One of the best prices at Lake Monticello!!
Offered at 294,900
15 River Ridge Road Video Tour of Home
Rob Alley, Realtor
The Avery Group at Roy Wheeler
540-250-3275
roballey@roywheeler.com
http://www.robsellscharlottesville.com/
http://www.forestlakesliving.com/
http://www.theaverygroup.com/
Showing posts with label Homes. Show all posts
Showing posts with label Homes. Show all posts
Tuesday, October 21, 2008
15 River Ridge Road - Home for Sale at Lake Monticello
One of the best prices at Lake Monticello!!
Offered at 294,900
15 River Ridge Road Video Tour of Home
Rob Alley, Realtor
The Avery Group at Roy Wheeler
540-250-3275
roballey@roywheeler.com
http://www.robsellscharlottesville.com/
http://www.forestlakesliving.com/
http://www.theaverygroup.com/
Offered at 294,900
15 River Ridge Road Video Tour of Home
Rob Alley, Realtor
The Avery Group at Roy Wheeler
540-250-3275
roballey@roywheeler.com
http://www.robsellscharlottesville.com/
http://www.forestlakesliving.com/
http://www.theaverygroup.com/
Thursday, September 18, 2008
First Ever Video Walkthrough Tour by The Avery Group
The first video walkthrough tour by The Avery Group. This is a home we have listed in Gordonsville, VA. 19408 Lovers Lane.
I have some work to do to get this all perfected, but it is coming along and before you know it, video walkthrough tours will be a permanent part of Avery Group listings!
I have some work to do to get this all perfected, but it is coming along and before you know it, video walkthrough tours will be a permanent part of Avery Group listings!
First Ever Video Walkthrough Tour by The Avery Group
The first video walkthrough tour by The Avery Group. This is a home we have listed in Gordonsville, VA. 19408 Lovers Lane.
I have some work to do to get this all perfected, but it is coming along and before you know it, video walkthrough tours will be a permanent part of Avery Group listings!
I have some work to do to get this all perfected, but it is coming along and before you know it, video walkthrough tours will be a permanent part of Avery Group listings!
Monday, September 15, 2008
Avery Group to Start Video Tours of Homes!
With the addition of a Sony Full HD 1920x1080i Handycam to the Avery Group, we will start doing video walkthroughs of homes. This should be a serious step up from the old fashioned Virtual Tours. Especially since Virtual Tours are, more often than not, glorified slideshows. This should give more information and more detail of a home than still pictures stitched together. This will be a huge step forward for the technology that is already incorporated in the Real Estate Practices of the Avery Group. The first tour should be ready by the end of this week and we will be walking through 19408 Lovers Lane. I will keep you posted...
Avery Group to Start Video Tours of Homes!
With the addition of a Sony Full HD 1920x1080i Handycam to the Avery Group, we will start doing video walkthroughs of homes. This should be a serious step up from the old fashioned Virtual Tours. Especially since Virtual Tours are, more often than not, glorified slideshows. This should give more information and more detail of a home than still pictures stitched together. This will be a huge step forward for the technology that is already incorporated in the Real Estate Practices of the Avery Group. The first tour should be ready by the end of this week and we will be walking through 19408 Lovers Lane. I will keep you posted...
Tuesday, July 15, 2008
Charlottesville Real Estate Market Update May 2008
The number of sold properties in May rose significantly from April. There was 190 sold properties in April, compared to 253 in May. Our inventory also dropped a little bit from 2513 to 2456. These are both steps in a positive direction for our Charlottesville Real Estate Market. Higher sales and lowe inventory reduces our months of inventory considerably to around 10 months of inventory. The buyers are out there for the correctly priced homes.
Charlottesville Real Estate Market Update May 2008
The number of sold properties in May rose significantly from April. There was 190 sold properties in April, compared to 253 in May. Our inventory also dropped a little bit from 2513 to 2456. These are both steps in a positive direction for our Charlottesville Real Estate Market. Higher sales and lowe inventory reduces our months of inventory considerably to around 10 months of inventory. The buyers are out there for the correctly priced homes.
