November 23, 2017

Seattle Mortgage Reel, Weekly KickOff, Week of July 17, 2009

What is driving mortgage rates?

If you have ever invested in a savings bond or a Certificate of Deposit you had the issue date and a maturity date.   Bonds and Treasuries are very similar.  Year after year we have a period of time most commonly mid year bonds come up for maturity from previous issuance dates.  On the maturity date these bonds come up for auction.  BUT the economy has not been this bad in previous years and keep in mind that our national debt is being financed right now by treasuries and bonds.  Globally we saw two weeks ago China question if the United States would be able to repay the debt issued in these bonds and rates jumped higher.  The Federal reserve continues to print money and has to continue to issue and flood the market with more treasuries and bonds.  In order to attract more buyers for bonds yields are pressured higher.  As yields go up then mortgage rates also follow the same cycle.   10 year bonds are not mortgages, mortgage back securities are the true financial vehicle mortgages are secured by.  Currently the Federal Reserve is purchasing mortgage back securities through both a mix of bonds and treasuries.  

To summarize and make it super simple.  If bond auctions do well in the open market then yields lower and mortgage rates reduce, vice versa, if bonds do not auction well yields go higher and mortgage rates go up.  

Lowest rates since mid May!

Last Thursday and Friday the market rejoiced with some of lowest rates posted since mid May.  Will this last, it may be short lived as we are now entering earnings season for Wall Street.  Investors globally are watching to see if there are signs of improvement to corporate earnings, production, inventory, consumer confidence and most importantly the GDP (Gross Domestic Product).  Beware of lenders promoting rates going lower.  We are facing right now what is called a tough ceiling of resistance.  Each time we approached 4.75% on a 30 year fixed rates bounce higher.  This is where the market has currently called a ceiling.  In a nut shell this is determined by moving averages calculated in days.  For example the 100 day moving average shows rates meeting resistance from moving lower.  

On the housing front…..

First time home buyers continue to be the strength in the housing recovery.  Aided by the $8,000 stimulus tax credit first time home buyers continue to be a force in purchase price points of $350,000 and under.  It is reported from brokers and realtors that there are bidding wars happening in certain areas.  Bidding wars?  It is true but not how it was four years ago.  Today offers come in lower than asking price, but because there are more buyers who are looking for homes in this price range, they may pressure prices higher.  For example a home recently listed at $300,000.  First offer comes in at $270,000, next offer comes in at $280,000, third offer comes in at full price plus closing costs.  This is a realistic scenario first time home buyers face on well priced property!

Tax stimulus, $8,000 at closing?

We have heard this rumored and advertised by agents and lenders alike we had to find out the truth.  We contact the Department of Financial Institutions, FHA, HUD and the IRS.  Each time we inquired what program was available to administer the tax credit to be available at the time of closing.  Currently the State of Washington does not have a program established to provide the money up front.  Some other states have created a program where the funds are gifted until the tax credit is received and then repaid back to the funding program.  If not paid back by home owner, a lien/second mortgage is filed on the home.  

Comically, when we asked a representative about the tax credit he responded, “when was the last time you knew in advance when you would receive your income tax refund after filing for taxes?”  I replied true and laughed.  His next response “exactly, do you really think it is possible to file an amendment, issue the check and have it show up in 45 days or less at closing?”

How to file for a tax credit?

We have posted a downloaded copy of the form needed to file for a tax credit refund.  At this time you will need this form and a copy of your final HUD settlement statement from the closing of your new home to file.  Please click here  for a copy of the form.

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