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Category Archive: ‘Interest Rates/Loan Limits’

Rates Keep Rising



Rates keep having bad days:

Mortgage rates spiked abruptly today, bringing them to the highest levels in well over 2 years.  The average lender is now quoting conventional 30yr fixed rates of 4.25% on top tier scenarios with more than a few already up to 4.375%.  You’d have to go back to the summer of 2014 to see a similar mortgage rate landscape.

The impact on the market, in simple terms:

Fewer prices will seem attractive, but the obvious ones will draw a crowd.  Buyers will be pickier, and will wait longer to see if sellers will come down.



Posted by on Dec 1, 2016 in Bubbleinfo TV, Interest Rates/Loan Limits, Jim's Take on the Market | 2 comments

Change in Mortgage-Interest Deduction?

For the few that are actually affected, higher rates with a lower cap sounds like a wash – and if there are other changes/improvements of other taxes, any change in the MID would be negligible.

But the impact on homebuyer psychology could dampen the demand.

For more than a century, homeownership has come with a small bonus: The mortgage interest deduction.

It allows borrowers to deduct the interest paid on their home loans from their income taxes. Real estate agents, homebuilders and mortgage lenders have long used it as a selling point. Every so often it comes up in debate, but it is so popular that lawmakers are more than a little bit afraid to touch it. The future Trump administration apparently is not.

“We’ll cap the mortgage interest, but we’ll allow some deductibility,” said Steve Mnuchin on CNBC Wednesday after confirming that has been asked by President-elect Donald Trump to head the Treasury Department.

The mortgage interest deduction is already capped at loans up to $1 million if you’re married and filing jointly, and at $500,000 if you file separately. That said, the median price of a home in the United States is just more than $200,000, so not a lot of people make it to that cap. The vast majority (84%) of those who do benefit earn more than $100,000 a year and are not the most cost-burdened homeowners.

The deduction is very popular, but it benefits far fewer taxpayers than one might think. The current homeownership rate is around 62 percent, but of those homeowners, one-third do not have a mortgage. They own their homes outright, so the deduction would not apply to them.

Some homeowners, mainly middle- and lower-income families either don’t pay federal income taxes or don’t itemize, so the deduction wouldn’t apply to them either. Only about 40 million (or 22.5 percent) of the 173 million households in the U.S. benefit from the mortgage interest deduction, according to the Tax Policy Center.

For those who do itemize, here’s how the math works: Let’s say you have a $500,000 30-year-fixed mortgage at 4.5 percent, and you’re in the 33 percent tax bracket. In the first year of your loan, the deduction saves you just more than $10,000 in taxes.

If the Trump administration caps deductions at even $100,000, as Mnuchin suggested, that would not hit most borrowers because on that $500,000 (which is more than most loans in general) the total annual interest payment was about $23,000. Granted, homeowners may have other deductions, medical expenses, charitable, religious or otherwise, but most would not make it to $100,000 even with the mortgage.

Despite the small number of borrowers a cap would affect, real estate industry leaders oppose any changes, especially in an environment where they are trying to convince young millennials that a home is a good investment.

Posted by on Dec 1, 2016 in Interest Rates/Loan Limits, Jim's Take on the Market | 1 comment

Are Rising Rates A Problem?


Are rising rates that big of a deal?

Maybe – and only if they mess with the buyers’ psychology.

We have been spoiled with rates in the mid-3s for the last six months – including jumbos – and our local market has been cooking. Buyers have been hoping for any break, but if they find the right house at a decent price, will an extra 1/2% on rate stop them?

Probably not – we are lucky to live in a very affluent area, where the majority of houses sell for more than $1,000,000:

NSDCC Detached-Home Sales, Jan-Oct

Total # of Sales
Median SP
Sales Over $1M
% of Total

Some buyers will dig in just on principle – if they have to pay a higher rate, logically the seller should be more flexible on price. But if the right house is found, and wifey kicks you in the shins and says ‘buy the house’, the extra half-point isn’t going to matter.

Especially in these areas:

Percentage of Detached-Home Sales Over $1M, Jan-Oct, 2016:

La Jolla, 92037 = 97%

Del Mar, 92014 = 97%

RSF, 92067 = 100%


Posted by on Nov 15, 2016 in Interest Rates/Loan Limits, Jim's Take on the Market, Market Buzz, Market Conditions, North County Coastal | 0 comments

Back to 4% Mortgages


Excerpted from MND:

“Taper tantrum” refers to the market’s reaction to the revelation that the Fed would begin reducing the pace of its asset purchases in mid-2013.  For most of us, that’s as bad as it gets for bond markets.  Even for those who lived through the brutal weeks in April 1987, the worst 3 days of the taper tantrum represented a more abrupt change in yields in terms of the percentage of gains erased compared to the worst 3 days in 1987.

