In a recent article (here) by Kathleen Howley, we learn that the current average 30-year mortgage interest rate of 3.24% is within one basis point[1] of its all-time low of 3.23%. According to article:

Fannie Mae projected last week the average this quarter would be 3.2%, followed by 3.1% in the third quarter and 3% in the fourth quarter.

Fannie Mae is forecasting an average of 2.9% for every quarter of 2021.

Continue reading “Interest Rates Dropping – Again!”

In a recent Reuters article (here), authors Ann Saphir and Lindsay Dunsmuir note that the Federal largesse of trillions of dollars currently being spent to address the inevitable fallout from sidelining millions of employees and businesses is far different from 2005 – 2009 when the financial and real estate markets fell into the abyss, causing the Great Recession.

Back then, the government, the press, and many in the public, measured deservedness for bailout funds by the metric of “moral hazard” – i.e. whether giving financial assistance to certain groups would be viewed and encouraging “bad behavior”.

For example with the advent of “no-doc loans” and “liar loans”, borrowers were able to qualify for home loans priced far beyond their ability to repay.  At the time, the lenders and mortgage brokers were able to convince borrowers to “bite off more than they could chew” because if they got into trouble, they could either refinance the home, or resell it. Of course, this advice was based upon the theory that real estate does not go down in value.

But in 2007+ that is exactly what happened. Values tanked, thus resulting in borrowers being unable (a) to refinance – because they had no equity, and (b) to resell – because they were “underwater” i.e. their mortgage exceeded the value of the depreciated home. When that occurred, it meant that to convey title, the seller had to bring money to the closing table. This is what came to be known as “negative equity”. Thus, entered the era of the short sale.

So when the Great Recession hit, federal bailout funds were not available to borrowers who had engaged in “moral hazards” i.e. they had fudged their numbers to lenders (or were viewed as having done so), and ended up with a home that could not be refinanced or resold.  To make matters worse, banks were now chastened, and having seen the light, immediately began to raise their lending requirements to a point that few folks could qualify.

In the end, however, it appears that the yardstick of “moral hazard” was never really applied to the Big Banks, even though they were patently culpable by disregarding common sense underwriting and instead making loans to anyone who could fog a mirror.

The reason for the frivolous lending was simple; lenders sold their loans into the private secondary market, where investors, hungry for higher returns, bought these securities as if they were spun gold. So the Big Banks no longer cared about the financial bona fides of their borrowers, since they no longer carried the loans – borrower defaults became someone else’s problem.  And the rating bureaus, like Moodys and S&P, became enablers in the ruse, by telling investors they were buying “investment grade” products, when they weren’t. See articles here and here.

And what became of the Big Banks who created this Ponzi Scheme?  Well, the political decision was made that “moral hazard” would have to take a backseat to financial stability. In other words, the perps were bailed out for the good of the country.

But today, the picture is far different.  The only fault that can be assigned to the travails of the American people is an errant virus, and it is wreaking havoc to consumers and businesses alike.

It remains to be seen whether Main Street will receive the same help from the government as Wall Street. Unfortunately, even though “moral hazard” is absent this time, the calculus ultimately remains the same: The loss of a Big Bank may still be viewed as more worthy of a bailout than the neighborhood Mom & Pop grocery.  ~Phil

Introduction.  Almost as soon as the COVID pandemic flared up, I began to receive calls asking whether the virus could constitute the basis for refusing to perform under a pending Sale Agreement.  One broker reported that the buyer wanted out of the contract because of “uncertainty”.

These are not altogether unreasonable reactions to performance; after all, we’ve never experienced anything like this pandemic before. However, over the years, comparable issues have arisen, the most obvious being wars, strikes, and natural disasters.  So let’s take a look at how the courts have dealt with these events in the past. Continue reading “Is COVID-19 a Defense to Breach of the Oregon Real Estate Sale Agreement?”

Mortgage rates have just dropped to the lowest level in almost 50 years, compelling both homeowners and home buyers to get off the couch to take advantage of record-level savings on their mortgage.

“The average 30-year fixed-rate mortgage hit a record 3.29% this week, the lowest level in its nearly 50-year history,” said Sam Khater, chief economist of mortgage giant Freddie Mac. “Meanwhile, mortgage applications increased 10% last week from one year ago and show no signs of slowing down.”

To put this record rate in perspective, 3.29% even dips below levels seen during the housing crisis. The average 30-year fixed-rate mortgage dropped to 3.31% in 2012. [More: Go to link here.]

The average U.S. rate for a 30-year fixed mortgage dropped to 3.29% this week

Go to link here.


Expects to continue raising rates in near future

July 5, 2018  Kelsey Ramírez

The Federal Open Market Committee released the minutes from its June meeting Thursday, where the committee elected to raise interest rates for the second time in 2018.

The minutes showed the Federal Reserve is not concerned about the rising threat of a trade war or other economic disruptions.

Many economists are predicting disruptions to not only the U.S. economy but also to the world, predicting gross domestic product could drop by 0.1 percentage points in the U.S. and 0.4 percentage points worldwide due to President Donald Trump’s trade war.

And while the Federal Reserve did mention some global economic challenges during its meeting, they were not the focus and did not seem to affect members’ predictions for the future of rate hikes. [MORE: Go to link here.]

A few years ago, before the real estate market got crazy hot (and before we changed the OREF Sale Agreement form), it wa not unusual for a buyer to submit their preapproval letter to their seller, go under contract, and then try to find other lenders who might offer better rates or terms.

But in 2013, TRID[1] was enacted as a part of the government’s response to the 2007/8 Financial Crisis; Dodd Frank, the massive 2010 2,300 page rewrite of financial regulations (containing another 22,000 pages of administrative rules) was created, and the Consumer Finance Protection Agency, or “CFPB”, became its most prominent offspring. Continue reading “Why Oregon Homebuyers Should Shop Their Loans Before Going Under Contract”

The same factors that have affected area real estate for the last few years—limited inventory and an influx of new people to the area—are still in play. According to Business Oregon’s website, which gets its information from the Bureau of Labor, Bend’s current median home price is $404,000 and the median household income is $60,404.
At a real estate forecast breakfast this week, put on by the Central Oregon Association of Realtors, Hayden Homes’ Geoff Harris said that someone earning $60,000 per year is about $140,000 short of being able to afford the median house cost. Molly Brundage, with BrundageSmith real estate, said there’s only one house in Bend that’s currently for sale under $300,000, which is still too expensive for a standard household.  [MORE: Go to link here]

Some good news from the latest RMLS™ Market Action letter. New listings for May 2017 reached 4,388, which was 5.9% higher than May 2016, at 4,144. This number doesn’t top the 5,182 new listings for May 2008, but then again, maybe that’s a good thing. For those who remember the Bad Old Days, 2008 was the beginning of the end for the real estate market; it was not until September 2012 that housing prices finally began to increase, after a hiatus of exactly five years, i.e. September 2007 was the apogee for housing prices, before they fell over the Abyss. Continue reading “Analysis Of The Portland Metro Residential Market – May, 2017”

disaster03I am convinced there is a professional handwringer class that gains some perverse comfort in predicting the inevitable crash in real estate prices. They point to our indisputably red hot real estate market, and conclude that since it cannot last, it will “collapse”, “burst”, or otherwise come crashing down on our shoulders. Continue reading “Bubble Talk: Why Portland-Metro’s Hot Housing Market Is Not Going To Collapse”