Mortgage rates going DOWN

For the seventh time in the past eight weeks, mortgage rates have been on the decline. Rates are once again under 6.5% for a 30 year fixed and 6.1% for a 5 year adjustable, respectively. I actually just had a client who just closed who locked in his rate because he didn't want to risk an increase on his rate, especially with a close date 90 days out. Who could blame him? At the time the Fed was increasing rates and it just wasn't worth the risk. Well, won't you know it, rates started to decline a week before he had to close, and yes, they were below his lock. While my client wasn't able to change his rate, he still had a great rate and an amazing new home. The moral of this story in not to not lock in a rate, but that mortgage rates are not going to run straight through the roof, like so many people feared. According to Frank Nothaft, Freddie Mac VP and Chief Economist, "with short term interest rates increasingly seemingly on hold, for a while at least, interest rates overall should not experience any big shifts in either direction." Not only is this good news for buyers, but for sellers as well. With rates stabilizing at such low rates, that should keep more buyers out there and sellers who are ultimately ready to make that next move, will be able to sell and then buy their new home. And there you have the circle of real estate life.

Media Schmedia

One of the most frequent questions I've been asked lately has been is what I think about the market in Chicago, by clients and non-clients alike. Well, I know it doesn't seem like a surprise to be asked that kind of question, but there has been one specific common thread to all these conversations....the media. The media whether it is print, television or on-line has been droning on about how the housing market is slowing down and oh, no the world's going to end because interest rates are higher than they were 4 years ago! And while both of these are true to varying degrees I believe in many cases the message the media sends is out of context for two reasons. One, the housing market is very much a local phenomenon, but the media largely uses nationwide and regional generalizations. There are so many factors that affect housing and many are specific to that local. There are even differences between Chicago and the Chicago suburbs! One factor is demand. The demand or need for housing is not the same across the country. For example over the past few years demand for housing on the East and West coasts has driven the 20 and 30% price appreciation they had been experiencing, while in Chicago, demand was high and price appreciation was significant, it was not of the same intensity. While Chicago's growth was steady, the activity on the coasts is what fueled much of the talk of the housing bubble and leads me to my second point. Everyone seems to forget that the past five years have been a period of record housing growth fueled in part by record low mortgage rates. Well it's no surprise the market is slowing down, how long can record growth be sustained? Eventually it has to balance out and that's exactly what's happening. Is that a bad thing? From my perspective, no, balance is a good thing especially when it doesn't have to be the result of some "catastrophic" event. On a somewhat lighter note, in such good times, we often forget what "normal" is. Until the past few years 9 or 10% on a mortgage was considered a great rate and there actually was a period about 20 years ago where interest rates were 18%! Gasp!!!