Mortgage Rates Moving Up

[JPatrick]

The banks I've been watching have raised their 30 year fixed by about .25 to .50 this week.
Anyone else noticing this?

 

[cardude]

Yes, I've noticed. I talked to a rep at Wells Fargo, and she said their rates went up .375 on a 30 year in one week.

However, she expects the rate to fall back down to where it was for some reason, and she told me to hold off. How about that?

Rates are jumping around like crazy right now............

 

[JPatrick]

However, she expects the rate to fall back down to where it was for some reason, and she told me to hold off. How about that?

........

I like the sound of that, but did you get a look at her crystal ball?
Cloudy or clear?

 

[liveitup]

Banks are swamped in refi's and some are pricing rates higher "just because ".It's pure greed,plain and simple.

Find a good mortgage broker and shop around,you can still find rates below 5% on a 30yr fixed.

 

[ziggy29]

Banks are swamped in refi's and some are pricing rates higher "just because ".It's pure greed,plain and simple.

Well, by that logic, isn't all of supply and demand "greed" if it's "greed" to increase prices due to higher demand?

If you have a product and you have suddenly increased demand for it, doesn't Econ 101 indicate higher prices "just because"?

If I have 100 widgets for sale at $50 and I had 1000 people offering to buy them, isn't the natural market response to raise the price to the point where I could still find at least 100 buyers?

If that's "greed," then what is it when businesses *cut* their pricing because of reduced demand? Generosity? Beneficence? Or just plain market forces?

 

[Gotadimple]

Well, by that logic, isn't all of supply and demand "greed" if it's "greed" to increase prices due to higher demand?

If by 'product,' you mean the mortgage itself -- there is no reason to increase rates simply because of demand. Most of the mortgages will be sold back to Freddie and Fannie with the originating bank keeping the mortgage for servicing. Same problem as before.

If by 'product,' you mean the servicing, then raising the rate is pure 'greed,' as if anything, the rate and associated fees should reduce due to supply and demand.

But then, we live in amazing times, don't we?

-- Rita

 

[liveitup]

Well, by that logic, isn't all of supply and demand "greed" if it's "greed" to increase prices due to higher demand?

If you have a product and you have suddenly increased demand for it, doesn't Econ 101 indicate higher prices "just because"?

If I have 100 widgets for sale at $50 and I had 1000 people offering to buy them, isn't the natural market response to raise the price to the point where I could still find at least 100 buyers?


If that's "greed," then what is it when businesses *cut* their pricing because of reduced demand? Generosity? Beneficence? Or just plain market forces?

The recent performance of mortgage backed secutities do not support a 1/2 point + increase in rates since last week.

Why are we spending billions to buy up treasuries,in an effort to lower rates and spur growth?If the lender is going to raise rates due to strong demand,it defeats the purpose of the program.

In a normal business environment I would agree with you,if the supply is limited.Supply is not an issue......There's plenty of mortgage credit available to those who qualify.This isn't about widgets,it's about an economy in a severe recession.

 

[Nords]

The recent performance of mortgage backed secutities do not support a 1/2 point + increase in rates since last week.

The latest move in mortgage rates won't have squat to do with MBSs until the crowd of eager refinancers with high credit ratings (me included) dries up. That may take a few months.

Our refinancing appraiser was easily 75 years old and had been recalled to active duty to handle the explosion in demand. Spouse offered to have him sit in the familyroom dictating his report to her while she typed-- either because she wanted to get this moving or because she was worried that his paperwork overload would outlive him.

Why are we spending billions to buy up treasuries,in an effort to lower rates and spur growth?If the lender is going to raise rates due to strong demand,it defeats the purpose of the program.

I'm not sure I see how this relates to lowering my mortgage payments, putting cash in my pocket a little more quickly than the federal government. Of course it has spurred a sort of growth.

