RICK DYER'S BLOG

Mortgage Rates Drop to Lowest Level Since May

US mortgage rates dropped for a third consecutive week, reaching their lowest level since late-May, a move that bodes well for the hard-hit housing market.

Interest rates on U.S. 30-year fixed-rate mortgages dropped to 5.14 percent for the week ending July 16, down from the previous week’s 5.20 percent, according to a survey released on Thursday by home funding company Freddie Mac.

That is the lowest since the week ended May 28, but significantly higher than the record low of 4.78 percent set the week ending April 2. Freddie Mac started the Primary Mortgage Market Survey in 1971.

The drop in rates is a positive for the U.S. housing market, which has been showing some signs of stabilization, with sales rising and home price declines moderating in many regions of the country.

Mortgage Bonds Soar, Pushing Up Interest Rates On Home Loans

Yields on Fannie Mae and Freddie Mac mortgage bonds soared .75%,  pushing up interest rates on home loans and adding to the hurdles for a recovery in the housing market and economy.

Last week, investors stopped contributing to the Federal Reserve’s effort to keep loan rates low, deciding it was no longer safe to purchase mortgage securities at lower and lower yields relative to Treasuries.

Investors stopped assuming the central bank would succeed in capping mortgage-bond yields.  As a result the average rate on a typical 30-year fixed-mortgage rose to 5.23 percent as of  May 29, from as low as 4.85 percent this year on April 28, according to Bankrate.com data.  A $300,000 30-year mortgage carries a $1,685 monthly payment with a 5.4 percent rate and $1,565 payment with a 4.75 percent rate, a difference of $1,440 a year.

DETROIT (AP) – Hopeful signs that the worst may be over for the economy boosted Americans’ moods in April, sending a closely watched barometer of sentiment to the highest level since November.

The New York-based Conference Board said Tuesday that its Consumer Confidence Index rose more than 12 points to 39.2, up from a revised 26.9 in March. The reading marks the highest level since November’s 44.7 and well surpasses economists’ expectations for 29.5.

The consumer confidence survey showed a substantial improvement in consumers’ short-term outlook, including even their assessment of the job picture. Economists closely monitor consumer sentiment because consumer spending accounts for more than two-thirds of economic activity.

Government Intervention Continues to interfere in Foreclosure Market

Notices of Trustee sale, which set the auction date and time, rose 82 percent from March. Notices of Default, the first step in the foreclosure process, reached a record level – nearly 26 percent higher than the previous historic peak in April 2008. Even though foreclosure notices rose dramatically, sales at auction decreased 41 percent, to reach the lowest levels seen since the third quarter of 2007.

While best explained by the unintended consequences of government intervention in the foreclosure process.there is a lag between foreclosure filings and foreclosure sales, these dramatic differences are likely.

Bidding Wars Emerging on Foreclosures
The Federal Housing Finance Agency reported that home prices nationwide rose a seasonally adjusted 0.7% in February from January, led by gains on the West Coast. The Wall Street Journal’s quarterly survey of 28 major metro areas shows that there is still a glut of homes available in most markets. But the glut has shrunk, and some areas are running into shortages of moderately priced homes in middle-class neighborhoods.

The more appealing bank-owned homes around $300,000 and under, tend to be sold quickly. The market for homes in the Santa Ana California area is “red hot.” Falling home prices are igniting bidding wars in San Diego as first-time buyers compete with investors for the same foreclosed properties.

Banks are favoring all-cash bids; or, offers from people who seem certain to qualify for financing. Banks may well choose the offer least likely to fall through rather than the highest bid.  Some brokers say banks appear to be deliberately setting asking prices low in some cases to provoke bidding battles.  Multiple offers on bank owned homes is now common in  Arizona, Washington, D.C., Minneapolis-St. Paul, and California.