With all this chatter about the 4.5% interest rate range, you’d think we were in for some major life-altering, world-saving changes. Well, that’s just NOT going to happen.
Why?
Because the lowest rates in the world won’t do a thing to curb the underlying reason our housing market collapsed.- The unsustainable and over-inflated housing PRICES.
Because you can’t buy a house if you have NO JOB. http://money.cnn.com/2008/12/05/news/economy/jobs_november/index.htm
Because you can’t sell a house when you owe more than it’s worth without ruining your credit. That’s right- lenders will not consider a short sale unless the owner can prove hardship- and that means they have to stop paying their mortgage! With late mortgage payments on a credit report, kiss owning a NEW home goodbye.
Because when 10% of homes are IN (or nearing) foreclosure, that means that housing inventory will soon GROW. http://www.foxbusiness.com/story/markets/economy/home-loan-problems-break-records/
Rates are already fantastic- 5% on a 30 year fixed, with a point or two, of course. But still, very attractive. What will happen if they fall to 4.5%, on OUR dime??? In reality, very little, to nothing. People WILL clamor to refi to 4.5%, but they won’t be able to because the new government subsidized rates will be for PURCHASES only.
Will the people who CAN buy now benefit? Sure. They’ll save some money in INTEREST. But will their purchase price still be over-inflated? Probably. Will they have a job next year???? I hope so, but the way things are going, I wouldn’t exactly count on it.
Lock when you are comfortable, and don’t bet on some miracle plan that might not ever happen.
Jennifer Monastero
Last 5 posts in Credit Scores/Bad Credit
- How to Boost Your Credit Score – Part 2 - November 2nd, 2009
- Is It Harder to Get a Mortgage? Perception is Reality.... - October 29th, 2009
- Your Credit: Collection Accounts - September 17th, 2009
- Credit Balances and Your Credit Score - August 8th, 2009
- What's the Difference Between Mortgage Delinquency and Mortgage Default? - August 2nd, 2009
- Stumble it!
- Categories: Credit Scores/Bad Credit, Mortgage Rates
Comments
7 Comments so far
Mr. Noatak
This is a very intelligent analysis Jennifer. If only the government understood the situation as well as you. You are correct on every count. In my opinion, house prices are still too high and must come down. Easier credit perpetuates or recreates the same systemic problems that led us to the situation we all find outselves in. Also, if the government begins to offer refinancing of EXISTING loans to 4.5%, then they will in effect be competing with healthy banks for active loans on their books. In my judgement, this could be a disaster when banks lose all of their home loans (and cash flow) to a competitor they cannot compete with.
Keep up the good thinking.
Urbantwang
That was a great blog entry. I’m currently considering buying a home (first time) after years & years of saving and bottling up my jealousy of others able to buy in the higher priced market. I was always stuck in a tiny rental apartment. I could qualify for the loans, but I didn’t want to pay the high mortgage and wondered how other people were able to pull it off. Now I see they were unable to pay that high mortgage after all. I feel I was smart to wait.
Now (finally) the options are open for me, but I’m still very reluctant. The homes once out of my reach of $300K are now in my price range in pre foreclosure selling for $188K and so on. My fear is …there won’t be any equity to gain and the prices may fall more once I buy. Once you save up a lot of money and see it in your bank account it is hard to let it go. I fear I will need that money I saved.
I’m watching the credit card companies lower credit limits to ruin fico scores so they can raise interest rates. They’re also raising the minimum monthly payments and adding new additional fees. Even people with fantastic fico scores are getting screwed and if they carry any balance at all will be raped. It is a horrible time and I fear things will get worse for everyone.
Chris
My wife has a steady job in the medical industry. Think you can quit getting sick? There are jobs out there. 7% unemployment is nothing compared to 1933 @ 25%. I know at least 50 home owners. None of them are being foreclosed on. The numbers are true, but don’t always paint the real picture. Most of the foreclosures are junk homes. The people that owned them just didn’t care anyway.
If you can’t sell your house for what you owe, you paid too much. Sell some of your other junk and come up with the cash to balance it out and close the deal. You’ll get to show a loss on your tax return.
Delafield
Jennifer,
I’m in the same boat as you. I’ve been looking at houses for the past 18 months. I just saw a house that I’d like to purchase (asking price is $320k). I have $200k in the bank for a down payment. The only problem is that we just had a layoff at the company that I work for and things continue do get worse.
I’d like to pull the trigger and make an offer on the house but just as you said, I’ll probably get laid off the next day. For some reason, Bush and the Republicans want to destroy the economy before they lose the White House. America is losing 20,000 to 50,000 jobs every day.
Why Buy a House? | Mortgages Unzipped
[...] feel Jennifer’s pain. Economic figures suggest that the whole world is falling apart and Armageddon is soon upon us. [...]
An Open Letter To President Obama | Mortgages Unzipped
[...] Everyone is UP IN ARMS about the ‘Stimulus Package”. An $800 BILLION dollar, comprehensive- to say the least, plan to get the economy going again. Where is our anger and outrage over the Fed’s complete and total WASTING of $500 Billion? From now until July (the projected end of this idiotic experiment), we will see no stability, we will see no benefit. Might we see lower rates? Absolutely. But we’ll see lower rates with or without this astronomical waste of funds. And again, what good is a low rate when housing prices are stil inflated, people are losing their jobs, and no one can buy or refinance? Read an old blog I wrote here: http://www.zillow.com/blog/mortgage/2008/12/05/i-bought-my-house-at-45-too-bad-i-lost-my-job-the-nex… [...]
Erasmo Arredondo
I took out a equity loan on my house to pay off my credit card debt at 12% interest about 5 months ago at $1.118.00 a month because I was desperate for the loan. It includes my property taxes and life insurance in case I kick the the bucket. When can I applied for another loan to lower my interest and lower my monthly payments.