STILL LOOKING FOR LOWER RATES

Mortgage rates have improved over the last 2 weeks. Current research indicates that the Federal Reserve will be working hard to push rates lower as they still have enormous supplies of treasury bonds to sell over the next few months. Foreign countries and pension funds don't want to buy treasury bonds, only to see bond prices lose value within days. Dropping bond prices and rising rates discourage everyone from buying bonds, if they believe the bonds will immediately lose value.
The Fed will work behind the scenes to promote lower rates.

I expect lower stock prices in the next few weeks which will help create a flight to safety. Those planning to purchase homes or refinance should be prepared to lock in rates soon. Mortgage rates have been very volatile, often changing several times within the same day. I advise clients to review their current mortgage needs now while rates remain historically low and determine what rate will meet their needs. I then track the rates and notify each person when their target rate is available.

I anticipate rates and stocks to whipsaw frequently in the months ahead. Eventually, more weakness in stocks should occur by September. This time period should be favorable to bonds and supportive of lower rates. Anyone with adjustable rate mortgages must carefully consider refinancing now while they can lock in low rates.

INTEREST RATES AT A PIVOTAL LEVEL

On Friday, the ten year yield reached 4% before turning back below that level. When the ten and thirty year rates hit key levels, everyone takes notice. While a ten year rate of 4% may not be historically high, the rate of increase has been sharp and rapid.

Is it reflation? Is it a sign of recovery? Is it inflation? Is this good or bad for the economy or for me as an agent or a consumer?

The rate of change has been excessively rapid, reflecting an increase in the money supply and a return of speculation back into the stock market and inflation hedges. Just 3 months from the collapse of the stock market, investors have fled from the bond market and are ready, once again, to speculate with "hot money". When the bond market sees selling pressure, rates rise and the cost of borrowing rises for consumers and businesses. Recovery in the real world will require TIME to pay off or lose excessive debt and LOW RATES to enable that recovery.

I fully expect to see bonds rally and rates drop as the Fed attempts to lower costs of borrowing. He is dedicated to stimulating the housing market and the economy by providing low rates and liquidity. Once this rally is done, I am looking for rates to skyrocket for a much longer period.
I see a window of opportunity for low rates to peak during the next stock market downturn.

Eventually, all of the stimulus programs will create incredible inflation. This week one of my customers wondered if they should refinance, take out as much equity as possible, and take their equity now. Although the extra funds provide cash for future needs, I advise against this alternative,unless you have special needs.

AT THE PRESENT TIME, I ADVISE MY CUSTOMERS TO REFINANCE MORTGAGE DEBT AT THE LOWEST POSSIBLE LEVEL AND KEEP THEIR FUTURE DEBT SERVICE LOW. THIS IMPROVES MONTHLY CASH FLOW WHICH CAN BE USED TO PAY BILLS AND ADD TO SAVINGS.

I am always available to agents and customers to review individual situations and make recommendations for future mortgage needs. I track rates and notify customers when their target rates have been reached. No one should allow the next opportunity to refinance pass without action, especially anyone with adjustable rate mortgages.

FIDELITY BANK MORTGAGE

Effective June 15th, I am joining Fidelity Bank Mortgage in Atlanta, Georgia. Fidelity has the pricing power of a bank combined with the efficiences of local processing and underwriting. I will be able to deliver superior customer service with terrific turnaround times, as well as the best available rates and products.

MORTGAGE RATES FIRMLY OVER 5%

In my last few posts, I discussed the issues facing the Fed in controlling mortgage rates and the bond market. Not much has changed over the last week, although bonds are trying to mount a rally at the current level. We are seeing a conflict between bonds and stocks. As the perception of an improving economy continues, stocks rise and bonds sell off. Unfortunately, our economy still requires exceptionally low rates to stimulate the housing market and the costs of borrowing. If the fed prints too much money to buy bonds and support the bond market, the dollar declines and sets up inflationary pressures. So, right now the Fed is between the rock and the hard place. My perception is that the Fed will work overtime to support the bond market and try to push mortgage rates below 5%.

Anyone who has not refinanced should get another opportunity as we approach the fall season.

I think it will take time to see ultralow rates again unless we see more issues arise in the stock market or banking sector.

MORTGAGE RATES SHOULD FIND A TEMPORARY REPRIEVE

We have seen mortgage rates creep up these last few weeks. Rates are still historically low and offer tremendous value for those needing to purchase homes or refinance. However, we are seeing warning signs. Normally, fund managers exit bonds and buy stocks in a progressive fashion as they chase stock performance and have less regard for safety. We could have expected some increase in yields as stock values improved.

