From HousingWire:
Fannie Mae economist: Rates will not halt current housing recovery
Interest rates on a 30-year, fixed-rate mortgage have risen from 3.35% at the beginning of May to 4.51% in mid-June. This 116 basis-point increase in nine weeks has raised the question whether the recent increase will stall the housing recovery, the bright spot in the economy thus far in 2013.
In a commentary on the impact of rising mortgage rates on the housing recovery, Fannie Mae Economist Mark Palim wrote, “While there is no historical precedent for the effect on the housing market from an increase or decrease in mortgage rates due to the Federal Reserve’s policy of quantitative easing, history suggests that interest rate increases at the level recently witnessed will not stop the current housing recovery.”
Palim continued to note that history shows that a rapid rise in interest rates tends to have little correlation with home prices. Rather, rising interest rates are more likely to be linked to a drop in home purchase volume and a rise in the market share of adjustable-rate mortgages.
He added that from 1992 to today, there have been two instances where housing experienced a meaningful rise in mortgage rates over a short period of time where there has been a noticeable impact of the housing market.
From October 1993 to December 1994, mortgage rates jumped from 6.83% to 9.20%. During this period, the rising trend in existing home sales was reversed.
However, the impact on home prices was muted. The rate of appreciation slowed, but annually price changes remained positive, according to Palim.
Also, from October 1998 to May 2000, mortgage rates rose from 6.71% to 8.51%. Compared to the previous report, this was smaller and more gradual. This longer adjustment period looks to have led to a more muted housing market response.
In this instance, the pace of home sales and the rate of increase in house prices moved horizontally, rather than vertically.
@pourmecoffee: Satan: I will provide Wyoming with natural resources beyond your wildest dreams should you elect Liz Cheney, who I endorse today.
Would a rise in interest rates just mean more interest income so income rises?
From Reuters:
U.S. mortgage applications fall on soft refinancing demand -MBA
Applications for U.S. home mortgages fell last week, driven by a decline in demand for refinancing loans as mortgage interest rates remained at a two-year high, data from an industry group showed on Wednesday.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, fell 2.6 percent in the week ended July 12.
The MBA’s gauge of loan requests for home purchases, a leading indicator of home sales, rose 0.5 percent. The MBA’s seasonally adjusted index of refinancing applications fell 4.2 percent.
Interest rates on fixed 30-year mortgages averaged 4.68 percent in the week ended July 12, unchanged from the previous week when the average reached its highest level since July 2011, the Mortgage Bankers Association said.
The refinance share of total mortgage activity fell to its lowest level since April 2011, accounting for 63 percent of applications versus 64 percent the week before.
Interest rates on a 30-year, fixed-rate mortgage have risen from 3.35% at the beginning of May to 4.51% in mid-June.
Tick… tick… tick… tick…
Anon [1];
Pretty clever — if the target audience is prepubescent tweeners. Mentally, I suppose it is.
From CNBC:
Corelogic: There is no housing bubble
Home prices are up over 12 percent nationally from a year ago, and limited supplies of homes for sale continue to push that number higher. Demand is coming back, home builder sentiment is at a seven-year high and real estate agents are reporting bidding wars. None of this means housing is heading back to the bubble, according to economists at CoreLogic.
The fundamentals are there right now, and the market is responding,” said Mark Fleming, chief economist at CoreLogic.
Even in the fastest growing markets, where prices are up around 20 percent from a year ago, Fleming pointed to still near-record affordability. For housing price affordability to return to the average level that we saw in the years between 2000 and 2004, he said, either home prices would have to rise an additional 47 percent or interest rates rise to 6.75 percent. Only Washington, D.C., and Hawaii are “technically unaffordable,” according to CoreLogic.
Rising mortgage rates will help to temper the possibility of a bubble as well, but they will not cut into demand dramatically, as some have predicted, according to Fleming.
