Points in Our Favor: 2015 Mortgage Rates Looking Good

February 26, 2015

When it comes to predicting mortgage interest rates, during certain years economists are the smartest persons in the room. 2014 was not one of those years.

In 2014, economists theorized that when the Federal Reserve stopped its program of buying longer-term treasuries and mortgage-backed securities, rates would rise. Freddie Mac’s deputy chief economist Len Kiefer said that he expected the average rate to rise to 5.1 percent by the end of 2014. Later in 2014, he pulled back his prediction to 4.3 percent. This prediction was still too high.

For 2015, Freddie Mac’s chief economist Frank E. Nothaft – who is also a lecturer at Georgetown University – said he expects to see interest rates climb throughout 2015, averaging about 2.9 percent for 10-year treasuries and 4.6 percent for 30-year mortgages.

Some economic forecasters think the Fed’s board of governors will not raise rates in 2015. Their rationale is that the euro, which is racing toward parity with the strengthening dollar, is making U.S. goods expensive for our trading partners. If the Fed raises rates, the dollar would get even stronger, harming the U.S. economy. Because of this and other factors, it seems unlikely that rates will be raised in 2015.

Local real estate has benefited from the strengthening economy and low interest rates.

When asked for some highlights of the Georgetown real estate market, Michael Brennan Jr. of the Georgetown office of TTR Sotheby’s said, “One of the most remarkable events in Georgetown real estate in 2014 was the rollout of 1055 High. In just seven days’ time, all seven units sold, all cash, all over list price.”

Looking at the start of 2015, Brennan said that, as of early February, “There are only three houses listed for sale in Georgetown below $2 million. With available inventory this low, buyer demand will remain strong for our neighborhood in 2015.”

The most notable listing so far – the Fillmore School building and property – was just listed by TTR Sotheby’s for $14 million.

Clearly, Georgetown continues to be one of the hottest addresses in Washington and in the county. A well-balanced community with strong residential, business, restaurant and workspace components, it also continues to be one of the safest neighborhoods in D.C.

With mortgage interest rates flirting with two-year lows, the affordability index is at one of its highest points ever. It looks like 2015 will be an excellent year for real estate and mortgage rates.

Bill Starrels lives in Georgetown and is a mortgage banker specializing in residential purchase and refinance mortgages (NMLS#485021). Reach him at 703-625-7355.

Fan Favorite, Nats Fest Returns to the Convention Center

December 22, 2014

The Washington Nationals’ Nats Fest returned to the Washington Convention Center Dec. 13, after being last held at National Harbor. The popular, annual event was attended by thousands of Washington Nationals’ fans and featured panel discussions of Nationals players, management and owners.

There were autograph sessions with various stars, including player Jayson Werth and manager Matt Williams. The Racing Presidents posed for photographs with fans and showed their skills in a home run derby. Children were able to bat in batting cages and run bases.

The team appeared amazed by a towering collection of toys in its Toys For Tots campaign. Fans brought in toys and received game vouchers from the Nationals.

Players were interviewed by the press during the event. Pitching ace Jordan Zimmermann said that he enjoys playing with his National’s teammates and hopes to remain on the team. Several players highlighted the fact that the Nationals won 96 games last season. Almost all said they did not watch all of the post-season games after the Nationals lost in the first round of the post season.

Jayson Werth — recently stopped by the police for doing 110 m.p.h. on the Beltway in his Porsche — did not meet the press. Instead, Werth spent the time delighting fans, young and old, by signing autographs.

It was another fun afternoon for Nats fans of ages.
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2013: Good Year for Mortgages

November 19, 2014

The loan limits for single-family home mortgages were announced on Nov. 29. For the Washington metropolitan
area, loan limits for Fannie Mae and Freddie Mac backed mortgage loans remain unchanged.

In most of the country, the loan limit will be $417,000 for one-unit properties. The loan limits are established under the terms of the Housing and Economic Recovery Act of 2008 (HERA), and are calculated each year. The limits for most
selected high-cost areas remains at $625,500.

The Washington, DC, metropolitan area is designated as one of the high-cost areas in the contiguous United States where mortgage loan limits are $625,500 for one-unit properties.