On the other hand, we have the Fed buying treasury bonds to provide a buyer of last resort to keep yields down. The most significant factor affecting current bond market performance is the vast amount of supply the US government needs to sell this year in order to fund our country's debt. The Fed prints money out of thin air in order to buy treasury bonds(so we sell bonds to ourself and pay with printed money). The effect on the dollar is harmful, bringing down the value of the dollar and leading to inflation. When bond yields rise, we are being warned of inflation to come in the future. Those buying our debt want a better return.

Back to the Fed: he needs to keep rates low so individuals and businesses can borrow and refinance debt at low levels. He needs to keep borrowing costs low for the US government. The bond market is vastly larger than the stock market. Expect the stock market to pull back in the next few weeks with a bigger decline to take place in late summer to early fall. The only solution to creating another bond rally is an engineered deflationary wave(i.e. another stock market crash).

Realtors: expect better sentiment to persist through the summer along with great rates. This is the time for sellers to get realistic and price their homes to move. The coming supply of REO will continue to put pressure on prices. First time home buyers are once again, one of the most prominent groups of buyers. There are excellent programs available in addition to government incentives.

MORTGAGE RATES UNDER PRESSURE

We are witnessing a sudden drop in bond prices with yields rising to uncomfortable levels. In the past, it was normal to see stock market fund managers sell bonds and add stocks once stock market rallies looked sustainable. Much of the recent rise in stocks has come too quickly on the back of news which has been spun into the "green shoots" story line. In fact, banks have been propped in order to complete secondary offerings. Mission is now accomplished.

The fed has been buying treasuries in an effort to keep mortgage and refinancing rates low. Now the fed is stuck between a rock and a hard place. I predict the stock market will pull back (and be allowed to do so) in order to find willing buyers of treasury bonds. Look for a tug of war in the next few weeks.

MORTGAGE RATES STILL UNDER 5% !

Mortgage rates have continued to stay in a narrow range of 4.5-4.75%. Home purchases are picking up and refinances have continued at a steady pace as homeowners take advantage of these excellent low rates. The fed is continuing to hold down long term rates by purchasing treasury bonds. My forecast remains unchanged : rates should stay in this range for the next few weeks to months. I am anticipating the stock market to retreat in the late summer to fall, at which time, bonds should continue a more vigorous rally which will lead to lower rates.

Consumer sentiment appears to be improving in the housing market. Going forward,the overall theme to note is that lower rates and the fed's support of all lending institutions should help spur mortgage lending and be supportive of the real estate market. There are incentives and new products available to encourage home buying. New products are also available for REO homes.
Realtors should be seeing more activity in the resale market as low rates and low prices create opportunities.

FED MOVES BRINGS LOWER RATES 4.5%

My prediction of a bond rally did materialize although it was larger than I anticipated. The fed's announcement of his intentions created one of the largest one day bond moves ever seen. Basically, the fed announced that he will print money out of thin air and use those funds to buy an enormous supply of longdated treasury bonds, as well as mortgage backed securities. Buying 30 year treasuries supports bond prices and gives us low mortgage rates. Buying MBS will hopefully provide liquidity in the funding of mortgage loans.

What these actions mean for the real estate: lower rates will support the refinance market going forward. The stock market continues to look for that elusive bottom. I anticipate improvement in the stock market by late Spring, early summer which along with lower rates and availability of mortgage funding should provide a boost to the real estate purchase market. I think that agents can begin active marketing within the new few weeks to homebuyers, and should definitely encourage sellers to use this window of opportunity to price their homes to sell. Barring any unforeseen new announcements related to the economy, the summer could provide a welcome relief and more optimistic tone for real estate activity.

Going Out on a Limb: Looking For A Small Bond Rally

What a difference a week makes. Several big rally days in the stock market and everyone is calling a bottom. The financial stocks are celebrating like the worst is over and unexpectedly, the bond market has held up well. While I don't expect a huge rally in the bond market, I am seeing technical signs that the stock market will retreat soon and send investor money back into the safe haven of bonds. I still expect a trading range for bonds until the fall.

The competing themes will continue to be money flowing into bonds for their safety VS. money leaving bonds because of the increasing supply and fear that the multi-decade rally in bonds will be the last bursting bubble.

