I’m seeing 30 yr fixed rates under 5%. If you are considering refinancing, please contact your loan officer. If you are considering a purchase, contact your agent. It is impossible to know how long these rates will remain this low.
If you need resources, please let me know off-line. (tim@legacyescrow.net)
S-Crow
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57 responses so far ↓
1
pat ruvolo
// Jan 23, 2008 at 10:34 am
Yeah, great! Now see if the banks can acyually loan the money. Let us not forget that you actually have to have a job now! If someone wants a million dollar home in socal (even with your rate) they need to make over 300k per year! God friggin luck, can you say CRASHHHHHHHHHHHHHH
2
S-Crow
// Jan 23, 2008 at 10:42 am
My wife just relayed to me a unique question which deserves its own post:
“How will throngs of homeowners with super low interest rates feel about selling when the time comes? Further, how will this impact the longer term market?”
3
vboring
// Jan 23, 2008 at 10:43 am
S-Crow - from your position, can you tell whether lending standards are materially changing? are purchases going through without down payments or are traditional lending standards the theme of the day?
if banks are competing to sell loans, but only interested in selling them to the small subset of people with $50k+ liquid cash today to throw in the deal, we may see that rates have further to fall.
so, that is the $100 question. what do today’s lending standards actually look like in real life?
i thought rates would kill housing prices, but maybe it will be standards instead.
4
S-Crow
// Jan 23, 2008 at 10:59 am
vBoring,
Excellent question. The lending standards for purchasing has really changed the pool of borrowers. There are still programs and money readily available for the borrowers who need some legroom, per se, in qualifying. FHA comes to mind.
Yes, rates could fall further based upon banks competing for the sterling borrowers, but I would guess that at some point economic factors will eventually weigh in and rates will move up. This is one area where I’ve been terribly wrong in reading interest rate movement. And my friends in the business let me know! :0 It is remarkable to see rates under 5% again for 30 yr fixed programs.
One interesting thing I am seeing is that currently we’ve had some refinance transactions fall through, BECAUSE of falling rates. In other words, people are rescinding transactions because of very heavy shopping. They lock in a rate only to find that the rate has dropped further and can obtain a better deal from another resource.
5
Teacher Greg
// Jan 23, 2008 at 11:01 am
Since the most important thing for a homebuyer is “what do they get for their monthly payment”, perhaps the lower rates will cause some to aim higher. Considering the crap homes in seattle that sell for such high prices I know that I am willing to look at the top of what i can afford to try to find something that might actually have a parking space and more than 1 bathroom. Does this mean that low end/substandard houses now become more difficult to sell? (assuming too that low end buyers are least likely to have a large downpayment and/or good credit).
6
S-Crow
// Jan 23, 2008 at 11:10 am
Teacher,
You are right on the money. In Snohomish Co., there are cases where resale (older) homes are really struggling to sell because builders have dropped prices.
If you have a newer home that may cost a bit more than a resale in a community that a consumer likes, it does come down to the mortgage payment. I know of a 30 yr old house that is over $500K competing with a brand new home for more of a price, but when comparing the actual cost in mortgage (about $100 more a month), people will go for the new home.
It really poses a problem for resale homes competing with new construction out in the suburbs. Going forward if these interest rates don’t spur buying or inventory outpaces sales, then resale homes are really in for long market times. As it is, inventory since Jan 1. has come out of the gates strong.
7
Erik
// Jan 23, 2008 at 11:17 am
S-Crow:
Broadly speaking, and understanding that you aren’t providing counsel here, what are the kind of requirements to get a 30-year fixed at 5%? Are we talking about only perfect credit with at least 20% down? Or is the somewhat lower, perhaps something like well-documented income, good credit, and 5% or 10% down?
I’m still having a hard time understanding what the current standards are and who is considered by the banks to be a good person to lend to.
It may be too difficult for you to generalize, but I’d be interested in whatever you can share.
Thanks,
E.
8
Cougar
// Jan 23, 2008 at 11:23 am
Inventory is still overpriced as far as I see and a lower interest rate won’t help the high purchase price as a long-term appreciation. I see new construction prices reduced meeting the comps in some areas making buying new more attractive. Still homes are overpriced in all areas of Seattle. Each week I see more inventory, reduced pricing, and unfortunately there are those who will learn a hard life lesson in personal financial management. It is a good time to refi and lock into the lower rate “if they qualify”.