It’s scary to consider, then, that the past 3 days (Wed, Thu, and today) have actually seen a bigger intraday yield spike than the worst 3 days of the taper tantrum!  The fact that we can even begin to compare this move to the taper tantrum puts it in a league of extraordinary sell-offs that have rarely been seen in modern bond market history.  It’s worth noting, however, that most of those extraordinary sell-offs were precipitated by the recent juxtaposition of long-term or all-time low yields.

What do higher rates mean for the NSDCC real estate market?

If you are thinking of selling in the next six months, you should put your home on the market today, while the uncertainty is still relatively unknown.  I can be reached at (858) 997-3801!

Trump was less than impressive on 60 Minutes last night, and way too vague.  It doesn’t sound like he will be saying anything to calm the markets, and any new economic policy will take months – or years – to implement.

It is virtually irresistible for home buyers to wait-and-see if prices come down.  They will expect some trade-off for the higher rates, but our casually-motivated sellers are going to think lower prices are somebody else’s problem.

Higher rates will have an impact on keeping deals together too.  Once a buyer secures a property and opens escrow, then their lender delivers the bad news – boom, the payments turned out to be higher than expected.  The home inspection will be the last straw, and if the sellers take the repair requests too casually, deals will be dying.

It’s hard to imagine that the robust momentum we’ve enjoyed while rates have been in the mid-3’s will continue with rates in the 4’s.  Something has to give.

The media won’t be helping either:

Get Good Help!

Posted by on Nov 14, 2016 in Interest Rates/Loan Limits, Jim's Take on the Market | 3 comments

Mortgage Rates Keep Rising


Buyers aren’t going to be happy about rates starting with a four….which we will probably see by next week:

Mortgage rates continued a relentless move higher today, as financial markets continue rapidly adjusting the price of new realities (more on that in a moment).  The average 30yr fixed rate quote surged another eighth of a point today (a huge move, relative to the average 24 hours), bringing the 2-day total to 0.25%.  That’s nearly unheard of in modern economic history.

(NOTE: There are several articles floating around today that say rates have only risen 0.03% week-over-week.  These are based on Freddie Mac’s weekly survey which has not yet captured the volatility of the past 2 days, due to its sampling methodology).

The last time rates moved a quarter point higher in 2 days was during the throes of the taper tantrum in mid-2013.  Incidentally, the following 2 days also saw a quarter point spike, bringing rates a total of 0.5% higher in 4 short days.  Those were the worst 4 days for mortgage rates on record.

Read More

Posted by on Nov 10, 2016 in Interest Rates/Loan Limits, Jim's Take on the Market | 3 comments

Mortgage Rates Dropping

rates sept 27

Are you still thinking about packing it in for 2016?

Mortgage Rates maintained their recent winning streak today, falling for the 5th straight day.  The average lender is now offering the best rates in nearly 2 months.  You’d have to go back early August or late July (depending on the lender) to see a better combination of rate and upfront cost.

Read more here:

Posted by on Sep 27, 2016 in Interest Rates/Loan Limits, Jim's Take on the Market, Market Conditions | 0 comments

Rates Are Steady


Janet Yellen has spoken today – but no big shocks:

The possibility of a December hike, around 50 percent before Yellen’s remarks, moved up to 53.5 percent, according to the CME. However, the market continues to doubt anything happening in September, which has just an 18 percent chance.

“Ultimately we think Yellen’s speech really doesn’t give us anything new,” said Chris Gaffney, president of World Markets at EverBank. “They continue to be data dependent and the members still ‘believe’ growth will return in the coming months — but the data continue to prove them wrong so the Fed’s credibility continues to come into question.”

Even if/when the Fed bumps their Fed funds rate, I’m not sure it would change mortgage rates much.

Posted by on Aug 26, 2016 in Interest Rates/Loan Limits, Jim's Take on the Market | 2 comments

Brexit Impact on Real Estate

June 27 rates

How is the Brexit going to impact the sales of real estate?

From MND:

There’s no telling how long this “initial reaction” period will continue and what the longer term effects will be, but for now, the short term effects have been strongly positive for rates.  The most prevalent conventional 30yr fixed quote is still 3.5% on top tier scenarios, but 3.375% gained a lot of ground today.  With just a bit more improvement, the average lender would be at 3.375% for the first time since early 2013.  This is also the lowest stably-maintained rate we’ve ever recorded (there were scattered instances of 3.25% back in 2012).

