If you follow my blog you would have seen in some of my recent posts that I had concerns about the higher home prices and interest rates cooling off our recovering housing market. Fortunately someone else noticed as well. I can’t say I am in favor of all the printing of money, but I am in favor of making sure the housing market recovers from years of foreclosures and people being stuck in their upside down homes.
Mortgage rates drop fast after Fed stimulus decision
WASHINGTON – Sept. 19, 2013 – Area homebuyers caught off guard by interest rates that spiked in the past few months could catch a break from the Federal Reserve’s decision Wednesday to continue its massive bond-buying effort.
Within hours after the announcement, rates for 30-year-fixed mortgages dropped by about a quarter of a percentage point, local mortgage experts said. It was one of the biggest one-day drops in memory.
“We’ve seen crazier days than today, but that kind of improvement is a good day,” said Dan Starelli, senior vice president and regional manager for home lending at Umpqua Bank in Roseville.
The plummet came after a steady rise in mortgage rates that Starelli said was among the fastest increases in years.
Rates for 30-year-fixed mortgages went from near-historic lows below 3.5 percent in May to more than 4.5 percent last week, according to mortgage giant Freddie Mac. Those rates were with buyers paying nearly 1 percent of the loan amount in points and fees; zero-point loans had higher interest rates.
The jump was driven by fears that the Fed would taper its $85 billion-a-month program to buy government and mortgage bonds, which had driven home-loan rates to record lows and given a big boost to the housing market.
Sacramento-area home prices rose by double digits this spring, partly because homebuyers were scrambling to take advantage of ultra-low interest rates. But as rates rose and inventory increased, the region’s overheated market experienced a slight cooling.
In a news conference Wednesday, Federal Reserve Chairman Ben Bernanke cited the rising rates and potential slowdown of the housing market as factors in the Fed’s decision.
When it became clear that the Fed intended to continue its stimulus efforts unabated, mortgage rates fell quickly.
At Umpqua, Starelli said, the rate for a conventional loan with no points went from 4.875 in the morning to 4.625 in the afternoon. The rate for a loan backed by the Federal Housing Administration fell from 4.5 percent to 4.25 percent, he said.
Rates could continue to improve based on the Fed’s actions or rise again because of other economic factors, he said.
Brent Wilson, a mortgage strategist at Comstock Mortgage in Sacramento, said that he and other lenders were advising clients earlier Wednesday to wait before locking into a mortgage rate.
“We were telling them hang on. Don’t lock. We’ll get back to you this afternoon,” Wilson said.
It turned out to be good advice.
“Rates are safely in the low-to-mid 4 percent range after today,” Wilson said. But, he cau