9
MarkM
// Jan 23, 2008 at 11:34 am
Overall it’s great that interest rates are lower so it seems that those who are looking to refinance should probably do that. In terms of first time home buyers, I think with the housing prices still being as high as they are it may not help much. Included the one link from CNN’s website today. I know it’s just their prediction and I do think overall Seattle may hold up better then other parts of the country but still feel that we will be getting some correction.
10
MarkM
// Jan 23, 2008 at 11:35 am
Oops.. here’s the link
http://money.cnn.com/2008/01/23/real_estate/merrill_forecast/index.htm?postversion=2008012313
11
Buceri
// Jan 23, 2008 at 11:41 am
S-Crow
I have a 4.875% 15yr loan (10 1/2 yrs left); and I have zero motivation to sell and stay in my area because of that rate.
12
Scotsman
// Jan 23, 2008 at 11:54 am
So you can now buy a depreciating asset with a 5% loan instead of 6%. Who cares, when the “asset” is depreciating at 7% or more per year?
Anyone looking to buy at this time should just throw their down payment in the trash- it’s less hassle, and gives you the same result.
13
AndySeattle
// Jan 23, 2008 at 12:03 pm
Scotsman said:
Anyone looking to buy at this time should just throw their down payment in the trash- it’s less hassle, and gives you the same result.
And it may be mildly amusing! “Weeee! Watch me throw away $80k! Ha Ha!”
14
Angie
// Jan 23, 2008 at 12:08 pm
You’re welcome to give it to me instead of throwing it in the trash. I’d even write you a really really nice thank you note and send it with a big bunch of flowers.
By the way, thanks for the heads up, SCrow. My husband and I have been watching rates fall, to our amazement, and I think we might just jump on it and refi.
15
steve-o
// Jan 23, 2008 at 12:30 pm
I think the lower rates will put positive pressure on house sales (people won’t have to sell because they can refi and a few more houses will be sold to new buyers). But the reason for the lower rates (recession) will have a negative effect (people having to sell because they loose their jobs or fear they will or they’ll retire early etc).
But even if the recession is mild or doesn’t come to pass (yah yah, I know), lower rates will not have much effect. Houses didn’t tumble in Boston, San Diego, and Miami (to name a few) because of rates, they tumbled because they ran out of new buyers. Lowering the rates will not appreciably increase the rate of new buyers. If a twenty something didn’t buy a first house two years ago when rates were around 4% and house prices were 20% lower, then it’s highly unlikely that they are going to buy now.
16
steve-o
// Jan 23, 2008 at 12:35 pm
The low US dollar combined with lower rates may appreciably increase the rate of new buyers from outside the US, however. Not sure what percentage of Seattle houses/condos are sold to non US people though. Probably less than 1% .
17
Ubersalad
// Jan 23, 2008 at 1:20 pm
Lower mortgage rate - another manufactured bailout?
18
Nozferatu
// Jan 23, 2008 at 1:35 pm
I don’t get it…you’re pitching all this bad news and “this isn’t the time to buy crap” and then you turn around and tell us to contact our agents and loan brokers?
You’re losing credibility FAST. What a ridiculous thing to say while you’re preaching other crap???? So how does it benefit us all that the rates went down on overpriced POS homes?
Geez……………………………
19
Nozferatu
// Jan 23, 2008 at 1:38 pm
What’s more, after all that’s been said and done around here and on other forums….I SIMPLY CANNOT BELIEVE there are people, even here, who are EVEN NOW ready to purchase….
All I can say is there’s a huge amount of hyprocrisy going on here.
20
Ira Sacharoff
// Jan 23, 2008 at 1:48 pm
well, if you own an overpriced POS home and unable to keep up with the readjusted ARM payments, you might be able to keep the overpriced POS home by refinancing at a lower rate.
Maybe I’m a Pollyanna, but I didn’t see S-crow’s post as a suggestion that people refinance or buy…the operative word was IF…”if you’re considering”.
