Interest Rates – What’s the Low Down?

By Kristal Kraft Denver Realtor | Published: February 3, 2010

Jet trails should go up, not interest rates!Funny how when things are good people, tend to forget that things are good, and good things don’t necessarily last forever.  I’m referring to interest rates.

The other day, a client made mention of a “high interest rate” being 6%.  It struck me funny,although I didn’t laugh.  To me a 6% interest rate is actually pretty darn good!  Of course in this market, it’s high, but I can remember when interest rates were 18% on mortgage loans!

Yes, that’s true, in the 1980’s we saw inflation and high interest rates like never before.  I started selling real estate in 1984 and found myself “justifying” a TERRIFIC interest rate of only 14%!  (ouch!) Yes, of course home prices were much lower then.  We were selling nice entry level homes in the $40 and $60 thousands, but still at 18% that was like Master Charging a house!

Well these days of good interest rates maybe coming to a close. Starting April 1, 2010 the FED is stopping it’s purchase of mortgage backed securities.  This isn’t new news.  In fact the FED has been broadcasting the decision for several months now.

Experts seem to agree, mortgage rates will increase.  It won’t be steep, (like the 1980’s thankfully!) but we do expect to interest rise.

How will this affect the average Denver real estate buyer?  Well a 1% increase, say 5% to 6% on a $250,000 mortgage is $156 a month.

That means if a home buyer is qualified at 5% for $250,000, when the interest rate goes up, the same buyer can only qualify for a loan of $224,000!

That is a big difference!

Dan Green’s Mortgage Report uses logic saying the rate came down by one percent when the Fed stepped into help, therefore it might go up by the same amount.  Nobody knows.  One thing we all can agree on is to lock your rate.

If it’s time for you to buy a home, that time is probably right now.

Start your home search here, click on Denver Home Search in the bar above.  You’ll love the convenience of being able to search the MLS-idx data base, save searches and favorite properties.  Please call me if you need help.

Posted in Real Estate Tips for the Wise | Tagged , , , | 1 Comment

FHA is Changing Rules and the Scope of Qualifying for Buyers

By Kristal Kraft Denver Realtor | Published: January 30, 2010

Recent announcements by FHA will have impacts on our spring time (and beyond) buyers.  The rules mean more money down and higher payments, here’s the scoop:

  1. Beginning April 1, 2010 the Upfront MIP is increasing from 1.75 to 2.25.  (MIP is the Mortgage Insurance Premium that all buyers using an FHA loan get to pay, up front in order to obtain the loan.)  to give you an idea of how much this increase is, let’s talk numbers.  On a $200,000 the Upfront MIP increases by $1,000.  Typically the buyer finances this amount into the loan, making that $200,000 loan a $204,500.  This increase raises the buyer’s payment on a 5% loan by $5.35 a month for 30 years.
  2. The good news for investors (AKA flippers) FHA has implemented a waiver (beginning Jan. 15, 2010) that allows properties to be transferred without having to wait the required 90 days.  This rule which personally I have never understood has only been waived for one year.  Apparently FHA is realizing that it’s not good to interfere with investors who are actually helping our economy?
  3. Buyers who’s FICO credit scores are less than 580 (this is a relatively low score) will now be required to put 10% down when purchasing a home using FHA financing. This is a double whammy for those with low scores, typically they have a low score and no cash.  This rule is reinforcing the importance of maintaining a good credit score.
Posted in Real Estate Tips for the Wise | Tagged , , , | 1 Comment

The One That Got Away

By Kristal Kraft Denver Realtor | Published: January 29, 2010

Fisherman have the reputation for telling stories about “the one that got away.”  It’s always the biggest, strongest, oldest most difficult fish in the water. But alas it got away.

Well photographers have the same bragging rights.  Sometimes, like me we even can provide proof, sort of.

This is my fisherman-like tale.

After many days of boring, flat, cold dead winter light I was anxious to find something worthy of shooting.  One morning I rose before dawn, dressed and headed out in hopes of catching the sunrise.

I’d checked the time table and new what time the sun would come up, but I was late. The sun really lights the land long before it rises above the horizon.  I figured that out on my way to the planned destination.  There wouldn’t be enough time to reach it, so I went to plan B.

The sunrise itself is a worthy vision, but it becomes so much more interesting when there’s life included. This morning I almost had that wonderful silhouette of a horse, except the horse didn’t cooperate.

By the time I got set up he was  on his merry way to the other side of the hill where the grass was obviously greener!

He got away.

Posted in Life After Real Estate | 4 Comments

Home Values Rose In November 2009 By Another 0.7 Percent

By Real Estate News | Published: January 29, 2010

Home Price Index April 2007 to November 2009

Reporting on a two-month lag, the government said home values rose 0.7 percent in November.

National home prices are at their highest point since February 2009.

But before we look too much into the FHFA’s Home Price Index, it’s important that we’re cognizant of its shortcomings; the most important of which is its lack of real-time reporting.

According to the National Association of Realtors™, 80% of purchases close within 60 days. As a result, because of its two-month delay, the Home Price Index report actually trails today’s market data by an entire sales cycle.

This is one reason why home values appear to be rising even while new data shows that both Existing Home Sales and New Home Sales fell flat last month.  The home valuation report is using data from November; the sales reports are using data from December.

The Home Price Index is a trailing indicator and next month, as the Spring Market gets underway, the government will be reporting data from the holidays.

The same is true for the Case-Shiller Index. It, too, operates on a 2-month lag.

All of that said, however, long-term trends do matter in housing and the Home Price Index has shown consistent improvement over the last 10 months.  In many markets, home sales are up, home supplies are down, and values have increased.  This trend should continue into the early part of 2010, at least.

If you’re wondering whether now is a good time to buy a home in Littleton , consider low prices, cheap mortgages and an available tax credit as three good incentives.  By May, none of them will likely be available.

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A Simple Explanation Of The Federal Reserve Statement (January 27, 2010 Edition)

By Real Estate News | Published: January 27, 2010

Putting the FOMC statement in plain EnglishThe Federal Open Market Committee voted to leave the Fed Funds Rate within its target range of 0.000-0.250 percent.

In its press release, the FOMC noted that the U.S. economy “has continued to strengthen”, that the jobs markets is getting better, and that financial markets are supportive of growth.

There was no mention of the housing market’s strength.  The last 3 statements from the Fed included that specific verbiage.

It’s the fifth straight statement in which the Fed spoke about the economy with optimism.  This should signal to markets that 2008-2009 recession is over and that economic growth is returning to U.S. economy.

The economy isn’t without threats, however, and the Fed identified several in its press release, including:

  1. Credit remains tight for consumers
  2. Businesses are reluctant to hire new workers
  3. Housing wealth is down

The message’s overall tone, however, remained positive and inflation appears is still within tolerance.

Also in its statement, the Fed confirmed its plan to hold the Fed Funds Rate near zero percent “for an extended period” and to wind down its $1.25 trillion commitment to the mortgage market by March 31, 2010.  This is noteworthy because Fed insiders estimate that the bond-buying program suppressed mortgage rates by 1 percent through 2009.

Mortgage market reaction to the Fed press release is, in general, negative. Mortgage rates in Denver are rising this afternoon.

The FOMC’s next scheduled meeting is March 16, 2010.

Posted in Real Estate Tips for the Wise | Tagged , | Leave a comment

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  • Kristal Kraft Denver Colorado Blogger Welcome to Denver Dwellings where I blog about Denver real estate trends, where to live, eat, play and how to buy or sell a house in Colorado. This part of the world is where I call home, it is a place I love and I hope that joy shows through!