So I was minding my own business this morning doing my daily reading like I do every day, when all of a sudden I had this thought!!! OMG how can this happen on such a beautiful day in Lincoln California. I began to wonder how much money the Fed has out into purchasing the Mortgage Backed Securities (MBS) they began buying last year to stimulate the housing market. So actually went tot heir website to find the answer to my question that began to bring shade into my office. The website for you who would like to see what I saw this morning is: http://www.newyorkfed.org/markets/soma/sysopen_accholdings.html There you will find a list of current activities and balances on several items.
Thus far the Fed has purchased $976,864,637 in Mortgage Backed Securities of a promised $1.25 Trillion by the end of the 1st Quarter 2010. So, looking at the amount of what they have purchased thus far, and what remains of that total, we have a gap of $274,245,472,700 to be purchased in the next six weeks. So we have more 1/5th of the total amount promised in circulation to date. If the Fed were to use the rest of the money in this short period, mortgage rates would decrease to the point of historically even lower rates. But yet we still haven't addressed the issue of what happens when the FED begins to sell these assets to the general public and "reap" the rewards of this wise solution to the government shoring up the housing market and increasing the Federal Debt to unknown amounts. Whatever happened to cutting taxes and letting people figure out how to spend the money and balance the checkbook they've been balancing all these years? Washington doesn't have a checkbook, they have a printing press!
Mortgage rates appear to be headed higher this year as everyone agrees. Where we begin to differ is how high they will go. I thing they're going to end up somewhere in the mid sixes, others think a bit lower and others think a bit higher. No one anticipates rates getting to double digits this year, but be ready for them to go there in the next few years. What this means is this: If you have wanted to purchase a new home or refinance a current home, the time is ripe to jump on that thought. Don't get me wrong here. I'm not saying the sky is falling right now and you better act before we get to 20% rates by Christmas. Rates will go up but it will be a gradual increase so there really is no need to panic and rush into something without the proper due diligence. So relax a bit, but put more thought into stashing money so when things don't pick up as promised by people who have never held a public job, you'll be able to weather the storm once again.
Wishing you the bestest.
Ed
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