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Market Analysis

(We attempt to update this consumer comment section regularlyshould news warrant. But, there are times when we are on vacation or there is other interference and an update is delayed. If you find that the comment is out dated, please check back. We will do our best to remain as current as possible in helping you determine the home loan market information. Thank you!)

April 30, 2020


We are experiencing very turbulent and confusing times. The crises have resulted in decisions, often   made quickly, to react to fast changing developments. Although we think the requirements and regulations are of a temporary nature, we are unsure how long this temporary situation will exist. The best antidote for confusion is information Toward that end, we want to try to make some sense of what is happening in the home loan financing arena.


A quick comment:     The information expressed herein is our personal opinion and expectations.

We are regularly asked about whether the stock market is a good way to determine the direction of interest rates? The stock market is a barometer of how the business community interprets the financial picture. Recently, the trend has been downward suggesting that the business community is not optimistic or “bullish” on the economy. While the stock market can seem to mirror interest rates (even in more normal times), it is not a reliable indication of the direction of home mortgage rates.

Another confusion is the role of the Federal Reserve (the FED) and how their decisions affect home mortgage rates. The FED adjusts “short-term” rates. These mostly affect business loans, equity and auto loans and other shorter- term indebtedness. When the FED lowered the rate to nearly zero it was to alleviate fear among small businesses (and large) that funds for needed loans would be available and affordable during this crises. While lower short-term rates can eventually translate into lower long-term mortgage rates, it does not always occur. We tend to follow the 10-year bond/treasury note as an indication of the rate trend – up or down. This, too, has proven a less reliable measurement during this particular period.


Perhaps the greatest impact upon long-term mortgage rates at the present is the concept of “hedging”.

This is a complex and complicated system using formulas by which a lender attempts to minimize risk when a loan is initiated and the interest rate is “locked” – for perhaps 30, 45 or 60 days. The short version is that when a lender locks a loan they are committed to delivering that loan to the borrower at the agreed upon rate regardless of what has occurred in the market during the locked period. Adverse market movement could result in significant loss. This is especially so when the market is rapidly adjusting.


It is easy to see that when the market environment becomes unpredictable (as it is today) lenders are reluctant to lock loans for long periods and/or, in some cases, to make loans until the market “quiets” and is more predictable. If they are to make loans during this unpredictable period they are likely to “hedge” their bet – one method is by having what appear to be extraordinary high rates. That accounts for rates having jumped dramatically and perhaps staying at higher rates for at least the near future.

In addition to discouraging loans and lock-ins by increasing the rates, lenders change qualifying requirements. Borrowers must have higher credit scores, more down payment or cash reserves at close of escrow in order to qualify. The result is that borrowers who were “qualified” only days prior can often be deemed unqualified with the newly applied, more stringent qualifying requirements. Frustrating, confusing and very, very annoying especially if one was qualified and suddenly is not. But it is understandable that lenders must protect themselves and if not by hedging rates alone, by accompanied more conservative qualifying guidelines. 


And so it is this predicament that we find ourselves in today. The logical questions are what do sellers and buyers do today and what can we expect in the future. Here is the tricky part. Regardless of the unreliability of predicting the future we share our thoughts on what we might expect going forward.

Although we don’t know exactly how long, we believe the situation to be temporary. The economy will require re-igniting when the crises passes and everyone will be eager to return to business as usual, including the real estate finance community. So, if you are in a transaction that is stalled, it may be wise to remain committed, at least for a while. If qualifying requirements have adjusted, determine if the buyer can meet the more stringent conditions? If not immediately, how long until the credit score could be increased, the reserves be accumulated or the additional down payment be acquired via savings and/or gift? Obviously, if there is not chance that a borrower can meet the new guidelines the transaction may need to be cancelled. But finding another qualified buyer in this atmosphere may not be easy?


