were for 15-year fixed mortgages, a popular option for people refinancing their homes, and for loans with a fixed rate for five years that then become variable. The previous records for these mortgages also were set in November.
Lenders were offering the 15-year loan at an average of 3.54%, down from last week's 3.66% and eclipsing the previous low of 3.57% in the Freddie Mac survey.
The five-year Treasury-indexed hybrid adjustable-rate mortgage averaged 3.18% this week, down from 3.25% a week earlier, which had tied the previous low.
The average offering rate for 30-year fixed-rate mortgages had briefly dropped below 4.2% in the survey last fall. The 4.39% rate that Freddie reported Thursday was sharply below last week's 4.55%.
Borrowers would have paid less than 1% of the loan amount in upfront lender fees to obtain the rates, Freddie Mac said. Solid borrowers often can find slightly better rates by shopping around, and it's also possible to lower mortgage rates by paying more upfront.
Indeed, experts said this week that it was possible for the lowest-risk borrowers to obtain 30-year home loans with rates fixed at less than 4% -- as long as they were willing to fork over 3% or more of the loan amount in upfront fees and discount points to certain lenders.
The Freddie Mac survey asks lenders what terms they are offering to borrowers with good credit ratings who have 20% down payments or 20% equity in their homes.
The above article is from the LA Times written on August 4, 2011
Since this article was written, Standard & Poors downgraded the U.S. Economy to A++ and now the current administration says that rates will be low for the next 2 years. Nothing makes sense any more!
Saturday, August 13, 2011
Wednesday, August 3, 2011
Real-estate expert sees disconnect in lending
by J. Craig Anderson - Jul. 31, 2011 12:00 AM
The Arizona Republic
Read more: http://www.azcentral.com/business/articles/2011/07/31/20110731real-estate-disconnect-lending.html#ixzz1TyZd8t4H
Arizona State University professor and real-estate development veteran Mark Stapp sees a troubling disconnect between local efforts to build sustainable communities and the globalized mechanisms through which those efforts are funded.
The Phoenix-area commercial real-estate market's problems, which include but are not limited to $3.5 billion of securitized commercial mortgage loans currently in default, are largely the result of that disconnect, he said.
Stapp, still active as a developer, is executive director of the Master of Real Estate Development program at ASU's W. P. Carey School of Business.
He said communities need to get away from relying on massive, corporate lending institutions to fund the development of local real-estate projects. In other words, go back to the way things used to work: local investors funding local development.
Stapp explained the problem this way:
"Real estate is location-specific, unique and small, which makes it really hard to trade and value on a significant scale. Still, the financial world took properties with fundamental differences and bundled them together, in order to create a larger scale, offset transaction costs and trade a bunch of properties together (as commercial mortgage-backed securities)."
Each pool of disparate real-estate assets then was assigned a single investment rating, Stapp said.
"This overlooked the nuances of the individual properties," he said.
Stapp said it's not too late for areas such as metro Phoenix to turn back the clock by setting up local real-estate funds that would finance local development on a project-by-project basis. Everyone involved would benefit, he said, because investors would have more control over where their money was being spent, and developers would know that a project was being financed on its merits, not some financial algorithm devised hundreds of miles away.
The Arizona Republic
Read more: http://www.azcentral.com/business/articles/2011/07/31/20110731real-estate-disconnect-lending.html#ixzz1TyZd8t4H
Arizona State University professor and real-estate development veteran Mark Stapp sees a troubling disconnect between local efforts to build sustainable communities and the globalized mechanisms through which those efforts are funded.
The Phoenix-area commercial real-estate market's problems, which include but are not limited to $3.5 billion of securitized commercial mortgage loans currently in default, are largely the result of that disconnect, he said.
Stapp, still active as a developer, is executive director of the Master of Real Estate Development program at ASU's W. P. Carey School of Business.
He said communities need to get away from relying on massive, corporate lending institutions to fund the development of local real-estate projects. In other words, go back to the way things used to work: local investors funding local development.
Stapp explained the problem this way:
"Real estate is location-specific, unique and small, which makes it really hard to trade and value on a significant scale. Still, the financial world took properties with fundamental differences and bundled them together, in order to create a larger scale, offset transaction costs and trade a bunch of properties together (as commercial mortgage-backed securities)."
Each pool of disparate real-estate assets then was assigned a single investment rating, Stapp said.
"This overlooked the nuances of the individual properties," he said.
Stapp said it's not too late for areas such as metro Phoenix to turn back the clock by setting up local real-estate funds that would finance local development on a project-by-project basis. Everyone involved would benefit, he said, because investors would have more control over where their money was being spent, and developers would know that a project was being financed on its merits, not some financial algorithm devised hundreds of miles away.
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