Nashville Real Estate Forum

Weekend Market Update

July 17-18, 2010

I hate using the term “no-brainer.” If you tell someone, “It’s a no-brainer,” they may take it the wrong way and feel personally insulted. So I am not going to say, “To refinance in this market is a no-brainer.” I’ll just say, “This market is a game-changer.”

Defying the experts, mortgage rates have gone down this year instead of up as widely predicted. When you get too many people all saying the same thing, you know Mr. Market will do the opposite just for spite.

For all the folks I have helped earlier in this decade to get an extremely low interest rate---like in the mid 5s or higher---I am no longer going to talk you out of refinancing due to costs, no matter how many mail pieces you get from unknown brokers promising pie in the sky.

It is time to seriously look at refinancing, even if you bought a home or refinanced as recently as eight months ago. Rates have stepped a full leg down during the past 75 days. 4.5% is the new 5.5%. Many people are opting to go to 15 years at around 4% or lower to save hundreds of thousands of dollars of interest over the term of the loan, and to have the imposed discipline to pay down the loan more quickly.

Conventional wisdom during my 34 years in real estate/homebuilding/mortgage banking was that you do not pay down your mortgage---that there are better investments. When you pay down your mortgage, it’s like burying money in the back yard. You don't get to dig it back up. You are avoiding interest and nothing more. But, with “safe” investments like CDs and Treasuries yielding a pittance, it suddenly makes sense to avoid paying interest at 5% or 6% or so.

Stocks sold off hard on Friday on more news about a weak economy, and according to script, Treasuries and mortgage interest rates benefited. The 4% Fannie Mae contract rose 41 basis points this week. A “point” in mortgage world equals 1% of the loan amount, and there are 100 bps (basis points) in one discount point. One point or 100 basis points generally translates into .25% in the interest rate. So, when somebody says “rates fell,” it is more accurate to say it costs less to get such-and-such rate than it did before.

The DJIA dropped 261 points on Friday to close at 10,097 and the S&P 500 lost 31.6 points to close at 1,064. The 10-year Treasury dipped back below 3% yield and closed at a yield of 2.94%. We are looking at the 3% yield mark as a confirming indicator of mortgage rate direction.

Viewing this from another angle, would you be surprised to know that all 15 of the Dow stocks yield more in dividend than the 10-year Treasury?

I do not have the crystal ball, but I do recognize that we are at an all-time low in mortgage rates right now, today, at this time, ahora. I lean toward the concept of locking a low rate while the getting is good. Gut feeling is that this extreme position cannot go on forever or go much if any lower.

Please call me with any questions about the market or to run a free analysis of what a refinance---with cash out or not---would mean for your financial bottom line. Gary Moore 615-579-8658.

30-Year Conventional Fixed

4.375% $100,000-$417,000

15-Year Conventional Fixed

3.875% $200,000-$417,000


30-Year FHA-100% VA

4.5% $100,000-$393,300


30-Year Jumbo Fixed

5.5% $417,001-$900,000

(Interest-only available-Call me)

THDA Great Start

5.35% $100,000-$393,300

4% of sales price Gift

Call for free pre-approval and to discover

the best financing for you!

...by Gary Moore

Mortgage Planner, First Community Mortgage

...a subsidiary of First Community Bank

Cell: 615-579-8658 Toll-free fax: 866-321-6513

"Human-nature will not change." - Abraham Lincoln

Visit my mortgage website:

http://www.BrentwoodHomeLoan.com

(0% points, 1% origination. Market Update informs consumers and Realtors on market trends, offers subjective opinions and is not a quote for a unique borrower.)