With everything going on in the market my phone seems to be ringing off the hook. I figured it would be a good time to, as one realtor politely asked, to "put it in English and give my opinion".
I am not here to talk about the stock market. We all see the recent losses and I do not think anyone thinks it is over, actually far from it. I am not a seasoned financial expert, but I know you don't put a bandaid on a lacerated artery...which is the equivalent of what our govt. tried to do with our financial market.
Now on to rates. Simply put, rates are affected by demand of the instrument they are secured against.
If there is no demand, yields will rise on the secured instrument to attract demand...so rates rise.
If there is demand, rates fall because the instruments do not have to offer as much incentive to attract investors.
While there are other factors, this is a simplified version.
Normally when the stock market takes a tumble, investors are pulling their money out and putting it into safer avenues...like bonds. When that happens the yields offered are lowered...so rates fall. Simply put - Stock market bad, interest rates good.
Likewise the reverse happens - Stock market good, rates rise...because higher returns need to be offered to attract investors away from the stock market.
Now look our current situation -
· Stock Market very, very bad
· U.S. govt. cannot get act together on debt, only just provided another bandaid
· U.S. has no long term (or even short term relief) solution to economic crisis - jobs, unemployment, budget, debt, housing, etc.
· Lack of confidence in U.S. ability to pay our debt
· U.S. has been downgraded by S&P
· U.S. cannot bail anyone our like before, nor would the citizens of this country stand for it, IMHO ("In My Humble Opinion"...learned that from my kids. Darn texting). Soooo, there is uncertainty on how financial institutions will whether this storm.
· Global problems - think Greece, Spain and Italy - are having an overwhelming effect
These issues make past statistics irrelevant. There is no data to compare this too, so I personally think everyone is flying by the seat of their pants figuring it out as they go.
So back to rates.
They cannot go much lower. Financial institutions want to hold on to whatever margins they have, the govt. cannot go lower on their rate, Higher conforming limits for high-cost areas are gone Sept 20th...what other signs do we need that things are not changing for the better.
Will rates go lower? Who knows? I find it doubtful. I personally think they will rise. I think margins will be increased as less lending options are available and financial institutions want to increase profit, capital, stock, etc.
Now the simple truth is anyone who does not take advantage of interest rates in the low 4's (4.25% today), with only 3.5% to put down....with homes as low as they are....should be considered a bigger problem than everything listed above.
People may not like it, but my last statement is not very far from the truth. Good old fashion "Greed" seems to cloud many peoples judgment. Not capitalizing on both housing and interests rates being bottomed, or near bottom, at the same time...is just being "penny wise and pound foolish".
Example - not too long ago the FHA monthly MIP was .50%.....now it is 1.15% (for over 95% LTV). On a $300,000.00 loan that is a difference of $162.50 a month....for 5 years (old was $125 a month...new is $287.50). Over 5 years that is $9750.00...not including a difference in rate from when they were at 4%.
So what does beating up some poor home owner who lost his job down another 10k get anyone? Break even? What the people with jobs don't seem to understand is they are part of the solution - get inventory off the street, defaulting people out of their loans and help stabilize the market.
Bottom line - Buy the home, get the poor soul out, be happy and start a family. Get some new little tax payers out there...it is the only way we can get this country back on its feet. lol
While no one can predict the market, here is what you can predict - Good things do not last forever.
There is also another old saying, “Don’t press you luck”. J
So, give your borrowers some education. Heck, I prefer you refer them to me; I will give them some serious insight as to why they need to get into a home and now. (They surely are not getting that from their customer service rep at the bank that is pushing a checking and savings account at the same time) J
I will leave you with this thought - The last time I checked it wasn’t “buying at the absolute lowest it will ever be”. It’s “Buy low, sell high”. Right? BUYERS...take some control over what is going on...Buy a home and be happy you got a great deal.
Now back to work everyone...we have taxes to pay.J
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