30 yr – 5.48% w/ 0.5% in fees. DOWN from 5.69%. 1 yr ago - 6.25%
15 yr – 4.95% w/ 0.4% in fees. DOWN from 5.21%. 1 yr ago – 5.98%
5/1 ARM – 5.13% w/ 0.4% in fees. DOWN from 5.40%. 1 yr ago – 6.00%
1 yr ARM - 4.99% w/ 0.6% in fees. DOWN from 5.26%. 1 yr ago – 5.49%
(Average mortgage rates according to Freddie Mac’s Primary Mortgage Market Survey®, as of 1-24-08)
Note: These rates should be used for trend line analysis only and NEVER for comparison shopping. Your rate will vary depending on multiple factors. In general, this simply helps demonstrate which direction mortgage rates have moved from week to week.
Summary: WOW! Center Stage: The Federal Reserve cut the Fed Funds Rate by ¾ percent and the stock markets are bouncing like a rubber ball dropped from the Sears Tower. The Fed move was extraordinary in both its size and timing. It is the largest cut since 1984 and also the first time in more than six years that the Fed took action outside of a regularly scheduled meeting. The last time was immediately 9/11. As a result, mortgage rates continued trending downward.
Mortgage Industry – It seems that the desired result has been achieved with this latest Fed action. Usually the market PRECEDES any Fed action. This time was slightly different though. It appears that the liquidity, or influx of money, to the mortgage market is resulting in lenders doing what their supposed to do – lend money.
The Fed: While the big R word, recession, has been bally-hooed about, the Fed’s Beige Book survey of regional conditions showed that 7 of 12 Fed districts showed increased economic activity. Overall, this specific report denotes slow economic growth
Retail Sales: For December, retail sales fell by 0.4% while the final November reading was a positive 1.0%. Waiting for January numbers might provide a better idea of what the trend really is at this time.
Housing: December Housing Starts fell 14.2%, the slowest pace since May 1991 and for 2007 overall, fell nearly 25%. Permits declined 8.1% and Builder Sentiment remained unchanged at a reading of 19. Overall, excess inventory needs to get off the shelves before any marked improvement happens.
Inflation: Have you noticed that food and energy prices are rising? No kidding Jim…and the moon is made of cheese! Wholesale inflation rose 6% for 2007 while consumer inflation rose 2.2% in 2007, according to official government data…which is always suspect. Inflation is at the forefront of discussion. The Fed rate cut may help cause more inflation as more dollars in the economy (which happens when they lower rates) are chasing a limited supply of goods…Economics 101.
The Fed II: The Fed is expected to cut rates at their next meeting and probably the meeting after that. The administration is looking to give away $150b, with a “B”. Yay, free money for everyone! Could these moves be inflationary too…Me thinks “yes”. With all this inflation talk, long term views call for rising long-term interest rates (mortgages), continuing weakness in the US dollar and rising commodity prices (i.e. gold). So while these Fed moves are certainly intended to improve the economy, the net-net bottom line is that it helps the bankers obtain cheaper funding, results in lower returns for "savers" and most likely further deteriortes the dollar. So instead of them hitting the Staples "easy" button, it appears more likely that the Fed really hit the "Panic" button...Oh well, since I can't control it, I'll observe and react the best I can and share accordingly.
Real Estate: It’s still a real estate buyer’s market and qualified borrowers are in a great position to take advantage of the market. Since many people have been removed from the market as potential buyers due to the loss of the previously aggressive loan programs, they must still live somewhere. How about a house you might own? The rental market is strong…more renters. So if you’re a supplier of rental homes, now might be a good time for you. Can you handle the cash flow? Cash-flow controls mortgages and mortgages control real estate. How much money will you make on real estate you don’t own?
Thought of the Week: “The path of least resistance is the path of a loser.” - HG Wells, Author
Meet my friend Jimmy. More to come on him later. He's cool.
