I think one things for sure: we have all either have been touched (and not in such a good way!) by this "market" or know someone who has. I think it will be late '09-'10 before we start to make any kind of real headway. But we are still in for some really bad days short-term. Hiring is down, gas and food are up, homes are down, mortgages are tight, second mortgages are getting tighter.... I listened to 6 "market/economic gurus Friday night! Totally split on where we're going. As Gomer Pile would says, "surprise, surprise..!
New blood in that Oval Office might offer some relief...but if the two branches can't "play nice", we're screwed, again! We have to balance the budget, don't we have to do that at home and our businesses? What the hell! I hope it comes in the form of less spending, but there are only two choices to get it balanced, right! I think housing is always a great bet long term, the only issue with a market like this is when to buy? Monitor your neck of the woods and look for the inventory of listings to get down to 60 days or less (meaning enough buyers to purchase all the listings in 60 days).
In the mean time fix any financial or credit issues you have so you will be in a position to take advantage. Keep your house payment @ 25% of your gross income, I have seen some qualify at 50%, don't do it! Get rid of your non-deductible debt. Don't get involved in "multiple offers", have the house "inspected" (different than an appraisal), take a 30 year fixed, refi if they go lower, don't pay it off sooner if you have the dicipline to eliminate non-deductable debt and max every retirement account you can. If you still have money left over invest it in taxable places (you can usually get at this money if you need to,always helps). If you get a mortgage now, you are borrowing money at about 4.5% depending on your "tax bracket", you can make this all day long with long term investments. Keep in mind when you ay your mortgage down and the market tanks liks this, you can't get at the equity, and if the "values" went down you
lost it for now anyway! More ARMs will adjust this year than last, Kevin knows of what he speaks, the foreclosure volume will surely double in the foreseable future. That inventory will get added to what's already there and "around and around we go". Look for the Mortgage insurance companies to start going down! Keep your "House" in order, you will be fine.
The mortgage, credit guy!
PS. Donna Summer says it best " I (we) will Survive"! It was her wasn't it????
Saturday, June 7, 2008
Tuesday, June 3, 2008
What moves Mortgage rates?
(funny how we've turned into our own "networking gourp"! With all you amazing experts from so many different Industrys! Very cool!)
Mortgage rate movement: I will not be getting very technical here and you'll find out why at the end. One of you asked about the Fed's affect. Thy Fed controls the "Fed Funds" rate. This is the rate that banks pay when they borrower amongst themselves. The only way this really affects us is with Prime. The Prime rate is 3% over the Fed Funds Rate, always! Prime is 5% now, and the Fed Funds is 2%. This affects Home Equity Lines, because they are almost always based on Prime. Prime was 8.25% last year! So the Fed has no direct affect on the 30 year fixed Mortgage rate. Still might see some bounces, like what happened with Clinton-sex-gate, but not as much! Unless of course Bernanke knows Monica as well!
The Bonds guys control the fixed rates. Which really happens when the stock market is tanking, which really happens because of all the crap around the US and the World we have no control over!!! (Confused?) In general, when the stock market tanks, the Bond market does well (because people are moving their money from Stocks to Bonds, "Mortgage Backed Securities"). Considered a "safer" vehicle for your money! ( At least used to be!) When the Stock Market rally's , money moves out of the Bond side back to stocks and the rates go up.
These are all generalizations now. Too many things affect the Mortgage Rates, as noted in the previous Blog! To that end, WHO CARES! If it makes sense for you to buy a home today, for whatever your reasons are....buy it! Get the best rate at that time. You will never guess the rate bottom...and you can always refinance if they drop significantly! Normally we are worried about this issue when the values of homes are rising..(not an issue now)...and in that market you will lose more waiting for the rates to fall, because you will end up paying more for the same house...as you "wait"! You only get "one" shot at the price, you have numerous shots at the rate!
the Mortgage Guy
PS. If you do find a way to predict the rates, I will pay you a billion dollars now and you can retire to an island of your choice...I will sell the idea for ten times that amount and buy the country around your island!
Mortgage rate movement: I will not be getting very technical here and you'll find out why at the end. One of you asked about the Fed's affect. Thy Fed controls the "Fed Funds" rate. This is the rate that banks pay when they borrower amongst themselves. The only way this really affects us is with Prime. The Prime rate is 3% over the Fed Funds Rate, always! Prime is 5% now, and the Fed Funds is 2%. This affects Home Equity Lines, because they are almost always based on Prime. Prime was 8.25% last year! So the Fed has no direct affect on the 30 year fixed Mortgage rate. Still might see some bounces, like what happened with Clinton-sex-gate, but not as much! Unless of course Bernanke knows Monica as well!
The Bonds guys control the fixed rates. Which really happens when the stock market is tanking, which really happens because of all the crap around the US and the World we have no control over!!! (Confused?) In general, when the stock market tanks, the Bond market does well (because people are moving their money from Stocks to Bonds, "Mortgage Backed Securities"). Considered a "safer" vehicle for your money! ( At least used to be!) When the Stock Market rally's , money moves out of the Bond side back to stocks and the rates go up.
These are all generalizations now. Too many things affect the Mortgage Rates, as noted in the previous Blog! To that end, WHO CARES! If it makes sense for you to buy a home today, for whatever your reasons are....buy it! Get the best rate at that time. You will never guess the rate bottom...and you can always refinance if they drop significantly! Normally we are worried about this issue when the values of homes are rising..(not an issue now)...and in that market you will lose more waiting for the rates to fall, because you will end up paying more for the same house...as you "wait"! You only get "one" shot at the price, you have numerous shots at the rate!
the Mortgage Guy
PS. If you do find a way to predict the rates, I will pay you a billion dollars now and you can retire to an island of your choice...I will sell the idea for ten times that amount and buy the country around your island!
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