Economists rejoice! here is some background data on possible interest rate movement this week - courtesy of Steve McGirr at Verdeo Funding....
Mortgage Bonds are trading lower, but improved from their worst levels, in response to hot consumer inflation readings, delivered this morning via the Personal Consumption Expenditure (PCE) data. The headline PCE number is on fire, showing overall inflation climbing 0.8% for June - the highest jump in 27 years - and left the year-over-year headline reading at a beefy 4.1%. The Core PCE, which excludes food and energy, jumped 0.3% in June, which left the year-over-year Core PCE at a heated 2.3%. This is up from last month's reading of 2.1% and above the Fed's comfort zone of 1 - 2%. Other components of the report, Personal Income and Spending, were reported near expectations and garnered little attention, especially in light of the hot inflation readings. These stubbornly high consumer inflation readings continue to apply pressure on the Fed, which must weigh future monetary policy decisions amidst a sluggish economy and weak labor market.
Speaking of the Fed and monetary policy, the Fed is meeting as we speak, and tomorrow at 2:15pm ET will announce their interest rate decision and policy statement. We expect the Fed to keep the Fed Funds Rate rate at 2.0% for now, although we expect dissention amongst the voting members - inflation hawks like Philadelphia Fed President Charlie Plosser will likely call for a rate hike to fight inflation. Currently, the Fed Fund Futures suggest a 93% probability there will be no change in rates, and a 7% probability of a 25bp rate hike.
Fundamentally, inflation is pressuring Mortgage Bonds lower, and technically, a heavy layer of resistance is also keeping a lid on any advance. For now, we can try and be patient and see if Bonds can further recover from their earlier losses, especially since we have a cushion via some positive changes from 10am.
For detailed real estate market information for the Sacramento region please visit www.HotFolsomHomes.com
Showing newest posts with label interest rates. Show older posts
Showing newest posts with label interest rates. Show older posts
Monday, August 4, 2008
Tuesday, June 12, 2007
Interest Rates rise. The Question: When to Jump in?
Does market Timing apply to the Real Estate market? Read on...
By Alex Veiga, AP Business Writer
Wannabe Buyers Welcome Housing Market Slump, but Lenders Tighten Mortgage Standards
LOS ANGELES (AP) -- Kurt Montufar isn't stressing over the housing slump. He's actually hoping things get worse. Like many wannabe homebuyers who were priced out of the market during the last boom, Montufar spends time these days scanning real estate ads and news reports to determine if it's time to take the plunge and buy.
Foreclosures rising? Great. Cash-strapped sellers pressured into lowering prices because they can't find buyers? Even better.
"Somebody else's misfortune could be my happy ending," said Montufar, 27, a resident of suburban Los Angeles.
Indeed, the advantage is shifting to buyers in many previously high-flying housing markets, as homes take longer to sell and prices level off or begin to fall.
Modest annual declines have been seen in cities such as San Diego, Boston, Las Vegas, Phoenix and Honolulu, according to first-quarter data on existing single-family homes compiled by the National Association of Realtors.
Meanwhile, price gains of just 1.4 percent or less were reported in New York, Chicago and Washington, D.C.
Those numbers have left many people trying to "time" the market to take advantage of the slump. But experts said that can be risky because there is little consensus on how long the current doldrums might last.
In addition, the market forces that helped drive the housing boom -- affordable financing and the alluring prospect of escalating home values -- are no longer a given. Potential price breaks could be wiped out if interest rates rise any higher.
"In general, it is very difficult to time the market," said Raphael Bostic, associate director of the University of Southern California's Lusk Center for Real Estate.
"The real problem with that is you don't know when the floor is until after it's passed. If the floor is right now, you missed it," he said.
Montufar, an asset manager and part-time real estate agent, has little choice about waiting for prices to fall further.
He would like to pay about $500,000 for a home in the San Fernando Valley. However, the properties he has been eying are still priced at about $650,000.
"At this point, I've got no choice but to wait and see ... how low they get so that it gets to a point where I can afford it," he said.
Others have already seized opportunities to buy.
Melanie Scalice, 36, a seventh-grade teacher living in the Boston suburb of Arlington, Mass., saved for years for a home. She decided to jump into the market when local housing prices began to dip after years of double-digit percentage increases.
"The timing has been great," Scalice said. "With prices going down, there's so much for sale that I had a lot to choose from."
Still, she had to go to Fitchburg, some 40 miles from Arlington, to find a home that suited her budget and need for space. She settled on a $199,000 condominium.
Areas outside big markets may still represent the best option for finding an affordable home.
"There are areas where prices will, at worst, stay flat, but probably continue to go up," said Patrick Lashinsky, CEO and president of Emeryville, Calif.-based ZipRealty Inc.
Home prices haven't lost much steam in the Northwest. Seattle's metro area, for example, saw its median price soar 12.3 percent during the first quarter.
In California, where home values more than tripled since 1995, sales have been lagging and price appreciation has slowed or fallen in major metro areas.
Prices have declined sharply in regions that saw major home or condo construction in recent years, such as Riverside, San Bernardino and San Diego counties.
Even if prices fall further, it could be tough for buyers to find affordable financing if interest rates increase much more.
The Federal Reserve raised the federal funds rate from 1 percent to 5.25 percent between June 2004 and June 2006. The rate, which can affect mortgages, has held steady since then.
Meanwhile, the monthly average interest rate for a 30-year fixed mortgage crept from a low of 5.23 percent in June 2003 to 6.26 percent last month, according to mortgage giant Freddie Mac.
In addition, lenders have tightened standards in response to a surge in defaults by subprime borrowers, and a number of subprime lenders have gone out of business altogether.
