By Patricia Orsini
Europe just delivered the U.S. housing market a pleasant surprise for summer. Thanks to the financial chaos across the pond, experts are forecasting that mortgage rates may fall to 4.5 percent over the next few months, rather than shoot up to 6 percent, as previously predicted.
This could provide the historic opportunity many buyers have been waiting for.
The lower rates are good news for home sellers, as well. When the Obama administration's tax credit expired at the end of April, some real estate brokers were convincing sellers to reduce asking prices by $8,000 -- the same amount first-time buyers might have gotten through tax credits in the preceding months. With reduced rates, the cost of a home goes down, and sellers might be able to sell closer to their original asking price.
It's also a reversal of fortune for the more than half of all borrowers with 30-year fixed-rate mortgages of 5.75 percent or higher, who might be able to refinance their rates at more than a full percentage point. Furthermore, more people will qualify for mortgages, and others might find they qualify for a slightly larger loan.
"The lower the rate, the more affordable the mortgage payment; it's a great buying opportunity," Melissa Cohn, president of mortgage broker Manhattan Mortgage Co., in New York City, told HousingWatch.
Speaking from her office Monday afternoon, Cohn added, "We are definitely busy. People want to take advantage of this opportunity. I've been in business for 25 years; in terms of fixed rates, this is the lowest I have seen."
Mortgage rates declined this week, upending predictions that rates already had hit rock-bottom and would be increasing again as the Federal Reserve's mortgage-securities purchase program ended. The reason: Investors from around the world who are finding refuge in U.S. Treasury bonds.
Amid concerns about the global economy, America is looking like a safe bet in terms of investment. The rates on the bonds decrease when there is more investment; when Treasury bonds drop, so do mortgage rates.
This wasn't something people were predicting a month ago, when projections were for interest rates to go up, says Manhattan Mortgage's Cohn. On Monday, the average rate for a 30-year, fixed-rate loan was 4.87 percent.
In late March, according to Freddie Mac, the average 30-year mortgage rate was 4.9 percent. By the week of April 8, the rate had gone up to 5.21 percent, then dropped slightly in the following weeks.
The rush to qualify for the tax credit made April a big one for home sales -- existing home sales were up 7.6 percent from March. But there still are plenty for sale. At the end of April, there was an 8.4-month supply of homes nationwide.
Not everyone believes the lower rates will boost the number of home sales. Unemployment remains high, and qualifying for a mortgage is not as easy as it once was.
Nevertheless, the low rates and large number of homes for sale scream opportunity for buyers. But they need to act quickly, says Cohn. While the Wall Street Journal reported that industry-watchers are saying rates could go as low as 4.5 percent this summer, Cohn says no one knows how this is going to play out.
"The mortgage rates are based on the economy, and the economy is volatile right now," she says. "When we start seeing positive signs in Europe, the rates will start going up again."
Cohn's advice: Stay on top of the news. "If the markets are volatile, the rates can change more than once a day.
"Before they head north," she says, "take advantage of the volatility."
Wednesday, May 26, 2010
Friday, May 21, 2010
Housing Bounce Starts in 2011, Says Index of Top Experts
If you're keeping track of all the real estate surveys out there, add this one to your list: MacroMarkets, the research firm founded by housing sage Robert Shiller, has started releasing a monthly "home expectations survey" that asks a hundred of the country's top housing analysts to forecast prices five years out.
And guess what? May's consensus predicts national home prices, as measured by the benchmark S&P/Case-Shiller Index, to start recovering next year. That might seem optimistic, as the index has been sinking steadily over the past three years, with only one uptick posted so far (in February's data, the latest available).
After a fat zero predicted for this year's price gain, the survey sees 2 percent growth next year, a pace which adds up to a cumulative 12.36 percent by the end of 2014. The range of predictions for 2014 runs from a depressing -17.99 percent to a giddy +36.74 percent.
"This is not necessarily a resounding indicator of a raging bull market, but it's a more optimistic projection than we would have seen ... six months ago," says Terry Loebs, MacroMarkets managing director and co-developer of the survey.
But do these numbers mean anything?
As Henry Blodget pointed out on Business Insider: "the vast majority of the analysts in the survey didn't see a crash coming (ever) in 2007." He adds that such a speedy recovery within five years of a bust would be unusual. "Usually after a bubble bursts, prices fall way below trend for a while. If this forecast is right, they won't even have fallen back to trend, let alone below it," he writes.
Loebs counters that old rules don't apply. "We are in uncharted territory," he says. "We're coming off of a historic bubble and an historic series of government programs to support the housing market."
And of course, everyone has a good reason for their forecast.
The Wall Street Journal's James Hagerty spoke to economists on either end of the scale. Gary Shilling, who runs a firm that offers economic advice to"'leading corporations" and institutional investors, offered the most bearish prediction: He is concerned about oversupply of inventory, including those from looming foreclosures (read: shadow inventory). On the other side, James LaVorgna, a Deutsche Bank economist whose prediction was the most bullish, argued that a job market rebound would spark enough demand.
My view: MacroMarket's survey is worth tracking, even if just as an indicator of sentiment. The firm created the influential S&P/Case-Shiller Index and its co-founder, Robert Shiller, is the same Yale economist who warned about the housing bubble long before it was fashionable.
Hopefully this survey will make it easier to spot the Shillers of the next housing bubble. (Pun fully intended.)
by Dalia Fahmy
And guess what? May's consensus predicts national home prices, as measured by the benchmark S&P/Case-Shiller Index, to start recovering next year. That might seem optimistic, as the index has been sinking steadily over the past three years, with only one uptick posted so far (in February's data, the latest available).
After a fat zero predicted for this year's price gain, the survey sees 2 percent growth next year, a pace which adds up to a cumulative 12.36 percent by the end of 2014. The range of predictions for 2014 runs from a depressing -17.99 percent to a giddy +36.74 percent.
"This is not necessarily a resounding indicator of a raging bull market, but it's a more optimistic projection than we would have seen ... six months ago," says Terry Loebs, MacroMarkets managing director and co-developer of the survey.
But do these numbers mean anything?
As Henry Blodget pointed out on Business Insider: "the vast majority of the analysts in the survey didn't see a crash coming (ever) in 2007." He adds that such a speedy recovery within five years of a bust would be unusual. "Usually after a bubble bursts, prices fall way below trend for a while. If this forecast is right, they won't even have fallen back to trend, let alone below it," he writes.
Loebs counters that old rules don't apply. "We are in uncharted territory," he says. "We're coming off of a historic bubble and an historic series of government programs to support the housing market."
And of course, everyone has a good reason for their forecast.
The Wall Street Journal's James Hagerty spoke to economists on either end of the scale. Gary Shilling, who runs a firm that offers economic advice to"'leading corporations" and institutional investors, offered the most bearish prediction: He is concerned about oversupply of inventory, including those from looming foreclosures (read: shadow inventory). On the other side, James LaVorgna, a Deutsche Bank economist whose prediction was the most bullish, argued that a job market rebound would spark enough demand.
My view: MacroMarket's survey is worth tracking, even if just as an indicator of sentiment. The firm created the influential S&P/Case-Shiller Index and its co-founder, Robert Shiller, is the same Yale economist who warned about the housing bubble long before it was fashionable.
Hopefully this survey will make it easier to spot the Shillers of the next housing bubble. (Pun fully intended.)
by Dalia Fahmy
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