This Week in Real Estate 1-9-2015 - Lower interest rates on low oil prices

Oil Plunges, Lower Interest Rate … Even LOWER Mortgage Insurance

This week has had a lot of unrest in the financial markets and it is mostly because of Oil. We love our cheap gas prices, but what it is bigger meaning.

Oil is now at less than $50 a barrel and in the summer it was over $100 a barrel. This is a 50% drop in just 6 months and the pressure on the pricing is to continue lower. Why this happening is a classic study in supply and demand.

When Oil prices were high, over $100 a barrel, the relatively expensive way of getting oil Fracking, was implemented for the first time on a very large scale in the US. Now the US is producing nearly as much oil as the Middle East. In order to deter investment in more fracking operations, the Saudi Arabian producers have increased production flooding the global market to discourage more competition.

Oil demand is unlikely to soak up the excess supply anytime soon, with Europe’s economy is stalled, Japan picking up the pieces from its recent sales tax hike and China still trying to control its runaway housing and fixed-asset investment bubbles without pricking its bad debt problem. And our economy while growing is doing so very slowly. The threat of a global slowdown is very real.

So this week interest rates hit their 52 week low, which is great news from the stand point of buyers and sellers. Cheap money will keep housing in demand and prices higher.

In addition, yesterday President Obama announced that the Mortgage Insurance on FHA loans will be reduced by 50 basis points (1/2 percent). This move will help thousands of first time home buyers and home buyers that have had a short sale or foreclosure in the last 5 years.

So get off that fence and get shopping.

-Kris

Tip of the Week

When to refinance?  Have you purchased or refinanced your home in the past 12-18 months? Interest rates have been declining since July of 2013. It might be time to think about refinancing.

·         How long do you plan on staying in the home?

·         How much will you be saving?

·         How long is the payback (saving = cost to refinance)?

·         Have you built up enough equity to remove some Mortgage Insurance?

·         Can you reduce the term of your loan?

If you are interested to find out whether or not now is the time to refinance please contact.

Cheris Hallman, HomeStreet Bank

707.333.4900

Cheris.hallman@homestreet.com