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Saturday, August 26, 2006

Mortgage Rates Fall to Five-Month Low

Slower economic growth and the Fed hitting the pause button have helped bring fixed mortgage rates to a five-month low.

RISMEDIA, August 25, 2006—Mortgage rates declined for the seventh time in the last eight weeks, aided by last week's better-than- expected reading on the Consumer Price Index. The average 30-year fixed rate mortgage fell to 6.48%, the lowest since March 29. According to Bankrate.com's weekly national survey of large lenders, the 30-year fixed rate mortgages had an average of 0.32 discount and origination points. The average 15-year fixed rate mortgage, popular for refinancing, dropped by a similar amount to 6.19%. On larger loans, the average jumbo 30- year fixed rate declined to 6.74%, Adjustable rate mortgages also backtracked. The average 5/1 adjustable rate mortgage slid to 6.24%, and the average one-year ARM retreated to 6.00%. Although inflation remains a threat, bond investors are confident in the Fed's forecast that inflation will recede as the economy cools. Bond yields and fixed mortgage rates both reflect some concern on the part of investors that the economy will slow too much, causing the Fed to cut rates at a later date. Fixed mortgage rates are closely related to yields on long-term government bonds. Fixed mortgage rates have fallen nearly one-half of a percentage point since the Fed last hiked rates at the end of June. At the time, the average 30-year fixed mortgage rate was 6.93%, meaning that the monthly payment on a loan of $165,000 was $1,090. With the average 30-year fixed rate now 6.48%, the same loan originated today would carry a monthly payment of $1,040.74. With the recent pullback, fixed mortgage rates remain an attractive refinancing alternative for adjustable rate borrowers facing sharp payment adjustments.

On The Fence?

As a Realtor I find many of my clients waiting for prices to go down which they have. Many people say to me "You probably don't want prices to go down?" My response suprises them. I think the market could not and should not substain these prices. I too was was a first time buyer.

I just read an acrticle that stated the rates have gone down the last 4 weeks in a row. I now read an acrticle that states it is a 5th week which I will post in my my next blog. I believe this comes from Federal Reserve not raising the rates.

I was at the Dr. office the other day and they all know I am a Realtor and one gal said "Wow the rates are so high we can't buy" I thought were did she get that idea?

When you read a newspaper article read beyond the the title. I often find when I see articles, I find out after I read after the first paragrah there is more to the story. In my opinion this is a great time for buyers to get into the market especially with the rates and so much inventory. It is also good for sellers as long as they are in tune with the market this also makes sense for them.

I am 100% right? I cant say yes or no I can only say it is my opinion. If you would like more information or would like to post your ideas please feel free to do so.

Best Wishes,
Bridget

Thursday, August 10, 2006

Homes Sales To Hold Fairly Steady For Balance of Year

(August 8, 2006) – The housing market is in a process of stabilizing with little change in overall sales volume expected over the balance of the year, according to the National Association of Realtors®.David Lereah, NAR’s chief economist, said the indicators already are leveling-off. “We’ve seen a minor easing in closed transactions of existing-home sales, and a slight increase in the leading indicator of pending sales based on contracts,” he said. “New-home sales and housing starts have been fluctuating, so the overall market is stabilizing.”“On one hand is the rise in mortgage interest rates that has slowed sales in many higher-cost markets, and on the other is 3.8 million new jobs over the last two years,” Lereah said. “This means many potential home buyers could enter the market in the foreseeable future, especially in moderately priced areas where affordability conditions remain favorable. In fact, this is already occurring.”Although sales will be fairly steady over the balance of the year, declines since last fall mean annual totals will be lower. Existing-home sales are forecast to fall 6.5 percent to 6.61 million this year, the third highest on record after 2005 and 2004. New-home sales are projected to drop 12.8 percent in 2006 to 1.12 million, also the third best on record. Housing starts should be down 9.1 percent to 1.88 million this year.The 30-year fixed-rate mortgage is running nearly a percentage point higher than a year ago but is likely to rise very slowly in the months ahead, reaching 6.9 percent in the fourth quarter.NAR President Thomas M. Stevens from Vienna, Va., said current market conditions are favorable for buyers. “The rise in housing supply is the biggest change in the market over the last year,” said Stevens, senior vice president of NRT Inc. “Clearly, this has taken pressure off of home prices and has significantly widened choices for buyers. At the same time, sellers are getting excellent returns – but in this competitive environment they need real estate professionals more than any time since the 1990s to market their homes and maximize value.”The national median existing-home price for all housing types is forecast to grow 4.3 percent this year to $229,000, while the median new-home price is expected to rise only 0.5 percent to $242,100 as builders offer incentives to clear unsold inventory.The unemployment rate should average 4.7 percent for the balance of the year. Inflation, as measured by the Consumer Price Index, is likely to be 3.5 percent for 2006, while growth in the U.S. gross domestic product is projected at 3.5 percent. Inflation-adjusted disposable personal income is expected to grow 3.0 percent this year.