The areas in our region that qualify for the high-cost loan limits include Washington, D.C., Arlington, Va., Alexandria, Va. (metro- politan area) along with counties in Maryland — Calvert, Charles, Frederick, Montgomery, Prince George’s — and in Virginia — Arlington, Clarke, Fairfax, Fauquier, Loudoun, Prince William, Spotsylvania, Stafford and Warren. In Virginia, the cities of Alexandria, Fairfax, Falls Church, Fredericksburg, Manassas and
Manassas Park also qualify.

In these areas, the limits are: 1-unit; $625,500; 2-unit, $800,775; 3-unit, $967,950; 4-unit, $1,202,925.

For FHA loans, the loan limits for 2013 will be the same as those for conventional loans. The new limit will be $625,500 reduced from $729,750, the 2012 limit. FHA loans enable a homebuyer to buy a property with as little as a 3.5-percent down payment and unlimited gift money from family members. There are no income limits for those desiring FHA loans.

Housing in the Washington, D.C., metro- politan area appears to be stabilizing. Mortgage interest rates as of the end of November were near historic lows. According to the Freddie Mac survey of purchase money mortgage rates, the rate for 30-year fixed rate money was 3.32 percent and for 15-year fixed rate money was 2.64 percent — both with just under one point in discount fees.

The economy is moving forward at a steady, slow pace. The prospects of the fiscal cliff still looms, House Speaker John Boehner still says he “doesn’t want to go over the cliff” but will do “whatever it takes to deal with the debt prob- lem.” If no deal is done, rates may go lower. If severe austerity programs are invoked, the economy is likely to slow which means rates would not rise. There are no catalysts on the horizon for higher mortgage rates. 2013 should be a good year for mortgages

Bill Starrels lives in Georgetown and is a mortgage loan officer. He can be reached at 703- 625-7355 or bill.starrels@gmail.com.

With Helpful Fed, Mortgage Rates Head Lower for Everyone

November 6, 2014

The stock and bond markets can be subject to a lot of volatility in this day and age. When the stock market has a bad day, with triple-digit declines, the bond markets usually have a good day. This means that rates tend to go lower when stocks sell off, providing a short window of opportunity to lock in a lower rate.

A year ago, almost all economists were predicting the 10-Year Treasury notes would be yielding 3 percent or more by the fourth quarter of 2014. The economists were wrong. On Oct. 15, the 10-Year Treasury note yield fell to 2.08 percent. This figure was around 100 basis points lower than a lot of economists were talking about several months earlier.

Mortgage interest rates which track the 10-Year Treasury yields went to their lowest levels since earlier last year. Rates on 30-year fixed-rate money were below 4 percent. Rates on 15-Year fixed-rate notes were around 3 percent. Rates on 7-year adjustable-rate mortgages were around 3 percent.

Rates have moderated in recent days to around 4 percent, but are still at the lowest levels in months.
The index value for the 1-Year LIBOR is currently 0.58. LIBOR has been coming down in yield for more than a year. Since the LIBOR index is the favored index for most adjustable-rate mortgages, when they adjust they will be going lower. (The common margin is 2.25 percent. Margin plus index equals 2.83 percent.)

Commodity prices continued to head lower. Oil prices have been in a recent free-fall. Prices were just above $80 a barrel, as we approached the last part of October. The high benchmark was $115. Gasoline is at four-year lows.

The drop in Treasury yields and the drop in commodity prices are related to the trouble in the European economy. The EU countries are fighting to stave off recessionary conditions. Deflation has become more of a concern then the specter of inflation.
The Fed announced an end to the buying of bonds and mortgage-backed securities in October. However, it added that it would be a while before it would be raising short-term rates.

These rates hold true for all buyers, from first-time buyers to buyers of multi-million-dollar homes. These rates are good for everybody. It remains an excellent time to buy a home or to refinance an existing one.

Bill Starrels lives in Georgetown, where he is a mortgage loan officer (NMLS#485021). He can be reached at bill.starrels@gmail.com or 703-625-7355.

D.C. Strong in Loan Choices, Too

September 25, 2014

As we enter the final months of 2014, we find a couple of outstanding news items in Washington, D.C. Real estate continues to be strong, mortgage interest rates are low and the Washington Nationals are National League East Division champs and are in the play-offs. Times look good for the nation’s capital.

