But let’s keep this in perspective.  An average 30-year fixed rate today as I write this is 6.5%.  Is that high?  Compared to the 5.75% of earlier this year and the 5.25% of 2003, yes it is.  But historically, 6.5% is a GREAT interest rate to buy a home.

Here are some rates from the past:  November 1983 – 13.5%.  March 1990 – 10.8%.  June 1996 – 8.0%.  May 2000, 8.4%.  July 2006 - 7.0% and June 2007 – 7.0%.  So is 6.5% a “high” interest rate.  I don’t think so.

The current bear market is right in line with the average historical time frames, and the extent of the decline is worse than previous bear market averages, but still slightly better than the bottom made in 2002.  So the historical data might suggest that we could be nearing a bottom.  Many people will say that it’s different this time, and that we have never had a financial crisis like we are seeing.  While that is true, it’s always different, and it’s always something.  The last bear market was driven by fears of terrorism and fueled by a dot com/tech bubble…both of which had never been seen before either. 

As for the date October 9th, which was yesterday, it’s interesting to note that October 9th of 2002 marked the end of the last bear market.  And October 9th 2007 was the beginning of the present one.  While it may just be coincidence, it will be interesting to see if yesterday’s low has some significance in stock market history. 

One bright spot is that oil prices are plunging, falling from a high of $147 last July to current levels of around $80 – at least making a trip to fill up at the gas station slightly more “bearable.”   (Yes, a little pun intended there.)

As far as mortgage rates go, the news isn’t much better than it is for stocks.  The weird part of this is usually when the stock market is having a bad day, mortgage rates will have a good day as investors are pulling money out of stocks and parking it in bonds.  But money is flowing out of bonds as well.  Where is the money going?  Maybe under mattresses – who knows.  But it is important to note that even though rates are rising, they are not high.  As I write this the 30 year mortgage rate is right around 6.375%.  That is not a bad rate.  In fact, it is a very good rate to borrow money for a home. 

Let’s all keep our chins up.  This, too, shall pass.

When the governement came in and backed up the mortgage securities of Fannie Mae and Freddie Mac, it made those securities look more apetizing to Wall Street investors.  They started scooping them up, causing demand to increase, thus yields rose and prices dropped.  Now some say that just like our domestic investors are now finding these investments more attractive, so will foreign investors.  These foreign investors take longer to jump in, so if and when they do, the demand could continue to go up, causing prices to drop again and mortgage rates to follow suit.

Let’s hope this scenario plays out.  It is just what the nation’s slumping housing market needs.  Of course, our market here in Eastern Idaho is still strong, but we will also take any bump we can get.

I believe the reason for this nice downward pressure on mortgage rates is due to the price of oil coming down.  Mortgage rates are tied to the bond market and the bond market hates anything inflationary.  High oil prices are definitely a risk for higher inflation, causing the bond market to react negatively.  In turn, so do mortgage rates.

An example of this was the aftermath of Hurricane Gustav.  There were fears the hurricane would wipe out or severely damage all the refineries and oil platforms along the Gulf of Mexico.  When the hurricane was not as bad as feared, the markets reacted positively assuming there would not be a negative affect on oil prices.  And thus, mortgage rates came down.

So pray for continued lower oil prices, and hurricanes that don’t pack a lot of punch.

The Act provides for a First Time Homebuyer tax credit of 10% of the purchase price or a maximum of $7,500.  Sounds great, and it is a good thing.  But just like a piece of cake that is tasty and delicious, there are calories to count once you eat it.  The calories for the tax credit is you have to pay the tax credit back to Uncle Sam.  It is not a freebie.  You have to pay the entire tax credit back with $500 added to your taxable income until paid back or if you sell your home and earn a profit, you pay back the remaining tax credit balance. 

I anticipate for the next 6 months you will see many ads from mortgage originators and real estate agents saying “Buy a home today and get a $7,500 tax refund!”  Will the rest be disclosed once the new home buyers are at the agent’s or originator’s desk?  I hope so.  But logic tells me this is another buyer beware and many first time homebuyers will be lured into buying a home based on only a half disclosure.  If you have any questions on this, please call or comment on my site.

First, if you are an investor, stocks are cheap.  Have you ever heard the expression “buy the recession”?  Stocks are much cheaper than they were last year and the stock market has always rebounded.  The bargain stocks you buy now will most likely be worth a lot more next year or the year after when we come out of our bad times. 

