It’s here – 30 year fixed rates are under 4%. I have 3.875% this morning (8/10/11) with no points and actually a little rebate toward other closing costs on a conforming loan size under 80LTV with excellent credit scores. Rates are so low the lenders are having a hard time readjusting their rate sheets to display the rates under 4%.
Yesterday the markets roller coaster reaction displayed how uncertainthey were about taking the Federal Reserve Open Market Committee's decision to keep the federal funds rate between zero and 0.25% at least through mid-2013. On the one hand, investors welcomed the extra certainty of the statement, compared with the committee's usual ambiguous remarks, but the move also highlights expectations for sluggish growth and a prolonged recovery. In Tuesday's rate decision statement, the committee said it "expects a somewhat slower pace of recovery over the coming quarters than it did at the time of its previous meeting" and said that "downside risks to the economic outlook have increased." That spells major uncertainty.
KEEP TELLING YOURSELF THE FOLLOWING...
Economic outlook assumptions are still based on assumptions of assumptions. Perceptions of reality are constantly skewed. It's a trader's world, we just live in it...
At least for now the reality of a long road to recovery has been restored.The yield on the benchmark 10-year Treasury has fallen to 2.09%at the close of the market after bouncing off its all-time low. In the wake of S&P's historic debt downgrade on the U.S and the growing uncertainty regarding the global economic outlook, a rush to safe havens has been triggered - gold prices hit fresh highs and the US Treasury Bonds flattened their yield curve to new lows. Not only was the U.S. downgraded, but so too were Fannie Mae, Freddie Mac and the entire Federal Home Loan Bank system. Fannie and Freddie supply liquidity to 70% of the mortgage market. Keep in mind, the Fed does not have the ability to control long term mortgage rates.
Buyers shouldn't be complacent. The latest MBA forecast says rates on 30-year fixed-rate mortgages could rise the last three months of this year and continue to go up next year. Freddie Mac's Chief Economist sees the housing market "firming," citing CoreLogic's National House Price Index, up three months in a row. Another study showed the number of homes listed for sale in Q2 at its lowest level since 2007. Home values also fell at a slower pace in Q2 and 19 markets showed quarterly gains! Zillow announced this week that they see the bottom of the market.
Consumers who refinance are continuing to pay down their loans, at least in part according to new figures compiled by Freddie Mac. Roughly 26% of mortgagors engaged in a 'cash-in' refi by bringing more money to the closing table in an effort to reduce principal. In 1Q, 21% of consumers engaged in cash-in transactions. “This is primarily a 'rate-and-term' market, meaning that the typical homeowner is looking to cut their interest rate or shorten their loan term,” said Freddie chief economist Frank Nothaft. Cash-out refi’s accounted for just 23% of the market, compared to 46% from 1985 to 2010.
The $567,500 super conforming limit is coming down to $505,000 October 1st. All lenders are cutting off loan applications 30-45 days prior to that date – so right about now! The lenders are gearing up for more activity and seem willing to work toward funding loans far better than we have seen in the past 3 years!
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