The ups and downs of interest rates and what they mean for buyers

The following is an article submitted by Mortgage Advisor Steve Nimmer.

It seems like every week we hear news about fluctuating mortgage interest rates. They're up, they're down, they remain unchanged...it's a lot to digest. Educating buyers about how mortgage interest rates work and how changes in rates can affect their loans in process can prove invaluable.

Many factors can influence mortgage rates. The role of the investor, bond prices/yields, other market-driven and policy-driven rates, and lender competition all play a role in determining mortgage interest rates.

Investments
Mortgages are one of the many investment products on the market today that investors "purchase" to realize a profit. Investors, such as Fannie Mae and Freddie Mac, buy mortgage-backed securities, which compete with other investment products in the marketplace and are influenced by the current Treasury bond yields. Mortgage-backed securities also provide fixed coupon payments to investors similar to bonds, but carry more risk and often better returns.

Other Rates
In addition, many other types of interest rates affect mortgage rates. Rates on bonds and securities go up in order to attract investors and the prime and LIBOR rates go down in order to attract borrowers. The Federal Reserve also sets specific rates to ensure stability and balance in the economy, and while the Fed does not set specific targets for mortgage rates, it does indirectly end up influencing them because these rates tend to move in the same direction as other financial interest rates.

Lender Competition
Lenders also compete against each other, balancing what their investors want to buy against what a homebuyer is willing to pay – and what the competition is offering.

Contact me today for more information about interest rates.

Steve Nimmer
Coldwell Banker Mortgage

(912) 604-3834
NMLS #: 186680

A. Joseph Marshall
Coldwell Banker Commercial
Commercial Real Estate Advisor
Savannah, Ga

U.S. Federal Reserve Atlanta District Report 2012 2nd Quarter

The following is from the U.S. Federal Reserve Atlanta District Report.

Real Estate and Construction. District residential brokers indicated that home sales were flat to slightly up compared with year-ago levels. Reports indicated strong sales at the middle price points, while several brokers noted that declining inventories of foreclosed homes were limiting investor-driven sales. Brokers also reported that the decline in inventories has helped stabilize home prices in many areas. Most brokers reported that home prices were flat to slightly up compared with a year earlier. However, contacts continued to note some downward pressure on home prices resulting from low purchase offers and appraisals that were coming in well-below asking and offering prices. The sales outlook among brokers remained positive with most anticipating continued modest year-over-year home sales gains.

District homebuilders reported that new home sales and construction rose modestly compared with year-ago levels. The majority indicated that new home inventories declined further on a monthly and an annual basis. Most builders reported that new home prices were flat to slightly up compared with a year earlier. Price gains were strongest among Florida builders. Contacts noted that multi-family construction remained robust. In the near-term, homebuilders expect sales and construction to post modest gains compared with a year earlier.

Apartment sector gains drove improvements in the District’s commercial real estate markets as occupancies rose and rental rates increased. The region’s office and industrial sectors saw small improvements as vacancy rates moderated somewhat; however, reports on District retail real estate continued to be more mixed. The majority of commercial contractors said that construction activity was flat on a year-over-year basis. The majority of contacts anticipate a modest increase in private commercial construction activity through the remainder of the year, while public works projects are expected to decelerate.

A. Joseph Marshall
Coldwell Banker Commercial
Commercial Real Estate Advisor
Savannah, Ga

U.S. Federal Reserve Beige Book: Atlanta District

By Editors: [bn:PRSN=3214650] Alex Tanzi on June 06, 2012 

The Federal Reserve Atlanta District last week released the April and May data that show moderate economic expansion.

Summary:

Reports from Sixth District business contacts indicated that economic activity continued to expand at a moderate pace in April and May. Reports were somewhat more positive than the previous report, and expectations remained generally optimistic across most sectors. However, uncertainties surrounding the potential impact of developments in Europe weighed on the outlook

Key Excerpts:

Real Estate and Construction. The majority of residential brokers said that home sales exceeded year-ago levels in April and May with many reporting that sales exceeded expectations. Strengthening sales, mostly from cash buyers and investors, were noted by most Florida contacts. Brokers observed that inventory levels across the District continued to decline. The majority of contacts reported that home prices were flat to slightly up on a year-over-year basis. The sales outlook among brokers remained positive with most anticipating year-over-year gains, albeit from very low levels of overall activity, over the next several months.

Banking and Finance. Lending standards remained largely unchanged since the last report, but banking contacts indicated that more applicants were qualifying for loans. Most District bankers commented that demand for refinancing mortgage loans continued to increase; more applicants had ample cash for down payments or enough equity in their homes to meet the loan requirements. Credit availability increased and competition among lenders for loans remained strong. Some bankers mentioned improvements in the general creditworthiness of borrowers and appraisal valuations.


Read the full article at U.S. Federal Reserve Beige Book: Atlanta District

A. Joseph Marshall
Coldwell Banker Commercial
Commercial Real Estate Advisor
Savannah, Ga

U.S. demand for commercial real estate loans up, but lending standards not loosened

From TheReadDeal
January 31, 2012 04:00PM

Summary: While demand for commercial real estate loans are up, lending restrictions from banks reflecting federal policy are not loosened. This is problematic for seekers of new loans and those wanting to refinance.

Key Quotes:
While nationwide demand for commercial real estate loans is up, banks are not loosening lending constraints, it would appear, reviewing figures from the Federal Reserve’s quarterly Senior Loan Officer Opinion Survey on Bank Lending Practices report, released yesterday.

The five- and seven-year commercial real estate loans originated during the boom are beginning to come due in 2012, and many observers have speculated that even borrowers who are not distressed could have trouble refinancing in the current climate. New regulations such as those that demand higher equity ratios, are constraining banks’ lending.


Read the full article at: U.S. demand for commercial real estate loans up, but lending standards not loosened: Fed Report.


A. Joseph Marshall
Coldwell Banker Commercial
Commercial Real Estate Advisor
Savannah, Ga