“Buyers buy based upon payment, and those payments are still highly affordable relative to their incomes,” he said. “Even with 100 basis point swing, there’s still plenty of room in that [affordability] index.”
The concern, however, has been that as mortgage rates rise, home prices would necessarily fall, as buyers lose purchasing power. That may not be the case, according to a new analysis.
As the rich lady in Southampton said to the young couple who told her they locked in on a 4% mortgage, “how quaint, I did not know people still did mortgages”
Fixed Mortgage rates are irrelevant. What is relevant is people are now doing ARMs again to afford more expensive homes and unlike Spring 2008 or Spring 2000 when rates were high and looked to be headed lower now rates are only a little higher and may be heading a lot higher. Folks locking into homes they cant afford with a fixed rate now will be screwed when ARM resets.
I would argue it is a great thing for young couples to have a high mortgage interest rate.
When I closed in Spring 2000 rates were 8%, young couples bought less house then they wanted and cheaper houses to afford mortgage. Come 2002 when rates fell like a brick we all refinanced or heavily pre-payed mortgage which set us up as great consumers. The folks who bought at peak Spring 2004 with three year ARMs, we all know how that turned out.
Fast Eddie says:
July 17, 2013 at 8:37 am
Interest rates on a 30-year, fixed-rate mortgage have risen from 3.35% at the beginning of May to 4.51% in mid-June.
Tick… tick… tick… tick…
[1] anon
Very surprised that you would prefer Enzi to Chaney. But then you were never much into details.
Next time a mouth-breather starts salivating over some crap written by Matt Taibbi, you can think about the current cover of Rolling Stone to put it in context…..
http://www.rollingstone.com/culture/news/five-revelations-from-rolling-stones-boston-bomber-cover-story-20130716
9. oh noes
I emphasize that, because our asset purchases depend on economic and financial developments, they are by no means on a preset course. On the one hand, if economic conditions were to improve faster than expected, and inflation appeared to be rising decisively back toward our objective, the pace of asset purchases could be reduced somewhat more quickly. On the other hand, if the outlook for employment were to become relatively less favorable, if inflation did not appear to be moving back toward 2 percent, or if financial conditions–which have tightened recently–were judged to be insufficiently accommodative to allow us to attain our mandated objectives, the current pace of purchases could be maintained for longer. Indeed, if needed, the Committee would be prepared to employ all of its tools, including an increase the pace of purchases for a time, to promote a return to maximum employment in a context of price stability.
Federal Reserve Chair Ben Bernanke Wednesday told lawmakers a highly accommodative monetary policy will remain appropriate for the foreseeable future, citing an unemployment rate that is still high and the slow pace of price increases.
Hunger Games, U.S.A.
By PAUL KRUGMAN
Last Updated: Jul. 14, 9:05 PM ET
“Something terrible has happened to the soul of the Republican Party. We’ve gone beyond bad economic doctrine. We’ve even gone beyond selfishness and special interests. At this point we’re talking about a state of mind that takes positive glee in inflicting further suffering on the already miserable.
The occasion for these observations is, as you may have guessed, the monstrous farm bill the House passed last week.”
Big drop in 10 year yields on Bernanke’s remarks. Expect the 30yr to fall under 4.5%.
JJ (12):
QE4EVA: Never going to stop. Uncle Ben is just talking to placate the sheep who think that the ecomomy is doing great and that we are well on our way to recovery. We’ll be hearing the same talk in July 2016.
U.S. 10-year 2.466%
Anyone who locking in a rate last four weeks is not happy as Ben’s goof cost them bucks.
I sat tough with my long positions in bonds. I was down and now it is back. Doing nothing worked out. Lots of folks paniced in their Bonds and Bonds funds too and got burnt. Just like in stocks.
Bet a few folks paniced in Spring 2009 went to bonds and paniced a second time and sold bonds in early July and got burnt twice and sitting in cash and buying back bonds at higher prices
What is the connection between the 10 year yield and mortgage rates? I know that there is one, just wondering exactly what it is and why?