21
Matthew
// Jan 23, 2008 at 1:54 pm
Nozferatu,
Utilize your reading comprehension skills. That post was made by S-Crow, not “the Tim”. I haven’t seen him “pitching bad news” as he works in the real estate biz and usually keeps it pretty real and unbiased.
22
Chris
// Jan 23, 2008 at 2:00 pm
Are typical residential loans you see typically assumable?
23
Ubersalad
// Jan 23, 2008 at 2:04 pm
Btw, this is more in reference of refi than purchase.
24
gluten-freek
// Jan 23, 2008 at 2:08 pm
Nozferatu,
The fact that S-Crow is publicizing the current low interest rates gives much more credibility to this site. These low rates are kind of a surprise. I would be much more worried if the bloggers here continued to say “Don’t buy…Ever!” This blog isn’t called neverbuyaseattlehouse.com. Instead, it is dedicated to issues surrounding the housing bubble (which we are in).
As for sending mixed messages, I don’t see it. S-Crow never said “you need to buy now!” He said, “If you are considering refinancing, please contact your loan officer.” If I owned a house, this would be a great time to refinance. As a renter though, I still believe that prices will fall over the next 1-2 years.
I don’t know how this makes anybody a hypocrite. Take your outrage elsewhere please.
25
Alan
// Jan 23, 2008 at 2:27 pm
The price drops occuring just outside of Bellevue/Redmond/Kirkland combined with a sub 5% interest rate is causing me to consider buying. I could get a $400k house with 20% down for a PITI of around $2k. I’m actually finding places I can afford and that I wouldn’t mind living in.
There aren’t many of them though. I want to wait for more selection, but I think this window with this interest rate might be small. If interest rates start to go back up then prices are going to have to continue falling to get me interested again.
26
Nozferatu
// Jan 23, 2008 at 2:36 pm
Just the fact that it is being pitched here is enough in book to say it like it is…
I guess alot of you haven’t paid attention the titles of his other blog entries? I wouldn’t call it “good news…” and certainly not positive light for Seattle.
I think when push comes to shove, the crowd on both sides is generally the same…the people cheering for drops are cut from the same cloth as the scammers and flippers who made out like bandits. It’s all preaching in retrospect.
27
t-town
// Jan 23, 2008 at 2:43 pm
Nozferatu said,
“Just the fact that it is being pitched here is enough in book to say it like it is”…
I don’t see anything being “pitched” here.
It has been years since rates have been this low so it is newsworthy and will help some people out.
28
softwarengineer
// Jan 23, 2008 at 3:11 pm
SOME OF US HOME OWNERS ARE CONTENT WITH HIGHER INTEREST RATES
If you have a paltry principle that puts interest payments just high enough to be bigger than the standard tax deduction: ya get to deduct property tax, charities, sales tax, etc, etc off your income. Sure, ya pay taxes on the interest of cash ya didn’t pay off your house with….but a lower interest rate would upset the system.
I still think owning a home free and clear is somewhat better, but deducting stuff on the long form is fine too, if you have the ready cash to buy your house title at any time and your debt is just a planned tax loophole. Actually, ya kind of break even.
29
newbie
// Jan 23, 2008 at 3:12 pm
What I would like to do is get a 300k loan right now and stick it in a money market account and wait to buy when I feel the market is right. Can this be accomplished?
BTW Nozferatu maybe people would take you serious if your name wasnt taken from an old anime! =) (j/k)
30
Alan
// Jan 23, 2008 at 3:14 pm
Nozferatu,
I wouldn’t call it cheering. I would call it paying attention.
The Fed’s rate cuts have the potential to trigger strong inflation, but they are doing it to stop sudden deflation caused by the credit contraction.
One can place bets on what will happen. Taking out a multi-hundred thousand dollar loan on a house that you think is overpriced is a bet on inflation. Even if real house prices drop during an inflationary period, your real debt also disappears. During periods of high inflation, interest rates are high because lenders do not want to see their loans evaporate away due to the inflation. Taking out a large loan at a low interest rate before a period of strong inflation looks really smart.
On the other hand, if we see a deflationary period then that debt is going to grow quickly with respect to everything else. If deflation occurs, holding onto cash and buying after everything has dropped in price is going to look smart.
