Record low mortgage rates toss housing a lifeline

With the $500 of monthly savings Jim Hennessy of San Diego gained by cutting the rate on his $417,000 mortgage, he plans to rebuild his beaten-up retirement account and maybe even take a cruise.

This is the outcome the U.S. government was driving at when it said it would pump hundreds of billions of dollars into buying mortgage bonds, freeing up lenders to make new loans and lower-rate refinancings that spur consumer spending and the economy.

"Maybe there's a vacation in our future, maybe a cruise because those rates have come down so much," said Hennessy, managing director of a marketing firm.

The worst housing slump since the Great Depression has crippled top international banks and has tipped the world's biggest economies into recession.

Hennessy cut his mortgage rate by a full percentage point by refinancing 11 days ago into a 5-1/2 percent 30-year loan.

That will help to pay college tuition for his children, and "we'll probably put more into savings and try to have some semblance of a retirement," he said.

Hennessy is just one example of borrowers aiming to reduce their home loan payments or buy a home as a result of government actions to push mortgage rates to new lows.

The average 30-year U.S. mortgage fell more than 1/4 point in the week ended December 18, to 5.19 percent, the lowest since Freddie Mac started its weekly survey 37 years ago.

It was the seventh straight weekly decline and brought rates down from about 6-1/2 percent in October.

The decline was also the result of the Federal Reserve cutting its benchmark federal funds rate target to a record low this week.

"Being baby boomers, we're looking down the road at retirement, and are making every effort to be as debt free as possible," Hennessy said.

Deep stock market losses and two years of home price declines have shredded wealth for many homeowners who may be able to restore some of their losses with cheaper borrowing.

Rodney Anderson, managing partner of Rodney Anderson Lending Services, a unit of Supreme Lending, in Plano, Texas, said mortgage applications are starting to flood in.

"We're seeing pre-approvals in the amount comparable to 2003, and July 2003 was my biggest month ever in mortgage history," he said. "I closed 287 loans that month and we're already seeing closings occurring in December and our January pipelines are just starting to launch."

Swapping high-rate home loans for more affordable mortgages is driving most of the demand, but purchases are also starting to revive, he said.

"With current low gas prices and the amount of money people save on refinancing, this is an opportunity for the economy to start making moves in the right direction," Anderson said.

MULTIPLE CHOICES

An overabundance of unsold homes has been one of the biggest thorns in this housing crisis. In addition, much lending froze amid huge write-downs by banks on soured mortgages and record foreclosures.

The latest interest rate cuts may be enough to entice some buyers who were waiting for even lower prices. Borrowers with strong credit have plenty of homes from which to choose.

Keith Freeman, a director at a technology consulting firm who now rents in Atlanta, plans on moving to Miami and has made a bid on a house there. Despite some trepidation that rates could fall still further, he said, "Rates are historically low, let me just bite on something."

It makes it easier that he doesn't have to sell a home, a stumbling block for many buyers in a struggling market.

"I'm not concerned about myself," Freeman said. "I have phenomenal credit, money in the bank, a good-paying job, I can put 20 percent-plus as a down payment. I know I'm a candidate that lenders will probably drool over and I can close in a minimal amount of time."

But borrowers without pristine credit and easily documented income will have a harder time. Stringent lending standards could mean that at least a third of those who apply to refinance will fail to win approval, several analysts said.

Many owners also have mortgages that are higher than their homes' value, and won't be able to refinance.

"Don't count your chickens before they've hatched," advised John Murray of Realty Executives Prestige Properties in Boston.

"Historically speaking, if we saw a half-a-point rate drop we would expect a 10 percent rise in sales," he said. "There's a lot of desire, but we have yet to see if that yields fruit."

Weekly market activity update

As the holidays loom, activity in the the Twin Cities housing market that isn't lender-mediated (i.e. foreclosures and short sales) is quieting down quickly, while the lender-mediated market is plugging along with no discernable effect from the usual seasonal ebbs and flows.

For the week ending December 13 there were 1,240 total new listings and 556 pending sales, which are up 2.2 percent and 36.3 percent, respectively, from the same week in 2007. Of these new listings, 48.0 percent of them are lender-mediated, while a hearty 60.0 percent of pending sales are. The market share comprised of these lender-mediated homes has been growing steadily every week for the last several months and should either hold steady or continue to grow through the rest of 2008. Traditional sellers always pull back this time of year—banks do not.

Minnesota:Why Are Property Valuations Up?

