Time to Buy a House

Why Now is the Perfect Time to Buy a House With home prices rising for the third straight quarter, it is pretty hard to argue that the housing market recovery hasn't picked up steam. In fact, according to S&P Case-Shiller, home values increased 7.3% in the last quarter of 2012 alone. That means we are seeing the bounce from the home value bottom. Combined with mortgage rates with a national average in the 3% range, and you have the perfect storm for the best time to buy a home. But there is a problem - as the recovery continues, affordability will fall. Home values will continue to stabilize and improve, and mortgage rates are going to rise. Contrary to what the press would have you believe and what many people now think, the government doesn't control mortgage interest rates. While the Fed has been able to manipulate and affect mortgage rates with things like quantitative easing, it is not the same as control. The housing market is recovering as part of the US economy as a whole, and with that recovery is a natural increase in mortgage rates. That means that even as house prices rise, so will mortgage interest rates, providing a double whammy to buying power. YEAR-OVER-YEAR CHANGE IN HOME VALUES; SOURCE: S&P CASE-SHILLER Last Week's Mortgage Rates Recap Last week we ended the week with slightly better mortgage rates than we started, and improved rebate pricing. However as we warned, there was lots of intraday volatility - mortgage rates and pricing fluctuated throughout the day. We saw swings of as much as .500 in rebate in a day, which on a $200,000 loan is $1,000. We ended the week with risks greatly favoring locking in interest rates. Most of this market movement was created due to the ongoing concerns in Cyprus as well as the positive bias that continued in the stock market regardless of that concern. This Week's Mortgage Rates Forecast Risks Favor: LOCKING As most of last week focused on Cyprus, it helped to keep mortgage rates stable and even to improve slightly. However, in the early hours of the morning this AM European Union leaders agreed on a bailout package intended to keep Cyprus in the euro zone and rebuild its devastated economy. That bodes poorly for mortgage interest rates, as there is no reason to see a flight to safety to bonds. Also, as shown in the chart above, the technical indicators on the MBS (mortgage backed securities) market also point to rate weakness. This week for any consumers who are less than 30 days from closing, we advise to lock. This week already appears to be one of a rising interest rate environment, and along with a number of key economic reports and a holiday week, volatility is a given. BOTTOM LINE: Lock in these low rates and don't look back.                                           RateAlert’s Most Trusted Mortgage Loan Officers MLOs that subscribe to RateAlert’s Executive service have the training and market knowledge, along with the data at their fingertips, to expertly help you navigate the difficult and sometimes treacherous process of obtaining home financing and securing some of the best rates the market has to offer. If you would like to learn more about how to time the market to obtain the best interest rates, don’t hesitate to contact the MLO who sent you this commentary. Cyprus secured a bailout from its creditors; ending a week of financial panic that threatened to see the island nation become the first government to leave the euro zone. In the late hours of Monday morning Cyprus agreed to the outlines of an aid package, paving the way for 10 billion euros ($13B) of emergency loans to stave off the threat of default. The accord imposes losses that two European Union officials said would be no more than 40% on uninsured depositors at Bank of Cyprus Plc, the largest bank, which will take over the viable assets of Cyprus Popular Bank Pcl, the second-biggest, which will be wound down. Europe’s stock market rallied on Monday and early Monday bolstered US stocks for a better open at 9:30. The Cyprus solution is the first time since the credit and debt crisis began in Greece in 2009 that bank depositors and stock holders are being forced to take losses; all shareholders and bond holders in the Cyprus Popular bank that will be closed. The deal will undoubtedly bring into focus the safety of deposits  and bonds issued by other banks in the larger countries in the EU that are still facing debt issues (Italy, Spain, Portugal). At 9:00 this morning on the Cyprus deal the US stock indexes were pointing to a strong open; early today it appears that today may be the day when the S&P 500 index moves to an all-time high at 1565. The 10 yr at 9:00 -7/32 at 1.96% +3 bp and 30 yr MBSs -9 bp frm Friday’s close. At 9:30 the DJIA opened weaker than it was trading in the pre-market futures, +26, NASDAQ +11, S&P +5; all of the indexes were over twice as higher than at the actual open. MBS prices at 8:30 -21 bp, at 9:30 -2 bps. Already today a lot of volatility. There are no economic reports today but Fed chief Bernanke will be in discussions with IMF and BOE officials on lessons learned from the crisis. Hardly a topic that has much meat given the renewed increase in the EU over their banks and the Cyprus crisis. More bank issues now turning to Spain. Spain's government will impose heavy losses on investors at nationalized banks and hire external advisers to help it manage the banks' assets. A number of key reports this week and Treasury borrowing $99B of notes at its normal monthly auction. No reports today; tomorrow Feb durable goods orders, and new home sales; weekly claims on Thursday and the final Q4 GDP data. Two indicators of consumer confidence this week; the Conference Board’s consumer confidence index and the final Mar U. of Michigan consumer sentiment index. The Cyprus deal this morning has removed some of the safe haven concerns that drove the 10 yr note yield down briefly to 1.90% last Tuesday; this morning the 10 at 1.95% has pushed the note back over its 20 and 40 day averages. In the MBS market the 30 yr Apr FNMA coupon never did break above its 20 and 40 day averages (price). The outlook remains bearish, but not severe. The fixed income market is still tied to how the stock markets trade. As long as the equity markets continue to improve the bond market isn’t likely to decline in rates. On the other side; as long as the Fed is still holding its QE purchases there is little likelihood rates will increase much. Technically, the 10 has resistance at 1.90%, support at 2.00%; 30 yr FNMA MBS has resistance at 103.03 price and support at 102.00 (current price . Although a deal was reached to keep Cyprus from existing the EU, the reaction in the US and German bond markets hasn’t been much. Visit us at globalhomefinance.com for all your home loan needs.