Friday’s Rates for Leap Day February 29, 2008
Today, negative economic news caused a significant sell off and traders “leaped” from stocks to the security of bonds, such as mortgage backed securities. Rates have improved by roughly an 0.125% since this morning. Mortgage rates remain highly volatile and (as always) I recommend locking over floating…especially as we get closer to the FOMC meeting on March 18, 2008. It’s highly anticipated that the Fed will once again cut rates; this is viewed as inflationary which tends to have a negative reaction to bonds (mortgage rates).
Conforming Mortgage Rates (loan amounts up to $417,000 for 1-unit properties). The conforming rate quote below is based on owner occupied, “full doc” purchase with minimum credit scores of 680 with an 80% loan to value or lower, a loan amount of $400,000, and with reserves (taxes & insurance) not being waived. Rates quoted are priced based on a 45 day lock with 1 point and there are no prepayment penalties on any of the rates quoted below.
30 Year Fixed: 5.625%. (APR 5.769%)
30 Year Fixed with 10 Year Interest Only: 5.875% (APR 6.007%). Tip: Check out the 10/1 Interest Only ARM below if you are considering this product. Both of these programs offer fixed rates for 10 years–the 10/1 ARM offers a lower rate by a full half point.
10/1 ARM Interest Only: 5.250% (APR 6.308%).
10/1 ARM: 5.250% (APR 6.257%)
15 Year Fixed: 4.875%% (APR 5.107%).
7/1 ARM: 4.750% (APR 6.360%).
5/1 ARM: 4.625% (APR 6.652%).
FHA/VA 30 Year Fixed: 5.875%% (APR 6.404%). Payment per $1000 = $5.92. (not including FHA mortgage insurance).
JUMBO (Non-Conforming) Rates. Pricing is based on the same criteria above, with the exception that the loan amount is $417,001-$650,000 (20% down).
30 Year Fixed: 6.625% (APR 6.781%)
10/1 ARM: 5.875% (APR 6.656%).
10/1 ARM Interest Only Payments: 6.625% (APR 7.164%).
7/1 ARM Interest Only Payments: 6.375% (APR 7.203%).
7/1 ARM: 5.250% (APR 6.606%).
Prime Rate (what HELOCs are based on): 6.00%
Please do not select your Mortgage Professional by interest rates alone and do not shop rates by APR. These programs all have the same closing costs so you can see APR is not a valuable tool. If you were considering a conforming product that offered a 10 year fixed period with interest only payments and relied solely on APR, you would wind up choosing the mortgage with a higher note rate by 0.75%! This is $250 more per month on a $400,000 mortgage.
This is just a small sample available of rates and products. Rates are as of Friday, February 29, 2008 at 2:00 p.m. and may change at any time. Available programs may change at anytime as well. This is not a guarantee nor is it a commitment of interest rate. For your personal rate quote or for loan amounts over $650,000, please contact me.
Sphere: Related ContentGood advices are an imperative in a changing market
I am having a very difficult time training some agents who still want to believe that “a house is worth what a buyer is willing to pay for it.” That is just SO not true. That runs more along the lines of “A sucker is born every minute.”
On the other hand I once fired an agent for saying, “I won’t let you pay a dime more than the property is worth!” If you are pretending that you can value a property “to the dime” you are just blowing hot air.
I spend two to three hours a week, outside of my normal real estate activities, training agents on a variety of topics. Many who have had their licenses for 2-3 years have never had to fine tune their home valuation skills, and find themselves feeling like they are rookies again. It’s a difficult change to embrace, but necessary. When there were five offers, buyer agent skills involved “how to win the bid” more than what is this house “worth”. When garnering an offer for a seller client, how to handle multiple offers was more important than how to price the property in the first place. That is no longer the case, and agents must spend time learning how to value property, with a reasonable degree of accuracy.
One of my mantras is “Agents are not allowed to use the word like”, unless they are referring to what a majority of buyers may like. “I like” coming from an agent, is like a stock broker recommending that you buy Target stock because he enjoys his shopping experience at that store better than at Fred Meyers. I often tell agents that they are not allowed to personally like or dislike properties. Whether or not you personally like a property is often a sign that you have not yet honed your valuation skills to the level of a true professional. When an agent stops saying “I like”, that is the day they begin to cross over from apprentice to professional.
This changing market leaves much less margin for error. Every week we go out and look at six to eight properties (Broker’s Opens) and come back and value them. To many this seems like a foreign exercise. Some still say “but I think my buyer would like…” or “I didn’t like”.
