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Pasadena Real Estate Mortgage Rates Update- November 19, 2008

Pasadena Real Estate Mortgage Rates Update- November 19, 2008

by Brian Brady

The economy is really sick:

Today’s CPI report signals deflation, or a prolonged price slide, may become another hazard facing Federal Reserve Chairman Ben S. Bernanke and President-elect Barack Obama. Deflation could worsen the economic downturn by making debts harder to pay off and countering the impact of Fed interest-rate cuts.

”The economy’s really just in horrific shape,” said Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities in New York. Fed officials will ”take rates as low as they have to” to avoid ”a deflation-type scenario, which now all of a sudden is very possible.”

LaVorgna predicts the Fed will cut its main rate to 0.5 percent from its current 1 percent when it meets on Dec. 16.

Fed Vice Chairman Donald Kohn said today that while the risk of deflation is ”still small,” policy makers must be ”aggressive” in fighting the danger. The economy ”is declining right now” and will record a couple of quarters of contraction, he said in answering questions after a speech in Washington.

Fed policy makers last month forecast the U.S. economy will contract through the middle of 2009, with some officials prepared to cut interest rates further in response, according to a record of the group’s meeting.

If the Fed’s thinking of cutting rates further, why aren’t mortgage rates going down?  I think it’s because the Fed has done all it can do.  Future rate cuts are like that eighth scotch.  Drinking that eighth scotch isn’t going to make you feel any better than the seven prior.  It just might make you feel worse.

I advised folks, right after the election, to lock loans with rates under 6% if they were closing within 30 days.  Today, I’m suggesting that you lock any loan that is closing this year.  Today, a 45-day lock for a 6.0% rate would costs 1.25%.  While you may see rates drop below 6% , in the next 45 days, the risk of them moving higher is greater.

Take 6% and run.

Posted on November 19th, 2008
Posted by: Irina Netchaev

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Pasadena Mortgage Rates Report: Fed Cut To Prompt Lower Mortgage Rates Into November?

Pasadena Mortgage Rates Report: Fed Cut To Prompt Lower Mortgage Rates Into November?

Brian Brady

We analyze Pasadena mortgage rates by examining the mortgage-backed securities market
and its reaction to economic data and events.  Today, the Federal Reserve cut
the Fed Funds rate to an historical low of 1%:

The Fed funds rate target is now 1%,
the lowest level in more than four years. In announcing its decision, the
Federal Open Market Committee cited a drop in spending by consumers and
businesses, and predicted that consumption
may slow further due to tighter lending standards.

“The pace of economic activity appears to have slowed markedly,” the FOMC
said in a statement, “owing importantly to a decline in consumer expenditures.”

Why’s the economy in the tank?  You just aren’t spending enough money, Joe
the Plumber.  Of course, you can’t borrow any either so you’re hesitant about
spending.   Hence, the Fed cut in rate.  Normally, a Fed cut should be followed
by a RISE in mortgage rates but it looks like the mortgage-backed securities
market anticipated the cut a week ago. 

Candleperl_2

 

Let’s take a look the crystal ball (market chart):

See what’s happening here?  Two weeks ago, we had a six day BIG drop, which
caused rates to rise from 5.875% to 6.5%.  That drop was followed by a 5 day
rally, which brought rates back down to 5.875%.  Then, we had a six day BIG
drop, driving Pasadena mortgage rates back up to 6.5% (today)…

…and I think the market overreacted which means I think we’ll see
lower mortgage rates into the beginning of November
.

This is the kind of volatility we’ve come to expect.  Pasadena mortgage rates should
drop to 6.25%, pause, then drop again to the 6% level or below.  No guarantees
but November closings should get a peek at 6% or better rates soon.

Posted on October 29th, 2008
Posted by: Irina Netchaev

2 Comments »

Pasadena Real Estate Mortgage Rates Report: October 27, 2008

Pasadena Real Estate Mortgage Rates Report: October 27, 2008

 

Brian Brady

Friday, Pasadena mortgage rates jumped from 5.875% to 6.25% as mortgage-backed securities traders joined the world wide sell-off.  Global stock markets plunged Friday and the Asian markets were weak for Monday.  Investors world wide don’t want to be invested in ANYTHING.

When the world panics, we FLOAT mortgage rates.  So, roll the projectors!  The movie “Float Club” is playing all week.

