If you are interested in purchasing a home - you want to know what rates are doing - and what you should watch, right? Well, for the last 20 years I've been telling people it's pretty easy to figure out what's going with rates, because we are in a cyclical business that THRIVES on bad news in the Economy. I tell folks, "it's like a hospital - business is good - everybody's sick. Look for bad news in the economy to drive rates lower." (because very few of my clients are looking for a HIGHER interest rate).
So let's test that theory with today's headlines...
- Home Equity Falls in the US for the first time since 1945. Meaning for the first time - counting all the people who own their home free and clear - and all the people with mortgages - we are now in a situation where as Americans, we owe more than 50% of what the property is estimated ot be worth. (that's bad news - especially given the precedence of it being the first time in over 60 years)
- MBA announced through a complicated formula that almost 8% of the mortgages in the country are past due - and almost 6% are in some form of foreclosure. (more bad news)
- HEADLINE - US Household Wealth DROPS for the first time since 2002.
Okay - so you get my point - we have some pretty bad news sitting in the headlines, so where are my lower rates? They are gone. In fact CNBC says there's PANDEMONIUM in the Secondary Markets (where they sell mortgage backed Securities / and therefore where they PRICE what the Mortgages are worth / which equates out to what your rate will be).
There were rumors this morning on the trading floor that the US Treasury was going to put out an announcement that mortgages written through Freddie Mac and Fannie Mae (these entities are referred to in the news as GSEs) would have the "full backing and faith of the US government." This gave a few minutes of relief - until Secretary Paulson's office came out and announced it wasn't true.
So what's a home buyer to do? Find a lender who is watching the headlines - and being vigilant about finding them the best rate. The best rate available this morning, might not be the best rate available this afternoon. This SHARP volatility is likely to continue for at least the next six months.
Shortly, in our opinion - everyone in America will understand what the "credit crunch" really is... Because it's going ot effect college loans, commercial loans and credit cards. The Federal Reserve is going to have to work with the Treasury on "Out of the Box" ideas - and then FINALLY - someone is going to have to figure out that with the underwriting guidelines as strict as they are, the mortgages written TODAY are a VERY safe bet. Once institutions begin BUYING mortgages - this whole thing will clear up. Until then - it's going to be a bumpy ride.
If you or your friends and family are interested in educated information regarding mortgage loans in the Triangle, call Steve and Eleanor Thorne, 919-649-5058
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