Friday, May 2, 2008
Charlottesville Real Estate Market Update April 2008
Charlottesville Real Estate Market Update for April 2008
New Listings in April
Number of New Listings: 526
Median Price: $299,000
Average List Price: $458,705
Contingent Listings in April
Number of Contingent Properties: 252
Median Price: $275,000
Average List Price: $389,872
Average Days on Market:123
Pending Listings in April
Number of Pending Listings: 89
Median Price: $289,500
Average List Price: $403,414
Average Days on Market: 135
Sold Listings In April
Number of Sold Listings: 190
Total Sold Volume: $58,567,425
Median Price: $266,250
Average List Price: $322,273
Average Sold Price: $308,250
Percentage of Sold Price to List Price: 95.65%
Average Days on Market: 125
Currently Active Properties in our MLS: 2,513
Median Price: $324,000
Average List Price: $611,124
Average Days on Market: 143
Months of Inventory: 17.33
**All numbers reflect data from the CAAR MLS in the areas of Charlottesville, Albemarle, Greene, Fluvanna, Louisa and Orange
Our months of inventory dropped again. It's down to 17.33 from 18.90 in March. This means that Real Estate is picking up, which isn't a surprise since this area has always seen an increase in activity in the Spring. Just like in March, most people are selling their home about 5% less than their asking price. Keep that in mind while you are negotiating your offers.
Charlottesville Real Estate Market Update April 2008
Charlottesville Real Estate Market Update for April 2008
New Listings in April
Number of New Listings: 526
Median Price: $299,000
Average List Price: $458,705
Contingent Listings in April
Number of Contingent Properties: 252
Median Price: $275,000
Average List Price: $389,872
Average Days on Market:123
Pending Listings in April
Number of Pending Listings: 89
Median Price: $289,500
Average List Price: $403,414
Average Days on Market: 135
Sold Listings In April
Number of Sold Listings: 190
Total Sold Volume: $58,567,425
Median Price: $266,250
Average List Price: $322,273
Average Sold Price: $308,250
Percentage of Sold Price to List Price: 95.65%
Average Days on Market: 125
Currently Active Properties in our MLS: 2,513
Median Price: $324,000
Average List Price: $611,124
Average Days on Market: 143
Months of Inventory: 17.33
**All numbers reflect data from the CAAR MLS in the areas of Charlottesville, Albemarle, Greene, Fluvanna, Louisa and Orange
Our months of inventory dropped again. It's down to 17.33 from 18.90 in March. This means that Real Estate is picking up, which isn't a surprise since this area has always seen an increase in activity in the Spring. Just like in March, most people are selling their home about 5% less than their asking price. Keep that in mind while you are negotiating your offers.
Tuesday, April 22, 2008
The Real Estate Mexican Standoff
Here is a quote from the First Quarter Market Report written by Dave Phillips CEO of the Charlottesville Association of Realtors.
Play the game, there are a number of people out there trying to move their money out of Real Estate and just want anything they can get. Make an offer, if they reject, move to the next one. In the words of NIKE, Just Do It. You can find really good deals in a market such as this.
Read the entire 1st Quarter Market Report
"Simply put, there are too many homes on the market right now. This surplus of inventory should keep prices low as sellers are forced to offer “good deals” in a very competitive marketplace. There is a direct, inverse relationship between inventory and prices. The more homes we have on the market, the more pressure there is on sellers to keep prices down. For this reason, we do not expect home prices in the area to increase in the near future.This is a very accurate statement about the status of our market. It's almost as if buyers and sellers are in an old fashioned Mexican Standoff. Buyers continue to wait for prices to come down, while sellers are resisting the trend. I do have to take this opportunity to say THIS IS A GOOD TIME TO BUY REAL ESTATE.
Currently, we have 3,673 homes on the market, compared to 3,100 at this time last year. The median price of these homes for sale is $319,000. The average DOM (days on market) of these homes is 147 days. It is a great time for first-time buyers, because there are 663 homes for sale under $200,000 with an average DOM of 130. There are 576 homes currently on the market priced at a million dollars or more, with an average DOM of 200."
Play the game, there are a number of people out there trying to move their money out of Real Estate and just want anything they can get. Make an offer, if they reject, move to the next one. In the words of NIKE, Just Do It. You can find really good deals in a market such as this.
Read the entire 1st Quarter Market Report
The Real Estate Mexican Standoff
Here is a quote from the First Quarter Market Report written by Dave Phillips CEO of the Charlottesville Association of Realtors.
Play the game, there are a number of people out there trying to move their money out of Real Estate and just want anything they can get. Make an offer, if they reject, move to the next one. In the words of NIKE, Just Do It. You can find really good deals in a market such as this.
Read the entire 1st Quarter Market Report
"Simply put, there are too many homes on the market right now. This surplus of inventory should keep prices low as sellers are forced to offer “good deals” in a very competitive marketplace. There is a direct, inverse relationship between inventory and prices. The more homes we have on the market, the more pressure there is on sellers to keep prices down. For this reason, we do not expect home prices in the area to increase in the near future.This is a very accurate statement about the status of our market. It's almost as if buyers and sellers are in an old fashioned Mexican Standoff. Buyers continue to wait for prices to come down, while sellers are resisting the trend. I do have to take this opportunity to say THIS IS A GOOD TIME TO BUY REAL ESTATE.
