How will mortgage rates move for the remainder of the year?

With the short week last week, it was a relatively quiet news week. Wednesday saw a “cornucopia” of economic news released to little fanfare, as attention remains fixed on the fiscal cliff negotiation. We have written a holistic guide to the fiscal cliff, including background information and its possible effect on real estate and mortgage rates. You can read the entire article HERE.

For our column here, we will republish the section on mortgage rates. To stay informed on the economy, real estate, and mortgage rates as the fiscal cliff approaches, make sure check in with our website for daily updates, or tune into our radio show Mortgage Matters on KVEC 920 every Saturday morning from 10 a.m. to 12 noon.

How will the fiscal cliff affect Mortgage Rates?

Markets have been moving on speculation about the likelihood that we go over the fiscal cliff. During the same time, there has been concern about the Greek debt situation and poor U.S. economic data. This combination of anxieties pushed the Dow to its worst week since June.

Typically during a down market, mortgage rates fall. This time, says Central Coast Lending owner Jason Grote, we may be around the lowest levels we will get.

“I don’t think that rates will move in the short term as we near the cliff. The market is very good at anticipating and pricing in expectations, and I have to believe that either way we are already padded for the outcome.”

We have seen some small improvements since the headlines shifted focus from the November 6 election to the fiscal cliff. You can follow along on our Mortgage Rate Tracker, but here are the three noteworthy improvements:

  • 30-year fixed, 3.250 percent rate: has dropped about 0.030 percent in price, which is 3/8 of a point.
  • 30-year high balance, 3.375 percent rate: has dropped just 1/8 of a point in price.
  • 30-year USDA, 3.250 percent rate: has dropped 3/8 of a point in price.

The 15-year fixed, Jumbo, VA, and FHA programs have remained mostly unchanged.

A plunge over the fiscal cliff would likely cause rates to fall even further – breaking significantly through already record-low rates.

“If we go over the cliff, rates would have to fall,” said Grote. ”The impact to GPD and overall impact to the economy will be a sharp decline. This will mean once again that bond yields will experience downward pressure as investors make the familiar flight to quality.”

Avoiding the fiscal cliff, however, would likely bring rates slightly higher.

“In the event that bipartisan agreement is reached I think that we will see rates increase a bit,” said Grote.

Goldman Sachs said that it expected the S&P 500 to fall about 8 percent in the lead up to the fiscal cliff, but if the dilemma is resolved, it sees the potential for significant strength in equities. The note said that it could see the S&P 500 recovering for a 16 rise from current levels by the end of 2013. Grote agrees with the analysis.

“The compromise would be a demonstration of great bipartisan cooperation and give a breath of hope to the international investment community, this means a real bright future and strong growth potential for America’s economy. That renewed hope would certainly drive the stock market up and a corresponding upward pressure on interest rates.”

Last time the U.S. government dealt with federal debt, it primarily kicked the can down the road, which is partially why we are dealing with the Fiscal Cliff dilemma today. For the economy to show any lasting strength, it will be necessary to create a lasting blueprint for success.

“I think the key here is the whether the solution is watered down and another short term band aid or if it’s a sounds plan with lasting benefit,” said Grote. “The more watered down, the less impact we should expect in general.”

Feng Shui your Front Door

My Door-Keeper, Olive

A recent email from National Association of Realtors highlighted a blog about front door colors. The article referred the the door as the necktie of the home. It can be subtle, or make a huge statement. The question being, what does your door color say about you? At the end of the blog the author defined several colors like Blue, Green, Black, but not the most common – white. Intrigued, I “asked the google”. I soon learned that there is a lot of information on the psychology of color as it relates to the front door of your home. What I found most interesting was that many articles I came across related color to the overall feng shui of the home. Furthermore, color alone was not the key, the doors directional orientation and material are critical to ensuring balance and harmony in the home.

  • North facing should be wood and painted Blue, Black or White
  • Northeast facing should be wood and painted Orange, Purple, or Yellow
  • East facing should be wood and painted Green, Blue, or Turquoise
  • South facing should be wood and painted Red, Pink, or Purple
  • West facing doors can be made of metal or any other material than wood and painted Pink, Apricot, or Orange
  • Northwest facing doors can be made of any material and painted Gold, Silver, Yellow, or White

My door faces west, it’s made of wood, and in need of a fresh coat of green paint. I broke all the Yin and Yang guidelines but my door-keeper, Olive, and I still feel quite at peace.

From the perspective of an agent who opens a lot of doors to potential buyers, I find the following four points more important than color:

1. Keep your doorway well lit with a defined path leading to it.

2. Remove any obstructions that may be a trip hazard or distraction like kids toys, old broken pots, dead plants, etc.

3. Keep your door in good repair. Give it a power wash or a fresh coat of paint.

4. Be sure it’s in good working order. This means that the locks engage, the handles are functional and not loose, and that the door swings open and closed with ease.



San Luis Obispo County mortgage rates continue to drop

Happy holidays! Sorry to be like all those stores who pull out their Christmas decorations come November 1, but we would like to announce a steep mortgage rate cut ahead of the coming holiday season. After all, lower mortgage rates + refinance = savings… and savings mean you can get that pesky holiday shopping out of the way at all of these stores proclaiming “holiday” discounts.

