Posts Tagged ‘RateWatch’

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

Markets: It’s a good thing it’s a short trading session today, because bonds are getting massacred.  That continues the trend for the week that has seen us lose over 100bps, pushing rates above 5.25% this morning.

Analysis: Good employment data – we actually have seen some hiring in this report – makes it look more and more likely that the bottom of the recession has come and perhaps gone.  Couple that with looming $3 trillion deficits, and that means that bonds are doomed.  This time, there’s no Fed backstopping things.

So, it turns out that I was wrong, and that the end of the Fed purchases of mortgage-backed securities IS going to have a hugely negative impact on interest rates, as the conventional wisdom said it would.

Action: The only thing to do is to move as quickly as possible.  If you are considering a real-estate transaction (the government goosing of the housing market comes to an end on April 30, FYI), move now.  Nobody can lock your rate without an address, so get a contract in place as soon as you can.

Despite my small joke in the headline, I do know that there’s nothing in the housing markets that is anything like as important as the real events being commemorated this weekend, beginning today with Good Friday and culminating with Easter on Sunday morning.  I recall singing at many Easter sunrise services as a teenager, and the power of the commemoration of the Resurrection is with me as I write this.  RateWatch is about how important the market is, but all things considered, nothing that happens in the market is very important at all.  Take some time this weekend to appreciate how insignificant all this really is compared to the things that really matter.  I know I will.

Cj

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Markets: Flat.  No change.  Rates hover at 5% and a bit below.  15-year loans are at 4.25% and thereabouts, 5/1 ARMS are 4% or a shade lower.

Analysis: A piac nem tud melyik iranyba menni, ugyhogy semmisem tortenik.  If I write the same thing I’ve been writing for the past month, it gets old, even for me, so I wrote it in Hungarian this time.  Prizes for the first person to email me the sentence above in English.

There’s nothing going on, people.  Or, at least, nothing that is big enough to make the markets move.  Breathlessly we wait for the Fed to stop buying mortgage-backed securities, and loud are the forecasts of rate-based doom, and yet…nothing.  Still, nothing.

Clarification: There is a lot of confusion about the homebuyer tax credits, so let me herewith set the record straight.  YOU DO NOT HAVE TO CLOSE ON YOUR PURCHASE BY APRIL 30.  The house merely has to be under contract by April 30.  It can then close any time before JUNE 30.  “Under contract” means there is an agreement, signed by both the seller and the buyer, outlining the sale price and the terms of the sale.  As long as you have that in place by April 30, you still qualify for the tax credit, and that is either the first-time homebuyer credit or the long-time homeowner credit, either one.

Cj

Markets: We’re off 12bps, which is a bit less than what we gained yesterday.  Rates hang out right at 5% (fractionally more on some programs, fractionally less on others).  SOmething interesting to note: the 15-year loans are operating at their biggest spread in a decade – the 15 year fixed loan is currently selling at 4.25% and better, depending on your credit and equity position.

Analysis: We talked about this last time (and here as well, in greater depth), there just isn’t any good reason to believe that much is going to change here.  I got some push-back on my contention that politics is driving the market at the moment, but I’m sticking to my guns here.  Even if Obama is indifferent to a second term (and I’m not convinced that he is, all protestations to the contrary), the driver on this stuff is Congress, more than the President.  The retirement of Evan Bayh of Indiana is a black, black sail for the Democrats.  Having spent 25 years in the political arena, I’m quite sure that most of the sitting Congressmen want to keep their jobs, and that usually means tossing bread to the plebs as they go to the polls.  That argues against fiscal restraint and higher interest rates.  I’m just saying.

NEXT year, well, that’s a different story.  And please let me emphasize, I’m no prophet.  I’m just telling you what I think, and freely acknowledge that I’m often wrong.  But I’m never slow on the trigger, so right or wrong, you’ll have the benefit of someone watching what’s happening in the markets while you do the real work out there.

Action: The tax credit expires on April 30 if you do not have a home under contract.  Call your Realtor and get cracking.  The FOMC stops buying mortgage-backed securities in 42 days.  That’s going to have SOME impact on rates, and it isn’t likely to be good (although, as argued, I don’t think it will be very big).  Move expeditiously.  That is all.

Cj