If you are looking to buy a house, boy, it sure is a buyers market.  Many sellers are very desperate to sell their homes and giving incentives or dropping prices, or both, to get their homes sold.  Of course you must have good credit to buy a house in this market, but if you do, you can get a great buy right now.

The other good news that we take for granted is the geopolitical situation, which is the underpinning of our financial stability and prosperity, is at least holding steady and maybe even getting better.  We haven’t had a terrorist attack on US soil since 2001.  The North Koreans haven’t set off any nuclear test detonations since 2006.   Andd things appear to be getting better in Iraq.  

And finally, the US economy is still growing.  Sure, the financial markets are taking a beating, but part of the purpose of having financial markets is to act as a buffer for the real economy.  And the real economy keeps chugging along.  It might be a little slower than we have seen in the recent past, but it is still growing.  Anyone who calls this time a recession has to admit it is one of the mildest recessions we have seen.

So keep your head up – there is always as silver lining if we look for it.

IHFA has long been the #1 choice for first time homebuyers.  They offer low, fixed interest rates and down payment assistance programs to help people purchase their first home.  IHFA does not offer a “retail” outlet for their loans.  So to get an IHFA loan you must go to a bank or mortgage broker. 

Congratulations Avery Financial Group!  And thank you for providing financing for our first time homebuyers in all of Eastern Idaho.

Lately we have seen some reversals in both real estate and mortgage lending.  Markets that once were depreciating are leveling off and mortgage rates are still very low by historical standards.  People are buying homes and refinances are still happening.  Here in Eastern Idaho, including Pocatello, Blackfoot and Idaho Falls, we actually haven’t seen any depreciation.  It is true there are more houses on the market now than there have been in “the boom years”.  But this is now more of just a normal real estate market rather than a hot market.

I was watching a report on money.cnn.com that actually reported “housing’s rosy outlook”.  It talked about how real estate is local; meaning that, yes, there are some bad markets in the nations, such as Phoenix, AZ or Miami, FL.  However, there are many markets that are doing great.  Don’t trust everything you read or hear in the media.  Click here to watch the full report.  http://money.cnn.com/video/#/video/news/2008/05/19/news.harlow.coldwell.ceo.intv.cnnmoney

It was refreshing to see a national media report that was positive on our markets.  Since markets in general, including real estate markets, are driven by perception and feeling, perhaps we could see some of the markets that are depressed rebound quicker if more of our media friends would be just as enthusiasic reporting the positive rather than the negative.

At least they are if you want a home loan.  With the recent tightening of the credit markets, your credit score can not only determine if you get a loan, it can determine the rate, terms and fees of the loan you get.  Not long ago if you had a 620 credit score, you could get the best rate available for a mortgage.  Now, that score has raised 100 points to a 720. 

So what is considered “good” credit?  Credit scores generally range from 350 to 850, depending on the credit bureau.  On a grading scale, 720 to 850 is A plus credit.  680 to 720 is A credit.  620 to 680 is B credit.  580 to 620 is C credit.  520 to 580 is D credit and 520 and below gets you an F.  So, from the example above, a person with a 620 credit score, considered C plus to B minus credit, could get the best rate available.  Now a person has to have A plus credit to get that premium rate.

Why is this?  Simply speaking, lenders are scared.  Due to some irresponsible lending decisions in the past, many lenders are taking some serious losses on some loans they have made.  When lenders take big losses, they aren’t as willing to make new loans.  And the new loans they are willing to make will be to borrowers they are 100% sure will pay them back.

So it is more important than ever to pay attention to your credit score.  Having that A plus score instead of a B or C score might make the difference of getting a loan or getting denied.  And it will definitely make a difference on the interest rate and terms you get.  Higher credit scores can save you a lot of money in interest. 

So how do you improve your credit scores?  How credit scores are calculated is kind of tricky.  Someone with perfect pay history might still only be in the B or A credit category instead of A plus due to some other factors.  It is a good idea to review your credit with a mortgage professional 4 to 6 months before you are going to apply for a home loan.  Many times there are some suggestions we can make to take your credit score from a 680 to a 720 in only 30 to 60 days.  And if you have credit scores in C, D or F range, there are still things you can do to improve.  It might take longer but scores can come up.

So call me at the Avery Financial Group to schedule your free credit counseling appointment.  You will be glad you did.