THE IMPACT OF THE TAX CREDIT:

On a national level, Purchase applications plummeted 27 percent last week and have declined almost 20 percent over the past month, despite relatively low interest rates.  The data continue to suggest that the tax credit pulled sales into April at the expense of the remainder of the spring buying season.  In fact, this drop occurred even as rates on 30-year fixed-rate mortgages continued to fall, and are at their lowest level since November 2009....However, refinance borrowers did react to these lower rates, with refi applications up almost 15 percent, hitting their highest level in nine weeks."

On a more local level.......

The data seems to suggest that our local housing market is hotter than the rest of the country. The number of home sales has steadily increased over the past several months and home prices have risen in may local markets too. My own observation is that the purchase market is getting stronger, based on the number of pre-approval letters that I write for clients making offers. Realtors and Title Company friends are also telling me that their business has increased too. I am seeing the higher priced markets moving.

What's Hot!

·         JUMBO's are Back! Fixed rate loans to $1.5M starting at 5.375% are very attractive. Larger loans are slightly higher. Jumbo ARM's start in the mid 4.0%'s.

·         ARM's: The yield curve has steepened making the spread or difference between Adjustable and Fixed rate loans greater. Conforming ARM's are priced in the 3.25% - 4.0%.

·         Buydowns: As if rates are low enough, the 2-1 buydown allows the first year rate to be 2% below the going rate for a fixed rate loan. Example: An interest rate of 3% in the first year, 4% in year 2 and then 5% thereafter for the next 28 years. Other variations are available.

·         Reverse Mortgages: Can be used for purchase or refinance transactions. Perfect for Senior borrowers - particularly those that can't qualify for a traditional mortgage. Qualifying is based on age and equity - not income.

·         Cash-in refinances: According to Freddie Mac, One-third of all refinances now of the "cash-in" variety- where the homeowner pays down the principal balance in order to refinance. Many of the refinances that I have handled over the past year have been cash-in. The reason's are: Homebuyers trying to avoid to mortgage insurance, avoiding jumbo loan limits, low appraisals, or they just can't qualify for a larger loan but want to take as much advantage as possible of today's low rates.

Mortgage Rate Update:

Mortgage Rates continued their slow descent this week as the situation in Greece and other European countries forces investors to the safety of U.S. Treasuries and Mortgage-Backed Securities. Low inflation and continued concern over employment has kept a lid on rates this week. This is all good news for homebuyers and homeowners looking to refinance. We can't expect the slide in rates to continue and when a solution emerges for Europe the rise in rates will be rapid.