Dennis' Mortgage Blog

Question of the week:  What will happen to mortgage rates in 2009?  Answer:  I wish I was able to accurately answer that question!    There will continue to be downward pressure on interest rates as long as there is bad economic data; however…the difficult question to answer is just how low can rates go?  The Fed is “all in” at 0% interest for overnight loans, which means they cannot go lower.  The banks and lenders need to have a spread between what they pay investors (depositors) and what they charge borrowers so there is not much more room for them for lower rates to be somewhat profitable.  We are in historic economic times with historic rates; I would not make any decision regarding a mortgage dependent on lower rates but would make that decision based on current rates.

If you have a question you would like me to answer send it to me!

It has been quite a year to say the least.   We have seen huge price changes in home values, parts of Los Angeles County (Glendale area) saw drops in values of only 5-6%, while parts of Los Angeles County (parts of Long Beach) have seen drops in excess of 20% in value from 2007.  There are pockets throughout Southern California where prices have held, or even gone up; there are pockets where price deterioration is calculated on a daily basis. 

Throughout the region one factor is constant, those looking to purchase homes are finding what should be terrific values in the long run.  Because of the low interest rates and reduced prices we are seeing significant sales volume as first time buyers are entering the market to take advantage of what it has to offer.  This activity is helping to sustain some markets and put some solid foundation in for the future.

One move that would help prices more than any other:  Congress needs to lift the loan limits for Southern California and other “high cost” areas to the limits that just expired: $719,000 for single family residences.  Lowering the limit to $625,500 has a very negative impact on much of our markets.  Call, email, fax or write your Congressional Representative or Senator and ask them to push to move the limits back to $719,000 to help our housing markets.

As is always the case on short weeks with major holidays in the middle we saw jerky trading with ups and downs.  As a result we end the week flat (conforming), slightly down (conforming jumbo) and slightly up (FHA).  Like Midwest weather, just wait a day or two and everything will probably change.

NOTE PRICING BELOW IS BASED ON 20% DOWN FOR CONFORMING, 3% FOR FHA, FULL DOC, AND FICOS OF 740 AND ABOVE (change from last Friday):

30 year conventional at 1 point 4.875%          ó 0.000%

30 year conforming-jumbo at 1 point 5.00%      ê 0.125%

30 year FHA at 1 point 5.25%                             é 0.25%

While it has been a most challenging year for us, 2008 provided me the opportunity to do what I enjoy:  help put families into their own homes.  Increasing homeownership is a driving passion for me; I know how much it improves the quality of life for families and also local neighborhoods and communities.  It has been my honor and privilege to once again be able to assist so many families with the opportunity to achieve homeownership; thank you to those who provided me that opportunity!

Best wishes as you ring in the New Year!

Dennis

Remember this update is posted weekly on My Blog at www.DennisCSmith.com ; feel free to forward the link to family and friends who may be interested in past commentaries.