Mortgage Rates Near One Year High
Further echoing the messages fromprevious posts, the real estate market in Fredericksburg, Texas continues toface downward pressure as rising interest affect both the availability ofcredit and the ability of many borrowers (buyers) to access it. With tighter, more expensive money asthe rule, buying power is reduced and prices (by necessity) must continue tofall.
All is not doom and gloomhowever. The good news is that thereappears to be plenty of buyers still searching for their Fredericksburg Texasdream property so sellers should not panic. Sellers should, however, be aware of factors affecting theiraudience (interest rates, increased competition, etc.) and set (or re-set)their expectations accordingly.
Clearly the real estate market inour community is experiencing an “adjustment” but this is simply a sign thatmarket factors are at work balancing the supply and demand and that all isworking as it should.
Mortgage Rates Near a Year High
ByRUTH SIMON and JAMES R. HAGERTY
July 23, 2008; Wall Street Journal Page C14
Home-mortgagerates are nearing their highest levels in a year, adding to pressures on thealready weak housing market.
Rateson conforming 30-year fixed-rate mortgages rose by nearly 0.40 percentage pointin the past week to an average of 6.71%, according to HSH Associates in PomptonPlains, N.J. Rates on jumbo loans, which are too big to be eligible for purchaseby Fannie Mae or Freddie Mac, currently average 7.84%.
Thehigher rates are making it more difficult for borrowers to refinance andputting another crimp on weak home sales. “It’s a tough market and ratesgoing up isn’t helping it,” said Steve Walsh, a mortgage broker inScottsdale, Ariz.
Mortgagerates typically move in line with rates on 10-year Treasurys. Treasury rateshave risen, but so has the spread between rates on 30-year mortgages and10-year Treasurys, said Nicholas Strand, a mortgage strategist at BarclaysCapital.
Banksset their interest rates on mortgages based on demand for those loans frominvestors, including Fannie Mae and Freddie Mac. When demand is weaker, theymust offer investors a higher interest rate.
WalterSchmidt, a senior vice president at FTN Financial Capital Markets in Chicago,said the latest increase largely reflects fears that Fannie Mae and Freddie Macwouldn’t be able to buy as many mortgages in the months ahead as they haverecently. The two companies are the biggest buyers of mortgages and relatedsecurities. Both are facing heavy losses on defaults, and investors believethey probably will have to raise large amounts of capital to cope with thoselosses.
Freddieadded to jitters last week by saying it might sell some mortgage securities toreduce capital needs. And some smaller Asian banks have been selling mortgagesecurities, said Arthur Frank, a director at Deutsche Bank Securities in NewYork.
