Ethical Homes» trends

Mortgage Market Update 8/21/09

sweth — Fri, 21 Aug 2009 23:23:05 +0000

A quick weekly overview of where the mortgage markets are, where they have been, and where they are expected to go.

Looking Back: Volatility continued to swing the market wildly, but in the end produced only a mild downturn in pricing–by the week’s end, prices were 47 bps worse than where when they started the week.
Right Now: For the “ideal” borrower (i.e. down payment on a purchase or equity for a refinance of at least 20%, FICO score of 740 or higher, and paying 1 discount point, with loan amounts of $417k or less on a 30-year fixed-rate mortgage) in the DC area, rates are currently in the 5.250% to 5.500% range.
Moving Forward: Next week is expected to have less volatility, with little significant economic news expected; rates will be driven primarily by performance of stocks. In Bankrate’s weekly survey of mortgage analysts about where they expect rates to move in the next 45 days, only 23% predicted that rates would go up, while 39% predicted that rates would stay roughly level, and 38% predicted that rates would go down over that period; it’s not a ringing endorsement for rates going down, but 77% of those surveyed do at least feel confident that rates aren’t going to go UP in the next few weeks. In the shorter term, rates will continue to see high volatility, but there are opportunities for good rates to pop up periodically as a result of that volatility. Borrowers who are floating their rate right now and who have a moderate tolerance for risk may be able to float their loan a little longer and lock in a better rate.

These updates are intended to give you a very quick snapshot of current mortgage rate trends. As a result, they are full of simplifications and assumptions; if you are currently in the process of purchasing or refinancing a loan, make sure to talk to your mortgage loan consultant about your specific scenario and the factors that affect it. If you aren’t working with a loan consultant yet, feel free to contact us and we’d be glad to meet with you for one of our free, no-obligation mortgage scenario consultations. And if you’re a data junkie and want to follow the gyrations of the mortgage markets in real time, learn about the shorthand that we use in discussing mortgage pricing and then follow us on Twitter.

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Mortgage Market Update 8/7/09

sweth — Fri, 07 Aug 2009 15:07:38 +0000

A quick weekly overview of where the mortgage markets are, where they have been, and where they are expected to go.

Looking Back: Economic news this week was much better than expected, driving investors into stocks and away from mortgage-backed securities. Volatility was the watchword yet again, most of it negative; by the end of the week, mortgage prices were a whopping 159 bps worse than where when they started the week.
Right Now: For the “ideal” borrower (i.e. down payment on a purchase or equity for a refinance of at least 20%, FICO score of 740 or higher, and paying 1 discount point, with loan amounts of $417k or less on a 30-year fixed-rate mortgage) in the DC area, rates are currently in the 5.375% to 5.625% range.
Moving Forward: Next week will again be dominated by reactions of the stock market to any economic data that comes out, as well as the quarterly Treasury auctions on Tuesday-Thursday. In Bankrate’s weekly survey of mortgage analysts about where they expect rates to move in the next 45 days, 31% predicted that rates would go up, 46% predicted that rates would stay roughly level, and 23% predicted that rates would go down over that period; compared to last week’s 31-38-31 split, that shows that some analysts who previously thought that a slow economic recovery would eventually bring down rates have now decided that current rates are the “new” status quo. In the shorter term, rates will continue to see high volatility, with a negative bias against economic news–any better-than-expected economic news will have a strong negative effect on mortgage pricing (rates will go up quickly), while worse-than-expected econ news will have only a mild positive effect on mortgage pricing (rates will come down slowly). We again strongly encourage borrowers who find a good rate to lock that rate in if possible unless their tolerance for risk is very high.

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Mortgage Market Update 7/31/09

sweth — Fri, 31 Jul 2009 13:24:39 +0000

A quick weekly overview of where the mortgage markets are, where they have been, and where they are expected to go.

