It is well documented that I finance homes and follow the market like its my job. (maybe because it is) Nate, you are not exactly wrong, but you are not exactly right either. When buying a home you need to do extensive research on the area. California has alot further to fall still than lets say most of northeast Ohio. Plus, lets say prices come down in another year but rates are siginificantly higher, wont make buying in the future easier. Plus this week, congress just got rid of the dpa's (down payment assistance) for fha and upped the down payment from 3% to 3.5%. The ability to get into house is becoming more and more difficult.
Mac, the first mistake you made was an advanced mistake for a lay person but a one alot unexperinced or uneducated loan officers make. The mbs's (mortgage backed securities) do not follow the 10 year bond per say. MBS's most important componet is the yield or the spread. This can best be described as the investors required additional rate of return or the confidence in mba's which is at an all time low for obvious reasons.
Now lets analyse what is going on in the current market. Inflation is the biggest enemy of the mba. What would help us is proof that we are in a recesion, which just when you think the proof is there, bam....a major econimic report comes back showing growth on Friday. Durable Goods shows .8% rise versus consensus of .4% decline....Excluding autos, Durable Goods up 2.0% versus consensus of .2% decline. Adding to mortgage bond woes, Consumer sentiment rises significantly to 61.2 versus 56.4 consensus Completing the trifecta of mortgage bond-negative news, New Home sales down only .6% to 530k, consensus was 505k. Despite the barrage, stocks doing worse than they should be. This is a good sign.....What does all this mean?
Well, I do think the economy is in a recesion and the reports will prove that soon. On top of that the fed is concerned about inflation and has vowed to help fannie and freddie. This should all help mortgage rates in the long term even if the 10 year bond goes up. But, as more and more foreclosures happen, investors, congress and the mortgage insurance companies will repeal the low money down programs forcing you to have to come up with more down payment.
How does this effect your decision? Simple, if you are looking long term, say 10 years or more, then no problem. If you might need to get out of the house in say the next 2 or 3 years, now is a bad time to buy. But, waiting might mean buying wont be possible for the first time home buyer that doesnt have alot of down payment. In the end for every 100k on loan, an 1/8th of a point more only costs $9 more. Lets say you get 7.25% instead of 6.75%, then you only pay $45 more on a 100k loan, not really a difference maker. Making sure the time is right for you to buy is a much more complex decision than just the rates available. I hope I helped and didnt just confuse the issue.