The argument here has been that housing is overvalued in today’s dollars and that market will see a deflation. Even without general deflation, most people here are expecting housing prices to drop. The Fed’s actions can change that expectation. Instead of housing prices dropping, the price of everything else (including salaries) could catch up to the overinflation value of housing today. If that happens, you will be able to buy the same house at the same price but at a much higher interest rate on your loan. If you expect inflation, and the Fed’s actions seem to make that more likely, the buying today at a low interest rate makes more sense even if you believe that housing prices in real dollars will fall.
31
vboring
// Jan 23, 2008 at 3:40 pm
Alan,
so which is it? hyperinflation, deflation, or regular old 3% inflation?
the lenders are willing to make the 30 year bet on regular old 3% inflation by lending at less than 5%, so we know where they stand.
if i was going to be here long term and had the cash for a down payment handy, i would consider buying even at silly inflated prices in order to secure such a low interest rate because i think we’ll see inflation above 3% for a while. maybe even above 5%.
in this case i’m using “inflation” to refer to the change in cost of living and incomes, not to the change in the size of the total money supply.
32
Alan
// Jan 23, 2008 at 4:04 pm
I have no idea and I’m not entirely certain I want to place a $300k bet on it.
33
patient
// Jan 23, 2008 at 4:17 pm
“I have no idea and I’m not entirely certain I want to place a $300k bet on it.”
Perhaps this report can make your choice a bit easier?
http://money.cnn.com/2008/01/23/real_estate/merrill_forecast/index.htm?postversion=2008012317
34
S-Crow
// Jan 23, 2008 at 4:29 pm
“Merrill Lynch’s figures are way too pessimistic, and they are unprecedented,” Lawrence Yun, the National Association of Realtors chief economist told CNNMoney.com.
Heck, when Merrill gets their teeth kicked in by all the nutty CDO garbage losses, due to the “unprecedented” run up in housing prices….Lawrence, how else do you expect them to report? Anybody see the terribly funny irony in that statement?
Now that is material for Saturday Night Live, lol!
I think many on this blog are still waiting for the 30-40% increase in median prices that Lawrence Yun discussed for 2007 housing in the Puget Sound region.
35
Everett_Tom
// Jan 23, 2008 at 4:43 pm
Some of his statements kinda remind me of the Iraqi Information Minister.. Remember that guy?
“There are no American infidels in Baghdad. Never!”
and
“I triple guarantee you, there are no American soldiers in Baghdad.”
About the same time a tank rolled by outside..
Yea.. I think Yun’s about at that level…
36
WestSideBilly
// Jan 23, 2008 at 4:52 pm
The_Tim did a post with some quickie photoshopping comparing Yun to Al-Sahef.
37
Hyperbola
// Jan 23, 2008 at 5:01 pm
To answer newbie’s question: Yes, it is possible to lock in an interest rate for your loan synthetically. Just buy CALLs on interest rate indexes. You pay a premium up front, in exchange for any gains in interest rates. The expiration date of the options should be the same as your loan closing date, and the number of options you buy (after calculating deltas) should give you the equivalent interest-rate exposure of borrowing $300,000 at current interest rates.
Of course, this is not simple and may not be very profitable depending on overhead, but it is theoretically possible.
38
Everett_Tom
// Jan 23, 2008 at 5:10 pm
That’s Awesome!.. off to the Archives..
39
david losh
// Jan 23, 2008 at 6:05 pm
I’m very pleased about the interest rates being lower. There is a potential to refinance out of an Adjustable Rate about to reset. These mortgages will be passed along by rent to own, or lease purchases.
The housing industry lives to see another day. In that regard low fee brokerage or craigslist will become more viable. You’ll be buying money more than houses, or as you say buying debt.
The lenders have a higher set of performing loans with the ax that they can call those loans. The long view is that these loans will need to be gotten out of the original lender’s name at some point.
40
Markor
// Jan 23, 2008 at 6:51 pm
Even if the price/rent ratio is lower than the 15-year historical average? (That is, the price is cheap compared to renting a comparable place.) Lots of houses on the Eastside qualify as cheap.
41
Markor
// Jan 23, 2008 at 6:54 pm
Plus CD rates on savings are going to be in the toilet.
