Mortgage News You Can Use

November 8, 2007 

 Area home prices will actually rise? A recent article from Fortune suggests that area home prices will actually rise.  In Detroit houses are so cheap—the median is around $100,000—that even a shift in the economy from disastrous to mediocre is all that’s needed to lift both rents and prices. In most markets people won’t lay out much more in monthly costs to own a home or condo than they would to rent a similar property unless they expect a huge profit when they sell.  Indeed, speculators chasing quick profits did a lot to inflate the recent bubble. We did not experience the speculative buying that many parts of the country enjoyed.  That’s a good thing.  Once the speculative fervor fades prices must fall to restore their normal, long-term relationship with rents.  Rents exercise a kind of inevitable gravitational pull on prices. So what are rents saying about home values today?  To answer that question, Fortune worked with Moody’s Economy.com to estimate adjustments needed to get prices and rents back in balance. The headline is gloomy. Prices in most markets will fall by double digits over the next five years.  But not for the Detroit, Indianapolis, Cleveland and a few other locales the bubble missed—HOORAY!

——Rates continued their downward trend in the past week, which is evidence that the markets believe the economy is not as strong as the government reports are indicating.  For the week ending November 1, 30-year fixed rates averaged 6.26%, down from 6.33% the week before.

——Today, investors are pricing in a 100% chance that the Fed will again lower interest rates by a quarter percentage point in December.  There was only a 70% chance as of yesterday.

——Today, both the Bank of England and the European Central Bank have both announced their decisions to keep their interest rates on hold.  It’s important to keep an eye on foreign central banks monetary policy moves, as this can impact demand for our US bonds.  Their decision to hold rates steady had no impact on Bonds today.

——Never-NeverlandNobody (apparently) is immune from a foreclosure.  Michael Jackson’s Neverland Ranch is in foreclosure.  As of October 12, the King of Pop owes $23,212,963 on a $23,000,000 loan.

____  Disclaimer: The information contained in this newsletter has been gleaned from various sources and is  intended to be current and accurate, however we cannot and do not warrant or guarantee as such. This newsletter is for informational purposes only and is not intended to be, nor should be considered as,  investment advice. It does not take into consideration the financial circumstances, needs or investment objectives of any specific person who may receive this newsletter. Individuals should seek financial advice with regard to specific circumstances before making any investment decision.©Copyright 2007—Ann Arbor Mortgage Company, LLC