The economy is moving forward in a nice fashion. The jobs outlook is improving. Inflation is at bay. This has been the catalyst for the Federal Reserve to keep interest rates low. Europe’s economy is not as robust as the United States’. This is good for anyone who has an adjustable rate mortgage that is set against the LIBOR index.

The LIBOR – short for London Interbank Offered Rate – is the basic rate of interest used in lending between banks on the London Interbank market and also used as a reference for setting the interest rate on other loans.

The current value for LIBOR is 0.59. Most LIBOR-based Adjustable Rate Mortgages have a margin of 2.25 percent. If one’s ARM is adjusting this month, the new rate would be 2.84 percent. (2.25 + 0.59 = 2.84 percent) That’s good news for anyone whose ARM is adjusting.

Interest rates for most conventional 30-year fixed rate mortgages are holding around 4 percent with little or no points. Rates for jumbo mortgages (above $625,000 in the D.C. metropolitian area) are also just above 4 percent with no points. Rates on government-sponsored FHA or VA loans are in the high 3-percent range. Mortgage interest rates are lower today than a year ago.

Rates on Home Equity Lines of Credit (HELOCs) are as low as prime. Prime is currently at 3.25 percent. Rates on Adjustable Rate Mortgages for five and seven year terms are in the low- to mid-3-percent range.

Underwriting standards still require full documentation. This means pay stubs, bank statements and W2s for most customers. If one is self-employed or owns investment property, tax returns for the last couple of years will be required. If you have a very small adjusted gross income (AGI), this will limit your ability to borrow money.

Get pre-approved before you go house shopping. A pre-approval – not to be confused with a pre-qualification – takes a full loan application and is underwritten. This will give you an edge when competing against another potential borrower. Many real estate agents will not work with a buyer who does not have a pre-approval. They want to know the client with whom they are spending time is good to go.

2014 remains an excellent time to buy a home and get a mortgage. Prices are strong, and interest rates are still low. This combines for a decent affordability index. The D.C. market remains one of the strongest in the nation.

Bill Starrels lives in Georgetown and is a mortgage loan officer. He can be reached at 703-625-7355 and bill.starrels@gmail.com. NMLS#485021

Rates Cool As Summer Heats Up

July 16, 2014

It seems that when the nation’s economy is ready for a breakout the Eurozone economy stands up and spoils the party.

The June report released the first week of July recorded 288,000 new non-farm payroll jobs, which blew away consensus numbers of 218,000. The unemployment rate fell to 6.1 percent.

The May payroll numbers were revised up from plus 217,000 jobs. April’s employment numbers were also revised from up from 282,000 jobs to 304,000. Total employment gains those months were, therefore, 29,000 higher than the Bureau of Labor Statistics previously reported. Job growth averaged 272,000 for the last three months.

In more normal times, payroll numbers this strong would have driven the yields on bonds and mortgages much higher. For a few days, the rates on mortgages did go higher. They spiked to around 2.6 percent.

Days later, the Federal Reserve Bank released its much anticipated minutes. The Fed committed to the end of its bond-buying program around October of this year. At the same time, the Fed reiterated its dovish stance on rates and committed to keep interest rates low for the foreseeable future.

There were problems with Portuguese banks and weaker than expected Chinese export data. These problems compounded economic concerns and erased the enthusiasm from the jobs data.

The rates on the 10-Year Treasury notes, instead of testing a new high of 2.63 percent on July 3 (after the jobs report), actually tested lower resistance levels a week later. The yield fell to 2.53 percent on July 10. If there is more negative news on the domestic or international economies, the resistance level may be broken. The 52-week low is 2.42 percent, set on June 28.

The direction of rates for the balance of the summer will be determined in the last weeks of July. It will be interesting to see where rates end up by August.

Houses continue to be in strong demand in the Washington metropolitan area. Coupled with attractive mortgage rates, it continues to be an excellent time to buy a home.

Bill Starrels lives in Georgetown, where he works as a mortgage banker. Bill can be reached at 703-625-7355 or at bill.starrels@gmail.com (NMLS#485021).