42
Rhonda Porter
// Jan 23, 2008 at 6:55 pm
Under 5% didn’t last long today. One of the lenders I work with had 6 rate changes today (3 rate sheets from one lender in one day is a lot). In fact, rates are back to low 5’s for a 30 year fixed conforming. And yes…that means credit scores 680 or better and 20% equity. Today was wild…so was yesterday…who knows what tomorrow will bring.
43
Markor
// Jan 23, 2008 at 7:14 pm
Good post Alan.
But effectively not, if your nominal wages are stagnant (your real wage drops) and you don’t have money invested to take advantage of the higher interest rates.
Unless the deflation is massive, in which case you better have that cash in the form of gold you buried in the ground, and not just bits on a bank’s hard drive.
I agree, and buying today makes sense as well if you expect massive deflation, unless you’re confident you can fairly convert those gold coins hidden in the ground into a house later.
The case for waiting to buy is what remains: moderate inflation or deflation, interest rates don’t rise too much, and Seattle doesn’t become (or hasn’t become) too popular, so that a price bubble can deflate.
44
Markor
// Jan 23, 2008 at 7:18 pm
To be comparable apples-to-apples, all the rates should be for no cost loans. A sub-5% rate can really be 6+% when, say, 4 points are charged, plus misc. fees that are not factored into the APR. The lowest no-cost rate I’ve seen since 1990 is 5.5% circa 2003.
45
patient
// Jan 23, 2008 at 9:29 pm
If you are tempted to buy a home now you should at least consider this risk: You buy a home today with 20% down and Merrill Lynch is proven right and we have a 20-30% price correction in the next two-three years. If you now need to move of any reason ( relocation, loss of income or other ) you are upside-down on your mortgage. You can now either bring money to the table if you have any to save your credit score or you can foreclose and trash your credit score. In both cases you have wiped out your downpayment, in one you have also likely depleted your savings and in the other you have trashed your credit score. Another result? Back to renting for many years.
46
synthetik
// Jan 23, 2008 at 11:42 pm
I wouldn’t buy a home at 0% interest right now. B52-Ben can drop rates to 0 and it won’t solve anything. Why would you buy something today when you fear it will be worth -much- less tomorrow.
You’d have to be a complete and utter moron *cough* david louse *cough* right now.
47
Markor
// Jan 24, 2008 at 12:05 am
Merrill Lynch may have to reassess that prediction given the lastest info, namely lower interest rates (good for buyers, bad for renters/savers) and the concomitant inflation (ditto). Homes that used to be 20% overpriced may now be only, say, 10% overpriced.
48
economist
// Jan 24, 2008 at 2:19 am
well, if you own an overpriced POS home and unable to keep up with the readjusted ARM payments, you might be able to keep the overpriced POS home by refinancing at a lower rate.
Unfortunately that POS is now worth less than the loan balance, so you can’t refinance. Also many FB’s wouldn’t qualify on the basis of documented income either.
Even if the price/rent ratio is lower than the 15-year historical average?
Nice footwork. The “15-year historical average” has been grossly inflated by the bubble prices of the last 5 years. Where’s the price/rent lower than the historical median for the last 10 years before the bubble, or even for the whole 15 years up to now? And even that is high when you compare it to the whole post-WWII period, never mind the 1930’s.
49
Angie
// Jan 24, 2008 at 7:11 am
To be comparable apples-to-apples, all the rates should be for no cost loans. A sub-5% rate can really be 6+% when, say, 4 points are charged, plus misc. fees that are not factored into the APR. The lowest no-cost rate I’ve seen since 1990 is 5.5% circa 2003.
Yesterday, for a brief and shining moment, I saw a few credit unions posting 5.25% or lower with no point buy-downs.
We jumped and locked yesterday. When the dust clears we’ll be down to 5% from 6.25% and save $200/month on P&I. We’ve got the cash to pay closing costs out of pocket and should recoup those costs in a year or so.
The lower monthly payment means we should easily be able to rent this house out for enough to cover PITI and maintenance when we’re ready to move on in a few years….
Thanks again for the notice, SCrow!
