Danny Salas

Real Estate Today Radio – December 10, 2010

 

 

Check out Danny Salas and Dan Henry (Steve Williams Realtor) on Real Estate Today Radio! 

Check out Danny Salas and Dan Henry (Steve Williams Realtor) on Real Estate Today Radio and hear why they both agree that it is best to act now instead of waiting for the market to bottom out.

 

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Chico, CA Interest Rates Market Report – Economic Influences – November 18, 2010

Why Are Rates Skyrocketing?

There are a couple of things occurring.  QEII is taking effect on the market, and deflating the value of the dollar, worldwide.  The U.S. is doing the exact same thing, it has ridiculed other countries of doing, in the past.  Quatitative Easing II is the government’s stimulus program to actually cause inflation (interest rates’ worst nemesis), in order to spur economic life, into an increasingly dead economy.

The second main issue is, again, Europe.  This time, it is Ireland.  Ireland’s financial banking system is at the brink of complete collapse.  Therefore, as we’ve seen in the past with other European Countries, the European Central Bank (ECU) and the International Monetary Fund (IMF), have stepped in and offered a deal to Ireland, that they may not be able to refuse.

Why would Ireland Refuse Help?

Pride!  Simply, put…Pride, Austerity, and higher taxes.  Ireland has the lowest tax rate of any European country.  And the concern is, that if they accept this assistance, they’ll have to raise taxes and perhaps cause the unrest that Greece had to endure, through their financial fiasco.  In economics, austerity is when a government reduces its spending and/or increases user fees to pay back creditors.  Austerity is usually required when a government’s fiscal deficit spending is felt to be unsustainable.

Safe-Haven Treasuries, Not As Safe

Investors Moving Money

During the uncertainty in Europe, investors tend to move their money into the safe-haven of U.S. Bonds, Treasuries, and Mortgage-Backed Securities.  However, with a plan on the table to revitalize Ireland’s financial stability, that safe haven is less attractive, and therefore, money pours out of these places, and into Stocks, Bonds, Gold, Oil, etc.  This causes rates to increase.

Hold Your Horses

Europe is still not out of trouble.  Greece, Portugal, Spain, and Italy, are all beginning to show signs, again, of financial trouble.  Their banking systems may need more bailout help, as they already have experienced.  If this rears its ugly head again, we could see these same investors shuffle money back into the safe-haven of U.S. Bonds and Mortgage-Backed Securities…causing rates to move downwardly again.

Watch Europe Carefully…Rates Could Benefit

Locking In

If you haven’t done so, already.  You’re not working with the right mortgage banker.  However, if you or your client, just had your application taken…I’d hold out and watch what happens with Greece, Portugal, Spain, and Italy.  We may have a small rebound, after suffering HUGE losses, this past two weeks.

Related Must Reads

Past European Troubles
Greece’s 1st Financial Rescue Program
Portugal’s Past Troubles

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MI Moving Maximum LTV to 97%

A Good Sign 

Beginning October 8, 2010 PMI Home Insurance raised their maximum LTV (Loan To Value) to 97%.  For most in the industry, it will be a good thing. With a 3% down payment, more potential homebuyers will qualify for loans.

Criteria Outline

Minimum 720 credit score Non-distressed markets only Owner-occupied 1 unit, attached and detached,     PUDS and condominiums Purchase only Conforming loan amounts Retail only Fully amortizing fixed-rate and     Hybrid ARMs (5/1, 7/1, 10/1)

To See All of PMI’s Criteria and Rate Changes, Check Out:

www.pmi-us.com

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Chico, CA Interest Rates Market Report – Economic Influences – October 28, 2010

Government Stimulus Causing Rate Increases

For the most part, you have probably seen mortgage interest rates start to rise over the past few business days.  The new government stimulus program is getting ready to roll out, in November.  This will, most likely, cause interest rates to rise.

Inflation TOO LOW!

The reason sounds simple, however, you generally read that inflation will cause rates to increase.  On the opposite extreme, there is deflation.  I’ve written about this, in the past, however, the government has been announcing that they are very concerned that the level of inflation in the country is uncomfortably low.

What does this mean?

In order for an economy to grow, there must be inflation.  Inflation, in the U.S., is virtually non-existent, and we are now approaching a point where deflation is becoming a major concern, and a real threat to the economy.  The government has stated that they are committed to preventing this from happening, and they are stepping in with a new round of stimulus.

How This Differs From The $1.25 Trillion Stimulus

The initial stimulus program, when the government pumped $1.25 Trillion into buying Mortgage-Backed Securities, to keep interest rates low, was to also enable businesses and consumers to borrow money.  This round of stimulus, launcing in November, is particularly focused on increasing prices at the Wholesale and Retail Level, forcing items to cost more, and therefore, eluding a downward spiraling ecomomic distaster, by preventing deflation from occuring!

Is This Gonna Work?

What is critical for you, as a consumer and professional Realtor to understand, is that inflation is the nemisis of bonds and Mortgage-Backed Securities.  Mortgage-Backed Securities are the determining factor regarding interest rates, and if the government is committed to increasing inflation, then mortgage rates have nowhere to go, but up.

The Writing’s On The Wall

I’ve written before that many times, speculation will have an impact on interest rates, more so than actual economic statistics.  The government stimulus package will start in November, yet we have already seen an increase in over 50 basis points, for a loan’s cost.  That translates to approximately, 1/2 Point on a real estate loan.  And this is just in the past two weeks!

What Should You Do?

I am urging you to please contact me right away.  I can provide you updated financing information, on your particular situation, or your buyers’, so you all can make an educated decision on what your next step should be.  I just want to be certain that you are kept up to date on what is happening, and that you understand how the changing rates will impact you today, or in the future.

Related Must Reads

Deflation Concerns, One Year Ago
Rates Were Expected To Go Up A Long Time Ago…When I Was Wrong

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