Rates

Well, the unexplained happened, and rates have tanked, into the very low 4's and high 3's.  So lets see what is up.

When we last left our heros, the US Government was in turmoil because we couldn't do anything about our debt.

Then they decided on the debt, which was a meaningless vote, mainly due to the 14th amendment.  But each party got to speak their mind and create a crisis that didn't need to happen.

So then S & P decided to downgrade our debt rating from AAA to AA+.  Most of us, self included, thought that this would have and should have caused people to flee Treasury Bonds, which in turn should of caused interest rates to climb.

But then the unthinkable happened, the markets and the US government basically gave S & P the middle finger and said "really, do you actually think New Zeland, Austraila, Canada and France are better economically than the US?"

Then panic took over the the computer trading kicked in, the Dow has been on a up and down ride.  And with people removing their money out of Stocks, they have to put it somewhere, so it has been into Bonds and Gold.

You can see by the 10 year Bond chart above, we have been trading way below the 3.00% mark for quite some time and have even tickled the very low 2.15% mark.  Now remember, for a 30 year interest rate, we actually add 1.75 BPS to this price, on an average, so that puts conventional rates in the 4.00% and we add about 1.50 BPS for govies, and that puts them in the 3.75%.

Now something else that happened, but didn't get too much attention:  A very large French Bank came out with some very worrisome news, similar to what happened to Lehman Brothers during the 2008 collapse.  Well that caused investors to once again see another huge crash, like 2008.

This once again drove the stocks down and the bonds up.

In between the debt ceiling being raised and today, we have basically seen panic trading and HUGE volitility.  Friday we saw some calm, but this week we are going to see even more economic news, which is anticipated on not being so good.

With the bad economic news out there, rates will continue to remain at their lows.  But we are pretty close to the bottom.

In a recent conference call which I was on with a long time bond trader, he indicated that having the 10 year in the low 2's isn't really feasiable.  And he did not see the 10 year falling below 2.00%.  That translate into the 30 year mortgages trading in the 3.625 to 4.00% range, which is about where we are at right now.

Thrusday I locked quite a few loan,  it is better to catch them on the way down than on the way up.

Rates can't really stay here for long, the last time we were here was 11/5/2010, and rates crept back up with in 60 days to the high 4's, low 5's.  History tells us, lock em here, if they go down, well don't cry, but you will cry if they go up and you didn't lock.

Perfect Storm Brewing

A recent blog of mine was about the Perfect Storm coming up with a potential shortage of homes.  I have receveid quite a bit of comments on that, most of them indicating that we are heading into that directdion.

MLS data was release Friday, and once again showed a reduction on the # of homes on the market.

All active = 4041
With out contingency = 3248
<$350,000 = 2829
SFR = 2536

That is 2536 homes on the market, now you figure that a certain % of these homes are true dives, lets say 10%, so that is 2282 homes on the market that ware worth looking at.

Number is getting smaller!