The Federal Reserve and Mortgage Rates

Article Submitted by Kristi Hunt, a recommended Larson Realty Service Loan Officer.

The Federal Reserve constantly evaluates the US economy and, when necessary,
takes steps to address inflationary concerns and avoid economic
recession or depression. The mass media, in turn, reacts by providing a
wide range of opinions and interpretations of the Fed’s monetary policy.
This can make it very difficult for consumers to decipher how such
actions will influence interest rates in general and mortgages in
particular.

And although actions of the Federal Reserve can have a direct impact on
the Prime rate, mortgage interest rates are dictated by the trading of
mortgage-backed securities, which are similar to bonds and trade on a
daily basis. This means that the real dynamic at the heart of interest
rate movement is the competitive relationship between stocks and bonds.

Stocks, bonds, and mortgage-backed securities compete for the same
investment dollars on a daily basis. There is literally only so much
money to be invested. When the Federal Reserve feels that interest rates
need to be decreased in an effort to stimulate the economy, this
reduction in rates can often cause a stock market rally. When the market
becomes bullish, the money to invest in stocks comes from the selling
off of other investments, including mortgage-backed securities.

Unfortunately, when mortgage-backed securities are sold off to fuel
stock market rallies, this causes interest rates to go up, not down.

Historically, there have been many instances where the Federal Reserve
has increased interest rates, arousing fears that corporate profit
margins would be affected. This resulted in stocks being sold off,
leading money managers to search for a place to invest their newly
liquidated assets until the next market rally. One such safe haven has
been mortgage-backed securities, which cause mortgage rates to drop.

The daily ebb and flow of money is what matters most when it comes to
the movement of mortgage interest rates. I make it a point to
continuously monitor interest rates for my clients and advise them of
opportunities to manage their mortgage debt at a better rate. This is
the foundation of my business model as a trusted advisor.

If it’s been 12 months or longer since you last reviewed your mortgage,
please call me.  We’ll analyze your financial situation together and create a plan that’s
right for you.

For a free lending consultation you can reach Kristi Hunt, with One On One Mortgage, at (801) 420-8115.

Wall Street Journal editorial says ‘housing crisis is over’

This recently posted in the Utah Association of Realtors newsletter:

An editorial in Tuesday’s Wall Street Journal says “it’s very likely April 2008 will mark the bottom of the U.S. housing market.” Author and hedge fund manager Cyril Moulle-Berteaux says affordability, the same factor which led to the bust, will stop the housing decline. He argues that homes are now on average back to being as affordable as they were in the 1990s and early 2000s, the result of falling prices, lower interest rates and rising incomes. He says once home sales bottom, the rate of price declines will slow as inventory continues to drop. Moulle-Bereaux predicts prices will stop falling by sometime in 2009. Read the complete editorial.

Provo Job Growth Out Paces the Norm! Good for Real Estate!

Information recently posted by the Utah County Association For Realtors.

One area that is likely to maintain its torrid job growth is Provo, Utah, which had the eighth-fastest job growth the past five years, at 4.2% annually. Provo ranks 11th overall in our ranking of the Best Places for Business and Careers. Employment actually accelerated in 2007 and was up 5.5%. Crime rates in Provo are among the lowest in the country, and 31% of the adult population has a college degree, compared with 25% nationally.

Business costs in Provo are 6% lower than the national average. Good news for employers like Intel (nasdaq: INTC – news - people ) and Micron (nyse: MU – news - people ), which created a flash-memory joint venture in the area that started production last year. The venture is expected to eventually create 1,850 jobs with a total investment of $3 billion. Read the article in it’s entirety here

Forbes magazine names Salt Lake No. 3 city for home sellers

Salt Lake is the third-best city for selling a house, says a new Forbes analysis. In its “Best Cities for Home Sellers” report, Forbes said that high job growth combined with declining inventory and a sharp drop in new construction — “despite not having an overwhelming inventory glut” — make Salt Lake City a good market for sellers. Other top markets for sellers include San Jose (No. 1) and San Francisco (No. 2).

The report’s findings come from a study of the country’s 40 largest metro areas that analyzed unsold vacancy rates, construction starts, job growth and the degree to which the new conforming loan limits would affect financing availability in the city. Read the Forbes story.

Rents increasing

For all of our investors: this good news (for you) was just published in the Utah Association of Realtors newsletter.

Wasatch Front rental costs on the rise

As many would-be home buyers remain on the fence about becoming homeowners, demand for rental space across the country continues to increase — and so do the prices.

Along the Wasatch Front, renters are particularly feeling the squeeze. Over the past year, the average apartment rent price in Salt Lake rose nearly 10 percent to $803, the largest increase among 19 major Western markets surveyed by RealFacts. Rents soared by 15.9 percent in the Provo-Orem area to $829 and rose 6.8 percent in Ogden-Clearfield to $688, said the March RealFacts report released April 17.