Average person stays in house 7-10 years so the ten year rate is a better tie to the 30 year mortgage. Plus ten year is more liquid than thirty year so a better yield comparison.
25 years ago and more they always used 30 year bond vs. 30 year mortgage as folks stayed in one home like our parents did. Today that does not happen.
Brian says:
July 17, 2013 at 10:29 am
What is the connection between the 10 year yield and mortgage rates? I know that there is one, just wondering exactly what it is and why?
Was listening to a radio talk show on Saturday by some mortgage guy…..in the past few months, he has taken calls from potential clients that for some reason are afraid to refi out of their existing 8 to 10% mortgage. I can only assume these people are elderly and don’t feel comfortable with refis.
HAHAHAHA
Its not a bug it is a feature
http://wallstcheatsheet.com/stocks/unions-obamacare-will-shatter-backbone-of-middle-class.html/?ref=YF
For the most part, the ten year treasury determines the direction the rates will go for the 15, 20 and 30 year mortgage interest rates. They do not move in lockstep, though the charts are pretty similar. Everything you need to know is here…
http://tinyurl.com/10vs30
If the mortgage is under 100K most banks wont refinance, the old folks should just do a HELOC and continue paying the same payment they had at 8% and odds are HELOC would be paid off long before rates go up.
Several times I tried to help my mother in law but she distrusts everything which means she always loses financially which makes her even more distrustful.
She wont grieve taxes as she is afraid folks will come into her house, wont do cds as afraid rates will go up, wont buy stocks as she is afraid they will crash. Never prepaid mortgage or refinanced, did full 30 years was afraid if she prepaid she would run out of money. Wont even switch to USAA insurance that is cheaper as she thinks it is a gimminck So you give up.
Back in Dec 2011 for instance she was moaning at xmas she has 50k in savings paying zero and she needs income to live off. This was when Whitney causes munis to crash. I told her I could get her ten investment grade NYS munis at 6% which would be 3k a year tax free. To which she responded sounds like a scam to me. Then I got I dont want to be locked in for ten years, which I said you can sell anytime you want and with yields at a high right now most likely you will make money or worse break even. But why are you selling you dont need money you get interest and you could just give the bonds to your kids in your estate if that is what you are worried about.
I had same conversations lots of time in bank. One year I over reached and pretty much got upset with a women rolling six month cds who was dead broke and took her 100K and made her buy a 50K ten year treasury and 1-5 year cds at 10K each. Next year she gave me a cake she was so happy and as a typical old jewish lady told me why did you let me buy the one year cd, now rates have falling and I am losing money. Oh well. Ladys was like 82 and broke and this was like 1986. I told her to just keep rolling maturities into five year cds rest of life and she will be fine. Lucky for me Rates did not drop like a brick till 2009 so estate would have loved me as she was long dead by then.
People With Bad maths Skills Are More Likely To Wind Up In Foreclosure
http://au.businessinsider.com/math-skills-predict-risk-of-foreclosure-study-2013-6
That’s the case made in a new study by a trio of Princeton University researchers, who say they’ve found evidence that people who can’t perform basic maths calculations are more likely to default on their mortgages….. They asked them five simple maths questions….“The simplest one was: There is a sofa that costs $300 when it’s full price, and it’s on sale for half the price. How much is it on sale?”…Another question asked: “There’s a disease, and the probability of getting the disease is 10 per cent. How many people out of 1,000 got the disease?”
The study found that 20% of people who scored low scores on the maths questions wound up in foreclosure, compared to just 7% of people who scored high.
If the mortgage is under 100K most banks wont refinance, the old folks should just do a HELOC and continue paying the same payment they had at 8% and odds are HELOC would be paid off long before rates go up.