In a normal business environment I would agree with you,if the supply is limited. Supply is not an issue......There's plenty of mortgage credit available to those who qualify. This isn't about widgets,it's about an economy in a severe recession.

I think it's all about supply, because banks & credit unions can't instantly ramp up their workforce to handle the demand. Instead they add fees, raise rates, and even impose waiting lists on their customers-- until they can get around to them. We jumped on the refinancing as soon as we started hearing about delays and appraiser shortages.

A friend of mine is a finish carpenter, which was a very good avocation to be in on Oahu over the last six years. He knows all about demand. Since 2006 his "bid" has consisted of pricing the materials & labor, adding in a 10% profit, and raising the total by 50%. Last year he was raising some totals by 100%, especially for those "demanding" customers in a hurry. He was working 60-hour weeks for most of the last five years to make all that hay, and now he's enjoying a semi-retirement recession until the next upswing.

 

[DblDoc]

I think it's all about supply, because banks & credit unions can't instantly ramp up their workforce to handle the demand. Instead they add fees, raise rates, and even impose waiting lists on their customers-- until they can get around to them. We jumped on the refinancing as soon as we started hearing about delays and appraiser shortages.

This is what our Pen Fed broker told us last Feb when we refinanced. They were using it to control volume of applications.

DD

 

[JPatrick]

This is what our Pen Fed broker told us last Feb when we refinanced. They were using it to control volume of applications.

DD

It it--OK folks, business is great and we are making hay, but this is hard work, so lets get out there and find ways to stifle these pesky profits.

Or is it--OK folks, business is great and we are making hay, I'm convinced the lemmings will pay more, so let's raise our prices.
?

 

[DblDoc]

It it--OK folks, business is great and we are making hay, but this is hard work, so lets get out there and find ways to stifle these pesky profits.

Or is it--OK folks, business is great and we are making hay, I'm convinced the lemmings will pay more, so let's raise our prices.
?

It was that they were overwhelmed with business and this was a way to turn down the spigot.

DD

 

[ERD50]

Or is it--OK folks, business is great and we are making hay, I'm convinced the lemmings will pay more, so let's raise our prices.
?

I don't see why you use the derogatory term "lemmings". What you described is basic supply/demand. We *all* do it, and willingly play the game from both sides. Do you have a better alternative? Do we need a "Pricing Czar" to set the price for every transaction that takes place? That's what the market is for.

Do you charge less for your time than you think the "lemmings" would pay you?

-ERD50

 

[Gpond]

I see nothing wrong with lower housing prices. The intervention to prop up housing prices borders on immoral. The reason the U.S. government is trying to reinflate housing prices is state governments have crafted their budgets with ever rising property taxes.

The last 8 years the mantra was home ownership for all. Raising housing prices and stagnant wages is a formula for what we are seeing now and it ain't pretty.

 

[ERD50]

The reason the U.S. government is trying to reinflate housing prices is state governments have crafted their budgets with ever rising property taxes.

Are you sure about that?

I pay no property tax to the state of IL, only sales and income tax.

My property tax is levied by the County and Local governments. And in my case (not uncommon I believe), the *amount* of my property tax is not affected by house prices, only the distribution of those taxes is based on relative house prices.

If the house next door is assessed at 2X mine, he pays 2X the tax. But (outside of other legislated increases), if all the houses in the district increase or decrease in value by 50%, no taxes would change.

I've found that quite a few people who pay these taxes do not understand that relationship. But in addition to reading the available info, I had a discussion with our County Assessor and she confirmed to me that that is how it works (in our County).

-ERD50

 

[Gpond]

Article from back in 2007 when housing prices started to trend water:

States awash in surpluses for the past two years are now treading water, with several desperately looking for lifelines to help them get out of budget trouble.

A slumping housing market and skimpier sales tax collections are busting budgets from California to Florida at a time when national job growth is sluggish and consumer confidence is at a nearly two-year low.

