On Friday, we blogged that Scott A. Anderson, a senior economist at Wells Fargo, said that mortgage rates had bottomed and should move up. His logic: the yield on a 10-year Treasury — 3.33% on Friday — barely covered inflation. He expects the yield to rise. (Note: Treasury yields and mortgage rates are only loosely related.)
Then on Monday, the 10-year yield jumped to 3.52%. And Monday the average rate in Orange County for a 30-year fixed-rate loan at the old conforming limit of $417,000 rose to 5.88% with a one-point fee up from 5.86% on Friday. And jumbo loans — again above the old limit of $417,000 and not yet bought by Fannie Mae or Freddie Mac — rose to 6.99% with a one-point fee from 6.95%.
So what do you think?
Have mortgage rates bottomed?
Seems like they are headed up. This is awfully bad news for OC home sellers. As a potential buyer who is ready to jump in any time I can see a good deal, I just got priced out of my market with these high jumbos. The bank says that the higher conforming limit will not help us if we attempt to purchase a $550-600k house, and that it will be regular jumbo loans as usual. We have 10%, but not 20% down, and that will cause our base rate to jump another .25% on top of its already higher level. So this week, if we bought the home of our dreams, we could expect about 7.65% and a monthly payment (including tax) of about $4500-4850. Which is outside the budget unless we want to be house-poor, and we don’t. So like (I’m sure) many other potential buyers, we will be waiting, renting, and watching. I figure the prices must drop again, like they did at the end of last year, early this year. Of course if the prices came down today and we could find a good deal we’d pay the higher rates for a few months until we could (hopefully) refi. Interest rates can be renegotiated. The balance can’t.
But honestly, since we’ve been waiting for the last 2.5 years, we’ve grown a bit impatient with this horrid real estate market. We’ve seen about 5 other couples who were friends leave the area for places like Texas, Colorado, Utah, and Oregon. We know of quite a few other couples who are friends of friends, acquaintances who’ve done the same thing. These were all young professionals, college educated, with good jobs. SoCal seems to be bleeding its future to other states. If this continues, we’ll see a real slump in the local economy as good help becomes harder to find. Not to mention the enormous supply of baby boomers OC has, and is beginning to lose from its workforce. Right now many of them are putting their homes on the market, at ridiculous prices of course, in hopes of cashing in and moving elsewhere. This trend will only increase in the coming months and years.
The market has nowhere to go but down.
How about a little credit? I told you in our interview back in December that come February rates would shoot up! Ok, I KNOW it is March! Look out as FNMA has already started charging extra with lots of add ons bringing most 30 year fixed over loan amounts of 550,000 with cash out and over 80% to the 8.5-9% range.
Lou Pacific
Real Estate and Mortgage Company Consultant
Serving OC for 30 Years
Now if rates continue to creep up, which undoubtedly they will… then more buyers are going to be pushed out of their budget, just like Josh. Plus more homeowners tryng to sell will have fewer potential buyers… so what else would that do to the market, but make it worse and eventually drive prices down further.
I could name 1 street in the city of Orange where one house is at $229 per square foot and another across the street is at $342. There is not a major difference in lot size or much else… but one homeowner is dreaming if they think that they will get $342 per sq foot, when a larger just as nice home is at almost $150k less. Granted one has been up for sale for over 6 months and one for less than 1 month, but still.
Unfortunately the bottom is not here yet for prices, but the rates have probably seen the lowest numbers.
HEAR YE! HEAR YE!
This comment is for the sole purpose of giving LOU PACIFIC credit for his ALMOST acccurate prediction that rates would go up in FEBRUARY!!
Let it be known that he went against all rhyme and reason, the pundits, the bloggers, the economists, and the doom-sayers by making this ALMOST accurate prediction!!
We, the humble commentors on this blog, salute your finite wisdom!! We bow down to your uncanny ability to ALMOST predict rates accurately, and wish to one day share in this other-worldly ability you possess to ALMOST be correct!!
Hooray for LOU PACIFIC!! Hooray!!
If so cal prices are going up, then I am doubly glad I got the heck out when I did.
Went to school there from 2001-06. Saw the housing writing on the wall and decided I didn’t want to pay triple what I should for a house.
Moved to North Carolina, bought a great house with 10% down and pay 20% of my monthly salary for the 30y fixed. Plenty of money left over to pay off credit and school loans.
You are all crazy if you stay in SoCal (or CA in general) and throw your money away.