effect of lower interest rates on home prices

[(former)FormerSanDiegan]

No, because long term rates don’t necessarily correlate to the Fed Funds rate.

However, the reset rates DO correlate with the Fed Funds rate. Mortgage resets over the next 12-18 months have been cited as the next wave of downward pressure. These are primarily alt-A and prime borrowers.
The rates over the next 24 months WILL have an impact on these resets and WILL have an impact on whether or not foreclosure rates will continue to trend higher or start to flatten.

For example, ALT-A and Prime mortgages tied to the 1-year LIBOR with the typical 2.25% margin would rest currently at 6.75%.

[Raybyrnes]

Interest rates Hit historical lows not so long ago and the economy did not collapse. I would tend to think that the rest of the world would continue to devalue our currency which would have the effect of increasing demand for our exports.

Long term rates and short term rates are not always correlated but the majority of people bought homes using a first and second mortgage. A 2 point reduction in the Fed Funds could potenially lower payments on 2nd loans by enough to help some homeowners skate by for a longer period of time. This would work against non homeowners at lease in the short term.

With additional time there is additional opportunities for government to conimue to step in to help these people or I should say hurt those on the sidelines.

[Raybyrnes]

Interest rates Hit historical lows not so long ago and the economy did not collapse. I would tend to think that the rest of the world would continue to devalue our currency which would have the effect of increasing demand for our exports.

Long term rates and short term rates are not always correlated but the majority of people bought homes using a first and second mortgage. A 2 point reduction in the Fed Funds could potenially lower payments on 2nd loans by enough to help some homeowners skate by for a longer period of time. This would work against non homeowners at lease in the short term.

With additional time there is additional opportunities for government to conimue to step in to help these people or I should say hurt those on the sidelines.

[Raybyrnes]

Interest rates Hit historical lows not so long ago and the economy did not collapse. I would tend to think that the rest of the world would continue to devalue our currency which would have the effect of increasing demand for our exports.

Long term rates and short term rates are not always correlated but the majority of people bought homes using a first and second mortgage. A 2 point reduction in the Fed Funds could potenially lower payments on 2nd loans by enough to help some homeowners skate by for a longer period of time. This would work against non homeowners at lease in the short term.

With additional time there is additional opportunities for government to conimue to step in to help these people or I should say hurt those on the sidelines.

[Raybyrnes]

Interest rates Hit historical lows not so long ago and the economy did not collapse. I would tend to think that the rest of the world would continue to devalue our currency which would have the effect of increasing demand for our exports.

Long term rates and short term rates are not always correlated but the majority of people bought homes using a first and second mortgage. A 2 point reduction in the Fed Funds could potenially lower payments on 2nd loans by enough to help some homeowners skate by for a longer period of time. This would work against non homeowners at lease in the short term.

With additional time there is additional opportunities for government to conimue to step in to help these people or I should say hurt those on the sidelines.

[Raybyrnes]

Interest rates Hit historical lows not so long ago and the economy did not collapse. I would tend to think that the rest of the world would continue to devalue our currency which would have the effect of increasing demand for our exports.

Long term rates and short term rates are not always correlated but the majority of people bought homes using a first and second mortgage. A 2 point reduction in the Fed Funds could potenially lower payments on 2nd loans by enough to help some homeowners skate by for a longer period of time. This would work against non homeowners at lease in the short term.

With additional time there is additional opportunities for government to conimue to step in to help these people or I should say hurt those on the sidelines.

[SD Realtor]

Alarmclock no you cannot lock any mortgage rate in advance. You need to send in the fully executed purchase agreement on a home to get the loan process started.

I am by no means a mortgage expert however I was under the impression that many of the resets were to the Libor rather then the Fed Funds. Not that it makes a whole lot of difference…

The 10 year treasury yield is still the best vehicle IMO to track long term mortgage trends. However the premium for underwriting these has increased. Once upon a time I used to use about 1.25% as a fudge factor off of the 10 year to guestimate a fully amortized (conforming) 30 year fixed rate mortgage at 1 point. Now I am not so sure what value to use.

I actually do believe that if we ever enter a point where mortgage rates are depressed to ridiculous values (say 5% for a fixed 30 year jumbo) then yes IMO that will help prop up sales as long as there is not a wholesale recession. Now I don’t see those rates ever happening… but ya never know. Wall Street and our government may do anything to hold off the big bang.

SD Realtor

[SD Realtor]

Alarmclock no you cannot lock any mortgage rate in advance. You need to send in the fully executed purchase agreement on a home to get the loan process started.

I am by no means a mortgage expert however I was under the impression that many of the resets were to the Libor rather then the Fed Funds. Not that it makes a whole lot of difference…

The 10 year treasury yield is still the best vehicle IMO to track long term mortgage trends. However the premium for underwriting these has increased. Once upon a time I used to use about 1.25% as a fudge factor off of the 10 year to guestimate a fully amortized (conforming) 30 year fixed rate mortgage at 1 point. Now I am not so sure what value to use.

