Seattle Real Estate Mortgage Rates Today 1/4/2012
Seattle Real Estate Mortgage Rates Today 1/4/2012:
Year is off to a strong start for the stock market but what is to come of the housing market which is so closely tied to the economic recovery. Breaking news today has a letter addressed from Fed President Ben Bernanke addressed to the U.S. Senate and the committee on banking, housing and urban affairs. Much of the letter address the problems we are all well aware of, short sales and foreclosures. BUT on within the letter for the first time they have made a point to take the Bank Real Estate Owned / REO properties and begin to rent them to improve the housing market. Why do this? To ease the pressure on the housing market and to take advantage of the strong rent market. “One method of gauging the profitability of renting a particular property is to calculate its capitalization rate, or cap rate–the expected annual cash flows from renting the property relative to the price at which the REO property holder could expect to sell it in the owner-occupied market.23 Preliminary estimates suggest that about two- fifths of Fannie Mae’s REO inventory would have a cap rate above 8 percent–sufficiently high to indicate renting the property might deliver a better loss recovery than selling the property.24 Estimated cap rates on the FHA’s REO inventory are a bit higher–about half of the current inventory has a cap rate above 8 percent–because FHA properties tend to have somewhat lower values relative to area rents.” Ben Bernanke. For the full letter from Ben Bernanke click here.
An 8 percent cap rate is extremely to a commercial real estate investor, this cap rate could be the drive for institutions to become land lords which will increase their liquidity and cash flow from stagnant REO properties. What will this do the real estate market? Well this is still a plan not in action, but one that in some states like California, many smaller banks are already putting into action. Lets consider if this were to role out in all states. REO properties and short sales are a very big reason that real estate values continue to fall. If you take the Bank Owned/REO properties off of the market prices will begin to stabilize. Demand for housing will grow and prices will increase. EVEN from an appraisal stand point, market comparable will now use current resale comps instead of REO which are sold in many cases less than market value, which contributes to driving prices down.
Could this be the fix all? Hardly, but a step in the right direction. Under current guidelines a home owner who has short sale their home has to wait up to 2 years before being able to finance a new home. This creates demand for housing in the rental market. The hope is that once the restriction of the 2 years has lapsed they renters will once again become home owners. Very interesting to note that there were many polls that stated that people will no longer want to own a home and choose to rent. Interesting to note that many are now wanting to once again own their own home. Big turn in just the last 24 months attributed to growing optimism that the economic recovery is pointed in the right direction.
Turning to our local economy, we once again received good news from Boeing which turns to Washington to up their production on the 737 from 30 a month to a possible 60 per month to meet contracts. This is very good for job creation and our local economy. Renton which is the main plant for production of the 737, producing approximately 30 planes per month has plans to up production to 60 per month. Also to note announced today is the closing of a Boeing production facility in another state slated to build the military aircraft tanker, now moving production to Washington, potentially another 5,000 new jobs. Job security equals consumer confidence. With more confidence and job security people will once again return to purchase homes, especially with those who are relocating to our area which we can confirm being true through the relocation companies we work closely with. Thank you Boeing.
Drilling down on Mortgage Rates. It is still being fore-casted that we have not seen the lowest of lows for mortgage rates, it is now being speculated that mortgage rates are going to drop as low as 3.5% (not being specific to any loan program/scenario). Speculations which is coming from the troubled financial situation of Europe and the growing story of China beginning to show signs of weakness. Some bank economists have looked at the first half of 2012 for this to happen and then looking to close the second half of the year with Mortgage Rates moving higher. How much higher? Not much but from the current and future lows, a tick higher. Speculated again 4.5% to 5.00%.
A lot of guessing as to what is going to happen on the national stage and not expected much from government in an election year sets the tone that much of 2012 will be flat. BUT for our local economy we are looking at the glass being half full with hopefully better times ahead!
Timing is everything just as location of the home is critical. Timing in securing an interest rate, BEST rate, is working with a mortgage professional who has their pulse on the market and when best to advise and educate their clients when timing is right. Along with this key knowledge is to be on top of all of the lending and underwriting changes which seem to almost happen daily. We at the Mortgage Reel are Licensed Washington Loan Originators, serving clients with transparency, knowledge and most importantly keeping your goals in mind. How can we assist you today?
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