Mortgage Rates: Where are they headed?

I just received this email from our new in-house lender, who by the way, is getting rave reviews.  I've titled the post Mortgage rates:  where are they headed? because I believe that Faramarz is giving us a very insiteful vision into the future.  For those interested here is the message verbatim

"I've been having the big "What's happening with rates?" discussion with several agents and clients the past few days. The Federal Reserve met yesterday and announced that they were keeping the Discount Rate rate near zero for an "extended period of time." Many people have mistakenly taken this to mean that mortgage rates will also stay very low for this same extended period of time. Nobody can predict exactly what will happen because mortgage rates are not set by a committee but, rather, determined by open trading much like other bonds, stocks, and commodities. This is a huge deal for our borrowers because higher mortgage interest rates dampen the buying power of potential borrowers. Most borrowers are very cash flow sensitive and are usually not in a position to withstand a sudden increase in their affordable monthly payment. In order to keep their monthly payment the same, they must reduce their purchase price target as rates rise.
The Discount Rate is the interest rate the Federal Reserve Banks charge depository institutions on overnight loans. It is an administered rate, set by the Federal Reserve Banks, rather than a market rate of interest. The primary conventional mortgage rate is a market-determined interest rate for long-term residential mortgage loans. A change in the short-term discount rate may not affect interest rates on long-term mortgages.

While these two interest rates tend to move together, they also may follow different paths from time to time. For example, in 2001 stimulative Federal Reserve monetary policy reduced the discount rate to 1.25 percent, its lowest rate in more than 50 years. In contrast, mortgage rates fell only slightly during the same period.

The residential mortgage rate is the market-determined "contract interest rate on commitments for fixed-rate mortgages" published by the Federal Home Loan Mortgage Corporation (FHLMC or Freddie MAC). It represents the long-term end of the interest rate spectrum. Lenders must incorporate into their long-term loan pricing decisions their expectations for future inflation and interest rates. Movements in the mortgage rate also reflect supply-and-demand conditions in the market for mortgage-backed securities. Over time, movements in the primary conventional mortgage rate are highly correlated with movements in other long-term interest rates, like the 10-year constant maturity Treasury bond rate.

The Federal Reserve has been keeping rates low by purchasing $1.25 Trillion of mortgage backed securities since December, 2008. This program is set to end in March and FHLMC will once again be looking to the general investment community for funds. The yield that the investment community will demand has a direct impact on rates. The Federal Reserve has been buying MBS at a much tighter spread and at a much lower yield than that generally demanded by the investment community so we will likely see an increase in mortgage rates, even if the Discount Rate stays near zero.

If you have any questions about any of this, please give me a call or send me an email.

FM

■ ■ ■ Faramarz Moeen-Ziai
Bank of Commerce / Mortgage
3130 Crow Canyon Place, Suite 300
San Ramon, CA 94583
Ph: 925.627.2563
Fx: 925.476.0353

And I like you to visit my website http://www.billfletcherhomes.com/.  Please call  or email me for home valuations, BPO's or questions you might have about East bay real estate,neighborhoods, or other real estate related issues.

Come see my new listing at 4462 Saint Andrews Road, Oakland

Here's the link to my new listing of this beautiful mid century view home in the Oakland Hills. I'lll be there hosting Open Houses on Monday 1/18 from 11-1 and Sunday 1/24 from 2-4
http://www.postlets.com/res/3250968

Please visit my website for more information about this home, and others, market updates and other home buying and selling information in the East Bay, http://www.billfletcherhomes.com/.  Or email me for home valuations, BPO's or other real estate related needs.
bill@billfletcherhomes.com

Real Estate Market analysis for those who are Buying or Selling a Home iin North Oakland

If you are thinking about buying or sellling a home in North Oakland you'll want to look at these charts.  They cover the period from December 2008 through December 2009 for the combined zip codes of 94608 and 94609 for single family detached homes.  When you look at these you will see why North Oakland makes it on the national list of top ten zip codes for sales price going over list price. Look at this chart:

 Click On Chart To Enlarge

What we see is a 69% price increase from a year ago and two recent months, October and December where the sold price went far above the list price on the average home!  This area continues to be hot.

Click on chart to enlarge

This chart represents the number of homes for sale in these zip codes.  If you are buying or selling a home in North Oakland you want to be aware of these numbers. From a year ago the supply of inventory dropped by a half.  There are not enough properties to keep up with the demand.  If you're planning on buying in this area you should be prepared to offer more than the list price, not that it will necessarily happen but I've seen throughout the summer and fall that good houses tend to go over the asking price and sometimes by a great deal.  If you are planning on selling your home in North Oakland, prepare it with care if you can, paint, upgrade, landscape, refinish wood floors,  and you probably will get top dollar for your home.  I do not expect these numbers to last forever, but North Oakland has been undervalued and it appears to me to be poised to be the next Temescal.  There are numbers of cafes and restaurants opening and proximity to BART, Berkelely, Emeryville, and Freeways along with some real charming homes and nice neighborhoods make it a great choice for many.

