Mortgage Rates Improve

While the headlines were focused on the poor performance of the stock market, mortgage rates improved moderately during a volatile week. Mortgage rates were helped by a couple of factors. Seeking to reduce risk, investors sold stocks and moved the funds into relatively safer Treasury bonds and government guaranteed mortgage backed securities. In addition, slower economic growth and lower energy prices reduced expectations for future inflation. More good news for the housing market came from the September Existing Home Sales report, which rose 5.5% from August to the highest annual rate since August 2007.
Another important development was a decline in Libor rates during the week. Libor rates are viewed as a primary indicator of credit market conditions. They are also an important benchmark for setting the rates on many consumer loans, including adjustable-rate mortgages. Libor rates shot higher during the credit crisis when financial institutions became reluctant to lend money to each other. The broad series of recent government actions brought Libor rates down closer to more normal levels. A series of government officials made statements during the week, including Fed Chief Bernanke, former Fed Chief Greenspan, Treasury Secretary Paulson, and FDIC Chairman Bair. The common theme is that the government is ready to take further actions as needed to support the economy and financial markets. Broad support was seen for a second fiscal stimulus package. The decline in the housing market was a key factor in causing the credit crisis, and many proposals are under consideration to help stabilize the housing market and prevent foreclosures. The bottom line, though, is that it will take some time for economic conditions to improve. For more information or for free mortgage advice please email me at corey@frontstreetmtg.com.

Welcome to Our Office

As part of a new advertising campaign we've been doing some photo shoots to show the location of our "offices". A very important aspect of our business model is to get rid of the costs and headaches that come along with a standard bricks and mortar office. This allows us to more closely focus on marketing and introducing new technologies to our clients that will actually help them to buy and sell waterfront property. We wholeheartedly believe that we can be of better service to our clients by spending more time in the field making ourselves aware of available properties and touring properties with our buyers to make sure they find the perfect match for their needs. We are just coming off the peak of our color change up here in Northern Michigan, but it is still spectacular out there. It got down into the 20's last night, so you may want to have a neighbor turn on the heat at your cabin up here if you haven't found time to get up north soon.

One of the greatest things I realized today as we were driving around and setting up shots was how quiet the lakes and rivers of Northern Michigan are this time of year. We were very surprised to see a fly angler fishing The AuSable in front of our cabin when we arrived this morning. It worked out great for the photos! He was equally as surprised having spent the entire morning with the river to himself. If you can make the time to get up this fall it will be well worth the trip. With less traffic and fewer people, you'll get to see a side of Northern Michigan often missed by the summer crowds. The wildlife tends to be more active and the fishing and hunting can be spectacular if you enjoy those past times. We hope to see you soon.

Investor Confidence Slowly Rises

On Monday, the government announced that it will use up to $250 billion of the $700 billion rescue fund to make equity investments in a wide range of financial institutions. Their purpose is to inject capital into the banking system and encourage lending. Many other countries have taken a similar step. This, along with the other government actions, seems to have increased investor confidence in the banking system, and conditions in the credit markets showed signs of improvement during the week. Equity markets were extremely volatile this week, and the stock market ended with moderate gains. Mortgage rates moved in a very wide range during the week as well, but they finished the week nearly unchanged.
In a speech Wednesday, Fed Chief Bernanke suggested that the key tools to "confront and solve" market problems are now in place. He emphasized, though, that financial markets and the economy may take months to recover. Many investors had expected that the rescue plan and other government actions would have a larger immediate impact. Now the general outlook is for economic growth to remain weaker than normal until at least the middle of 2009. Bernanke added that he expects the inflation rate to decline due to a slowing economy and lower energy prices, which would be good news for future mortgage rates. The inflation data released during the week supported the view that inflation rates are slowing. The September Consumer Price Index (CPI) remained flat from August, and the core rate, which excludes food and energy, rose only 0.1% for the month. The Producer Price Index (PPI) reflected an even greater impact from lower energy prices with a substantial decline. For more information or for free mortgage advice please email me at corey@frontstreetmtg.com.

First Time Home Buyer Tax Credit

This is an excerpt from a recently received newsletter from the National Association of Realtors.

WASHINGTON — First-time homebuyers should begin planning now to take advantage of a new tax credit included in the recently enacted Housing and Economic Recovery Act of 2008.
Available for a limited time only, the credit:
Applies to home purchases after April 8, 2008, and before July 1, 2009.
Reduces a taxpayer’s tax bill or increases his or her refund, dollar for dollar.
Is fully refundable, meaning that the credit will be paid out to eligible taxpayers, even if they owe no tax or the credit is more than the tax that they owe.

However, the credit operates much like an interest-free loan, because it must be repaid over a 15-year period. So, for example, an eligible taxpayer who buys a home today and properly claims the maximum available credit of $7,500 on his or her 2008 federal income tax return must begin repaying the credit by including one-fifteenth of this amount, or $500, as an additional tax on his or her 2010 return.

Eligible taxpayers will claim the credit on new IRS Form 5405. This form, along with further instructions on claiming the first-time homebuyer credit, will be included in 2008 tax forms and instructions and be available later this year on IRS.gov, the IRS Web site.