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You already know that what the Federal Reserve does with interest rates has a huge impact on the housing market.   I’m Russ Boyd and what you might not know is that the Fed influences housing prices in another significant way—through its purchasing of mortgage-backed securities (MBS)—and now the question is that when the Fed stops buying those securities in the near future, how will it affect the housing market?
Some background will help explain what is going on. Let’s start with a definition. An MBS is a group of mortgage loans that are pooled together and sold as a bond.

Part of a Pool

It is easy to understand how MBS come about and how they work. When you go to a bank or mortgage broker to borrow money to purchase a home, the home is collateral, and your mortgage—the promise you’ll pay principal and interest each month—is the anticipated cash flow the lender receives from you.
That bank or broker then sells your loan to an entity that aggregates your loan with a bunch of other loans into a big “pool” of various types of loans with various maturity dates (fixed, adjustable rate, one-year, 30-year, good credit, bad credit, etc.) The aggregator then issues these pooled mortgages as bonds, the MBS, which promise investors an attractive stream of interest payments.
Who are these aggregators?
They are government sponsored entities (GSEs). One large group is the Federal Home Loan Banks (FHLB), a private corporation made up of 8,100 member banks. All of the member banks must own stock in FHLB in order to participate in its loan program.  Other GSEs, which have become household names are Fannie Mae, Freddie Mac, and Ginnie Mae
To recap,  an MBS is a pool of home loans sold as a bond. And we know who issues them: government sponsored enterprises such as Freddie and Fannie, etc. So, how does this help us understand where real estate prices are going?

Easier to Get a Home Loan

Well, most banks have neither enough money, nor any desire, to hold a large number of home loans for an extended period of time. Absent a place for the banks to sell them, as many of us found out over the last year, it then becomes difficult for us to get a new loan. Thus, the MBS market is currently providing us all with an important means of loan supply, albeit indirectly via our bankers and mortgage brokers. The easier it is for banks to sell our loans to MBS aggregators, the easier it is for us to get a home loan. The more difficult it is, the harder (and more costly) it is for us to get a mortgage.
When the entire financial system found itself on shaky ground the housing market was affected big time. Anticipating a big increase in homeowners defaulting on their mortgages, investors no longer wanted to own their existing MBS, let alone buy newly issued MBS.
With no buyers for those securities, the GSEs couldn’t sell them or issue more. As a result, the supply of mortgage loans all but came to a screaming halt.
To the rescue came the Fed. Last November, as part of its efforts to get the economy moving again, the Fed announced it would buy $500 billion in mortgage-backed securities. In March of this year it raised its target to $1.25 trillion, and it has followed through on its pledge.  These purchases have undoubtedly provided much needed liquidity to the MBS market and helped keep the long-term mortgage rates at historic lows.

Behind the Higher Rates

O.K., let’s get back to the original question: What’s next? Well, just as it has been with interest rates, the Fed has been transparent about its intentions toward MBS. It has said it will stop buying MBS once it fulfills its commitment of buying those $1.25 trillion worth of bonds. It will complete that purchase sometime during the first quarter of next year.
That means that, sometime within the next five months, the Fed will be withdrawing a prop under the housing market.
What remains to be seen is how other investors react as the Fed slows—and then eliminates—its purchase program.
My expectation: As the Fed pulls out, private investors will demand a higher interest rate for such securities—to compensate for their concern people will continue to default on their mortgages—and thus long-term mortgage rates will rise. The real question is how fast and how high.
The real estate and mortgage markets are more complex than ever.  I encourage all interested buyers, sellers and homeowners to work with an agent that they can trust, an agent that values their business and an agent that has the skills and experience to provide counsel and guidance in this complex market.



If you are in the San Francisco Bay Area, I invite you to start at our Resource Center, www.AboutBayAreaHomes.com. There you will find links for active home listings, including bank owned and short sales, home loans, market activity reports, home seller strategies, staging and decorating,  a suite of 19 calculators, plus my book, “Let’s Make a Deal, The insiders Guide to Buying and Selling Real Estate” and more.  Of course I am always available to discuss your real estate or mortgage related questions or concerns, just call, text or email me for a prompt response.

