Thursday, April 8, 2010

Mortgage Rates Continue To Rise

On Monday this week I took note that Freddie Mac interest rates had jumped from 4.99% up to 5.08% since the Fed ended their mortgage purchase program.

Today we received word that they have jumped again from 5.08% up to 5.21%.



Yesterday the Mortgage Brokers Association announced an enormous rise in the 30 year fixed rate mortgage from 5.04% to 5.31%.

I would imagine Bernanke is watching these rates like a hawk, the eye in the sky, ready to pounce back into this market should rates continue to rise.


If mortgage rates were to rise to the 6% to 7% range, (they would already be double that without Fed intervention) it would bring the housing market to its knees.

The 30 year treasury bond auction today clocked in at 4.77%.  The 10 year bond this week crossed over the important 4% level.

Why is this important?

Treasury bond rates have a major impact on mortgage rates.  If an investor can get a guaranteed 4.77% return over 30 years lending to the government, would they be willing to lend to an American homeowner for 5.21% over 30 years?

Risk free at 4.77% vs. massive risk at 5.21%.  Which would you take?

The answer hopefully would be the 4.77%, which is why treasury rates will have to go much lower to keep mortgage rates from exploding higher, or the Fed is going to have to come back into the mortgage market.  The only way to get treasury rates lower would be to create a stock market sell-off, (scare people back into treasury bonds) or for the Fed to begin buying treasury bonds again themselves.

Chris Martensen has written another incredible article discussing the future of the treasury bond market (the most important story of this decade).  Last year he wrote the original shell game, which was probably the most important article of the year.

Wednesday, April 7, 2010

Dylan Ratigan

A brief and easy to understand explanation of how The Con works in the USA.

Visit msnbc.com for breaking news, world news, and news about the economy

Tuesday, April 6, 2010

William Mack On Real Estate

Good conversation this morning with William Mack, chairman of Area Property Partners, who notes that while prices are getting more attractive there will be better opportunities to buy over the next 18 months.

This will be due to the banks taking write downs on their bad loans, which they have not yet begun to do, and thus allowing them to sell the buildings at real market values.

Monday, April 5, 2010

Mortgage Rates Rising

Don't look now but here comes the rise in the 30 year mortgage bonds.  The most recent rates from Freddie Mac can be seen below.  (One of the government mortgage giants that now represent the mortgage market)



Looks like the Fed leaving the market has already made an impact.  With home prices falling, we all shudder to think about what would happen to prices should rates be allowed to rise to real market levels in our new communist country.