A number of wannabe buyers are pinning their hopes on foreclosures, which some studies predict will explode during the next two years as adjustable mortgages reset to higher interest rates.
Foreclosure activity jumped 62 percent nationwide in April from the year-ago period, according to Irvine-based RealtyTrac Inc. Among the states with the highest foreclosure rates were Nevada, Colorado, Connecticut, Florida and California.
Gino Barragan of La Puente, Calif., a lifelong renter, was among the hundreds of people who attended a recent auction looking for a good deal on a foreclosed home.
Barragan, 34, was hoping to find a condo costing less than $300,000. He found only one that he liked within his price range.
"I am willing to wait, but I'm keeping my eyes open," said Barragan, a teacher.
Bruce Norris, president of The Norris Group, a real estate investment company, said now might be the best time to purchase a home, if the buyer plans to live there for 10 years.
"I'm not sure that I wouldn't rather pay today's price with today's interest rate than count on a big discount and the wild card that interest rates might be very different," Norris said.
"It would not shock me to have a 10 percent interest rate by the end of this negative cycle," he said.
By Alex Veiga, AP Business Writer
Wannabe Buyers Welcome Housing Market Slump, but Lenders Tighten Mortgage Standards
LOS ANGELES (AP) -- Kurt Montufar isn't stressing over the housing slump. He's actually hoping things get worse. Like many wannabe homebuyers who were priced out of the market during the last boom, Montufar spends time these days scanning real estate ads and news reports to determine if it's time to take the plunge and buy.
Foreclosures rising? Great. Cash-strapped sellers pressured into lowering prices because they can't find buyers? Even better.
"Somebody else's misfortune could be my happy ending," said Montufar, 27, a resident of suburban Los Angeles.
Indeed, the advantage is shifting to buyers in many previously high-flying housing markets, as homes take longer to sell and prices level off or begin to fall.
Modest annual declines have been seen in cities such as San Diego, Boston, Las Vegas, Phoenix and Honolulu, according to first-quarter data on existing single-family homes compiled by the National Association of Realtors.
Meanwhile, price gains of just 1.4 percent or less were reported in New York, Chicago and Washington, D.C.
Those numbers have left many people trying to "time" the market to take advantage of the slump. But experts said that can be risky because there is little consensus on how long the current doldrums might last.
In addition, the market forces that helped drive the housing boom -- affordable financing and the alluring prospect of escalating home values -- are no longer a given. Potential price breaks could be wiped out if interest rates rise any higher.
"In general, it is very difficult to time the market," said Raphael Bostic, associate director of the University of Southern California's Lusk Center for Real Estate.
"The real problem with that is you don't know when the floor is until after it's passed. If the floor is right now, you missed it," he said.
Montufar, an asset manager and part-time real estate agent, has little choice about waiting for prices to fall further.
He would like to pay about $500,000 for a home in the San Fernando Valley. However, the properties he has been eying are still priced at about $650,000.
"At this point, I've got no choice but to wait and see ... how low they get so that it gets to a point where I can afford it," he said.
Others have already seized opportunities to buy.
Melanie Scalice, 36, a seventh-grade teacher living in the Boston suburb of Arlington, Mass., saved for years for a home. She decided to jump into the market when local housing prices began to dip after years of double-digit percentage increases.
"The timing has been great," Scalice said. "With prices going down, there's so much for sale that I had a lot to choose from."
Still, she had to go to Fitchburg, some 40 miles from Arlington, to find a home that suited her budget and need for space. She settled on a $199,000 condominium.
Areas outside big markets may still represent the best option for finding an affordable home.
"There are areas where prices will, at worst, stay flat, but probably continue to go up," said Patrick Lashinsky, CEO and president of Emeryville, Calif.-based ZipRealty Inc.
Home prices haven't lost much steam in the Northwest. Seattle's metro area, for example, saw its median price soar 12.3 percent during the first quarter.
In California, where home values more than tripled since 1995, sales have been lagging and price appreciation has slowed or fallen in major metro areas.
Prices have declined sharply in regions that saw major home or condo construction in recent years, such as Riverside, San Bernardino and San Diego counties.
Even if prices fall further, it could be tough for buyers to find affordable financing if interest rates increase much more.
The Federal Reserve raised the federal funds rate from 1 percent to 5.25 percent between June 2004 and June 2006. The rate, which can affect mortgages, has held steady since then.
Meanwhile, the monthly average interest rate for a 30-year fixed mortgage crept from a low of 5.23 percent in June 2003 to 6.26 percent last month, according to mortgage giant Freddie Mac.
In addition, lenders have tightened standards in response to a surge in defaults by subprime borrowers, and a number of subprime lenders have gone out of business altogether.
A number of wannabe buyers are pinning their hopes on foreclosures, which some studies predict will explode during the next two years as adjustable mortgages reset to higher interest rates.
Foreclosure activity jumped 62 percent nationwide in April from the year-ago period, according to Irvine-based RealtyTrac Inc. Among the states with the highest foreclosure rates were Nevada, Colorado, Connecticut, Florida and California.
Gino Barragan of La Puente, Calif., a lifelong renter, was among the hundreds of people who attended a recent auction looking for a good deal on a foreclosed home.
Barragan, 34, was hoping to find a condo costing less than $300,000. He found only one that he liked within his price range.
"I am willing to wait, but I'm keeping my eyes open," said Barragan, a teacher.
Bruce Norris, president of The Norris Group, a real estate investment company, said now might be the best time to purchase a home, if the buyer plans to live there for 10 years.
"I'm not sure that I wouldn't rather pay today's price with today's interest rate than count on a big discount and the wild card that interest rates might be very different," Norris said.
"It would not shock me to have a 10 percent interest rate by the end of this negative cycle," he said.
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