I am seeing increased purchase activity as rates stay under or close to 5% and home prices are perceived as attractive. I foresee rates staying at these levels for the time buying, esp. since the FED has stated he will buy longterm bonds if needed to keep mortgage rates low. He has no other way to keep rates down since they have already cut overnight lending rates to zero.
Refinance activity has been strong as well as clients are realizing that these rates are exceptional. I continue t0 advocate locking in these rates at these levels.
Although pessimism about the economy and housing still persists, I am seeing more buying interest and customers calling to prequalify. First time home buyers and financially secure move-up buyers are seeing the current situation as a great opportunity. Agents should use this time to pursue marketing strategies and prepare for these active buyers.
I am changing my outlook on the bond market. I previously expected an exhaustion rally sometime this spring before seeing rates rise. I am considering that further economic weakness in the fall may lead to the timing of a final bond rally in that time frame.
The implications of having lower rates for most of the year will have a positive effect on the purchase and refinance markets.

MORTGAGE RATES STILL IN A NARROW RANGE

As expected, mortgage rates continue to remain in a very narrow range of 4.875-5.15%
Factors keeping rates low: the stock market is now trading at levels not seen since 1997, wiping out over 10 year of gains. This triggers the flight to safety of buying treasury bonds. The markets are still trying to find that elusive bottom which is continually offset by news of tremendous losses from Citigroup and AIG.

Second, the Fed really wants to keep rates low to help home and business owners get the cheapest money available. He is buying the longer dated treasuries.

Factors which will eventually push rates higher: An incredible supply of bonds that the government needs to sell to finance all of their bailouts and deficits. Who is going to buy all of these bonds? China and Japan (who have bought our bonds for years) now have their own national problems. 30 year bonds which yield 3% or less are no longer attractive and are competing with corporate bonds.

Our belief is that volatility in the stock market may create a final bond rally BUT that we will see higher rates in time. Risk/ reward continues to favor locking in good rates when your need and the rates work together. No one has a crystal ball including me.

I will continue to advocate that waiting for the lowest rate may result in losing a great rate. Everyone should review their longterm financial needs and determine if their current mortgage meets those needs while rates remain at generational lows.

OVERVIEW OF LAST WEEK

On Tuesday, President Barack Obama signed into law a $787 billion economic stimulus plan designed to spur consumer spending and create millions of jobs. The American Recovery and Reinvestment Act contains numerous provisions: roughly $300 billion in tax breaks for individuals and businesses, more than $250 billion in aid to distressed states, and almost $200 billion to upgrade the nation’s infrastructure. The package also includes an $8,000 tax credit for first-time homebuyers, which does not have to be repaid unless you sell your home within three years.
On Wednesday, Obama unveiled the $75 billion Homeowner Stability Initiative. The multi-step plan would help struggling homeowners by providing incentives to lenders, servicers, mortgage holders and borrowers to help modify mortgage loans. The goal is to prevent as many as nine million Americans from losing their homes to foreclosure.

As the week unfolds watch for the stock market to attempt a rally while bonds bounce up and down without a huge change in mortgage
rates. The fed is going to put maximum effort into keeping long term rates low for homeowners and for corporations. Expect a final bond rally to begin within a few weeks-this will be the best opportunity to lock in rates under 5%.

BOND MARKET RALLIES AS STOCKS SLIDE

This week saw the passage of the stimulus bill and information was released on how the mortgage relief plan will be implemented. Apparently, the stock market was not pleased with these plans as stocks sold off all week long. As money left the stock market, it helped the bond market rally and mortgage rates improved. Mortgage rates are staying rangebound between 4.75-5.25% as predicted. In the longterm, there is concern with supply of bonds which will ultimately push rates higher. Near term, lows in the stock market( near levels not seen since 1997) are keeping rates down. Many of my clients locked in excellent rates under 5% this week.
I continue to advise clients that rates are at historic low levels: fed funds rates are already at 0-0.5% so the fed has little means to push rates lower. Waiting for much lower rates will result in losing a great rate for the longterm.
I will post over the weekend with more information about the mortgage relief plan although full details will not be known until early March.

WEEKEND RESEARCH

I spent hours researching this weekend and find that my outlook remains the same. The stimulus bill has passed although most of our elected officials admit that no one read the entire bill which was over 1000 pages long!  At this juncture, we will need to see what the stock and bond market reaction is this week once the bill is signed into law. My review of technical charts and third party research suggests that bonds will bounce around in a vary narrow range which means mortgage rates should remain in the 4.875-5.25 area in the next few weeks.

I still see potential for another bond rally in March which could push mortgage rates slightly lower.   The other unknown is what the government will offer in terms of a plan for relief to stressed borrowers- we expect more details in the next few weeks.  Elected officials opted NOT to include a plan to offer low rates for refinancing in this stimulus bill.

Longer term, bank bailouts and stimulus bills = huge debts, government borrowing=

INFLATION + HIGHER RATES.   Borrowers who can lock in these great rates for purchases or refinances should do so very soon.   After the next rally in bonds, potential for much higher rates could surprise everyone waiting to lock in at 4%.  

