Jimmy Kinley Coldwell Banker Home Loans
(Dennis Martin All Denver Real Estate Blogger: I’ve known and respected Jimmy’s opinion about mortgage rates for along time. I am passing this along to my clients so they will know what a seasoned mortgage professional thinks about the future of mortgage interest rate. The combination of rates and prices make this the best time to buy in many, many years.)
The Time to Buy A Denver Home Is Now
The Federal Reserve Board repeated its announcement last week at the conclusion of it meeting that the Fed will conclude the $1.25 Trillion Mortgage Back Securities Purchase Program by the end of March. That program has helped keep mortgage interest rates low.
What does this mean to the market? It will most likely result in higher interest rates for folks buying homes or trying to refinance.
For the past several months, dating back to Nov 2008, the Federal Reserve has been on a MBS buying campaign to keep interest rates low. The FED has been purchasing Mortgage Backed Securities at roughly 20 Million a week since Nov of 2008. The success of the program is evident when you reference the chart below. Rates ended 2009 with the lowest average in history at 5.04%. The next lowest year was 2003 ending at an average of 5.83%. The way this works is the Fed participates in the open market as a buyer of Mortgage Backed Securities (MBS) increasing the demand for the securities which creates a lower rate of return on the security which translates into lower interest rates for new Mortgages being issued. If the demand is decreasing for MBS the interest rates for Mortgage is increasing because the investors will require a higher rate of return to purchase MBS. The recent stabilization of low interest rates was the result of this campaign and when it is eliminated we will most likely see greater swings in interest rates from day to day and week to week. The end result of which will be higher interest rates.
Need another reason why now is the time to buy? The tax credit is ending!
Buyers must be Under Contract by April 30th, 2010 and Close by June 30th, 2010 to qualify for the First Time Homebuyer Tax Credit and the Repeat Buyer Tax Credit. This will be here before we know it and with the increase activity in the housing market under $500,000 it may become harder to find the right house for your buyers. We have already seen a large decrease in inventory.
For frequently asked questions visit the website www.federalhousingtaxcredit.com
It is commonly said that you don’t know rock bottom until it is in your rearview mirror. “Not this time!!!”