Not only are rental prices rising across the Wasatch Front, but apartments are becoming harder to find in this tight rental market. At 2.1 percent, Salt Lake City has the fourth-lowest multi-family vacancy rate in the U.S., according to the Commercial Real Estate Forecast from the National Association of Realtors. Typically, a vacancy rate under 5 percent is a landlord’s market, a situation characterized by fewer concessions and higher rental rates, says the NAR report.

The National Association of Realtors projects rental prices across the U.S. will rise 5.3 percent this year, up from a 3.1 percent increase in 2007.

New Listing in Historic Provo’s First Subdivision

A New Listing In South Jordan!

Market Conditions Demand FHA Reform Now!

The National Association of Realtors is a strong voice for supporting homeowners and speaking out politacally for measures that will help buyers and sellers. Below is a recent call to action from the NAR to all of it’s Realtor members to contact local representives regarding the FHA reform bill.

The increased loan limits for FHA that were included in the Economic Stimulus package are set to expire at the end of the year. NAR supports an FHA Reform Bill that includes realistic and permanent increases in the loan limits.

Early evidence shows that the increased FHA loan limits are providing a much needed infusion of stability, liquidity and security into the market. If Congress lets the new limits expire, the fragile housing market will once again be thrust into a period of turmoil. Don’t let Congress stop progress through inaction. Tell Congress that realistic loan limits that permanently help all areas of the country are needed now.

Brigham and I sent the following letter to Senator Hatch.

The new loan limits passed in the recently enacted Economic Stimulus bill will expire in less than 10 months. These new loan limits will offer much needed relief to more than 325,000 families this year alone. Dramatically reducing these limits at year’s end will push our nation’s fragile housing markets into turmoil once again. Realistic loan limits that permanently help ALL areas of the country are needed to bring stability to the marketplace.

FHA’s downpayment levels led many borrowers to opt for the exotic, risky mortgages that have been the hallmark of the foreclosure crisis. The FHA reform bills will allow FHA to modify downpayment requirements and offer flexible financing to eligible borrowers.

As your constituent and a REALTOR, I want to stress how important it is for FHA reform legislation to be quickly enacted. These bills, passed the House and Senate in 2007, are now stalled in conference. Permanent increases in the FHA loan limits, lowered FHA downpayment requirements, and new opportunities for condominium purchases are needed to create safe and affordable mortgage options for our state’s homebuyers and those wishing to refinance. These changes will also provide much needed stability to our local housing markets and economies.

Sincerely,

Brigham and Karmel Larson

If you are interested in sending your own letter, click here.

HOT PROPERTY….Own for less than rent!!!!!

You could live here for around $600/mo. ….. and gain great equity! (your basement renters would pay for almost 1/2 or your mortgage, you don’t have to have any cash to put down)

Have you heard that it’s a buyer’s market? If you are renting and can fit in a two bedroom, it’s time to buy! I just found this property on the MLS this morning and it’s going to go fast. We just sold an identical property (that wasn’t remodeled) in 8 days from being listed for $15,000 more! The property below will go fast…

Here are the numbers and how it can work:

Purchase price $149,000.

Offer could include 3% down, 3% closing costs to be paid for by the seller. That means you don’t have to have any available cash to buy this house.

Mortgage would be for $145,000, 30 years at about 5.69% (today’s average rate). Using a conservative 6%, your monthly payment would be “roughly” $869.35 plus 15% for taxes and insurance, or approximately: $1000/mo.

This home has a 1 bd. legal accessory apartment that can be rented out for AT LEAST $400/mo. Provo/Orem Chamber of Commerce just listed Provo rental rates at an average of $485 for 1 bedroom units, so the rent could be potentially as high as $500.

So….. if you can afford $600 a month and are interested in being a homeowner, investor, landlord-call us and we’ll introduce you to a great lender who can help you get pre-qualified. We’ll set up a showing so you can have a look and further discuss your options!

To view a complete listing of this property, go to our CLIENT MLS ACCESS and enter the MLS # 782495. Call us immediately if you want to schedule a showing.

We are contacting all of our investors and renter contacts today to tell them about this property!

Please forward to any friends you know who may benefit from this opportunity!!!

**Rates and estimated mortgage calculations would need to be verified by a good faith estimate from a lender and would depend upon your credit score and employment situation.

Garden Tips for March

Brigham and I have been taking a six week gardening course on everything from pruning, fertilizer and pest control, to rototilling, watering and individual plant/crop care. We both love working outside and seeing what our yard can produce and creating a great space for our kids to run and play.

Now that the snow has melted… it’s also that time of year that our sellers ask for tips on how to get their yards in top notch shape to have the best curb appeal. We always take new photos for our clients once the snow has melted so that the exterior has the best marketing possible. Below are some tips to consider for March and April yard maintenance. We will post new, time appropriate yard and garden tips each month through the September harvest season.