THE BASIS POINT

WeeklyBasis 02/05/07: Goldilocks is Just Right

As 2006 ended, most economists and Fed officials were expecting the economy to be crippled by high energy prices plus weak housing and manufacturing. But so far in 2007, wages and employment are increasing, energy costs are dropping, and even housing is holding up in many areas. All of this means rates have climbed and will perhaps climb a bit more – but this doesn’t mean a sharp shift from pure seller’s market to pure buyer’s market. It means we’re in a relatively normal market, or a “Goldilocks market” as the economists like to say. A normal (or Goldilocks) market is balanced between being too hot and too cold. Higher rates have brought home prices back to fair levels for buyers and sellers, yet rates are not prohibitively high for anyone. The first reaction of I get from most sellers lately is that they feel they’ll lose, but most see it all come together when I show them net profit plus the lower than expected costs on a new purchase.

Conforming ($200,000 – $417,000) – NO POINTS
30 Year: 6.25% (6.39% APR)
10/1 ARM: 6.5% (6.64% APR)
5/1 ARM: 6.375% (6.525% APR)

Jumbo ($417,001 – $650,000) – NO POINTS
30 Year: 6.375% (6.515% APR)
10/1 ARM: 6.5% (6.64% APR)
5/1 ARM: 6.375% (6.525% APR)