The Great Recession is not the great American equalizer after all. It's been widely reported recently that this recession hit middle and low income families the hardest, while the wealthy have continued to prosper. It may be chic to save and everyone brags about coupon clipping, but the idea that "we are all in this together" may not actually be the case.

According to the Associated Press, incomes have declined across all demographics, but at a greater percentage for middle and lower income groups. "Median income fell last year from $52,163 to $50,303, wiping out a decade's worth of gains to hit the lowest level since 1997." In fact, the gap between the rich and the poor has widened to the point that the wealthiest ten percent of Americans earned 11.4 times those below the poverty line earning $12,000 a year. Previously, the highest earning difference was 11.22 times higher in 2003.

The unemployment rate stands at a thirty year high of 9.7 and a great majority of those job losses have been lower income ones, particularly in construction and manufacturing. While wealthier Americans have had reductions in executive pay, far more of the middle and lower income earners have lost their jobs. This disparity between the rich and the poor is more pronounced in larger cities, like Atlanta, New York and Chicago.

The recession seems to be coming to a close with signs that the economy is finally growing. The Commerce Department reported that the economy shrank less than expected, with gross domestic product dipping just 0.7 percent from April to June, after dropping 6.4 percent in the first quarter of the year (AP). Measuring the value of all goods and services, the GPD is a good barometer of the health of the economy.

The better than anticipated numbers are attributed to businesses and consumers spending more than expected. The better news is largely credited to the government's $787 billion stimulus package and programs like Cash for Clunkers. What is not expected to improve anytime soon is the unemployment rate, which analysts believe will reach 10 percent by the end of the year.

As hiring in most sectors remains stagnate and layoffs continue, the gap between the haves and have-nots is likely to widen. Congress is considering ways to regulate executive pay and this along with The Great Recession is not the great American equalizer after all. It's been widely reported recently that this recession hit middle and low income families the hardest, while the wealthy have continued to prosper. It may be chic to save and everyone brags about coupon clipping, but the idea that "we are all in this together" may not actually be the case.

According to the Associated Press, incomes have declined across all demographics, but at a greater percentage for middle and lower income groups. "Median income fell last year from $52,163 to $50,303, wiping out a decade's worth of gains to hit the lowest level since 1997." In fact, the gap between the rich and the poor has widened to the point that the wealthiest ten percent of Americans earned 11.4 times those below the poverty line earning $12,000 a year.

The unemployment rate stands at a thirty year high of 9.7 and a great majority of those job losses have been lower income ones, particularly in construction and manufacturing. While wealthier Americans have had reductions in executive pay, far more of the middle and lower income earners have lost their jobs. This disparity between the rich and the poor is more pronounced in larger cities, like Atlanta, New York and Chicago.

The recession seems to be coming to a close with signs that the economy is finally growing. The Commerce Department reported that the economy shrank less than expected, with gross domestic product dipping just 0.7 percent from April to June, after dropping 6.4 percent in the first quarter of the year (AP). Measuring the value of all goods and services, the GPD is a good barometer of the health of the economy.

The better than anticipated numbers are attributed to businesses and consumers spending more than expected. The better news is largely credited to the government's $787 billion stimulus package and programs like Cash for Clunkers. What is not expected to improve anytime soon is the unemployment rate, which analysts believe will reach 10 percent by the end of the year.

As hiring in most sectors remains stagnate and layoffs continue, the gap between the haves and have-nots is likely to widen. Congress considering ways to regulate executive pay along with President Obama suggesting higher taxes on the wealthy as one the ways to pay for health care reform, the resentment between the two ends of the income spectrum may also increase. While the Great Recession is the worst state the economy has been in since the Great Depression, some Americans are faring better than others.


Ki's real estate business is based in Austin, Texas. His website gives comprehensive information on Austin real estate. His website provides future home buyers with a free search of homes in the Austin MLS along with a blog with statistics and commentary on Austin Texas real estate.

Mortgage Rates Fell yet again this week. The 30 year fell from 5.04 to 4.94. This marks the 5th week in a row where mortgage rates have either fallen or held steady. For the most part rates have been slowly falling. In fact this week accounts for half of the total fall in the last five weeks. So how does 4.94 look in a historical context. It is the lowest rate we have seen since May 28th. More importantly though it is lower than any rate we have seen prior to March 26, 2009 in the 40 years we have been compiling reliable data on average mortgage rates.

In addition to the 30 year rate the other major mortgage products fell as well. The 15 year fixed fell from 4.46 to 4.36. The 5 and 1 year arm fell from 4.51 to 4.42 and 4.52 to 4.49 respectively. Below are rates from the last few weeks.

Oct 01, 2009
30-yr 4.94 15-yr 4.36 5-yr ARM 4.42 1-yr ARM 4.49

Sep 24, 2009
30-yr 5.04 15-yr 4.46 5-yr ARM 4.51 1-yr ARM 4.52

Sep 17, 2009
30-yr 5.04 15-yr 4.47 5-yr ARM 4.51 1-yr ARM 4.58

Sep 10, 2009
30-yr 5.07 15-yr 4.50 5-yr ARM 4.51 1-yr ARM 4.64

Sep 03, 2009
30-yr 5.08 15-yr 4.54 5-yr ARM 4.59 1-yr ARM 4.62

Mar 05, 2009
30-yr 5.15 15-yr 4.72 5-yr ARM 5.08 1-yr ARM 4.86

So why are rates falling. The fed has been buying mortgage backed securities to keep rates low. But the expectation is that interest rates cannot stay this low forever. Historically rates are abnormally low and at some point they are going to start moving back up. One thing to watch is the government's buying of mortgage backed securities. To stop inflation from getting out of control the fed needs to stop buying securities once the economy starts improving and recently the fed has started to pull back on the volume of mortgage securities they are purchasing.

In addition to rates its also helpful to look at actual mortgage payments to provide perspective. We translated today's rates into a payment on a 200k mortgage. We also did the same thing with rates from September 17th and February 26th.

Oct 01
30-yr $1066.32
15-yr $1515.71
5-yr ARM $1003.88
1-yr ARM $1012.18

Sep 17
30-yr $1078.53
15-yr $1526.92
5-yr ARM $1014.55
1-yr ARM $1022.89

Feb 26
30-yr $1082.21
15-yr $1548.44
5-yr ARM $1080.98
1-yr ARM $1050.53

Looking at the 30 year rate a mortgage payment is pretty similar to 2 weeks ago and 6 months ago. A 200k mortgage 6 months ago would have been 1.46 percent less or $15.89 less a month.

So what is going to happen moving forward. I would expect rates to stay around 5 for the time being. As long as the government continues buying mortgage backed securities we should see rates at historically low levels. Once the market starts to improve rates will start to increase. If the government is careful and avoids inflation rates should likely rise to 6-8 percent. If the government loses control of inflation we could see rates move up into the double digits.

Ki studied at UT. He hosts a website with a graphical Austin home search. His site also has a graph showing mortgage rate trends along with several mortgage widgets.

In need of a loan to buy a house, make repairs on your home or buy a house and make repairs on a home? Are you thinking you might not qualify, though, so you've not started the process? You just might be surprised. The federal government currently has a variety of 18 federal mortgage assistance programs available to eligible homebuyers. Keep in mind, however, that most are for those who have very low- to middle-income and the home mortgaged must be your primary residence.

All available federal mortgage programs and are provided below. Detail for all programs may be accessed on the govloans.gov website by selecting Housing under the Loan Quick Search section. Other websites indicated also provide information about the loan programs.

* Section 203h Mortgage Insurance for Disaster Victims - If you live in a federally declared disaster area and you are a home owner or renter, contact a FHA-approved lender in order to apply or call the FHA for more information at (800) CALL-FHA (225-5342).

