Short-term rates nearing historic lows

For the second time this month, the Federal Reserve has cut a key short-term interest rate, but the widely anticipated move was expected to have little immediate impact on mortgage rates.
In slashing its target for the federal funds overnight rate by 50 basis points, to 1 percent, the Federal Open Market Committee said a decline in consumer expenditures has "markedly" slowed economic activity.
Weaker prospects for economic growth, and declines in energy prices and other commodities, have the Fed expecting that inflation will moderate in coming quarters, providing leeway to cut short-term rates to near historic lows.
The Fed today also unanimously approved a 50-basis-point cut in the discount rate to 1.25 percent. The Fed also made emergency 50-basis-point cuts in the federal funds and discount rates on Oct. 8.
The federal funds rate -- the rate banks charge each other for overnight loans -- was gradually reduced to 1 percent after the dot-com stock market crash, where it stayed for much of 2003 and 2004. It has not been lower than 1 percent since 1958.
Cutting short-term interest rates is intended to stimulate borrowing. While some home equity loans are tied to the federal funds rate, most adjustable-rate mortgage loans are indexed to the London Interbank Offered Rate, or LIBOR.
LIBOR has remained elevated in recent weeks despite efforts by central banks around the world to make money more easily available, as banks remain reluctant to loan money to each other because of fears of insolvency.
Fixed-rate mortgage rates are largely determined by the willingness of secondary market investors to purchase mortgage-backed securities. Long-term mortgage rates, which have historically tracked longer-term investments such as the 10-year Treasury, have not come down in concert with Treasuries because they are in less demand by investors.
Fannie Mae and Freddie Mac, which guarantee most of the mortgage-backed securities purchased on the secondary market, are also major investors in them. Both companies are facing higher borrowing costs.
Holdings of Fannie's and Freddie's debt and mortgage-backed securities by foreign central banks plummeted by $47 billion during the four weeks ending Oct. 22, to $923.4 billion, Bloomberg News reported.

Short-term rates nearing historic lows

For the second time this month, the Federal Reserve has cut a key short-term interest rate, but the widely anticipated move was expected to have little immediate impact on mortgage rates.
In slashing its target for the federal funds overnight rate by 50 basis points, to 1 percent, the Federal Open Market Committee said a decline in consumer expenditures has "markedly" slowed economic activity.
Weaker prospects for economic growth, and declines in energy prices and other commodities, have the Fed expecting that inflation will moderate in coming quarters, providing leeway to cut short-term rates to near historic lows.
The Fed today also unanimously approved a 50-basis-point cut in the discount rate to 1.25 percent. The Fed also made emergency 50-basis-point cuts in the federal funds and discount rates on Oct. 8.

The federal funds rate -- the rate banks charge each other for overnight loans -- was gradually reduced to 1 percent after the dot-com stock market crash, where it stayed for much of 2003 and 2004. It has not been lower than 1 percent since 1958.
Cutting short-term interest rates is intended to stimulate borrowing. While some home equity loans are tied to the federal funds rate, most adjustable-rate mortgage loans are indexed to the London Interbank Offered Rate, or LIBOR.
LIBOR has remained elevated in recent weeks despite efforts by central banks around the world to make money more easily available, as banks remain reluctant to loan money to each other because of fears of insolvency

Fixed-rate mortgage rates are largely determined by the willingness of secondary market investors to purchase mortgage-backed securities. Long-term mortgage rates, which have historically tracked longer-term investments such as the 10-year Treasury, have not come down in concert with Treasuries because they are in less demand by investors.
Fannie Mae and Freddie Mac, which guarantee most of the mortgage-backed securities purchased on the secondary market, are also major investors in them. Both companies are facing higher borrowing costs.
Holdings of Fannie's and Freddie's debt and mortgage-backed securities by foreign central banks plummeted by $47 billion during the four weeks ending Oct. 22, to $923.4 billion, Bloomberg News reported.