I don’t expect everyone to buy into the concept that an agent really can know what a property is worth. But I do think it’s odd that they all seem to know what it’s worth when a seller won’t list it at “the right price”, but then play dumb when the buyer wants to know what it’s worth. The conversation all too often turns to what it will take to “get it” vs. what it’s worth, when there is a buyer client in the room vs. a seller client.
Maybe this is just part of the 15 year old problem of a double standard for buyer clients vs. seller clients. Maybe it’s the conflict of interest involved in the agent needing the price to be fairly accuate in order to sell it for a seller, but not wanting to value it properly for a buyer client, because then they might have to say DON’T buy it.
We’re definitely “back to basics” with regard to real estate agent training classes. Those who refuse to accept any valuation technique beyond “it’s worth whatever a buyer is willing to pay for it”, will be left in the dust . If agents continue to refuse to accept the fact that property valuation is one of their duties as an agent, I may have to switch to holding these classes for people who are buying property vs. those charged with guiding them well through the process.
Licensing criteria does not involve training agents in an ongoing way in the art of home valuation. All to often, Brokers want to say “go out and SELL!”. Maybe it’s time for the buyers themselves to be able to access classes on home valuation techniques that go well beyond “price per square foot” and “the comps”. For now, suffice it to say that “comps” are not relevant to your valuation, unless you have at least driven by that “comp” to see if it had obvious differences beyond the photos available in the mls. “comps” are not properties “for sale”. “Comps” are properties that have SOLD.
And in this changing market, if it sold before August of 2007…it ain’t a comp, unless you make appropriate adjustments for what happened in the latter part of 2007.
Sphere: Related ContentWill St. Patty’s Day Bring Us Luck with Conforming Loan Limits? February 28, 2008
By mid-March, HUD is required to publish what they determine to be median home prices which Fannie Mae and Freddie Mac will be using for what the temporary loan limits will be (125% of the median home price). I’m hopeful that Fannie, Freddie and banks are working dilingently NOW on what the guidelines and pricing will be for this new bracket of loans priced from $417,001 to the new temporary limit and that we’re not waiting after the loan limits are announced for lenders to figure out how they’re going to deal with the new loans.
I’m currently working with a couple who are looking at homes priced around $600,000. They could be perfect candidates for the new conforming loan limit. With 20% down, they will have a loan amount of $480,000. Here are a few scenarios I shared with them:
Structuring the mortgage as a jumbo compared to with a conforming first and second mortgage (heloc):
I am really favoring the 10 year ARM right now. Ten years is a heck of long time. Picture you and your life 10 years ago…and 
try to imagine your life 10 years from now. Mortgage planning is about selecting the right product that suits your long and short term financial pictures. If you select a 30 year fixed mortgage, yet you keep the home for less than 10 years, you may be losing hundreds of dollars every month. With that said, you cannot put a value on “peace of mind”. If you are going to lose sleep at night because you have an adjustable rate mortgage (that is fixed for ten years) then don’t do it. Go for the long term mortgage. Personally, I would lose sleep over not having the long term savings. It is a choice…YOUR choice. BTW…the photo of me might be closer to 13-14 years ago! 
Of course this couple could wait and see what the new loan limits may be…this plan has potential to backfire however. I’m hearing that the add to rate may be anywhere from 0.25% to 1.000% to rate for loans over $417,000. Worse case, the new conforming loan limit would still have rates where our jumbo rates currently are. Plus, we still don’t know what the new limits are. It’s highly speculated that our area will see the limit just shy of $500,000 (speculated being the key word). However if the add to rate is significant enough, then the new limit will make little difference to our current “jumbo” rates.
With the Fed meeting on March 18, 2008 and an anticipated 0.50% rate cut in the works, mortgage rates may very well be higher by that time . The Fed cutting rates typically causes mortgage bonds to react for the worse as it is an inflationary sign. It’s great for your HELOC, not so for your unlocked mortgage rate.
My advise is for my clients to proceed with an approval now. If the new conforming rate proves to be a better scenario for them while we’re in transaction, it’s easy for us to change plans (as long as we’re more than a week from closing).
Sphere: Related ContentWhat are they doing now? February 27, 2008
Geez, just when I wanted to get a quick Zillow fix, they go sprucing & fixing. Maybe spring refactoring is coming early this year? And why don’t they deploy the new & improved bits to their production servers at 2 AM, when I’m not using the site! Oh well, at least Eppraisal and Cyberhomes were still up.
