Syndicated columnist, Lou Barnes has hit the nail on the head regarding how inflated media coverage of the current downclick in rate adjustments have been and how I as a realtor have to coach my clients about how the Feds rate reduction really has no major effect on mortgage rates but more so on short term interest rates like car loans, home equity loans and credit card loans.
Rates have dropped a bit but they are back up to 5.75% and my advice is still to wait and see on the refi decision after more economic news is seen and if you've got a place your interested in purchasing and the loan calculations are within your comfortable means then by all means, make that purchase.
Here is the full article from Inman News:
Commentary: Average rates on mortgages unchanged in recent surveys
Friday, February 01, 2008
By Lou Barnes
Contrary to the conviction of deeply confused civilians and reports by lazy news media, mortgage rates are unchanged, about 5.75 percent for the lowest-fee 30-year paper.
If you don't believe me, visit
http://www.freddiemac.com/ and its weekly survey. It is unbiased by sales jive, although it suffers from "survey lag" (early-week data released on Thursdays always misses real-time reality), and assumes a fractional origination fee. Last week's "5.48 percent" captured the one-day hysterical bottom when the industry could not log onto rate-lock Web sites. Yesterday's "5.68 percent plus 0.4 percent origination" is still about right, and all but identical to the prior week's "5.69 percent plus 0.5 percent."
Yet, the media refer constantly to "dramatically lower mortgage rates." They are better, but ... drama? Freddie's average for the whole of 2007 was 6.34 percent. A half-percent drop is nice for buyers, and a help to a few refinancers, but no fire sale.
"How can it be the same ... !?!" says the client, after a cumulative 1.25 percent cut at the Fed in only eight days? Answers follow.
Brand-new January economic data are not that bad. They're not bad enough to justify the Fed's panic, let alone to anticipate more cuts. Payroll growth slipped to flat in January (negative 17,000 is within the huge range of error and revision), unemployment down to 4.9 percent in a workforce statistical quirk -- soft, but hardly a recession. The purchasing managers reported their first gain in six months, likewise soft, but with persistent strength in foreign orders. Fourth-quarter GDP grew by a mere 0.6 percent; however, aside from a temporary drawdown of business, inventories grew at 2 percent.
The Fed's form is disturbing to long-term investors. Central banking is not figure skating, but Fed Chairman Ben Bernanke has departed his predecessor's 17 years of gradualism for lurching on the rink. A Fed that will lurch down will lurch up.
Investors bought long Treasurys and mortgages at these levels 2002-2004 because former Fed Chairman Alan Greenspan said after every meeting into 2006: Excessive monetary stimulus most likely will be "removed at a measured pace." Translation: You're safe for now, and we'll give you time to get out before we kill you.
In those late Greenspan years, deflation was the problem. Today, inflation is rising all over the world: Australia at a 16-year-high of 3.8 percent core; Europe at a 14-year-high of 3.2 percent; U.K. at 2.6 percent core; China at 6 percent-plus; and an economy completely out of control beginning to export inflation to us.
