Mortgage Interest Rates….How low can they go??

For quite a while now we have enjoyed the positive effects on the real estate market from low mortgage rates but it looks like it’s going to get even better!  Yesterday’s announcement by the Fed of the emergency step of lowering the benchmark U.S. interest rate by one-half of one percent, in an effort to offset the negative effect tot eh financial markets from the coronavirus will likely lead to even lower mortgage interest rates.

What’s the connection between the federal funds rate and mortgage interest rates? This is something often asked not only by homebuyers but is even within the real estate community as since the Federal Reserve doesn’t “set” mortgage rates, the connection is not always clear.  I’m not an expert in this area by no means, but I have a decent understanding of it and will share it from the perspective of the most popular home mortgage, the 30-year fixed-rate mortgage.  First, we have to understand where the money for those mortgages comes from.  It comes from investors, investors that compare an investment in 30-year mortgages to other comparable investments.  One of those comparable investments would be the 30-year treasury.

St Louis Home Mortgage Originations Drop Five Percent In Third Quarter

There were 9,983 home purchase mortgage loans originated in the St Louis metro area during the 3rd quarter of this year, a decline of 5% from the prior quarter and a decline of 3% from a year ago, according to a report just released by ATTOM Data Services.  This is the lowest number of home purchase loan originations for the 3rd quarter since 2015 when there were 9,731 home purchase mortgage loans originated.   As the historical table below shows, the peak for loan originations in St Louis was in the 3rd quarter of 2005 when there were 17,698 purchase mortgage loans originated.

St Louis MSA Purchase Mortgage Originations

St Louis MSA Purchase Mortgage Originations

St Louis MSA Historical Purchase Mortgage Originations

St Louis MSA Historical Purchase Mortgage Originations

Nearly 1 In 5 St Louis Home Sales In Past 12-Months Were Cash Deals

There were 37,721 homes sold in the St Louis metropolitan area during the past 12 months as reported by MORE, REALTORS.  Of those, as the chart below illustrates, conventional financing made up the lion’s share of the sales.  Conventional mortgages accounted for 18,967 home sales (50.3%), followed by cash transactions with no financing that accounted for 7,109 sales (18.9%), then 6,353 (16.8%) sales with FHA loans, 2,333 (6.2%) with VA loans, and 770 (2.0%) sales financed with USDA financing. The remaining 5.8% of the home sales were financed with one of roughly 30 other lessor popular financing methods.

St Louis MSA Home Sales By Financing Type – Past 12 Months

(Click on chart for live, interactive chart)

St Louis MSA Home Sales By Financing Type - Past 12 Months.
By St Louis REALTORS, MORE, REALTORS

Date source: MARIS

Home Loan Origination Data Showing Impact Of Interest Rates On Refi’s But Not Home Purchases In St Louis

Mortgage interest rates have been on the rise and hit their highest level in seven years toward the end of May, however, the higher rates don’t appear to be having an effect on the number of people in St Louis obtaining home loans yet.  The table below is based upon the latest data from ATTOM Data Research, just released yesterday, and shows that there were 6,830 home purchase mortgage loans obtained in the St Louis metro area during the 1st quarter of this year.  This represents an increase of nearly 10% from the number of home purchase mortgage loans that were obtained in St Louis a year ago.  Even if we go back to the first quarter of 2016, when the average 30-year fixed rate mortgage rate was below 4%, there were just 6,093 home purchase loan originations, 12.1% fewer than the most recent quarter.

The number of St Louis homeowners refinancing their home mortgages during the first quarter of this year dropped over 10% from a year ago and was down over 15% from the first quarter of 2016.


Mortgage information and advice from a St. Louis Mortgage Banker – Final post of the series

Dennis Norman

Dennis Norman

By: Dennis Norman

Today we pick up where we left off yesterday with my E-View TM with respected mortgage banker, H. John Frank, President of Paramount Mortgage Co. here in St. Louis.

If you missed part one, two, or three, there are links to both at the end of this post. And now, the final part of the E-View TM:

Q-This is a good time probably to address the Internet. There appear to be hundreds of lenders on the Internet for the consumer to choose from in addition to their local lenders.
Do you think there is cause for concern for a borrower in dealing with an Internet based company that does not have a physical location in their market? Or should they treat that type of company the same as a local company when checking them out to consider as their lender?

H. John Frank, Jr., President, Paramount Mortgage Co.

H. John Frank, Jr., President, Paramount Mortgage Co.

A-When you deal with a local lender or someone you have previously dealt with, you can always go into their office and discuss the problems or hopefully a local representative will be at the closing to go over the numbers with you and correct any mistakes or changes that have occurred. Continue reading “Mortgage information and advice from a St. Louis Mortgage Banker – Final post of the series