Aug. 12 (Source: By Drew DeSilver, The Seattle Times) - CORRECTION: Information in this article, originally published Aug 10, 2011, was corrected the next day. In a previous version of this story, the sidebar showing the monthly payments for various size loans said the payments covered the loan?s principal. But they actually were monthly principal and interest payments.Aug. 10?Plunging interest rates, a consequence of the turmoil in the stock market, are proving to be a boon for mortgage refinancers. But so far, those low rates aren?t doing much to reignite the nation?s torpid housing market, and they may even delay its recovery.
With rates on conventional 30-year fixed-rate mortgages falling near, and in a few cases below, the 4 percent level, homeowners locally and nationally have been rushing to refinance in recent weeks.
?It?s really quite astonishing,? said Rich Bennion, executive vice president at Seattle-based HomeStreet Bank, a major regional mortgage lender. ?I?ve been in the business 34 years, and it?s like, how low can you go??
On Wednesday, HomeStreet set its rate on a 30-year mortgage at 4 percent. The rate on a 30-year loan insured by the Federal Housing Administration was 3.875 percent.
Bennion said that in the first nine days of August, HomeStreet received 402 mortgage applications, about two-thirds of them refinancings. That compares with 716 applications for all of July.
Refinancings also have exploded at BECU, said Debra Toepfer, mortgage-production manager at the giant credit union.
BECU is averaging more than 100 new mortgage applications a day, Toepfer said ? a 54 percent increase just since the end of July. Among those, there are four refinancings for every purchase.
On Wednesday, BECU?s rate on a conventional 30-year fixed mortgage was 4.25 percent, down from about 4.5 percent a month ago. The rate for a 15-year fixed mortgage was even lower: 3.625 percent.
The rates are nearing lows reached last October and November as an indirect result of tumbling stock prices.
Since late July, spooked investors have been selling shares and pouring the proceeds into perceived safe havens ? and Treasury bonds, despite Standard & Poor?s recent downgrade of the federal government?s credit rating, are still considered the safest haven of all.
As investors bid up the price of Treasurys, the yield falls ? in this case, to levels not seen since the depths of the 2008 financial panic. The 10-year Treasury bond, the most influential on long-term mortgage rates, ended Wednesday yielding a mere 2.107 percent.
The Federal Reserve?s message Tuesday that it would keep short-term rates ultralow until mid-2013, while not directly tied to mortgages, likely will hold down rates on all kinds of debt for the foreseeable future.
The possibility of locking in a lower rate, of course, doesn?t make refinancing a good idea for everyone. Homeowners need to consider closing costs, and whether they?ll be in the house long enough for their lower monthly payments to cover those costs.
While low, stable mortgage rates are good news for refinancers, they may not lure homebuyers back into the market, real-estate brokers and researchers say.
The Fed?s announcement ?will relieve some of the pressure on would-be homebuyers to move before rates go up,? said Glenn Crellin, director of the Washington Center for Real Estate Research at Washington State University.
?It sends a signal to prospective buyers that, if you think home prices are going to go down some more, you can stay on the sidelines and wait for a better price,? Crellin said. ?It?s going to prolong fence-sitting on the part of many would-be buyers.?
The center reported Wednesday that 85,000 homes were sold statewide in the second quarter, 4 percent below the first quarter and 11.3 percent below a year earlier. The median resale price for the quarter was $226,900, down 7.6 percent from a year earlier.
According to the widely followed Case-Shiller home-sales index, month-over-month prices in the Seattle area have risen, however slightly, for three months in a row. To some, that indicates the local market has reached bottom, though it?s worth noting the local index rose five straight months in spring and summer 2010 before falling again.
Mike Skahen, owner and designated broker at Lake & Co. in North Seattle, said lower rates will aid sales, but a real upturn won?t happen until potential buyers believe home prices are rising.
?Buyers aren?t going to suddenly start streaming into (real estate) offices, but I would expect there to be some good open-house traffic this Sunday,? he said.
Drew DeSilver: 206-464-3145 or ddesilver@seattletimes.com
Source: By Drew DeSilver, The Seattle Times
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Copyright (c) 2011, The Seattle Times
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A service of YellowBrix, Inc. Publication date: 2011-08-12
Source: http://www.loansafe.org/homeowners-race-to-refinance-as-mortgage-rates-plunge
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