We think that rates will readjust and remain in the low range because there will be a need to stimulate home buying and boost the economy. We think that the qualifying guidelines are likely to readjust but, to be honest, these are often slower to readjust than interest rates. We feel that home values might adjust downward slightly, especially for those who feel that they must sell, but overall, if demand stays high and inventory remains low, values will stabilize.


It is likely that some potential buyers may be reluctant to purchase and some may have had financial adjustments that delay a home purchase. But, home ownership still represents the most effective way for persons to build wealth (over time) and makes for a good investment.

There are likely to be some transformative changes but they are mostly of a longer-term variety. For instance, there may be more reliance on e-commerce, digital documentation and social media for business use. Whether these are good or bad for the consumer is another topic for another time.

As indicated initially, this is a confusing, frustrating and annoying time. We cannot control much of what is happening but we can control ourselves. Some form of “normalcy” will occur. In the meantime, we are challenged to function from our best selves. Stay safe, stay healthy and be kind to one another.



We long for when sheltering in place will eventually end and we get back to normal activity. Some project that we have undergone a transformation and that we will encounter a “new normal” that adopts many of the adjustments we have lived with during our isolation period.

It can be both fun and harrowing to imagine how various aspects of our society will have been transformed. While we dwell mostly on how real estate housing and financing might be changed, many cultural aspects of our lives may be altered.


The simple act of shaking hands is an example. This form of greeting is typically recognized as an easy way to suggest “I accept you into my space” or a sort of welcoming gesture. If some are reluctant to re-embrace this gesture, will awkwardness occur when determining what is acceptable? Do we adopt a replacement form of greeting – the fist bump, hands held in a prayerful pose with slight bow or some greeting arrangement yet to be determined? Kind of crazy to even think about, huh?


If we expand our vision it can become nearly overwhelming to consider the future of distance learning, adjustments to food distribution, upgrades to our health systems in preparation for future pandemics, and many meetings and communications via future computerized arrangements. 

Teleconferencing, for example, has become an accepted way to conduct meetings. Doctors have used this form of communication with patients. Schools, from kindergarten through college, have adopted this method of staying in touch with students. Will this less personal approach continue when we are able to go back to our offices, doctor offices and schools? Patients, especially in more rural areas, might benefit from an enhanced teleconferencing ability. In-person business meetings where body language of all participants can be viewed and where comments made are not protected by distance may provide better outcomes? School, especially at young ages, is a social event as well as a learning environment. Easy conversation with instructors and peers can be critical at the higher learning levels.  On the other hand, maybe enhanced telecommunication capacity at the university level would enable more adults to re-enter or continue educational pursuits? Maybe control educational costs? Lots to think about with good and bad potential.


But, let’s confine our thoughts now to the real estate environment. With every change, many of which we might view as good and even necessary, could have unintended consequences that need to be considered.

E-signing Documents: In the interest of speed and simplicity, e-signing was becoming more widely used. But, some critics were noting that more and more buyers and sellers were questioning the lack of knowledge of signed documents accompanying this method of confirmation. Real estate can be complicated requiring the explanation of forms and documents, full discussion of rates and terms with would-be buyers and a bit of in-person hand-holding in difficult transactions. A personal connection may avoid future confusion, disappointment or misunderstandings?


Virtual Home Tours:   Will the physical showing of homes be mostly replaced by virtual tours? Not everyone will have access to the media tools for virtual home viewing. While perhaps used for narrowing the number of homes to see in person, it is likely that few sales will be made without prospect buyers personally viewing a home prior to purchase? Are there safety issues related to having all aspects of a home shown on-line? Could a possible question arise of “what does my agent do to earn a commission if I view homes on line and (as noted above) I sign everything via my smart phone”? Ah, we say, we could use Skype or Zoom to insert the personal touch! But will that work?


Appraisals:      We have encountered not only delays but reluctance from some appraisers to enter homes during this virus crises. Previously, there had been promotion of internet appraisals – use of sites like  ------------------- and  --------------------. While criticized for inaccuracies and often low-ball values, this method of home valuation is easy and quick. The loss of eyes-on valuation of unique features, upgrades and personal comments and price reconciliation among comparison properties could result in lower overall values. We don’t know the consequence of losing the professionalism of on-site appraisers?