UPDATE on RATE IMPROVEMENT

As I predicted several days ago, we did get an improvement in rates. Unfortunately, we also have the stock market retreating back to lower levels and great disappointment with the Treasury Bailout Plans. Market reaction: plans to help the banks move forward lacked details and just seemed to be more of the same. Details on the plan to help with mortgages has yet to be released. I now expect treasuries to trade in a narrow range as huge supplies are coming on to the market. Although our government's most recent auction of treasuries was supported this week, it will be tough to move such a huge supply. I expect the FED to be buyer of last resort behind the scenes.
For the next few weeks, I expect rates to be in a narrow range. I would advise your clients making purchases not to wait too long to lock in reasonable rates. Although the stock market is exceptionally weak today, I do not see a flight to bonds which may be telling us that buyers are not looking for safety today. A stock market rally may be evolving which will compete with bonds for money; thus rates could easily rise back up. Clients who choose to wait for that extra fraction of rate improvement might lose an excellent longterm rate.

STEPPING OUT ON A LIMB- LOOKING FOR RATES TO IMPROVE SHORT TERM

Although we are still awaiting details of the treasury's bank bailout plans, my view of the stock and bond markets lead me to expect an improvement in mortgage rates short-term. Technically, the ten year bond is oversold, and I am seeing signs of money buying this bond. Although there is room for 30 year yields to head higher, a turn is coming which should provide a small relief rally(improvement) in bonds and better rates. After a sharp turn, expect a range bound market in bonds with very little day to day change: the fed will be trying very hard to keep rates low. Congress and the Treasury may offer a plan to offer homeowners low rates BUT once again, where is the money coming from?

CAN THE FED SAVE THE BOND MARKET, THE STOCK MARKET AND THE DOLLAR ?

As we await the final vote of the stimulus package and the full details of the Geithner plan, it becomes evident that the fed is going to have a tough time saving the stock market and the bond market, not to mention the dollar. If stocks improve, money usually moves out of bonds. In order to execute elements of the Geithner plan, the US Govt. is going to have to finance all of the stimulus and bailouts by selling bonds (the money has to come from somewhere!!!). When money is moving to stocks and foreigners are dealing with their own issues, the fed will monetize debt - which means the fed will print money and buy back the bonds the treasury just issued.
If it sounds crazy and you feel confused, you are not alone. The Fed is struggling to find solutions to a massive debt bubble.

Printing lots of money to buy our own bonds in order to keep rates low and finance the govt. spending will kill our dollar. So stay tuned for the full details of the Geithner plan and the results of the stimulus vote while we watch to see which market the Fed helps first.
For my readers who think the Fed will try to save the stock market, keep in mind that the bond market is far larger than the stock market and the low rates are needed to keep lending going in all aspects of our economy.

MANAGING YOUR MONEY

I have added a section below my blog on looking at ways to reduce debt by reviewing fixed items in your budget. When I submit your loan application for review, one of the items being evaluated is your ratio of debt to income. Reducing debt through costs savings will improve your ratio.

Perspective on Current Rates/Roadmap to the Future

This week was volatile for the stock and bond markets. The treasury market has seen a persistent sell-off in longer term dated treasuries which has resulted in higher mortgage rates.
Mortgage rates do not exist in a vacuum but are affected by multiple factors in the economy.
Financial institutions, investors, mututal funds etc. split their allocation of funds between bonds and equities. As stocks fell in the fall, everyone fled to the perceived safety of all US govt. issued bonds and notes. This so-called flight to safety and liquidity led to some investors buying short-term paper for 0% return: people just wanted to park their funds in a safe place. Also, the federal reserve announced their intention to keep buying long-dated treasuries and forcing yields lower. If you thought you might not get more than 3% return on a bond, you might be tempted to lock in today and take the 3% if you worried that next year, the yield would be 2%.

As stock performance has stabilized, it has encouraged some investors to sell bonds and invest that money in stocks. Several weeks ago, Barron's featured a cover article which warned that bonds were the new bubble just waiting to burst which also encouraged much selling of bonds.
In addition to those 2 factors, the government has outlined numerous stimulus plans which will have to be financed by issuing more bonds. This supply of bonds will be overwhelming and difficult to unload at current rates. The bond market can only be controlled so far and then market mechanisms take over. The huge supply of bonds expected at such low rates suddenly makes corporate bonds and stocks look better on a risk reward basis. The flight out of bonds has started. On a short-term basis, bond yields may improve and we may see better rates.
The federal reserve has an enormous task ahead in trying to bring rates back down and will not be able to overcome normal market forces forever.