The second issue is term extension, if someone has 7 years left on a loan, and you tell them they need to refinance into a 15 year, they feel like they are being screwed. Once you move into an odd amortization length loan (like a 10 year mortgage), you tend to need to pay a penalty with a higher rate, it’s almost never worth it.
Another option is moving to a 15 year term with a cash out to the minimum, and immediately repay the cash-out amount back towards principal with the first payment. Borrower would continue to make accelerated payments (not paying the coupon amount) to end the loan at their expected date (or likely earlier).
I know people who are paying mid to high fives and have not refinanced, for no other reason than they don’t want to be bothered with the process.
“they don’t want to be bothered with the process”
Well the process has gotten significantly worse than it used to be. I spent no less than 20 hours collecting all of the items I needed for my last refinance. Maybe closer to 30 considering the 6-month rent loss insurance issue. Of course, the savings more than made up for my lost time. Now if it was an older person who doesn’t access their accounts online, that time frame could easily double or triple.
That six month rent loss insurance is a great deal. I have it and if I get flooded I just sit back and collect rent anyhow. I kinda like it.
Libtard in the City says:
July 17, 2013 at 11:51 am
“they don’t want to be bothered with the process”
Well the process has gotten significantly worse than it used to be. I spent no less than 20 hours collecting all of the items I needed for my last refinance. Maybe closer to 30 considering the 6-month rent loss insurance issue. Of course, the savings more than made up for my lost time. Now if it was an older person who doesn’t access their accounts online, that time frame could easily double or triple.
For the amount of savings, I would be bothered.
[20] pain,
“It’s not a bug, it’s a feature.”
We’ve been saying that here for the past two years. Nice to know the world is catching up to NJRERER. Grim is so cutting edge, he needs OSHA labels.
Shocker..
N.J. school board members and others lied to get free lunch for their kids, state comptroller says
It’s worth being bothered, but you have to have the time.
#20, #28
As a programmer, that is in my top 5 favorite sayings of all time. Can be applied to life to, in so many ways…
“That six month rent loss insurance is a great deal. I have it and if I get flooded I just sit back and collect rent anyhow. I kinda like it. ”
I’m just mad that MetLife doesn’t carry it. On the bright side, my new premiums are way less than what I was paying for MetLife, but I can already tell that this insurance company blows (Tower). They never charged me for one of my two policies, even though they sent me a receipt that said I paid for starters. Hopefully, no claims and I’ll be fine.
I have Metlife and I have the six month landlord insurance.
Oddly Met does not offer it directly but Met agents can offer it. .
Libtard in the City says:
July 17, 2013 at 1:32 pm
“That six month rent loss insurance is a great deal. I have it and if I get flooded I just sit back and collect rent anyhow. I kinda like it. ”
I’m just mad that MetLife doesn’t carry it. On the bright side, my new premiums are way less than what I was paying for MetLife, but I can already tell that this insurance company blows (Tower). They never charged me for one of my two policies, even though they sent me a receipt that said I paid for starters. Hopefully, no claims and I’ll be fine.
#16
I’m one of those people, locked in at 4.375 last week and today it’s 4.0. Any ideas from the group?
Well when I was referred to an agent (with Tower) they said I had to convert both my primary and investment insurances over to Tower, but Tower’s rates were much higher than MetLife’s. Then my mortgage broker suggested I get quotes from his insurance guy (Wilkins) and he put me in Tower but at a much lower rate than MetLife quoted me. You might want to try to get a quote from another broker.
This twisted logic and “Do as I say, not as I do” is the baseline requirement for public employment in NJ.
She told investigators she did not include her own income on the applications because she was not the person receiving the free lunch.
She added that her income “is none of (the school district’s) damn busines.
I just scanned for Reviews of Tower Insurance online. Let’s just say, I hope I don’t need to put in for any claims.
Tower Heist with Eddie Murphy and Ben Stiller is that the same place
Libtard in the City says:
July 17, 2013 at 2:27 pm
I just scanned for Reviews of Tower Insurance online. Let’s just say, I hope I don’t need to put in for any claims.
