Seriously, I'm holding out until rates goes to 4%. The newspaper and media experts all told me it would happen. Heck, even the US Treasury Department talked about it.
But here we are at 5.75% (in a matter of a few weeks, after being closer to 4.875% for months) and there's a pretty good chance we are headed toward 7%. Many blogs ago, I predicted we'd hit 5% (rates were about 6.25% at the time) and just this evening a fellow brother in the mortgage industry, KEVIN HANCOCK, commented on my lucky prognosticating and asked where I thought we were heading. Back to the 4%'s or up, up, and away? I figured it was worth posting my response to him in a separate blog entry, so here we go. Crystal ball time.
Hey Kevin! So funny that I wrote that blog post in September of 08 and so much has happened since then. We had that massive stock market correction and banking world avalanche. Rates did go to 5% and below. Depsite the blindfold we all wear, I may have hit the pinata on my predictions.
Now what? The recent rate run-up concerns me. We were skating on thin ice for months with the low rates and we've finally broken through and it doesn't feel all that good. With the commodities market, bonds, and treasuries selling at an insane pace, the fundamentals aren't good for a return to 4.875%. Not good at all. The FED spending $1.25 trillion on mortgage-backed securities seemed like a good idea until the novelty wore off and everyone else stopped buying.
Here are my predictions for the rest of 2009:
1. We'll have another temporary run at 5%. It will mainly be in response to the FED's announcement to buy EVEN MORE mortgages, probably to the tune of another $1 trillion. This will be in tandem with some good economic news that will give foreign investors a little more confidence in our lending system. This will last a few weeks, so blast your database your concerns and let them know this may be their last chance to get into the 5% range. Lock on the dips, there may not be many left.
2. Rates will be in the low 6% range by the end of the year; maybe even 6.5%. The FED's mortgage-backed security purchase program will run out of cash and then all bets are off. Prime will also be at 4% after some concerns about inflation emerge and the FED decides in their infinite wisdom that printing money like bonkers should be tempered with a little bit of fiscal responsibility.
3. Money will be flowing out of mortgages and into everything else. Gold, oil, muni bonds, T-notes, annuities, and even coffee cans in the backyard. This can only have an adverse effect on interest rates. There will be a natural pull higher and higher and higher still. Amen.
Will we hit 7%? There a pretty good chance we will in the next 12 months. Hopefully my next post will be sooner than that.