Mortgage rates in San Luis Obispo County have steadily dropped over the past few months, and with prices as good as they are, we feel comfortable publishing rates that are between 1/4 and 3/8 of a point lower than we have been.* Here are a few examples:

  • 30-year fixed: 3.000 percent (3.121 percent APR)
  • 15-year fixed: 2.375 percent (2.558 percent APR)
  • 30-year FHA: 3.000 percent (3.993 percent APR)

You can see the rest of our mortgage rates for November 19 (there are 10 loan programs listed) HERE.

In the wider world, markets continue to be held hostage by Fiscal Cliff speculation. As we wrote here last week:

Stocks had their worst week since June, as markets turned their focus from the election to the upcoming “fiscal cliff” dilemma that you will begin to see headlines about every day.

Talks between the White House and Congress began last Friday, and representatives said everything positive: there are a few fundamental agreements as to how this should get done. Among the agreements: the government will not allow the U.S. to fall over the “fiscal cliff.”

Today, stocks jumped on optimism that a deal could get done, as the Dow rose over 200 points. A brief refresher on the fiscal cliff for those of you who don’t yet know:

The fiscal cliff is a combination of expiring tax cuts and mandated cuts in government spending.  Inaction would cause about $500 billion in spending to disappear from the economy, which some predict would slide the U.S. back into recession.

Housing continues to be a bright point for the economy. U.S. Employment, on the other hand, had an alarming report come in on Thursday – a  78,000 jump in jobless claims for the week ending November 10. This can be partially explained by damage resulting from Hurricane Sandy, but still suggests an underlying weakness.

To follow the data as it is released, as well as updates on the fiscal cliff progress, make sure to check in with our website throughout the week. The Central Coast Lending newsroom covers the latest local and national real estate, mortgage, and economic developments.


*APR is subject to increase and terms subject to change. APRs may very depending on loan details such as points, loan amount and loan-to-value, your credit, property type and occupancy. Closed rate and APR assume a rate and term refinance of a single family detached owner-occupied primary residence, loan amount $417,000 ($561,200 for high balance), and a minimum FICO score of 760. Situations vary based on applicant.


Stocks struggle as fiscal cliff uncertainty hits the markets

Banks and bond markets were closed Monday in observation of Veteran’s Day. Stock markets opened with a brief morning surge, but the three major U.S. stock indexes (Dow, S&P 500 and Nasdaq) moved slightly below opening levels as the day progressed.

Last week, stocks had their worst week since June, as markets turned their focus from the election to the upcoming “fiscal cliff” dilemma that you will begin to see headlines about every day.

Mortgage rates dropped along with stocks, as investors moved from volatile stocks into the relative safety of U.S. government debt. When Treasury prices increase (dropping yields), mortgage rates drop.

With banks closed today, rates will remain at Friday’s low levels. We can expect mortgage rates to remain low during the Fiscal Cliff discussions. Volatility and danger in stocks usually ends up by pushing investors into U.S. Treasuries, thus (ultimately) putting downward pressure on mortgage rates.

We will take a much closer look at the fiscal cliff, including its effect on mortgage rates, in the coming weeks. For now, the basics:

The fiscal cliff is a combination of automatic government spending cuts and tax cuts and deductions due to expire at the end of the year. Congress has until December 31 to put together a “debt deal” that will go towards reducing the deficit in order to avoid the automatic spending cuts.

Should no action be taken, the combination of tax increases and spending reduction could cause the U.S. to sink quickly into another recession. We saw one estimate that the “cliff” could take $607 billion from the economy (from tax increases and spending cuts). According to one estimate, it would take unemployment back up to 9.0 percent.

The real estate market is watching this problem closely as well. The Mortgage Forgiveness Debt Relief Act was passed in 2007 to relieve the tax burden on struggling homeowners that participate in a short sale or mortgage debt reduction program. Without the tax deduction, homeowners would be taxed for “forgiven” debt. In a short sale, for example, the bank allows the homeowner to sell the property for less than the mortgage is worth. For example, the homeowner might sell for $280,000 when the property is worth $320,000. The original law counted that $40,000 discount as taxable income. The Mortgage Forgiveness Debt Relief Act took that tax burden off the books.

We profiled the San Luis Obispo Real Estate market on Friday and concluded that the market has shown some real signs of recovery. If the Debt Relief act were to expire, the market would be negatively effected, possibly sending home prices back down to the bottom as foreclosure activity ramps up again.

Let’s hope that Congress shows support for the housing market and passes an extension for the Mortgage Forgiveness Debt Relief Act.

Gobble Gobble

Traffic jam in my driveway this morning was worth a snapshot.  Wild turkeys in full fanfare!  These turkeys have taken refuge on our property, along with several deer.  The abundance of nature is wonderful and one of the many perks of living within SLO city limits, adjacent to Bishop’s Peak Open Space.   

Paso Perfect Place for Music!

I just caught wind of another well kept secret in Paso.  D’Anbino Vineyard and Cellars host live music on a regular basis.  The tasting room is downtown on Pine and an intimate setting with a nice dancefloor.  The owners select bands that range from jazz to blues to rock and roll and more……a nice variety.  They sell the own wines which are thoroughly enjoyable as well as easy enough on the wallet……..appetizers are available.  Last Saturday, my fav band – Unfinished Business – played.  These rockers look like accountants and sound/act like Mick Jagger……love love love them!  The line up sounds like just the kind thing for a great evening out with friends…..go to for the scedule and more info.