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Recent Westhill Articles


Home Buyers: Lock in these Low Mortgage Rates Now

Mortgage rates are at an all-time low. Recent data released by Freddie Mac from 1972 through February 2013 illustrate just what historic times home buyers currently live in.


With the Federal Reserve purchasing $45 billion worth of longer-term Treasuries and $40 billion in mortgage-backed securities—for a total of $85 billion each month—30-year fixed rates have been driven down below 4.0% for the first time ever.

When large institutions buy large quantities of bonds—say $85 billion per month—bond prices are bid higher, which drives bond rates down (bond prices and rates are inversely related). And this is exactly what the Fed intends to do—push mortgage rates down to give relief to home buyers and make it possible to finance their next home.

This maneuver by the U.S. central bank is known as quantitative easing (QE) and is unprecedented in its scale. How much longer the Fed will make these monthly purchases is unknown. What is known, however, is that the Fed cannot continue this program indefinitely. Meaning at some point, these purchases will end and rates will normalize.

When will rates increase? How high will they go? How fast will they move? Nobody can predict exactly what rates will look like going forward.

But if you lock in a fixed rate today, you won’t have to worry where rates go tomorrow.


Rising Home Prices Still Far From Peak

In January 2013, national U.S. home prices had their strongest 12-month increase since the summer of 2006, according to the latest data released late-March 2013. With home prices accelerating, potential buyers might be wondering if they’re too late. Is the buyer’s market over? 

The S&P/Case-Shiller Home Price Index (HPI)—a leading measure of U.S. home prices—increased a sharp 7.3% for the 10-City Composite, and 8.1% for its 20-City Composite from January 2012–2013. That constituted its largest year-over-year gain in more than six years.

“The two headline composites posted their highest year-over-year increases since summer 2006,” says Chairman of the Index Committee at S&P Dow Jones Indices, David M. Blitzer. “This marks the highest increase since the housing bubble burst.”[1]

But home prices are still far from their peak. Despite the rally in homeowners’ equity, prices are still only around 70% of their June/July 2006 high.


Robert J. Shiller, professor of economics and finance at Yale and the “Shiller” behind the S&P/Case-Shiller HPI, had these prudent words to say about rising home prices in a recent New York Times article: “The bottom line for potential home buyers or sellers is probably this….If you have personal reasons for getting into or out of the housing market, go ahead. Otherwise, don’t stay up worrying about home prices any more than you do about stock prices.”[2]

Home prices have risen in part because historically low interest rates and an improving job market have brought many buyers back into the market. The average rate on the 30-year fixed loan for 2012 was around 3.7% according to Freddie Mac. Borrowers have never seen borrowing rates this low—ever.

So if you want to buy that next home—with rates at an all-time low and prices still about 30% from their peak—it begs the question. Why wait for interest rates to rise and prices to climb?


[1] press release, Mar 26, 2013


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