(original posting 4-10-2008)

Important news about 100% financing, please read

Aloha!

          Mortgage interest rates haven't changed much over the past two weeks hovering around 5.625% despite that the big picture has been relatively gloomy. Even though bad news for the economy usually means good news for bonds and mortgage rates we haven't seen the expected market reactions. Either we are blindly charging forward or more needs to be said for the resilience of the American economy. Stocks remain strong, but many stand firm that this is just a delay of the inevitable and the reality of recession will eventually sink in, eventually leading to a bond rally and lower mortgage interest rates. Yesterday's Fed minutes release from last months FOMC meeting indicated that the economic slowdown could continue well into next year while Former Federal Reserve Chairman Alan Greenspan shared similar thoughts at a conference in Tokyo on Tuesday.  Mr. Greenspan feels that home prices are starting to stabilize and that we may see a very large rate of liquidation in the second half of this year. Once most of the home inventory has been eliminated then the markets can start to stabilize, but as Greenspan put it, "it will be slow, it will be hesitant." Greenspan also said that inflation will be contained during the current slow down before picking up as the world economy recovers. Which is great news for bonds, remember as far as mortgage rates are concerned, recession good :-), inflation bad :-(.      

So, let's take all this and blend it up into an analysis. First add bonds, then add stocks, a dash of the Fed, a splash of Greenspan, hit blend, then serve: 

I think the early bird gets the worm in this case. The rollercoaster is probably far from over, but the markets seem to be getting use to the ride. So I wouldn't expect magical rates to just suddenly appear. Even if we slip into a worse economic situation and recession is no longer a debate but a reality, that doesn't guarantee rates are going to go sliding with it. The Fed can lower rates all they want, but as we've seen so far this year that usually works against bonds as it tends to stimulate a stock rally. But really, why is anyone waiting? Even if rates dip under 5.5% again how much of difference will it actually make and is it worth losing out on a great price on a great investment. I'd hate to see people miss out on the bottom floor because they were waiting for someone to announce it's here. Hi, I'm someone, Hi, it's here! You don't officially know it's the bottom until it starts to stabilize and recover and guess what it's starting to stabilize so here comes the bottom, don't wait for the memo! Once we start to eliminate the inventory this great window of opportunity will have past.

          But, besides the price points there is another factor that is squeezing the opportunity out of the market. In case you haven't heard 100% financing is all but a thing of the past. The mortgage insurance companies are no longer willing to ensure up to 100%. I still have a lender or two that can still do 100% financing, but it's not going to last. So come on early bird, get the worm! Also, lenders continue to tighten guidelines, while others continue to seek buy outs and financial support. We're all familiar with what happened at Countrywide, Bear Stearns almost went under last month, and now Washington Mutual is discussing a deal for a $5 billion dollar cash infusion from a private equity group, this days before announcing they(WaMu) would be exiting the wholesale lending industry.

          The way I see it, the time is now, so let's get excited! Rates are incredibly low, home prices are bottom floor, the market can still offer good financing options, and with economic recovery right around the corner, the window of opportunity is NOW!!

Aloha!