RateWatch Cinco de Mayo – As I said before…

Markets: Bonds are up again today, up about 18bps (which is .18), and that puts us right on the lows of the year.  Rates have not responded quite as exuberantly, but we’re touching 5% again.  Even lower on some programs.

Analysis: Rates are sticky down, meaning that they stick on the way lower and don’t mirror market conditions exactly.  They are also slippery up, meaning that they rise faster than you would think when the market deteriorates.  I think that might explain the hysteria about interest rates, with everyone and their dog predicting a gigantic surge in rates when the Fed stopped buying mortgage-backed securities at the end of March.

Okay, not everyone.  As you know, faithful readers, I predicted that rates would not go higher, at least not by much.  And for once, I was right.  It just didn’t seem rational to me that with the global debt overhang we would have a massive flight out of mortgage-backed securities causing a huge rise in interest rates.  It has, in fact, not happened.  Rates remain in the range they have been for 18 months.

Additionally, there isn’t going to be any significant fallout – not for the next few months – from the expiration of the tax credit for homebuyers.  The market will adjust.  There was an extra $8k built into pricing on homes, which will now slowly vanish, and lower prices will start pulling the same buyers back into the market.  Not all of them, of course, because many of them were getting an $8000 “gift” from mom and dad that they were going to pay back from their government largesse, and that is gone.  But there will be other incentives.  The market wants to move.  Real estate wants to move.  And it will.

Action: if you’re in the market, stay there.  We’re about to see the best prices for houses and the best rates we’ve seen in many years.  Get with us, get into the PerfectHome program, and we guarantee when you find the house you want to buy, you’ll be able to buy it.  That’s right.  We guarantee it.

Cj

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