More Links

Are you looking for an experienced agent to help you buy or sell a home? Contact Jim the Realtor!

(760) 434-5000

Carmel Valley
(858) 560-7700

Category Archive: ‘Interest Rates/Loan Limits’

NSDCC Upside Potential

Jumbo mortgage rates in the threes have helped to propel our higher-end market to new heights.  Of the 854 houses for sale between La Jolla and Carlsbad, 757 of them – or 89% – are listed over $1,000,000!

NSDCC Detached-Home Sales, Jan 1 – Aug 31

Total # of Sales
Sales Over $1M
Percentage of Sales Over $1M

The housing market – and its higher prices – are completely dependent upon mortgage rates staying ultra-low. Thankfully, hardly anyone needs to sell!

Here’s an interesting comparison:

The fixed-rate monthly payment on a $710,000 mortgage back in 2007 was the same as the monthly payment on a $1,000,000 mortgage today.  Yet, in spite of inflation, the San Diego Case-Shiller Index is about the same as it was in 2007!

With our prices still well under SF/LA/OC prices, and the market being flush with boomers who are retiring, we could have plenty of upside here.  The Fed is going to have to keep rates low, so as long as that happens, another 10% to 20% increase in prices is very feasible over the next five years.   Or at least until an extreme event happens, like a major earthquake, or some kook pushing the nuke button.

Look at how consistent the number of sales have been – there has been hardly any variation over the last six years (avg 2,103 sales).

This is where the stagnation would come in – prices could keep going up for the next few years, but with fewer houses selling – mostly because they don’t deserve the extra premium.

Posted by on Sep 7, 2017 in Interest Rates/Loan Limits, Jim's Take on the Market, North County Coastal | 4 comments

Fed Raises, Mortgage Rates Drop

Rates are under 4.0%, no points! From MND:

Mortgage rates fell convincingly today, though not all lenders adjusted rates sheets in proportion to the gains seen in bond markets (which underlie rate movement).  Those gains came early, with this morning’s economic data coming in much weaker than expected.  Markets were especially sensitive to the Consumer Price Index (an inflation report) which showed core annual inflation at 1.7% versus a median forecast of 1.9%.

Core annual inflation under 2.0% is a hot topic–especially today–considering that’s one of the Fed’s main goals.  This afternoon’s Fed Announcement did acknowledge the recent drop in inflation, but continued to suggest it was being held down by temporary factors.  The Fed also officially unveiled its framework for decreasing the amount of bonds its buying (though it didn’t announce a start to the program yet).

Bottom line: Fed bond buying is one of the reasons rates are as low as they are.  Markets know the Fed will eventually enact this plan and they’ve accounted for that to the best of their ability.  But as the Fed actually goes through the steps toward enacting the plan, it causes some upward pressure for rates.  That was the case this afternoon, but bond markets were nonetheless able to hold on to a majority of improvement seen this morning.  As such, the day ended with most lenders offering their lowest rates in exactly 8 months (a few days following the presidential election).

Posted by on Jun 14, 2017 in Interest Rates/Loan Limits, Jim's Take on the Market, Market Buzz, Mortgage News, Mortgage Qualifying | 0 comments

Fed Hikes, Mortgage Rates Lower

Mortgage rates fell at their fastest pace of the year following today’s rate hike announcement from the Fed.

If you’re wondering why mortgage rates fell while the Fed’s rate moved up, you’re not alone. Fortunately, the explanation is simple. Financial markets had already fully accounted for the chance that the Fed would hike rates today. They’d even gone a step further an begun to account for a faster pace of future rate hikes. And it was that future outlook that allowed for our pleasant surprise.

As it turns out, the median forecast among Fed members didn’t see the Fed Funds rate ending the year any higher than the previous batch of forecasts (both for 2017 AND 2018). While there was no way to know exactly how much markets had prepared for the forecasts to move higher, it was certainly more than “not at all.” In other words, rates had recoiled in fear over the past few weeks, expecting to see a very scary monster today. When the monster turned out to be cute and cuddly (relatively), rates calmed down quickly.

The average lender offered mid-day improvements that brought rates 0.125% lower, on average. In terms of conventional 30yr fixed rates, most lenders are back down to 4.25% now on top tier scenarios.