The Brexit will be great for mortgage rates, and we could – and should – see the lowest rates yet.  The 10-year closed today at 1.4377%, and we add 1.75% to it to find the target for 30-year conforming rates (3.18%).

Lenders are like gasoline companies, and reduce their rate slowly on the way down.  Hopefully, by the end of the week, we could see the 30-year mortgages being quoted around 3.25%!

But home buyers are concerned about overpaying, so lower rates will just keep them optimistic – they won’t make them want to pay more for a house!

There will be more turbulence, but never as a society have we had such teflon memories. We just swipe it all away!

Posted by on Jun 27, 2016 in Interest Rates/Loan Limits, Jim's Take on the Market, Thinking of Buying? | 1 comment

Favorable Mortgage Rates Continue


Anyone who thought that the threat of higher mortgage rates would cause buyers to rush their home-buying decision can chillax, as Kayla would say.  The threat has subsided, making buyers even more comfortable and deliberate in their search for the perfect match. These guys quote rates with no points:

Mortgage rates were sideways to slightly lower today, keeping them in line with the lowest levels in more than three years.

While there are a few aggressive lenders quoting 3.5% on conventional 30yr fixed loans, 3.625% is the most prevalent quote on top tier scenarios.  3.75% had been more common until last week’s jobs report sent rates quickly lower, and all but eliminated the possibility of a Fed rate hike in June.  The Fed Funds Rate does not directly dictate mortgage rates, but increasing expectations for Fed rate hikes tend to coincide with increasing mortgage rates.

When rates have been near these 3-year lows, we’ve only seen them dip lower briefly–and usually not by that much.   That means locking is never a bad idea at current levels.  Even so, risk-takers could also find justification to float based on the hope that European markets continue to pull US interest rates lower as the European Central Bank (ECB) begins a new bond-buying program tomorrow.  As always, if you choose to float, set a limit as to how much rates would have to rise before you’d lock to avoid further losses.

“I continue to favor floating all loans right now.   The benchmark European bond, the 10yr Bund, set new record lows today ahead of the ECB corporate bond buying which is set to begin tomorrow.  I think it is worth the risk to float overnight to see how that impacts the Bund which will have an impact on US Treasuries.  Today, the Bund helped push the 10 year to about a 1month low.”  – Victor Burek, Churchill Mortgage

Posted by on Jun 8, 2016 in Interest Rates/Loan Limits, Jim's Take on the Market | 4 comments

New-Home Sales Rise

If this sort of good news holds up, look forward to the Fed bumping their rate again. Mortgage rates have come down since the last Fed hike!

From MND:

New home sales surged in April after a disappointing report in March.  The Census Bureau and the Department of Housing and Urban Development said today that sales were at a seasonally adjusted annual rate of 619,000, an increase of 16.6 percent from the previous month and 23.8 percent higher than in April 2015.  That said, it should be noted that this report has a notoriously high margin of error, with this month’s ringing in at 15.4 percent.

Sales in March were also higher than earlier reported.  Last month’s report had those sales down from February by 1.5 percent to a seasonally an annual rate of 511,000.  That number

On a non-seasonally adjusted basis there were 61,000 newly adjusted homes sold during the month.  In March sales totaled 50,000.

At the end of the reporting period there were an estimated 243,000 new homes for sale nationwide.  This is estimated at a 4.7-month supply at the current rate of sales, down from 5.5-months in March.

The median price of a new home sold in April was $321,100 compared to $292,700 a year earlier.  The average sales price was $379,800 compared to $334,700 in April 2015.

The Mortgage Bankers Association, based on the numbers of applications submitted to the mortgage subsidiaries of new home builders, had predicted sales to decline 11 percent from March.  On a non-seasonally adjusted basis they had projected sales at 48,000 units, down from 54,000 units in March.

Sales in the Northeast were up 52.8 percent from March and an astounding 323.1 percent from the previous year. Sales in the Midwest declined by 4.8 percent and 9.1 percent from the two earlier periods.

Sales of new homes in the South rose 15.8 percent from March and 18.1 percent year-over-year.  The West saw sales increase by 18.8 percent month-over-month and 23.6 percent for the year.

Posted by on May 24, 2016 in Builders, Interest Rates/Loan Limits, Jim's Take on the Market | 1 comment