I actually do believe that if we ever enter a point where mortgage rates are depressed to ridiculous values (say 5% for a fixed 30 year jumbo) then yes IMO that will help prop up sales as long as there is not a wholesale recession. Now I don’t see those rates ever happening… but ya never know. Wall Street and our government may do anything to hold off the big bang.

SD Realtor

[SD Realtor]

Alarmclock no you cannot lock any mortgage rate in advance. You need to send in the fully executed purchase agreement on a home to get the loan process started.

I am by no means a mortgage expert however I was under the impression that many of the resets were to the Libor rather then the Fed Funds. Not that it makes a whole lot of difference…

The 10 year treasury yield is still the best vehicle IMO to track long term mortgage trends. However the premium for underwriting these has increased. Once upon a time I used to use about 1.25% as a fudge factor off of the 10 year to guestimate a fully amortized (conforming) 30 year fixed rate mortgage at 1 point. Now I am not so sure what value to use.

I actually do believe that if we ever enter a point where mortgage rates are depressed to ridiculous values (say 5% for a fixed 30 year jumbo) then yes IMO that will help prop up sales as long as there is not a wholesale recession. Now I don’t see those rates ever happening… but ya never know. Wall Street and our government may do anything to hold off the big bang.

SD Realtor

[SD Realtor]

Alarmclock no you cannot lock any mortgage rate in advance. You need to send in the fully executed purchase agreement on a home to get the loan process started.

I am by no means a mortgage expert however I was under the impression that many of the resets were to the Libor rather then the Fed Funds. Not that it makes a whole lot of difference…

The 10 year treasury yield is still the best vehicle IMO to track long term mortgage trends. However the premium for underwriting these has increased. Once upon a time I used to use about 1.25% as a fudge factor off of the 10 year to guestimate a fully amortized (conforming) 30 year fixed rate mortgage at 1 point. Now I am not so sure what value to use.

I actually do believe that if we ever enter a point where mortgage rates are depressed to ridiculous values (say 5% for a fixed 30 year jumbo) then yes IMO that will help prop up sales as long as there is not a wholesale recession. Now I don’t see those rates ever happening… but ya never know. Wall Street and our government may do anything to hold off the big bang.

SD Realtor

[SD Realtor]

Alarmclock no you cannot lock any mortgage rate in advance. You need to send in the fully executed purchase agreement on a home to get the loan process started.

I am by no means a mortgage expert however I was under the impression that many of the resets were to the Libor rather then the Fed Funds. Not that it makes a whole lot of difference…

The 10 year treasury yield is still the best vehicle IMO to track long term mortgage trends. However the premium for underwriting these has increased. Once upon a time I used to use about 1.25% as a fudge factor off of the 10 year to guestimate a fully amortized (conforming) 30 year fixed rate mortgage at 1 point. Now I am not so sure what value to use.

I actually do believe that if we ever enter a point where mortgage rates are depressed to ridiculous values (say 5% for a fixed 30 year jumbo) then yes IMO that will help prop up sales as long as there is not a wholesale recession. Now I don’t see those rates ever happening… but ya never know. Wall Street and our government may do anything to hold off the big bang.

SD Realtor

[(former)FormerSanDiegan]

I am by no means a mortgage expert however I was under the impression that many of the resets were to the Libor rather then the Fed Funds. Not that it makes a whole lot of difference…

True. But LIBOR rates tend to correlate with the FED funds rate. Currently the 1-year LIBOR is about 0.9% less than a year ago. Most of the drop has been since the FED dropped rates.

[(former)FormerSanDiegan]

I am by no means a mortgage expert however I was under the impression that many of the resets were to the Libor rather then the Fed Funds. Not that it makes a whole lot of difference…

True. But LIBOR rates tend to correlate with the FED funds rate. Currently the 1-year LIBOR is about 0.9% less than a year ago. Most of the drop has been since the FED dropped rates.

[(former)FormerSanDiegan]

I am by no means a mortgage expert however I was under the impression that many of the resets were to the Libor rather then the Fed Funds. Not that it makes a whole lot of difference…

True. But LIBOR rates tend to correlate with the FED funds rate. Currently the 1-year LIBOR is about 0.9% less than a year ago. Most of the drop has been since the FED dropped rates.

[(former)FormerSanDiegan]

I am by no means a mortgage expert however I was under the impression that many of the resets were to the Libor rather then the Fed Funds. Not that it makes a whole lot of difference…

True. But LIBOR rates tend to correlate with the FED funds rate. Currently the 1-year LIBOR is about 0.9% less than a year ago. Most of the drop has been since the FED dropped rates.

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