* Basic FHA Loan (Home Mortgage Insurance - HUD/FHA) - You may be eligible for this program only if you are a homeowner in need of refinancing an existing mortgage. Check with a FHA-approved lender to see if you qualify and visit the FHA website for more information.

* Combination Mortgage Insurance for Manufactured Home and Lot - The loan title says it all. For more information visit the govloans.gov website.

* Condominium Unit Purchase (Mortgage Insurance - HUD/FHA) - Need assistance in buying a condominium? Visit the govloans.gov website for more information.

* Home and Property Disaster Loans - This program falls under the federal Small Business Administration (SBA) and offers financial assistance to homeowners and renters in declared disaster areas. To apply, call (800) 659-2955, e-mail DisasterCustomerService@sba.gov or visit the SBA disaster assistance website.

* Hope For Homeowners - Is your home at risk of default or currently in foreclosure? If so, this program may be just what you need to save it. For more information, visit the Hope for Homeowners website.

* Indian Home Loan Guarantee Program - Targeted for low-income Native American homebuyers, you can find more information about the program on the govloan.gov website.

* Indian Home Loan Guarantee Program (Section 184) - Native Americans are provided home buying opportunities through this program. For more information and how to apply, check out the HUD website.

* Manufactured Home Loan Insurance (HUD/FHA) - Enables the purchase of a manufactured home. For program contact information visit the HUD website.

* Mortgage Insurance Purchase of a Cooperative Housing Unit - This applies if you want to purchase a townhouse or similar dwelling. See HUD website for more information.

* Property Improvement Loan Insurance (HUD/FHA) - Get a HUD insured loan through a private lender. For more a list of lenders and brochure #2651, call HUD at (800) 767-7468 or visit the HUD website for more information.

* Rehabilitation Mortgage Insurance (HUD/FHA) - You may be eligible to obtain a loan to purchase and rehab a new or existing home. For more information, visit the HUD website.

* Rural Housing Loans - To be eligible for this program, you must have very low- to modest-income. Begin the application process by visiting the USDA website under rural development.

* Rural Housing: Farm Labor Housing Loans and Grants - Applicable to housing for farm labor, get more information by visiting the USDA website under rural development.

* Rural Housing: Housing Repair Loans and Grants - Homeowners with very low-income may be eligible for this program. For more information see the USDA website under rural development.

* Section 203k Rehabilitation Mortgage Insurance - You may be eligible to obtain a loan for a home and repairs needed with this program. Visit the HUD website for more information.

* VA - Home Loans - Interest Rate Reduction Refinancing Loan - Guaranteed loans for veterans, reservists, service members and eligible unmarried surviving spouses. Contact a regional loan center for information for purchasing or refinancing a home. See the VA website for more information.

* VA - Home Loans - Specially Adapted Housing Direct Plan - This program provides supplemental financing for the previously stated VA loan; although, it is rarely used. Visit the VA website for more information.

Ki works as a realtor in the Austin real estate market. He created a website for buyers to search for Austin homes for sale. He also maintains a blog devoted to Austin Texas real estate market which has regularly posted statistical updates.

Marshalls are preparing to put Madoff's mansions on the market, and victims of his ponzi scheme are hoping to cash in big time. Based on court records, the FBI is revving up to sell an estimated $30 million in real estate and property, all of which will go to his victims. The three homes on the way to market are a penthouse in Manhattan, a Montauk beach house on Long Island and a waterfront Palm Beach retreat.

Vacation real estate Madoff owned in Côte d'Azur that was seized by the feds back in March has since been sold. The chic three-bedroom Cap d'Antibes home netted $1.48 million noted the Justice Department. Funds from the sale are being held at the U.S. Marshall's office.

Marshalls opened the doors to Madoff's Manhattan luxury penthouse earlier in September giving the public a glimpse into the lifestyle of the previously rich rip-off artist. The two-story apartment was the location of Madoff's confinement during his house arrest.

Four fireplaces, a baby Steinway piano, antique rugs, custom-made furniture and other fine furnishings must have made Madoff quite comfortable while carrying out his Ponzi scheme. U.S. Marshall Roland Ubaldo said that the Manhattan penthouse was the crown jewel of all Madoff's properties seized by the government. It's easy to see why with all the lavish decorations and furnishings.

A wraparound terrace provides a stunning view of southern Manhattan. His and her closets contain Madoff's handmade Belgian shoes and boxes of designer clothing that are all packed away and awaiting auction. His den does not disappoint, either, with cherry paneling and a leather bull - his personal trademark.

According to court filings, the apartment was valued at $7.5 million by the FBI. One New York appraiser has his doubts about the appraisal. Miller Samuel appraiser, Jonathan Miller, said that what he'd seen of it so far would be considered fairly modest, in his opinion. He cited that it was not actually a Park Avenue duplex, which is what the press coverage had been calling it. Its address is on 64th Street and it sits a block east on the corner of Lexington.

The Montauk beach house with 3,000 square feet of living space sits on a one-and-a-half acre prime lot atop a bluff overlooking an ocean beach. It sits closer to the water's edge than would be allowed today due to earlier more lax zoning regulations.

Feds estimate its worth at $7 million, but tax assessments indicate its value at $3.3 million. Regardless, one real estate agent noted that the history and high-profile of the home may cause it to sell for as much as $10 million. Purchased in 1980, the Madoffs originally only paid $250,000 for the home.

Listed under Madoff's wife's name, the Palm Beach hideaway is valued at $7.5 million. Featuring a pool, 8,753 square feet of living space, five-bedrooms and seven-bathrooms, the two-story home sits on a waterfront half-acre plot. Included in the property is a boat dock where Madoff parked his now-seized yacht, the Bull. It is a 55-foot fishing vessel reportedly worth $1.5 million.

Well shaded by lots of large trees and a large second-floor veranda, the house sits just down the shore from a location where Madoff lured in many of his victims, the Palm Beach Country Club.

Madoff is making amends in his not-so-luxurious jail cell and the hope is that the victims he left as carnage will be reimbursed for some of their loss and suffering.

Ki lives in Central Austin. He works in the Austin real estate market. His website lets people search the Austin MLS. His site also has information on Austin real estate as well as a search for Homes in Pflugerville

News articles throughout the U.S. headline stories about indictments for mortgage fraud. Although you may think you could never be scammed, you should think again.

Above-average, intelligent, middle-class professionals have been duped as well as the average Joe. Almost no one is beyond the long arm of a mortgage scammer's reach. You can, however, become better educated in the antics of fraudsters in order to thwart the most common scams used.

Today, the most common mortgage scams played out in the media are perpetrated against those who are in danger of losing their homes to foreclosure and homeowners who are eager to sell their properties. Other types of mortgage fraud exist, too, though.

A good example of fraudulent practices against homeowners facing foreclosure is in the case of a recent Florida indictment. One financial company with offices statewide was indicted on several counts of defrauding trusting homeowners in default or facing foreclosure. Promising to help homeowners who were in default of their mortgages to keep their homes, the company was taking money from the homeowners without providing any assistance. Homeowners ended up losing their homes to foreclosure. More often, low-income and Hispanics were the victims.

In order to avoid mortgage fraud, you'll want to understand the motivation behind it. There are two basic classifications of mortgage fraud - fraud for property or housing and fraud for profit.

Fraud for property or housing typically occurs when a potential homebuyer desires certain property that they clearly cannot afford. The borrower submits intentionally fraudulent information regarding income, employment, assets or debt in order for the income to appear inflated qualifying the applicant for the loan. This is done with the thought that no one will dig deep enough to discover the facts. Sometimes, the borrower will enlist family members or mortgage professionals to assist in the fraud.

