Good morning! I hope everyone is enjoying their weekend. After hearing all the talk about lower interest rates recently, I had to smile. Does anyone remember January 2008 when interest rates were at 5% for a couple of hours? I do. Did it do any good? Not really. There were a ton of mortgage applications right around this time. But the bottom line is that loans couldn't get done and closed. So what has changed?
Nothing really. In fact, credit has probably gotten tighter. I know we're all looking for that shot in the arm to get us moving again. And the idea is great and I hope it works. I'm just not sure we're ready to exit the downturn we're in. I expect maybe Spring or Summer 2009, at least up here. Case in point. I get an email from a borrower that he wants to refinance. The rate I got him in 2007 was the best I could do at the time given his credit score. Now their credit score is better. The problem? Their house has declined in value, probably to the point where I can't do it.
Obviously, there's a ton of interest by borrowers to refinance. And it's so easy to take an application, pull credit and get excited about the prospect of a new loan. Then, we start working on the minutiae and find that it can't be done or doesn't make sense. Obviously, I'm talking about refinancing at this point. I don't know about you but the purchase market is pretty dead up here right now.
What are you seeing in your neck of the woods? Is this helping your business? Do you expect to close more loans because of the lower rates. If so, good for you. I just think it's important to bring a little levity here. When the " make sense" loans start getting done again that will start to signal a turnaround. Right now that's not happening. Plus, we're going to probably be getting some bad news in January. If retail sales are as gloomy as they predict for the Holiday Season, expect several bankruptcies after the first of the year. In other words, we're not out of the woods yet. We will be soon. We just need another six months or so. Feel free to disagree with me; after all it's just my 2 cents! Have a great day!
Paul McFadden
Paul, your assessment is pretty much spot on for most parts of the country. Title applications have spiked a little this week and I suspect they will as rates come down, but overall, we have a long way to go before we see any stablization in the real estate and mortgage markets. I think longer than spring/ summer 2009, simply because we are going to have to work the ARM resets out of the market and that is going to ugly and long.
Keep the faith, keep working hard and believe!
Bo
Paul:
In my opinion, you ask a very good question in the title of your post. However, I look at that question from a different perspective. Unemployment numbers are approaching a 15-year high. If you don't have potential borrowers with jobs, then they can't qualify for a loan or make payment on any current or future loans.
Let's get people back to work. Then, we can discuss the benefits of lower interest rates.
That's my $.02.
It seems as if the Bond Market is falling so far that we will be at 4.5% before we know it... great post!!!
I just locked in 5.125% on a 30 year loan yesterday on my refi. I currently have a 4.5% interest only loan that is due to reset in April. Fortunatley, the downturn in the real estate market hasn't hit Dallas as hard as other places and I have been making prinicpal payments in addition to the interest payments. My home has held its value and my credit score is very good. But I do think it will be another 6 months or so before we see smoother sailing.
Paul, values are being affected for purchase and for refinance. I agree that if no one is working or if they are working, can credit qualify, but the value does not hold then we are spinning our wheels. I do not know that this will clear within 6 months.
I've never found that lowering rates jumpstarted real estate sales. it's more about confidence on the part of the buyer.
I think that whether the Treasury gets involved or not, we could see rates under 5% in the next quarter... There is starting to be money out there and it needs somewhere to go.
Interest Rates have hlped with refinances more than new purchases. The problem with my market is that their is a shortage of buyers with credit & cash. In the past we have been able to create cash thru the use of concessions. However, the rules of the game are changing.
It will help buyers in our area. Our market wasn't hit as hard as others. The biggest problem here is consumer confidence b/c they listen to too much national news. I think it will definately jumpstart refis and new sales here a lot! The sooner the better. If they wait 60 days to do it, the buyers that don't HAVE to move, will not get off the fence and move for another 60-90 days which will hurt December and January!
Paul!
Finally somebody else said it!
I have been talking about this for the past week ever since there was a buzz about 4.5% mortgage rates.
I have been saying for a long time that the market slowdown is not about housing affordability. If it were about affordability we would have more home sales in 2008 than we had in 2006 when home prices and mortgage rates were higher - but we don't. In fact we have 1.6 million fewer home sales in 2008 than in 2006.
Bo: I thought you would like to see what the next couple of years in the real estate market will look like. This is going to be the great unraveling of our economy unless the government does something massive.