Interestingly enough, gold isn’t skyrocketing in price.  Long held as a “safe haven” during times of turmoil, investors are opting to hold their portfolios in cash instead:

Bullion is down 15 percent this month as the dollar climbed to a two-year high against the euro and the Standard & Poor’s 500 Index headed for its steepest monthly loss since 1938.

`We’re seeing some consolidation in the market today as investors pause for breath following the roller-coaster we had last week,” Zhu Lv, research manager at Shanghai Tonglian Futures Co., said from Shanghai today.

Gold for immediate delivery gained as much as 1.7 percent to $746.91 an ounce, and traded at $735.33 at 10:29 a.m. in Singapore. The metal fell below $700 on Oct. 24. Silver for immediate delivery was up 1 percent at $9.4575 an ounce.

Gold still benefits from its safe haven properties, although these days, more and more are choosing to hold just cash instead, so it won’t be surprising to see gold below $700 again,” said Zhu.

What’s that mean?  It means that while investors are cautious, they aren’t completely terrified and that bodes well for mortgage-backed securities.  When investors buy mortgage-backed securities, mortgage rates drop; that’s what we think will happen in the next 7-10 days.

I cautioned borrowers to lock in all October closings last week when Pasadena mortgage rates dipped below 6%.  That opportunity had a short-lived window.  Like all panics, reason eventually prevails.  Central banks world wide are slashing interest rates to avoid an economic recession.  This make US dollar denominated investments, especially mortgage-backed securities more attractive.

Hold out for a mortgage rate below 6% if you’re closing in November.

Originally posted on Millionaire Real Estate Lender

Posted on October 26th, 2008
Posted by: Irina Netchaev

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Pasadena Real Estate Mortgage Rates Report – October 21, 2008

Pasadena Real Estate Mortgage Rates Report – October 21, 2008

Brian Brady

By: Brian Brady

America’s #1 Mortgage Broker  

Pasadena Mortgage rates are finally below 6.0% again.  If you’re closing on your Pasadena home purchase in October, take any rate under 6.0% and lock it in to closing.  In the beginning of the month, I suggested to wait for lower rates if you were closing in the last two weeks of October.  I said:

You can safely delay mortgage locks if your closing after October 17th.  Delaying your lock is a bit different from a “float” recommendation.  It means that you should expect lower rates and jump on one when you feel it’s “good enough”. The market should remain volatile.  The par rate (with no yield spread premium to the originator) should drift as low as 5.625% in the next 60 days but it may have to go through 6.125% to get there.

We made it through the 6’s but never lower than the original 5.875%.  If I still think there is room for improvement in mortgage rates why am I recommending to lock for October closings?

My strategy is more about limiting higher rates than gambling for better rates.  I try to avoid unnecessary risk by being biased to locking unless there is irrational fear.  While I was dead on about the irrational fear in the mortgage-backed securities market, my timing was off.  If you’re closing a Pasadena home loan this week, and delayed your lock, I might have cost you some money.

The mortgage-backed securities markets are finally able to focus on the economy now that the drama is over on Wall Street.  Economic fundamentals drive mortgage rates and the economy doesn’t look real healthy. 

Expect rates to improve to 5.625% and fluctuate between 5.625% and 6.25% through the rest of the year.

If you’re closing on your Pasadena home after November 1, 2008, delay that lock until 5.625% is available.  All October closings, take what you can get today.

Posted on October 21st, 2008
Posted by: Irina Netchaev

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Pasadena Real Estate Mortgage Rates Report – October 14, 2008

Pasadena Real Estate Mortgage Rates Report – October 14, 2008

Brian Brady

By: Brian Brady

America’s #1 Mortgage Broker

If you’re closing your loan after Friday, I left you naked (not locked).  I told you that the fundamentals of the economy would bring rates lower after the bailout was announced.  Rates were at 5.875%, today they’re at 6.5%.  What’s in store for the rest of the month?

Eric Holloman of Rate Link offers this two-minute research report about why “headline risk” should be replaced by economic data as a determination of mortgage-backed securities pricing.  If he’s correct (and I think he is), the next three days will be important for the direct of mortgage rates through the end of the year.