Document Notarization:                     Questions have been raised before about the efficacy of the notarization process. There were attempts at virtual notarization during the shelter-in-place regulations. There were questions of validity, assurance of valid verification, etc.  Perhaps we will have a review of the process and its actual contribution to the loan process?


Credit Reporting:        The reliance on credit scores to determine a borrower’s priding has increased in recent years. High credit scores result in mor competitive interest rates and pricing terms. Changes were touted that included greater information – rental payments, additional information related to accounts, job loss data, etc. Critics raised questions of both too much and too little information. As we emerge from the economic shutdown, it is likely that many will have suffered some credit delinquencies that were beyond their personal control. How will lenders view these temporary credit difficulties when qualifying a potential home buyer? Will the buyer be penalized for a lower score that could impact his/her ability to purchase a home? Will an alternative method of “trended data” showing a more complete picture of past and current credit usage and payments emerge?

October 30, 2019

The Federal Reserve (The FED) has lowered its interest rate several times in recent months, usually a quarter percent at a time. There is general confusion regarding what this FED action means to the typical consumer. The article following these comments provides an explanation regarding the role of the Federal Reserve in “controlling” the economy generally. In the meantime, while it seems logical that a reduction in the interest rate is a good thing, ther can b unintended consequences.

Real Estate Mortgages:           Usually, FED rate changes are anticipated well in advance during which time the markets adjust resulting in little actual change in market rates at the time of the FED’s announcement. It is important also to recognize that the FED actions impact short-term rates only. While long-term mortgage rates may eventually follow suit, there is often no immediate similar reduction in home mortgage rates.

Other rate related instruments:           The FED action more directly impacts rates related to auto loans, home equity lines of credit and credit card rates. These financial instruments typically are variable rate loans and are affected more immediately. Even here, a quarter percent reduction can be a bit disappointing, especially with credit cared debt. With a average consumer debt of $8,000 and an interest rate in the 15 to 18 percent level, a quarter percent adjustment is likely to represent less than a $3.00 a month adjustment in payments.

Savings Rates:             While the cost of borrowing money is reduced, the rate on savings accounts are likewise reduced. Persons relying upon interest returns as their prime source of income can be significantly impacted.

Finally, we should consider a major reason that the FED might lower rates. Rising FED rates are typically to combat inflationary economic affects while reductions are made to stimulate an economy that might be sliding into recession. The recent slowing of the global economy impacts our domestic economy and the recent FED rate reductions have been made to promote continued growth and to assure us that the economy is strong, vital and healthy.

As you read the next article, note that the increase and reduction in the FED rate is done purposefully and is an important element in our economic stability.  






What Role does the Federal Reserve Play in the Economy?

            The Federal Reserve (The FED) is tasked to maintain stability that, in turn, will shepherd the economy through ups and downs. The FED sometimes walks a fine line between raising interest rates to combat potential inflation and rate reduction without tipping the economy into deflation.  

            Early in the year the economy seemed to be humming and the FED moved to combat excessive growth by raising rates. A reminder is necessary – The FED impacts short term interest rates which affect equity line, auto and business loans. Long term mortgage rates, while move somewhat in accordance with the FED changes, are not necessarily primarily affected. The increased short-term rates have the affect of slowing the economy from inflationary impact. More importantly, the increase was to provide the FED room to lower the rate if a long overdue recession actually developed.

            By mid-year, as if on cue, the economy somewhat unexpectedly showed signs of global and domestic slowing (a potential sign of a coming recession). Potential inflation was no longer the concern and the FED lowered the short-term rate a quarter percent in September (without noticeable impact on the already low long-term mortgage rates). As the global and domestic economies both continue to slow, the FED’s challenge is to lower rates (to stimulate the economy) without promoting deflation.

