Jumbo loans are a different story.  One year ago, a 30-year fixed jumbo was 7.875%.  Today, it’s 5.75%, a 2.125 point drop.  The median price of homes in the jumbo arena dropped over 6%, so with both interest rates and value of those homes down, Buyers can buy much more than they could have a year ago.  So those who decided to “wait and see” made a good decision. 

HOWEVER, neither the interest rates nor the home prices will stay this low.  We certainly hope that Buyers trying to outsmart the market won’t be left out in the cold.  Literally.

Check out this article in the Wall Street Journal.

 Activity has definitely picked up as evidenced by increased showing appointments. The Buyers are sending a clear message that if the home is a “deal”, they will step up.  The lending environment for jumbo loans is very tight and you actually have to qualify for the loan like you did in the good old days.  There are some very good loans but exercise caution and choose a reputable lender who can deliver what they promise.  If the interest rate and loan package is too good to be true … Some analysts are predicting increasing interest rates in the next six months so take advantage of these historic low rates and jump in to the market!

First of all, be prepared to provide proof that you can support a mortgage when you make loan application. Gone – at least for this year – are the days when you can finance a home on a good credit score alone. Be sure to bring paycheck stubs, W-2’s or 1099’s and tax returns along with current asset statements to your interview with your home mortgage consultant.

Interest rates should remain excellent overall for at least the first two quarters of this year, equal to or below the best 30 year fixed mortgage rates that we’ve seen in decades. Why? In part because the Fed is buying mortgage backed securities to the tune of approximately $4 billion every trading day between now and June, and when the price of mortgage bonds remains stable or goes up, interest rates tend to stay the same or go down. If you want to take a look at monthly interest rates on 30 year fixed mortgages since 1971, there are easy to read tables available at Freddie Mac, just put “historic rates” in the search engine. Our rates as of January 9th are as good as or better than any rates during that 38 year time span.

There will be volatility this year, so if your mortgage professional is able to quote you a rate that you love, lock it before you lose it! There are many economic reports that have a high impact on the price of mortgage bonds and on interest rates, and the changes can be swift from day to day. The prime rate, currently at 3.25%, is unlikely to go up this year which makes home equity lines of credit very cheap in the short term.

I’ll leave speculation on housing prices to the Realtors© at Dickson Realty, the ultimate professionals in the real estate field, but every one I’ve spoken with has agreed that 2009 will be a wonderful time to buy in the Reno Sparks area. There are some national real estate spokespeople who have said that it’s possible that buyers may be able to buy houses this year for the lowest price – and the cheapest money – for years to come. Don’t miss out!

My colleagues and I have been shouting from the rooftops that now and the upcoming months are the perfect time to buy real estate, now we have one more reason to urge on the fence buyers into the marketplace.

“Despite good-faith efforts by both the private and public sectors, the foreclosure rate remains too high, with adverse consequences for both those directly involved and for the broad economy,” Ben Bernanke said, addressing a Fed conference on the housing and mortgage markets. “More needs to be done.” In a move to increase credit availability, the Federal Reserve and Federal Home Loan Banks announced that they would purchase up to $600 billion in Mortgage-Backed Securities (MBS), exciting news that sent interest rates for 30-year fixed-rate mortgages plummeting below 6.00% and near the lows for the year!

The result of such action will help the nation’s economic recovery and bring stability to the housing market,” said 2009 National Association of Realtors® President Charles McMillan in a statement. “NAR estimates that lowering the mortgage interest rate by 1 to 2 percentage points can result in up to an additional 800,000 home sales.

The interest rate drop, the incredible first time buyer mortgage programs and our current real estate prices could be the most valuable gifts under the tree this year! Happy Holidays!

 Monday brought good news to the stock market and the financial sector with the report that troubled Bear Stearns would be getting $10 instead of the measly $2 per share reported earlier and mortgage bond prices went down on the news.  Existing Home Sales were reported at a better than expected pace which was good news for the housing industry.  Bond prices ended the week on an upturn partially fueled by the favorable moderation in the inflation figures from Friday’s Core Personal Consumption Expenditure Index for February.  This is the Fed’s favorite measure of inflation and Mr. Bernanke and his team are watching very closely for any signs of inflation which would be expected after the 6 cuts to the Fed Funds Rate in the current rate cut cycle that began on September 18th. 

Keep in mind that when mortgage bond prices go up, interest rates go down and vice versa.  It’s important to be dealing with a mortgage professional who is in tune with the bond market so that your interest rate can be locked at the optimal moment.

If you don’t understand why the rate cuts the Fed is making aren’t reducing mortgage interest rates, stay tuned for next week’s report.