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San Diego Mortgage Rates Report- March 1, 2014

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Mortgage rates rose moved down towards the Febuary 14th territory after rising a full 1/8 of a percent in the week eneding February 21, 2014.  International unrest led worldwide capital to fly towards American bond markets and that made mortgage bonds attractive again to investors.  Conflicting economic data on Friday stalled a big rally and broght rates in line with the lowest they've been in two weeks.

You can follow the national average mortgage rates at Bankrate.com.  San Diego mortgage rates tend to be .125% LOWER than the national average.  Average rates as of February 6, 2014:

30 Year fixed conventional average=  4.30%
15 Year fixed conventional average=   3.32%
30 year fixed VA/FHA average=               3.87%
30 year fixed VA/FHA jumbo avg.=       4.13%
5/1 adjustable rate conv. average=         3.49%

Absent any crazy inflation data next week, we expect the bond market to firm up a bit and mortgage rates to drop a little bit next week.  We don't think it unreasonable to hold out for VA/FHA rates of 3.75% and conventional rates of 4.0%.  As always, floating can be very riskyiand may not be suitable for all borrowers.  Next week's jobs report might be a market mover.  Make sure that you are dealing with a knowledgable originator if you choose to float.

Congratulations to Jason Lopez on his new position as Team Leader of Keller Williams La Mesa.  I"ve known Jason for a number of years and his knowledge, enthusiasm, leadership skills, and management style will be an asset to a fine brand name.

San Diego Mortgage Rates Report: February 14, 2014

Subscribe to the mortgage rates report via text by adding your cell phone here.

Mortgage rates were generally stable this week but the Friday sell off in mortgage bonds suggests that Tuesday's rate sheets (Monday is a federal bank holiday) will have higher rates on them.  The bond market closed almost 1% lower today than it did last Friday.  We reported last week that lenders were "padding" the rate sheets in anticipation of this sell off.  It appears that, unless the bond market turns around Tuesday morning, the lenders have "burned through" the padding.

You can follow the national average mortgage rates at Bankrate.com.  San Diego mortgage rates tend to be .125% LOWER than the national average.  Average rates as of February 6, 2014:

30 Year fixed conventional average=  4.27%
15 Year fixed conventional average=   3.28%
30 year fixed VA/FHA average=             3.87%
30 year fixed VA/FHA jumbo avg.=      4.13%
5/1 adjustable rate conv. average=         3.49%

Even though California sales volume and prices are down from December, and consumer sentiment is weak, forecasters think it's weather related and see a sunny 2014-16 for the economy. You may disagree with those forecasters (I do) but new Fed Chairman Janet Yellin is not listening to you or me.  Nor is she listening to Ben Bernanke (former Fed Chairman).  In fact, Wall Street is worried that she may have a different plan than Bernanke and, when Wall Street is worried, they sell bonds...

...and that means higher mortgage rates.  Lock your rates when you can--the near-term future is murky for rmortgage rates.

Subscribe to the mortgage rates report via text by adding your cell phone here.

 

Thi

age=  4.26%
15 Year fixed conventional average=  3.31%
30 year fixed VA/FHA average=           3.86%
30 year fixed VA/FHA jumbo avg.=      4.11%
5/1 adjustable rate conv. average=      3.49% - See more at: http://delmar.typepad.com/brianbrady/2014/02/san-diego-mortgage-rates-report-february-7-2014.html#sthash.n7A0PmfL.dpuf

You can follow the national average mortgage rates at Bankrate.com.  San Diego mortgage rates tend to be .125% LOWER than the national average.  Average rates as of February 6, 2014:

30 Year fixed conventional average=  4.26%
15 Year fixed conventional average=  3.31%
30 year fixed VA/FHA average=           3.86%
30 year fixed VA/FHA jumbo avg.=      4.11%
5/1 adjustable rate conv. average=      3.49% - See more at: http://delmar.typepad.com/brianbrady/2014/02/san-diego-mortgage-rates-report-february-7-2014.html#sthash.n7A0PmfL.dpuf

