San Diego Housing Bubble News and Analysis

It is bogus and it's also misleading.
It is MSM blabber, reported as news.

Mortgage rates right now are higher than they were two weeks ago. Compared to two weeks ago, the general dirction ISN'T down.

They were lower at the open this morning, but spiked up mid morning.

For better than average borrowers, 30 YR are at 4.875% right now.
The 10 YR Bond was up almost 16 basis points today.
.. HLS

HLS
Would you consider the following information bogus and misleading. I would read who the author before you answer.

Mortgage Rates Forced Down by the Fed

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As I noted a couple weeks back, the Federal Reserve will be conjuring money out of thin air to buy "large quantities" (their words) of mortgage-backed securities. The mere anticipation of this flood of freshly-printed cash into the mortgage market has been enough to increase the demand for mortgages and thus lower rates.

The accompanying graph shows that 30-year fixed mortgage rates, depicted in blue, have dropped to a level not seen in years. As a matter of fact, fixed mortgage rates have not been this low for three decades.

Note that the Fed has not actually begun purchasing mortgages just yet, though it is set to begin doing so this month. The drop in rates appears to have taken place just in anticipation of the Fed's artificial goosing of demand.

The Fed intends to have purchased $500 billion worth of mortgage-backed securities by mid-2009. So once they really get going, they may push mortgage rates lower still.

-- RICH TOSCANO

Ray, I'm not sure what your problem is and I'm not intimidated by who said it.

The comments above are factual and qualified.
He didn't state average rates or anything misleading or bogus. He clearly states that they MAY push rates lower.

The FACT is that the 10 YR bond is up 16% since Tuesday (2 trading days) which is an indicator of mortgage rates. Rates closed higher this week, back near 5%.

Therefore you can look forward to the report about average rates from average reporters geared to average people to show that the average rates will be well off their recent lows.

Some more articles on this:

http://mrmortgage.ml-implode.com/2009/01...

http://optionarmageddon.ml-implode.com/2...

I like this guy's theory from optionarmageddon:

My theory is that while the Fed is buying MBS’s, almost everyone who’s NOT the Fed will be selling them. Oh sure, some traders may buy over the first month or two of the Fed’s six month planned MBS-purchasing period, but as the end of the Fed’s intervention nears, you’d have to be pretty damn dumb to be left holding MBS’s. So prices will fall & rates rise even before the Fed’s done trying to force down rates. I suppose the Fed could double down & print even more money with which to try to manipulate the agency MBS market, but at some point, they’ll be done with that scam (probably when they’ve realized it’s not working), and there will be a rapid snap-back causing rates to rise. The net effect of the manipulation scheme may be higher rates, especially since printing money wil eventually result in higher inflation.

http://optionarmageddon.ml-implode.com/2...

If rates are going down (and that's debatable per HLS), then this is only a temporary reprieve that won't last.

I don't know if rates are going up or down, I leave that to others to predict. I just tell people the truth about where they currently are.

I also tell people that if you can predict rates correctly, you should trade bonds on Wall Street.

You will make so much money that you can pay cash for a house and not be bothered with a mortgage.

It's a lot harder than you think to predict rates correctly. Even many "experts" are wrong.

I'd also say that 30 YR fixed mortgage rates are more likely to go up a point or two from here than go down a point or two.

When rates get back near 6%, I can already hear people telling me that they wish they would have refi'd when they had the chance below 5% instead of holding out for a 1/4 of a point lower.

I hear there was an article in the Tribune suggesting that rates might go down after Obama signs the 800B stimulus or whatever it is called. Anyone read it? Any thoughts on this? I agree that rates have gone back up after they quickly dropped but could it be reasonable to consider floating rate for now?

The rates can come down and it wont save the RE market. It's about unemployment...and it's rising to higher levels this year. Oh well.

Floating a rate with anyone that you don't trust 110% is crazy.

It's an open door to getting screwed by banks or brokers, they profit by overcharging you. They usually have you at "float"

I'll float a loan if someone really wants to, but I feel more comfortable having them lock a rate.
I don't want surprises for them or me.

Why submit your loan if you aren't ready to lock ?

On days like the last two, the 10 YR bond is up 16%, mortgage rates are way up, BUT the media is talking about rates being down.

Hard to get folks to understand that rates went up while they floated when average people are talking about rates being down for the last 9 weeks.... HLS

HLS
My problem is that at every turn you try and make like every person in the mortgage business is a schmuck except yourself and that no consumer can figure out finance without your help. I posted a series of articles demonstrating interest rates going down in addition to having a number of friends who are institutional mortgage backed securities salespeople who truly see the market well in advance because their customers are institutions like CALPERS and PIMCO who actually move markets when they buy or sell securities.
Are rates going to head higher. Sure. In the immediate future. Not likely.

