Where is the beef?
Within the argument that the strategies of the Federal Reserve Board and government are setting us up for a major storm of inflation, the markets will first need to see some evidence that inflation is indeed about to rear its ugly head. Yes, the Feds have supplied record low rates and flooded the market with stimulus dollars during this crisis. Thus far, the recovery has been slow and tepid. And the latest inflation report is quite benign. Consumer inflation for 2009 did not reach 2.0%, excluding food and energy. Some economists warned that the fiscal crisis could bring a danger of deflation but these warnings do not seem to be panning out as well.
It seems we can’t go one day without news reports which contain speculation as to whether the Federal Reserve will cut off the spigots with regard to purchasing bonds after their latest deadline of April 1. Rates have already risen moderately over the past several weeks. If the Fed left the bond market “cold turkey” this could provide quite a rate shock and jeopardize the fragile recovery. The latest inflation news is good news in this regard. If inflation stays under control for the first two months of 2010, expect the Fed to have more flexibility. Most recently, oil prices have receded somewhat, but still are not close to where they were two months ago. Energy prices are seen as a temporary factor, but higher energy prices can fuel inflation elsewhere if given the time to fester.
The Markets. Rates eased slightly again in the past week. Freddie Mac announced that for the week ending January 14, 30-year fixed rates averaged 5.06%, down from 5.09% the week before. The average for 15-year fixed eased to 4.45%. Adjustables were mixed with the average for one-year adjustables rising to 4.39% and five-year adjustables staying at 4.32%. A year ago 30-year fixed rates were at 4.96%. “Rates for fixed-rate loans eased a little further this week, while ARM rates were mixed,” said Frank Nothaft, Freddie Mac vice president and chief economist. “With fixed rates staying near a record low, many homeowners are taking the opportunity to refinance. For instance, over the past three-and-a-half months, on average more than 75 percent of conventional applications were for refinance transactions, according to Mortgage Bankers Association. The Federal Reserve recently reported positive news in both the housing market and the overall state of the economy in its January 13th regional economic report, which spanned the last few months of 2009. Economic activity improved in 10 of its 12 districts. Home sales, especially for lower-priced homes, increased due in part to the homebuyer tax credit and house prices appeared to have changed little since its last report.” Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.
Current Indices For Adjustable Rate Mortgages
Updated January 15, 2010
| Daily Value | Monthly Value | |
| Jan 14 | December | |
| 6-month Treasury Security | 0.14% | 0.17% |
| 1-year Treasury Security | 0.34% | 0.37% |
| 3-year Treasury Security | 1.49% | 1.38% |
| 5-year Treasury Security | 2.51% | 2.34% |
| 10-year Treasury Security | 3.76% | 3.59% |
| 12-month LIBOR | 1.000% (Dec) | |
| 12-month MTA | 0.471% (Dec | |
| 11th District Cost of Funds | 2.093% (Nov) | |
| Prime Rate | 3.25% |
Sellers who get more than one offer should be aware that the highest offer isn’t necessarily the best offer, say experienced practitioners. In this tough market, going with the buyer who has enough cash to pay a large down payment and who won’t be scared away if the inspection uncovers some needed repairs is often the wise choice. Practitioners should encourage sellers to review all the terms and conditions of the sales contract. In some areas, the allocation of fees can take a big bite out of the net proceeds. While most contracts are written to reflect that, it isn’t always the case. Also, the closing date in the offer should be considered carefully. A buyer who can close quickly can save a seller thousands. Offers contingent on the sale of another property are particularly suspect in this market. Source: Inman News
Home buyers should be prepared for extra costs beyond the payment on their new home. “Some people walk away from closing with a nickel and a stick of gum, and that’s probably not going to be a good idea,” says Dale Robyn Siegel, president of Circle Mortgage Group, in Harrison, N.Y. People whose only previous experience is renting often don’t realize how costly water, heating and air conditioning, taxes, and general maintenance can be, says Allan Glass, owner of ASG Real Estate Inc. in Los Angeles. He estimates that buyers should have at least 1 percent of the purchase price of their home set aside for improvements and other expenses. Source: MarketWatch
Off-campus student rental housing is surviving the recession nicely, say landlords who rent apartments and rooms to students near campuses all over the country. “I wouldn’t say it’s recession-proof, but it’s recession-resistant,” says Jim Arbury, an executive with the National Multi-Housing Council, a Washington, D.C.-based trade group for the apartment industry. “It’s still one of the bright spots in the housing market.” For instance, Brad Hastings, whose company Walk2Campus rents 400 units in South Carolina, has about a 94 percent occupancy rate. Hastings says it’s not a business for everyone because it’s management-intensive. “You have a customer base who, possibly for the first time, are living out on their own. There’s a certain amount of hand-holding, teaching of life lessons.” Source: Inman News