Currently, we have 3,673 homes on the market, compared to 3,100 at this time last year. The median price of these homes for sale is $319,000. The average DOM (days on market) of these homes is 147 days. It is a great time for first-time buyers, because there are 663 homes for sale under $200,000 with an average DOM of 130. There are 576 homes currently on the market priced at a million dollars or more, with an average DOM of 200."
Play the game, there are a number of people out there trying to move their money out of Real Estate and just want anything they can get. Make an offer, if they reject, move to the next one. In the words of NIKE, Just Do It. You can find really good deals in a market such as this.
Read the entire 1st Quarter Market Report
Thursday, March 27, 2008
Foreclosure Update
According to a release on INMAN News on Friday loans entered the foreclosure process at a record rate during the fourth quarter, and things are likely to get worse before they get better, the chief economist for the Mortgage Bankers Association said today.
Although reductions in short-term interest rates have lessened the shock of interest-rate resets for many borrowers with adjustable-rate mortgage (ARM) loans, falling home prices are leaving more homeowners with little or no equity in their homes -- and less incentive to keep up on their mortgage payments.
Although reductions in short-term interest rates have lessened the shock of interest-rate resets for many borrowers with adjustable-rate mortgage (ARM) loans, falling home prices are leaving more homeowners with little or no equity in their homes -- and less incentive to keep up on their mortgage payments.
Foreclosure Update
According to a release on INMAN News on Friday loans entered the foreclosure process at a record rate during the fourth quarter, and things are likely to get worse before they get better, the chief economist for the Mortgage Bankers Association said today.
Although reductions in short-term interest rates have lessened the shock of interest-rate resets for many borrowers with adjustable-rate mortgage (ARM) loans, falling home prices are leaving more homeowners with little or no equity in their homes -- and less incentive to keep up on their mortgage payments.
Although reductions in short-term interest rates have lessened the shock of interest-rate resets for many borrowers with adjustable-rate mortgage (ARM) loans, falling home prices are leaving more homeowners with little or no equity in their homes -- and less incentive to keep up on their mortgage payments.
Wednesday, March 12, 2008
Foreclosures Even Affecting the Rich - Lender to Michael Jackson: Pay up or Beat It
Foreclosures are even affecting the Rich right now. Last month the Hearst mansion went to auction, and now it looks like Neverland Ranch, home of Michael Jackson will be going to autcion.
Lender to Michael Jackson: Pay up or Beat It
I wonder where this carousel is going to stop before its over...
Lender to Michael Jackson: Pay up or Beat It
"On March 19, at 1:00 p.m., Michael Jackson’s Neverland Ranch in Los Olivos,
Calif., is scheduled for a public auction at the Santa Barbara County Courthouse
at 1100 Anacapa Street. The opening bid is estimated to be at least $20,000,000.
The sprawling Jackson estate — located at 5225 Figueroa Mountain Road — sits on
2,800 acres of rolling hills in California’s wine county north of Santa Barbara.
Financial Title Co. filed the notice of trustee’s sale with the Santa Barbara
County Superior Court on Feb. 26. The auction notice for the property was
recently posted on RealtyTrac, the leading online marketplace for foreclosure
properties." - RisMedia
I wonder where this carousel is going to stop before its over...
Foreclosures Even Affecting the Rich - Lender to Michael Jackson: Pay up or Beat It
Foreclosures are even affecting the Rich right now. Last month the Hearst mansion went to auction, and now it looks like Neverland Ranch, home of Michael Jackson will be going to autcion.
Lender to Michael Jackson: Pay up or Beat It
I wonder where this carousel is going to stop before its over...
Lender to Michael Jackson: Pay up or Beat It
"On March 19, at 1:00 p.m., Michael Jackson’s Neverland Ranch in Los Olivos,
Calif., is scheduled for a public auction at the Santa Barbara County Courthouse
at 1100 Anacapa Street. The opening bid is estimated to be at least $20,000,000.
The sprawling Jackson estate — located at 5225 Figueroa Mountain Road — sits on
2,800 acres of rolling hills in California’s wine county north of Santa Barbara.
Financial Title Co. filed the notice of trustee’s sale with the Santa Barbara
County Superior Court on Feb. 26. The auction notice for the property was
recently posted on RealtyTrac, the leading online marketplace for foreclosure
properties." - RisMedia
I wonder where this carousel is going to stop before its over...
Thursday, March 6, 2008
Huge Changes May be Coming for Lenders and Appraisers
This article is relevant information to the Charlottesville Area and Real Estate in general. There have been quite a few past clients where appraisals came in higher than expected and we had conversations about this exact scenario.