Mortgage Interest Rates Defy Most Experts

June 27, 2014

The mortgage market is defying almost all economists’ short-term forecasts. Most expected bond yields and mortgage yields to be on the rise in 2014. This has not been the case. The 10-year Treasury yield hit its high-water mark at 3.03% on Jan. 2. At the end of May, it was at 2.46%, very close to a low for the year. These numbers basically caught all by surprise.

Interest rates with no points on 30-year fixed-rate mortgages have been hovering around 4% on purchase-money conventional loans. Rates have been in the high 3s on government-backed 30-year fixed-rate FHA loans.

On 15-year fixed-rate purchase loans, rates recently have been close to 3% with no points. Rates on adjustable-rate mortgages are also quite low. On a 5/1 ARM, with the loan fixed for the first five years, the rates are in the high 1s with no points.

Also important is the LIBOR index. The London Interbank Offered Rate is defined as the benchmark rate that some of the world’s leading banks charge each other for short-term loans. The LIBOR index is used by most of today’s adjustable-rate mortgages.

When an adjustable-rate mortgage is reset, the margin (usually 2.25%) is added to the index value; this determines the new rate going forward. As of the end of May, the one-year LIBOR index was 0.549. The new rate is: 2.25 + 0.549 = 2.799%. This is why folks with adjustable-rate mortgages are happy these days.

In June 2012, there were criminal settlements against major European banks in connection with a LIBOR rate-fixing scheme that propped up the LIBOR index. The U.K. invoked the Financial Services Act of 2012, which brought the setting of LIBOR rates under U.K. regulatory oversight. The scandal has made it nearly impossible to track good historic data on the LIBOR index because normal market forces were not at work.

One of the catalysts for the currently low bond yields is weakness in the eurozone economy, with further stimulus announced by the German Central Bank. Another is the revised fourth-quarter GDP, which showed negative growth for the first time since 2011.

It is hard to predict where bond yields and mortgage rates are headed in the near term. One thing is certain: current rates are very attractive for folks looking to purchase or refinance a home.

Bill Starrels lives in Georgetown. He specializes in refinance and purchase mortgages (NMLS #48502). He can be reached at 703-625-7355 or bill.starrels@gmail.com.

Uncertainty Jolts Rate Increases

April 11, 2014

Mortgage interest rates rose in March after the new Federal Reserve Chairwoman Janet Yellen gave her first press conference. In her statement, Yellen implied that the federal funds rate may increase several months earlier than originally anticipated by market watchers.

Mortgage interest rates moved upwards of a quarter point higher in rate. The “best execution” went from around 4.25 percent to around 4.5 percent for 30-year fixed conforming money. Rates went up dramatically in the course of around 24 hours.

There will be a lot of examination and interpretation of the Fed’s comments in coming weeks. Some Fed watchers seem to think that the markets reactions may be a little extreme.

Everyone knows that eventually the Fed will be raising rates. The larger question is: when? At the same time, the overall economy is growing but not by robust numbers. Another factor is the continued instability, generated by foreign events, which fosters some insecurity in the markets.
Traditionally, uncertainty is good for the bond markets, which in turn are good for mortgage interest rates.

On another front, policy makers are studying possible changes to the mortgage tax deduction. The current study shows that wealthier homeowners benefit more than average homeowners. Some of the proposals would have income limits for those who want to qualify for the mortgage deduction. Considering that many members of Congress own a couple of homes and understand the clout of the real estate industry, we will have the makings of some interesting discussion of this issue in the future.

As this column is being read, most readers will be getting ready to file their 2013 taxes. Make sure that you have your account review of your last mortgage settlement sheet. This is especially true if you have refinanced or purchased a home in the last tax year. Nobody wants to leave money on the table when it comes to taxes.

It will be a volatile time in the mortgage rates for the near term. Take advantage of any dips in rates and lock in. Listen to your mortgage professional during these times of volatility.

Bill Starrels lives in Georgetown. He is a mortgage loan officer who specializes in refinance and purchase mortgages. He can be reached at 703-625-7355, or email bill.starrels@gmail.com (NMLS#485021).

