Click on Image for full-sized view.

This is a great time to refinance or buy a home.  If you haven’t looked into it yet, you probably should.  Not everyone will be able to save money of course, but I would say at least 80% of homeowners will be able to save 10% of their monthly interest payment on their mortgages.  It never hurts or costs anything to look, so I suggest doing it soon. 

Now is one of the few times I’ve said in the past few months to float and not lock. I’m 99% certain that Bond prices will go higher in the next couple weeks causing rates to drop.  We’re likely going to see a day when prices spike.  That will be the day to lock.  It won’t last long, so get ready and pay close attention.

Have a great New Year and stay tuned!

With the current state of the Global Economy, many people have their opinions of how we got here, who’s to blame, and what should be done to fix things.  I’ve made my opinions clear for the last year about what needs to be done to fix the mess because pointing the finger won’t get us anywhere at this point. 

It’s funny to see that as time goes on and more research can be done about the state of the Economy and how we got here, the more detailed and obvious everything becomes.  I strongly recommend that you watch THIS VIDEO of Barry Habib explaining exactly how the banking, financial and credit crisis occurred.  It will make 100% sense to you once you’ve watched it.  This is the type of information I acquire on a daily basis so I can educate my Clients about the Markets myself.  I wanted to give this Video to all my subscribers as a Christmas Present of sorts. 

Interest Rates are likely to stay in the low 5% range for the remainder of the week as I expect Bond Prices to remain unchanged for the most part.  However, I’m feeling a pretty big move building up in the markets for the beginning of 2009.  I expect that mostly everyone who wanted to sell for tax loss purposes has already done so this year.  I also expect those same people along with everyone else to jump in to the market in early 2009 in hopes that it will be a good year to own stocks.  So, I’m predicting a very strong Stock Market move in January of 2009, but what about Mortgage Bonds?  Well, with the Federal Reserve and Treasury Department aggressively buying Mortgage Securities, there’s really only one way for the price to go… Higher!  I’m expecting rates to at least remain at these levels for the next couple months if not inch lower.

Stay tuned.  Much more on the way…

I’ve been studying the Financial Markets long enough to know that it’s a good idea to “Expect the unexpected”, so I’m not going out as far on the limb as I feel I can comfortably, but all the signs are pointing to lower rates here.  I’m going to stick with my recommendations for the past few weeks, but I’m going to get a little more specific this time…

If you’re currently fixed in with a rate of 6.25% or better and you have no other mortgages or debts that you’re consolidating into a refinance, I think it makes sense to wait until the middle of January before thinking about getting locked in.  That being said, the process may take a while with the Holidays, so it would still be a good time to get things started with your refinance application.

If you’ve currently got an adjustable rate or any rate of 6.75% or above, go ahead and get locked in at this level or somewhere near it.  You should be able to see a nice savings that you can take to the bank every month and be proud of…

I’m leaving the 6.375%-6.625% people in limbo here.  I’m calling this the Gray area.  A lot of the math within these recommendations is reliant upon the loan amount.  For example, if you have 6.5% w/ a $50,000 loan amount, you shouldn’t do anything.  However, if you have a 6.5% w/ a $250,000 loan amount, you probably should.  Always run the math before you assume it’s a good idea just because the rates seems better.  Of course, contact me directly so we can analyze your specific situation.

Here is how Mortgage Bonds finished trading for the week…

Click on image for full-sized view.

30 year fixed rates closed for the week at 5.125%.  Expect very light volume sessions next week with the Christmas Holiday fast approaching.  I don’t think we’ll see much movement.  Stay tuned.  Much more to come.

Now, the Federal Reserve will be a buyer of Mortgage Securities in even greater abundance than the Treasury.  The goal here is to moot my last post.  You’ll notice I’m talking about how we’re all just going to have to be patient.  There’s no Government intervention that’s going to fix this over night.  Well, apparently the FOMC took that as a challenge.  They are now committed to solving this problem in 2009.  How silly of me to think that we (Americans) could be patient.

Typically, when rates are cut, it’s a very inflationary occurence and therefore bad for Mortgage Bonds which determine interest rates.  However, just look at today’s chart.

Click on image for full-sized view.