Weekly Market Activity Report Twin Cities

Weekly Market Activity Report

Home sales continued their recent upward streak for the week ending October 11, with pending sales posting a 21.1 percent increase over the same week in 2007. While this doesn't keep pace with the extreme increases seen throughout September, it remains a positive indicator of recent buyer demand. Almost half of the properties bought during the week in question were lender-mediated foreclosures or short sales—47.3 percent, to be exact.
On the supply side, things look decidedly different. New listings declined by 10.0 percent for the same time period comparison and are down 11.5 percent over the last three months. The total supply of active homes for sale sits at 30,495, which is 9.4 percent below this time last year. Inventory should decline through the remainder of the year as traditional home sellers take their homes off the market with greater frequency during the fall and winter months, waiting for the inherent optimism and renewed spirit of spring's thaw.

Weekly Report PDF Graphs

Weekly Market Activity Report

Weekly Market Activity Report

After spending weeks hypothesizing what role the sunsetting FHA seller-funded downpayment assistance was having in stimulating the recent jump in home sales, we may have our first indication this week. For the week ending October 4—the first week we've measured in which the program was unavailable to prospective Twin Cities home buyers—pending sales were ahead of the same week last year by only 3.5 percent. While this is still an upward annual trend, it is about a 15 percent decline in buyer activity as compared to the activity of each of the previous four weeks.
Now that the FHA program is gone, time will tell if home sales will continue to surpass 2006 levels, as seen over the past several weeks. While one week of a relative downturn is too small a sample size to be predictive of the future, our changing financial climate bears close scrutiny in the weeks ahead.
Listing supply continues to draw down, as new listings declined by 12.0 percent for the same time period comparison and the total number of homes for sale is 9.1 percent lower than it was one year ago.

Market Activity Report - PDF

Home fraud ring restitution

Judge orders Parish fraud ring to pay victims

October 9, 2008

A federal judge in Minneapolis handed down the final sentence involving the Parish Marketing mortgage fraud case on Thursday, ordering the now-imprisoned perpetrators to repay their victims.
U.S. District Judge Ann Montgomery ruled that five people convicted in the case -- Michael Parish and his wife, Ardith Parish, son-in-law Christopher Troup, Kristopher Robbins and Melissa Smith -- are responsible for almost $5.5 million in restitution.
They will pay the majority of that amount after they are released from prison, although they'll also repay modest amounts from what they earn doing prison jobs, said Assistant U.S. Attorney Joe Dixon.
After serving time, each will be responsible to pay at least $150 per month.
The money will be paid to victims who have made claims to the U.S. Probation Office. Those victims include unpaid contractors, homeowners and others. Thursday was the last day for victims to file for restitution, Dixon said, but they can still file lawsuits to recover lost money.
Parish Marketing accounted for $20 million to $50 million in losses. It recruited straw buyers to secure mortgages on expensive homes that Parish built, then its executives pocketed the mortgage proceeds or used them to pay other straw buyers. The homes were built primarily in New Market, New Prague and Lonsdale.
Michael Parish, the architect of the scheme, was sentenced in July to 13 years in prison. Ardith Parish was sentenced to five years. Troup received 10 years, Robbins two years, and Smith one year and one day.

Real Estate Acronyms

Q: What do all of those real estate acronyms in the ads mean?

A: If you find yourself stumbling over weird acronyms in a real estate listing, don't be alarmed. There is method to the madness of this shorthand (which is mostly adopted by sellers to save money in advertising charges). Here are some abbreviations and the meaning of each, taken from a recent newspaper classified section:

* assum. fin. -- assumable financing

* dk -- deck* gar -- garage (garden is usually abbreviated "gard")

* expansion pot'l -- may be extra space on the lot, or possibly vertical potential for a top floor or room addition. Verify actual potential by checking local zoning restrictions prior to purchase.

* fab pentrm -- fabulous pentroom, a room on top, underneath the roof, that sometimes has views

* FDR -- formal dining room (not the former president)

* frplc, fplc, FP -- fireplace

* grmet kit -- gourmet kitchen

* HDW, HWF, Hdwd -- hardwood floors

* hi ceils -- high ceilings

* In-law potential -- potential for a separate apartment. Sometimes, local zoning codes restrict rentals of such units so be sure the conversion is legal first.

* large E-2 plan -- this is one of several floor plans available in a specific building

* lsd pkg. -- leased parking area, may come with an additional cost

* lo dues -- find out just how low these homeowner's dues are, and in comparison to what?

* nr bst schls -- near the best schools

* pvt -- private

* pwdr rm -- powder room, or half-bath

* upr- upper floor

* vw, vu, vws, vus -- view(s)

* Wow! -- better check this one out.