Looking Back: For the third straight week, we once again saw a great deal of volatility in mortgage rates, but we finally did see some strong positive movement at the very end of the week, with mortgage prices roughly 41bps better than where they started the week.
Right Now: For the “ideal” borrower (i.e. down payment on a purchase or equity for a refinance of at least 20%, FICO score of 740 or higher, and paying 1 discount point, with loan amounts of $417k or less on a 30-year fixed-rate mortgage) in the DC area, rates are currently in the 5.125% to 5.375% range.
Moving Forward: With this week’s treasury auctions (the main source of volatility this week) completed, the next two weeks will probably be dominated by reactions of the stock market to any economic data that comes out; expect more volatility, with any large improvements in rates likely to only last for a few hours (although continued slow improvement over the long run is possible). In Bankrate’s weekly survey of mortgage analysts about where they expect rates to move in the next 45 days, 31% predicted that rates would go up, 38% predicted that rates would stay roughly level, and 31% predicted that rates would go down over that period. (That’s almost the exact same breakdown as last week’s 27-46-27; basically, 8% of the analysts got off the fence about whether rates would go up or down, but the ones who did pick a side split 50-50 on which side they picked…) In the shorter term, rates will continue to see high volatility; we strongly encourage borrowers who find a good rate to lock that rate in if possible unless their tolerance for risk is very high.

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Mortgage Market Update 7/24/09

sweth — Fri, 24 Jul 2009 15:54:36 +0000

A quick weekly overview of where the mortgage markets are, where they have been, and where they are expected to go.

Looking Back: In the previous week, we once again saw a great deal of volatility in mortgage rates, but in the end very little movement. Rates dropped significantly in the middle of the week, and then rose again on Thursday wiping out most of the gains from earlier in the week, ending the week with mortgage prices roughly 25bps better than where they started the week.
Right Now: For the “ideal” borrower (i.e. down payment on a purchase or equity for a refinance of at least 20%, FICO score of 740 or higher, and paying 1 discount point, with loan amounts of $417k or less on a 30-year fixed-rate mortgage) in the DC area, rates are currently in the 5.250% to 5.500% range.
Moving Forward: Technical indicators still imply that the markets underlying rates might improve in the long run, but the stock market continues to siphon funds away from mortgages, making it hard for mortgage rates to stay low for any extended period of time in the short run. In Bankrate’s weekly survey of mortgage analysts about where they expect rates to move in the next 45 days, 27% predicted that rates would go up, 46% predicted that rates would stay roughly level, and 27% predicted that rates would go down over that period. In the shorter term, a large supply of Treasury Bond auctions next week will probably prevent lenders from lowering rates unless bond markets not only rally but sustain that rally throughout the week; barring that sort of sustained rally, expect rates next week to at best stay flat, most probably rise a little, and possibly rise significantly if auction demand is weak while stock demand stays strong.

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Mortgage Market Update 7/17/09

sweth — Fri, 17 Jul 2009 15:02:40 +0000

A quick weekly overview of where the mortgage markets are, where they have been, and where they are expected to go.

Looking Back: In the previous week, we again saw a great deal of volatility in mortgage rates, this time mostly negative–we end the week with mortgage prices roughly 120bps worse than where they started the week.

Right Now: For the “ideal” borrower (i.e. down payment on a purchase or equity for a refinance of at least 20%, FICO score of 740 or higher, and paying 1 discount point, with loan amounts of $417k or less on a 30-year fixed-rate mortgage) in the DC area, rates are currently in the 5.250% to 5.500% range.

Moving Forward: Technical indicators still imply that the markets underlying rates might improve, but better-than-expected economic news has triggered a stock rally that is pulling money away from mortgage bonds, driving rates up. In Bankrate’s weekly survey of mortgage analysts about where they expect rates to move in the next 45 days, 50% predicted that rates would go up, 25% predicted that rates would stay roughly level, and 25% predicted that rates would go down over that period.

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June 2009 NoVa Housing Statistics

sweth — Sat, 11 Jul 2009 12:17:30 +0000

The June 2009 statistics are in for the Northern Virginia housing market.

Here are the initial NVAR/MRIS statistics for June 2009 home sales activity for Fairfax and Arlington counties, the cities of Alexandria, Fairfax and Falls Church and the towns of Vienna, Herndon and Clifton.

A total of 2,169 homes sold in June 2009, a 14.16 percent increase above June 2008 home sales of 1,900.
Active listings decreased by 27 percent from last year, with 7,617 active listings in June, compared with 10,440 homes available in June 2008. The average days on market (DOM) for homes in June 2009 decreased by 14.46 percent to 71 days, compared with 83 days in June 2008.
Sales prices continue to remain lower than those realized last year. The average sales price in June fell by 7.42 percent from June 2008, to $451,354, compared with last June’s average of $487,549.
The median price of homes sold in Northern Virginia in June was $392,367, which is a decline of 5.68 percent compared with June 2008′s median price of $416,000.
The number of pending home sales in Northern Virginia in June shows an increase of 17.12 percent at 2,463 compared to 2,103 in June 2008.