.

HLS,
Do your lenders offer "free closing cost" re-fi option (with slightly higher rate)? If yes, it'll make the decision much easier. As long as the "no-cost" rate is better than what I have now, there is no risk to take it - assuming no prepayment penalty in contract provision

You are right. It makes the decision so much easier.

YOU will pay a higher payment for 30 years than you should have. Every single one of your 360 payments will be for more than they should have been. That was an easy decision to make, because it was FREE!

I don't deal with foolish gimmicks or encourage people to gamble with their financial security. There is NO SUCH THING as a free loan, or free closing costs. ARMS, Neg Am loans, etc sounded good to people because it was a "better deal"

In casinos it's called a sucker's bet. Things that suck people in that appear to be a deal, but end up costing a small fortune in the long run, representing huge profits to the house.

People with your mindset foolishly pay more money every single month but are happy because it was "FREE" or no risk.

Brainwashed bank employees will be happy to sign you up for this deal, they have been trained to think just like you do !!

I'll assume that FSBO means that you don't use RE agents either because it costs something.

FWIW most FSBO's end up with less money in their pocket. Another "easy decision" because it was FREEEEEEEEEEEEEEEEEEE

FSBO,
Under some circumstances your objective is fine. If the spread between what you have and prevailing rates is enough to get you a "no cost loan", that betters your situation,than that is an option. Maybe you are looking at keeping the loan for much less than the full 360 payments too(Who isn't?).Maybe you have an indefinate timeframe and don't want to spend thousands upfront or roll them into the loan. Maybe rates will actually go down further and you can use some dough to refinance then if you want to.

HLS, When rates were 4.5%, what was the fair "no cost" rate? (Best qualified borrower, low LTV).
There many people out there with 6.25% and higher and shorter or indefinate timeframes in mind for having the loan.

http://www.mtgprofessor.com/a%20-%20opti...

When rates were 4.5%, what was the fair "no cost" rate? (Best qualified borrower, low LTV).
***********************
Probably 5%-5.25%
this is no point,,, NOT NO COST.
To have a total no cost loan rate would be higher, depending on loan amount.
************************************

Why smart people want to gamble with hundreds of thousands of dollars of debt, I just don't understand.

Penny wise and dollar foolish.

By historical standards, rates are low. At some point people will have "enjoyed" a no cost loan for a few years, AND THEN be stuck in a higher rate and payment for the remaining 15-20-25 years.

They will never clearly understand their foolishness, because they got a free loan, and are happy. (So is the lender!!)

There are millions of people today that are in a higher rate than they qualified for at the time they got their loan, enjoying their "FREE" loan.
They got SCREWED.

In today's market, it makes no difference that rates are below 5%, these people DO NOT QUALIFY to refi. No chance. ZERO.

They are screwed into the higher rate that they are in, and it will cost them a small fortune in the long run for that free loan.

Financial ignorance is incredible in this country and many "intelligent" people on this website confirm this with their comments about FREE loans being a wise choice.

No wonder Suze Orman gets rich telling people whether or not they can afford something. It's pathetic that some people are allowed to breed.

Some people think that they are a notch above somebody else because they think that they can figure the break even point of a "no cost" loan.
Most people are clueless in figuring this out correctly.

If/when CD rates get above 7% again, which they probably will, all the geniuses who were in a hurry to pay off under 5% mortgages are going to look really foolish, and if CD rates get to 10%+ again, it will prove these people to have been stupid.

Gamble if you wish on short term gratification, at the expense of long term sense, it's what this broken economy is built on.

Govt greater plan to keep people financially confused, illiterate, and making foolish financial choices to keep the economy wheels greased has been extremely successful.

I don't think it is necessarily stupid to pay off low interest debt today. I'm in a situation now where I'm debating jumping in on the low end of the market with a 3-4 year mortgage payoff goal. My plan would be to be debt free and have a greatly reduced cost of living which would free me up to do what I really want in life without depending on my current income. I'd rather not pay rent or a mortgage. That would cut my monthly income requirement in half.

To each his own, but I see a huge attraction to debt free living. I don't want to be tied to my current job and income and feel reducing liabilities would be greatly liberating.

I predict the response to this way of thinking would be that I should save my extra money now instead of paying down low interest debt so I can invest it in the future at a rate of return greater than my mortgage once CD rates rise.

At some point it comes down to what you value in life. Right now I feel I would value debt free living today over higher savings rate at some unknown future date.

garysears, it's definitely to each his own. There's no one right answer for everyone. Only you know what's right for you. The way I see it is, you need $x in expense to live from now until you die. So you need to make $x in order to not become homeless. Whether you pay off $x in 3 years or in 30 years, it doesn't really matter. Paying it over 30 years will make your life more constant in term of expense vs income. That's without counting in inflation. Just looking back 30 years ago and see how cheap things where in nominal dollar term, it's a no contest for me. If you live well below your mean and have plenty of $ saved up for rainy day (2-3 years), you shouldn't really need to worry about your job.