“The forecast is looking pretty grim,” Sujit M. CanagaRetna, a state tax expert for the Council of State Governments, said. “The implications for states are serious.”

Nasty budget brawls broke out this year in California, Georgia, Illinois and Rhode Island as states’ financial picture appears in transition.

The stalled housing market is pinching states across the board, but more severely for states such as Arizona, California, Nevada and Florida that rely heavily on real estate taxes. A drop in home sales and prices mean states take a smaller cut — both in real-estate-related taxes and sales tax as most people who buy homes also purchase new appliances and carpeting and spend big money on home-improvements. Florida, for example, is particularly dependent on sales tax revenue since it does not have a state income tax.
State budgets tenuous heading into '08

 

[JPatrick]

I don't see why you use the derogatory term "lemmings". What you described is basic supply/demand. We *all* do it, and willingly play the game from both sides. Do you have a better alternative? Do we need a "Pricing Czar" to set the price for every transaction that takes place? That's what the market is for.

Do you charge less for your time than you think the "lemmings" would pay you?

-ERD50

My, my, so upset.
I think of a lemming as one who follows the crowd for the sake of following the crowd. One who goes along with popular opinion without the benefit of appropriate research. Frequently the lemming is lead to a disastrous conclusion.
Your definition likely differs, but using mine, and looking at the overall mortgage industry over the last few years, can you spot the lemmings? Have you seen examples of the industry taking an attitude that the sky is the limit as to what we can sell these "lemmings?" Can you see the unfortunate outcome for those who followed? Shoot, can you see/feel the outcome for those of us who didn't?
So would you think that maybe with todays refi drumbeat reverberating around the country there might be some thought in the industry of heading down a similar, if less dramatic, path?
I'll predict that before the refi boom is over, we will hear cases of usurious fees and rates way beyond the mean.
But I'm with you. Charge what you can while you can. What the heck, that didn't hurt us befire did it??

 

[cashflo2u2]

I never could understand the talk about lower or higher property taxes due to changes in valuations and/or rates (and the resultant effect on municipalities). I would think the only thing that matters is how much the municipality spends in total. The rest is all arithmetic, i.e., dividing the total spending by the aggregate assessment and arriving at the tax rate.

 

[Gpond]

I never could understand the talk about lower or higher property taxes due to changes in valuations and/or rates (and the resultant effect on municipalities). I would think the only thing that matters is how much the municipality spends in total. The rest is all arithmetic, i.e., dividing the total spending by the aggregate assessment and arriving at the tax rate.

Lets put it this way. When you get a pay raise do you spend less?

 

[ERD50]

Kinda tenuous at best. Most of it relates to sales tax. What I questioned in your post was the statement that *property* tax flow/ebb with home prices, and that it is a State level problem. I would also think HIGHER house prices would leave LESS money to be spent on furnishings, etc.

I'd be curious to see a list of States that levy a property tax, and of those, which are based on the absolute value of the property rather than the relative value (like my County).

-ERD50

 

[ziggy29]

I never could understand the talk about lower or higher property taxes due to changes in valuations and/or rates (and the resultant effect on municipalities). I would think the only thing that matters is how much the municipality spends in total. The rest is all arithmetic, i.e., dividing the total spending by the aggregate assessment and arriving at the tax rate.

Well, the thing is, when assessments rise by 10%, many municipalities don't lower the tax rate so that their "take" matches inflation plus population growth. If the tax rate were routinely set this way, you wouldn't see some of the "tax revolts" that can occur when assessments are rising beyond typical wage growth.

What's funny -- well, not "ha ha" funny -- is that assessments may rise 10% and then the city or school district cuts the tax *rate* by 1% and claims to "cut taxes" even though you're paying 8.9% more in city and/or school taxes than the year before.

 

[ERD50]

My, my, so upset.

Not upset, just amazed when people ignore the basics of supply/demand, or twist it to their own view.

