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Biggest Housing Boom Since 2006 And The Truth About "All Time Low" Rates

The National Association of Realtors’ Existing Home Sales report is the broadest measure of housing market activity. It just hit a 14-year record for the 3rd month in a row. It’s not just existing homes. The new home market is crushing it as well. This week’s data on Housing Starts (the ground-breaking phase of new construction) showed another solid step back toward the boomy levels of late 2019. Builders may not be breaking ground as fast as they were a year ago (before covid), but that has everything to do with covid and nothing to do with demand. This week’s record result for builder confidence reflects that. To top it all off, this week brought another round of news articles proclaiming “all-time low” mortgage rates. But are they really? For some borrowers in some scenarios, yes. But in
Biggest Housing Boom Since 2006 And The Truth About "All Time Low" Rates
Biggest Housing Boom Since 2006 And The Truth About "All Time Low" Rates

Low Rates Forever? Not Exactly, But The Word 'Indefinitely' Sounds Better All The Time

Mortgage rates were mixed today, depending on the lender. The underlying bond market (which dictates day to day changes in rates) has been more volatile in the past 48 hours compared to the past 4 weeks. Mortgage lenders respond to this volatility in different ways. It’s those differences that account for higher rates for some lenders and lower rates for others. But those differences are only in day-over-day terms. In other words, one lender might be higher in rate compared to yesterday only because they didn’t respond to yesterday’s market volatility in a timely way. Specifically, lenders have a choice as to whether or not they will adjust their mortgage rate offerings based on market conditions. Some are jumpier than others. Quite a few lenders increased rates in the middle of the day (yesterday
Low Rates Forever? Not Exactly, But The Word 'Indefinitely' Sounds Better All The Time
Low Rates Forever? Not Exactly, But The Word 'Indefinitely' Sounds Better All The Time

Mortgage Rates Vary Widely–Nothing To Do With The Fed

Yesterday’s policy announcement from the Federal Reserve had a chance to cause significant volatility for the bond market and the bond market is the chief ingredient in the mortgage rate equation. But this time around, the Fed didn’t cause a measurable reaction in the mortgage market. I’m frequently asked whether mortgage rates are 0% since the Fed just kept rates at 0%. People hear a headline on the news or a radio soundbyte mentioning the words “Fed, rate, zero,” and then assume the Fed just made some change that dropped rates to zero percent. After all why would there be so many news headlines about it if the Fed merely kept its policy rate unchanged?! It’s a fair question in that sense, but understand that the Fed’s rate decision will always make the news, even if the rate is the same as
Mortgage Rates Vary Widely–Nothing To Do With The Fed
Mortgage Rates Vary Widely–Nothing To Do With The Fed

Mortgage Rates Still Battling Hangover From Last Week's Drama

Mortgage rates are still coping with the after-effects of last week’s surprise implementation of a new fee on refinances. The fee in question is technically an LLPA (Loan-Leve-Price-Adjustment). LLPAs are a normal part of the mortgage pricing process and they help lenders account for different risk factors (credit score, equity, occupancy, etc.). The new refi LLPA is a bit different in that it’s in a sub-category known as an “adverse market fee.” This is the agencies’ way of collecting extra money to compensate for extra risks–hopefully transitory ones. None of the above would have been a big deal for the mortgage industry had the new fee been rolled out like every other fee: with plenty of advanced notice and in logical, palatable amount. As it stands, it more than doubled the average fee
Mortgage Rates Still Battling Hangover From Last Week's Drama
Mortgage Rates Still Battling Hangover From Last Week's Drama

Most Mortgage Rate Headlines Are Wrong Today

There are quite a few more new stories than normal about mortgage rates today. Most of them are wrong. This one is not, and it’s pretty easy to see why. Freddie Mac releases its weekly mortgage rate survey every Thursday morning. The survey accepts responses from Monday through Wednesday, but based on a comparison of day-to-day rates versus the survey numbers, it would appear Monday’s rates get most of the weight, Tuesday’s slightly less, and Wednesday’s almost none. In other words, the survey has historically compared Mon/Tue rates to Mon/Tue rates. That’s not a problem if that was made more clear by the throng of journalists that cite the survey as the definitive word in week-over-week rate movement. As it stands, however, we have headlines unequivocally proclaiming mortgage rates are at
Most Mortgage Rate Headlines Are Wrong Today
Most Mortgage Rate Headlines Are Wrong Today

New Mortgage Rate Record; What Is a "Top Tier" Scenario?