Lenders, however, often detect this kind of fraud through thorough review and validation of documents and by keeping diligent records. Contrary to what many might think, it is against federal law to assert intentional incorrect information on loan applications. Those who do are at risk of being charged with a felony and serving time in prison.

Fraud for profit scams often involve a group of mortgage professionals who defraud a potential homebuyer, a potential lender or a homeowner in danger of foreclosure. One example of this is a mortgage scam played out in the Midwest just recently. A builder, real estate broker, mortgage broker, and appraiser were all involved in a scam to inflate the value of homes in order to skim off the excess of the actual value. The difference of the value of the home versus the loaned amount was distributed among everyone involved in the scam.

After the discovery of the fraud, homeowners find out that they are stuck with paying for property that is valued less than what they actually loaned. Lenders, on the other hand, were forced to foreclose on some of these properties that ended up being worth far less than the amount owed on the property.

Another example may be the case of a dishonest mortgage broker who presents loan documents for a straw buyer - a buyer who does not exist, so fraudulent information is presented on the loan documents to create the illusion of a real buyer who can afford the property. The loan is dispensed and the mortgage broker walks away with the money with no intent to live in the home or pay for the property.

Sometimes straw buyers are represented by real people who participate in the fraud for financial gain. This often occurs, again, when there is no intent to live in the home and often with no intent to pay for the mortgage.

There are more mortgage fraud examples than there is space to write about them. The Federal Trade Commission (FTC) provides thorough information on mortgage scams and how to avoid them. Just go to their site at ftc.gov and search under look for the tabs under Consumer Protection. You'll find all you'd ever want to know about how mortgage fraud occurs and how to avoid it.

If you are facing financial difficulties that are making it difficult to pay your mortgage payments, you may want to enlist the assistance of an experienced financial advisor. If you do, however, make sure the company you hire is reputable. Check with your lender to see what programs they may offer or if they can refer you to a reputable financial advisor. You may also want to visit Fannie Mae or Freddie Mac sites for new federal programs available.

In addition, free advice is available through the U.S. Department of Housing and Urban Development (HUD) certified agents. Speak to a HUD certified housing counseling user by calling (888) 995-HOPE.

Ki works and lives in Austin. He has been involved with Austin real estate for a decade. His site escapesomewhere.com developed a Austin MLS search with houses and commercial properties. His site also has a Austin real estate blog with news and statistics.

The recent headlines have trumpeted a rebound in the American housing market. According to the Associated Press, July's 7.2 percent increase in home sales was the biggest month-to-month jump in the last ten years. But before breathing a sigh of relief and checking Zillow for increased home values, it might be a good idea to look at the story behind the new and improved numbers.

A big chunk of the recent increase is first-time home buyers taking advantage of the tax credit. One third of recent home sales are due to the $8000 incentive for first-time home buyers, which will end in November. Another third of the recent sales across the nation are actually foreclosures. According to a recent report on NBC news, home prices overall are down 23 percent in the last year, largely due to the number of foreclosures across the country.

NBC news broke down the numbers even further, showing that the biggest surge in home sales are for homes under $100,000. While sales of homes in this price range rose an impressive 39 percent in the last month, sales for homes over $250,000 are actually down. In fact, the higher the price tag the fewer homes are selling.

Better numbers in several sectors of the economy, including housing, have led Federal Reserve Chairman Ben Bernanke to announce that the U.S. economy is on the verge of recovery. He said at a Federal Reserve conference in Wyoming that "the prospects for a return to growth in the near term appear good." Not a resounding endorsement of the world economy, but certainly keeping to the more positive tone he has taken lately.

According the Associated Press, Bernanke continues to stress the importance of freeing up consumer credit, stating this is the key to any kind of long term economic recovery. However, banks continue to be careful with lending to consumers. Mortgage defaults remain at an all time high--which brings us back to the housing numbers. While foreclosures continue to less of a factor in Austin as they are in other parts of the country, they are taking a toll on the economy as a whole.

As the latest housing numbers have indicated, foreclosures are great for bargain hunters but bad for the housing sector and the overall economy. It only takes one foreclosure in a neighborhood to skew the assessment of overall home values in that area. Mortgage defaults that lead to foreclosures cost banks a significant amount of money. The banks in turn raise rates on credit cards and fees to recoup some of these losses, along with making fewer loans overall.

The real estate industry is lobbying Congress to get an extension on the first-time buyers' tax credit, because many industry analysts are predicting a plunge in the housing numbers after November. "I would not be at all surprised to see a dip at the end of the year once the tax credit expires," Robert Dye, senior economist with PNC Financial Services Group, told the AP.

Austin continues to weather this long recession better than the rest of the country, but let's hope the story behind the national numbers gets better.


Ki moved to Austin for school. After graduation, he started working in the Austin real estate market. He has a website where future owners can search the Austin MLS. His website also has a blog with updates in Austin Texas real estate.

With real estate vacancies on the rise and new construction having taken a sharp downturn, many cities across the nation are coming up with some clever and creative methods to entice new building construction into their respective areas.

Although home sale numbers may be resurrecting in some cities, this is not the case for most. Not only are home sales down, but new home construction has hit rock bottom in many major cities.

Commercial vacancies are also steadily climbing, which have caused the lending industry to raise the bar in obtaining new construction loans. Builders are now struggling more than ever with a variety of costs, and are much more hesitant in a down economy to begin new projects.

Insightful U.S. cities are noticing the significantly diminished number of new building permits, and are responding. In order to kick start the slumping industry, many cities are cutting various impact fees typically charged to builders. Generally, impact fees are one-time fees charged on new construction to pay for infrastructure for the new development, like roads, sewer systems, curbing, lighting, schools, parks and other community needs.

The hope is that the savings will entice developers to complete or build-out existing construction and encourage new residential and commercial development.

Earlier this year, the City of Harrisburg, Oregon, cut in half what are called the city's Systems Development Charges. These are the fees the city bills home builders pay per house. City officials stated that the reduction in fees saved new home builders nearly $5,000 per house, a savings that is supposed to be passed along to the buyer. The city's program ended August 1.

Following suit with numerous other local California governments, Riverside County reduced their impact fees to builders just this month. The California Building Industry Association says it's a growing trend that's paying off. Riverside officials voted to cut development fees by 50 percent for one year effective August 15. That adds up to a savings of about $2,100 per single-family dwelling. In addition, the Western Riverside Council of Governments will consider a reduction in the Traffic Uniform Mitigation Fee (TUMF) that currently cost builders $10,000 per home.

Naples, Florida, made history in cities that are considering the reduction of impact fees. Known to charge the highest impact fees in the state, the city was one of the first to consider lowering impact fees in January of this year. The county's commissioners voted to suspend certain impact fees for two years. Benefactors of the suspended fees will primarily be existing commercial property owners who change the use of commercial space listed on the building permit.

Arizona state government initially rejected, and then subsequently approved, a budget that included a two-year suspension for impact fees assessed by city governments relative to construction sales and building codes, along with reduced assessments for commercial property tax. The National Association of Office and Industrial Properties (NAIOP) and Home Builders Association of Central Arizona (HBACA) had been petitioning for a three-year moratorium on impact fees.

In attempts to bolster commercial development, Meridian, Ohio has also jumped into the fray. Officials have waived impact fees for fire and police for all commercial building permits through September 30, 2009.

Boise, Idaho Mayor Dave Bieter has deferred fees for building permits and inspections for new construction. The fees are not due until the occupancy permit is issued by the city. In addition, impact fees for fire, police and parks are being deferred.

The trend seems to be catching fire throughout the nation; although it is unclear as to what extent these deferred, reduced or eliminated impact fees will benefit the community in the long-run.

Ki has been interested in Austin real estate since graduating from the University of Texas. His website has a graphical search for Austin homes for sale. His website has statistics and information on Austin real estate and commercial real estate.

