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%!