Bloomberg News reported on Wednesday that Fannie Mae is proposing to ban the use of appraisals by a lender's employees or those arranged by mortgage brokers.
The proposal was contained in what Bloomberg referred to as a "talking points" memo distributed to lenders this week and was in response to an investigation of the mortgage industry by New York Attorney General Andrew Cuomo. In November the AG filed suit against First American, parent company of one of the country's largest appraisal management companies, charging them with folding under pressure from Washington Mutual, a major client, to use only those appraisers that provided property values acceptable to WaMu.
WaMu was not included in the original suit but Cuomo demanded that Freddie Mac and Fannie Mae each appoint an Independent Examiner to review mortgages and the underlying appraisals that the two GSEs have purchased with particular emphasis on those purchased from WaMu.According to the Bloomberg article, the memo was part of an on-going effort by Fannie Mae to cooperate in the Cuomo probe.
The proposed change would mean that Fannie Mae would no longer authorize its lending partners to use appraisers employed by a wholly owned subsidiary and, while we have not seen the memo, apparently it contains reference to the eventual establishment of an appraisal clearinghouse which we assume would assign appraisers to a project.
Bloomberg quotes Jonathan Miller of a New York appraisal company Miller Samuel, Inc. as saying that about three quarters of residential mortgage appraisals are arranged through brokers who only get paid if a loan closes. Miller called the practice "laughable" because it creates a financial incentive for mortgage brokers to push appraisers toward higher valuations. Higher appraisals also mean more homeowners qualify to refinance their homes and take cash out, he said.
The appraisers themselves have long urged that appraisers be required to keep arms-length from the lenders. Many complain that honest appraisers who refuse to match the values that the lenders want soon find them selves without work and that they are frequently pressured by the loan officers who assigned them to a project to raise their values.
The proposed restrictions would apply to loans acquired after Sept. 1, according to the memo.
Huge Changes May be Coming for Lenders and Appraisers
This article is relevant information to the Charlottesville Area and Real Estate in general. There have been quite a few past clients where appraisals came in higher than expected and we had conversations about this exact scenario.
Bloomberg News reported on Wednesday that Fannie Mae is proposing to ban the use of appraisals by a lender's employees or those arranged by mortgage brokers.
The proposal was contained in what Bloomberg referred to as a "talking points" memo distributed to lenders this week and was in response to an investigation of the mortgage industry by New York Attorney General Andrew Cuomo. In November the AG filed suit against First American, parent company of one of the country's largest appraisal management companies, charging them with folding under pressure from Washington Mutual, a major client, to use only those appraisers that provided property values acceptable to WaMu.
WaMu was not included in the original suit but Cuomo demanded that Freddie Mac and Fannie Mae each appoint an Independent Examiner to review mortgages and the underlying appraisals that the two GSEs have purchased with particular emphasis on those purchased from WaMu.According to the Bloomberg article, the memo was part of an on-going effort by Fannie Mae to cooperate in the Cuomo probe.
The proposed change would mean that Fannie Mae would no longer authorize its lending partners to use appraisers employed by a wholly owned subsidiary and, while we have not seen the memo, apparently it contains reference to the eventual establishment of an appraisal clearinghouse which we assume would assign appraisers to a project.
Bloomberg quotes Jonathan Miller of a New York appraisal company Miller Samuel, Inc. as saying that about three quarters of residential mortgage appraisals are arranged through brokers who only get paid if a loan closes. Miller called the practice "laughable" because it creates a financial incentive for mortgage brokers to push appraisers toward higher valuations. Higher appraisals also mean more homeowners qualify to refinance their homes and take cash out, he said.
The appraisers themselves have long urged that appraisers be required to keep arms-length from the lenders. Many complain that honest appraisers who refuse to match the values that the lenders want soon find them selves without work and that they are frequently pressured by the loan officers who assigned them to a project to raise their values.
The proposed restrictions would apply to loans acquired after Sept. 1, according to the memo.
Mortgage Rates and the Fed - Get it Straight ! !
I ran across this article today by Matthew Graham. I thought it would be useful information for those looking to buy property. Here it is:
"I can't decide what was more troublesome yesterday: the comically uninformed questions put to Big Ben regarding mortgage rates, or the comically inaccurate article printed by CNBC on the same subject. Whatever the case, the media is awash with analysts, experts, officials, and laypersons offering rather strong opinions on a subject about which they have such a painfully shallow understanding.
Today Bernanke testified before congress on the state of the economy. I'll leave it to the 1000 or more other articles to bring you up to speed on the salient points. I'm more concerned with something that no one has really talked about yet: the lack of understanding of our mortgage problems. My concern began to peak after overcoming my amazement at a question I heard today from Luis Gutierrez. CNBC has kindly saved me from needing to type the exchange, listen here.