You can follow the national average mortgage rates at Bankrate.com.  San Diego mortgage rates tend to be .125% LOWER than the national average.  Average rates as of February 6, 2014:

30 Year fixed conventional average=  4.26%
15 Year fixed conventional average=  3.31%
30 year fixed VA/FHA average=           3.86%
30 year fixed VA/FHA jumbo avg.=      4.11%
5/1 adjustable rate conv. average=      3.49% - See more at: http://delmar.typepad.com/brianbrady/2014/02/san-diego-mortgage-rates-report-february-7-2014.html#sthash.n7A0PmfL.dpuf

San Diego Mortgage Rates Report-- February 7, 2014

Mortgage rates have remained stable this week.  While the week started off well, with the mortgage bond market rising over 1%, those gains haven't passed through to the mortgage rate sheets.  Lenders were cautious about the bond market optimism and their cautious approach was warranted.  The mortgage bond market gave back all of its gains and rate sheets have remained stable all week.

You can follow the national average mortgage rates at Bankrate.com.  San Diego mortgage rates tend to be .125% LOWER than the national average.  Average rates as of February 6, 2014:

30 Year fixed conventional average=  4.26%
15 Year fixed conventional average=  3.31%
30 year fixed VA/FHA average=           3.86%
30 year fixed VA/FHA jumbo avg.=      4.11%
5/1 adjustable rate conv. average=      3.49%

We now offer an 80/10/10 mortgage.  This means that a home buyer can put 10% down, get an 80% forst mortgage (up to $545,000) and a second mortgage for the difference between the 80% first loan and the 10% down payment.  Home buyers like this because it allows them to get approved without having to pay mortgage insurance. 

Home buyers must have a minmum credit score of 720 and the debt-to-income ratio can not exceed 43%.  First mortgage limits are $545,000 and the second mortgage limits are $500,000.  This can be helpful for home buyers who had to rely on a jumbo mortgage because jumbo loans require at least 20% down payment.  Now, San Diego home buyers, looking in the $750,000 range, won't need $150,000 down payment for a loan.  Under the 80/10/10 program, they could put down $75,000, get a first mortgage for $545,000, and a second mortgage for $130,000.

Subscribe to the mortgage rates report via text by adding your cell phone here.

San Diego Mortgage Rates Report: August 5, 2013

Mortgage rates improved about 1/4% since last month's report.  Today's best execution rates average 4.375% for a conventional loan and 4.125% for a VA loan.  Keep in mind that a "best execution rate" assumes the highest credit rating, a debt-to-income ratio undee the guidelines limit, and at least 20% downpayment.  Each borrower is an individual and may or may nor meet that criteria.

But it's a guide if you're watching the mortgage rates market.  Speaking of which, you can receive a twice weekly update, via text message, by sending the word "RATE" to 313131.  I'll be sending a text message in the middle of the week and on the weekend with the best execution mortgage rates.  You can always unsubscribe too so I won't be text-spamming you.

July was crazy for the mortgage bond market.  Wild price swings were the norm, with rates getting as low as 4.275% for conventional loans and as high as 4.75%.  While that might not seem like a "wild swing" to you, the home buyer, it has been perpelexing to mortgage industry veterans because we can't get a read on the market at all. 

One school of thought is that the Federal Reserve Bank will stop subsdizing rates, through bond purchases, as early as September.  That would suggest rates could rise as high as 5.0% plus.  The other school of thought, that the Fed woul delay this "cold turkey" approach until next year, was confirmed by the less than robust jobs report.

I gave up trying to outguess the Fed when they started this who quantitative easing policy.  I'm locking all loans at application and recommend that customers do the same.  It's just too volatile and the risk of a being stuck with 5% mortgage is greater than the potential reward of waiting for a 4% rate.

San Diego Mortgage Rates Report: July 10, 2013

Independence Day meant more things than barbecues, beer, and baseball this year.  Mortgage bond investors didn't like the idea of independence from Federal Reserve Bank subsidies.

