What a week!!! It seems every morning I awoke to new earth-shattering economic news. If you want drama, don't watch the new fall lineups on your favorite network, just watch the news channels. The past month has brought us the collapse of big banks, bailouts of even bigger banks and insurance companies, natural disasters, and surprise running mates. Hollywood's best could not have thought this up.
Ok, don't watch the news channels. Usually their so-called experts play great to their audiences, but display their lack of knowledge to those of us that know better. This morning I saw one "expert" that I mostly respect state that although mortgage rates are very good right now, you need very good credit and 20% down to qualify. I guess she never heard of FHA.
What happened? Bear Sterns, Indy Mac, and Lehman Brothers were huge investment banks that bought into mortgages in a bad way and paid the price. Countrywide and Merrill Lynch only avoided the same fate thanks to buyouts by Bank of America. Fannie Mae and Freddie Mac wavered, but the government knew they held too much of the mortgage money and their demise would be catastrophic if not fatal to the housing market. AIG was next in line, but again the government stepped in to throw a lifeline to this insurance giant.
As this played out, we saw violent shifts in the market as investors attempted to navigate the waters and determine where to put their money, or just as important, where not to have their money. The stock and bond markets looked like yo-yos. Tuesday I saw mortgage rates climb a 1/2 point in about 2 hours as The Federal Reserve announced no change to overnight rates and AIG faltered. Some invested heavily in gold. Many more invested in treasuries knowing they would take short-term losses but their money as a whole was safe.
Thursday saw a virtual run on the bank as $180 billion dollars was withdrawn from money market accounts. Investing was no longer about making money. Now people just want to find a way to keep the money they have. Now the government is coming to the rescue and bailing out the entire market. They are going to insure money markets and create a company that will absorb all of the bad mortgages. This has put confidence into the market. Mortgages rates are increasing as a result, but our economy is becoming healthier fast.
We are at the bottom of the market!!!! Granted I cannot be sure of this, but if I'm wrong, I am not off by much. This injection of money into the market is going to speed up the process of recovery for the ailing housing market. If the government guarantees mortgages, investors will view this as a safer place for their money. Though we may not see a dramatic loosening of underwriting guidelines, we will see the money start to flow somewhat quicker and smart investors will become more likely to buy a houses.
Now is the perfect time to buy!!!
Realtors, explain to this to your customers.
Today's news is unprecedented.
We are unlikely to ever see this combination of high inventory, discounted sales prices, and historically low interest rates.
Call everyone you know and tell them the time is now.