This question would not be that troublesome at all if it came from a mortgage consumer in the general public (if you don't know why it's troublesome yet, that's OK, we will cover that in a moment). But it comes from a member of the House financial services committee, a member of the subcommittee on financial institutions/consumer credit, and the chair of the subcommittee on domestic and international monetary policy. This guy should know something about this topic! For all I know, he and the rest of his ilk are quite knowledgeable in the rest of their purview, but his question, in conjunction with previous communications from members of congress, illustrates an appalling lack of understanding about the very specific topic of the macroeconomic role of mortgage finance.
Simply put, mortgage rates are tied to Fed policy decisions about as much as they are tied to the price of pork bellies! OK, that's a slight exaggeration. But I've previously written on just how unconnected the two can be. We've seen some Fed rate cuts that have preceded decreasing mortgage rates, and other rate cuts that have preceded increasing mortgage rates. It's enough to confuse anyone! (sarcasm) Wait! Maybe Fed rate cuts don't have a direct bearing on mortgage rates! (sarcasm) Sure, Home Equity Lines of Credit are tied to Prime, but that's about it. Maybe there is more than just one thing that affects mortgage rates! (sarcasm)
Since I know you're burning with curiosity, I'll give you a short version of the answer Bernanke should have given. Here goes... Almost all mortgage rates are in direct relationship with the yields of Mortgage Backed Securities (MBS). MBS are basically bonds: when the price goes up, the yield goes down. Their yields vary directly with mortgage rates and they are responsive to macroeconomic forces in a similar way to other types of bonds. So since inflation decreases today's value of a dollar, and since bonds return a fixed income, inflation makes bonds less valuable. (do you see where I'm going with this yet?). When something is less valuable, less people want to buy it, so the price goes down to attract buyers. When the price goes down on a bond, the yield goes up. And we just said that MBS yields equal mortgage rates. Ipso facto, ergo, therefore, rising inflation is a stimulus for rising mortgage rates.
Granted, this is not the whole story, but it is one of the most easily understandable reasons that mortgage rates have not fallen in concert with the Fed rates. Yes, money is cheaper for banks when rates are cut but BANKS DO NOT SET MORTGAGE RATES!!
Countrywide has to get together with Fannie Mae or Freddie Mac, pour a couple billion dollars of 30 year fixed mortgages into a cauldron, mix well with eye of newt and leg of toad, go down to the flea market, and auction off very small cups of this witch's brew (individual Mortgage Backed Securities) to investors. It's these investors: Saudi oil barons, overseas governments, institutional investors, and billionaire Chinese businessmen, who really hold the note on your mortgage. It's their appetites and goals that truly determine mortgage rates. Luis Guitierrez should know that. And you should too.
The fun continued when I read CNBC's article. I don't even have the space in this article to go line by line on this one, but suffice it to say that, should our bovine friends (especially bulls) not feel up to the task, the assertions herein could serve as equivalent fertilizer.
Mortgage rates high? Historically we're quite low! Perhaps it is referencing the fact that mortgage rates haven't fallen as much as they "should have" considering the yield on the 10 year treasury, which even mortgage brokers believe (incorrectly) is a good indicator of interest rate direction.
Yes, the spreads between mortgage rates and treasury rates are wider than they've been in the past. Maybe that has something to do with the perception of quality decreasing in the wake of a massive mortgage crisis! (understatement) Mortgage yields have always been higher than treasury yields in order to compensate investors for the extra risk.
So don't be surprised when the Fed cuts rates and mortgages hold steady. As long as inflation is a concern and the quality of MBS as an investment is in question, there will not be a direct relationship. My Scoff-O-Meter was tripped all the more abruptly as yesterday was a fantastic day for mortgage rates, a very inopportune day to write such an article.
In conclusion, even if it's not feasible for the average consumer to digest and understand the complex macroeconomic forces that govern mortgage rates, the more people in congress and the news media that understand, the better equipped the general population will be to mitigate our freefall towards and stimulate our recovery from what will be one of the lowest points in our economic history."
Thank you matthew for you wonderfully written post. Leave comments and let's discuss this!
"I can't decide what was more troublesome yesterday: the comically uninformed questions put to Big Ben regarding mortgage rates, or the comically inaccurate article printed by CNBC on the same subject. Whatever the case, the media is awash with analysts, experts, officials, and laypersons offering rather strong opinions on a subject about which they have such a painfully shallow understanding.
