Posts Tagged ‘utah mortgage’

Markets: We’re trading in a very narrow channel this week, and no news is good enough or bad enough to get us out of it.  Our benchmark 4.5% FNMA 30-year bond is off 3bps, meaning it’s flat for all intents and purposes, exactly as it has been for the past week.  We successfully weathered another $12 billion in bond auctions this week without a blip.  This is remarkable, and ought to be telling smart people something.  More on that below.

Analysis: I want to point everyone at a really interesting article from the Wall Street Journal about what’s coming in interest rates on mortgages when the Fed stops buying mortgage-backed securities.  For a long time now, conventional wisdom has held that the only think keeping interest rates this low (5% as of this writing, and a fraction lower in some instances) is the presence of the Fed, doling out huge chunks of money to keep the mortgage market stable.

But look, people, this can’t be right.  Market players aren’t stupid.  They can see the same things everyone else can, and if they really thought that the true market level – minus the Fed – was 6%, we’d be seeing a move in that direction right now.  Instead, what we see is…nothing.  And that’s not because the Fed is buying everything in sight, either.  The markets just don’t believe that there’s going to be a big rate move on April 1.  I don’t believe it, either.

Action: That means that the true market mover right now is the new home purchase market, because the $8000 tax credit for first-time homebuyers and the $6500 credit for long-time owners will expire on schedule.  Houses must be under contract by April 30, and the close deadline is June 30.  If you’re in this market, now is the time to move.  Short sales take an average of 40 days to get completed, which leaves us about a month of extra window in case something goes kablooie.  Which in this market, folks, it does with regularity.

Been saying it for a while.  Do not wait.

Markets: The collapse of the dollar has driven rates slowly but surely to levels we haven’t seen in six months.  Seriously.  It would not be impossible to find 4.625% on some 30-year fixed loans, and we’re closing a 5/1 ARM tomorrow at 3.875%.

Analysis: Well, exactly a year ago today we watched as the mortgage market exploded and rates dropped by more than a full point in two hours.  I remember this well, as I logged on in a spare moment from a condo in Florida, where I was supposed to be on vacation, and spent the next two solid days on the phone because of it.  Not that I’m complaining, exactly, although it was surely most inconvenient.

But this is gratitude week, and I am spending it more or less being grateful.  I am truly grateful for all of you and your willingness to pass along the information I share here.  I depend on referrals for all of my business, and I don’t forget that you have to be thrilled with what you get from me, or you won’t refer me – and I wouldn’t want you to.

We’ll be making some changes to our operations here over the next couple of months that should improve our communications and expand the number of available channels for it, so that you can get this alert however suits you best, whether by Twitter or Facebook or email or text or what have you.  Watch for that, and in the meantime, give me suggestions on how I can make this alert more useful to you.  In turn, let me ask you to forward it on to someone – just one person – that might enjoy it, so that the reach of good, solid market information can grow.  Thanks in advance.

Action: And here is a suggestion from alert reader AmyJo in which she suggests that I add an action section to RateWatch, so here it is: if you’re interested at all in potentially refinancing or purchasing, hit reply to this email and let’s start the conversation.  Average lead time from first discussion to close is running at a career-high 84 days now.  It takes time to get things in place to qualify in this environment.  Do not wait and miss out, and yes, we’re still working in the holidays.  Let us work for you.

Cj

Chris Jones

Markets: The bond market has reversed itself the last two days and is headed higher once again.  It has broken through a couple of lines of resistance and is now trading at what my sources say is “an unsustainable level”.  More on that below.  Current levels on the FNMA bond correspond to 30-year fixed rates below 5%, though not very much below.  Still.

Analysis: What is the definition of “unsustainable”?  If you ask me, unsustainable means “you can’t keep doing this forever”.  These days, it seems to also mean “you can’t keep doing this for long enough to matter,” as when a football team grabs an early lead through fancy trick plays, but shortly runs out of those and cannot sustain the advantage.  It matters which we’re talking about, because the bond market certainly is in Unsustainable 1 territory, but not – again, just as clearly – in Unsustainable 2 territory.  We know this because we’ve been here before.