State and local governments across the nation are gearing up to spend federal stimulus funds. The U.S. Department of Housing and Urban Development (HUD) birthed the Neighborhood Stabilization Program (NSP) that provides federal stimulus dollars to assist neighborhoods hardest hit by the home foreclosure crisis. The NSP falls under the umbrella of the American Recovery and Reinvestment Act (ARRA).

HUD's intent for the NSP is to provide assistance to more than 500 communities, cities and counties across America in the form of rent relief, for homeless prevention and to assist low-income families to buy homes. Organizations that are eligible for NSP funding are cities, non-profit agencies and housing authorities.

St. Lucie and Martin Counties in Florida hope to receive some $7.5 million in stimulus dollars. The counties recently applied for the funds through the state's Department of Community Affairs. Both counties intend on buying foreclosed homes, renovating them and selling them to low-income homebuyers. The other initiative for the funding will be to weatherize neighborhood homes.

Fresno County, along with the City of Fresno, has received a total of $18 million in NSP funding to address the abundance of local area foreclosed homes. Officials have already interviewed several developers that will be hired to buy, renovate and sell or rent the homes to low-income families.

Blighted areas will benefit the most from the funds. A byproduct of the dollars will be construction jobs associated with renovating the properties.

Massachusetts may see some activity soon in many of their local cities and neighborhoods, since the state applied for funds in the total of $54 million. Boston Community Capital, alone, applied for $50 million in NSP funds in order to broaden the organization's ability to assist the state's residents who are facing foreclosure on their homes. The group has already committed $4 million in assistance to purchase abandoned property, loan funds to small developers renovating vacant properties and assist struggling homeowners in keeping or buying back their homes.

Connecticut has thrown their hat into the ring for $45 million in NSP dollars, which will target the state's four most hard hit cities. The Connecticut Consortium falls under the state's Department of Economic and Community Development (DECD), and will be responsible for allocating the funds to local communities. Low- to middle-income families will be the primary beneficiaries of the program.

Chicago received $5.4 million in stimulus funds earlier this year. The city's goal is to reinvest profits made from selling renovated properties back into other foreclosure properties.

Ohio was allocated $45 million NSP dollars to jump start the housing market in blighted neighborhoods. The intent is to allocate the stimulus money quickly, so that communities will be enabled to attack the growing numbers of abandoned and boarded up homes.

Kentucky was awarded $44 million, Evanston, Illinois applied for $39.4 million and Virginia received $45 million. Brad Pitt even entered the fray with his Make It Right Foundation. If funding is approved, it will benefit New Orleans and a project the group will launch in Newark, NJ. His organization, as part of a consortium of non-profits, is asking for $65 million.

Ki works to help buyers searching for Austin Texas real estate. He has worked in real estate for almost a decade. He maintains a searchable Austin MLS directory on his website. His site has current information on mortgage rate trends.

Mortgage rates fell this week to the lowest point since May 28, 2009. Whether May 28, 2009 is the summer is open to some debate. The summer solstice usually is considered the technical beginning of summer which occurred on June 21st this year. Some consider Memorial Day the beginning of summer which was May 25th. Either way this is the lowest we have seen the 30 year mortgage rate in the last 3 months.

The question of course is why mortgage rates are falling. Generally once the economy starts improving interest rates should rise. I think what has happened is that while the actual economy has improved the expectations about the economy have fallen. During the last 2 months people thought the economy might experience a V shaped recovery. Basically once the economy turned around it would recover quickly.

But since that time more people are now expecting a U shaped recovery. Basically the economy is going to recover but it's going to occur more slowly. On the positive side these lower expectations could be lowering mortgage rates. Here are mortgage rates for the last few weeks.

Aug 20, 2009
30-yr 5.12 15-yr 4.56 5-yr ARM 4.57 1-yr ARM 4.69

Aug 13, 2009
30-yr 5.29 15-yr 4.68 5-yr ARM 4.75 1-yr ARM 4.72

Aug 06, 2009
30-yr 5.22 15-yr 4.63 5-yr ARM 4.73 1-yr ARM 4.78

Jul 30, 2009
30-yr 5.25 15-yr 4.69 5-yr ARM 4.75 1-yr ARM 4.80

Jul 23, 2009
30-yr 5.20 15-yr 4.68 5-yr ARM 4.74 1-yr ARM 4.77

As we can see for the last few weeks the 30 year mortgage rate has been hovering from 5.20 to 5.29 until this week when it abruptly fell to 5.12. In addition to rates we like to look at mortgage payments. We took today's rates and translated them into a mortgage payment for a 200k loan. We also did the same thing with rates from August 6 (2 weeks ago) and rates from January 15 (6 months ago).

Aug 20
30-yr $1088.35
15-yr $1536.12
5-yr ARM $1021.7
1-yr ARM $1036.07

Aug 06
30-yr $1100.69
15-yr $1543.3
5-yr ARM $1040.88
1-yr ARM $1046.91

Jan 15
30-yr $1068.75
15-yr $1545.36
5-yr ARM $1104.4
1-yr ARM $1060.23

As we can see there is some savings compared to 2 weeks but nothing too substantial. Compared to 6 months ago a mortgage payment would be 1.83 percent more. So basically we are seeing rates and mortgage payments slightly higher than 6 months ago and slightly lower than the last few months.

What we are going to see moving forward depends on the economy. If we experience a V shaped recovery we should expect mortgage rates to move up quickly. This is because the massive amount of money the US government has poured into the economy during the recession should lead to inflation when the economy recovers. But if the economy experiences a U shaped recovery and continues to lurk around in the doldrums we should see low interest rates for the next few months.


Ki lives in central Texas and works in the real estate market in Austin. His website escapesomewhere provides a mortgage rate widget along with a mortgage calculator widget.

News headlines throughout major U.S. cities note record-high commercial vacancies, along with a decrease in the asking price for commercial rental space. As was predicted by several major real estate statisticians earlier this year, the next real estate bubble to burst is commercial properties.

Based on statistics compiled by Cushman & Wakefield (C&W), the commercial vacancy rate hasn't been this high since mid-2005. C&W, a global commercial real estate brokerage and consulting firm, found that vacancy rates increased in 24 of the 32 major markets they surveyed.

Colliers International, a global commercial real estate service provider, noted that rental office space is becoming abundantly available. Nationally, office space vacancies in major business districts jumped from 12.5 to 13.74 percent in the second quarter of 2009. Suburban markets increased 1.95 percent to 16.28 percent. In addition, the firm found that the asking rent in major districts dropped by 3.2 percent during the quarter to an average of $38.25 per square foot. Average asking rent in U.S. cities overall, however, are now more often priced at around $25.00 per square foot.

Both firms note that the market has been pummeled by increased supply and a decline in demand due to the economic downturn. Executive Managing Director Maria Sicola asserted that elevated unemployment numbers translate into the reduced demand reflected in higher vacancy rates. More than 66% of 6.5 million square feet of newly constructed commercial space was still vacant at the end of the second quarter of 2009.

Michael Cohen, a research strategist for Property & Portfolio Research (PPR), stated that the firm's expectation was that vacancies would reach historic highs in office, apartment and warehouse space in 2009. According to ING Clarion Real Estate Managing Director David Lynn, the hospitality market has been dealt the biggest blow with major cutbacks in business and leisure travel.

Most cities across the nation are experiencing a rise in commercial vacancies. Phoenix has a 17.4 percent vacancy, Chicago's is at 15.4 percent, Washington, D.C. holds an 11.7 percent rate, Las Vegas exceeds 20 percent, Kansas City is higher than 18 percent, Providence, Rhode Island is now over 30 percent, and so on.

