Mortgage rates were rising at the end of the month, according to the latest tabulation by mortgage giant Freddie Mac.
Freddie Mac used the word "surging." Though that seems a tad strong when you consider the most recent bump up was 0.8 percent. Nevertheless, the big secondary market, which keeps the money flowing to local lenders, says rates will move even higher over the summer.
The big bugaboo, of course, is inflation, or at least the fear thereof.
"Financial markets believe that the current rate of inflation is above the Fed's comfort zone, which will lead to more rate hikes in the near future," Frank Nothaft, Freddie Mac vice president and chief economist, warned. "A rate hike in July is thought to be a sure thing, and what was believed to be a vaguely possible hike in August is now considered to be highly likely."
So the handwriting is on the wall. If a new house or mortgage is in your immediate future, you'd better get cracking.
In its latest report, the company said the average rate for a 30-year, fixed mortgage was 6.71. That's the highest its been since May 2002, when the average was 6.76 percent.
The average for a 15-year fixed-rate loan was also up to 6.36 percent. That's 0.11 percent higher than it was in the proceeding report. And it, too, is higher than it's been since May four years ago.
But the real story is in adjustable rate loans. One-year ARMs indexed to Treasury securities averaged 5.75 percent, a 0.12 percent gain -- and worse, the highest its been since summer 2001, almost five years. Last year at the time, the one-year adjustable cost just 4.23 percent.
Five-year, Treasury-indexed hybrid ARMs averaged 6.32 percent, up only 0.9 percent. But the rate is the highest its been since Freddie Mac started tracking it on 2.5 years ago.
Fun Houses
Bobby Lux builds houses for kids. They're not cheap, at least as far as play houses go. Up to $10,000 in some cases, depending on the style and furnishings. But they are fun.
"I build quality custom homes for children. Their parents pay for them, but I work for the kids and try to get them a good quality product that's going to last," says Lux, who has been building play homes for kids for about 15 years. It started as a project for his grandchildren and soon turned into a job.
They may be play houses, but Lux takes his business very seriously. He is passionate about creating a look that is unique and representative of each child's style, and his goal is to build something that will last long enough to be passed on to future generations.
"Basically it's very similar to building a [real] house. I put vinyl floors, carpet, I put electrical in it -- it's all low voltage for the children so they won't get shocked. I put lighting systems in. They have countertops, stainless steel sinks, running water -- if they'd like. I build miniature appliances like microwaves and dishwashers," says Lux. One house had Formica countertops, another used marble flooring that was left over from when the family built their home.
Lux believes his houses allow children to have fun while also teaching them to be responsible for their own space and to appreciate quality. His homes can be built in about a month. For more details visit just4funplayhomes.com .
Beware the Next Big Scam
Now to something a little more serious: The next big real estate scam, which a Georgia prosecutor says will target nervous builders who are sitting on unsold inventories as well as worried home owners who can't sell, even at a discounted price. Whoever plays along could wind up in jail.
Mortgage fraud is conservatively estimated by the FBI as a $1.2 billion a year "business."
David McLaughlin, an assistant attorney general in Atlanta, thinks the worst is yet to come. With the number of unsold houses building every day, he says its only a matter of time before fraudsters turn their attention to sellers, including builders. The scam he sees works like this:
A builder has finished several houses, but been unable to sell them. He's getting anxious because not only have sales slowed, but prices are starting to decline when he's approached by a buyer who proposes a happy outcome. Not only will the buyer take the houses off the builder's hands, he'll pay $100,000 more per house than the builder is asking. All the builder has to do is kickback the extra hundred grand to the buyer after closing.
Bite, according to McLaughlin, who says his goal is to put people in prison, and you're an accomplice to a felony, at least in the Peach State. "If you are kicking back money, that is an omission made with intent to defraud," he says.
Georgia has already arrested several builders on racketeering charges. The latest case is an example of a new "get tough" attitude in the mortgage community as well as among law enforcement officials at all levels. The alleged ring leader was turned in by a lender who was asked to fund the fake sales. Georgia is the only state which has codified the act of mortgage fraud as a crime, punishable by up to 20 years in prison, but at least five others -- New Jersey, Utah, Colorado, Oklahoma and California -- are considering similar legislation.
At the federal level, meanwhile, the FBI is urging lenders to file reports of suspicious activities, even if they are not required to do so by law, in hopes of building a data base so they can stay at least one step behind the criminals.