Just before the holiday, I suggested that the Fed was sending stabilizing signals that the quantitative easing programs wouldn't be completely abandoned.  Last week, there was only one fear; the non-farm payrolls report released on Friday (July 5, 2013).  That report exceeded expectations and the mortgage bond market nearly collapsed-- rates spiked to as high as 4.875% for conventional loans and 4.75% for VA/FHA loans.

One thing which contributed to Friday's volatility was that it was a day after a holiday.  The trading desks operated with skeleton crews of junior traders, most of which were nervously selling befoe the weekend.  When their senior colleagues returned on Monday, they saw buying opportunities in mortgage bonds.  The mortgage bond market recovered a bit more than half of its losses, in two trading sessions, and rates settled in at 4.625% for conventional loans and 4.5% for VA/FHA.  Today, the mortgage bond market is slightly off on news that wholesale investory stocks are being depeleted.

All eyes were on the release of the June meeting of the FOMC minutes.  The consensus is that the bad news is already out and, since the Fed Governors are split on the idea of QE tapering, the bond market is getting used to the idea that Fed action (or inaction) won't ruin the bond market.

Where do we go from here?

I look to investment adviser Lenore Hawkins a lot.  She and I both share free market views and she has a good understanding of how non-subsidized economies should act.  From her July newsletter:

While many are criticizing the Fed for the tumult the comments caused in the markets, we think they ought to be applauded for injecting uncertainty into a market that was becoming entirely too complacent about the degree of excessive leverage being used to combat the low rates of return imposed by the Fed’s financial repression.

As we delve deeper into the data,  and you knew we were going to go there, the job growth continues to be among lower quality jobs.  The unemployment rate held steady at 7.6%, but the U6 (broader employment metric) jumped from 13.8% to 14.3% caused by a surge in part-time work.  Full-time jobs dropped by 240k and in fact, since the start of the year only 130k full-time jobs have been added while 557k part-time jobs have been added.  The unemployment rate would today be 11.1% if the participation rate was the same as it was pre-recession.  Despite the headlines, Main Street is still struggling.

I agree with Lenore--the grass isn't necessarily greener in this economy...yet.  As economic data materialize this summer, we may realize that the QE bond buying program is (a) ineffective and (b) causing little asset bubbles (think real estate prices in San Diego)--a classic case of the unintended consequences of bad monetary policy.

I thnk we're at a crossroads of a mini-panic.  The higher mortgage rates have certainly slowed mortgage applications, listings aren't moving as quickly as they did 4-5 months ago, and sellers are rushing to list homes for fear that higher mortgage rates will tank the real estate market.

The Fed isn't going to let mortgage rates tank the real estate market.  Bernanke sees a housing rebound as essential to a broader-based economic recovery.  On the other hand, Bernanke understands that QE has to end...eventually.

This summer should continue to be choppy.  I expect the mortgage bond market to bounce around a lot this summer as we all get used to a "new normal".  That "new normal should have mortgage rates bouncing from as low as 4.25% up to 5%.  Currently, best-execution conventional rates are around 4.625% and best execution VA/FHA rates are around 4.5%.  Jumbo rates are still over one percentage point higher with executions in the 5.75%-6.125% range

As volatility is the word of the summer, I still advise home buyers to lock-in rates at application--floating is just too risky.

San Diego Mortgage Rates Report: July 1, 2013

Mortgage rates have been marching steadily higher, from 3.00% to 4.25%,  since May, 2013.  In my last report, I discussed how it was important to keep things in perspective--it got uglier.  Mortgage rates rose to as high as 4.625%, at the end of the week, and the mortgage bond market opened up last week, desperately looking for some sort of direction from the Federal Reserve Bank (FED).  This whole rise started when FED Chairman Ben Bernanker suggested that it would "taper" the heavy bond-buying program, designed to subsidize mortgage rates.  Bond traders were looking for clarification from the FED.

