Rates Are Still Low

Sometimes we lose our perspective. While rates on home loans have been increasing for the past few weeks, if you read the headlines, it seems like rates are really high right now. They are not. According to the Freddie Mac survey of home loans, the 30-year fixed loan averaged over 5.0% every year from 1975 until 2010, a period of 35 years. That is a generation in which rates have averaged over 7.0% in the long haul.

It is only since the financial crisis hit that rates averaged below 5.0% and for the past five years, the average has been a little over 4.0%. Yes, there were a few periods where rates dropped below 4.0%, including early this year. However, when you look at the difference between 7.0% and 4.0%, rates are over 40% below where they have been historically. This is why renting is more expensive than owning right now in most areas of the country.

There is another message here that we have been delivering for a while. These low rates are not expected to last forever. Every time rates increase as they have in the past few weeks, we ask ourselves--is this the end of the super low rates? We hope not. However, we keep cautioning our readers that rates are great right now and if you are thinking about purchasing a home, refinancing or even purchasing a car, now is an excellent time. You never know when this sale on money will end.

Mike Ervin
Branch Manager/Mortgage Banker
NMLS: 282715
O: 650.451-7797
C: 650.766.8500
mike@mikeervin.com

Lifting Others Up

Almost a decade ago the first salvos of the subprime mortgage crisis were being felt. We know now that what started in our real estate sector spread not only to our entire economy, but to great swaths of the world as well. It was as if we pulled the world into recession. As the world's largest economy, it is not surprising that as we sunk, we took much of the world with us.

Now that our economy is recovering, the world is still languishing in many areas. The question is -- can we now lift the world out of recession? We think that it is logical that this could happen. However, there is one factor which must be in place -- our real estate market must be clearly recovered. The real estate markets led us into recession, and now they must lead us to prosperity.

This is why the monthly real estate data being released is so important. Last week we had existing and new home sales data released and the results were mixed, but the more important existing home sales figure was positive. This represents a decent start to the spring selling season. We are not saying that the jobs report next week will not be watched closely. The jobs numbers are very, very important. But employment will not keep improving without help from the real estate sector. The Federal Reserve Board is meeting as we release this newsletter and you can be sure the real estate sector will be on their mind as they prognosticate about the next employment report to be released next week.

Mike Ervin
Branch Manager/Mortgage Banker
NMLS: 282715
O: 650.735.5261
C: 650.766.8500