Virginia Beach Mortgage Market Recap-April 28

There were few surprises to speak of last week in the Virginia Beach mortgage market, especially on the housing front, where home sales continued along their well-established downward trajectory.

Existing-home sales fell 2% to a seasonally adjusted annual rate of 4.93 million, the National Association of Realtors said. Meanwhile, the inventory glut persists in the new-home market, where sales dropped 8.5% to an annual pace of 526,000, the fewest since October 1991.

Surprisingly, there are glimmers of hope. The median price of existing homes rose to $200,700 last month from a revised $195,600 in February, the Realtors report showed. Whats more, the Office of Federal Housing Enterprise Oversights home-price index showed prices rising a seasonally adjusted 0.6% in February from January, the first monthly gain since June. While its too early to call a bottom, one could argue that Virginia Beach home sales could stabilize (at lower levels) by midyear.

One could also argue that the subprime and Alt-A segments of the mortgage market are also stabilizing. Although delinquencies continued to rise during March, roll rates – the percentage of troubled mortgages that move from one delinquency state to another (i.e., 30- to 60-day delinquencies) – decreased across all vintages, while cure rates – troubled loans that were successfully worked out – increased slightly across all but the 2002 vintage, according to Clayton Holdings.

Read: South Hampton Roads Real Estate Area Market Report-Virginia Beach Statistics

Consumer Confidence
(April)

Tues. April 29,
10:00 am, et

62
Index

Mortgage Applications

Wed. April 30,
7:00 am, et

None

Gross Domestic Product
(1st Quarter 2008)

Wed. April 30,
8:30 am, et

0.2%
(Increase)

Employment Cost Index
(1st Quarter 2008)

Wed. April 30,
8:30 am, et

0.8%
(increase)

Federal Reserve
FOMC meeting

Wed. April 30,
2:15 pm, et

2.00%
Federal Funds Rate

Personal Income
& Expenditures
(March)

Thurs. May 1,
8:30 am, et

Income: 0.4% (Increase)
Expenditures: 0.3% (Increase)

Construction Spending
(March)

Thurs. May 1,
10:00 am, et

Employment Situation
(April)

Fri. May 2,
8:30 am, et

Unemployment: 5.2%
Hourly Wages: 0.3% (Increase)

HOW ABOUT RAISING RATES?

Weve mentioned before that efficient markets are synonymous with confidence and liquidity – the result of investors appetite to underwrite risk and savers appetite to provide leverage to investors who want to underwrite risk. As risk appetite increases, liquidity follows, producing an increase in overall confidence.

Perhaps higher interest rates could increase both liquidity and confidence. Higher rates would strengthen the U.S. dollar – which has been in a free fall the past two years – and, therefore, strengthen foreign confidence in the U.S. economy. Walter Bagehot, a 19th century British economist, noted as much 140 years ago when he called a seizing of internal markets ˜a domestic drain and the flight of capital abroad ˜an external drain. Bagehot argued that raising interest rates restores foreign confidence and makes domestic banks more willing to lend.

But would higher rates further ravish the housing market? Interest rates exert influence on home prices, to be sure, but the relationship is surprisingly tenuous. In 1980, the prime 30-year fix-rate mortgage averaged 13.7%, rising to 16.1% in 1982. Home prices during that period tumbled over 20%. From 1984 through the present, mortgage rates have steadily trended lower, but in 1989 the housing market endured a major 15% correction. Of course, its enduring another correction today on relatively low rates.

At this stage in the game, more willing lenders are more important to reviving the Virginia Beach housing market than marginally lower interest rates. After all, what good is cheap money if no one is willing to lend it?    

Information provided by Fred Levine, Union Mortgage Group, (757) 287-0551.

For more information on Virginia Beach mortgages and real estate, visit ButlerTeamHomes.com. Start your Virginia Beach home search here.