On January 8th, The San Diego Resolution Run will take runners on a loop
around Fiesta Island in scenic Mission Bay Park's De Anza Cove while
raising funds for charities that seek to keep the environment healthy.
According to Freddie Mac's weekly survey of more than 125 banks nationwide, Encinitas mortgage applicants electing for a conventional ARM over a conventional fixed-rate mortgage will save 105 basis points on their next mortgage rate.
"Conventional" loans are loans backed by Fannie Mae or Freddie Mac.
Today's average, conventional 30-year fixed rate mortgage rate is 3.91% plus points and closing costs. The average rate for a comparable 5-year ARM is 2.86%, plus points and closing costs.
In other words, for every $100,000 borrowed, a conventional 5-year adjustable-rate mortgage will save you $58.15 per month, or $698 per year.
That's a 12 percent savings just for choosing an ARM.
12 percent is a big figure that adds up over 5 years -- especially for households that plan to sell within those first 60 months anyway. There is little sense in paying the mortgage rate premium for a 30-year fixed-rate mortgage when a 5-year ARM is perfectly suitable.
For the reason why adjustable-rate mortgages continue are so much lower than their fixed-rate counterparts, look no further than the U.S. economy. ARMs reflect Wall Street's short-term economic expectations; whereas fixed-rate mortgages reflect medium- to long-term expectations.
In the short-term, analysts expect the U.S. economy to grow slowly, with low levels of inflation. This supports the U.S. dollar, the currency in which mortgage bonds are denominated. When the dollar is strong, demand for mortgage bonds tends to increase.
This supports lower interest rates.
Conversely, over the longer-term, inflation is expected to return, which devalues the dollar and everything paid in it (e.g.; mortgage-backed bonds). This is why inflation is linked to higher mortgage rates. When inflation is present in the economy, mortgage bonds lose value, driving mortgage rates up.
Adjustable-rate mortgages aren't perfect for everyone, but in the right situation, they can be a big money-saver and a helpful tool for stretching a household budget. Given today's rates, the money-saving potential is larger than usual.
Before you choose an ARM, discuss your options with your loan officer.
The Non-Farm Payrolls report is more commonly called the "jobs report" and, lately, it's been Wall Street's domestic economic metric of choice. As jobs go, so go markets.
In the 12 months beginning November 2007, the economy shed 2.3 million on its way to losing more than 7 million jobs by the end of 2009.
It's no coincidence that the stock market has been wayward. Jobs are a keystone in the U.S. economy and the connection between jobs and growth is straight-forward :
It's a self-reinforcing cycle. More employees begets more employees.
As a rate shopper in California , this is an important understanding. Job loss was, in part, behind the big drop in mortgage rates since 2007. A weak economy drives investors away from equities and into safer securities such as mortgage bonds (which are backed by the U.S. government).
The excess demand causes mortgage rates to drop and that's exactly what we've seen. Since late-2007, mortgage rates have been in decline.
In the first 11 months of 2011, though, 1.5 million people went back to work; the economy showed signs of shoring up and economic optimism is returning. Mortgage markets have temporarily ceded to the Eurozone, but with one more strong jobs report to close out the year, momentum could tip and stock markets could roll.
If that happens, mortgage rates will rise. Maybe by a lot.
This is why Friday's Non-Farm Payrolls data is so important. Economists expect that 150,000 new jobs were created in December. If the government's actual number is larger than that, prepare for higher mortgage rates.
Conversely, if job creation falls short of 150,000, mortgage rates may fall.
If the prospect of rising mortgage rates makes you nervous, remove your nerves from the equation. Call your loan officer and lock your rate ahead of Friday's Non-Farm Payrolls release.
Some expect those trends to continue through the first quarter and beyond. Others expect a rapid reversal.
Who's right and who's wrong? A quick look through the newspapers, websites and business television programs reveals "experts" with opposing, well-delivered arguments views. It's tough to know who to believe.
For example, here are some "on-the-record" predictions for 2012 :
The issue for buyers, seller, and would-be refinancers in Temecula and nationwide is that it can be a challenge to separate a "prediction" from fact at times.
When an argument is made on the pages of a respected newspaper or website, or is presented on CNBC or Bloomberg by a well-dressed, well-spoken industry insider, we're inclined to believe what we read and hear.
This is human nature.
However, we must force ourselves to remember that any analysis about the future -- whether it's housing-related, mortgage-related, or something else -- are based on a combination of past events and personal opinion.
Predictions are guesses about what might come next -- nothing more.
For example, at the start of 2009, few people expected the 30-year fixed rate mortgage to stay below 6 percent, but it did. Then, at the start of 2010, few people expected the 30-year fixed rate mortgage to stay below 5 percent, but it did.
All we can know for certain about today's market is that both mortgage rates and home values are low, creating favorable home-buying conditions sranch and nationwide.
At that start of last year, few people expected mortgage rates to even reach 4 percent. Today, rates "with points" price in the 3s.
What 2012 has in store we just can't know.
Coming January 6-8, The Gem Faire, established in 1989, has become a
world-renowned marketplace for the finest gemstones, beads, jewelry,
minerals, fossils, meteorites, lapidary equipment, metaphysical items and
much more at the lowest prices in today's market. Workshops and classes
are also offered.
January 6-7
Need to get rid of the electronic waste just sitting around your home or
Extreme caution is required.
To clean an Oriental rug, first vacuum the rug on both sides, then follow these cleaning instructions:
After several hours, test the front of the rug for moisture. When it feels dry, flip the rug over to dry its back.
Note : Do not dry an oriental rug in the sun because the sun's rays may cause it to fade.
Once both sides of the rug are totally dry, feel the top surface. If it feels stiff, crunchy or hard, take a dry brush and make gentle strokes. A light vacuuming will also do the job.
Oriental rugs that receive proper care can become family heirlooms, passed down from one generation to the next. Make sure you clean yours properly.
