Will Rates Go to 5%? They Just Fannie Mae.

So true RICH!  I've always heard that today's solutions create tomorrow's problems.  Rates aren't everything.  If they were, houses would be flying off the MLS right now.  Good to hear from you my friend.

Hey Kevin!  So funny that I wrote this 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.

2. Rates will be in the low 6% range by the end of the year; maybe even 6.5%.  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. HVCC continues to be devastating to our industry and the public outcry will eventually get this ridiculous policy overturned.  Turn times will be improved in response and we will see a normal growth pace established with 75% of our business coming from purchases vs. refi.

4. Higher rates will finally get some of the people waiting on the sidelines into the purchase game.  There will be a growing sentiment that "I'm missing out" unless I get in now.  Coupled with the $8000 FTHB tax credit and a growing FHA/USDA marketshare, we'll see the pending home sales number hit new highs.

5. Credit scoring laws will be changed to address short sales, deed in lieu, and loan mod lates.  There will be some kind of exemption if borrowers can prove they exercised every option to avoid FC, and this will create a whole new slew of buyers who had good income and assets, but crappy credit.

My next post should be "Will Rates Go to 7%"?  People may not like my answer, but professionals like you and your team (I checked out your profile; good stuff) will certainly figure out a way to not only survive, but to thrive.  Best wishes my friend.