50
S-Crow
// Jan 24, 2008 at 8:13 am
Angie,
The credit is yours. You took action. But, if you are really feeling generous, I like 12 oz. single shot mocha’s. :)
51
ray
// Jan 24, 2008 at 8:55 am
Just speaking for 500 Realty we have had a surge in buyer activity this last 2 weeks. More and more people entering our data base that are actively out looking. Nice to see a bump in this activity. It could be seasonal but I suspect with so many homes down 10-20% and the low interest rates the interest is coming back. Not to mention all the new transplants here from Utah, Idaho, and Missouri that I have met who took jobs at Boeing.
Most likely a temporary blip because we all agree home prices must come down! Then there is Reno. A death march in trying to get things sold. No economy and No Californians to buy their homes.
Ray Pepper
http://www.500Realty.net
52
patient
// Jan 24, 2008 at 9:23 am
“Merrill Lynch may have to reassess that prediction given the lastest info, namely lower interest rates (good for buyers, bad for renters/savers) and the concomitant inflation (ditto). Homes that used to be 20% overpriced may now be only, say, 10% overpriced.”
If the low interest rates has taken the price pressure off somewhat an increase will put it right back. Meaning there is really a very limited risk in waiting as long as the inventory is not dropping dramatically. The potential upside of waiting however is huge. To buy now has the opposite odds, huge risk and very limited upside. The main bubble driver was that lenders gave money to people who couldn’t afford it. That has changed and no stimulus package or interest rate level will reinstate that behaviour.
53
Affluent Bitter Renter
// Jan 24, 2008 at 9:56 am
“Merrill Lynch may have to reassess that prediction given the lastest info, namely lower interest rates (good for buyers, bad for renters/savers) and the concomitant inflation (ditto). Homes that used to be 20% overpriced may now be only, say, 10% overpriced.”
This ignores what is happening to credit standards - a bank isn’t going to lend out money (even if it can borrow the money from the Fed at 0% interest), unless it thinks it can get paid back. So, down payments of 20% (30% in sharply declining markets), requiring strict documentation of income, a requirement that you sell your previous house before you buy your new one, etc., will massively reduce the pool of potential buyers.
A lower interest rate will benefit only those purchasers who can meet the new, strict credit requirements.
54
Markor
// Jan 24, 2008 at 11:33 am
What is the interest rate after factoring in the closing costs? That’s why I think no-cost rates should be used, to compare apples-to-apples.
55
WestSideBilly
// Jan 24, 2008 at 11:47 am
It appears to me that the r’tards in Washington DC are going to do whatever it takes to hide the recession until after the election. Deficit stimulus packages, bailouts of CDO/CDS companies, whatever it takes. I suspect the pressure will be on the fed to keep interest rates low (or make them lower) regardless of impact until 2009.
56
Nell Plotts
// Jan 25, 2008 at 9:34 am
Cribbed from http://housingdoom.com/
STATEMENT OF OFHEO DIRECTOR
JAMES B. LOCKHART ON CONFORMING LOAN LIMIT INCREASE
“We are very disappointed in the proposal to increase the conforming loan limit as we believe it is a mistake to do so in the absence of comprehensive GSE regulatory reform. To restore confidence in the markets we must ensure that the GSEs’ regulator has all the necessary safety and soundness tools. ”
Yesterday Chairman Dodd talked about moving a GSE reform bill early this year. We are ready to work with him and the Senate Banking Committee. We will also be working with Fannie Mae and Freddie Mac to ensure that any increase in the conforming loan limit moves through their rigorous new product approval process quickly and has appropriate risk management policies and capital in place.
For those of us who feel that increasing the conforming limit is, in fact, a BAD Idea, we can take comfort from an article by Herb Greenberg of Marketwatch, who points out that there aren’t likely to be a lot of borrowers who qualify anyway:
–New borrowers still have to qualify. Fannie/Freddie is full doc only primarily.
–Without stated income for wage earners, it’s tough to qualify for a $700,000 loan.
–In 2005 to 2007, 70% of all jumbos were stated income for a reason: Ninety percent of all stated income borrowers lied about their income to qualify.
–Refi’s will still have trouble due to values dropping in jumbo areas by such a large amount. These are the ones that really need the help.
57
AndySeattle
// Jan 29, 2008 at 6:59 pm
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