Today Bernanke testified before congress on the state of the economy. I'll leave it to the 1000 or more other articles to bring you up to speed on the salient points. I'm more concerned with something that no one has really talked about yet: the lack of understanding of our mortgage problems. My concern began to peak after overcoming my amazement at a question I heard today from Luis Gutierrez. CNBC has kindly saved me from needing to type the exchange, listen here.
This question would not be that troublesome at all if it came from a mortgage consumer in the general public (if you don't know why it's troublesome yet, that's OK, we will cover that in a moment). But it comes from a member of the House financial services committee, a member of the subcommittee on financial institutions/consumer credit, and the chair of the subcommittee on domestic and international monetary policy. This guy should know something about this topic! For all I know, he and the rest of his ilk are quite knowledgeable in the rest of their purview, but his question, in conjunction with previous communications from members of congress, illustrates an appalling lack of understanding about the very specific topic of the macroeconomic role of mortgage finance.
Simply put, mortgage rates are tied to Fed policy decisions about as much as they are tied to the price of pork bellies! OK, that's a slight exaggeration. But I've previously written on just how unconnected the two can be. We've seen some Fed rate cuts that have preceded decreasing mortgage rates, and other rate cuts that have preceded increasing mortgage rates. It's enough to confuse anyone! (sarcasm) Wait! Maybe Fed rate cuts don't have a direct bearing on mortgage rates! (sarcasm) Sure, Home Equity Lines of Credit are tied to Prime, but that's about it. Maybe there is more than just one thing that affects mortgage rates! (sarcasm)
Since I know you're burning with curiosity, I'll give you a short version of the answer Bernanke should have given. Here goes... Almost all mortgage rates are in direct relationship with the yields of Mortgage Backed Securities (MBS). MBS are basically bonds: when the price goes up, the yield goes down. Their yields vary directly with mortgage rates and they are responsive to macroeconomic forces in a similar way to other types of bonds. So since inflation decreases today's value of a dollar, and since bonds return a fixed income, inflation makes bonds less valuable. (do you see where I'm going with this yet?). When something is less valuable, less people want to buy it, so the price goes down to attract buyers. When the price goes down on a bond, the yield goes up. And we just said that MBS yields equal mortgage rates. Ipso facto, ergo, therefore, rising inflation is a stimulus for rising mortgage rates.
Granted, this is not the whole story, but it is one of the most easily understandable reasons that mortgage rates have not fallen in concert with the Fed rates. Yes, money is cheaper for banks when rates are cut but BANKS DO NOT SET MORTGAGE RATES!!
Countrywide has to get together with Fannie Mae or Freddie Mac, pour a couple billion dollars of 30 year fixed mortgages into a cauldron, mix well with eye of newt and leg of toad, go down to the flea market, and auction off very small cups of this witch's brew (individual Mortgage Backed Securities) to investors. It's these investors: Saudi oil barons, overseas governments, institutional investors, and billionaire Chinese businessmen, who really hold the note on your mortgage. It's their appetites and goals that truly determine mortgage rates. Luis Guitierrez should know that. And you should too.
The fun continued when I read CNBC's article. I don't even have the space in this article to go line by line on this one, but suffice it to say that, should our bovine friends (especially bulls) not feel up to the task, the assertions herein could serve as equivalent fertilizer.
Mortgage rates high? Historically we're quite low! Perhaps it is referencing the fact that mortgage rates haven't fallen as much as they "should have" considering the yield on the 10 year treasury, which even mortgage brokers believe (incorrectly) is a good indicator of interest rate direction.
Yes, the spreads between mortgage rates and treasury rates are wider than they've been in the past. Maybe that has something to do with the perception of quality decreasing in the wake of a massive mortgage crisis! (understatement) Mortgage yields have always been higher than treasury yields in order to compensate investors for the extra risk.
So don't be surprised when the Fed cuts rates and mortgages hold steady. As long as inflation is a concern and the quality of MBS as an investment is in question, there will not be a direct relationship. My Scoff-O-Meter was tripped all the more abruptly as yesterday was a fantastic day for mortgage rates, a very inopportune day to write such an article.
In conclusion, even if it's not feasible for the average consumer to digest and understand the complex macroeconomic forces that govern mortgage rates, the more people in congress and the news media that understand, the better equipped the general population will be to mitigate our freefall towards and stimulate our recovery from what will be one of the lowest points in our economic history."
Thank you matthew for you wonderfully written post. Leave comments and let's discuss this!
Mortgage Rates and the Fed - Get it Straight ! !
I ran across this article today by Matthew Graham. I thought it would be useful information for those looking to buy property. Here it is:
"I can't decide what was more troublesome yesterday: the comically uninformed questions put to Big Ben regarding mortgage rates, or the comically inaccurate article printed by CNBC on the same subject. Whatever the case, the media is awash with analysts, experts, officials, and laypersons offering rather strong opinions on a subject about which they have such a painfully shallow understanding.
