Thursday, May 28, 2009

Will the higher rates kill the party?

Interest rates took a big jump this week. They are currently sitting at about 5.5% for those with perfect credit and a DP. The scuttlebutt in the blogosphere is that this is going to kill the market. Refi's especially would seem to be hurt by this rise. I think most folks with reasonable credit and half a brain already have a fairly low rate. So a 5.5% refi may not help those families on the verge of affordability if they already have a 5% or 6% loan. Where as a refi at 4.5% might have made a difference.

One things for sure the higher the rates go the more pressure there will be on the prices. It also does not help those loan resets if the rates start to rise. That will lead to more foreclosures as payments adjust upwards. It's also likey to increase drop outs on sales that are curently pending. Since the loan process is taking so long these days loan locks will expire, potential payments will rise and people will back out.

It seems the Fed is losing control (what little they had). They Fed rate is already at zero, they were buying up treasuries yet the interest rates are still going up. It seems poor Ben may have run out of magic bullets. I wonder what he will try next....

Next news item, Mortgage delinquencies hit record levels

The Mortgage Bankers Assn. reported Thursday that foreclosures were at record levels, with 1.37% of all home loans nationally starting the foreclosure process during the first quarter of the year.

However, in California, Florida, Nevada and Arizona -- states where housing boomed the most and now has crashed hardest -- the rate of homes entering foreclosure was 2.45%, the trade association said.

"Those states account for about 46% of the foreclosure starts in the country and represented 56% of the increase in foreclosure starts, including half of the increase in prime fixed-rate foreclosure starts," the association's chief economist, Jay Brinkmann, said in a statement. "It is difficult to overstate the severe impact home price declines have had on mortgage performance in those four states."

Perhaps there is some consolation for California: It's not the worst state in terms of foreclosures.

In Florida, 10.6% of the mortgages "are somewhere in the process of foreclosure," Brinkmann said. "In Nevada it is 7.8%, Arizona 5.6% and California 5.2%."

In addition to the news above, over 12% of all residencial loans are delinquent at least one payment. 12%!


ojedalive said...

Ben is a brain-dead loser that has failed the people and shares some responsibility for the mess and the continued downward spiral. Also, that freak looks like a cartoon character. I loved it when Bill handed him his sorry but on the Factor.

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Rt.66 said...

Hope Genica is right.

This blog is a good read and deserves lots of traffic :)

Enjoying. Keep up the good work!

WillyWanker said...

I love this blog and I come to read the articles and the comments every week. I wish there were some blog like it about the Coachella Valley area (Palm Springs/Rancho Mirage/Palm Desert/La Quinta etc.).

Keep up the great work.

wiseone said...

Yes, I agree. More information with regards to La Quinta Palm Springs area. I am thinking of relocating there and I am trying to sell my house in the Seattle area. I have an island home in Puget sound and it goes on the market shortly. There seems to be revolution in the air and at some point things here in California will change. People ask me why do you want to leave Seattle, well the dreay days get to you! Cant beat the california weather. Just love it here. Any advice from the peanut gallery would be appreciated thanks!

golfer_X said...

Wiseone, you do know it's 110+ in the summer in Palm Springs right? You're just trading perfect summers and crappy winters for perfect winters and unbearable summers. La Quinta and the palm springs areas are ghost towns in the summer months.
As far as the market goes it's like a miniature version of SoCal. The higher end areas are still hanging on but the lower end areas have been pummeled. La Quinta and some of the nicer areas have not fallen as much yet. I don't buy the "this area is different" theory. I see all areas as connected and they will all fall about the same. It might not happen at the same time but eventually they will all come back into line with each other.

wiseone said...

Yes, I know that the weather there in the summer time can be a bit warm. In seattle the rain is nonstop from october to july 5th. Yes, it mostly rains on july 4th.

I suppose I will have to be sure to get a house with A/C and a nice pool ot offset the warm weather. Ghost town is good, not too crowded. I will wait for another 6 months and keep my eye on the market. Besides, I still have off my home before I can move anyway.

I really enjoy this blog. I read it often. I do miss the realtard section. I seem to bust a gut when I read it. Anymore coming?

Thanks for the advice. As the saying goes, "A wiseman is one who seeks good advice from many".

Joel said...

I'm also moving from the Northwest (White Rock, British Columbia) down to the Palm Desert area this summer. I grew up in Palm Desert from 10-16, and I must say, I'd rather be trapped inside of my house because of unbearable heat than trapped inside because of freezing rain. At least I can look out at a blue sky rather than an overcast soggy day!

North Indio is looking good. Reeeeeal good.

WillyWanker said...

I live in the desert and I love it. Though it's true that the weather does get scorching hot in the summer, I have a house in South America that I escape to in the summer months. Since the seasons are switched around, I get a chance to ski and to enjoy the rain and actually wear wool and I enjoy the giant change in seasons and locales. I have stayed in the desert at least one summer and have found some charms to allay some of the discomfort of the heat, but, still, I prefer to get away and come back in late September and then only catch the tail end of summer.

One can still play golf or tennis very early in the morning during the summer months and, if one is able to, escaping to a movie at 'The River' during the afternoon when NO ONE is there is great too~~~feels like playing hookey from life. Restaurants have lots of 'two~fer' offers and the place is as quiet as one might expect a resort town to be when you go 'off season'. Overall, I find the desert a wonderful place to live and it's still handy to bigger city centers such as San Diego and Los Angeles if one needs to go shopping for something truly special.

Jdizzle Fo Shizzle said...

Its all stupid if you ask me. Right now the banks think its cheaper to pay interest on the foreclosed rather than letting home prices take a dive and potentially cause more foreclosure. Besides, the government has modified the rules on how they write off the losses in their books. In the meantime, homes are still unaffordable and people are still losing jobs. What is driving the stupid stock market up? Hope is not a strategy..

golfer_X said...

Well, once a home is foreclosed no one is paying interest. The bank does have holding costs but interest isn't one of them. Obviously a dead asset is not making them any money and they are going to get stuck paying the property taxes plus any maintenance and HOA fees. It is stupid of the banks to hold it and it does cost them money. As prices decline the amount they can sell if for is less and less every day. The banks are caught between that rock and that hard place. They can't dump them all at once, that would really kill the prices. But they also can't keep them.