Interest Rates Sill Lower

Despite rumors of one more rate increase by the Federal Reserve, long-term mortgage rates declined at the end of the week.

FHA Loan Limits Are Up

Effective January 1, the Federal Housing Administration (FHA) has just increased its highest loan limit to $362,790 in high cost areas nationwide. This is a $50,000 increase from last year's limit. FHA loans are usually available at lower interest rates than conventional loan rates, with easier lending guidelines to help first-time buyers. While extra paymentc called MPI (mortgage risk insurance) are tacked on that are not tax deductible, this is still very good news because it gives borrowers a lot more loan assistance in high markets that was not available before.

A Good Time to Refinance with the Start of the New Year

The 30-year fixed mortgage rate fell last week overall to 6.28%, down from 6.36%. This could still be a good time to consider a refinance if you're not in the market for a new home purchase. Happy and Prosperous New Year!

The End of the Year, But Not the End of Home Prices

The median home price statewide in November according to the California Association of Realtors is $548,000. But the number of sales decreased by 11.2 percent for home resale activity. Local areas differ from these figures, as previous posts show. Please see the linked article for more information.

Southern California Median Home Price Increase

The median home price was up from October by 1.3 percent to $479,000, and up 15.4 percent from November, 2004. This reflects Los Angeles, Riverside, Ventura, San Bernardino, San Diego and Orange Counties. The highest number sold for November was in Los Angeles County at over 9,000 residential sales, a decrease of 3.6% from last year; and Riverside County at over 5,900 sales, an increase of over 18% from last year. The typical mortgage was about $2238 in November, about $1800 higher than a year ago. Continued demand for housing remains very strong overall in Southern California.

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.