Sales activity in Greater Northern Virginia (the above jurisdictions plus Prince William, Loudoun and the Greater Piedmont counties) for June 2009 shows a very slight increase from June 2008.

The number of Greater Northern Virginia region homes sold in June was 3,657, a 2 percent increase from June 2008′s total of 3,586 sales.
Along with the increase in home sales for June, there was also an increase in the number of pending home sales, from June 2008′s 4,054 to 4,465 pending sales in June 2009, a 10.14 percent climb.
The average sales price of $382,980 in June 2009 continues to lag behind the 2008 average by only 6.91 percent. The June 2008 average sales price was $411,388.
Across Greater Northern Virginia, the number of listings showed a decrease from 2008 numbers, with 14,730 listings active, which is 34.54 percent less than this time last year, when 22,501 homes were available.
The average DOM for a home sold in June 2009 was 75 compared with last year’s 99 DOM, a decrease of 23.88 percent.

These numbers reflect a summary of a wide variety of areas; market trends in individual area within the larger market can vary significantly from the summary values, sometimes by as much as 50% or more. Here are links to the statistics for individual jurisdictions within Northern Virginia:

If you would like to see the statistics for other specific cities or counties, or for a specific zip code or neighborhood, let us know and we’d be glad to send them to you.

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Mortgage Market Update

sweth — Fri, 10 Jul 2009 15:23:32 +0000

Responding to popular demand, we present the first of a hopefully regular series of updates on where the mortgage markets are, where they have been, and where they are expected to go.

Looking Back: In the previous week, we saw a lot of volatility in mortgage rates, with prices swinging by up to 70 bps over the course of the week (most of it on Wednesday and Thursday); the week ends with prices roughly 60bps better than where they started the week.

Moving Forward: Technical indicators imply that the markets underlying rates might improve, but lenders are currently skittish and have been slow to dole out improvements in the form of rate decreases, while quick to pass on deteriorations in the form of rate hikes. In Bankrate’s weekly survey of mortgage analysts about where they expect rates to move in the next 45 days, 19% predicted that rates would go up, 44% predicted that rates would stay roughly level, and 37% predicted that rates would go down over that period.

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Why You Can’t Predict Interest Rate Movements, pt. II

sweth — Fri, 06 Jun 2008 16:22:34 +0000

In an earlier post, we discussed why you can’t predict interest rate movements; next, we discuss why you shouldn’t believe the claims of people who say otherwise.

Borrowers sometimes tell us that their uncle or their friend or some blog that they’ve found has a system that makes perfect sense and does, in fact, predict movements in mortgage markets very consistently. Our response is twofold:

First, ask that uncle/friend/blog to show a record of all of their documented predictions and the corresponding market movements that followed them, and show mathematically that they did in fact predict those movements with some statistical significance. Don’t be fooled by them mentioning how their theory says that after a certain event X happens, markets will do Y, and showing you some examples of X being followed by Y; unless they can show you every instance of X, and every instance of Y, and show that there’s a statistical correlation between the two, then they’re almost definitely (whether intentionally or not) cherry-picking a few cases where their theory holds, and ignoring (or just not noticing) all of the other cases where it doesn’t.

And even if they can show statistical correlation, if they don’t have a model that explains why X causes Y, then all they’ve really done is show a pattern in past performance. One phrase that every investment advisor in the US knows by heart and repeats ad nauseum but that consumers constantly ignore is “past performance is no guarantee of future results”, and there’s a reason that investment advisors repeat it so much: because it’s true. Unless you have a model that shows why a particular pattern is occurring, then there’s no reason to believe that the pattern will continue to hold, and many investors have bankrupted themselves assuming otherwise.

And again (and this is especially relevant for people who are trying to sell you advice), ask them for documented evidence of their predictions. It’s easy for someone to look at the numbers after the fact, pick out some apparent pattern, and come up with a rule of thumb that seems to make sense. If their theory is any good, though, then they should have been able to predict how that pattern would unfold before it happened, and should be able to show that they did in fact make those predictions in advance.
Second, ask them for the money that you would otherwise need a mortgage to get. There are literally billions of dollars to be made by an investor with the ability to accurately and consistently predict how mortgage bond markets move, and at the very least many millions of dollars to be made by someone who had that knowledge and wanted to sell it to investors even if they didn’t want to invest themselves, so if the uncle/friend/blog is in fact able to predict those market movements, they presumably are independently wealthy and can afford to loan you the cash for your purchase.

