My New Blog

We have been urging our Minnesota and North Dakota Veterans to make a decision soon about buying or refinancing a home with a VA Loan. For severa l weeks we've been writing about the probability of VA loan and other mortgage rate increases: here they come. The headline screams Debt Fears Send Rates Up. What's happening in Washington will make VA loan rate increases impossible to avoid. The reason is the spending spree our federal government has taken on. Add to that the unfunded Medicare and Social Security entitlements of over 100-trillion dollars and you start to get the picture of why international investors are having serious second thoughts about this nation's economy and our ability to ever pay down debt.

This week foreign investors turned their backs on a treasury auction which resulted in bond prices  going down and rates moving up (remember anytime bond prices move down rates go up). This could spell serious trouble for the US housing market as mortgage rates have also started going up. This, coupled with the ending of the Federal Reserve's program of buying mortgage backed securities, will likely continue pushing VA and other loan rates upward.

We at VALoansND and VALoansMN have begun a serious campaign urging our clients to reach out to other Veterans, their families and friends, advising them that a mortgage refinance, a chance to buy a home, at these historic low rates is passing. Yes, we want the business but even moreso, we want any qualifed person to not miss this fading opportunity to save tens of thousands of dollars.

Excuse me home builders, but your bad news may be good news for Minnesota homeowners and VA loan seekers. This week the Fed held their meeting to discuss inflation and rates and the outcome was good for consumers, for now. The Fed left their Federal Funds Rate unchanged (we discussed this rate in greater detail at www.myfhablog.com ). It is likely that investors in mortgage backed securities (MBS) will read the language from the Fed as indicating that inflation is not a problem and there’s no reason for mortgage rates to rise. This even though the year old program of the Fed buying these MBS and keeping rates down comes to an end this month. So, rates are apparently going to stay somewhere in the 5% range for a VA loan, but what’s good about the bad news for builders?

The U.S. Commerce Department reported that new housing starts fell .6% from a month earlier. Apartment construction also fell to its lowest level since the mid 1990’s. That means our construction workers are hurting. But the benefits of this bad news may be homeowners. As the supply of homes for sale decreases there is more of a chance of prices for existing homes to stabilize from their 4 year slide. The supply of homes for sale is bloated way out of proportion and it may even get worse. We’re advising our clients that now is a great time to get a VA loan in Minnesota and buy a house. We at VALoansMN believe this bloated supply of homes for sale and our historic low VA loan rates is presenting an opportunity that could be characterized as “once in a lifetime”.

We fully expect this opportunity to remain for the short term. There are over 3 million existing homes for sale nationwide. There are another 5 million properties estimated to be in mortgage delinquency or foreclosure. We see the homes for sale number to consistently rise through much of this year keeping home prices down. So when we hear housing starts are sliding, we’re not surprised. What is not known is what may happen to mortgage rates. We still believe there could be considerable upward pressure in the not too distant future.