If you are thinking about buying or selling a home in North Oakland check this blog for timely information.  Also feel free to call or email bill@billfletcherhomes.com or check out my website http://www.billfletcherhomes.com/ for more information about buying or selling a home in North Oakland, or elsewhere in the East Bay

Buying a Home in South Berkeley, North Oakland: Get to know the Neighbors

If you are buying a home in South Berkeley or North Oakland in the near future or even in a more distant future here is an opportunity to get to know the neighborhood and the neighbors.  there is a neighborhood association called WANA who supports a monthly "happy hour" on the second Friday of the month.  This is usually held at Cafe Vino on the corner of 66th and Scaramento (good food and wine there, by the way).  this coming Friday 1/8 there is a grand opening celebration at the neighborhood's newest hangout , The Actual Cafe,on the corner of Alcatraz and San Pablo.  Neighbors will be making there way down to this new addition in a show of support.  Come join the fun!  Meet some folks and learn about what a great place South Berkeley and North Oakland is to live. Get to know the Neighbors!

Buying Investment Property in Berkeley

If you are thinking about buying investment property in Berkeley you should probably get aquainted with the Rent Stabilization Board. On the third Saturday of each month they hold a counseling session for both landlords and renters. Its a free community service.  Here is information as posted on the Berkeley Web site:

FREE SATURDAY COUNSELING
for Landlords and Tenants at
the Berkeley Central Library
Next Session: Saturday, January 16, 2010. Housing Counselors from the Berkeley Rent Board offer free, one-on-one counseling sessions. Counselors assist both tenants and landlords by answering questions on housing topics, including security deposits, rent control, evictions and unpaid rent. For more information, please contact Jacquelyn Morgan at the Berkeley Rent Board, (510) 981-4917.

When: Third Saturday of the Month

Time: 11 a.m. - 12 p.m. (noon) (Please arrive between 10:30 and 10:55 a.m. See below.)

Where: Berkeley Central Library
Berkeley History Room, 2nd Floor
2090 Kittredge Street (at Shattuck Avenue)
(In the Downtown Berkeley Public Library)

Please arrive at the 2nd Floor Reference Desk between 10:30 and 10:55 a.m. A lottery held at 10:55 a.m. will determine the order participants are seen.

Accessibility: Wheelchair accessible.

Sign Language Interpreters and Other Accommodations: To request a sign language interpreter, real-time captioning, materials in large print or Braille, or other accommodations for a library event, please call 510-981-6107 or TTY 510-548-1240. At least five working days notice will ensure availability.

TTY Patrons who are deaf or hard of hearing and patrons with speech disabilities may call the Reference Services TTY with questions about library services, library holdings or brief reference questions. The TTY number is 510-548-1240.

It makes sense for anyone with the intention of buying investment property in Berkeley to learn the rules, know the pitfalls and begin developing relationships as well.

Please feel free to email me at bill@billfletcherhomes.com or visit my website: http://www.billfletcherhomes.com/

Buying or Selling a Home in Berkeley: Market Update January 2, 2010

If you are buying or selling a home in Berkeley you want to be educated as to what is going on in the market place.  In Berkeley, as in all of the east bay there are many micro markets for buying or selling a home.  The following charts sum up in a visual way what is going on in the city as a whole.  For specific micro markets, (zip codes and MLS areas) it would be more expedient for you to pop me an email (bill@billfletcherhomes.com).  I do not have the time to post every market.  There is a high degree of variability in the Berkeley market so  before buying or selling a home in Berkeley please check with me or with another realtor of your choice.

The first two charts really sum it all up.  There is a dirth of inventory right now. And, contrary to what you read, there are plenty of buyers. When you think about it the market place is really quite screwy.  There are hardly any properties for sale in parts of Berkeley, Albany, Oakland, etc, and then in some areas it seems like every house is for sale.

This chart shows the how many months it will take to sell every house that is on the market in Berkeley in December 09. Conventional wisdom says that through 7 months it remains a sellers market. the chart below shows that in December we had about a 5 week supply. What we have is a huge reduction in the number of homes available for buyers. If a greater number of homes do not become availabe in the months ahead we should see an increase in prices.

CLICK ON CHART TO ENLARGE

The next chart shows the actual umber of houses on the Market in Berkeley for the past 13 months (December 09-Dec.09), another indication that supply is very low.

 CLICK ON CHART TO ENLARGE

The following chart shows what the average selling price vs the average for sale price was for the past year.  Keep in mind that we are seeing areas where the sellling price is quite higher than the for sale price. The market is very mixed and care needs to be taken when pricing a home.

CLICK ON CHART TO ENLARGE

What does all this mean?  Basically that if you are planning on buying or selling a home in Berkeley this year you should pay attention to these market dynamics.  There are currently at least a half a dozen markets in Berkeley and you need to know which one you are in.  Please call or email me if I can be of further assistance. bill@billfletcherhomes.com

And please visit my website for more in depth information about the East Bay Market, property searches, open homes, and reports:  http://www.billfletcherhomes.com/