Russ Boyd and his team professionally assist buyers, sellers and homeowners in the Peninsula Communities of the San Francisco Bay Area. They serve clients in San Mateo, San Francisco, Santa Clara, Alameda and Contra Costa counties. Licensed as a Real

I get a lot of calls from people who ask me if the San Jose or San Francisco Bay Area mortgage or refinance rates are the same as everywhere else in the nation.  The answer is no.  When comparing mortgage or refinance rates it is extremely important to make sure your specific property address qualifies for a certain rate.  Many times I have provided mortgage or refinance interest rates to people for investment properties or condos and they say the rate quote is higher than what other lenders have quoted.  In every single instance the property type or occupancy type wasn’t correct.  In some cases lenders quote the lowest mortgage rates to get you in the door.  Then they say you aren’t qualified and the interest rate is higher.  At this point in the process most people just continue the mortgage transaction, and these lenders understand this.  To get the best mortgage rates in San Jose and the San Francisco Bay Area it is important to ask the right questions when obtaining a mortgage rate quote.  Make sure you confirm the property type and occupancy status in the beginning.  Also make sure you understand the three variables in the cost of the mortgage.  The first is the mortgage or refinance interest rate.  During the comparison process make sure you understand the type of mortgage home loan you are applying for.  Let’s say it is a 30 year fixed mortgage.  Make sure the mortgage interest rate quotes you receive are for 30 year fixed mortgages and not for adjustable rate mortgages, because the mortgage rates for adjustable rate mortgages are typically much lower.  You also need to understand if you are paying points to achieve a particular rate.  If you are, this is a cost to you and must be weighed against the mortgage rate quotes you receive without paying points.  The last thing to consider in mortgage rate comparison shopping is the closing cost.  If the mortgage or refinance rate is low and the closing costs are high you need to figure out if the mortgage or refinance program makes sense for you.

Click Watch Video or read text below

1. Interest Rates – Bankrate recently reported, that mortgage rates are at their lowest point ever in their survey taking history. They have been conducting rate surveys since September 1985. The national average for a 30 year fixed rate mortgage is very near 5%. This is great news for buyers. If you read or listen to the news, you will see that refinancing has increased dramatically. Why do you think this is? As I’ve mentioned, I am working on several refinances and have locked rates under 5%. Any further rate drops are likely to be minimal. One thing that you can count on, when rates begin to rise, they go up much faster then they go down. The current interest rate alone, is a really good reason to consider purchasing a home.
2. Housing Prices – Everyone knows that housing prices are down in most regions. Do you think prices are going to continue to decline? Perhaps, but most of the decrease is now reflected in today’s prices. Two good reasons to buy.

3. Seller Motivation – Due to the current market conditions, it is pretty easy to identify motivated sellers. In many instances, you can easily find a motivated seller by looking at the property description. Look for keywords such as: “motivated seller,” “make an offer,” or “must sell.” Be sure your agent is on the lookout for consistent price reductions. If you like the property and the seller is motivated, then you should seriously consider making an offer. If you don’t, chances are someone else will and you will have missed your opportunity. Don’t let happen to you.
4. Tax Advantages – Current tax law allows homeowners to deduct interest paid on mortgages and the amount of paid property taxes. If you are paying rent, you do not qualify for these deductions. The federal and California State governments are also offering incentives. The most widely publicized are the Federal $8,000.00 first time home buyer tax credit and the California $10,000 tax credit for a new home purchase. This makes a great opportunity even more incredible. You can find more information at our resource center, www.bayareateamonline.com.
5. Timing – You must have heard the expression “buy low and sell high,” right? It might even be your mantra. As with any investment, it is ideal to purchase when prices are low rather than at their peak. However, if you are waiting to purchase a home because you believe prices will continue to drop, you will likely miss out of an ideal opportunity. The time to “buy low” is right now. Once everyone comes to the realization that prices may already be at their lowest point, then you can rest assured that buyers will jump in and start buying. It might not be a mad rush anytime soon, but the best deals will be the first target.

