We keep referring to last week’s chaotic stock market; let’s just call it a month!  The month’s activity and fears of overseas debt default are really influencing the mortgage market.  Two trends are emerging:  a decline in the average interest rate and a decline in applications for mortgages.  Conventional wisdom is that the two work opposite one another.  Mortgage rates tend to follow the Treasuries and rates continued to fall.  Freddie Mac’s weekly survey of mortgage lenders found that the weekly average rate for a thirty (30) year fixed rate mortgage dropped (again) to 4.84%. The fifteen year fixed rate showed slight decrease at 4.3%.  To obtain the rates, an average of 0.7 point down was required to get the rate.

As recently as February, everyone was expecting mortgage rates to increase to 6%.  That hasn’t happened.  As fears about European debt and a second collapse have mounted recently, investors around the world are moving cash into U.S. bonds.  The cascading result bears a decrease in mortgage rates.  This could be great for the housing market because...

as interest rates decline, buyers have more purchasing power and may be less apt to demand a continued trend in declining prices.  Conventional wisdom holds that a 1% decline in mortgage rates results in a 10% decline in price reduction to a buyer.  This could be just the medicine to hold the fragile stability the housing market is nearing.

Now is a great time to become an active buyer in the market.  The first critical step in this market is to get pre-approved for a mortgage.  Entering the market with an understanding of what is financially possible gives the buyer credibility to sellers and saves everyone a lot of grief down the line.  Start by checking credit history; underwriting standards are the toughest they have been in at least a decade.  Work to discover any incorrect or questionable items and repair these as soon as possible.  While it is a good idea to have 20% down, we are seeing some buyers qualify with less down.  Smart money is on making a smart buy.  Having knowledge specific to a neighborhood you are considering purchasing in is critical.  Our latest monthly reports are out.  High Forest Ranch is a great area of Black forest to consider.  There are currently 52 homes on the market in a wide price range.  For more information, check out our monthly report.