Market Brief
May 2010 was just one of many months in the last several years where we have witnessed Turbulence (and yes that is with a capital ‘T’). This past month will be remembered for Stock Market declines, worries about the Euro, debt in Europe especially for PIIGS , the growing disaster in the Gulf, and declining mortgage rates.
A decline of nearly ½% in fixed rate mortgages was realized albeit for only a few days at the height of worries about debt in Europe along with benign US economic growth and worries of inflation being abated for the time being.
Some of our customers got 4 ¼% to 4 ½% 15 year fixed rate loans with Zero points. That was not thought of much of a possibility even in March of this year. The federal government was to stop buying mortgage loans and in effect reduce their support of the residential housing mortgage market. The forecast was that we would gradually see a rise in mortgage rates.
But as I’ve said for many, many years, there are just too many factors that end up determining what mortgage rates settle at. Any economist worth their salt has been humbled and had to eat their forecasts for breakfast, lunch, and dinner when their best thought out forecasts were blown out of the water.
The other development in the mortgage has been for seniors who look into a Reverse Mortgage. In April, the major investors that make those loans started offering 5.50% fixed rate loans with no monthly service fees and dramatically lower fees. For loan amounts above $300,000 it was normal to see total fees of $17,000 to $21,000. Now we’re seeing those fees between $3,000 and $8500. Quite a drop! Some people are still better off using a Variable Rate option for a Reverse Mortgage but that’s why I ask a lot of questions. Before making a final decision, a lot of factors must be considered.
Some areas of housing in California have seen a modest increase in price per square foot. Areas with high unemployment and a large supply of houses listed for sale, particularly lender owned or short sale houses are still seeing some declines or at best a stabilization. Areas in the Silicon Valley towns are seeing robust activity for buying and increases in the price per square foot. It can be generally said that the valley region (Redding to Bakersfield) and the Inland Empire region will see homes for sale that are the result of foreclosure for at least 2-3 years. Areas with little new home building over the last 4 years and with decent employment will continue to see some price appreciation.