The FNMA 5.0% Mortgage Bonds actually traded up 84 basis points!  That’s a HUGE move for one day!  This is a really good sign.  The fact that the Government is going to continue to buy these bonds means that rates should stay low for a long period of time.  It’s even possible that rates could move even lower.  Although that’s difficult to say, I would feel pretty comfortable saying that rates should definitely not get any higher for a while. 

Stay tuned.  More to come.  If you don’t own a home…start looking soon.

Click on image for full-size view.

Remember this is only the over-night rate, so it takes a long time of sustained lower over-night rates to effect Mortgage Rates.  Usually, 9-12 months after the rate cut occurs, we can begin to see it’s effect on the economy, credit, and lending rates.

This cut is ignorant in my opinion.  The intention is good, but saying this would be a band-aid on a bullet wound wouldn’t even be a just anology.  The problem right now is that Consumers don’t want to borrow money because they’re afraid of a worsening Economy.  They’re afraid they will get pay cuts or lose their jobs.  It’s not because rates aren’t low!  Rates are already near historic lows!

What our Economy is missing right now is a very simple, yet difficult thing to obtain… Confidence.  Until Consumers are confident the Stock Market won’t lose another 40% of it’s value, their job is safe and no paycut is in site, and their home won’t lose another 30-50% of it’s value next year, they are not going to try to borrow money for ANY reason.  Everyone will be on the sidelines waiting for things to clear up.

This creates the stagnation we’re seeing today.  No one wants to do anything.  This is not what makes America’s Economy the Iron Horse it’s always been.  We need Consumers to be confident enought to start their own business, borrow money to do so even or buy a new car for Heaven’s sake, go to the mall and buy some stuff for the fun of it.  That’s the American Economy at it’s best.  Not the current coupon-clipping and car-pooling we’re seeing today. 

Imagine this… You pull up to a 4-way stop sign and three other cars pull up at the same time as well at the other three signs.  If all of you just wait until someone else goes, then no one will ever go and you’ll stay at that intersection the rest of your lives!  We know for a fact that eventually someone will go and the flow of traffic will be good again.  We know this about the economy too, but it’s hard to say how long it will take.  That’s right, it’s going to take a while.  No matter how many times the Government steps in and no matter how big of a deal is made in the media, this problem is going to be solved through the passage of time.  Not something we’re accustomed to here in fast-food Nation.  Maybe we’ll all learn a little patience as we figure this out.

As for Mortgage Rates, I have the same recommendation I’ve had for a couple weeks now.  If you have time to wait, do so.  We’ve haven’t seen the lowest rates possible yet.  If you’re buying or need to close soon, go ahead and lock.  A 5% on a 30 year fixed is nothing to be ashamed of…

Stay tuned. Much more to come.

As you can see from the Chart above, Mortgage Bond prices are the highest they have been all year.  Rates are at the lows of 2008 (5% fixed on 30 year loans).  If just a little progress can be made from here, we’ll see a big spike up in prices and a sharp spike down in Mortgage Rates. 

We need to keep a close eye.  When prices are at yearly highs or any type of long-term high, we know there will be a lot of resistence that could shoot the prices down much lower and quickly.  However, with the Department of Treasury in there as the big buyer, there’s a chance that we could see rates in the 4’s as soon as next week!  I’m betting on that outcome myself.  Of course, if you have a short-term perspective, let’s say you’re buying a home in the next few weeks, go ahead and lock in here.  If you’re considering a refinance or have a longer time horizon, sit tight and see what happens next.

Stay tuned!

Now, we’re going to see hundreds of thousands of jobs lost, more foreclosures on existing homes and of course, huge losses for your 401k or Retirement account.

The real question now is what effect will this have on Mortgage Bonds.  It’s very possible that Mortgage Bonds will move much higher amid this undoubted equity sell-off on Friday.  Of course, sometimes events that are this scary can result in a Market-wide sell-off of all paper assets.  I’m going to say that rates remain unchanged after tomorrow’s action.  There will probably be some intra-day downside in the Bonds, but with the Treasury in there buying, before the day is over, I expect it to get corrected.