So we’re here, and we’re here long enough to matter, IF.  It is absolutely true that most lenders (and this is especially true with the new federal babysitting regulations) cannot react fast enough to help you take advantage of rates that will be abnormally low for only a few hours.  It is also true, however, that some lenders can, and the number that have that capability can be increased by your timely action.  DO NOT WAIT FOR RATES TO HIT YOUR TARGET ZONE BEFORE YOU START TALKING TO YOUR LENDER.  That’s not going to work, people.  For most, a couple of hours is just not enough time to get all the documents whizzed back and forth before a lock becomes possible, not with rates moving with this kind of volatility.

Since I already used the running analogy last time, let me use a hunting one here.  If you think you’re going to get the perfect shot on a deer by waiting for the deer to get in the right area, then going in after it, you’re crazy.  The way to make sure of a good shot is to get there first and wait.  Similarly, the way to make sure you get the rate you want – and 15-year rates are in the very low 4s right now, for instance, with 5-year ARMs in the mid 3% range – is to get your documentation together and go over it with your lender BEFORE you need to shoot.  That gives you the very best possible chance to get exactly what you want.

These days, a couple of extra days is a godsend.  Get moving now, and give yourself a break.

Cj

Market: We’re flat.  Yesterday we were up 34 bps.  This is a trend, now, and not a blip.  There is consistent pressure for mortgage-backed securities (mbs) to rise to the 100- and 200-day moving averages, which we are sitting on right now.  That means rates holding steady at their current very low levels, between 5% and 5.25%. [Disclaimer: YOUR rate might be higher, and it might be lower.  That depends on a lot of things, not just the current market.  Get a pro to check for you.] [Incidentally, I am a pro.  <grin>]

Analysis: As usual analysis is complicated.  This morning’s data (ISM and pending home sales) were better than expected, which for months now has meant that mbs would retreat and stock would rise.  But for the past two weeks, that has not been so.  It’s not the Fed, this time – the Fed is buying mbs, of course, but buying them in ever-smaller quantities, and buying mostly the 5% and 5.5% coupons, meaning that they are providing no pressure for rates to go below 5%.  That pressure, what of it exists, is coming from the broader market.  And frankly, people, it makes no sense.

There’s no big move to the upside.  There is no immediate prospect of rates dropping back into the 4.5% range.  But still, there is this persistent pressure on mbs pricing that is holding things right where they are, instead of losing ground, as analysts expected (myself among them).  I wrote last week that the only thing I could point to was back-bench sentiment that the economy really wasn’t bottoming out and that there were worse things to come, but as time goes on that argument is less and less persuasive to me.  So I don’t know what it is.  Ideas?  What do you think?

Cj

Specifically, Utah County.  Our latest batch of appraisals in the Utah County area have come in about 10% lower than projected.  Since we run all of our appraisals through the best AMC on earth, 1st Choice AMS, we know these are not appraiser-specific values.  These are across the board, almost all properties, all appraisers and all loan types.

This is a warning for those of you that do business in Utah County.  Expect your values to be low.  We have not noted this problem in Salt Lake County, so at the moment we think it’s a phenomenon restricted to Utah County and southern environs.

Here’s our take on why this is: everyone knows that the $8000 first-time homebuyer credit is expiring in 90 days.  In Utah County, with its two large universities spewing forth about 10,000 graduates a year, there is an abnormally large population of first-time homebuyers.  That means that for the next little bit, that cohort, being especially active, is going to have disproportionate impact on home values.  When shopping for the thousands of properties out there, which is going to be most attractive to you: $198,000 or $204,000?  It’s human nature.  If the houses are even reasonably similar, the lower price is going to win, but here you also have the famous $1.99 effect working against you.

One of our most recent appraisals reaffirms this rather directly.  The house appraised for $203,000.  There were two comps in the low $200k range, each had been on the market for 300 days or longer.  There were 2 comps in the high $190k range, and their time on market was 42 days and SEVEN days.  The stuff that’s selling, people, is the stuff right under the K, at $295k and $195k, so if your house wants to appraise at $310k or at $210k, you might find that you’re in trouble.

Just a word to the wise.