Marketweek 12/08/03: Conforming Loan Limits Go From $322,700 to $333,700

Rates/commentary for the week of December 8, 2003. Friday’s weaker-than-expected Employment Report dampened hopes of a complete economic recovery, helping lower rates about 0.25% coming into today. Tuesday is the Fed’s last rate-setting meeting of 2003, and they are NOT expected to hike rates because there are no inflationary pressures on the economy. Friday’s release of November Retail Sales, which is a key measure of consumer spending, is expected to show a modest increase. We will only see upward rate movement if the increase is larger than expected (because investors will sell bonds and buy stocks). This stock emphasis (which can hurt bonds and push rates up) will also be encouraged by the Dow fast approaching it’s key psychological threshold of 10,000. But again, there are no significant signs of inflation so it looks like rates should remain near their 30-year lows as we close out 2003.

Good news (in case you didn’t hear): National Association of Realtors’ chief economist announced last week estimates that 2004 will be the second-best year ever, behind 2003, for new and existing home sales. Also, note that Conforming loan limits have been increased from $322,700 to $333,700. This is still a bit too low to mean a lot for the Bay Area purchase market, but it does open opportunities for me to structure certain deals at lower Conforming rates (as opposed to Jumbo).

Conforming ($50K – $333,700K) – NO POINTS
30 Year: 5.75% (5.89% APR)
15 Year: 5.125% (5.265% APR)
5/1 ARM: 4.875% (5.025% APR)

Jumbo ($333,701 – $650,000) – NO POINTS
30 Year: 6.125% (6.265% APR)
15 Year: 5.375% (5.515% APR)
5/1 ARM: 5.0% (5.15% APR)