Bad News Is Good News

February 27, 2014

The employment report for the month of March released March 5, was as ugly as it gets. The consensus among economists was that around 200,000 new non-payroll jobs would be created. The number released was 88,000. Lipstick would not help this report.
Not that much could be more troubling then the report; the numbers released on labor participation were equally unpleasant. Labor participation gages the percentage of potential workers that are actively looking for work. 500,000 people were estimated to have stopped looking for work. This is the largest one-month decline since December of 1979.
This explains why the unemployment rate dropped to 7.6 percent If 500,000 workers had not stopped looking for work, the unemployment rate would have either stayed stagnant at 7.7 percent or even gone higher. It is not unusual in a growing job market to see the unemployment rate tick higher when the job market grows. This is because the available labor market gets larger when unemployed workers get more optimistic and start actively looking for work. This is one of the reasons this job report coupled with the labor participation numbers is troubling.
Some economists are pointing to the payroll tax rise, not the sequester, as the catalyst for this job report. As part of the fiscal cliff deal in Congress earlier this year the Social Security payroll tax was allowed to revert back to 6.2 percent from the temporary level of 4.2 percent. This cost the average tax payer around $100 a month is income, which is less money a lot of consumers have to spend in the economy.
Effects of the sequestration are about to come on stage. Workers affected by sequestration are typically having their overall hours and pay cut back by five or ten percent. These workers will have less discretionary money to spend which will be a further drag on the economy.
Bad news can be good news for bonds, and ultimately mortgage interest rates. Before the jobs report, some economists and talking heads were debating when the Federal Reserve would take its foot off the accelerator, implying that this would happen sooner then what the was being stated. Well, the “experts” will have to find something to talk about on CNBC or on the internet. This report clearly reaffirms that the stimulus by the Federal Reserve, including keeping rates low is not going away anytime soon. The bond markets reflected this when 10-Year Treasury notes were trading at their lowest point since May of 2012. Mortgage rates are close to historic lows.
The lower rates are hitting at the same time as the spring housing market is starting. This should keep activity active and is good for buyers who need mortgages.

Bill Starrels lives in Georgetown he is a mortgage loan officer. He specializes in purchase and refinance mortgages. Bill can be reached at 703-625-7355, bill.starrels@gmail.com

Bad News Is Good News For Mortgage Interest Rates

Mortgage interest rates continue to hit new lows as the economy plods ahead slowly. Rates declined in reaction to disappointing job growth, according to a report released on July 6. The number of non-farm payroll jobs for June was up by 80,000. The consensus was 100,000 jobs. Some Wall Street firms raised their guidance to 125,000 after the release of a stronger ADP employment report the previous day.

As the report confirms, the reason for this market reaction is the economy’s tepid recovery. Rates simply are unlikely to move higher with a slow moving economy. Additionally, the Federal Reserve Bank may be prompted to do some quantitative easing. The markets are already pricing in more stimulus by the Fed.

Mortgage rates are at historic lows. Purchase mortgage rates 30-year fixed rate mortgages are priced in the mid-3 percent range. Fifteen-year fixed mortgages are below 3 percent. Rates for 5/1 and 7/1 adjustable rate mortgages are below 3 percent.

For every 200,000 borrowed at 3.5 percent on a 30-year note, the payment is $895 a month. At 5 percent, the payment would be $1,069 a month. This represents a savings of $174 monthly.

With the low interest rates, a borrower can get a larger loan than was the norm just a year ago. In order to get approved for a loan, a borrower needs debt to income ratios of around 40 percent. With historically low rates and home prices coming off their lows, the affordability index is excellent.

Other monthly reports were less than upbeat. The manufacturing index went down to a reading of 49.7 percent, below the 50 percent threshold considered the equilibrium. Readings below 50 percent are considered bearish. A factor contributing to this decline is the worsening of the EU economies. Exports are important to the manufacturing sector.

Goldman Sachs has reduced its target GDP for the Q2 GDP to 1.5 percent, one-tenth lower than their previous prediction.

Will rates still go lower? There is always the possibility. If one of the EU states stumbles in the weeks and months ahead, more money could flee to the safety of bonds. This could spur even lower rates. Meanwhile, rates could tick higher, too. Locking in at today’s low rates seems like the prudent thing to do.

Take advantage of the historically low rates and refinance, or consider buying that house or condominium.

Bill Starrels lives in Georgetown. He is a mortgage loan expert specializing in refinance and purchase loans. Bill.starrels@gmail.com or 703-625-7355.