Posted on 8th July 2011 by Anthony in The Economy
foreclosures, Greece, jobs, Maricopa, Maricopa Arizona, Maricopa AZ, Maricopa real estate, market, pinal county arizona, real estate, Volcano
The year is half-over. It’s an opportune time to take stock of analyst predictions made at the start of the year, and to recognize that the “experts” can be wrong as often as they are right. Maricopa real estate
For as much experience and authority an expert brings to the conversation, though, nobody can accurately predict the future.
As such, there’s often disagreement.
Looking back to December, some housing analysts called for a market rebound this year; while others called for a fall. With respect to mortgages, some said rates had nowhere to go but up; while others expected more dips.
As a layperson, how do you know who will be right?
In short, you can’t.
Predictions are a tricky business because they’re guesses about the future based on the world as it exists today. When the predictions listed earlier were made, the world was a different place.
A lot has changed since January:
- Slowing job growth has suggested to slower U.S. economic growth
- Food and energy costs have spiked, adding inflationary pressures to the economy
- Eurozone debt issues have grown, punctuated by a near-Greek default
- Tsunamis have caused widespread damage in Japan
- Earthquakes, floods and volcanoes have harmed economic output
None of these events had occurred as of December, when the original predictions were made. Yet, each of these developments has made a deep impact on housing, and on the economy.
So, what’s a Casa Grande homeowner to do? Think of the present instead.
First, mortgage rates are low today — extremely low by historical standards. Second, home values have been slow to rebound through most U.S. markets. Combined, these factors have made homes more affordable than it any time in recorded history. It’s not only cheap to buy a home right now, it’s cheap to refinance one, too.
Analysts are saying the home prices will rise this year, and mortgage rates will, too. Those predictions may ultimately be proven true. Until the future arrives, though, those predictions are just guesses. If you are looking for Maricopa real estate please visit www.pru1re.com for more information about the city of Maricopa and the great state of Arizona.
Posted on 1st July 2011 by Anthony in Mortgage Rates
ARM, Fixed Rate, Freddie Mac, Maricopa AZ, real estate
The interest rate differential between fixed-rate and adjustable-rate mortgages continues to widen and has now reached historic levels.
There’s never been a better time to lock an ARM.
According to Freddie Mac’s weekly Primary Mortgage Market Survey, homeowners in Casa Grande who lock their mortgage rate today will save 129 basis points on rate, on average, by choosing a 5-year ARM as their mortgage product as compared to a 30-year fixed rate loan.
The average 30-year fixed rate is 4.51%. The average 5-year ARM rate is 3.22%.
It’s the biggest interest rate spread between fixed-rate and adjustable-rate mortgage rates in Freddie Mac’s recorded history; a gap which is the result, in part, of the 5-year ARM dropping to all-time lows this week.
Rates for the 5-year ARM are even lower than during last year’s historic Refi Boom.
Putting today’s “spread” in action against a hypothetical $250,000 loan size, a homeowner that chooses an ARM over a fixed-rate loan would save $184.30 monthly, and would have $500 fewer closing costs.
That’s a 5-year savings of $11,558 — nearly triple what you would have saved just 2 years ago.
The main reason why today’s adjustable-rate mortgages are priced so aggressively relative to comparable fixed-rate loans is that Wall Street expects the economy to drag for the next several quarters, after which it expects an acceleration.
ARMs tend to reflect short-term expectations for the U.S. economy which is why short-term mortgage rates are dropping. Fixed products, by contrast, take a longer view and expectations for an economic rebound are pulling fixed-rate mortgage rates up.
For now, mortgage applicants can exploit the difference — especially those who plan to move within the next 5 years — but adjustable-rate mortgages aren’t right for everyone. ARMs carry particular risks about which you should be aware before locking.
Before you choose an ARM, therefore, talk it through with your loan officer.
