The Fed’s money printing mostly help home investors not buyers

Published: Friday, 14 Sep 2012 | 1:05 PM ET

For those of you who expected to wake up to a 30-year fixed rate mortgage below 3 percent, you may as well go back to sleep.

Yes, rates moved down, 0.125 percent, according to several sources, but that was not as low as some had predicted. Remember, we hit the low of 3.49 percent in July, but then we jumped back into the mid to high threes. (Read More: Fed Pulls Trigger, to Buy Mortgages in Effort to Lower Rates.)

“Short term, people who are thinking about moving really need to lock in,” says Craig Strent of Maryland-based Apex Home Loans. He is concerned that the strong consumer sentiment number that came in today could cause the Federal Reserve to pull back on its buying in the future. “When this thing turns, it’s going to be fast. Just pulling back a little sends a message,” adds Strent.

But others argue that the housing market is still on such shaky ground that that’s unlikely to happen. Mortgage applications to purchase a home have declined five of the last six months, according to Diane Swonk of Mesirow Financial.

“I think that this will be a trillion dollar commitment from the Fed,” said Swonk on CNBC’s “Squawk on the Street.” “Home values appreciating, that’s something very important in this economy getting more legs and moving forward more rapidly.” (You can watch the interview here.)

So say mortgage rates could dip lower than the latest record, perhaps to around 3.25 percent. How does that help me? Does it boost my home price? (Read More: Will Fed’s Mortgage Buying Juice the Housing Recovery?)

On the one hand, lower mortgage rates give potential buyers more purchasing power. “A 0.125 percent drop in rates adds 1.5 percent to your maximum purchase price (given all the other fees),” according to Dan Green at Waterstone Mortgage. “Assuming a mortgage payment of $1500, that’s the difference between $404,800 and $411,000-ish.” So that is how much more house you can buy. If people can buy more house, then perhaps home prices will rise.

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Proprietary OC Housing News home purchase analysis

125 East MAYFAIR Ave Orange, CA 92867

$495,000 …….. Asking Price
$495,000 ………. Purchase Price
9/10/2012 ………. Purchase Date

$0 ………. Gross Gain (Loss)
($39,600) ………… Commissions and Costs at 8%
============================================
($39,600) ………. Net Gain (Loss)
============================================
0.0% ………. Gross Percent Change
-8.0% ………. Net Percent Change
#NUM! ………… Annual Appreciation

Cost of Home Ownership
——————————————————————————
$495,000 …….. Asking Price
$17,325 ………… 3.5% Down FHA Financing
3.60% …………. Mortgage Interest Rate
30 ……………… Number of Years
$477,675 …….. Mortgage
$124,725 ………. Income Requirement

$2,172 ………… Monthly Mortgage Payment
$429 ………… Property Tax at 1.04%
$0 ………… Mello Roos & Special Taxes
$124 ………… Homeowners Insurance at 0.3%
$498 ………… Private Mortgage Insurance
$0 ………… Homeowners Association Fees
============================================
$3,222 ………. Monthly Cash Outlays

($326) ………. Tax Savings
($739) ………. Equity Hidden in Payment
$20 ………….. Lost Income to Down Payment
$144 ………….. Maintenance and Replacement Reserves
============================================
$2,321 ………. Monthly Cost of Ownership

Cash Acquisition Demands
——————————————————————————
$6,450 ………… Furnishing and Move In at 1% + $1,500
$6,450 ………… Closing Costs at 1% + $1,500
$4,777 ………… Interest Points
$17,325 ………… Down Payment
============================================
$35,002 ………. Total Cash Costs
$35,500 ………. Emergency Cash Reserves
============================================
$70,502 ………. Total Savings Needed

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	$509,500 530 East BARKLEY Ave		0.29 miles 3 bd / 1.75 ba 1,279 Sq. Ft.
	$464,999 1323 East ORANGE GROVE Ave		0.77 miles 3 bd / 1.75 ba 1,358 Sq. Ft.
	$474,900 1401 East OAKMONT Ave		0.78 miles 3 bd / 1.25 ba 1,213 Sq. Ft.
	$339,900 1214 West CHERRY Dr		0.84 miles 3 bd / 2 ba 1,123 Sq. Ft.
	$529,900 767 North LINCOLN St		0.86 miles 3 bd / 2 ba 1,469 Sq. Ft.
	$460,000 331 East TRENTON Ave		0.88 miles 5 bd / 2.5 ba 1,538 Sq. Ft.
	$489,000 1535 East EVERETT Pl		0.91 miles 3 bd / 2.5 ba 1,598 Sq. Ft.
	$479,900 119 South MAIN St		1.11 miles 3 bd / 2.5 ba 1,617 Sq. Ft.
	$499,000 664 West PALMYRA Ave		1.14 miles 2 bd / 1 ba 1,011 Sq. Ft.
	$539,900 567 East VAN BIBBER Ave		1.14 miles 2 bd / 2 ba 1,011 Sq. Ft.