New record for 30 year mortgage rate

Smart Real Estate News & Commentary by Chris McLaughlin August 13, 2010

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New record for 30 year mortgage rate

Here we go again setting new records.  Freddie Mac’s weekly report said the 30-year fixed rate slipped to 4.44% for the week ended Thursday, the lowest since it began tracking the rate in 1971. Last week’s rates stood at 4.49%, and a year ago it was at 5.29%.  The 15-year fixed rate fell to 3.92% this week, the lowest since Freddie Mac began tracking it 1991, down from 3.95% last week and from 4.68% a year ago.  Adjustable-rate mortgages also declined, with the 5-year rate falling to 3.56% this week, the lowest since 2005 when the lender began tracking it. 

Mortgage tracker Bankrate.com, which surveys large lenders across the country, said the average 30-year fixed loan sank to a record low for the fourth consecutive week, falling to 4.57% from 4.66% the previous week.  The 15-year fixed rate, which is a popular option for refinancing, also fell to the lowest level in the history of Bankrate’s 25-year old survey, dipping to 4.06%, from 4.11% the week before.  While the 1-year adjustable-rate mortgage held steady at 4.8% for a fourth week, the 5-year adjustable rate mortgage dropped to a record low of 3.92% from 3.95% the previous week.

Retail sales up

According to the Commerce Department, total retail sales rose 0.4% to $362.7 billion, compared with June’s 0.3% decrease.  The June drop was revised from the originally reported 0.5%.  The overall sales percentage gain was slightly lower than anticipated. Economists surveyed by Briefing.com had expected sales would rise by 0.5% during the month. 

Consumer spending accounts for two-thirds of U.S. economic activity, so retail sales and related reports are closely monitored to gauge the health of the economy.  Sales excluding autos and auto parts rose 0.2% last month, in line with economists’ forecasts. In June, sales on the same basis were down 0.1%.  Motor vehicle and parts sales also rose 1.6% in the month, and gasoline store sales rose 2.3%.  Overall, retail sales are up 5.5% over July last year.

Lower Jumbo rates

Low interest rates may not be helping out with regular mortgages, but the higher end of the housing market is getting a boost from lower jumbo rates—mortgages of $417,000 and above.  Unlike conventional mortgages, jumbo loans by definition exceed the conforming loan limit of $417,000 set by Fannie Mae and Freddie Mac. Jumbo rates are loosely tied to long term treasuries but they are traditionally higher because of the risk involved for the banks in making a larger loan.

“Sales volume for homes worth more than $1 million across the country are up more than 35% from last year at this time,” says Walter Maloney, spokesman for the National Association of Realtors (NAR). “Homes between $700,000 and a million are also on the rise by some 29% over last year. There’s no question that’s because of the historic low jumbo rates.”  Just how low are the current jumbo rates? Last year at this time, a 30-year fixed jumbo rate was averaging more than 6%. It’s now at an all time low average of 5.07%. And the re-finance rate for a 30 year jumbo is currently at 5.30%. A fifteen year jumbo is at the historic low average of 4.68%.  The reason for the rate decline is simple, say the experts: banks, which have a part in setting jumbo rates, have money to lend and see the benefits in doing so at lower rates.

Inflation up

The Commerce Department announced today that the Consumer Price Index increased 0.3% last month after falling 0.1% in June.. Economists surveyed by Briefing.com were expecting prices to rise 0.2%.  Energy prices rose for the first time since January, as commodity and gasoline prices spiked more than 4% during the month. Food prices, however, declined 0.1% as the cost of fruits and vegetables decreased.  Core CPI, which is closely watched by economists because it strips out volatile food and energy prices, edged up 0.1% for the month, in line with economists’ forecast and down from the 0.2% increase in July. 

Costs for housing, clothing, cars and tobacco continued to rise during the month while prices for medical care, airline fares and household furniture slipped.  Prices also rose on an annual basis in July. Overall prices rose 1.2% over the past 12 months, driven by 5.2% spike in energy costs due to higher gasoline prices. In June, overall prices edged up 1.1% from the previous year.  Core CPI rose 0.9% over the past year.

DSNews.com – Losses on CMBS Loan Liquidations Climb in Q2

During Q2, Moody’s Investor Service says that the 342 commercial real estate loans liquidated at a loss had a weighted average loss severity of 42.8 percent, 740 basis points higher than the current 35.4 percent weighted average.  “We anticipate that the cumulative loss severity rate will continue to rise from 35.4 percent as more loans from the 2006-2008 vintages of CMBS are liquidated at relatively higher loss severities,” said Keith Banhazl, Moody“s VP and senior analyst. 

From January 1, 2010, through June 15, 2010, a total of $3.2 billion of debt underwent liquidations, Moody’s says, a $2.6 billion increase over the same period in 2009. April 2010 recorded the highest amount of liquidations by current deal balance, with over $742 million of debt affected.  Moody’s reports that loans backed by healthcare properties have the highest weighted average loss severity at 61 percent, while loans backed by office properties have the lowest average loss severity at 31 percent.  The ratings agency’s update on CMBS loss severities covers all outstanding conduit and fusion U.S. CMBS transactions, whether they are or are not rated by Moody’s.

Now for our real estate education section…

Friday File: 15 Minute Short Sale Resolution

According to research conducted by Nielsen, social media websites now consume 23 percent of all time spent online…and a significant percentage of users spend the majority of their time using social media via mobile computing and/or cell phone. In fact, Americans now spend an average of six hours each week on some type of social network.

On the other hand, email usage via desktop has dropped by nearly 50% while simultaneously increasing via smart phones. The use of search engines and web portals like Yahoo or Google has declined due to the increased usage of direct links in articles, blogs and even email which no longer require extensive searching. Perhaps one of the most surprising findings is that twice as many older Americans (aged 50 or above) visit social networks than those under 18 years of age.

Not only does all of this add up to a lot of communication but it should be an inclusive requirement for all your real estate and short sales success.  For this week’s 15 minute resolution, let’s take a look at a few less common social media marketing resources.

Adly: Reach over 70 million users on Twitter and Myspace with this easy to use advertising platform. Of course, the true value comes from the ability to target prospective clients in your area while gaining strategic insight into the local data.

FourSqure: With an emphasis on geo-location combined with business, Foursquare.com is a great way to connect with others in the local area while spreading the word via mobile communications. From open houses to micro-transactions, this is considered one of the most promising upcoming social media sites today.

Gist: Gist was designed from the ground up as a tool to help build professional relationships by providing the right information at the right time. Think of it as LinkedIn on steroids and take a few minutes to check them out for this week’s 15 minutes resolution.

See you at the top!

Chris McLaughlin
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About the author:

Chris McLaughlin is widely known as America’s top
Real Estate Attorney and Investment Consultant.

    * As the top Florida foreclosure and pre-
      foreclosure expert, he oversees more than
      100 short sale & REO closings each month
   * Long-time authority on real estate investing
      and rapid reselling of distressed homes.  Owns
      portfolio of nearly 100 high-value, high-profit
     properties
    * Owner of one of Florida’s largest Real Estate firms,
     running 4 different offices, supporting over
     400 agents, uniquely positioning him to help
     thousands of investors make money in the
     biggest market opportunity ever!
    * Highly sought-after speaker, consultant, and
      seminar leader for current trends and hot topics
      in Real Estate Investing, Entrepreneurship, and
      Wealth Building
    * Follow me on Twitter: http://twitter.com/mclaughlinchris
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