Convinced that you won’t be able to predict where rates will go? If so, you’re probably be wondering how you should decide when to lock in rates. Here’s our advice on when to lock in your mortgage rate.

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Why You Can’t Predict Interest Rate Movements

sweth — Thu, 05 Jun 2008 12:27:49 +0000

Many of our clients ask us for advice about the best time to lock in rates to get the lowest possible rate; unfortunately, outside of anticipating certain specific short-term trends in rates, it’s impossible to know where interest rates will go, because those rates are by definition moved by surprising information.

Mortgage interest rates are, for the most part, based on the prices of bonds in the “secondary mortgage market”–when the prices of those bonds increase, prices for mortgages decrease, and when the prices of those bonds decrease, prices for mortgages increase.

So what determines the prices of those bonds? Simplifying greatly, they’re a measure of a lack of confidence in the US economy. When investors think that the US economy is going to be growing, they tend to invest more of their money in stocks (which are risky but which do relatively better as the economy booms) and less in bonds (which are safer but which do relatively worse as the economy booms); similarly, when investors are less sanguine about the future of the economy, they tend to invest more in safer bonds and less in stocks. Prices of stocks and bonds are driven by the same supply & demand concerns that affect everything else, so when the economic outlook is good and money is flowing into stocks rather than bonds, then there is less demand for those bonds, which drives bond prices down (and thus mortgage rates up); conversely, when the economic outlook is bad and money flows into bonds rather than stocks, then the demand for bonds increases, bond prices go up, and mortgage rates go down.

So one piece of conventional wisdom among naive mortgage market watchers is that bad news for the economy is good for mortgage rates, and good news for the economy is bad for mortgage rates, and that borrowers can use that knowledge to “time” the market and lock in their rate before some particular piece of bad news being released.

But here’s the catch: investors in stocks and bonds aren’t just looking at the economy as it is today–they’re looking at every bit of information that they can find to predict where the economy will be going in the future, and they are constantly factoring those expectations about future news into what they are willing to pay for those stocks and bonds today. Imagine, for example, that a news report shows that the economy lost 50,000 jobs last month; a naive market watcher might think that that bad news about the economy would drive investors to safer bonds, and drive down mortgage interest rates. Investors, however, know exactly when every economic report is due to be released, and so a month ago (after the last report), they started making their own guesses about what that jobs report was going to say, and pricing their bids on bonds accordingly; if they were expecting, say, a 70k job loss in that report, then getting that 50k job loss news would actually be good news in terms of expectations for the economy, and bond prices would go down and interest rates would go up.

What does that mean, then? It’s not economic news that moves mortgage rates; it’s unexpected economic news (be it completely unexpected news, or just news whose existence was expected but whose value was unexpected) that moves those rates. And pretty much by definition, you can’t predict that unexpected news unless you’ve got inside information that the thousands of bond traders devoting millions of dollars to research and analysis don’t have. So predicting where rates are going just doesn’t work. (There are a few exceptions to that rule, when looking at rates in the very short term; for example, investors often like to “hedge” their bets in anticipation of the release of certain types of economic news, so it’s possible to sometimes make reasonable predictions like “rates tomorrow morning will go up/go down before the release of Economic Report X”, but those particular movements are usually fairly small, only last for a few hours, and are usually dwarfed by the movements that follow the release of Report X, so that borrowers who try to lock during those short pre-X windows are effectively gambling anyway, betting that the (unpredictable) movement post-X will be in the opposite direction of the pre-X movement.)

Still not convinced that rates are unpredictable? Be sure to read part two of this series of articles, where we go into a little more detail about how to critically evaluate the claims of people who say that they can predict mortgage rate movements–especially if they want to charge you for that information.

And once you’re convinced that you won’t be able to predict where rates will go, you’ll probably be wondering how you should decide when to lock in rates. Here’s our advice on when to lock in your mortgage rate.

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The Country Life

sweth — Mon, 27 Mar 2006 05:03:02 +0000

Recent data from the US Census Bureau indicates that Americans are moving from metropolitan areas to more rural areas.

Think you might be happier with a home on the range? Locally, Lancaster and Bath counties in Virginia are among the top 15 rural places to live, as rated by Progressive Farmer magazine; if you're serious about looking for some rural space to call your own, be sure to read PF’s guide to putting down stakes in the country, and then contact us for help in acquiring that property.

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