            Deflation is described as the general decline in the prices of goods and services in an economy, which in turn increase the purchasing power of money. On the surface, this seems like a good thing for the buying public. But what often occurs is that as prices fall, consumers wait to see if they will reduce even more. As consumers stop spending a cycle can be initiated wherein inventories increase, business profits decline, unemployment occurs and an economy can descend into recession.

            What is the FED’s affect on real estate? Deflation can increase the purchasing power of would-be home buyers but is likely to also result in reduced home values. An area where we would like balance where home values are not run-away inflationary but are also not declining in value.

            The FED’s difficult job is to foster a balance between inflation and deflation. Hence 2019 saw rates increase before declining again as the global and domestic economies changed. While the FED can be easily criticized, its independence serves us well as they focus, not on politics, but on maintaining as robust an economy as possible for all of us. A very difficult task, indeed but one we should all appreciate.  




“Lowest interest rates in the past two years”. “Fixed rates as low as 3.5%”. These and other ads like them are seen every day and would-be borrowers easily believe that they are being disadvantaged when they are told that these rates are very seldom actually available.

The “pricing” for a home loan is based upon a combination of the borrower’s credit score, the amount of down payment (Loan-to-Value), whether the property is to be used for personal residency or investment purposes and several other criteria. The lender views this analysis as assessing their risk.

A borrower’s total loan profile determines the ultimate interest rate s/he is “offered” by a lender. The various risk elements are “adjustments” to the base rate. So, while the base rate might be 3.5%, the borrower must check each box in order to actually receive that rate.

Let’s note the boxes:

-          The borrower has a credit score of over 740 (less than 740 results in adjustments)

-          The property being purchased is a single family residence (additional units mean adjustments – including sometimes mother-in-law structures))

-          The down payment is 20% or more (adjustments decline as the down payment increases  from 5%, 15% and finally 20% or more after which the adjustments end)

-          The purchased home does not have acreage attached (usually 5+ acres can result in varying adjustments up to 20 acres – the land value vs the home (improved) value is also considered

-          What kind of loan is being acquired (Conventional, FHA, VA, USDA) – the initial starting rate varies depending upon the type of financing).

-          Will the rate provide a “rebate” with which to pay loan fees or closing costs – if so, the rate will likely adjust upward.

-          How long will the “lock in” extend – the longer the lock timing the more the adjustment


The temptation for prospective buyers is to call lenders and ask “what is your current interest rate”? Some are annoyed when the legitimate lender responds with “I can’t price a loan for you until I have your loan profile” - (based upon the list above). Or the borrower contacts the internet lender and is given that low rate which s/he is unlikely to actually qualify for upon loan submission.


Ironically, the same phenomena occurs with estimated closing costs. Some quotes conveniently disregard the additional title fees, the impound fees (when taxes and insurance must accompany the monthly mortgage payment) or the myriad of small fees (which all add up) that accompany every loan. Every borrower should know what to expect in the way of closing cost on the day the loan closes.


Final word:          Information is powerful and allows you to make you best decisions. Rates are not going to be significantly different between lenders. Closing costs (when clearly identified) will likely be higher than expected. It will depend upon who is sharing ALL of the information with you up front. When you find the mortgage originator that instills confidence, trust your instincts (gut) and stop shopping.



                With continuing low home mortgage rates why are more people not purchasing homes? That is a question concerning both mortgage professionals and real estate licensees.

                The culprit may be two-fold, a lack of affordable inventory and lenders’ unwillingness to take credit risk. The latter situation impacts potential borrowers who simply cannot meet all of the criteria imposed by today’s lenders.

                Low inventory has plagued the market for several years. Seniors are electing to remain in their homes and families are renovating rather than selling and moving up. Having to compete to purchase fewer available homes keeps home values artificially elevated to the point that affordability fazes some prospective buyers out of the market. New home construction has been impacted by higher land prices, lack of available labor and increased building supply costs. Compounding the issue is that home prices have been adjusting upward in many areas faster than wages and inflation. And while in some areas, smaller, starter homes are starting to be constructed, affordability and inventory are likely to remain a borrower concern.

