Thinking of Buying In Truckee – Tahoe? Mortgage Rates at New Lows, Thanks To Our European Friends

Each month since the end of last year we have heard nothing but good news for the struggling U.S. housing market. What economic event aided to retain our low mortgage interest rates this time you ask?  Well all the accolades go to the European debt crisis, specifically Greece, Spain and Portugal.  But hey let’s not single them out. With the easy entry policy into the European Union and Euro Dollar other countries may just follow suit.  So what does this mean to you, the U.S. home consumer – mortgage rates are at historic lows.

The current average rate for a 30 year fixed loan is 4.87%, according to Bankrate.com. That’s the lowest rate for a 30 year loan since Bankrate started keeping track 25 years ago. One could not find a better time in our generation to buy or refinance a home especially with home prices rolled back to the beginning of the millennium. 

So how did the European crisis directly impact how we got to these low rates? Unsteady investors are concerned about their investment so they moved heavily into to the safety of U.S. Treasury’s.  That in turn forced down the yield and influences a variety of consumer interest rates, especially mortgages. The decline is also good news for homeowners looking to refinance, particularly those who owe more on their mortgage than their house is worth. We have a large window of refinancing, call it even a door way sized opportunity.  There is also the government’s Home Affordability Refinance Program (HARP) that provides homeowners the ability to refinance into a low rate mortgage, even with a depressed property value.  This program has been extended to qualified homeowners through June 2011.

Let’s not take a good thing for granted though.  These moments in market time do not last forever.  Move swiftly to purchase or refinance today.  How long we have you ask?  The summer can easily cover your window of opportunity, but the market could stabilize in the next month to put a small increase in rates, perhaps upwards of 5.5% on 30 year fixed confirming loans by end of June.  It is also a natural market response to the buying season for real estate. 

Here are more reasonable reasons to the market:

1.  The European Union will deliver market stabilizing news with an action plan to calm the markets on a timed basis in the months to come.
2. BP Oil – want some low priced crude?  Grab a boat and a bucket and you can just scoop it up for free.  The Feds won’t let BP get away with much more time whether BP fixes it or the government does. Either way the leak will eventually be capped.
3. Existing Home Sales for April beat expectations by rising 7.6% after a pop of 7% in March. The annual rate increased to 5.77 million units, topping expectations. The median price of a home rose 4% to $173,100. It all sounds good, right? Well first of all, investors are a bit wary of the housing data.  So the negative is the “inventory” increased to an 8.4 months supply. That’s the bad news. The good news is that we are at least eating into that inventory we all know exists out there. The banks are finally getting a bit smarter in handling their inventory and also directing and accepting more short sales than in recent past. 
4. Unemployment is another long term beast of the market that from reporting to reporting period causes momentary shifts in our mortgage rates.
5. The Feds still have toe holds on the market from corporate stocks, corporate loans stimulus programs. Sooner or later Wall Street will want to see divesture. And let’s not even go to the budget…nothing like printing money.
6. Hey how about another war with the North and South Korea. The countries decided to do some real saber rattling just to keep our world markets on their toes. When we see improvement expect a war or at least some serious jawing over who gets to have the bath tub rights. This is very serious as the North Koreans military went to combat alert.

Believe it or not the bright spot in all this wild news that has kindly kept our rates low is that our nation’s people are feeling better.  Yes, consumer confidence is a bright. The Conference Board’s consumer confidence index rose for the third straight month, climbing to 63.3 in May from 57.7 last month.

So the market is playing out national slow recovery against the world as it turns more negative.  The plan is to invest in the good news nationally or what might happen later this year in the world that affects world economic recovery or recession. That is why we have low rates today.  Investors in the market are nervous about the world and they want some ROI safety until the world economic drama plays into the second half of the year.

Back in the old, pre-financial market meltdown days, mortgages used to be among those products that benefited from these kinds of flight-to-quality moves. Today’s new securities, of course, have market and interest rate risks, but are built from mortgages comprised of much better borrower stock than those of a couple of years ago. This being the case, and with risks associated with investing in mortgages at the beginning of what should be a long decline, they may be become more attractive to investors seeking to park some cash. If so, that’s good news for housing market moving forward. We’ll see.

Until then, what does this mean to you – you’re kidding right – go buy a house and enjoy the deal of a generation. Of course if you already have a home, then go refinance your property and sake a few thousand a year.  That could be vacation money.  Greece I heard is real cheep this year.

For further information on how you can take advantage this market opportunity regarding home financing please contact Desmond Elder at Pacific Mortgage Consultants, Inc. by e-mail e-mail or phone 530-582-4238.