Real Estate Report Newsletter
No
Changes For The Start Of The Second Half
Believe it or not, we are now in the second half of the year. Two weeks ago, the Federal Reserve Board met and elected to keep rates unchanged. Oil prices continue to skyrocket and the stock market is slumping. The question is, what changes are in store for the second half of the year? If the employment report is any indication of the future, do not expect the Fed to raise rates as quickly as some are predicting. The economy shed 63,000 jobs last month and 438,000 in the first half of the year. It will be hard for the Fed to act in the face of rising unemployment.
The markets seem to have recognized this fact, at least in the short term. Market rates have moved down moderately over the past 10 days. For rates to move down further we would have to see some significant news, either lower oil prices or a contracting economy. Otherwise, rates could bounce around in the same range for the next three months. Any indication that the economy is stronger will see a short-term increase. Any indication that oil prices are going down or the economy is definitely in recession would bring rates down in the short-term. In the past three months, we have had a steady dose of rising oil prices but mixed news with regard to whether the economy is in recession. In a few weeks we will get our first snapshot of the economic picture for the second quarter, but this number is subject to revision and the economic stimulus checks may skew the results. So the next quarter could be crucial in determining whether the Fed acts and our era of low rates is coming to an end.
The
Markets. Rates reversed their recent climb in the past
week. Freddie Mac announced that for the week ending July 3,
30-year fixed rates averaged 6.35%, down from 6.45% the week
before. The average for 15-year fixed fell to 5.92%. The
average for one-year adjustables decreased to 5.17 % and
five-year adjustables fell to 5.78%. A year ago 30-year
fixed rates were at 6.63%. "Rates reversed their three-week
rise, falling this week after the release of the latest
Federal Reserve’s (Fed) policy statement that it expects
inflation to moderate later this year and the reporting of
May’s timid increase in core personal consumption prices,"
said Frank Nothaft, Freddie Mac vice president and chief
economist. "According to recent trading activity in federal
funds futures, market participants lowered somewhat their
expectations of future rate hike hikes by the Fed compared
to last week. Housing affordability fell in April due to
gains in median house prices during the month, according to
the National Association of Realtors. However, even with the
recent erosion in affordability, homes were still more
affordable in April than during the 2005-2007 period of
skyrocketing house prices."
Current
Indices For Adjustable Rate Mortgages
Updated July 3, 2008
| Daily Value | Monthly Value | |
| July 2 | May | |
| 6-month Treasury Security | 2.10% | 1.86% |
| 1-year Treasury Security | 2.35% | 2.05% |
| 3-year Treasury Security | 2.87% | 2.69% |
| 5-year Treasury Security | 3.31% | 3.14% |
| 10-year Treasury Security | 3.99% | 3.88% |
| 12-month LIBOR–WSJ | 3.411% (June) | |
| 12-month MTA | 3.078% (June) | |
| 11th District Cost of Funds | 2.918% (May) | |
| Prime Rate | 5.00% (April) |
President Bush expressed confidence last week that he will
reach a deal with Congress on a housing-rescue plan, but
prodded lawmakers to show "less politics." The president’s
comments came as many homeowners, saddled with mortgage
payments they can no longer afford, are facing foreclosure.
The Senate is considering a $300 billion plan to back
cheaper loans for people who risk losing their homes, but
that measure has stalled for now. "I think we can get us a
bill," Bush said. "But it’s going to require less politics
and more focus." He spoke at a credit-counseling agency in
Arkansas that helps people saddled with debt. Senate leaders
hope to get back to the bill soon after their weeklong
break. The legislation has been snagged over an unrelated
dispute about tax breaks and renewable energy. The bill
includes elements Bush supports, including an overhaul of
the Federal Housing Administration. But the White House
opposes parts of the rescue plan, too. Source:
Associated Press
One of the tools being used more frequently by homeowners looking to relocate is house swaps. Real estate professionals and appraisers can help clients navigate the process, which involves matching two homeowners relocating to each other’s area and swapping their houses with one another. The swaps often involve some money passing from one party to another, to account for the homes’ differences in value. According to Kevin Davis of Blue Chip Realty in Tallahassee, FL, who has engaged in house swaps for more than a decade, "Those most interested in trades are sophisticated buyers who understand the process, and sellers who are motivated, flexible, and creative." Davis notes that some homeowners and investors engage in three-way trades. Source: Tallahassee (FL) Democrat
