Comments on: Austin Sales Market Update for August 2008 http://crosslandteam.com/blog/2008/09/23/austin-sales-market-update-for-august-2008/ Austin Real Estate Blog Wed, 08 Feb 2012 19:40:44 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: Tary Snyder http://crosslandteam.com/blog/2008/09/23/austin-sales-market-update-for-august-2008/#comment-37129 Tary Snyder Mon, 29 Sep 2008 14:56:51 +0000 http://crosslandteam.com/?p=522#comment-37129 Steve, another great post. It will be interesting to see how the Bailout plays out over the next few weeks leading up to the election. Tary Steve, another great post. It will be interesting to see how the Bailout plays out over the next few weeks leading up to the election.

Tary

]]> By: Steve Crossland http://crosslandteam.com/blog/2008/09/23/austin-sales-market-update-for-august-2008/#comment-36820 Steve Crossland Sat, 27 Sep 2008 15:19:21 +0000 http://crosslandteam.com/?p=522#comment-36820 Barry, Mortgage rates have historically tracked the 10 year treasury rate at about a 1.5% premium, meaning mortgage interest rates are typically 1.5% higher than the 10 year treasury rate. The 1.5% is known as the "risk premium", because the 10 year treasury has virtually no risk, whereas mortages have historically had some risk. At present, the "risk premium" is running at about 2.5%, meaning the mortgage interest rate is about 1% higher than it would be under normal risk circumstances. Of course, mortgages are at present viewed as more risky, thus the higher risk premium. What should happen eventually is that the markets settle back into the normal differential of 1.5%, and interest rates drop. More likely though, is that simultaneous to the downward adjustement of the risk premium gap, 10 year treasury will rise from where it is now and perhaps offset the adjusted differential. It won't surprise me if, at the end of this year, mortgage interest rates are still at or below 6%, which is a superb rate. Steve Barry,

Mortgage rates have historically tracked the 10 year treasury rate at about a 1.5% premium, meaning mortgage interest rates are typically 1.5% higher than the 10 year treasury rate. The 1.5% is known as the “risk premium”, because the 10 year treasury has virtually no risk, whereas mortages have historically had some risk.

At present, the “risk premium” is running at about 2.5%, meaning the mortgage interest rate is about 1% higher than it would be under normal risk circumstances. Of course, mortgages are at present viewed as more risky, thus the higher risk premium.

What should happen eventually is that the markets settle back into the normal differential of 1.5%, and interest rates drop. More likely though, is that simultaneous to the downward adjustement of the risk premium gap, 10 year treasury will rise from where it is now and perhaps offset the adjusted differential. It won’t surprise me if, at the end of this year, mortgage interest rates are still at or below 6%, which is a superb rate.

Steve

]]> By: Barry http://crosslandteam.com/blog/2008/09/23/austin-sales-market-update-for-august-2008/#comment-36754 Barry Sat, 27 Sep 2008 04:03:56 +0000 http://crosslandteam.com/?p=522#comment-36754 Interests rates are low now, but they may not be soon. The fundamental problem with the market was that risk was not correctly priced since derivative products were thought to cheaply transfer the risk to others. The natural mortgage rate is 7-9 percent and not the 5-7 percent we have seen in recent memory. These additional percentage points make a big difference in a bank's balance sheet. This is the rate banks would charge if they had to hold the mortgage on their books, which in the long term, is what will solve this mortgage problem. What kind of house could you afford with an 8% mortgage? The answer is the same house that you could afford with a 6%. The house will just lower in value to match the payment just as real estate rose in value when interest rates declined. Interests rates are low now, but they may not be soon. The fundamental problem with the market was that risk was not correctly priced since derivative products were thought to cheaply transfer the risk to others. The natural mortgage rate is 7-9 percent and not the 5-7 percent we have seen in recent memory. These additional percentage points make a big difference in a bank’s balance sheet. This is the rate banks would charge if they had to hold the mortgage on their books, which in the long term, is what will solve this mortgage problem. What kind of house could you afford with an 8% mortgage? The answer is the same house that you could afford with a 6%. The house will just lower in value to match the payment just as real estate rose in value when interest rates declined.