Some gems online for Tower:
Surly and uncooperative. They have an F rating from the BBB.
When they don’t want to help people, they just tell them their computers are down.
worst customer service imaginable. Use anyone else – this group is atrocious
the worst company that I have ever dealt with.
We were victim of Sandy.adjuster came out and said damage was there prior to storm and will not pay. Only claim we have ever made
I would not recommend this company to my worst enemy
Please, please stay away from this company unless you really want to fight with someone
Cuomo and the NYS AG have big lawsuits against tower over failure to pay after sandy. They eventually paid but folks were months late in getting funds
grim says:
July 17, 2013 at 3:03 pm
Some gems online for Tower:
Now I know why they are so cheap. I hope it’s worth the $500 or so I am saving per year.
Lib [35];
Wilkins Agency (recommended by Carl the mortgage guy) placed me with Tower (aka NJ Skylands) last year for home and auto — they were the cheapest. I had a low 4-figure Sandy claim which Tower stonewalled. I told Wilkins to shop the policy this year.
I consider it a cheap education – I could have ended up screwed for bigger money after having dutifully paid them for longer time. If I had serious damage to the house instead of just a detached structure, I can’t imagine the fight with them hammer and tongs just to make the place liveable. It would have been all-consuming. As it is I just had to deal with an eyesore and pay a grand or two. As little as they paid, Tower is still in the red on me, so they’re the losers by driving business away.
Albany, NY (February 21, 2013)
Governor Andrew M. Cuomo today announced that the Department of Financial Services is investigating the claims practices of three insurers following the aftermath of Storm Sandy. The three, Narragansett Bay Insurance Company, Tower Insurance Company and Kingstone Insurance Company, have had much higher than average complaints by consumers to the Department.
The insurers are being investigated for (1) failure to send adjusters in a timely manner, (2) failure to process claims in a timely manner, and (3) inability of homeowners to contact insurance company representatives. New York State has been tabulating the number of complaints against insurers and publishing updated report cards assessing insurance companies’ performance in responding to the disaster and paying claims at http://www.NYInsure.ny.gov.
The complaints about Tower Insurance create the appearance that the company has engaged in a pattern of failing to send adjusters to inspect damaged properties. Many New Yorkers had difficulty scheduling an inspection with Tower, while others have had their claims denied over the telephone without an adjuster visit. The Department has also received several complaints from Tower policyholders that they were unable to reach a company representative, that the company has delayed the processing of consumers’ claims, and that the company has improperly denied claims under the sewer backup endorsement.
How about this review?
in mold and fire ruins, had a house fire this company will find a way to deny your claim.it has been 7 months and never provided nothing for my children and family.i am living in a poor enviroment.please dont be another victim of this company.my life is ruined and i have 2 children
The guy in charge of the Department of Financial Services the insurance regulator for Tower supposedly wants to run for AG or Gov one day and is looking to make a big enforcement case that makes the press.
Towers is his golden opportunity. He will fry them.
This Business is not BBB Accredited
Tower Insurance Company
Vinnie the Mook down the corner can “insure” you.
EV update:
All of a sudden, Nissan doesn’t have enough Leafs to go around
Hack the price, and it starts to sell more. HOOCOODANODE?! Headline should have been : 235 Years Later, Adam Smith STILL Right!
Aside, I wonder how the non-union Nissan worker in TN are making out compared to the UAW Saturn workers in TN? Twinkie, anyone?
Narragansett Bay was another insurer I nearly signed up with year’s ago. Well I never had a claim prior to Snoctober and Sandy. Hopefully I never have a claim again. It helps that my brother is a lawyer though. It seems when he sends something on his lawyerly stationary, people always make amends. I’ll take the risk. I can be a real son of a bitch when I get screwed.
Locked in too at 4.375
A wneodrufl job. Super helpful information.
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