I’ve recently received a lot of requests from members of the site asking for my take on the markets and advice on how to best time their next move. I’m glad to hear that you’ve you found my past analysis’ to be useful, and I’m sorry for not being more consistent w/ those posts.
I’m preparing a market commentary that I will post later today. Hopfully this will shed some light on the recent violitility in markets. Stay tuned.....
Here it is! Hopefully it will give you a little better understanding of this crazy market. Even if you are not buying a home or refinancing….you are still impacted by what is going on. I know it’s a little long (sorry), but I think you will find it to be valuable read.
As many of you are aware, mortgage rates have dropped dramatically over the last 2 weeks……..
But, weren’t rates supposed to be going up?Over the last year and a half, rates have remained “artificially low”, thanks to the Fed’s MBS (Mortgage Backed Security) Purchase program. As a key buyer of MBS, the Fed was able to influence the price of the Mortgage Backed Securities (remember, when the price of MBS increases; rates go down and when MBS go down; rates go up). So, when the MBS purchase program ended in April, MBS lost their key buyer, as predicted prices dropped and rates ticked upward. Rates should be a lot higher than they are today. So, why aren’t they? The answer is simple…..luck. That’s right, luck!
As the saying goes...“Sometimes it’s better to be lucky than good!”Thanks to a highly unusual set of circumstances; Mortgage rates have dropped back down to historic lows! Catching a break would be an understatement for the US Bond Market. Over the last 3 weeks investors have flocked from across the pond to the US Bond Market in search of a safe haven. After all of the volatility over the last year, it’s hard to believe the US Bond Market would ever be thought of as a “safe haven” but as the turmoil in Europe worsened it caused a “flight to safety” to occur. A flight to safety happens when investors are nervous about owning risky assets like stocks, but do not want to miss out on earning a return on their funds, so they allocate money into risk-free U.S Treasury debt to provide a safe-haven AND an investment return. The flight departed from a little place called Greece who is in the midst of a failing economy. Next stop, Germany; who put a ban on “Naked Short Selling” (I’ll explain that another time and leave it to your imagination for now). From there we’ll make a quick stop in New York; home the US stock markets “flash crash”. After a quick detour to Europe to see the price of the Euro decline, we’re back in the states just in time for the announcement of bad jobless claims report 2 weeks ago, and news of a possible war between North & South Korea. Each and every one of these events along our journey has sent investors our way. This huge increase in foreign purchasing has filled the void left by the Fed when they ended the MBS purchase program and has compensated for what they are no longer buying. All of that results in the price of MBS’s going up which is pushing rates down lower due to the Treasury yields rising. This flight to safety could never have been predicted. Essentially a highly unusual set of circumstances has occurred in the market, and as a result; interest rates have rallied and improved dramatically.
Just when we thought it couldn’t get any better….While writing this commentary, the bond market has caught yet another break! The much anticipated Jobs Report was released this morning, and the results came in far worse than the estimate. This news sent investors running for cover as stocks fell below the 10,000 level. And, where do they go? You got it…BONDS! Rates are literally dropping as we speak!
I just finished locking 7 loans…
2 - 15 yr Fixed (1 @ 4.00% & the other @ 4.125)
4 - 30 yr Fixed (rates ranged between 4.50% & 4.75%)
1 - 5/1 ARM at 3.625%
Bottom line, rates are really, really low right now! Rates are incredibly volatile, and sooner or later the Bond Market’s lucky streak come to an end…..so, don’t expect them to hold at these levels, so you have more to lose than you have to gain by waiting.
It’s an awesome time to both purchase and refinance, however
be careful. Lately, I’ve been seeing a few questionable ads from several different brokers regarding No Cost Loans & Streamline Refinances….that are flat out misleading. For those of you who have just begun the process of refinancing….understand that there is no such thing as a No Cost Loan! You are paying for it by taking a higher rate. In most cases it will cost you a hell of a lot more than the standard fees, and always make sure that the broker is disclosing their YSP. As for streamline refinances…..nothing is streamline in today’s lending environment. Values have dropped, guidelines have changed, and turntimes have increased. At the end of the day, most of you will end up having to do everything these ads said you wouldn’t. Marketing like this is simply misleading. I’ve been doing the for 12 years, and believe in providing clear expectations (not false hopes)
Give me a call...I would love to look into your situation and see just what we can do to put some money back in your pocket. And, as always….I welcome the opportunity to compete for your business. Feel free to call anytime at 866.280.3899 or 206.852.9964 (cell)
Best Regards,
Erik Reault
