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Thursday saw a virtual run on the bank as $180 billion dollars was withdrawn from money market accounts.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.
This bottom that you're hoping we're at, does not factor in the inflation that will set in, due to the government paying around 1 trillion dollars for all the bad loans out there. Everything will now get more expensive, so who knows if we're really at the bottom.
Joe Almirantearena - California Home Loan Specialist - http://www.findmyloanonline.com
I just sent a newsletter with similar information in it to my list of contacts. I am trying to get them on the same page so they realize that now is the time to buy and not run........
Stacey~
It really is the time to BUY!
I have been telling everyone! Help spread the word!!!
I would agree that we are close to the bottom, but I am not about to jump for joy because uncle sam came to the rescue and guaranteed some things. What I will do is like you said, counsel my buyers on why now is a great opportunity for a long term home purchase (greater than 5 years) which is how real estate should be viewed.
Karl. You are exactly right. It is now for the smart guy. Thanks for sharing. Royal..
I agree that it is the time to buy, particularly in Texas. I am not yet convinced that we are at the bottom of the market.
Joe mentioned a great point... INFLATION. Inflation is the arch enemy of rates. As funds are injected into the market, the dollar will become weaker, which will lead to inflation. Though house prices may not have hit rock bottom in all areas, now is still the cheapest time to buy. Even if waiting to buy might save a few thousand dollars on the slaes price, a higher rate will cost more than the savings in sales price.
Karl,
So true ! We expect an uptick in activity due to the low rates and confidence starting to turn ! Not only is it a great time to buy a first home but also a great time to pick up a few investment properties for a portfolio ! I believe money will flow into real estate as part of the sector rotation... finally !
Back to the inflation concern, oil is up about $15 per barrel in the last 4 days. Interest rates are on the rise this morning. Time for everyone to get off the fence and buy while the getting is good.
Karl, We met at the Hammonton Commerce Event in the Spring. I enjoyed reading your post on mortgage appraisals. Explained very well.
Karl, I hope you are right about being at the bottome, or close to the bottom of the market.
Hi Toni - I absolutely remember meeting you. It's good to hear that the info I post helps. As far as being at the bottom, a lot of what happens next is going to depend on this $700 billion rescue plan.
I think it's a better time to increase my business by convincing those Sellers who have dipped their toe in the water but, have not fully committed to preparing, pricing and marketing their home as it must be done in this market that wwe are at a turning point. The market oculd truly go either way in a big way in the coming weeks and, while I applaud your optimism, I htink that home Sellers need more than wishful thinking and now is the time to "cook" or get off the pot.
Andy
Karl,
From your lips to the Buyer's ears........may the Buyer's take note.
Andy - If we are not optimistic, we shouldn't be here working through this market.
Dan - Spread the word. This blog is almost a week old and so much more has changed. The next few days will be very interesting as the latest plan is presented. What times we are living through.
We just need to make lemonade out of lemons! Be positive!
Norma - Thanks for stopping by and keep making that lemonade.