RateWatch Jan 21 – Not So Fast

Markets: A slow burn downward has reversed itself, and the market has now gained ground four of the past five days.  This keeps rates firmly at 5%, and even lower than that on some programs for those with great credit.

Analysis: It just doesn’t appear that there is any steam in the bond selloff.  The latest rounds of 3-, 5-, and 10-year bonds were met with extremely hot demand, especially from foreign buyers.  China may be scaling back its purchases, but other nations are picking up the slack.  Bonds are still hot.  Nobody is sold on the recovery yet.  Even the looming threat of the cessation of Fed purchases is not having any impact on bond prices.

Action: the phrase “smoke ‘em if you got ‘em” comes to mind.  Everyone knows that with the historical average for interest rates at almost 3 points above our current levels, this can’t last.  There’s no way that 5% can be the new normal, and rates are going to rise.  When, nobody knows (we’re already a year and a half past my prediction, in the interest of full disclosure).  But the incentives to purchase will not be extended again, and rates simply can’t get better than this – we’ve had this range now since Thanksgiving of ’08.  You wait, you’ll regret it.

Thanks to so many of you that supported our seventh annual Twelfth Night Charity Ball last week.  It was a great event, and we think we’ll be supporting both Heart-2-Home and Noah’s for the forseeable future.  Look for us next year a bit later in the year.  We’re looking at March instead of January, but more details on that forthcoming.

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