                In spite of the relaxation of some home loan qualifying guidelines, borrower concerns over the documentation process continue. Critics suggest that only the most pristine borrowers are able to easily acquire home financing. With current low loan default records, these same critics want lenders to relax credit criteria and allow more capable borrowers to purchase homes. Others harken back to when easy credit standards resulted in some persons buying homes that likely should not have and persons buying  beyond what they could actually afford.

                Because the qualifying rules are somewhat daunting for some borrowers, prospective buyers are encouraged to seek pre-qualification early. Identify their loan profile and exactly what they need to do to prepare for to purchase. In other words, get all of the required documentation in order.

                But neither the low inventory issue or the tight credit risk environment is likely to evaporate soon. It doesn’t mean that one cannot buy a home. But it does suggest that one become informed and educated in preparation for future home purchasing. Humboldt Home Loans can help you do just that.



Why You Should Buy Your Home Soon!

 At the risk of sounding like just so much real estate hype, there are some good reasons to consider purchasing a home soon. Home ownership still represents the typical path for middle class wealth building. While un-even across the state, 2018 did continue the signs of a continuation in real estate appreciation that many expect to continue into 2019 and beyond.

Home prices:  increased, albeit only slightly and not everywhere. Predictions are that home values will continue to grow slowly., thanks to a likely continued shortage in home for sale inventory.

Consumer Confidence Improving:  this drives the market and as people seem to be a bit more confident about the future it is expected that we could see inflation continue. Buying now allow new home owners to acquire the appreciation that we expect to accompany home ownership. occur.

Low Interest Rates:   home mortgage interest rates, while edging upward, remain at historic lows. Mortgage rates are going to increase but the FED seems focused on controlling inflation.

Unemployment Dropping:   skepticism over how the numbers are calculated and the types of jobs being created doesn’t detract from the fact that more people are working and feeling a bit more optimistic about the future. 



All real estate is local! That statement is true as every area is unique as to its home values, loan options available and its future growth. Regardless of the future changes in real estate financing ahead, the need for competent, knowledgeable loan originators will not change. Humboldt Home Loans’ emphasis remains on education and counseling – the two parts of the home buying process that most empowers consumers. Every potential buyer requires good information with which to make good decisions. Our promise remains the same – our focus is always based on what is best for our client. One may not always like what we say (sometimes having to tell one that they are not yet ready to buy) but we guarantee that the information will be accurate and in one’s best interest. And if you are not ready to buy now, we will provide a road map to home ownership in the future. 

Finally, low rates and moderate home price appreciation makes this still a good time to purchase a home. We urge that you become pre-approved for a loan before initiating your home buying search. There is a variety of loan options and you want to identify the one that is best for your circumstances. Call us today to schedule your FREE qualification meeting. 

For information regarding all of your real estate financing questions and concerns you are invited to call us at Humboldt Home Loans:

            John Fesler      707-269-2318                          Jody Harper      707-2692304


Visit the “tip sheet” section of this web site for answers to many of the most often asked questions – see below.

We follow the market every day, all day. We will attempt to keep you updated on what we think is happening and what you can expect regarding long term mortgage rates. We wish we could be clearer with our suggestions of what you should do in these market times. Remember, real estate is almost always a good long term investment. Discuss your situation with your Realtor and Mortgage Broker and then move ahead accordingly.



You may find several tip sheets (found in our "tip sheet" section of this web site) interesting as you determine if you should proceed with either a purchase or refinance transaction . . . check out "Never Been a Better Time to Buy", "Refinancing" and "Locking the Interest Rate"..

Here are a few additional tip sheets of particular interest. You may view our complete tip sheet table of contents by clicking below.

Acquiring a Loan via the Internet

Capital Gains Tax Clarified

TDS Required in All Sales

Preparing your home for sale

Sellers should be pre-approved

Real Estate Advertising

Credit Scoring . . . here to stay

Click Here for
Complete Tip Sheet
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