Mortgage rates are on a tear, with the average lender easily hitting new all-time lows today. How low is that? At this point it’s safe to say that anything over 3% is too high as long as we’re talking about a top tier scenario. So let’s take a moment to discuss what might separate one scenario from another. 1. Loan-to-Value ratio (LTV) As the name implies, it’s the ratio of the proposed new loan amount to the value of the home in question (note that the purchase price is used if it’s lower than the appraised value). This one of the two most important considerations that determines the pricing bracket your loan quote would fall into. By the time you get an LTV down under 75%, you’re paying almost no additional interest, but there’s a very important caveat. 2. Credit Score (FICO) This is the
New Mortgage Rate Record; What Is a "Top Tier" Scenario?
New Mortgage Rate Record; What Is a "Top Tier" Scenario?

Mortgage Rates Are Quickly Shaking Off Last Week's Panic

Mortgage rates moved lower again today, with the average lender erasing a good amount of the weakness seen last week. That’s good news considering rates hit all-time lows on the afternoon of June 1st (last Monday). After that, however, rates rose at their fastest pace in several months, raising some concern that the bond market (which underlies rates) was shifting gears in response to stronger-than-expected economic data. It remains to be seen whether these past 2 days constitute a reversal in a negative trend or if they’re merely a token correction to last week’s rate spike. In other words, are things good or are they just noticeably less bad than they were? We won’t be able to answer this until we see how things play out in the coming days. Tomorrow’s Fed announcement is the biggest potential
Mortgage Rates Are Quickly Shaking Off Last Week's Panic
Mortgage Rates Are Quickly Shaking Off Last Week's Panic

Mortgage Rates Fall Back Toward All-Time Lows

Mortgage rates were mixed this morning, depending on the lender. The more responsive lenders had already bumped rates higher yesterday in response to weakness in the bond market and were thus able to offer modest improvements this morning, or at least relatively flat pricing. Other lenders were noticeably weaker (aka higher in rate). As the day progressed, the underlying bond market improved fairly decisively. This allowed most every lender to offer lower rates by the end of the day. While this wasn’t enough to get us back to the all-time lows seen at times in the previous 2 business days, it was definitely a step in the right direction. It remains to be seen if this was a sign of things to come or merely a correction to yesterday’s bigger market movement. The average lender remains in the
Mortgage Rates Fall Back Toward All-Time Lows
Mortgage Rates Fall Back Toward All-Time Lows

Mortgage Rates Finally Bounce Higher

Mortgage rates have been on a tear recently. The average lender has either held rates steady or improved them every single day since January 16th. Some of those improvements have been substantial, ultimately resulting in the lowest rates in more than 3 years as of the past 2 business days. Today, however, finally brought an end to the winning streak with the first meaningful move back in the other direction. “Meaningful” may not be too meaningful depending upon how closely you’re following rate movements. The average lender is still easily able to offer conventional 30yr fixed rates of 3.5% on top tier scenarios. The bigger issue is merely the risk that today marks some sort of turning point in the bigger picture. It’s too soon to know if that’s what this is, but it’s definitely the first obvious
Mortgage Rates Finally Bounce Higher
Mortgage Rates Finally Bounce Higher

Mortgage Rates Digging Deeper Into Multi-Year Lows

In the world of interest rates, it’s good to be a mortgage today . The dominant species on that world is US Treasuries: the quintessential dollar-based loans (after all, they are loans to the US government). Loaning dollars to the entity responsible for the dollar is about as foundational as it gets, but I digress. Treasuries and mortgage rates tend to move in the same direction and by generally similar amounts. That’s because mortgage rates are based on underlying bonds (mortgage-backed securities or “MBS”) that are fairly similar to Treasuries in most of the ways investors care about. The prices of MBS dictate where lenders can and should set their interest rates, but ultimately, it’s up to the lender. If they’re flush with business and want to slow things down, they might set rates a bit
Mortgage Rates Digging Deeper Into Multi-Year Lows
Mortgage Rates Digging Deeper Into Multi-Year Lows