Mortgage Rate News

Right now, there is considerable debate concerning whether or not now is the right time to buy a home. I bought a new home last year, since the timing was right for my family. If the timing is right for your situation, you might consider now a good time to buy a home. CNN Money offers this encouraging view of the housing market:

“Homes became more affordable because median income and interest rates remained about the same throughout the country, as home prices continued to fall,” said Gopal Ahluwalia, an NAHB economist.

With home prices down, and a supply of homes on the market, you are more likely to find a good deal. On top of that, you can get an interest free loan for part of the home in the form of a tax credit — if you are a first-time homebuyer.

Despite the benefits listed above that can come when you buy a home now, many people are hesitating. The two main reasons for this hesitation include:

1. Trying to time the housing market. In this scenario, some would-be homebuyers try to wait until the bottom, when home prices are their lowest. They try to time it so they buy at the trough. The problem with trying to time the housing market is that it is very difficult to do — the chances of you doing this successfully are very slim. Conditions are good right now; even if they get better, they won’t be that much better.
2. Worries that home prices will continue to decline. The problem with this thinking is that it view home ownership as an investment, rather than a purchase. Also, it discounts the idea that over time real estate generally appreciates in value. If you plan to stay where you are at for at least five to seven years, chances are that home prices will be rising when you decide to sell. If you are looking to sell in less than five years, than maybe now is not the right time to buy a home, since it could take a while for this down cycle to sort itself out.

Overall, if you want to buy a home that your family can stay in for a while, now is a pretty good time to do it. Home prices are lower than they have been in a long time, and mortgage rates aren’t very high.

Tags: buy a home, right time buy home, home mortgage loan, tax credit,
mortgage loan blog, home prices

Mortgage lenders Fannie Mae and Freddie Mac are leading the charge lower on the stock market today. After the stock market saw some good success last week, things are changing a bit. CNN Money reports on one of the reasons that Fannie and Freddie are floundering again:

The financial newsweekly Barron’s quoted an unnamed Bush administration official as saying that government officials don’t expect the two firms to be able to raise needed capital from private sector investors to cover expectations of future losses from rising defaults and foreclosures of the trillions in mortgages they own or guarantee.

This is bad news for shareholders, who could see the same sorts of losses that Bear Stearns shareholders saw when the government facilitated that company’s “rescue” by JP Morgan. The good news, though, is that the government really plans to keep keep the two government sponsored enterprises afloat, so that a complete collapse of the two companies does not cause true chaos in the financial sector.

The news that Fannie Mae and Freddie Mac may soon need that bailout package spooked Wall Street investors, since it appears to be a sign of continued turmoil in the financial sector. However, the fact that the government is standing behind the two largest mortgage lenders in the country is providing a measure of hope, since the companies won’t be allowed to fail and bring what remains of the economy with them.

All that can be done now is to hope that the government’s current policy of supporting the mortgage giants until the economy rebounds will actually work. In the meantime, investors will need to ride out the stock market, determining whether they can stomach another round of retreats by shares.

Disclaimer: I am not an investment professional. Nothing in this piece or on this Web site should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional. All investment comes with the risk of loss. You are responsible for your own investment decisions and any loss that may result from your decisions.

Tags: mortgage lenders, mortgage loan blog, home mortgage loan, Wall Street,
Fannie Mae, Freddie Mac

One of the questions that many are asking right now is this one: When will the housing market bottom?

With the foreclosure rate still rising, and with new homeowners upside down on their mortgages, it is no surprise that people are rather worried that the housing market still hasn’t found a bottom yet. Quite recently, thought, Alan Greenspan offered his own view of when the housing bottom will be reached.

Er, sort of.

While he was quite clear about the problems faced by Fannie Mae and Freddie Mac (”Bad”), he showed a little more of the customary Greenspan-speak when talking about the housing market bottom, reports Market Pipeline:

“Home prices in the U.S. are likely to start to stabilize or touch bottom sometime in the first half of 2009,” he said in an interview. Tracing a jagged curve with his finger on a tabletop to underscore the difficulty in pinpointing the precise trough, he cautioned that even at a bottom, “prices could continue to drift lower through 2009 and beyond.”

So, the housing market bottom could be reached in early 2009. Or later.

Thanks for clearing that up.

In the end, though, when the housing bottom is reached is something that most people aren’t overly concerned with. They are more worried about things like making mortgage payments and how they are going to deal with the fact that inflation continues to rise. Forget “core” inflation. It’s the food and energy prices inflation that affect most Americans on an everyday basis. And food inflation, especially, is running away at a rather rapid pace.

In the end, if you can stay in your home, that is probably the best option. The housing market will eventually recover (although you are unlikely to score big like so many did during the last housing boom), and home prices will start to rise again. If you can ride things out for the next five to seven years, you will probably be okay.

But that isn’t much comfort for those whose ARMs are resetting — and who can’t get a refinance.

Tags: upside down mortgages, housing market, home mortgage loan, housing bottom,
Alan Greenspan, mortgage loan blog, core inflation