Along with the rise in commercial vacancies, insurance companies are becoming more concerned about liability associated with vacant real estate. Vacancies present additional risks not applicable to occupied real estate. Commercial insurance companies are encouraging owners of vacant real estate to minimize risk by implementing the following:

* Notify insurance company of vacancy, become informed and follow policy terms that apply to vacant property.
* Advise local authorities that property is vacant.
* Remove all combustibles, debris and any unnecessary materials from vacant property.
* Inform local fire department of materials left that could impair fire-fighting.
* Inspect property weekly, have someone watch the property or hire a guard service to daily drive by to observe property.

With real estate vacancy numbers not anticipated to see daylight for some time to come, this is wise advice, indeed.

Ki moved to Austin to attend college, and stayed to work in Austin real estate. He created a website encouraging buyers to search for Austin homes for sale. His site also has information on Austin Commercial real estate and general information and statistics on Austin real estate.

Mortgage rates rose again this week. This is the third time in the last 4 weeks that mortgage rates have risen. Why are mortgage rates rising? There are numerous factors at play but generally once the economy recovers it's expected that inflation, and mortgage rates, should rise. The last month of generally positive economic news has probably helped nudge mortgage rates up. Although rates are increasing they are increasing in small steps and not large strides. Since July 16th the 30 year rate has only moved from 5.14 to 5.29. While this is interesting it's certainly not a huge move upward. What is interesting is that the current (small) upward movement in mortgage rates might be the beginning of the rise that many in the financial industry have predicted. If the economy continues to rebound this could be the beginning of mortgage rates steadily moving up to 10% or higher. This is of course dependent on the continued movement of the US economy out of the current recession. While the government has made some statements about curbing inflation it seems more concerned with making sure the US exists the recession. Of the 4 major indexes 3 moved up this week. The 30 year note rose from 5.22 to 5.29, the 15 year mortgage rose from 4.63 to 4.68 and the 5 year arm rose from 4.73 to 4.75. The 1 year arm fell from 4.78 to 4.72. What is also interesting is that when rates were at their lows a few months ago the 5 and 1 year arm was higher than the 30 year fixed rate, which is highly abnormal. Since the 30 year rate has gone up (and the arms have stayed down) the 30 year rate is now above both arms. And now the spread between the 30 year rate and the arms is back to normal. Below are the rates for the different mortgage products for the last few weeks and for January 15 (6 months ago). Aug 13, 2009 30-yr 5.29 15-yr 4.68 5-yr ARM 4.75 1-yr ARM 4.72 Aug 06, 2009 30-yr 5.22 15-yr 4.63 5-yr ARM 4.73 1-yr ARM 4.78 Jul 30, 2009 30-yr 5.25 15-yr 4.69 5-yr ARM 4.75 1-yr ARM 4.80 Jul 23, 2009 30-yr 5.20 15-yr 4.68 5-yr ARM 4.74 1-yr ARM 4.77 Jul 16, 2009 30-yr 5.14 15-yr 4.63 5-yr ARM 4.83 1-yr ARM 4.76 - - - Jan 15, 2009 30-yr 4.96 15-yr 4.65 5-yr ARM 5.25 1-yr ARM 4.89 In addition to rates it's always interesting to look at actual mortgage payments. We took today's rates and using a mortgage calculator translated them into a payment for a 200k mortgage. We also did the same thing with rates from July 30, 2009 (2 weeks ago) and January 15, 2009 (6 months ago). Aug 13 30-yr $1109.36 15-yr $1548.44 5-yr ARM $1043.29 1-yr ARM $1039.68 Jul 30 30-yr $1104.4 15-yr $1549.47 5-yr ARM $1043.29 1-yr ARM $1049.33 Jan 15 30-yr $1068.75 15-yr $1545.36 5-yr ARM $1104.4 1-yr ARM $1060.23 As we can see that while rates have risen the effect on a mortgage payment (looking at the 30 year fixed rate) is relatively small. So what is our advice to potential buyers looking for a mortgage? I would start the process of looking for a lender/mortgage early on. Financing is stricter than it has been in the past and its good to start the process early so any potential problems can be resolved (i.e. credit report problems or extra documentation that is needed). Additionally, with a possible spike in inflation looming there is more of a risk of rates rising than falling so it makes sense to lock in early.

There is a provision in the Housing and Economic Recovery Act of 2008 that allows first time home buyers the ability to receive a credit on their taxes of up to $7,500 for purchasing a home. There is also a provision in the American Recovery and Reinvestment Act of 2009 that expands this tax credit for qualified first time home owners. The provision is called the first-time homebuyer credit.

The 2008 first-time homebuyer credit was created to infuse the slumping housing market, and is treated like an interest-free loan. Qualified participants were required to repay the loan interest-free over a period of 15 years, making 15 equal annual payments. You can find more details about this tax credit on the IRS website.

The provision in the American Recovery and Reinvestment Act of 2009 increased the first-time homebuyer tax credit to $8,000 for purchases made January 1 - November 30, 2009. In contrast to the 2008 tax credit, new home owners do not have to repay the credit as long as they do not sell their home within three years of closing on the home.

You need to be armed with the facts before you go to purchase a home on the assumption that you'll receive the credit. The following FAQs will help you navigate through the quagmire of confusion that has surrounded this tax credit.

* Who is eligible? Taxpayers who have not owned a home within the U.S. three years prior to purchasing a new or resale home in the United States. The closing and transfer of title on the home must be completed between April 9 and December 31, 2008 for the 2008 credit, and between January 1, 2009 and November 30, 2009 for the 2009 credit.

* What is the amount of credit? The credit allows for 10 percent of the purchase price. The maximum credit is $7,500 for 2008 and $8,000 for 2009.

* Are there income limits? Income limits are $75,000 for a single filer and $150,000 for a couple filing jointly. The IRS bases the credit on your modified adjusted gross income (MAGI). Your MAGI equals your adjusted gross income (AGI) plus IRA contribution deductions, foreign housing deductions, student loan deductions, higher education expense deductions and foreign income. Partial credit is available to some with higher MAGI.

* Does my home qualify? The home qualifies if it is the taxpayer's principal residence, is located within the U.S. and purchased between April 9, 2008 through July 1, 2009 for the 2008 tax credit, and January 1, 2008 through November 30, 2009 for the 2009 tax credit. For new construction, the date you actually occupy the residence will be considered the purchase date.

* What if I don't owe taxes or I'm exempt from filing? It doesn't matter. The credit applies to qualified applicants regardless of filing requirements, even to those who do not owe taxes or are exempt from filing. You may file solely to claim the first-time home buyer credit.

* How do I claim the credit? Although you are not required to claim the credit, you may do so by filing a Form 5405. You'll need to file the form with the applicable 2008 or 2009 federal income tax return.

* Does the tax credit act as a tax deduction? No. A tax deduction only diminishes the amount of income taxed. For instance, if the taxpayer's AGI is $40,000, then a deduction would reduce the amount taxed by $8,000, depending on the amount of applicable credit. The taxpayer would be taxed on the remaining amount of $32,000. Instead, the credit is directly deducted from what the taxpayer owes the government. If the taxpayer owes $2,000 to the IRS, then $6,000 would be the amount refunded to the taxpayer. If the taxpayer owes nothing, then the entire $8,000 would be refunded, depending on the applicable credit.

Ki has sold Austin real estate for almost 10 years. He works with a variety of buyers. His website offers listings directly from the Austin MLS. His site also has general information on Austin real estate and a mortgage widget to keep up to do on current trends with mortgage rates.

Mortgage rates continue to fall this week. The 30 year rate fell from 5.32 to 5.20. While this is not lower than the rates we saw a few months ago this is lower than any recorded rate before the start of 2009. The 15 year rate fell as well dropping from 4.69 to 4.63. In the last 5 weeks rates have fallen steadily each week going from 5.59 to 5.14. Below are rates from the last 5 weeks and rates from December 31, 2009 (6 months ago).