In this economic downturn, with home prices down,then your taxes for next year should go down, right? Homeowners showing up at truth-in-taxation hearings around the state are finding that is not necessarily the case and grappling with the fact that their property taxes will actually go up in 2009! Last night's hearing in St. Paul got a little heated with Christopher Rocco of St. Paul asking for an explaination of his taxes. The county has assessed the value of his home at $120,000 but he says that seven of the 21 units in his complex are in foreclusure. "They're selling for $20,000 apiece, so if they're trying to tell me that they're going to tax me on a $120,000 home, I'm not going to stand for that." Homeowners who want to appeal their property valuations need to do so in the spring, not December. Last spring, about 3,000 people contested their home values in Ramsey County and that figure could double next year. Says Gordon Folkman who directs the property tax division for the state's Revenue Department, "The primary reason that taxes change is that it's a function of a budget decision by cities, counties and school districts.

Drop in mortgage rates leads to jump in affordability

Drop in mortgage rates leads to jump in affordability

Minneapolis, Minnesota (December 10, 2008) – According to the Minneapolis Area Association of REALTORS®
(MAAR) based on data from the Regional Multiple Listing Service of Minnesota, Inc., a combination of substantial
declines in mortgage rates and the continued downward movement of home prices is leading to an unusually
attractive affordability environment.
Mortgage rates declined well into the 5 percent range
in the last month—the best rates of 2008 and the most
attractive since 2003. Add November’s tantalizingly
low median sales price of $175,000—down 19.2
percent from the same time last year and the lowest
November showing since 2001—and you have
extremely healthy affordability.

It is absolutely ‘go time’ for anyone interested in
making an affordable home purchase,”said Kevin
Knudsen, MAAR President. “The current combination
of low prices and low rates is unprecedented.”

MAAR’s Housing Affordability Index (HAI) jumped 19 points in the last month, and currently sits at 180. This is up
27.7 percent from last December’s mark of 141 and is the highest recorded HAI since we began tracking the data in
1990.
Lender-mediated home sales, which accounted for 53.5 percent of pending sales and 47.3 percent of closed sales,
posted a November median price of $130,881. This is a drop of $5,000 from last month and a decline of 20.7
percent from last year. Traditional properties, which exclude foreclosures and short sales, had a November median
sales price of $225,420, a decrease of 2.0 percent from last year.
The stark differences in home prices between the lender-mediated market and the traditional sales market has led
to two very different market segments, each comprising roughly half of total market activity. Foreclosure and short
sale prices are falling fast as banks aggressively price their homes, while the traditional market is more effectively
maintaining its value as buyers appear willing to pay a fair-market price for “turnkey” properties that are closer to
move-in ready. The one thing each market segment has in common is a large increase in affordability thanks to the
recent drop in mortgage rates.
“Buyers are being rewarded by market conditions that have continued in their favor all year,” said MAAR President-
Elect, Steve Havig. “Mortgage rates haven’t been this good in five years.”

Nation: Mortgage Rates Dip For 4th Straight Week!

30-year mortgages fell below 6 percent and are heading lower due to the government's massive new effort to aid the U.S. housing market. The Fed's move to spend up to $600 billion buying mortgage-backed securities owned or guaranteed by Freddie Mac and Fannie Mae caused rates to drop immediately by one half-point. Rates on 30-year fixed-rate mortgages dropped to 5.97 percent down from 6.04 the week previous. Rates on the 30-year hit a high for 2008 of 6.63 percent in July.

Holiday Season Opportunity For Today's Sellers

Holiday Season Opportunity For Today's Sellers

If you're getting ready to sell your home, doing so this season offers some real advantages. Although spring is the traditional high season for home listings and sales, it isn't necessarily a better time to sell. By waiting until spring to list your home, you could face more competition from other sellers. In addition, interest rates could be higher by then, discouraging some would-be buyers.

Here are more great reasons to consider listing your home now:

Motivated buyers. With fewer buyers in the marketplace during fall and winter, home shoppers tend to be more serious about purchasing. Consider that many corporate moves are made during December and January. Transferees need to find new homes fast--perhaps in your neighborhood!


Fast start for kids. Some experts advise parents that the transition to a new home can be smoother for some kids when they are moved during the school year--rather than spending the summer "friend free." Starting at a new school immediately upon arrival in the area helps kids establish routines more quickly.


Seasonal charm. Selling your home during cooler weather or over the holidays heightens its "warm" appeal. Keep your home bright by turning on lights and opening curtains and shades.


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