The context of our comments was that when the office could not staff up quickly enough to meet demand for their product, they raised the price in order to limit demand, and also maximize their profits. Basic Supply/Demand. If the customers walk away, they will lower their prices until supply/demand reach equilibrium.

It's what we all do, and for a good reason. I don't see any more reason to refer to the buyers as being "lemmings" any more than I would accuse someone of being a "Lemming" because they inhale and exhale, just like all the other "lemmings".

But I'm with you. Charge what you can while you can. What the heck, that didn't hurt us befire did it??

Well I asked - what is the alternative? Can you name one with fewer or less severe negative consequences?

And let's not forget (though I won't follow up on this since the soapbox is closed), the mortgage markets were artificially influenced by government actions to make loans more "affordable" to more people. There were consequences to that.

But it's really separate from the simple issue of an office deciding to raise prices because they can't meet demand. That's basic supply/demand, regardless the product. And the customer can go elsewhere if they don't like it.

-ERD50

 

[Gpond]

Kinda tenuous at best. Most of it relates to sales tax. What I questioned in your post was the statement that *property* tax flow/ebb with home prices, and that it is a State level problem. I would also think HIGHER house prices would leave LESS money to be spent on furnishings, etc.

I'd be curious to see a list of States that levy a property tax, and of those, which are based on the absolute value of the property rather than the relative value (like my County).

-ERD50

From the previous article: The stalled housing market is pinching states across the board, but more severely for states such as Arizona, California, Nevada and Florida that rely heavily on real estate taxes.
-------------
Property tax defined
Property tax is a tax that is based on a property’s value. It is sometimes called an “ad valorem”
tax, which means “according to value.”
The property tax is a local tax imposed by local government taxing districts (e.g., school districts,
municipalities, counties) and administered by local officials (e.g. township assessors, chief county
assessment officers, local boards of review, county collectors). Property taxes are collected and
spent at the local level.
http://www.revenue.state.il.us/publications/LocalGovernment/PTAX1004.pdf

 

[Gpond]

which means “according to value.”

Which means lower value = lower revenue = states budgets have to be cut.

When means less services, layoffs, hiring and pay freezes. Which in turns means, lower revenue because the tax base is smaller.

Which means reinflating housing is the easy way out.

When means if housing keeps falling states will want to feed at the federal bailout fountain.

 

[JPatrick]

I see nothing wrong with lower housing prices. The intervention to prop up housing prices borders on immoral. The reason the U.S. government is trying to reinflate housing prices is state governments have crafted their budgets with ever rising property taxes.
.

Who really knows what runs through the minds of our leaders, but a reasonable reflation of housing prices would be beneficial far beyond enriching the states.
A leveling or reflation of prices would no doubt open the flood gates of willing buyers. Nobody wants to buy a house unless they think it will rise in value or at least maintain. All those new homes need furniture and more, creating additional jobs which leads to more home buyers. Yes, more revenue will flow to the states which allows them to hire more pothole fillers who in turn can buy a house.

 

[ERD50]

Originally Posted by Gpond
which means “according to value.”

Which means lower value = lower revenue = states budgets have to be cut.

Not necessarily. And actually not true in my case (as I described).

Just because the Latin derivative is “ad valorem”
tax, which means “according to value.” , you must consider that there are various ways to implement that. In my case, the value of my house is a consideration, so "according to value" is technically correct. But it is not an absolute connection. A 10% increase in my home value does not automatically mean a 10% increase in my taxes. But if my house is assessed 10% higher than next door, my taxes will be 10% more than theirs.

So "lower value = lower revenue = states budgets have to be cut." does not hold in all cases.

What part of my earlier explanation did you not understand?

If the house next door is assessed at 2X mine, he pays 2X the tax. But (outside of other legislated increases), if all the houses in the district increase or decrease in value by 50%, no taxes would change.

You also didn't bother to quote another line from your source:

Illinois does not have a state property tax

-ERD50