Jul 16, 2009
30-yr 5.14 15-yr 4.63 5-yr ARM 4.83 1-yr ARM 4.76

Jul 09, 2009
30-yr 5.20 15-yr 4.69 5-yr ARM 4.82 1-yr ARM 4.82

Jul 02, 2009
30-yr 5.32 15-yr 4.77 5-yr ARM 4.88 1-yr ARM 4.94

Jun 25, 2009
30-yr 5.42 15-yr 4.87 5-yr ARM 4.99 1-yr ARM 4.93

Jun 18, 2009
30-yr 5.38 15-yr 4.89 5-yr ARM 4.97 1-yr ARM 4.95

Jun 11, 2009
30-yr 5.59 15-yr 5.06 5-yr ARM 5.17 1-yr ARM 5.04

Dec 31, 2008
30-yr 5.10 15-yr 4.83 5-yr ARM 5.57 1-yr ARM 4.85

So the question remains after rising a few months ago why are rates suddenly falling. Part of it can be attributed to the negative economic news that has been coming out. While the economy is not necessarily getting worse the recovery seems to be moving slower than first thought. The slow recovery has put the breaks (for now) on inflation fears and has probably helped to push down interest rates as well. This is of course good news for the real estate market. The longer rates stay low the better the prospects for the real estate market to get rid of some of the excess inventory that has built up over the last few years.

In addition to rates we like to look at mortgage payments. Using our free mortgage calculator we looked at mortgage payments based on today's rates for a 200k mortgage.

Jul 16
30-yr $1090.82
15-yr $1543.3
5-yr ARM $1052.96
1-yr ARM $1044.5

We also did the same calculation on rates from 5 weeks ago (when rates first started to fall) and rates from the beginning of the year.

Jun 11
30-yr $1146.89
15-yr $1587.84
5-yr ARM $1094.51
1-yr ARM $1078.53

Dec 31
30-yr $1085.89
15-yr $1563.93
5-yr ARM $1144.37
1-yr ARM $1055.38

As we can see the drop in rates over the last few weeks is rather significant. A mortgage payment would be 4.88% less today than it was 5 weeks ago. For a 200k it would be $56.07 cheaper a month.

So what is going to happen in the future? It's hard to tell and I will be the first to admin I was pleasantly caught off guard by the recent drop in rates. While its hard to know what is going to happen in the next few weeks over the next 6 months I would expect rates to rise significantly as the economy starts to recover. Over the next few weeks I would expect there is more of a risk of rates rising than falling simply because rates are incredibly low now.


Ki works as an agent in the Austin market and enjoys spending his free time in the hill country. His site provides information on mortgage rates along with a free mortgage calculator. It also provides extensive information on Austin Tx real estate.

After falling from 5.59 to 5.38 the previous week it looks like mortgage rates for the most part held steady this week. Of the four major mortgage products two fell and two rose. But for all four the movement was minimal. Thirty year mortgage rates rose from 5.38 to 5.42 and the 5 year arm rose from 4.97 to 4.99. The 15 year rate dropped slightly from 4.89 to 4.87 and the 1 year arm fell from 4.95 to 4.93. Below are rates for the last few weeks.

Jun 25, 2009
30-yr 5.42 15-yr 4.87 5-yr ARM 4.99 1-yr ARM 4.93

Jun 18, 2009
30-yr 5.38 15-yr 4.89 5-yr ARM 4.97 1-yr ARM 4.95

Jun 11, 2009
30-yr 5.59 15-yr 5.06 5-yr ARM 5.17 1-yr ARM 5.04

Jun 04, 2009
30-yr 5.29 15-yr 4.79 5-yr ARM 4.85 1-yr ARM 4.81

May 28, 2009
30-yr 4.91 15-yr 4.53 5-yr ARM 4.82 1-yr ARM 4.69

Dec 24, 2008
30-yr 5.14 15-yr 4.91 5-yr ARM 5.49 1-yr ARM 4.95

So while the 30 year rate has dropped from its recent peak of 5.59 on June 11, 2009 we are still up from the extremely low rates we saw in May. One interesting thing to note is that in the last 6 months 30 year rates have increased from 5.14 to 5.42. On the other hand 5 year arms have dropped from 5.49 to 4.99. Even with these changes I would still look for fixed rates over arms. There is a good chance that rates could be much higher in a year or 5 years when the arms would expire.

In addition to rates we also like to look at actual mortgage payments. Using our mortgage calculator we took rates from this week and converted them into a mortgage payment on 200k loan. We also did the same thing with rates from June 18th and from December 24th (6 months ago).

Jun 25
30-yr $1125.55
15-yr $1568.07
5-yr ARM $1072.42
1-yr ARM $1065.1

Jun 18
30-yr $1120.56
15-yr $1570.15
5-yr ARM $1069.97
1-yr ARM $1067.53

Dec 24
30-yr $1090.82
15-yr $1572.22
5-yr ARM $1134.32
1-yr ARM $1067.53

So as we can see the movement in the last week is minimal. Compared to 3 months ago a mortgage payment today would be $34.73 higher or 3.18 percent. Even though mortgage rates are higher than what they were before current rates are still low by historical terms.

Mortgage rates only provide part of the picture for how the lending environment is affecting the real estate market. The other part is that lenders remain very strict in their policies on when they will give out loans. So lenders are offering loans with low mortgage rates but they are not offering them to everyone.

This of course is having a serious dampening effect on the real estate markets potential recovery. Freddie Mac is particular is enforcing a number of new rules. While the government has spent significant resources on keeping mortgage rates low and easier and more effective method to help the real estate market would be to look through Freddie Mac's loan restrictions.

Ki is a realtor in Austin Texas. His site is a resource on Austin Texas real estate. It also provides a mortgage widget along with mortgage calculator code

Somewhere, somehow 600,000 jobs are going to be created and/or saved by the end of summer. In fact, the White House announced recently that 150,000 jobs have been saved in the last few months. Maybe it was yours; maybe it was mine. The problem is that all this job saving is a little difficult to pin down.

President Obama announced recently that this summer will see a ramping up of spending from the $787 billion stimulus fund and create or save 600,000 jobs. According to the Associated Press, the President spoke to his cabinet about "modest progress" in the economy. In particular he cited that fewer jobs were lost last month than expected. There have also been some admissions from this administration that their original economic forecasts made at the end of last year were too optimistic.

"At the time, our forecast seemed reasonable," said Vice President Joe Biden's top economic adviser, Jared Bernstein, explaining that the White House underestimated the scope of the recession.

By the White House's earlier estimates the nation's unemployment rate should be about 8 percent, not the 25-year-high 9.4 percent. It seems everything is on the rise these days from the President's un-approval rating for how he is handling the economy to gas prices to the national deficit.

But the Obama administration is trying to make things better. According to Recovery.gov, in the next 100 days the American Recovery and Reinvestment Act will save or create jobs in the following areas
* Department of Health and Human Services -- Enable 1,129 health centers in 50 states and eight territories to provide expanded service to approximately 300,000 patients
* Department of the Interior -- Begin work on 107 national parks
* Department of Transportation -- Begin work on rehabilitation and improvement projects at 98 airports and at more than 1,500 highway locations throughout the country
* Department of Education -- Fund 135,000 education jobs, including teachers, principals and support staff
* Department of Veterans Affairs -- Begin improvements at 90 veterans medical centers across 38 states
* Department of Justice -- Hire or keep on the job approximately 5,000 law enforcement officers
* Department of Agriculture -- Start 200 new waste and water systems in rural America

The government will also be flush with money in the weeks ahead as ten banks have been given permission by the Treasury Department to repay money they received from the government bailout of the banking industry. According to the Associated Press, $68 billion of the nearly $200 billion Troubled Assets Relief Program funds will be returned from banks such as JP Morgan, Goldman Sachs and American Express.