Tuesday, August 08, 2006

The Federal Reserve Does Not Raise The Rate

By Martin Crutsinger
ASSOCIATED PRESS
11:28 a.m. August 8, 2006

WASHINGTON – The Federal Reserve on Tuesday left a key interest rate unchanged, marking at least a temporary pause in what had been the longest unbroken stretch of Fed rate increases in recent history.
The Fed's rate-setting committee voted 9 to 1 to leave the federal funds rate, the interest banks charge on overnight loans, at 5.25 percent. It was the first time the Fed had met and not raised rates in more than two years.
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However, the relief for millions of business and consumer borrowers could be only temporary. The central bank said that “some inflation risks remain,” holding out the possibility that it could resume raising rates at future meetings.
The Fed decision means that banks' prime lending rate, the benchmark for various consumer and business loans, will remain at 8.25 percent. Before the Fed started raising rates in June 2004, the prime had been at 4 percent, its lowest point since 1958.
In 17 consecutive meetings stretching from June 2004 through June 2006, the Fed boosted the funds rate from a 46-year low of 1 percent to the current 5.25 percent, all in an effort to slow the economy enough to keep inflation under control.
The Fed's decision to finally pause had been widely anticipated given the signs of a spreading economic slowdown, in part reflecting the impact of the Fed's long string of rate hikes.
Overall economic growth slowed in the spring to a rate of just 2.5 percent, less than half the pace of the first three months of the year, and on Friday the government reported that the unemployment rate in July rose from 4.6 percent to 4.8 percent.
In explaining its decision, the Fed noted the slowing economy, saying, “Economic growth has moderated from its quite strong pace earlier this year.”
The Fed said this moderation in part reflected a gradual cooling of the housing market, the economic drag caused by rising energy prices and the lagged effects of previous Fed rate hikes.
But the central bank also signaled concerns about continued inflation risks, although it also said “inflation pressures seem likely to moderate over time.”
The central bank said that “the extent and timing of any additional” rate hikes that may be needed will depend on incoming data on both inflation and economic growth.
For the first time since Ben Bernanke took over as chairman in February, the Fed decision was not unanimous. Fed board member Jeffrey Lacker dissented, saying he would have preferred another quarter-point rate hike.
Many analysts believe the pause in rates will be short-lived as Fed policy-makers confront continued inflation pressures in the form of a relentless surge in energy prices and new data that wage pressures are intensifying.
The Labor Department reported Tuesday, just before the Fed policy-makers began meeting, that productivity slowed sharply in the spring while labor costs rose, a combination that could spell inflation troubles down the road.
Many economists believe the Fed will follow the August pause with one and possibly two more quarter-point rate hikes in the fall. The Fed's next meeting is Sept. 20.
Expectations of a pause in the rate hikes had been raised by Bernanke when he delivered the Fed's latest economic forecast to Congress last month, saying the central bank believed that a slowing economy would lower inflation pressures over the next two years.
At 5.25 percent, the funds rate, which is the overnight rate that banks charge to loan other banks, is at its highest point in more than five years.
The funds rate is the Fed's main tool for influencing economic activity. Higher interest rates slow borrowing for homes, cars and other items and in this way depress economic growth.