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Of course the National Media won't cover this much, since the news is always about "bad stuff" only. 

I expected mortgage interest rates to go up after the Federal Reserve stopped its artificial support of mortgage-backed securities on March 30th.  This obviously did not happen, for a surprising reason: with Greece in danger of defaulting on its National Debt and the rest of the European Union in a panic about what to do about it, worldwide investors consider securities based in the United States to be safer places to invest.  More investors = lower interest rates!

Whether this will be enough to revive the housing market remains to be seen, but at any rate it is a great time to re-fi. 

Feel free to call me to run the numbers on a re-fi.  I have a program that can help figure when you'd break even and then get ahead.  There is no financial incentive in it for me, as I'm not a mortgage broker!

Bill Sims Real Estate Insider's Newsletter

May-June 2010

The good news continues to get better! My last newsletter mentioned the supply of homes for sale in West St. Tammany had dropped from January's 17.4 months all the way down to a 7.4 month supply in February. Even though there are now more homes on the market (1,320 compared to 1,115 in February) there have been so many contracts to purchase written that the supply of homes available to buyers has dropped to just 6.7 months.

Officially a supply of more than 6 months is called a "Buyer's Market" and less than 4 months is called a "Seller's Market", so we are still in a "Buyer's Market", but heading fast toward a balanced market.

I have remarked to several people that real estate activity seems very similar to the Spring of 2004 and 2005, when the market was normal and healthy.

I am delighted to be able to say I was totally wrong about what would happen with interest rates at the end of March. I expected rates to go up when the Federal Reserve took mortgage-backed securities off Life Support (they were buying these securities to create an artificial demand and keep the bond prices up and interest rates down). To my surprise, investors have more than taken up the slack, and instead of interest rates increasing, they are back down below 5%!

The National economy has a number of signs that economic recovery is under way at a faster rate than forecast by the experts...the same experts who didn't forecast the recession, no doubt.

Feel free to call me at 985-246-9257 or email me at CaptWSims@yahoo.com to discuss the real estate market and how it might fit into your plans--I don't mind.

Sincerely,

Bill Sims

The funds market is worried that the new Health Care Bill will prove to be costly, and increase the Federal and State demands for borrowing.  Since there are only so much funds available, the old Supply and Demand curves shift, increasing the price (aka interest rate) as demand increases.

Another factor is that investors are now more concerned about inflation (being driven by the Government's spending this time around rather than by Consumer spending), and they are demanding higher interest to offset the inflation risk.

This is already being reflected in mortgage rates.  I do not know how high they will go, but I do believe they will be higher than we have seen in the past 2 years.  If inflation indicators go positive, then stand by for more mortgage interest hikes, which in turn will fuel inflation more...a vicious cycle!

Bill Sims Real Estate Insider's Newsletter

March-April 2010

My last couple of newsletters have been downright depressing if you are involved in the real estate industry or have a home to sell, but now I have some good news: there are 1,115 homes currently on the market in West St. Tammany Parish, and 202 of them are "Under Contract". Assuming 75% of these contracts make it to Act of Sale within a month, there will be 151 homes selling. That converts into a market inventory of 7.4 months...a HUGE improvement over the past month's supply of 17.4 months!

Perhaps at last buyers are trying to buy before the tax credits expire, and before Fannie Mae and Freddie Mac quit propping up the mortgage market on March 31st.

Do NOT take comfort in pronouncements by Federal Reserve Chairman Ben Bernanke that the Fed is going to keep interest rates low while the economy tries to recover...I have a degree in Economics, and it is Macroeconomics 101 that there is not a connection between the Federal Reserve Discount Rate and mortgage rates...The Fed Rate is very short-term (term measured in days) compared to a fixed rate mortgage being measured in years. Mortgage rates are determined by supply and demand...supply of mortgage backed securities compared to demand by investors. Alternative investments such as 10 Year Treasury Bills compete with mortgages for investors, and investors of course go for the best balance of yield compared to risk. And the Fed has run out of funds to prop up Fannie Mae and Freddie Mac.

For the past couple of years investors have felt that mortgage backed securities are not worth the risk at current yields, so the Federal Reserve has artificially propped up the market by buying $1.25 trillion of mortgage securities from Fannie Mae and Freddie Mac, along with $175 billion of debt.

When this ends on March 31st I expect interest rates to increase by .5 to 1.5% from the currently very low levels around 5%.

Sincerely,

William "Bill" Sims

Bill Sims Real Estate Insider's Newsletter

Jan-Feb 2010

The local real estate market has been very quiet. I had 1 listing sell in December to a first-time homebuyer taking advantage of the $8,000 tax credit, but that was the only "action" I had all month.

The $6,500 tax credit to current homeowners buying a different home has not made much impact--has barely been mentioned by the media, so I suspect few people know about it, and they likely do not understand how it works. Both the $8,000 and the $6,500 tax credit are set to expire in April, and more details are available on my website, www.BillSimsRealEstate.com.

I mentioned in the Nov-Dec newsletter that the Federal Reserve was threatening to quit propping up the mortgage backed securities market by March 30, 2010. They are still indicating that intention, though I do think the Administration could influence them to continue their efforts. Otherwise rates will rise from around 5% to 6 or 6.5%.

A rise from 5% to 6.5% on a 30 year fixed $300,000 mortgage would increase the monthly payment (exclusive of taxes and insurance) by $286. I can only imagine the negative impact this would have on the real estate market, and on the value of your home. Right now buyers are "making out" provided they don't sell a home, or have had the home they area selling for several years, but in this scenario nobody makes out but the investors in mortgage backed securities!

Sincerely,

This good news is buried back in the financial pages of most newspapers, and not even mentioned in the TV broadcasts: the average 30 year fixed mortgage rate nationwide has dropped to 4.71% as of December 1st.  This is the lowest national average ever recorded since records began being kept in 1971.

The Federal Reserve system has pumped $1.25 trillion into mortgage backed securities to force interest rates down.  Currently the Federal Reserve is saying they will run out of available funds "in the spring", and then we can expect rates to start up...I have a degree in Economics, along with graduate studies, and it is in Econ 101 that printing more money (which the Treasury Department has been doing furiously for the past year) is inflationary, and when inflation threatens the interest rate on loans--especially long-term loans such as home mortgages--goes up.  While I have no doubt the Fed will try to keep a lid on, at some undetermined time the steam is going to blow the lid off and inflation is going to become a real problem--a problem the Federal Reserve has few tools available to handle. 

Meanwhile, run the numbers and look at either re-financing or buying that new home now!  Call me to help figure how much your monthly payments will be at various rates--I have a calculator that computes payments.

 The House voted on November 5th to expand a popular tax credit for homebuyers. 

First-time homebuyers have been getting tax credits of up to $8,000 since January as part of the economic stimulus package. But with that housing program scheduled to expire at the end of November, the House voted to extend it into the spring .

Buyers who have owned their current homes at least five years would be eligible, subject to income limits, for tax credits of up to $6,500. First-time homebuyers — or people who haven't owned homes in the previous three years — could get up to $8,000. To qualify, buyers have to sign purchase agreements before May 1 and close before July 1.