Days On Market and a few other things
In a comment to my Sunday Night Stats post, I was asked to report the days on market in addition to the regular Sunday night data being posted. The system won’t let me run stats for data that exceeds 10,000 homes, so I can’t do a full year at once. That is why it is broken down into quarters. I also can’t go back before February of 2005 in non-archive format. So we’ll end with 2nd quarter of 2005 for comparison purposes. The numbers are for median days on market.
I’m posting these in real time with two windows up as I gather the information, so I have no commentary regarding the data at this time.
YTD Residential King County - 62 days
YTD Condos King County - 58 days
1st quarter 2007 Residential - 40 days
1st quarter 2007 Condos - 28 days
2nd quarter 2007 Residential - 27 days
2nd quarter 2007 Condos - 22 days
3rd quarter 2007 Residential - 33 days
3rd quarter 2007 condos - 27 days
4th quarter 2007 Residential - 47 days
4th quarter 2007 Condos - 43 days
1st quarter 2006 Residential - 26 days
1st quarter 2006 condos - 20 days
2nd quarter 2006 Residential - 20 days
2nd quarter 2006 Condos - 17 days
3rd quarter 2006 Residential - 24 days
3rd quarter 2006 Condos - 19 days
4th quarter 2006 Residential - 33 days
4th quarter 2006 Condos - 27 days
I have to go backwards on 2005 as the beginning of the 1st quarter is archived, and the 2nd quarter residential sales exceed the 10,000 limit. So 2nd quarter 2005 residential sales volume exceeds any quarter reported above. While this post is not about #of sales, that seemed important to note.
4th quarter 2005 Residential - 24 days
4th quarter 2005 Condos - 19 days
3rd quarter 2005 Residential - volume exceeds 10,000 homes
3rd quarter 2005 Condos - 19 days
2nd quarter 2005 Residential - volume exceeds 10,000 homes
2nd quarter 2005 Condos - 24 days
Inadvertently we learned that the 2nd and 3rd quarters of 2005 were higher in volume of Residential says than any quarter since that time.
As to days on market, looking at the 4th quarter comparisons between 2005, 2006 and 2007 likely gives you the best information regarding the lengthening of days on market. It would appear from what we have seen so far YTD in 2008, that this trend will continue.
Sphere: Related ContentThe first local information site to do it right
Why can’t I wait for EveryBlock to hit Seattle? I’m nosy. I like knowing where houses are being built in my neighborhood, I love knowing when a local restaurant was shut down by the health department, and I’m a sucker for truly local - like my neighborhood - news and sometimes the Capitol Hill blog is just slightly behind the times or just slightly east of 15th. I also want to know about crimes more minor than the Tully’s hold up.
Sphere: Related ContentExtensions: When Your Time is Up With Your Lock
When you lock in a mortgage interest rate, it is for a specific period of time, such as 30, 45 or 60 days. Your mortgage professional should make sure it is for an adequate amount of time to close the transaction. If it’s a purchase, the lock may be for a few days after the transaction and if it’s for a refinance, 30-45 days should be plenty of time in a “normal” market for the lock period. Purchases, depending on the type of transaction can be closed from two weeks or more (or more is preferred, less can happen too).
If you run out of time on your lock, it needs to be extended or the rate is no longer available (if rates have increased). Extensions, like locks, vary in price based on how long the
extension period is. Sometimes, if rates have improved or are the same, the lender may offer a “no cost” extension-that always makes me happy. 
When rates have worsened, you can count on a cost for your extension. Every lender has different costs. As a Correspondent Lender, we work with many lenders and they all have different costs and policies for extensions. Some will allow us to extend for a specific amount of days; for example if we only need 3, we can have a 3 day lock at a prorated cost. Others bracket the days and so if we need 3 days, and they bracket extensions 1-10 days, we’ve paid for 10 days.
Here’s a few examples of extensions offered by a few of the lenders I work with. The cost referenced are in fee as a percentage to the loan amount. If your mortgage is $400,000 and we are working with Lender A below, your extension rate would be 400,000 x 0.015% = $60.00 per day.
Lender A offers a daily extension at a rate of 0.015% per day. They allow me to re-extend if I did not extend long enough the first time (most lenders do not allow this…you go directly to worse case pricing).
With Lender A, the difference between a 30 day and 45 day (original) lock period today is 0.165%; extending for 15 additional days (if you locked 30 days and needed up to 45) is an additional 0.225%.