Here's one example, you pay off your $50k condo in 5 years, but you'll have very little in savings in 5 years. Then 5 years from now, you lost your job and economy stinks even more than it does today. You won't have enough $ saved up to live until you get a new job. What good is a paid off house when you're in that situation? The other scenario would be, you get a 30 year fixed loan for that $50k condo, which allow you to save $540/month ($214/month payment over 30 years vs $754/month payment over 5 years). After 5 years, you lost your job like the first scenario. But now, you'd have $32k saved up. Which is enough money to pay your mortgage for the next 12.5 years. Which scenario would you rather be in?

Gary, I didn't say it was stupid to pay off low interest debt, nor did I say that money should be invested waiting for CD rates to rise.

The response you predicted isn't the response at all.

You are mixing apples and oranges. Thinking that being debt free doesn't have a cost is silly.

The only way that anybody pays off debt is by giving up cash in exchange. You pay interest on what you haven't paid OR you collect interest on what you have.

When you are in a position that you can collect more on what you have than on what you are paying,
it's a beautiful thing.

I think it is foolish to simply say that being debt free is liberating.
If I can borrow money at less than I can lend it out for without any risk, I want to be in debt forever.

Having a "greatly reduced cost of living" doesn't mean you have to be debt free.

I've met people who have no mortgage and have little cash and worry every day. They gave up their cash to pay the mortgage so they would be debt free.

AN makes the point as well. It's not a matter of right or wrong, it's a matter of understanding what you are doing and more importantly why you are doing it... HLS

In my situation, my sub 5% fixed mortgage is actually a 2.x% mortgage since Unk Sam lets me deduct the mortgage interest - without that deduction my fed taxes would be way higher since I couldn't itemize.

Why in the world would I want to pay off a 2.x% loan early - I can earn about that much in a CD right now with the chance that I will earn a much better return in the next few years as interest rates march higher (yes I'm in the inflationist camp).

If it makes you sleep better at night, then go ahead and pay off that low cost mortgage. I've done that before and it ate me up not being able to itemize...dollars just flew out of my wallet...I'm not going down that path again.

Had another caller today who was in a rush to pay off their house, saddled with a 15 YR mortgage and a bunch of equity that they cannot get to.

They are in financial trouble, but don't qualify for a loan today. Lost their job. About 6 years into a 15 YR mortgage.

Their January payments will be at least 30 days late, mortgage and credit cards. Their credit score will drop 50 to 100 points once the lates hit, and then they will have no chance of refinancing for a long time.

They never thought they would be in this situation... selling the home may be their only way out, for whatever they can get.

The way I see it, a 30 YR mortgage and the difference in the bank would have spared them from this situation.... The difference in payments would mean over $150,000 in the bank after the last 5 years.

Bad luck or bad planning ??

Also, your marginal tax rate is probably around 45%, so the 5% is converted to 2.75%, not 2%.

Finally, your mortgage interest is only deductible to the extent that it, plus your property and state taxes, exceed your standard deduction.

However, you are correct in recognizing the benefits of diversifying your assets by taking on debt and offsetting it with equivalently earning investments. Better to be $100K in debt and have $100K in the bank than have zero in both. If interest rates fall further, you can pay off the debt. If interest rates rise, you can enjoy increased earnings. Just don't lock up the money in 10-year debt - borrow long and lend short to give yourself the most flexibility.

True that if they had been in a 30 year and saved the difference they would be in a better position. BUT if they had enough money to pay off the house in 15 instead of 30, what the hell are they doing with credit card balances? I know nothing about these people, maybe they are differnt than your usual American over the past decade or so. IMO Most likely the difference would not have been saved but rather spent on stuff they didnt need. No one thinks they are gonna get laid off when times are good, why not enjoy it? Life is short.....
WHere was their 6 month cushion? Assuming they are above the average income/house/lifestyle wise, seems like they should have been able to bring some CASH to the table if they really were financially smart, but unlucky. It seems like they are gonna learn a very hard financial lesson. I hope the best for them.

You are making several incorrect assumptions and have also read my post incorrectly...at no point did I say 2%, I said 2.x%.

I did not run my tax savings calculations based on tax rates or marginal tax rates. I went into TurboTax and looked at what my fed tax would be with mortgage interest deducted, and what my fed tax would be if I had NO mortgage interest to deduct.

That gave me how much my mortgage is saving me in fed taxes. I divided this savings by twelve, to give me my monthly savings.