There are other signs that the economy is slowly starting to improve. Granted most of the good news is really in the category of less-bad-news, but job losses are down, the economy is sinking at a lower rate and consumer confidence is starting to return. What is nearly impossible to track is if the improvement is a result of government intervention or just a part of the economic cycle.


Ki bikes Shoal Creek when he is not working. He has focused on real estate since graduating. His website is focused on Austin Texas real estate, where future owners can search for listings in the Austin MLS. His website has a blog devoted to Austin real estate with current market stats and information.

So for the previous two weeks we saw sizable gains in mortgage rates. Between May 28th and June 11th 30 year mortgage rates jumped from 4.91 to 5.59. This week we saw rates drop down to 5.38. Although we are still above what we were at two weeks ago it's nice to see mortgage rates moving back down. The other major mortgage products all went down as well. The 15 year dropped from 5.06 to 4.89. The 5 and 1 year arms dropped from 5.17 to 4.97 (5 year arm) and 5.04 to 4.95 (1 year arm). Below are rates for the 4 major mortgage products since May 21st.

Jun 18, 2009
30-yr 5.38 15-yr 4.89 5-yr ARM 4.97 1-yr ARM 4.95

Jun 11, 2009
30-yr 5.59 15-yr 5.06 5-yr ARM 5.17 1-yr ARM 5.04

Jun 04, 2009
30-yr 5.29 15-yr 4.79 5-yr ARM 4.85 1-yr ARM 4.81

May 28, 2009
30-yr 4.91 15-yr 4.53 5-yr ARM 4.82 1-yr ARM 4.69

May 21, 2009
30-yr 4.82 15-yr 4.50 5-yr ARM 4.79 1-yr ARM 4.82

Dec 18, 2008
30-yr 5.19 15-yr 4.92 5-yr ARM 5.60 1-yr ARM 4.94

So why are mortgage rates dropping? Basically for the last few weeks the economy has been improving and consequently we have seen mortgage rates increasing. In addition to that the government held a few bond auctions that went poorly which also provided upward pressure on mortgage rates. In the last week we have seen some signs the economy might not be recovering as cleanly and quickly as first hoped which has the effect of pushing mortgage rates down.

In addition to mortgage rates it's always nice to look at actual mortgage payments. We took today's rates and used a mortgage calculator and turned them into mortgage payments for a 200k loan. We also did the same thing with rates from June 11th (last week) and rates from December 18th (6 months ago).

Jun 18
30-yr $1120.56
15-yr $1570.15
5-yr ARM $1069.97
1-yr ARM $1067.53

Jun 11
30-yr $1146.89
15-yr $1587.84
5-yr ARM $1094.51
1-yr ARM $1078.53

Dec 18
30-yr $1096.98
15-yr $1573.26
5-yr ARM $1148.15
1-yr ARM $1066.32

As we can see payments based on 30 year mortgage rates the monthly payment on a 200k loans is about $26 dollars lower than they were last week.

So what is our advice? First of all I would still recommend 30 year mortgages. While rates on 5 and 1 year arms are lower I still expect rates to be much higher in 1 year and 5 years from now. So basically it's not worth the risk of having to refinance in a few years. Although rates are higher than they were a few weeks ago they are still near historical lows.

As always it's hard to predict what is going to happen moving forward. I would expect volatility in rates over the next month as we figure out whether the economy is one the road to recovery. Once the economy recovers we expect rates to increase rapidly. The government borrowed 50 cents of every dollar it spent this year. That mountain of debt should lead to higher interest rates.

Ki works as realtor in Austin Texas. His site is filled with information about Austin Texas real estate. It also provides information on mortgage rates along with a free mortgage calculator.

Last week mortgage rates moved up rapidly, moving up from 4.91 to 5.29. This week mortgage rates again jumped up .3 points going from 5.29 to 5.59. On May 21st rates were sitting at 4.82 which was a 40 year low. Now just a few weeks later rates are at 5.59. This is the highest we have seen rates since November 26, 2008. Unlike last week this week all the other major mortgage products went up as well. The 15 year rate jumped from 4.79 to 5.06. The 5 year arm moved from 4.85 to 5.17 and the 1 year arm moved from 4.81 to 5.04.

So what caused the sudden spike in mortgage rates? Basically the government had a few recent auctions of government debt that went poorly. With less interest in government debt, t-bills and mortgage rates have started to increase.

Below are rates for the major mortgage products for the last few weeks.

Jun 11, 2009
30-yr 5.59 15-yr 5.06 5-yr ARM 5.17 1-yr ARM 5.04

Jun 04, 2009
30-yr 5.29 15-yr 4.79 5-yr ARM 4.85 1-yr ARM 4.81

May 28, 2009
30-yr 4.91 15-yr 4.53 5-yr ARM 4.82 1-yr ARM 4.69

May 21, 2009
30-yr 4.82 15-yr 4.50 5-yr ARM 4.79 1-yr ARM 4.82

May 14, 2009
30-yr 4.86 15-yr 4.52 5-yr ARM 4.82 1-yr ARM 4.71

Dec 11, 2008
30-yr 5.47 15-yr 5.20 5-yr ARM 5.82 1-yr ARM 5.09

In addition to rates we like to look at mortgage payments. Using a mortgage calculator we took rates from this week and translated them into a mortgage payment for a 200k loan. We also did the same thing with rates from June 4th, May 28th and from December 11, 2008 (6 months ago)

Jun 11
30-yr $1146.89
15-yr $1587.84
5-yr ARM $1094.51
1-yr ARM $1078.53

Jun 04
30-yr $1109.36
15-yr $1559.79
5-yr ARM $1055.38
1-yr ARM $1050.53

May 28
30-yr $1062.66
15-yr $1533.05
5-yr ARM $1051.74
1-yr ARM $1036.07

Dec 11
30-yr $1131.81
15-yr $1602.5
5-yr ARM $1176.05
1-yr ARM $1084.67

So as we can see mortgage payments have jumped drastically. Compared to 2 weeks ago the mortgage for a 200k loan has increased by $84.23 or 7.3 percent.

One point is that although rates have jumped rapidly historically speaking rates are still very low.

So what do we expect moving forward? There is some speculation that rates will fall after the recent rise. I am not sure if this will happen or not there are some powerful forces moving mortgage rates. And regardless of what happens in the next few weeks with the massive government borrowing its expected that in 6 months rates will be significantly higher than what we are seeing today.

So what is our advice to people looking for a home? First of all I would lock in immediately. While rates might go down there is a significant chance will continue to rise. If rates fall you can always relock at the lower rate. Additionally, I would avoid arms. Although the difference between 30 year rates and arm's has increased I would expect rates to be much higher in a year.


Ki lives in Austin Texas. His website provides information on Austin Texas real estate. It also provides a mortgage widget and a free mortgage calculator.

This marks the third week in a row that mortgage rates have moved in one direction or another by more than .4 points. This is highly unusual. For some perspective for the 12 weeks from March 20th to June 5 mortgage rates held steady between 5.85 and 6.09. At this point mortgage rates are highly highly volatile. Here are mortgage interest rates for the last 4 weeks.

October 30, 2008
30-yr 6.46 15-yr 6.19 5-yr ARM 6.36 1-yr ARM 5.38

October 23, 2008
30-yr 6.04 15-yr 5.72 5-yr ARM 6.06 1-yr ARM 5.23

October 16, 2008
30-yr 6.46 15-yr 6.14 5-yr ARM 6.14 1-yr ARM 5.16

October 9, 2008
30-yr 5.94 15-yr 5.63 5-yr ARM 5.90 1-yr ARM 5.15

October 2, 2008
30-yr 6.10 15-yr 5.78 5-yr ARM 6.00 1-yr ARM 5.12

30 Year rates have been a little more volatile than the 15 year fixed and 5 year arm products. The one mortgage product that stands out is the 1 Year ARM. It has for the most part been steadily rising over the last few weeks.