Stay tuned as this unfolds. I’ll write a detailed piece over the weekend explaining whatever happens tomorrow.  For now, 30 year fixed rates are still in the low 5’s and are holding steady.

Click on image for full-size view.

I think this is a sign that the U.S. Treasury Department has not only started buying these Mortgage Bonds with the $500 Billion that’s been allocated to do so, but they have also decided exactly what range they want these bonds and therefore Mortgage Rates to be hovering around.  It’s a smart move on their part because the Bond Traders will provide little resistence to such a Big Player in the Market and the Treasury Dept. knows if they can keep rates in this range (low 5’s for 30 year fixed) it will give Homeowners a good reason to refinance and save money or go out and buy a home if they have been on the sidelines for this mess.  Since it’s clear this is a Housing-Lead Recession, fixing that problem is important to every other problem that is just spill-over from the Housing Mess.

KEEP A CLOSE EYE however on the new Box Play that’s forming right now.  You can see the 9-day consolidation in prices and the box that’s being formed by that.  This is something I’ve written about several times before.  The range of this box is much smaller, so it’s even more difficult to say which direction it’s heading.  However, I highly doubt the Treasure Dept. will let prices slip below their prepared levels.  So, this leads me to believe that rates should be heading lower at some point in the near future.  This accompanied by the fact the stock market has been up huge over the last couple weeks and is due for a little selling pressure which typically causes money to flow into Mortgage Bonds, which also points to lower rates.

I am trying to stay on the ball with these posts and trying very hard to get back to everyone, but it’s been extremely difficult with all the activity right now.  Stay tuned. Much more on the way.

I need everyone to listen really carefully here because the truth is that the NEWS doesn’t care about you and your family.  They only care about getting you to watch the TV.  The 4.5% interest rate provided by the Government is only TALK.  It has not been decided yet.  More importantly, the discussion is to provide a 4.5% interest rate for Home Purchases ONLY.

This is a real possibility and I believe it will take place once the new Administration takes over.  But, does this mean you should wait around for it?  ABSOLUTELY NOT. 

If you’re looking to buy a home and you can wait a couple months while looking then it may be something you can take advantage of, but certainly shouldn’t be a part of your plans.  Especially because it’s not even guaranteed yet.

If you’re a Homeowner waiting for lower rates to refinance, I think it’s a good idea to wait a short period of time, maybe a few months, and if rates haven’t moved then you should lock in without hesitation.  Of course, each situation is different.  For example, if a Client has a 9.75% adjustable rate, I won’t recommend waiting for that Client.  I’ll recommend they move quickly and get out of that adjustable because of how much extra it costs them each month to have their current rate.  If a Client has a 6.5% fixed, then I very well may tell them to sit tight for now and see what happens.

Take a look at the 2-Year Chart for Mortgage Bonds below.  This will help provide some perspective.

Click on Image for full-sized view.

Stay tuned. Much more to come.

There is only one time in history from which we can compare all the recent events.  Alan Greenspan started slashing The Federal Funds Rate in 2001 all the way from 6% to 1% with the final cut in June of 2003.  We saw the lowest mortgage rates in History in early 2004.  It takes a little time for the Fed rate cuts to work their way through the system and have an effect on Mortgage Rates.

The current Rate Cuts started in September of 2007 when Ben Bernanke started cutting rates from 5.25% all the way down to 1% again on Oct 29th, 2008.  So, we can expect that it should be somewhere around 10-15 months before we see the lowest possible mortgage rates based on this comparison.

Also, the Treasury is buying hundreds of Billions of Dollars worth of Fannie Mae Mortgage Bonds to help aide the Housing Crunch.  Higher Bond prices equal lower mortgage rates, so this is a huge sign that we can see lower rates as well.  Below is today’s Fannie Mae Mortgage Bond Chart.

 Click on image for full-sized view.

The only problem is that the comparison could be considered invalid because it was a terrorist attack that caused the last Market Crash and this time it’s a legitimate, full-on Recession that was caused by MORTGAGES.

All that being said, my opinion is the same it’s been for a while.  If you have a home in escrow or you’re in the process of a refinance, go ahead and get locked in.  However, if you have time, the smarter thing to do is wait and see what happens over the next few months.

Stay tuned. More to come.