If you think it's a stomach-turner to watch a volatile stock market and economy, try picking the right week to lock in your home loan.
There was nothing predictable about this art during the first half of 2008. As the global economy lurched between the poles of greed and fear, interest rates did the same.
That volatility is apparent in six months of weekly 2008 surveys by government-backed mortgage giant Freddie Mac:
• Borrowers saw 14 weeks when average rates topped 6 percent for a 30-year fixed rate loan.
• There were 12 weeks when rates stayed below 6 percent.
"We've been ranging 5.5 to 6.5 percent," says John Arvanitis, president of Sunrise Vista Mortgage Corp. in Citrus Heights.
The significance for a 30-year $250,000 home loan is a $181 difference in monthly payments.
What should a would-be borrower do? Try to pick a week when the financial market fears an economic downturn more than it fears inflation.
That happened this week. Rates on 30-year loans dropped to 6.35 percent from 6.45 percent a week earlier, according to Freddie Mac, the giant mortgage company.
So what is in store for the second half of 2008?
"I think we're going to be in a very volatile range at least until the (presidential) election," Arvanitis said.
"We anticipate rates staying above 6 percent the second half of this year," said Fred Arnold, president of American Family Funding near Santa Clarita, and president of the California Association of Mortgage Brokers.
Normally, Arnold said, rates fall during a downturn such as this. But a dramatic rise in gas prices will spur fears of inflation, "and if there's inflation, it's going to bid up the cost of money and thus the cost of interest rates."
Will rates go above 7 percent?
"Not this year," Arnold said.
And what does Arvanitis think? Will rates stay below 7 percent in the second half?
"I certainly hope so," he said.
Taking a walk
It's the question faced by thousands making peak 2005 loan payments on a home with 2008 values: Should I stay or should I go?
In Antelope, Randy Fatius, 55, has had it. He says he's walking away from the 1,200-square-foot house he bought in October 2005. Fatius made his last payment in March. Until April, he had never missed a payment.
"I thought that was the best I could do with the situation," Fatius says.
He insists on doing what the real estate industry and financial experts constantly advise people not to do.
The three-bedroom, two-bath home he bought for $312,000 with no money down is now worth $184,000, according to online evaluator Zillow.com. But a slightly smaller house near him is listed at $125,000 and has been on the market for 119 days. Within a mile, he counts nearly 80 homes owned by banks or in varying states of foreclosure.
Walking away is embarrassing, Fatius, a pipefitter and welder, admits. But staying is "stupid," he says.
"I crunched the numbers and it floored me," he says. He figures he's lost around $200,000 in less than three years and that "it would take me 17 years to get back the value I've lost."
He based his calculations on the value of his home eventually rising at about 4 percent a year.
Fatius said the house needs a new roof, and since his work is sporadic, his $1,700-a-month mortgage payment, not including property taxes and insurance, "really pinches" him.
Fatius talked to Home Front about his decision after paying $900 to youwalkaway.com, a San Diego County business that real estate experts dislike because they believe no one should just shut the doors and walk away from their homes.
The business helps people navigate the stages of default and foreclosures. Some industry professionals ask the media not to publicize it. But Fatius said the business has been helpful.
He knows what he's in for.
"My credit score is going to tank," he says. But he thinks the penalty isn't as bad as owning a house whose value has dropped so far below what he owes.
Experts says foreclosure stays on a record for about seven years. It may be four years before a buyer can obtain the best interest rates again.
This was the first home Fatius bought. "I don't think I'll ever buy a house again," he says.
He expects he can stay in it two or three more months. Afterward, he says, he'll move to the Pacific Northwest.
And, finally, don't start in with him about standard advice to call his lender for help. He did, he says, and got no help that could have made much of a difference.
Looking back almost three years after buying, Fatius says, "I had a gut feeling from the beginning I shouldn't have done it. I've felt it the whole time."
Sacramento County has had almost 9,400 foreclosures so far this year. This is just one story, with more still to come.
The rise and fall
Here's a very concrete example of how falling home values ripple through the economy. Sacramento County Assessor Kenneth Stieger says the 85,000 properties he recently reassessed downward for tax purposes represent $6 billion in lost value since last year.
Stieger, following the mandate of a 1978 constitutional amendment, reassessed 18 percent of the county's properties to reflect a declining real estate market.
As of July 1, Stieger estimates the combined values of county properties is $136.2 billion.
That's up almost 2 percent from last year.
In 2005, near the height of the housing boom, collective property values in the county increased almost 15 percent. What went up is fast coming back down.
Call The Bee's Jim Wasserman, (916) 321-1102. Read his Home Front blog at www.sacbee.com/blogs.