So what is going on with mortgage rates? Basically there are a number of strong forces pushing around mortgage rates like a wild hurricane. Over the last few weeks we have seen similar erratic swings with the stock market with both historic rises and drops happening several times in the last week. Add to the uncertainty in the economy with massive government bailout programs (the Fannie Mae takeover and the 700 billion bailout) we can begin to see that the erratic movement in mortgage rates is simply a reflection of a highly erratic time period in the general economy.

Ok let's look at what your payment would be on a 200k mortgage. Using our mortgage calculator we ran the numbers based on today's mortgage rates. We also ran the numbers based on mortgage rates from last week.

October 30th
30-yr 1258.87
15-yr 1708.31
5-yr ARM 1245.77
1-yr ARM 1120.56

October 23rd
30-yr 1204.24
15-yr 1657.60
5-yr ARM 1206.82
1-yr ARM 1101.93

It's hard to tell what rates are going to do moving forward. But it looks like rates will continue to remain volatile. What we are seeing is basically a tug of war between the government and the economy. The government is doing whatever it can to push down rates through takeovers, bailouts and lowering the fed rate. Negative factors that come up in the economy tend to push rates up because it causes banks to not want to lend out money. I think we will continue to see this tug of war for the next few weeks. Add a presidential election throw in for good measure and I expect to see mortgage rate volatility to continue. That said overall I expect mortgage rates to go down over the next month. The government shows no signs of letting up and I think they will win the tug of war in the long term.

What recommendations do I have for people looking for a loan? I hate recommending arms. If people are looking at the buying for a long term (single family home owners) I would advise to avoid arms. If investors are planning on being in a property for a short period of time and have the cash reserves to deal with random changes in mortgage payments the 1 year is attractive because the difference between 30 year and 1 year arms is greater than what we typically see.

Ki lives in Austin are writes about trends with mortgage rates. His site provides a free mortgage calculator and a graph of historical mortgage interest rates.

The general arguments concerning the bailout have gone something along the lines of

"The taxpayers should not have to foot a 700 billion dollar bill to bail out Wall Street"

"But if taxpayers do not bail out Wall Street the economy will fall apart and those same taxpayers will be hurt"

If we could be sure the bailout would work the second argument has some merit. While the bailout will certainly help the banks, the problem is we have almost no guarantee the bailout will help the real estate market and the general economy.

First let's look at some recent history of how the Fed has tried to help the troubled real estate market. The Fed usually attempts to lower mortgage interest rates to help the real estate market. By lower mortgage rates houses become more attractive. In addition, with lower mortgage rates home buyers can buy more expensive houses with the same monthly payment. Therefore lower rates can help stop falling prices. So it was not surprising in early 2008 the Fed cut the Fed rate. In normal markets lowering the Fed rate helps banks and causes them to lower mortgage interest rates. And after the fed cuts mortgage rates for a period of time dropped to 5.50. If they had stayed down there we might have averted some of the problems with the current housing crisis. But instead a few weeks later rates had jumped backed up to 6.2. Basically banks said thanks for the lower fed rates but we are not going to alter our rates. In fact, over the next few months mortgage rates rose all the way to 6.6. The next big move was acquiring Freddie Mac and Fannie Mae. This was one of the largest government takeovers in US history. The move was risky because the government was providing insurance for trillions in loans. And it initially had a positive effect on the housing market. But a few weeks later AIG ran into financial problems. It was almost as if the government takeover of Freddie Mac and Fannie Mae never happened.

So the previous moves the federal government has made to stop the financial crisis have not worked. Should the 700 billion dollar bailout be different? It could certainly help the markets. But it might not. Lets look at why.

One of the benefits of the 700 billion dollar bailout has nothing to do with banks. It has more to do with perception on Main Street. The hope is that the bailout will restore confidence in the real estate market on Main Street.

In politics people often talk about news cycles covering up the last news cycle. Basically the last piece of news stays in people's minds until the next piece of news comes along. The Fannie Mae and Freddie Mac news cycle (and the billions the government will spend on it) only lasted until the next piece of news, which was about a week. While the 700 billion dollar bailout should restore some confidence into the real estate market, that confidence might only last until the next piece of news. And with things happening so quickly that news cycle might not last very long and given the current market the next piece of new is likely to be negative.

The other benefit of the 700 billion dollar bailout is that the government is hoping to influence banks to start lending again. The idea is that by taking billions in toxic loans off the books for banks they will start lending again. The problem is that their is no guarantee this will happen. In fact when the fed lowered rates banks said thanks but decided that prospects for the housing market looked negative and continued to add restrictions to lending. In a similar fashion banks could say thanks for the 700 billion but we continue to see negative prospects in the housing market and therefore we will continue to have strict lending practices. But thanks for the 700 billion taxpayers.

Escapeso real estate is a small brokerage in Austin Texas. Their realtors works with clients looking for Austin real estate. Their site offers a free search of the Austin MLS along with current mortgage interest rates.

So it has been a week since the feds came in and took over Freddie Mac and Fannie Mae. While it will obviously take some time to know the long term repercussions I wanted to look at some of the immediate reactions to the move.

First let's look at the reaction from the media and the general public. One would expect there to be some political fallout from the largest takeover in government history. But because of the election and Hurricane Ike the reactions have largely been muted. There have been of course the expected positive reactions that this was a shrewd move to help the real estate market and negative reactions that the government should limit its involvement. But for the most part their has not been a big reaction one way or another. I have actually seen more stories about the reactions on the takeover from the presidential candidates than stories simply about the takeover.

While the media reaction has been muted the reactions in the financial markets have not been. Not surprisingly, the stocks of Fannie Mae and Freddie Mac plummeted after the announcement. The government said before hand that the common shares of Freddie Mac and Fannie Mae would lose most of their value in the event of a government takeover. So following the news of the takeover the share promptly lost 80% of their value.

The mortgage markets have reacted very favorably to the news. Considering the Fed has cut interest rates multiple times this year mortgage interest rates have remained relatively high. The reason for this was that banks were unsure about the financial stability of Freddie Mac and Fannie Mae which provides insurance for about half of the residential loans issued in the United States. This risk has now been lowered since the government takeover. Consequently mortgage rates have plummeted in the last week. 30 Year mortgages have dropped from 6.35 to 5.93. This is after rates have moved down from 6.63 to 6.35 partially on expectations that Fannie Mae and Freddie Mac were going to be taken over. I have seen some reports that this is lowest rates have been in the last 4 months. I think this understates how low rates have come down. Besides two brief drops at the beginning of 2008 this is the lowest rates have been since 2005.

The lower interest rates should have a positive effect on the real estate market. Lower rates pull down the mortgage on a house and tend to have a positive effect on real estate values and market activity. In another positive sign although their has not been too much media coverage the coverage that has come out has been mostly positive. To be honest I was a little surprised by this. I would have expected the coverage to be a little more mixed. But regardless the favorable media reaction combined with lower interest rates should help the real estate market. And based on what I have heard from different realtors their does seem to be an upswing in activity. But we won't have any hard data on this for a month or so.

So, at least in the short term, it seems the Feds have accomplished their goals of helping the real estate market with the Freddie Mac and Fannie Mae takeover. We will of course have to wait over the next few years to see if this move turns out to be wise. But for now the Fed has finally been able to push down mortgage rates.

Ki is a real estate broker working in the Austin real estate market. He maintains a website with a Austin MLS search and a frequently updated Austin real estate blog.