Today Bernanke testified before congress on the state of the economy. I'll leave it to the 1000 or more other articles to bring you up to speed on the salient points. I'm more concerned with something that no one has really talked about yet: the lack of understanding of our mortgage problems. My concern began to peak after overcoming my amazement at a question I heard today from Luis Gutierrez. CNBC has kindly saved me from needing to type the exchange, listen here.
This question would not be that troublesome at all if it came from a mortgage consumer in the general public (if you don't know why it's troublesome yet, that's OK, we will cover that in a moment). But it comes from a member of the House financial services committee, a member of the subcommittee on financial institutions/consumer credit, and the chair of the subcommittee on domestic and international monetary policy. This guy should know something about this topic! For all I know, he and the rest of his ilk are quite knowledgeable in the rest of their purview, but his question, in conjunction with previous communications from members of congress, illustrates an appalling lack of understanding about the very specific topic of the macroeconomic role of mortgage finance.
Simply put, mortgage rates are tied to Fed policy decisions about as much as they are tied to the price of pork bellies! OK, that's a slight exaggeration. But I've previously written on just how unconnected the two can be. We've seen some Fed rate cuts that have preceded decreasing mortgage rates, and other rate cuts that have preceded increasing mortgage rates. It's enough to confuse anyone! (sarcasm) Wait! Maybe Fed rate cuts don't have a direct bearing on mortgage rates! (sarcasm) Sure, Home Equity Lines of Credit are tied to Prime, but that's about it. Maybe there is more than just one thing that affects mortgage rates! (sarcasm)
Since I know you're burning with curiosity, I'll give you a short version of the answer Bernanke should have given. Here goes... Almost all mortgage rates are in direct relationship with the yields of Mortgage Backed Securities (MBS). MBS are basically bonds: when the price goes up, the yield goes down. Their yields vary directly with mortgage rates and they are responsive to macroeconomic forces in a similar way to other types of bonds. So since inflation decreases today's value of a dollar, and since bonds return a fixed income, inflation makes bonds less valuable. (do you see where I'm going with this yet?). When something is less valuable, less people want to buy it, so the price goes down to attract buyers. When the price goes down on a bond, the yield goes up. And we just said that MBS yields equal mortgage rates. Ipso facto, ergo, therefore, rising inflation is a stimulus for rising mortgage rates.
Granted, this is not the whole story, but it is one of the most easily understandable reasons that mortgage rates have not fallen in concert with the Fed rates. Yes, money is cheaper for banks when rates are cut but BANKS DO NOT SET MORTGAGE RATES!!
Countrywide has to get together with Fannie Mae or Freddie Mac, pour a couple billion dollars of 30 year fixed mortgages into a cauldron, mix well with eye of newt and leg of toad, go down to the flea market, and auction off very small cups of this witch's brew (individual Mortgage Backed Securities) to investors. It's these investors: Saudi oil barons, overseas governments, institutional investors, and billionaire Chinese businessmen, who really hold the note on your mortgage. It's their appetites and goals that truly determine mortgage rates. Luis Guitierrez should know that. And you should too.
The fun continued when I read CNBC's article. I don't even have the space in this article to go line by line on this one, but suffice it to say that, should our bovine friends (especially bulls) not feel up to the task, the assertions herein could serve as equivalent fertilizer.
Mortgage rates high? Historically we're quite low! Perhaps it is referencing the fact that mortgage rates haven't fallen as much as they "should have" considering the yield on the 10 year treasury, which even mortgage brokers believe (incorrectly) is a good indicator of interest rate direction.
Yes, the spreads between mortgage rates and treasury rates are wider than they've been in the past. Maybe that has something to do with the perception of quality decreasing in the wake of a massive mortgage crisis! (understatement) Mortgage yields have always been higher than treasury yields in order to compensate investors for the extra risk.
So don't be surprised when the Fed cuts rates and mortgages hold steady. As long as inflation is a concern and the quality of MBS as an investment is in question, there will not be a direct relationship. My Scoff-O-Meter was tripped all the more abruptly as yesterday was a fantastic day for mortgage rates, a very inopportune day to write such an article.
In conclusion, even if it's not feasible for the average consumer to digest and understand the complex macroeconomic forces that govern mortgage rates, the more people in congress and the news media that understand, the better equipped the general population will be to mitigate our freefall towards and stimulate our recovery from what will be one of the lowest points in our economic history."
Thank you matthew for you wonderfully written post. Leave comments and let's discuss this!