The FED delivered.  All throughout last week, it was obvious that the FED was buying mortgage bonds, to force rates lower, each morning.  It didn't work Monday or Tuesday.  On both days, the bond market was up (positive for lower rates) but prices had waned by the close of the trading session.  Traders listened to the FED governors, when they spoke and speak they did:

 

William C. Dudley, president of the Federal Reserve Bank of New York, said yesterday any decision to reduce the pace of asset purchases wouldn’t represent a withdrawal of stimulus, and that an increase in the Fed’s benchmark interest rate is “very likely to be a long way off.” He said bond purchases could be prolonged if economic performance fails to meet the Fed’s forecasts.

These comments were enough for the traders to calm down and start getting on the same side as The FED.  As the FED bought bonds last week, traders started holding mortgage bonds rather than trading them and rates started stabilizing, then retreating.  Today was no different--the bond market was slightly up today after three staright trading sesions of big gains.  That's positive for mortgage rates.

Where do we go from here?

It looks like the bloodletting is over...for now.  While it's unlikely that the FED will up its stimulus, to drive rates below 4.00%, it seems comfortable with mortgage rates at these levels.  My best guess is that the FED will keep watching economic data with a special eye on unemplyment figures. 

Today, conventional rates seem to be trading around 4.375% while government (VA/FHA) rates seem to be trading around 4.125%.  Jumbo rates, for loans from $700,000 to $1,500,00, haven't recovered--they are still at the 5.25% range.  Keep in mind that these rate indications are not quotes nor are they intended to be.    Each borrower will have different challenges and strategies for limiting costs or lowering rates.

What should homebuyers do right now?

I'm still locking all loans at application.  The FED has acted to stabilize the markets but it's still a mixed bag with that crew.  Economic data will have to be watched and a trend of weakening or flat data will be need to be confirmed before I'm ready to float rates.  That could come as soon as the middle or end of July but today, the risk is far too great to not lock  rate.

San Diego Mortgage Rates Report: June 20, 2013

If you haven't been following mortgage rates, they are higher than they were in April--you can read all about the rise from 3%-4.25% here if you want the technical explanations.  But let's look at these last two months with a bit of perspective here.  Things ain't as bad as they seem to be.  Consider this chart:

 

 Now it's time to offer some perspective:

1- Mortgage rates were between 5.5% and 6.5% for the 5 year period between 2003-2008. Home prices were much higher than they are today and incomes (in inflation-adjusted dollars) were lower than today.

2- Unemployment is much higher today than that period.

3- Rates dropped a lot after the Fed's QE program was implemented, went from 5% to as low as 3% last month. Today, rates are in the low 4s which is mid-range for the last five year period and much lower than the previous 5-year period.

4- Home prices are barely at 2004 levels.

THOUGHTS:

1- if you are one of the 90% of Californians that have a job, you can probably buy a home--it will cost less than it would have cost you in 2004

2- the run up in rates might soften the inventory problem and there may be room to negotiate for closing costs help or price reductions from sellers.

3- rates are sometimes temporary (you can always refinance if rates drop) while price paid is permanent--take advantage of the expected softness in the market

VA Approved Condos in Solana Beach, Del Mar and Rancho Santa Fe

Solana Beach, CA has four condominium complexes which are approved for VA home loans as of September 28, 2012.  They are:

• La Mer
• Lomas Santa Fe Villas
• Santa Helena Park (I worked on this approval)
• Villa del Sol

Del Mar, CA has no condominium complexes which are VA approved and there is one complex pending in Rancho Santa Fe, CA.  12Mortgage.Com makes VA loans up to $1,000,000.  The 2012, zero-down VA loan limit in San Diego County is $477,000.  Loans higher than $477,000 and less than $1,000,000 may require a downpayment but do not have a monthly mortgage insurance requirement.

If you do not see your complex on this list, it may require a review from the Veterans Administration before a loan can be funded there.  Please read about how we are able to help veterans by expediting that review process or call Brian Brady at 858-777-9751

Mortgage Rate Quote Expiration Dates

Looking at mortgage rates on the internet?  Maybe your shopping in the Zillow Mortgage Marketplace, on Lending Tree, or even in the newspaper.  One thing you should understand is, unlike milk, the mortgage rate quote "purchase on or before" dates do not extend for 3-4 days.  Mortgage rates change as often as 2-5 times each day.  Why is that?

