Drop In Jobless Rate Puts Fed Closer To Ending Bond Buys
The Federal Reserve is nearer to dialing back its massive bond-buying program after the unemployment rate dropped last month, a top Fed official said on Monday, adding that he wants reductions to start this fall.
The U.S. central bank is buying $85 billion in long-term securities each month in order to keep interest rates low and boost hiring and investment. Fed Chairman Ben Bernanke said in June that the Fed would probably make cuts to the program later this year, with an eye to ending it by mid-2014, when unemployment will likely be around 7 percent.
“Having stated this quite clearly, and with the unemployment rate having come down to 7.4 percent, I would say that the (Fed’s policy-setting) committee is now closer to execution mode, pondering the right time to begin reducing its purchases, assuming there is no intervening reversal in economic momentum in coming months,” Dallas Federal Reserve Bank President Richard Fisher said in remarks prepared for delivery to the National Association of State Retirement Administrators.
Here are four things you should consider when negotiating a great deal on a potential new home, Keep in mind when attempting to bid on a home that if you go too high you’ll wish you would have gone lower, but at the same time going too low and you can hurt your chances of getting the home you desire.
The first thing you need to do is prepare yourself; Knowing more information about the property you want allows you to have more control over price negotiations and allows you to know what your max bid should be. Things like hiring a home inspector to help find out what repairs are needed to the home can help you get a home for cheaper or possibly give you the ability to negotiate the current owner of the home to fix these repairs. Another helpful thing to know about is the properties history with certain information and circumstances you can help yourself negotiate a better deal by knowing some things such as how long the property has been listed, a property on the market for a longer period of time you can attempt to go lower than you normally may. Also things like relisting’s, short sales or foreclosures or unique things about the property. Also after finding out property information you also may want to find out information about the seller which could potentially have them motivated to sell the home such as needing to move out quickly or getting a divorce.
The second thing to make sure of when negotiating is always be polite. Negotiating with the seller face to face is a starting point, as it makes it a more real thing and lets them know you’re serious about your interest. Also consider this negation to be like any other business deal, you can always offer a low price that helps you but by throwing something extra to the seller might have them more willing to accept the offer, for example letting them chose the closing date. Always be as professional as possible and courteous but don’t let the seller bully you at the same time. Always be out to try and achieve a win-win with your seller.
Number three, Modesty is key. Look at it as a game of poker try to keep things in your favor by not letting the seller see all of the cards up your sleeve. Example may be not letting them now how you plan on paying for the home which may change the way he goes about the price. And very important to always try to remain emotionally detached as falling in love with a home can be the death of a good negotiation and is usually something a seller can see and some will take advantage of this fact. Always remember there are plenty of houses for sale and other options will almost always exist. When given a counter offer, don’t respond to it instantly but be sure to sleep on it and make sure you have everything planned out be it to propose another counter offer or accept the deal.
Finally always be wise. Once you and the seller have finally come to an agreement, make sure to get everything in writing. Make sure you fully understand all of the costs that come with a home outside of just the mortgage.
A Negotiating game done correctly is one in which all parties can walk away happy. So prepare yourself, and get ready to enjoy your new home.
Mortgage rates were essentially unchanged today, with some lenders in marginally better shape while others were marginally worse. Some of this discrepancy can be accounted for by mid-day reprices where lenders republish rate sheets on occasions where the mortgage backed securities market moves far enough in one direction. Lenders reprice at different times and under different circumstances, meaning that some underlying market movements can be bad enough to motivate some lenders to reprice.
The rest of the discrepancy is due to the fact that markets simply didn’t move much in the first place. Even without the reprices, some lenders were in better shape this morning while others were worse. For the most part, the differences are microscopic and the most prevalent 30yr Fixed quote for a top-tier scenario best-execution remains at 4.5%. Paying additional closing cost to move to 4.25% continues to make sense in some cases, but the amount of time required to break even (extra costs divided by monthly payment savings) is closer to 6 years in some cases compared to just under 5 years last week.
The rest of the week is pretty straightforward from a risk/reward standpoint. Both are huge and risk will continue to generally outweigh reward as long as interest rates continue to generally be trending higher. The steeper trends toward higher rates beginning in early May and late June have been consolidating since the July 5th blowout. “Consolidation” is just another way of saying “moving mostly sideways with plenty of ups and downs but generally with lower highs and higher lows.”
Rates can consolidate for several reasons, but one of the most common is simply because they are moving through a period of weeks that contain inconsequential information relative to some extremely important information. That’s probably what this consolidation owes itself to, and tomorrow is probably the day where we start getting that information. It’s not just one event either, but a rather impressive confluence of events including the Fed’s Policy Announcement, an important employment report, and first look at Q2 GDP among other things.
Markets are also cognizant that the mighty Employment Situation Report is released this Friday, and taken together with tomorrow’s events, should be plenty to suggest the next move higher or lower from this consolidative perch. That’s all well and good if the data and events work in favor of lower mortgage rates or even if they’re at odds in such a way that rates can at least stay flat, but the risk is that the data is unified in suggesting higher rates. If that happens, it could happen BIG, and this afternoon would be the time where you’d wish you would have locked. On the flipside, you could lock today and regret it if rates are able to make a more meaningful recovery, but that’s a different kind of regret than the “wish I would have locked” kind.
Today’s Best-Execution Rates
•30YR FIXED – 4.5%
•FHA/VA – 4.25%
•15 YEAR FIXED – 3.625%-3.75%
•5 YEAR ARMS – 3.0-3.25%
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