Using this savings figure, I used a mortgage calculator to figure out what interest rate would have been required to have a payment = my current payment - my monthly savings. That interest rate varies each year, but is in the 2.x% range.

Using this method, TurboTax automatically calculated the standard deduction in and I did not have to waste an ounce of pencil lead. There was no guesswork - since TT included all my actual income data, all I varied was the mortgage interest deduction. Piece of cake. I know my exact fed tax savings.

Agreed.

HLS,

No, there is no free loan. Every loan comes with costs. Closings costs, if not paid upfront, will be rolled over into the loan.

The similar is the mortgage broker's non-published commission, it seems to be paid by lender, but
it actually sends the final rate higher.

When adding more variables, such as, buying down points, it makes the loan price less comparable.

As for fsbo, I'd reserve 1% for MLS and ad cost, 2.5~3% for buyer/buyer agent, and leave the rest 1.5~1 % as additional incentive for buyer if the transaction could be closed quickly. it's certainly not for everyone under every circumstance. As for buying, I'd look for professional RE service.

FSBO,
There is no such thing as a "mortgage broker's non published commission"

It doesn't exist. What are you talking about ??

You can call it differently, but you should know it better than anyone else, the commission difference between 4.625% and 5.00% this afternoon, for no point 30 years 417k loan, same closing cost....

FSBO,
You have confirmed that you are a fool.

Refinancers,
Don't forget to call you banks to see if you qualify for their version of a streamline finance.
I was always a doubter but verified last night that I could get a refinance to 4.75 with Wells with a new appraisal an a point. There may be other details or specifics to other instituions but it sounds good.

Well's program is called time savers refi.I thnk the generic term is streamlined refi but HLS could clear that up. The point can be traded for a higher rate as I understand it. rates could also go down sweetening the deal despite teh point. My rate is only 5.62% on a low balance so I can afford to risk missing it.

Russ...
What were you a doubter about ??

Rates change like the wind. Some lenders have programs that they call streamline or whatever, but it doesn't mean it's a great rate.
It might be better than their NON-streamline, but that doesn't mean anything if their rates are high.

There is confusion with most people about points for loans and other closing costs.

I had 4.75% available with 1pt yesterday for anybody, not just streamline.

Talking about yesterday's rate today is like talking about stock prices yesterday. They don't apply today. They could be higher they could be lower.

The best rates move with the market. Lenders that use rate sheets can be higher to pad for volatility.

In most cases, my best rate with a fee is MUCH better than others who offer rates with no fee, but many people fall for "no fees"
I have never said that I have the lowest rates on the planet, nobody can say that. If someone is just looking for the lowest price, they can shop forever, and probably get fooled along the way.

I know that I am extremely fair and competitive and deal with some tricky situations, and am able to help people. I have the ability to pull credit scores that most others don't, which can mean a savings of thousands of dollars over the life of a loan for some borrowers.

I am normally available 7 days a week.

I can assure you that most people didn't get the lowest rate possible at the time they locked their loan.

If you can find someone else with my dedication and commitment then you are lucky. If you just want to look for the lowest price then just keep shopping.

People don't know what they don't know.

I'd love to see a thread on nightmare loan experiences,, I'm going to start one.

Most people are confused about the largest financial transaction of their life, and don't understand exactly what they are shopping for. .HLS

I doubted whether banks would, readily streamline never tested the waters, although, when I think about it I know a few people who have. Compare your streamline rates and overall loan pricing to what you can get with the mortgage people you might otherwise work with.Don't let a mortgage guy kidnap you and hold you hostage. It isn't rocket science. My mortgage broker actually recommended I talk with Wells. I bet that doesn't happen very often. Tell your friends.

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2:33pm 01/08/2009

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FRE 0.78, +0.03, +4.3%) said Thursday that the 30-year benchmark mortgage rate continued to plumb new lows following Federal Reserve purchases of mortgage-backed securities. The 30-year fixed-rate mortgage averaged 5.01% with an average 0.6 point for the week ending Jan. 8, the lowest average since Freddie Mac started tracking the average in 1971. Last week, the average was 5.10%, and last year it was 5.87%. "Interest rates for 30-year fixed-rate mortgages fell for the tenth week to a fourth consecutive record low due in part to the Federal Reserve's recent purchases of mortgage-backed securities issued by Freddie Mac, Fannie Mae and Ginnie Mae," said Frank Nothaft, Freddie Mac chief economist, in a statement. "On Nov. 25, 2008, the Federal Reserve announced that it planned to purchase up to $500 billion of these securities by the end of June of this year. For the sake of comparison, there were roughly $4.7 trillion of such securities backed by home mortgages available as of Sept. 30, 2008."