"I can't decide what was more troublesome yesterday: the comically uninformed questions put to Big Ben regarding mortgage rates, or the comically inaccurate article printed by CNBC on the same subject. Whatever the case, the media is awash with analysts, experts, officials, and laypersons offering rather strong opinions on a subject about which they have such a painfully shallow understanding.
Today Bernanke testified before congress on the state of the economy. I'll leave it to the 1000 or more other articles to bring you up to speed on the salient points. I'm more concerned with something that no one has really talked about yet: the lack of understanding of our mortgage problems. My concern began to peak after overcoming my amazement at a question I heard today from Luis Gutierrez. CNBC has kindly saved me from needing to type the exchange, listen here.
This question would not be that troublesome at all if it came from a mortgage consumer in the general public (if you don't know why it's troublesome yet, that's OK, we will cover that in a moment). But it comes from a member of the House financial services committee, a member of the subcommittee on financial institutions/consumer credit, and the chair of the subcommittee on domestic and international monetary policy. This guy should know something about this topic! For all I know, he and the rest of his ilk are quite knowledgeable in the rest of their purview, but his question, in conjunction with previous communications from members of congress, illustrates an appalling lack of understanding about the very specific topic of the macroeconomic role of mortgage finance.
Simply put, mortgage rates are tied to Fed policy decisions about as much as they are tied to the price of pork bellies! OK, that's a slight exaggeration. But I've previously written on just how unconnected the two can be. We've seen some Fed rate cuts that have preceded decreasing mortgage rates, and other rate cuts that have preceded increasing mortgage rates. It's enough to confuse anyone! (sarcasm) Wait! Maybe Fed rate cuts don't have a direct bearing on mortgage rates! (sarcasm) Sure, Home Equity Lines of Credit are tied to Prime, but that's about it. Maybe there is more than just one thing that affects mortgage rates! (sarcasm)
Since I know you're burning with curiosity, I'll give you a short version of the answer Bernanke should have given. Here goes... Almost all mortgage rates are in direct relationship with the yields of Mortgage Backed Securities (MBS). MBS are basically bonds: when the price goes up, the yield goes down. Their yields vary directly with mortgage rates and they are responsive to macroeconomic forces in a similar way to other types of bonds. So since inflation decreases today's value of a dollar, and since bonds return a fixed income, inflation makes bonds less valuable. (do you see where I'm going with this yet?). When something is less valuable, less people want to buy it, so the price goes down to attract buyers. When the price goes down on a bond, the yield goes up. And we just said that MBS yields equal mortgage rates. Ipso facto, ergo, therefore, rising inflation is a stimulus for rising mortgage rates.
Granted, this is not the whole story, but it is one of the most easily understandable reasons that mortgage rates have not fallen in concert with the Fed rates. Yes, money is cheaper for banks when rates are cut but BANKS DO NOT SET MORTGAGE RATES!!
Countrywide has to get together with Fannie Mae or Freddie Mac, pour a couple billion dollars of 30 year fixed mortgages into a cauldron, mix well with eye of newt and leg of toad, go down to the flea market, and auction off very small cups of this witch's brew (individual Mortgage Backed Securities) to investors. It's these investors: Saudi oil barons, overseas governments, institutional investors, and billionaire Chinese businessmen, who really hold the note on your mortgage. It's their appetites and goals that truly determine mortgage rates. Luis Guitierrez should know that. And you should too.
The fun continued when I read CNBC's article. I don't even have the space in this article to go line by line on this one, but suffice it to say that, should our bovine friends (especially bulls) not feel up to the task, the assertions herein could serve as equivalent fertilizer.
Mortgage rates high? Historically we're quite low! Perhaps it is referencing the fact that mortgage rates haven't fallen as much as they "should have" considering the yield on the 10 year treasury, which even mortgage brokers believe (incorrectly) is a good indicator of interest rate direction.
Yes, the spreads between mortgage rates and treasury rates are wider than they've been in the past. Maybe that has something to do with the perception of quality decreasing in the wake of a massive mortgage crisis! (understatement) Mortgage yields have always been higher than treasury yields in order to compensate investors for the extra risk.
So don't be surprised when the Fed cuts rates and mortgages hold steady. As long as inflation is a concern and the quality of MBS as an investment is in question, there will not be a direct relationship. My Scoff-O-Meter was tripped all the more abruptly as yesterday was a fantastic day for mortgage rates, a very inopportune day to write such an article.
In conclusion, even if it's not feasible for the average consumer to digest and understand the complex macroeconomic forces that govern mortgage rates, the more people in congress and the news media that understand, the better equipped the general population will be to mitigate our freefall towards and stimulate our recovery from what will be one of the lowest points in our economic history."
Thank you matthew for you wonderfully written post. Leave comments and let's discuss this!
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