Mark: Thanks for the post and the graph. The chart above could scare us all. I'd rather look at the glass as half-full. That is, we have been in a severe slowdown since the start of 2007 for all practical purposes. Now we're seeing some areas recover (think Southern California and Las Vegas). Granted it's people buying based on other people's misfortune but, still, people are buying again. I don't see credit easing so people either need to have their financial house in order or wait. I expect a slightly better year in 2009 than in 2008. It could be as simple as 2008 was pretty rough all over.
Jeff and Lisa: That's good to hear. Our market probably wasn't hit as hard as others either. However, things have been awfully slow. We shall see what 2009 brings.
Remo: Exactly! Buyers who can't qualify is a problem. And I think it will continue to be one until the lenders ease credit.
Lane: Thank you. The big thing right now is consumer confidence. Hopefully that will rebound sometime next year.
Li: See my comments to Lane above. You are dead on!
Eric: That's what I'm finding as well. Obviously, we as loan officers need to know what we're doing so we're not just spinning our wheels.
Thanks, Lorrie. I have heard Dallas has been a little more immune. Good luck to you and have a great day!
Rick: Obviously lower interest rates can only help our cause. Take care.
David: That's a great point. If everyone is concerned about their job status, they aren't too excited about moving, etc. I'm hopeful that 2009 will herald the return of consumer confidence.
Thanks, Bo. I always appreciate you positive thoughts. My feeling is that 2008 was pretty dismal for alot of us Let's put it this way; it was an eye-opener. Anyone who pulled through it will probably survive and see a better 2009.
Thank you all for your comments. I appreciate it! Have a great day!
Very touching and enlightening with tons of experience!
I can't agree more with you, except when we can see "make sense" loans and, maybe, a paradox between your good wishes and real observation: "Did it do any good? Not really" and "the idea is great and I hope it works."). To me, nothing is great if it not really does any good.
How long for us to see it happen? I hope it can be tomorrow as Annie sings. I really mean it when I say "tomorrow." Well, all depends on the approach our politicians take, not much for the poor folks to say.
I am going to mention all the brilliant thinking in my blog: Join the debate about the 4.5% rates..Agree /Disagree..don't know?
It's a great time to help the right people. I agree that the unemployment issue is the key. Thanks for the post!
JB: You're welcome! I too hope that consumer confidence will improve. That's the key.
Ed: Thanks for your comments. We shall see where we end up. I expect next year to be slightly better but not a breakthrough. 2010 could herald the start of a nice recovery. Take care.
Paul, I feel like the sub 5% mortgage market will awaken a slumbering market place. It will help some borderline buyers, and refi's occur, it will help some borrowers to buy a more expensive home, it will compel some fence sitters to buy, before rates go up. In sum, it will help enough people to stir the economy and be a "shot of energy" to help the recovery get off the ground.
Ray: As my wife often says "from your mouth to God's ears!" I certainly hope so. Call me a pessimist but I think the loan environment is going to stay difficult for the next few months at a minimum. Again, the lenders control who gets the money. And, so far, they don't seem to want to budge. Sure interest rates are low and may get even better. The problem is how strict the underwriting is. And I don't see that changing anytime soon.
Strangely when I went to lock a loan yesterday it was better priced at 5% than 5.125%. I have noticed that same phenomenon lately...why would it be cheaper to lock at the bottom?
I'm not sure but I occasionally have seen the same thing as well. Obviously, its' great for our customer!
With the rates back in the low to mid 5's I am seeing a spike in refis. Then the news hits and tells everyone that rates are going to be at 4.5% and suddenly my phone starts ringing from the borrowers in my pipeline (already locked) in a panic and their first reaction is that perhaps they should wait. Well, we may or may not see rates go that low and as you so aptly stated, we were at 5% once for WHAT??? A few hours??? Low to mid 5's is pretty darn good and I say take it while it's here. The problem with news like that it is tends to stall the market - suddenly everyone wants to wait for a better deal. In my market in the Northeast (southern Maine) we have not been hit as hard as other parts of the country and the most active purchase market is the first time home buyer who doesn't have to sell an existing dwelling..... and RD is more popular than ever!
Linda: Yes, it's a little confusing. I'm personally looking forward to things calming down a bit. In the meantime, we've got work to do! Good luck to you!
And to you Paul ...... and remember when they talk about a 6% unemployment rate, while my heart goes out to their terrible situation and I don't mean to minimize the seriousness of being in that situation (I've been there) if we look at it from the other perspective, we have 94% of the population gainfully employed.... is the cup half empty or half full???
Happy Holidays!!! and all the best in 09