I’m still recommending that you float your Pasadena mortgage rates; I believe we’ll see rates come back down under 6% within the next 7-10 days.  If the economic data suggest that we are NOT headed for a recession,mortgage  rates will stay in the 6.25-6.75% range.  If the data are as indicative of a downturn as I think they will be, lower rates should be on the horizon.  As always, keep checking back.

Originally posted on Long Beach Real Estate Home

Posted on October 15th, 2008
Posted by: Irina Netchaev

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Pasadena Real Estate Mortgage Rates Report – October 3, 2008

Pasadena Real Estate Mortgage Rates Report – October 3, 2008

Brian Brady

By: Brian Brady

America’s #1 Mortgage Broker

The bailout bill passed the House after a decisive victory in the Senate; it is certain to be signed into law by President Bush.  From Bloomberg.com:

These steps represent decisive action to ease the credit crunch that is now threatening our economy,” President George W. Bush said at the White House after the vote. He said he will sign the bill into law when he receives it. House Speaker Nancy Pelosi said the measure has been sent to him.

The House approved the measure in a 263-171 vote, four days after rejecting an earlier version. The bill’s defeat on Sept. 29 caused a 778-point drop in the Dow Jones Industrial Average, prompting dozens of lawmakers to reverse their vote on the legislation, the government’s largest intervention in the markets since Franklin Roosevelt‘s New Deal.

I expect the mortgage-backed securities market to gradually improve.  The euphoric response that followed the Nationalization of Fannie Mae and Freddie Mac was a result of pent-up anxiety about the explicit government guarantee of their debt.  This “bailout” is different than the Fannie/Freddie bailout.  While this bailout will provide support for battered mortgages, which should result in lower mortgage rates, it is clearly a signal that the Federal government will assume a lot of losses.

What worries me (and mortgage-backed securities traders) is the propensity for other governments to stick their hand out and ask for help:

California Governor Arnold Schwarzenegger today warned that his and other states may need emergency loans if a $700 billion financial-rescue package isn’t passed by Congress soon.

If this bailout restores order to the credit markets, California should be able to raise money through tax-advantaged municipal bond offerings.  If this bailout is insufficient to cure the credit crunch and states need to turn to the US Treasury to solve their cash flow problems, credit markets have seized to the point of financial Armageddon.

You can safely delay your mortgage locks if you are closing on your Pasadena home sale after October 17th.  Delaying your lock is a bit different from a “float” recommendation.  It means that you should expect lower rates and jump on one when you feel it’s “good enough”. The market should remain volatile.  The par rate (with no yield spread premium to the originator) should drift as low as 5.625% in the next 60 days but it may have to go through 6.125% to get there.  If you’re planning on refinancing your home loan, get your documentation in line, watch the Pasadena mortgage rates reports carefully, and jump on the opportunity when it presents itself.

MBS traders know in their heart that the bailout package and weakened employment data will lead to lower mortgage rates but every bump in the road (like the California request) will give them reasons to sell.

Delay your lock if you have time; lock those rates if you’re closing in 14 days.

Originally posted on Millionaire Real Estate Lender

Posted on October 3rd, 2008
Posted by: Irina Netchaev

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Pasadena Mortgage Rates Report: September 29, 2008

Pasadena Mortgage Rates Report: September 29, 2008

By Brian Brady

Remember I told you to sit tight on that mortgage rate lock until after the Bailout Bill was passed?

Well, the Bailout Bill failed.

Pasadena mortgage rates are a little better than they were this morning. This morning a 30-year fixed par rate was at 6.0%; this afternoon, it was at 5.875%.  If you’re closing on your Pasadena home loan in 30 days , there is more risk that you’ll get a rate over 6% than under 6%.  Lock your mortgage rate if you’re closing in October.

If you have time, wait it out.  The bailout bill failed but it isn’t dead.  If the bailout bill DOES ultimately fail, mortgage rates will skyrocket, housing prices will tank, and you’ll probably renegotiate or cancel that home purchase.

When the bailout goes through (and the whining on Wall Street will be so loud that it WILL go through), mortgage rates will come back down.

PS:  If you’re a baby boomer, this is your worst nightmare. Most of the people over 55 have most of their retirement assets in the stock market, through mutual funds in their 401-k plan.  If you’re a real estate investor or Pasadena home buyer, this might be really good news.

PPS: Did you know that Main Street already got bailed out? I’ll talk about that next time.

