It seems highly likely that mortgage interest rates are going to fall with the 10 Year Treasury Rate Yield. Earlier this week the Federal Reserve Bank announced they were going to purchase US debt which sent the yield on the 10 year plummeting. After the news finally settled in, the yield was down almost 5%. Average mortgage rates are sure to fall as well as there is a very strong correlation between the 10 year treasury rate yield and the interest rate on the 30 year fixed rate mortgage.
This might not be good for America in the future as we are likely to see inflation, but this is great news for anyone who was thinking about refinancing or buying a new home. No one really knows how low mortgage rates are going to go, but it does seem likely they will go lower for awhile. If we do see any type of bounce, it is likely the Federal Reserve will step in an do what it takes to keep mortgage rates low. While many of us many not agree with this tactic, we might as well take advantage of it while we can!
Last week, President Obama announced a major change to the Making Home Affordable Refinance Plan. In the initial plan that came out in March, those with a 105% loan-to-value could refinance; not necessarily at the extremely low mortgage rates, but they could refinance. Now that the housing market does not seem to be getting much better, the refinance plan has been extended to 125% loan-to-value. You could be have 25% negative equity in your home and still have the opportunity to refinance. This has never been the case in the history of the United States housing market.
Now that we know that the refinance plan has been extended is it now time for you to go for that refinance. I have many friends and family members who did not want to refinance because they knew their appraisal value would come to way too low for them to even be considered. Now that the Obama Refinance plan has been changed to 125% LTV, I would imagine many of them are going to seek out refinancing at these historically low mortgage rates. Will you take advantage of this unprecedented time as well?
There is a very interesting article on Reuters about low mortgage rates helping the housing market located here. It is an interesting perspective in that the article explains that easy money is making home prices look like they are improving. It may very well be the fact that they are not. The artificially low mortgage rates are causing home prices to go up because as mortgage rates decrease, home prices increase. If the government continues to push mortgage rates down to the 5% level, it is all in due time before home prices start rising because mortgage rates are so low.
Do you feel that the housing market has gotten any better? I have many friends who live in states where there seems to be no improvment. The states of Ohio and Indiana continue to see declines in home prices. I have friends and family in each state who have been trying to unload a house since late 2006 and they have yet to get anything close to what they want. Several offers have come in over 20% lower than their asking price. So, are the low mortgage rates making the home price data look better than it actually is?
AUTHOR: Colin Keller
One of the largest economic problems that President Obama set out to solve after being elect president with the housing crisis. The steep decline in home prices coupled with an increasing amount of foreclosures and shorts sales have brought the United States economy to its knees. Some analysts are predicting that the current housing crisis could cause the worse recession since the great depression; some well-known pundits think it is inevitable.
There is no doubt that is it going to take some time for home prices to find a bottom before we start to see a stabilization and steady appreciate again. Most experts felt that the bottom would come in March of 2009 when Obama released the Making Home Affordable plan and Ben Bernanke announced that the Federal Reserve was going to buy back over $1 trillion in mortgage backed securities. Both of these events were very significant because they were going to spark the interest in the housing market.
The Making Home Affordable plan was designed to allow individuals to refinance at lower rates as well as gain access to historically low mortgage rates. Well, mortgage rates are going to continue to reach historic lows because the Federal Government is printing money to force mortgage rates to stay under 5%. With rates under 5% and Americans having the opporunity to lock in at historically low rates, wouldn’t you think that home prices would have bottomed in March when these two events took place.
Well, unfortunately that is not the case. The Case-Shiller March data came in very similar to the previous six months: home prices continued to fall. There were only TWO cities in the 20 city index that saw an increase in home prices from the month of February to March. Sadly, those two cities, Charlotte and Denver, were only up 0.3% and 0.1% respectively. This is VERY bad news. If there were any time for the housing market to bottom, it was March.
It is quite possible that many of the mortgage applications did not get completed in the month of March as mortgage lenders were scurrying to complete the process. With the spike in applications, it is very likely that lenders were not able to complete all the applications by the end of the month. We can hope this is the case as this might be the last move before checkmate. I am sure that the current administration has many more plans up their sleeves but I am not sure what can solve the current housing issue. Supply greatly outweighs demand and Americans are losing their jobs; what else is there to do to help this housing crisis?
Ultimately, President Obama and his administration are trying very hard to help the housing market but in the long run free markets have to work themselves out. When we see that some of the housing supply comes off the market and there is a growing demand for homes, we will see a bottom in home prices. My question to you is, has Obama helped the housing market at all?
