The biggest news this week on the housing front, was that existing home sales fell 27.2% in July. The June results were also downgraded, and now the inventory of unsold homes on the market is about a 12.5-month supply at the current rate of sales, up from an 8.9-month supply in June. A healthy real estate market usually has 6 months of supply or less.  New home sales also fell 12.4% for the month, to a level not seen since 1968. If you add in all the distressed homes that aren’t on the market, yet, this adds to the softness. Part of this picture is skewed, though. Housing is a mess, but part of the reason that sales are down now is because many of the buyers who would have normally bought in the last few months, already bought earlier in the year in order to take advantage of the home buyers tax credit. The extra supply of homes on the market is putting more downward pressure on home prices. The good news in all this bad news is that there are buyers out there, sitting on the fence and waiting for the right house at the right price. These buyers are motivated by bargains. I expect to see a small pop upwards in sales over the next few months as some of the fence sitters take advantage of the lower prices and low mortgage rates.

In other news, orders for durable goods, items expected to last three or more years, rose 0.3% in July mostly a result of some big commercial aircraft orders. The Gross Domestic Product (GDP), the total output of goods and services produced in the economy, increased at an annual rate of 1.6% in the second quarter, lower than the 2.4% increase initially reported. The biggest market mover for the week wasn’t a report, though, but the reaction to a speech by Fed Chairman Ben Bernanke. In an economic summit at Jackson Hole Wyoming, Bernanke talked about the state of the economy and how the Fed is prepared to step in again if needed to add further liquidity to keep the avoid a double dip recession. News stories have come out over the last few weeks about how the Fed is divided about what to do, and when. Some Fed Governors want to hold back and are more concerned with long term consequences, while Bernanke is said to be more willing to act now. His comments were interpreted as a sign that the Fed is contemplating another round of quantitative easing, pumping more money into the system, possibly through buying more treasury bonds or mortgages. The finger is on the trigger, but nothing is likely to happen unless the economy takes another turn lower.

The effect of all this on mortgage rates this week is that mortgage rates are still near their best rates ever, but volatility is high and rates are as likely to worsen as go lower. Even as mortgage bonds have improved, mortgage rates haven’t. On days that mortgage backed securities have a good day, the wholesale lenders hold their rates or improve just a little. When mortgage bonds have a bad day, the wholesale lenders jump at the chance to raise rates (or more likely the pricing which determines the rates). Some of this is due to a normal cautious nervousness when rates are at previously uncharted highs. Part of this is because all the lenders pipelines are full, and they aren’t as hungry for new business when they are near capacity now. As some of the loans close, and more room is available, we may see some improvements, but for those waiting for the next leg lower in rates, it may be a long wait. There is a lot of activity this week, including the most watched indicator the employment report which will be released Friday morning.

Conventional loans up to $417,000

For Jumbo loans over $417,000

*(Another option is to break your Jumbo loan into 2 parts a conventional to the limit of $417,000 and a HELOC or fixed second mortgage for the rest. The blended rate is usually much better than a single loan would be.)

** 5-5 ARM is fixed for first 5 years, with 2/6 caps it can’t go more than 2% above the start rate for the next 5 years. 2% cap for next 5 years – so a blended rate over 10 years is no more than 1% over the start rate. Super Jumbos available.

FHA LOANS 3.5% down payment FHA Maximum varies by County

FHA APR reflects 3.5% down payment and the effect of mortgage insurance on the loan. Call for information on no-cost FHA streamlined Refinances

FHA 203K Rehab Loans – Call for Quote

VA Veterans Administration 0 Down Loans

Call for information on no-cost VA Streamlined Refinances

These are just a few of the mortgage programs and mortgage rates available. Which option is best for you depends on your own specific goals and needs. If you have any questions or want to go over your situation in depth, let me know how I can help.

Peter Thompson 630-479-6424

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