Brian can be reached at (858) 777-9751.

Posted on September 29th, 2008
Posted by: Irina Netchaev

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Pasadena Mortgage Rates Report: September 25, 2008

Pasadena Mortgage Rates Report: September 25, 2008

by Brian Brady

We are advising clients to delay locking their Pasadena mortgage rates until the Bailout hearings are over.  That could change in a New York minute so keep checking our mortgage rates report daily.  We could change if the mortgage bond markets start reacting to an expected bailout plan early.

The economic data suggest that we are in a full-blown recession. While that isn’t a good sign, it’s positive for interest rates.  Fed Chairman, Bernanke, may cut interest rates again:

Federal Reserve Chairman Ben S. Bernanke moved closer to cutting interest rates, signaling that risks to U.S. growth are greater than policy makers saw them just last week.

The “intensification” of the financial crisis in recent weeks is curbing Americans’ access to borrowing, making the outlook for consumer spending “sluggish at best,” Bernanke told lawmakers in Washington yesterday. While he noted that risks to inflation remain, the Fed chief’s testimony focused on “grave threats” to the banking system.

An expected bailout combined with the increased probability of a Fed rate cut compels us to remain positive but vigilant about lower mortgage rates.  Sit tight for now.

Originally posted on Mortgages Unzipped

Posted on September 25th, 2008
Posted by: Irina Netchaev

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Pasadena Mortgage Rates Report: September 19, 2008

Pasadena Mortgage Rates Report: September 19, 2008

by Brian Brady

Hold off on that Pasadena mortgage rate lockThe government is here to help.

 

I initially thought this massive government purchase of defaulted mortgage proposal would lead to higher mortgage rates, but quickly reversed course.  Here’s me today, on Zillow Mortgage Blog:

This action is an obvious attempt to stabilize the volatile mortgage market.  His rationale is that this plan (a massive MBS purchase) will cost the taxpayers a lot less than the alternative. Whether or not that’s true remains to be seen.  He specifically references the “spread” or yield difference between treasury notes and mortgage-backed securities.  If the US Treasury is going to buy mortgage-backed securities to narrow that spread, rates will drop in the near term.

I think we’ll see conforming 30-year fixed rates work down to 5.75% or below, next week.  Stay tuned.

 

Originally posted on Millionaire Real Estate Lender

Posted on September 20th, 2008
Posted by: Irina Netchaev

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Pasadena Mortgage Rates Report: September 17, 2008

Pasadena Mortgage Rates Report: September 17, 2008

By Brian Brady

Remember when I talked about the whipsaw effect, yesterday? Rates with no lender compensation to the broker, called “par” rates in the industry *, are 5.875% now.  That’s .375% higher than the 5.5% I reported yesterday.

Will Pasadena mortgage rates come back down?


Maybe.  They SHOULD since they are backed by the full faith and credit of the US Treasury.  They SHOULD start behaving like the 10-year treasury bond yield, which is down .06% in yield today.  They SHOULD be at the 5.5%  mark….but they’re not.

The mortgage default crisis spread to the world’s largest insurance company, prompting yet another government bailout.  Mortgage bond traders are starting to think that the US Treasury is going to have to start offering classes of debt, to deal with the crisis.

 

Stratification of debt, like the old Resolution Trust Corporation bonds, will most likely take us back to where mortgage-backed securities trade at a wide premium to Treasury debt.  This isn’t happening but mortgage bond traders are speculating that it might. If it does, then the demand for a 30 year mortgage, loaned to you, the American borrower, is not as high as a direct obligation of the US government.

 

What we seek to discover is how IRRATIONAL this fear, conjecture, and speculation is.  While it doesn’t seem rational, it isn’t quite irrational at these price levels.  If the 10-year treasury bond stays under 3.5% yield, and the mortgage bonds sell-off pushes mortgage rates up over 6.0%, then I think the fear isirrational and will change my recommendation- I’m still suggesting that you lock your mortgage rate at application.

 

* A par rate is where the originating mortgage broker does not receive any yield spread premium from the lender.  Borrowers can negotiate a fee for the mortgage broker to give you access to “par rates”, which are typically lower than the “retail” rates banks offer.


Originally posted on Millionaire Real Estate Lender

Posted on September 17th, 2008
Posted by: Irina Netchaev

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