It was widely reported this past week that 30-year mortgage rates were at a historic low. Rates dipped below 4% for the first time since the government has been keeping such records. I remember when I bought my first house, in 1989. I borrowed at 9.875% on an FHA loan, and thought I was STEALING the money, because mortgage rates had not been in single digits for years. My how times change.
Low rates are great news for homebuyers…if they can qualify.
Low rates are great for current homeowners looking to refinance…if the have equity.
Each time we see another dip in the rates, I expect to see a burst of activity in the mortgage markets. And don’t get me wrong…my friends in the lending business are busy…but they aren’t *swamped*, and that is a pity. They should be. But the combination of tight lending standards and negative equity is keeping Joe and Jane Public from taking advantage of this historic opportunity. It’s like the the money tree is loaded with $100 bills, but the branches are just out of reach for the average person.
I have said before that we really don’t have a real estate crisis in the country, we have a *credit* crisis. There are plenty of people that would love to buy a house at today’s bargain prices and rates, but the tight lending standards keep them out of the market.
This is doubly true in the investor world. Current rules limit the number of conventional mortgages that investors and landlords can have at a time (i think the current limit is 6). The investor’s credit, equity position, cashflow, and downpayment are all irrelevant. Hit that arbitrary limit, and you are cut off. That’s just dumb!
Investors would jump in the market and buy like there was no tomorrow if the lending standards were relaxed to a reasonable level. I’m not talking about the “can you fog a mirror” loans of the past. How about this: offer 30 year fixed rate loans to investors at 20% down and a point over owner-occupied rates. Those terms would make these safe, secure loans, and investors would jump into the market and soak up the excess inventory in short order.