I try to advise all clients on the best time to lock in a good rate but can't always pick the exact bottom. Mortgage rates change several times a day and constantly fluctuate just as stocks fluctuate. Due to volatile conditions we are experiencing in our economy, I try to view rates from a longterm perspective and a risk/reward perspective. On a historical basis, rates are near lows not seen for decades and very reasonable. Viewing risk/reward, I see that rates might improve to 4.5% if the economy worsens, but I see a greater risk of the bond market bubble popping within the next 8-18 months. I believe we could see rates as high as 7% in a short time if all of the stimulus packages lead to inflation. Therefore, I advise clients to take the best rate for their needs and not wait for the last fraction improvement.

With the treasury announcing plans for handling toxic assets and congress passing the stimulus bill, expect a volatile week for the stock market and mortgage rates.
For the short-term, look for rates to improve and stay within a narrow trading range as the stock market tries to rally. When this rally fails, I look for rates to improve as the bond market has a final rally. No one, including, me can give you exact dates. I can only provide a guide to these events which may also be affected as the "next best bailout package is proposed".

How and when you choose to make a purchase or refinance will depend on your individual needs.

Rate Watch Continues

Interest rates jumped this week from 4.75 to 5.25 within days. Despite the fed stating his intention to keep buying bonds and keep interest rates low, the bond market is responding to the knowledge that all of the planned stimulus packages and bailouts will have to be paid for with more and more bonds. The tremendous supply of new bonds will overwhelm demand resulting in lower prices and higher rates. Eventually, rates will head substantially higher.

Fear of future inflation has encouraged some of the selling in treasury bonds.
Only a renewed drop in the stock market may create another flight to the perceived safety of treasury bonds.
Any drop in rates to 5% or lower should be viewed as an opportunity to purchase or refinance.
Once this next flight to safety ends, I expect much higher rates.

Watching Rates

Bond yields are starting to head back down again-it's possible the fed is once again buying bonds to help control mortgage rates. Although the move in bond yields was significant today, expect the near term bond activity to be choppy. The stock market is showing more volatility as we work through the first quarter earnings season.
Eventually, I expect to see more buying in bonds with improvement in mortgage rates by early Spring. When this happens, this will provide an excellent opportunity for purchases or refinancing.

Getting Quotes from Internet Leads

Many internet sites advertise searching for mortgage rates on their sites. You can find an extensive listing of rates from different lenders in many states or you can choose to enter your information and then be referred to the lenders with the best rates.


WHAT YOU ARE NOT TOLD

You are often referred to lenders who have paid to receive your lead

The lenders who contact you may or may not have the lowest rates

The lenders on these lists are not blindly listed because they have the best rates- they are paying to be on these referral sites

The listed rates often look great - when you call you find out that the rate will be
higher for any number of reasons.



The internet can be a great search tool for information, but recognize the limitations of taking information from the internet at face value. This is the largest purchase you will make and manage in your lifetime- having a relationship with a local lender you can rely on is essential.

Mortgage Advice

The big push to refinance has started. Now that rates have dropped below 5%, everyone wants to lock in at the lowest possible rate. Although getting the best rate is important, trying to time the best rate in the bond market is like trying to catch the bottom of the stock market-almost within reach but usually impossible.

I always recommend that clients who want to make a purchase or refinance take the time to consult with a mortgage planner to discuss their financial needs and goals for the long term. Too often, people focus strictly on rate and may miss options that would help them reach their goals.


In these difficult economic times, I counsel my clients to purchase homes that they can easily afford based on their current income and savings. It is not wise to buy a home without keeping reserves for unexpected repairs. Whether you seek to purchase a home or refinance, I suggest you meet with a mortgage planner to decide what programs are best for you and what rate will meet your goals.

In December, rates briefly dipped below 4.5% for a few hours. Since then, rates have been creeping back to the 5% level. I expect rates to be volatile in the next few weeks with the possibility for lower rates later in the Spring. While some experts think rates may drop below 4.5%, others believe rates will drift between 4.5-5% in the near term and then skyrocket later in the year as all of the financial stimulus results in higher inflation. No one has a crystal ball-as a mortgage planner, I spend extensive time researching the trends and trying to pinpoint opportunity for my clients.

The best advice is to target what rates work for your purchase or refinance and to plan on taking that rate when available. Guidelines for approving mortgages are becoming tougher as banks want to make sure borrowers are qualified.

I will try to keep my predictions for rates and trends posted on a frequent basis. I am always available to answer questions or offer guidance.