Tuesday, June 5, 2007

And the Rates Keep Going Up!

When Dan Bernanke, Federal Reserve Chairman, speaks, all of us in the mortgage business hold our collective breath, hoping for bad news, until he's finished. Well -- not exactly. But, ironically, when people are working and spending money and our 401Ks are increasing in value, the bond market doesn't like it much, and long-term interest rates suffer.

His recent talk is particularly focused on housing and mortgage issues around the country.

We're still in a housing slump, but we're doing okay:

"Of course, the adjustment in the housing sector is still ongoing, and the slowdown in residential construction now appears likely to remain a drag on economic growth for somewhat longer than previously expected. Thus far, however, we have not seen major spillovers from housing onto other sectors of the economy."

"Prices have continued to be quite soft so far in 2007, although for the most part outright price declines have been concentrated in markets that showed especially large increases in earlier years."

People who obtained Sub-Prime Adjustable Rate Loans are still not doing well:

"All told, the rate of serious delinquencies for subprime mortgages with adjustable interest rates--corresponding to mortgages in the foreclosure process or with payments ninety or more days overdue--has risen to about 12 percent, roughly double the recent low seen in mid-2005."

But the bottom line is still good news for the economy in general:

"We will follow developments in the subprime market closely. However, fundamental factors--including solid growth in incomes and relatively low mortgage rates--should ultimately support the demand for housing, and at this point, the troubles in the subprime sector seem unlikely to seriously spill over to the broader economy or the financial system."

In other words, life is good for the most part, but if you're in the process of buying a home or needing to refinance an existing loan, it's a good day to lock in your interest rate!

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