SUMMER RECAP!

It has been an exciting and confusing summer for most people in regards to the markets, real estate, economy, gas prices you name it! A few facts:

• Markets*:
  Yes, the DJIA (Dow Jones) is down 6.8% since Memorial Day, hitting its 52 week low July 15th.
• S & P 500 down 6.1% and NASDAQ down 1.2%
• The 10-Year Treasury yield has hit close to its lowest levels this quarter, hopefully inching the 30 year fixed rate gradually lower.
• Fannie Mae and Freddie Mac stock dipped to lowest levels (FRE $2.26, FNM$3.53). Posting $14.9B combined losses over the last 3 quarters.
• Oil has traded as high as $147/barrel and as low as $67/barrel, all in the last 52 weeks!
  *Data obtained from http://www.marketwatch.com/
  

No wonder we are confused as consumers, the volatility and instability in the markets directly affect our perception of everyday life. The most obvious: gas prices, groceries, and 401K’s declining. What is the average consumer supposed to do? Conservatism is definitely the common thread - savings plans, diligent spending, traditional mortgages, fuel efficient automobiles etc…

Despite the gloom and doom that seems to pervade in media reports, we still have good news! In July Existing Home Sales rose 3.1%, to 5.0M units. The national median home price has declined 7.1% the last year, increasing the affordability for buyers. People still need homes, still have money for down payments, and still (now more than ever) hold a responsible view towards real estate. Home prices continue to drop and interest rates are historically low, thus allowing people to afford larger homes, grab better deals, and ensure solid financing!

No Down Payment Loans Still Exist!

All the news has been terrible, doomsday news on any 100% financing programs. Well, ironically our government still allows this option through their FHA loan program. The FHA loan is structured for 3% down, but with our specialized buyer's assistance programs we can actually get your down payment covered! Feel free to call or email with any questions! Why is this so important?

1. First time buyers can take advantage of the great purchasing opportunities
2. Buyers can save what money they have for improvements on foreclosures
3. Buyers can take advantage of low FHA rates on 3o Year fixed programs

Is This a Good Time to Buy?

The most commonly asked question I receive: “Is this a good time to buy?” My response? Of course - subjectively speaking anyways! As far as objective data to back this opinion up?

Historically, the average 30 year fixed rate since 1985 was 8.2% with a 1.25% charge. To compare: as of April 2008, the 30 Year fixed rate is 5.98% with a .47% charge (FHFB 2008). I can objectively say with housing prices 14.2% down in March from last year at this time (SP/Case-Schiller report) and historically low mortgage rates, it is an incredible time to invest in real estate!

Why Are Mortgage Rates Refusing to Drop?

The most frequently asked question I receive these days is "why are mortgage rates not dropping?" Since the Fed has consistently dropped the federal funding rate, the assumption is mortgage rates should fall. One year ago the fed funding rate was 5.25%, currently it is 2.25%. So what has the 30 year fixed done? Well, we are basically at the equivalent of a year ago with the 30 year fixed at 5.75%.

How is this possible? The key word now is LIQUIDITY! The diagram to the right describes why our rates remain stagnant - who the heck wants to back failing securities - with over $163 billion in losses due to the sub prime debacle. Secondary sources are remaining conservative in the purchasing of mortgage back securities which in turn keeps the mortgage market sedentary.

Market Mayhem!

Wednesday, January 23, 2008 proved to be one of the most volatile days on Wall Street – early signs of trading had the Dow Jones Industrial Average (DJIA) below 12,000. As Washington released the economic stimulus package in conjunction with a drop in weekly jobless claims, major U.S. stock indexes rallied dramatically, with the DJIA up 298.98 at closing. So what does all this mean for you? The graph pictured here shows the relationship between the performance of the Dow Jones and interest rates. Just because the Federal Reserve reduced the funding rate by .75% does not necessarily mean interest rates immediately drop in accordance. Unfortunately the Fed’s reduction did not spur confidence as was intended, but rather caused a massive sell-off shifting the focus to treasuries. When investors purchase bonds, it drives the yields down causing interest rates to drop as well. On Wednesday a 30 year fixed mortgage opened up at historic lows, reaching 5.125% (no points), by market close, the 30 year fixed was at 5.875% (no points). It is quite a time for investors and consumers alike!

Up and Officially Running!

It has been a hectic year-end, with many regulation and guideline changes occurring in the mortgage industry. Please stay tuned for informative discussions updated regularly in 2008!

Energy Savings Tips of the Day - Go Green

It is so easy to go Green - trendy or not I will jump on this bandwagon anytime. The simplest of actions can actually reduce your carbon footprint on the planet. If you are not ready to purchase a home or renovate green, how about unplugging your cell phone charger from the wall when not in use? Maybe just turn off your desktop or buy a $5 Energy Star light bulb that will last 5 years? Then pat yourself on the back and say good job for the day - you went green! Now what can you do tomorrow to build on that?