June was a record month for Arizona housing. 10,868 home sales occurred in June of 2011, surpassing the previous record of 10,252 units sold in June of 2005.
June was also a record month for home leases of Single Family Residences. 2,280 new leases were executed last month, beating the previous record of 2,002 leases in July of 2008.
Typically home sales and leases go in the opposite direction, but with all the short sales and foreclosures occurring – there are a lot of people changing residences.
Arizona short sales also set a record, contributing to 2,734 sold units – up 33% from May.
We are still very much in a market fueled by investors. 41% of Single Family Residences sales were purchased in cash. 29% with conforming loans, 24% with FHA loans, 4% with VA loans, and 2% with others.
Lastly, the median home price in Arizona increased in June to 111,000 from 109,000 in May.
(Arizona Housing statistics – breaking records – from Reggie Green @ Crossline Capital)
The bond market finished last week 16 bps down, pushing mortgage rates/pricing slightly higher.
Right now a well qualified borrower can get:
30 year fixed for 4.49% paying .6 pts, 4.625% paying 0 pts, 4.75% paying 0 costs
15 year fixed for 3.75% paying 0 pts, 3.99% paying 0 costs
7/1 ARM for 3.25% paying .9 pts, 3.5% paying 0 points, 3.75% paying 0 costs
30 year fixed FHA for 4.25% paying . 4 pts, 4.375% paying 0 pts, 4.5% paying 0 costs outside of FHA upfront MI
15 year fixed FHA for 3.5% paying . 6 pts, 3.75% paying 0 pts, 3.875% paying 0 costs outside of FHA upfront MI
30 year fixed VA for 4.25% paying .33 pts, 4.375% paying 0 pts, 4.49% paying 0 costs outside of VA funding fee
The markets are continuing to be fueled by the possibility of defaults in Europe and Congress working on increasing the debt ceiling. Even if the US deal gets done, America’s debt rating could lower from AAA.
The market is volatile right now so you could see large swings in mortgage pricing even during the same day. I still believe that rates will not go lower than the 4.375% – 4.5% 30 year fixed rates that we have seen for the past couple months.
Today’s Mortgage Rates.
Homes loans for Arizona, California, and Colorado.
MORTGAGE RATES DROP FOR 2nd STRAIGHT WEEK; BUT BE CAUTIOUS:
The bond market finished last week 31 bps up, pushing mortgage pricing down for the 2nd consecutive week.
A well qualified borrower can get a 30 year fixed at 4.375% for about .6 points, and a 4.5% with 0 points. 15 year fixed rates at 3.75% are now at 0 points, and 20 year fixed rates at 4.25% are at 0 points.
Even though rates and pricing are improving, we are seeing a benchmark rate that the market is not going below. For example, you can get a 4.375% for .6 points, but then if we go down to 4.25%, the pricing goes up to over 2 points. The cost difference is so large that for most loan amounts it makes no sense to pay that much more in fees. The same goes for 15 and 20 year fixed rates. There is a large pricing increase below a 3.75% 15 year fixed and a 4.25% 20 year fixed.
This will be a pivotal week for the U.S. stock market which means this could be a volatile week for interest rates. 20% of the S&P 500 are reporting earnings and 50% of the DOW Jones are reporting earnings this week.
Many experts believe that corporate earnings will be quite good, but many investors are uneasy about the debt ceiling negotiations in Washington. If the debt ceiling gets resolved and corporate earnings are positive, look for the stock market to shoot up, which will usually cause rates to rise.
MORTGAGE RATES DROP – BACK TO LOWEST LEVELS OF 2011:The bond market finished last week 69 bps up, pushing rates back down to the lowest levels of 2011.
We are in a very volatile market right now. Pricing / rates can change a lot in a small amount of time. In the week before last, rates rose as high as 4.625% and looked like they were primed to go even higher. Then the June national employment report came out and ended up being much gloomier than expected. This pushed investors out of stocks and into bonds, and caused rates to drop back down.
I don’t foresee rates going lower than 4.375% on a 30 year fixed.
My suggestion is the same as always – if you like a loan’s pricing – lock it.
