Have Rates Risen High Enough?

The overnight lending rate between banks was raised yesterday for the 13th time since June 2004, to 4.25 percent. The Federal Reserve may now be indicating "rates have risen to a level that doesn't spur economic growth", and that monetary policy for the first time in 2 years is not described as providing "accommodation" to the nation's economy. Banks typically raise their rates in anticipation of an upward movement by the Federal Reserve, so those changes have already occurred for now. Credit card rates, home equity line rates, and adjustable mortgages will be the most sensitive to upward rate changes. CD's & fixed-rate mortgages benefit or are not affected by an upward rate change. However, other language in their report hints at leaving the door open to increases in the future.

Interest Rates Edge Up at Year's End

The 30-year mortgage rate climbs up to an average of 6.32 percent, and another rate increase by the Federal Reserve is expected tomorrow.

Nationwide Decline Unlikely: Freddie Mac CEO

Few people realize how much of a driving force housing is in this economy, or that mortgages available in the U.S. are not available in other countries. California's (and the eastern) coastal markets have seen stronger prices than elsewhere, but overall, the CEO of Freddie Mac said yesterday that incomes are keeping up with the price increases, and a housing bubble is not where we're at. Certain markets will slow, but a nationwide decline is unlikely. Click on the link for yesterday's speech.

Will Incomes Catch Up with House Prices

The market is not in a bubble; even a modest downturn in housing would be felt throughout the economy, and a nationwide decline in housing prices remains highly unlikely. These points were covered in today's speech by the CEO of Freddie Mac, an institution which competes with the banks and is designed to help consumers obtain their mortgages. While the East and West Coasts have climbed steeply in housing prices, across large areas of the country incomes have kept up with prices. Richard Syron believes a spike in interest rates would be bad for the housing industry, a major driving economic force in the entire country, helped significantly by government sponsored Freddie Mac. Housing bubble vs. soft landing is the question for the 2006 future, and many feel that there will be no "crash" in prices, but various soft or somewhat harder landings depending on geographic region.

Mortgage Rates Holding

Rates did not move as much this week; the 30-year fixed is at 6.25 percent with an average .5 point. Consumer confidence is up more with a decline in gas prices. With the increase in conforming loan limits, buyers gain on the other end what they lose slightly with rate increases.

New 2006 Loan Limits

Freddie Mac announced its new single family mortgage loan limit will increase from $359,650 to $417,000 on January 1, 2006. This means a possible mortgage interest savings may be $24,700 over the life of a 30-year fixed-rate loan. Loan rates over the conforming limits are usually at 1/4 point higher (known as jumbo rates). In California where there are about 19 counties over the state's current median price, this means even more individuals can qualify for the median price home.

California Median Home Price Drop

The California median home price decreased 2.8 percent compared with the same period a year ago. Now at $538,770 for October, 2005, it has decreased 1 percent from September's $543,980 price. Overall, year-to-date sales were 3.1% above last year's level. The current inventory index is 4 months--compared to last year's 3 months at the same time. Interest rates are over 6%, compared to last year's at 5.72% for the 30-year fixed mortgage rate. It's taking slightly longer to sell a home compared to last year, and time periods vary by neighborhood and region.

NAR's Economist: Winding Down to an Expansion

As inventory builds in many parts of the country, and rates may continue upward in the next few months, the National Association of Realtors indicates that the housing sector may have reached its peak. Elsewhere, it's predicted that nationally, 4%-5% may be the new annual appreciation rate, especially in California where the percentage of buyers has declined to 14%. Nationally, sales were down in October in the West by 1.2%, which was a smaller decline than all other areas of the country. Weather and time of year are also typical factors which keep buyers out of the market temporarily. But does it mean the "bubble is bursting"? Stay tuned.

Southern California Median Home Price Down Slightly in October

At $454,000, the Southern California median home price was down .2 percent in October, but up 14.9 percent from October of 2004. Overall sales for October for condos and single family homes are lower as well, not unusual for the time of year, but also slightly lower than October 2004. Long Beach inventory is taking longer to go into escrow for some areas, and longer overall. This median home price should not be confused with the statewide median price which was $543,980 as of September according to the California Association of Realtors.

Bankrate's Top 10 Causes of Debt

Sometimes things happen out of our control, but the end result may be very much within our control. How well you do comes into play when you want to qualify for a loan--these days there are so many loan options that a buyer has a lot more opportunity than ever before. Gambling is listed as #5 on this list, and in California, there are plenty of places to get into trouble. While divorce, job loss and medical problems can happen seemingly without our consent, there are still money management, financial communcation and educating ourselves about financial management which can lessen the impact. Many people don't make any effort, where just some effort could lessen financial crises. Only you can do this for yourself. Take a look at this article, and think about saving money, paying down more debt, and avoiding unnecessary expenses.