As the Dust settles…mortgage rates improve!!

As I spoke a little the other day in the midst of the mortgage rate meltdown, many of us suspected that this was Wall Street overreacting to the Fed’s comments.  Now, before I say I told you so, we have to analyze what Ben Bernanke said last week.  It was clear and there were two parts to the story.

Not so easy it is Ben??
Alan Greenspan having a chuckle…

The first, Mr. Bernanke stated how the economy was heading in the right direction, things were getting better and it some point in the future the Fed would begin to start “tapering” its bond buying program that it has done for a few years now.

It would appear, the children running Wall Street only heard one thing….”There is Cake and Ice Cream in the break room!!”  What they missed was, “You can’t have any until you clean your room.”  Now, isn’t that much clearer to put it this way??

The Fed Chairman then followed his positive outlook comments by saying he was not altering its primary stimulus program, its stated intention to hold short-term interest rates near zero at least as long as unemployment remains above 6.5 percent and inflation stays under control.  This would be the cleaning the room part.

Mr. Bernanke said that the Fed intended to reduce the volume of its monthly bond buying later this year.  The Feds are currently buying $85 billion a month in Treasury securities and mortgage-backed securities to keep rates as low as possible.  What caught investors ear was “Later this year” he would start cutting his treasury buying program…this was sooner than originally planned.  Thus causing a panic in Wall Street and around the world where mortgage rates went up and the stock market tumbled.  Very rare to have both of these markets take a dive as they did. The Feds are now doing damage control and trying to put out a clear statement, which is working to some degree.

Now, back to the part of where “I told you so”, today’s headlines in several of the Mortgage News updates, “Mortgage Rates Fall at Fastest Pace in June”.  We are seeing a some improvement!  I don’t thing we will get back to the lows of earlier in the year, but we should see this calm down a bit and settle in to the low 4’s.  This is my opinion and anything can happen with the economy.  Mr. Bernanke is a few pay-grades above me and he did not see this coming!!

Bottom line: If you are looking to buy a home or possibly refinance, the current rates are still at their lowest they have been since the 1960’s!!!  To give you an idea of what this may cost you if you were to borrower $100,000 at today’s rate of 4.50%, it would be $507 per month compared to $450 at 3.5% that we were quoting in April. This is only an increase of $57 per month.  This is based on a 30 year fixed rate with 0 points.

Is it the right time to buy?  Of course, if you are looking for a new home, it has never been a better time.  Ok, perhaps last month would have been better, but this still pretty darn good!!!

Do you have questions about buying a home? Do you have questions about what is the right program?  This is what I am here for, to help guide you through the process, to make it easy, affordable and most of all, get you and your family in to the home of your dreams.

Email me anytime with any questions you may have about the home buying process.

Bill Nickerson NMLS #4194

Merrimack Mortgage Company179 Great Road Acton MA 01720

Bill’s Email

What is a Business Cycle?

The “Books” say an average business cycle is 44.4 months and we have lived through many of them. Some longer than that and some as short as a season in New England.  A business cycle is like the exhibit from our youth…“What makes an ocean wave, wave” at the New England Aquarium.  In the exhibit, you get to move the wave with a lever and if you move the lever too much you have to pull it back as the wave comes crashing down…and again, you go too far the other way and the wave crashes in the other direction.  It’s impossible to control an ocean wave.  So here we are now in the middle of a business cycle “The Ocean Wave”. 

As Americans we do the same thing.  When we feel confident and wealthy, we tend to spend a little too much; perhaps buy a car that has all the bells and whistles or buy the  house we all dreamed of or even dined at the newest expensive restaurant we’ve never been to… building up that ocean wave.  We did this as a nation and created a very large wave.  We are in the “Trough” of the business cycle which is like a dead calm in the sea.  Nothing moves.  We are paralyzed by our own actions and cannot find a direction to get back…there is just no wind for our sails.  As individuals, we are going through our own personal process of what will get us back on track.  In some cases, we cancel our vacations, limit the activities our children participate in at school or even bring lunch every day.  By drastically cutting our spending, we have moved the “wave” too far in the other direction thus hurting the economy even further.  Not only have we given up those fancy dinners…we are not even going to the local diner for the blue plate special.

Consumer confidence is measured at an all-time low today and we are letting our emotions and fear govern our decisions and actions.  The News Media has the ability to heighten this fear by focusing on the negative and over emphasizing the issues at hand.   As FDR said, “The only thing we have to fear is Fear itself”.  This speech was given in 1933 in the middle of one of the biggest bank panics of the century which followed the Stock Market Crash of 1929.  There was a “RUN” on the banks where consumers wanted to withdraw all of the cash they had in the banks for fear it would be gone.  The banks had lent this money out for loans, mortgages etc. and the banks quickly ran out of cash.  FDR implemented the Federal Deposit Insurance Corporation “FDIC” that to this day insures our deposits up to $250,000.  This speech did spark a generation as well as the economy, and it was backed by a plan of how to get us moving as a country.  Today, we do not look up to our leaders.   And as of this moment, we do not have a plan of how to get out of the economic turmoil we are in.  So as a strong country, we must take matters in our own hands and move ahead…full steam ahead.

We are in a very unique situation in the economy: Mortgage rates are creating new historical lows every day, house prices are nearing levels of value we have not seen since 2004.  As we always do, we will look back on this day and say, “I wish I had bought that home, or vacation house or even that investment property”.  Trust me; it happens every time we go through these business cycles.  As I mentioned earlier, we are letting our emotions govern our business decisions.  That is not allowed in business.  It’s business and there is no crying in business!!  Remember the saying “Buy Low and Sell High”.  This is not just some catch phrase.  It is a sound business decision that should be followed regardless of your emotional ties. 

So what do we do now? 

·         Keep spending but in a healthy way.  Make sound buying decisions based on needs versus wants.  By putting some money back into the economy, we will slowly recover.

·         Look to your advisers!!  Not your friends or family, but your financial advisers.  This would be the person that handles your investments, your banking, and your estate.  These are professionals that do this time and time again all day every day. 

·         Be patient.  Throughout history we have experienced turbulent times in the business cycle.  And we have pulled out of it.  In the words of Warren Buffett, “Americans are in a cycle of fear which leads to people not wanting to spend and not wanting to make investments, and that leads to more fear. We’ll break out of it. It takes time.”

For information regarding home financing or the economy, please contact me at     Bill@billnickerson.com   or    978-273-3227