Right now 30 year fixed par rates are back to 4.375%. 15 year fixed rates start at 3.75%. 5/1 ARMS start at 2.75%.
CONSUMER SENTIMENT TOWARDS THE HOUSING MARKET:Fannie Mae’s monthly national survey reveals some interesting things regarding the current consumer sentiment towards the housing market.
For the 2nd time in 13 months, consumers projected a decline in the values of homes.
Consumers expect higher rents
and consumers expect mortgage interest rates to remain very low.
A large majority feel that this is a buyer’s market. 66-69% of the consumers surveyed thought it was a good time to buy. While only 11% surveyed thought it was a good time to sell.
With home prices low and mortgage rates low, I definitely agree that this is a buyer’s market.
There is so much information out there regarding mortgage rates, costs, etc., it is very easy to see why some consumers get confused about mortgage pricing. This blog will attempt to explain to you mortgage pricing and how it applies to you and your clients.
WHAT IS THE FIRST QUESTION EVERY LOAN OFFICER GETS ASKED?
WHAT IS YOUR RATE? is by far the most common thing a potential client says first.
Unfortunately, there is not a simple answer to this question. As a mortgage loan officer, we can offer you a variety of different rates relative to the costs you want to pay.
The lower rates cost more and as we bring the rate higher, the closing costs go down. For example, when putting together a quote for a customer, I do something like this:
30 YEAR FIXED AT 4.375% – costs $4,400
30 YEAR FIXED AT 4.5% – costs $2,300
30 YEAR FIXED AT 4.625% – costs $0
When deciding what rate works best for you, you are going to want to consider how long you will be in the loan. If you plan on selling the home in 6 months, you want to keep your costs low because you don’t have the time to recoup the costs. If you plan on staying in the loan for 30 years, typically it makes more sense to pay a bit more in costs at the beginning of the loan.
WHY DO LOWER RATES COSTS MORE?
Whether you realize it or not, your loan is almost always sold immediately after the loan is completed.
The reason higher rates cost less is because a lender is making a higher premium when selling your loan on the secondary market. Thus they can charge you less and still be profitable. A lender can also do a 0 cost loan. They can do this by making enough on the sale to cover all third party charges like title, escrow, and appraisal and still be profitable.
WHY DO MORTGAGE COMPANIES DIFFER IN PRICING:
For the most part, mortgage rates and pricing should be similar if you are rate shopping. If you are rate shopping and one company is vastly superior over the others, it may be to good to be true.
Even though rates / pricing are similar between companies, they will not be the same for a variety of different reasons.
1# – Each company has a different level of profit they are making on each loan. Some companies make less on each loan, but strive to do a lot of volume.
Some companies try to make more on the loans they do fund, even though they may lose some business with rate shoppers.
A lot of times the profitability of each loan has to do with the lender’s overhead. If you have a large company that does a lot of advertising, has health insurance for all of their employees, etc, your loan is typically going to be more expensive because you have to pay for these things somewhere.
2# – Loan officers have different pre-negotiated levels of compensation. With the new lending laws that went into place in April 2011, each loan officer must have the same level of pricing on all loans. This can only change when charging upfront fees.
For example, I make 1% on every loan I do. Regardless of anything about the loan, if I fund the loan, I make 1%. Some loan officers may have a negotiated price of 1.5%. Some maybe 2%.
If a loan officer’s company prices similarly but I have a lower pre-negotiated rate of commission, I will be able to offer the better deal.
I hope this clears some of the confusion regarding mortgage pricing and makes you a more knowledgable consumer when shopping for a loan.
MORTGAGE RATES RISE WITH HUGE WEEK ON WALL STREET:Last week, Wall Street had its best week in over 2 years. When stock prices go up, the bond market goes down and interest rates rise. The bond market closed 141 bps down on the week.
Keep an eye on the stock market if you are floating a rate or still deciding whether to start a new loan. If the Greece situation gets worked out, we could see rates rise further. I expect some pull back on rates and pricing in the next week. Usually when rates go far one way, you will see a partial rebound back the other way.
Right now 30 year fixed par rates start out at 4.75%. 20 year fixed rates start at 4.25%. 15 Year fixed rates start at 3.75%. 5/1 ARMs start at 2.875%.