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Low Rates as Far as the Eye Can See...

Friday, October 17, 2014
by Don Roth

That's Not Necessarily Good News

Many of our colleagues remain convinced that low-interest rates are vital to rejuvenating home sales (particularly in existing homes) and keeping housing starts on an upward trajectory. But we think that boat has long sailed. We say that because low interest rates are indicative of the issues we mention above: geopolitical upheaval, slow global economic growth, and weakness in employment growth in a key U.S. demographic.

In addition, low rates are indicative of banks that are flush with cash and simply aren't seeing the opportunities to put that cash to use. Bloomberg reports that banks have accumulated so much cash that deposits exceed loans by a record amount. Banks make money lending, and are motivated to make loans when the opportunity arises. Instead, they've been plowing money into low-yield Treasury securities. That tells us two things: A dearth of lending means there is still a dearth of economic growth. On the other side of the coin, bank demand for Treasury securities will help keep interest rates – mortgage rates included – low.

When Federal Reserve officials begin to back off their cautious talking points and begin to talk up the economy, interest rates will rise. But that will be a good thing, because we'll have an economy marked by more opportunities that can support higher interest rates and a more market-driven lending environment.

Information provided by Jessica Regan.

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2010 Tax Credit Availability; Time is Running Out

Monday, March 1, 2010
by Don Roth

Just a reminder to all the buyers that wish to take advantage of the home buyers tax credit that time is running out quickly. In order to take advantage of the creidt you must have an executed contract dated no later than April 30, 2010 and with a settlement occurring no later than June 30,of this year. There has been some conversation about the extension of the credit but from everything that I have read there is little, if any support in Congress at this time to extend the deadline. Naturally, things change cahnge but i do not expect that to happen again.

As a reminder the First Time Home Buyer Credit is up to $8000 and the first time home buyer is defined as someone that has not owned a home in the last three years. The $6500 tax credit is aimed at people who have lived in a home for at least five consecutive out of the last eight years. There are income considerations for both credits but many potential buyers will be able to qualify for most, if not all of the credit. So if you are considering a home purchase and you combine the tax credit with the very attractive low interest rates, why wait act now before the credits are history.

 

Refinancing a Home Purchased One Year Ago

Wednesday, February 4, 2009
by Don Roth

Greg posted this question on Trulia Voice this morning and my response follows:

My wife and I bought a 2 unit duplex about a year ago. We went FHA and got locked in at a rate of 6.25. We both have 710 credit scores. We do not have much equity in the house yet. But with rates now around 5 % is it worth us to try and refinance and if so who would you recommend?

Greg:

I would first talk to the loan officer that you originally secured your current mortgage through and see what they may be able to do for you. The difference between the two rates per $10,000 is about $8.00 or $80.00 per month. Before you refinance, find out what, if any, costs you are going to incur for the refi. Then take into consideration how many years you are planning to remain in your home and see how long before you begin realizing the savings. In many cases, it can be four, five or six years, again depending on what your costs can be (ie origination fees, new title insurance, etc.). Using my above example of $80 per month on a $100,000 mortgage and say your refinacing costs are going to be $4000, you would need to be in your home for at least 50 months before you started realizing a savings from the refinance. And I know it is difficult to anticipate how long you are going to be in a home, but sometimes it is better to pay the higher rate than refinance, especially if you have to include some of the closing costs into the refi. There isn't a pat answer, but look at the costs versus what you will be saving and as additional piece of information, there is a proposal from The National Association of Realtors® to have a program where mortgage interest rates would be pegged at 4.5% for a certain period. And this proposal has gained some traction in Washington so maybe watch what comes out of D.C. before you make a decision. I hope this helps you in your decision.

Don Roth

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