The June 2009 Mortgage Rates Massacre

Posted by: Brian Brady on June 8th, 2009

Mortgage rates, prior to June, were stabilizing after a volatile first quarter.  Potential home buyers and existing homeowners were settling in to the fact that a 4.5% conventional mortgage rate could be had; some days you had to pay a couple of points, some days only one.  FHA and VA loans were about an eighth of a percentage point higher.

Brighter days in the real estate market seemed inevitable.

Volatility hit the mortgage rates market like an unexpected tsunami.  Here’s how it unfolded:

What does this mean to you, the professional real estate agent?

  1. Buyers in escrow, who haven’t locked-in a mortgage rate, are facing a monthly mortgage payment that is hundreds of dollars higher than they expected. (based on a $300,000 loan amount).  You’re going to have to do some tap dancing to keep them in the deal.
  2. Home shoppers, not in escrow, are going to read the Sunday paper, call the mortgage broker on Monday to discover what existing home buyers now know, and crawl back into a cave.  You’re going to have to lure them out of that cave with the prospect of lower home prices. 
  3. Customers with listed homes are going to have to get aggressive with pricing, request to see buyer’s lock-in agreements, and demand removals of loan contingencies as early as possible.

The Federal mortgage rate subsidy, for all its intended good, appears to be have lost its efficacy.  Mortgage rates that don’t receive federal subsidies (jumbo mortgages) were in the 6′s prior to the Fed’s support of conforming loan rates; expect the rest of the mortgage rates market to gravitate towards that level by year end. 

If you want to discuss my thoughts, contact me or confidently direct a customer to my online loan application.



One Response on “The June 2009 Mortgage Rates Massacre”

georges kfoury

You don’t need statistics to tell you that Americans are anxious about
their finances. Keep the worry out of mortgages by following these three suggestions.
Americans are worried. According to a recent report by the Rockefeller Foundation,
93 percent of households suffered a minimum of one “substantial economic shock”
between March 2008 and September 2009. And, in the summer of 2010, more than 70
percent of Americans were worried about losing their jobs.

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