Lender B offers extensions in brackets:
1-5 days = 0.063%
6-10 days = 0.125%
11-15 days = 0.188%
16-20 days = 0.25% up to 26-30 days = 0.375%
With Lender B, the difference between a 30 day and 45 day lock today is around 0.298%. Extending for 15 days with a 30 day lock is 0.188% based on locking today.
Lender C offers various options:
If your extension is within 10 days of your lock expiring and short term pricing has improved, they offer a 15 day lock at no cost.
If current pricing is worse than the locked rate, then you have the option of fee based pricing based on the expiration date:
5 days = 0.125%
10 days = 0.25%
15 days = 0.375%
30 days = 0.500% (purchase)
30 days = 0.500% (refi)
Lender C also offers market based pricing based on extending the lock from that date (instead of the expiration date of the lock) factoring in the current market.
When you extend on Lender C’s site, a LO has a couple of options they can select from based on how much time is needed and what is the lowest cost.
The difference between a 30 day and 45 day lock (currently) is 0.096% vs. having to extend after 30 days for 0.375% unless the market (rates) have improved.
Here are some possible reasons why a lock may require an extension:
~ Loan Originator did a short lock (less than 30 days or less than what was indicated for closing on the purchase and sale agreement).
~ Mortgage company did not perform in a timely manner.
~ Borrower did not provide documentation in a timely manner or caused delay in transaction.
~ Seller caused a delay in the transaction.
My personal opinion is that who ever caused the extension to be paid should be the party responsible for paying it. Often times, the delay may be unintentional but it happens. It’s crucial for borrowers to understand that once a loan is locked, a clock is counting down the days left for closing the new loan. On the occassion that I need to extend a loan, I review the transaction to determine why we ran out of time.
When I lock in a loan, I would rather have a few extra days than go short on the lock period. The cost of the next longer lock period is often less than what an extension may cost. The key is to make sure the loan is locked for the correct time frame to start with. Your Mortgage Professional should provide you with a Lock Confirmation that will disclose when your lock will expire. It’s important to confirm that your lender has allowed enough time for the transaction with the lock and to address the “what ifs” in the event the transaction does not close in time. With an extension, you are simply buying time.
Sphere: Related ContentWhy I Read Seattle Bubble February 26, 2008
I use to stop by and read seattlebubble once a week. Now I visit several times a day. The place to go is the forums, where other seattlebubble readers stop by to put all kinds of interesting questions up for debate, offer interesting articles about the current state of the industry that I may have missed during the day, provide critical analysis of real estate statistics, debate what’s being said in the main stream media, and I like this blog for the entertainment, which is really what blogs can be at times: entertaining.
When I first visited seattlebubble in early 2007, I found the voices of people who were questioning mainstream real estate industry tactics and strategies that I too had questioned during the bubble run-up years. I believe we have a lot to learn from people who do not necessarily agree with us. If raincityguide is mainstream rock and roll, seattlebubble is alternative punk rock. If raincityguide is macaroni and cheese, seattlebubble is mac and cheese with ketchup. If raincityguide is “No Country For Old Men,” seattlebubble is “I Drink Your Milkshake.”
Real estate agents in Seattle should read seattlebubble because there’s a good chance that your customers are reading it.
So why do I bring this up today? Seattlebubble has made it to the semifinals of the metroblogging contest. Simple concepts of game theory are played out here: what is good for your competition is also good for you. Cast your vote for seattlebubble here.
Sphere: Related ContentA while back I spelled Seatttle with…
three “t’s” on the sidepanel and was surprised just how much traffic it brought. Because I was more concerned with being professional than traffic, I fixed the type, but Mary just reminded me of the effectiveness of the error, so I thought I’d try it out again!
And if you are looking for Seattle real estate information, dont’ be discouraged if you landed on this page! We’ve got tons of great stuff on this site!
To highlight just a few: Ardell gives local condition stats ever Sunday, Rhonda provides mortgage rate updates every Friday, and I wrote a post about moving to Seatttle a while back that is loaded with questions, answers, insights, dangers, etc. from people. (There are almost 500 comments to date!)…
Sphere: Related ContentGreatest Real Estate Agent in the World February 24, 2008
Greatest Real Estate Agent in the World contest is getting a bit testy. Apparently my comments regarding “credibility” were personalized by the contest sponsor. I love his comments “you think you can walk into someone else’s house and tell them to start moving the furniture around because YOU aren’t close enough to the TV”
Hey pal, I didn’t walk into your house, you invited us to be in this contest to “learn something from one another”. Did you mean learn something from you? Sorry…I thought it was a come as you are party.
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