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.
Monday, March 23, 2009
Sunday, March 15, 2009
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.
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.
Monday, March 2, 2009
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.
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.
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