Some interesting news this week on interest rates.  For those of you financing your home purchase on Incline Village Real Estate, this could be the time to make your move.  Lake Tahoe listing prices and interest rates are almost too good to be true.  Maybe as well, the forecast for the 100 year snowfall for the Lake Tahoe basin and Incline Village Real Estate..  Read on..  Tim Lampe, your realtor by choice for 28 years.

 

As written by Steve Peterson,

Could it be that we're nearing the bottom for mortgage rates? It could, and this is important.

What we're running into is the unwillingness of investors to accept such low yields on their investments--unless (or until) fear and uncertainty rise again. Further, the mortgage market, since there aren't that many mortgages being originated, are holding to higher rates than the normal 0.5% spread between mortgage rates and mortgage-backed security yields would seem to enforce.

Perhaps the bottom is near, in any case. That possibility suggests that borrowers and homebuyers should be firming their financing needs--now, before rising rates incite a rush to lock in low rates. (Of course, there is no guarantee that this market will move uncharacteristically quickly. This tentative forecast, unfortunately, doesn't come with a calendar of events.)

 

KEY INDICATORS [10/12/10] 

 

Gold $1350.40/ounce [up]

Crude Oil(Brent) $83.47/brl [down]

U.S. Dollar to…

    Euro .7209 [down]

    Japanese Yen 81.74 [down]

6-mo Treasury Bill Yield 0.16%

10-yr Treasury Note Yield 2.42%

[6-month down 1 bp, 10-yr down 4 bps]

11th Dist Cost of Funds 1.713%[-]

30-yr Fixed-rate Mortgage 4.66%

15-yr Fixed-rate Mortgage 4.11%

1-yr ARM 3.77%

[HSH averages rates: 30-yr

down 4 bps;15-yr down 7 bps; 1-yr ARM down 5 bps]

 

Mortgage Bankers Association Mortgage Applications Index

week ending 10/1

  Overall

    782.6 (down 0.2%; down 0.8%

the week prior)

  Purchase Money Loans

    198.7 (up 9.3%; up 2.4%

            the week prior)

  Refinancing Loans

    4180.8 (down 2.5%; down 1.6%

the week prior)

 

Jobless Claims 10/2

    445,000 – prior week 453,000 – continuing claims at 4.462 m

 

Employment Report Sept

    Net decline of 95,000 nonfarm jobs – private sector jobs advanced by 64,000 – government payrolls down by 159,000 – unemployment rate remained at 9.6%

 

Consumer Credit Aug

    Down 1.7% - revolving down 7% - non-revolving up 1.3%

 

Weekly Commentary

 

“Even if interest rates drop to 2%, mortgage rates are going to stay right here. Originators don't expect [the] mortgage supply to be robust and will want to keep rates in the 4.25% to 4.625% range for the next few months.” [Paul Norris, a portfolio manager at Dwight Asset Management in Burlington, Vt., quoted in The Wall Street Journal]

 

The interest rate on fixed-rate mortgages is generally about 0.5% higher than the yield rate to investors in mortgage-backed securities (the investments made up of originated mortgage loans). At the moment, however, the spread is larger than 0.5%, leading some investors to think mortgage rates may fall further toward 4%--or even below that mark.

 

So we have another decoupling—like, for example, the formerly (nearly) automatic pairing of, say, a higher Dow Jones Industrial Index and a lower yield on the 10-year Treasury security. The old rules seem less and less relevant to today’s economy. Or, as some observers term it, to today’s “new normal.”

 

This decoupling may be particularly important. It means we may no longer be able to predict still-lower mortgage rates based on the old patterns within the markets. Chalk it up to this: At some point the markets simply stop welcoming lower rates. Investors want more yield than they can get on today’s 2-year Treasury note, for example. They turn either to longer-term Treasury securities or to stocks—especially those offering dividends that are attractive relative to Treasury security yields, or to corporate bonds. Indeed, higher-risk bonds have been coming back into favor.

 

The big take-away here is that we may be approaching the cellar floor for interest rates of all kinds. Of key importance, the Freddie Mac 30-year average rate may prove very resistant to further declines, as other mortgage rates may as well.

 

What’s disorienting in this is that reaching an interest rate bottom would happen, not because the economy is finally turning around, but because of investor demand. With fewer buyers for investments with rock-bottom rates, investors would most likely soon drive rates higher.

 

At the same time, though, there is a good chance that rising rates would bring buyers out of the woods—especially buyers of real estate—improving the economy in the process. There are no sure bets here, to say the least, but we’ve definitely reached a potential turning point for rates and for the econom