Now you know, this is a great time to buy a house. There is plenty of inventory, interest rates are low, house prices are down, sellers are motivated, you can take a tax deduction and you may qualify for up to $18,000.00 in tax credits. The timing is perfect. You have nothing to lose and so much to gain.

To further assist you, we’ve added two Rent vs Buy calculators to our Resource Center and
blog site….one is by Freddie Mac the other calculator is by Ginnie Mae. If you decide that buying in the San Francisco Bay Area makes sense for you, I can assist you with locating and financing your home. If renting seems like the right answer and you want to live on the Peninsula I can refer you to the best rental agent I know….

Russ Boyd and his team professionally assist buyers, sellers and homeowners in the Peninsula communites of the San Francisco Bay Area. They have served clients in San Mateo, San Franicso, Santa Clara, Alameda and Contra Costa counties. Licensed as a Real Estate Broker by the California Department of Real Estate, 01264240.

Click Watch Video or read text below

1. Interest Rates – Bankrate recently reported, that mortgage rates are at their lowest point ever in their survey taking history. They have been conducting rate surveys since September 1985. The national average for a 30 year fixed rate mortgage is very near 5%. This is great news for buyers. If you read or listen to the news, you will see that refinancing has increased dramatically. Why do you think this is? As I’ve mentioned, I am working on several refinances and have locked rates under 5%. Any further rate drops are likely to be minimal. One thing that you can count on, when rates begin to rise, they go up much faster then they go down. The current interest rate alone, is a really good reason to consider purchasing a home.
2. Housing Prices – Everyone knows that housing prices are down in most regions. Do you think prices are going to continue to decline? Perhaps, but most of the decrease is now reflected in today’s prices. Two good reasons to buy.

3. Seller Motivation – Due to the current market conditions, it is pretty easy to identify motivated sellers. In many instances, you can easily find a motivated seller by looking at the property description. Look for keywords such as: “motivated seller,” “make an offer,” or “must sell.” Be sure your agent is on the lookout for consistent price reductions. If you like the property and the seller is motivated, then you should seriously consider making an offer. If you don’t, chances are someone else will and you will have missed your opportunity. Don’t let happen to you.
4. Tax Advantages – Current tax law allows homeowners to deduct interest paid on mortgages and the amount of paid property taxes. If you are paying rent, you do not qualify for these deductions. The federal and California State governments are also offering incentives. The most widely publicized are the Federal $8,000.00 first time home buyer tax credit and the California $10,000 tax credit for a new home purchase. This makes a great opportunity even more incredible. You can find more information at our resource center, www.bayareateamonline.com.
5. Timing – You must have heard the expression “buy low and sell high,” right? It might even be your mantra. As with any investment, it is ideal to purchase when prices are low rather than at their peak. However, if you are waiting to purchase a home because you believe prices will continue to drop, you will likely miss out of an ideal opportunity. The time to “buy low” is right now. Once everyone comes to the realization that prices may already be at their lowest point, then you can rest assured that buyers will jump in and start buying. It might not be a mad rush anytime soon, but the best deals will be the first target.

Now you know, this is a great time to buy a house. There is plenty of inventory, interest rates are low, house prices are down, sellers are motivated, you can take a tax deduction and you may qualify for up to $18,000.00 in tax credits. The timing is perfect. You have nothing to lose and so much to gain.

To further assist you, we’ve added two Rent vs Buy calculators to our Resource Center and
blog site….one is by Freddie Mac the other calculator is by Ginnie Mae. If you decide that buying in the San Francisco Bay Area makes sense for you, I can assist you with locating and financing your home. If renting seems like the right answer and you want to live on the Peninsula I can refer you to the best rental agent I know….

Russ Boyd and his team professionally assist buyers, sellers and homeowners in the Peninsula communites of the San Francisco Bay Area. They have served clients in San Mateo, San Franicso, Santa Clara, Alameda and Contra Costa counties. Licensed as a Real Estate Broker by the California Department of Real Estate, 01264240.