]]> By: David http://crosslandteam.com/blog/2008/09/23/austin-sales-market-update-for-august-2008/#comment-36448 David Thu, 25 Sep 2008 13:55:50 +0000 http://crosslandteam.com/?p=522#comment-36448 I don't quite understand the hesitancy of buying in this market. Interest rates are low, and we are looking at future inflation that would drive the rates up. If you need to buy now, and you do not overextend yourself, why wouldn't you? I don’t quite understand the hesitancy of buying in this market. Interest rates are low, and we are looking at future inflation that would drive the rates up. If you need to buy now, and you do not overextend yourself, why wouldn’t you?

]]> By: shireen http://crosslandteam.com/blog/2008/09/23/austin-sales-market-update-for-august-2008/#comment-36395 shireen Thu, 25 Sep 2008 04:48:26 +0000 http://crosslandteam.com/?p=522#comment-36395 yup, didn't need to sell (only wanted a bigger backyard) and this week we withdrew the listing. I realized my biggest fear was getting an offer and then have the buyers bank withdraw financing before the close. Every day is a new nightmare on Wall Street, it it time to work on my personal balance sheet, not chase the perfect house. yup, didn’t need to sell (only wanted a bigger backyard) and this week we withdrew the listing. I realized my biggest fear was getting an offer and then have the buyers bank withdraw financing before the close. Every day is a new nightmare on Wall Street, it it time to work on my personal balance sheet, not chase the perfect house.

]]> By: Teddy http://crosslandteam.com/blog/2008/09/23/austin-sales-market-update-for-august-2008/#comment-36271 Teddy Wed, 24 Sep 2008 12:56:31 +0000 http://crosslandteam.com/?p=522#comment-36271 Steve.. great post and thanks for your blog.... Lakeway sellers are the biggest offenders and are still drunk on the kool aid of 2005 and 2006. But, I have to disagree somewhat about the buyers. Mortgages are still very costly and difficult to obtain and only the highest FICO scores get the best rates. Further, lenders are trying to decrease their risk by making the process costly in order to find out if someone can really afford the house. I've even seen where appraisals come in very low giving the buyer a tough choice of either coming up with additional downpayment cash or walking away from the deal. Last week, Thursday afternoon to be exact, our country dodged a bullet. We were a stones throw from a complete collapse in the markets. We are in unchartered waters economically and buyers are very prudent to let the system settle out before they take on debt. On the other hand, if a seller has their home listed and doesn't really need to sell, they probably won't. I would recommend that they suspend their listing until the spring selling season. I would venture to say that there are still many listings where sellers would tell you they really don't need to sell. Which begs the question, why would you list in this market in the first place if you didn't need to sell? Steve.. great post and thanks for your blog…. Lakeway sellers are the biggest offenders and are still drunk on the kool aid of 2005 and 2006. But, I have to disagree somewhat about the buyers. Mortgages are still very costly and difficult to obtain and only the highest FICO scores get the best rates. Further, lenders are trying to decrease their risk by making the process costly in order to find out if someone can really afford the house. I’ve even seen where appraisals come in very low giving the buyer a tough choice of either coming up with additional downpayment cash or walking away from the deal.

Last week, Thursday afternoon to be exact, our country dodged a bullet. We were a stones throw from a complete collapse in the markets. We are in unchartered waters economically and buyers are very prudent to let the system settle out before they take on debt.

On the other hand, if a seller has their home listed and doesn’t really need to sell, they probably won’t. I would recommend that they suspend their listing until the spring selling season. I would venture to say that there are still many listings where sellers would tell you they really don’t need to sell. Which begs the question, why would you list in this market in the first place if you didn’t need to sell?

]]> By: steve http://crosslandteam.com/blog/2008/09/23/austin-sales-market-update-for-august-2008/#comment-36219 steve Wed, 24 Sep 2008 03:24:28 +0000 http://crosslandteam.com/?p=522#comment-36219 I think it might not be accurate to say that buyers think the market is worse than it really is. If so, they might jump into the market. The buyers are thinking the worse is yet to come. I think it might not be accurate to say that buyers think the market is worse than it really is. If so, they might jump into the market.

The buyers are thinking the worse is yet to come.

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