READ: You'll NEVER get the lowest rate on your mortgage.

Mortgage rates are a dynamic market, based on mortgage -backed securities.  The volatility in mortgage bond markets is wildly erratic, especially in financial crises.  With European countries facing bankruptcy, perpetual war in the Middle East, and a debt-riddled US economy, things change...a lot...and more than once or twice a day.

We used to be able to "eat" those price movements, if they weren't too erratic, after we quoted your rate and before we locked it in for you.   A new federal rule, Regulation Z, prohibits us from adjusting our compensation, to your benefit, when the market changes.  If the market changes for the worse, you get stuck with the higher costs.  Conversely, yoou get rewarded with the lower costs if the market improves.  Essentially, you bear the risk and I am protected.  So much for the "consumer protection"of regulations.  Don't get me started down that path or I'll digress into the politics of mortgages.

What can you do to protect yourself? 

Well, if you have three quotes, and you are pretty sure that you've narrowed it down to 2-3 lenders, ask each lender to e-mail you a good-faith estimate, all at the same rate, at a specified time.  Then open your email, find the best one, call the winning bid, and lock-in the rate.

The key thing to remember is that the good faith estimate you receive is probably only valid for 2-8 hours.  If you're on-the-ball, act quickly, and are dealing with an originator who follows this market like a hawk, you'lll get a great deal.

San Diego Housing Approaches Rent Vs. Own Parity

Should you buy a home or rent one, in San Diego? 

As always, that depends.  If you're looking for a home in La Jolla, you may never find a one which is less expensive to own than rent, in today's dollars.  The physical beauty of the seaside burg is stunning and La Jolla has traditionally traded at a steep premium to rent v. own parity.

Nick Timiraos suggested that buying conditions are getting better for San Diego, in the Wall Street Journal:

Home ownership is also looking more affordable because after several years of declines, apartment rents will rise by around 4% this year, says Mr. Nadji. He says rents are poised "to pick up even more momentum across the country next year."

Rising rents are one reason a would-be home buyer should consider purchasing a La Jolla home rather than waiting for prices to reach parity there.  If inflation kicks in, and onc day it will, rents could increase a level far above what the mortgage payment, for a La Jolla home, would be today.

Even cities where it is still cheaper to rent than own have seen big boosts in affordability. In San Diego, the monthly cost of owning a home has averaged around 83% more than renting over the past two decades. During the third quarter, owning was 22% more expensive than renting, according to John Burns Real Estate Consulting

Take note of this figure.  In many San Diego sub-markets, (mostly the beach cities), housing prices will never reach parity with today's rents.  Like the La Jolla example, inlaftion may cure that in 2-3 years.  Still, some San Diego County markets have already reached parity meaning, it's cheaper to own rather than rent.  Even in some beach cities, like Oceanside or Imperial Beach.

I searched active Oceanside homes for sale and found one which is listed for $189,000.  With about $7,000 down payment,  and an FHA loan with a 4.88% APR, the monthly mortgage payment would be $1250, some $50-$100 below what it might fetch in rent.  That's one of many Oceanside properties which are at or below parity for the rent V own model.

I also found plenty of similar opportunities while searching for homes for sale in Chula Vista.  There were many more recently built homes, which command premium rents, listed under $250,000.

San Diego entrepreneur Bill Lyons intends to make these home searches easier when he releases his new website, Revestor.com.  Revestor organizes current listings, by capitalization rate or cash flow, to offer homeowners a chance to "rate" properties, by comparing the listed price to current rental data.

San Diego is still selling at a slight premium but this may be as good as it gets.  If mortgage rates continue to stay low, because of the Fed's printing press and quantitative easing, the bubble for low rates will soon pop, and inflation will kick in.  Locking in a price, and a low mortgage rate, might be the best way to insure you won a piece of our sunshiney paradise.