Read full article here:

Posted by on Mar 15, 2017 in Interest Rates/Loan Limits, Jim's Take on the Market, Market Conditions | 0 comments

Rates vs. Prices

We assume that if mortgage rates go up, prices will come down – but how has that relationship behaved in the past?  Rich details the history here, and explains why:

Below is a graph of home purchase price valuations alongside mortgage rates. If rates were driving home valuations, you’d expect these two lines to move in opposite directions. But they don’t. For example, homes have gotten pretty expensive when rates were sky-high (early 1980s), dirt cheap when rates were middling (late 1990s) and reasonably cheap when rates were at all-time lows (early 2010s). There isn’t much of a discernible relationship in this graph:

Read full article here:


Posted by on Mar 1, 2017 in Interest Rates/Loan Limits, Jim's Take on the Market | 1 comment

Janet Says Three Hikes in 2017

Home sellers should get on their horse.

Janet Yellen just gave the markets a wake-up call — the Federal Reserve does intend to raise rates three times this year, and possibly even in March.

Bonds sold off and their yields jumped as traders reacted to the Fed chair’s vague statement that the central bank will likely need to raise rates at an upcoming meeting and that “waiting too long for accommodation would be unwise.”

“She’s less cautious, that’s for sure,” said John Briggs, head of strategy at RBS. He said her comments and tone reinforced the Fed’s forecast for three rate hikes, even if she did not exactly speak to it.

“Normally, Yellen talks about downside risks,” said Briggs. “She just talked about the upside risk.”

Stephen Stanley, chief economist at Amherst Pierpont, noted Yellen dropped concerns about the economy in her comments.

“This turns on its head the default stance of Yellen and the doves for the last several years. … What she said today is that the economy currently justifies further rate hikes unless something changes. I view that as a low bar to rate moves. And note that she uses the phrase ‘at our upcoming meetings,’ which very clearly puts a March rate move on the table,” he wrote.

The two-year note yield jumped to as high as 1.25 percent from a low of 1.18 percent earlier in the day. The 10-year yield rose to 2.50 percent from 2.43 percent before her remarks were released.

Read More

Posted by on Feb 14, 2017 in Interest Rates/Loan Limits, Jim's Take on the Market | 1 comment

Renting vs. Buying

They may be using an algorithm or math formula to calculate the above, but there is more to the discussion.  The attractiveness of renting is different for everyone, regardless of income.

P.S. Rates have settled down nicely, and are at 4.10% today.

Read full article here:

Posted by on Jan 5, 2017 in Forecasts, Interest Rates/Loan Limits, Jim's Take on the Market | 0 comments

More Than A Fed Hike

A bad day for rates – mostly because they look like they will keep going up in 2017.  Elective sellers won’t budge until they get 1-2 years’ worth of proof that the market won’t support their price.

Mortgage rates skyrocketed (relatively) following today’s rate hike from the Fed.  It wasn’t the rate hike itself, however, that markets find most troubling. In fact, the hike was almost universally expected.  Rather, this was one of the 4 Fed meetings of 2016 that included updated economic projections (sometimes referred to as “the dots” due to the dot-plot chart the Fed uses to show where members see the Fed Funds rate in coming years).

Today’s dots showed that the Fed now sees an additional rate hike in 2016 compared to the last set of projections.  Longer term rates like mortgages and 10yr Treasuries had already adjusted for today’s hike, but they had not yet adjusted for any change in the dots.  With time running out for traders to take advantage of liquidity ahead of the holidays, the race was on to sell bonds as quickly as possible.  When traders sell bonds, it pushes rates higher.

Nearly every lender raised rates this afternoon–some of them multiple times.  At first that took the form of mere increases in upfront costs (i.e. the contract rate itself wasn’t moving higher), but subsequent reprices added up to an eighth of a point in rate for several lenders.  From a range of 4.125-4.25%, top tier conventional 30yr fixed quotes moved up to a range of 4.25-4.375%–well into the highest levels in more than 2 years.

To recap: this isn’t happening because the Fed hiked.  This is a reaction to the shift in rate hike expectations among Fed members.  It means they’re having a Matrix-eque moment where they’re “starting to believe.”  In this movie, the belief isn’t about Kung Fu and dodging bullets, but rather about the ability to continue gently raising rates.

Posted by on Dec 14, 2016 in Interest Rates/Loan Limits, Jim's Take on the Market | 1 comment

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