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Will we see a 3.5% mortgage rate soon? Cramer says yes . . .
Dec/17/08 12:04 Filed in: Mortgage
Rates
An open letter to my buy side clients. Jim
Cramer believes rates may go to an unprecedented 3.5%
soon. How believable is that, and what does it mean
for Real Estate, and what exactly is the effect on my
house payment?
I just wanted to jot out a note to my current buyers
about today's Fed decision. You may have noticed the
market went up 400 points based upon it (not that
that's so rare these days, well, it is if it doesn't
go down 500 the next day). Many of you know I am a
Cramerican- otherwise known as a devotee of Jim
Cramer, the stock market guy. People can say what
they like about him, but in my first year of
following his advice I was up 90%, the second year
110%, and we will not talk about the third. Truth is,
I got a big head and stopped listening to his advice
about halfway through the 110% year, otherwise I'd
probably have lost a lot less, as he was counseling
us to get out of stocks as far back as last November.
He does a segment in the morning called "Stop
Trading". Now, usually it is the regular doom and
gloom, ripping his hair out and cursing the Fed or
Hank Paulson for destroying yet another piece of our
economy.
However, yesterday his segment was devoted to his belief that a depression is now "off the table", due to recent Fed and Treasury moves. Today he was much more ebullient after the huge, landmark Fed decision that will cut rates to a half point over the next few months- His focus today was real estate. His ranting today was that people should now buy real estate rather than stocks, though he sees lots of great values there, too, because, in his words (NOT MINE, mind you- I am too lawsuit averse and close to the industry to ever promise such things, and I hesitate to mention him saying it as it is just an opinion of one man) it will be worth much more this time next year. He also believes rates will go to 3.5%, maybe within 30 days, a historical low.
If they go that low, and Cramer is right about the banks being just a few months from being able to lend more widely, I don't think it is absurd to think we will see the seller in a much better position than he/she is now in 6 months, with the buyer having less power, as there will be many more of them since these rates will be very temporary.
Now, my advice to you all is to take it with a grain of salt. However, today's move was so bold, and so large, that the reason the market went up is the Fed, for once, addressed all of the main concerns traders have had with the economy. It was a very complex decision, very layered with things I do not understand, but if you need elaboration, I would recommend calling Carl Salvo at Mid Oregon Lending- I have never met anyone who knows how mortgages really work than he does. He can explain the things I don't know about, and if I know him he will probably throw a little water on Cramer's ebullience. But I would suggest that those of you who do plan to buy in the next 6 months get a relationship with a mortgage manager, and stay in touch with that person so that you are ready when rates hit close to their low.
Remember, there is no single more important part of your mortgage than the rate. For example, a $200,000 loan with a 5.5% interest rate gives a payment of $1135.58. That same $200,000 loan at 3.75% gives a payment of $926.23! Huge difference! Therefore, the nicest thing about a very low rate, is that it either puts more cash in your pocket each and every month for as long as you own the home, OR it allows you to buy a better house! It's a win-win.
I encourage you to get in touch with your mortgage pro. If you have your own, that is great, but I do encourage you to ask them the 4 questions lined out in the lending brochure I have on my website at BendHomePage.com, they will cue you in on how much your guy/gal does or does not really know about the industry. And please remember, I get no kickbacks or even a burger for recommending or using a mortgage person, I just get to know that my clients, the ones that pay for my life and who will tell their friends about me if I do a great job, are well taken care of. Carl's info is below if you would like to ask him questions- he is a money wonk, so ask him anything you might think necessary- he will almost surely know the answer. I also recommend Brian Liebman at Community First bank, who has worked with our clients for years without a single negative word against him. Great, honest guy working for a bank that is one of the good guys, but for questions, I would probably go to Carl, as he has been inside the mortgage business on the wholesale end for years and has told me things no mortgage person ever has about the industry's inner workings. I will tell you I have more mortgage brokers who I am friendly with, but I don't feel quite safe enough about their motives to recommend them to my clients.
Happy Holidays, and I am happy to report that we are up to about 15 degrees today, ending up after the storm with about 4" of snow at my house! It feels like Summer after the last two days stuck near zero. Back up to the usual 30's by the weekend, thank goodness.
Carl Salvo- Mid Oregon Lending- 541-728-0390 : Carl@midoregonlending.com ; www.midoregonlending.com
Brian Liebman- Community First Bank- 541-385-0569 : liebman@mycommunityfirst.com ; www.MyCommunityFirst.com
However, yesterday his segment was devoted to his belief that a depression is now "off the table", due to recent Fed and Treasury moves. Today he was much more ebullient after the huge, landmark Fed decision that will cut rates to a half point over the next few months- His focus today was real estate. His ranting today was that people should now buy real estate rather than stocks, though he sees lots of great values there, too, because, in his words (NOT MINE, mind you- I am too lawsuit averse and close to the industry to ever promise such things, and I hesitate to mention him saying it as it is just an opinion of one man) it will be worth much more this time next year. He also believes rates will go to 3.5%, maybe within 30 days, a historical low.
If they go that low, and Cramer is right about the banks being just a few months from being able to lend more widely, I don't think it is absurd to think we will see the seller in a much better position than he/she is now in 6 months, with the buyer having less power, as there will be many more of them since these rates will be very temporary.
Now, my advice to you all is to take it with a grain of salt. However, today's move was so bold, and so large, that the reason the market went up is the Fed, for once, addressed all of the main concerns traders have had with the economy. It was a very complex decision, very layered with things I do not understand, but if you need elaboration, I would recommend calling Carl Salvo at Mid Oregon Lending- I have never met anyone who knows how mortgages really work than he does. He can explain the things I don't know about, and if I know him he will probably throw a little water on Cramer's ebullience. But I would suggest that those of you who do plan to buy in the next 6 months get a relationship with a mortgage manager, and stay in touch with that person so that you are ready when rates hit close to their low.
Remember, there is no single more important part of your mortgage than the rate. For example, a $200,000 loan with a 5.5% interest rate gives a payment of $1135.58. That same $200,000 loan at 3.75% gives a payment of $926.23! Huge difference! Therefore, the nicest thing about a very low rate, is that it either puts more cash in your pocket each and every month for as long as you own the home, OR it allows you to buy a better house! It's a win-win.
I encourage you to get in touch with your mortgage pro. If you have your own, that is great, but I do encourage you to ask them the 4 questions lined out in the lending brochure I have on my website at BendHomePage.com, they will cue you in on how much your guy/gal does or does not really know about the industry. And please remember, I get no kickbacks or even a burger for recommending or using a mortgage person, I just get to know that my clients, the ones that pay for my life and who will tell their friends about me if I do a great job, are well taken care of. Carl's info is below if you would like to ask him questions- he is a money wonk, so ask him anything you might think necessary- he will almost surely know the answer. I also recommend Brian Liebman at Community First bank, who has worked with our clients for years without a single negative word against him. Great, honest guy working for a bank that is one of the good guys, but for questions, I would probably go to Carl, as he has been inside the mortgage business on the wholesale end for years and has told me things no mortgage person ever has about the industry's inner workings. I will tell you I have more mortgage brokers who I am friendly with, but I don't feel quite safe enough about their motives to recommend them to my clients.
Happy Holidays, and I am happy to report that we are up to about 15 degrees today, ending up after the storm with about 4" of snow at my house! It feels like Summer after the last two days stuck near zero. Back up to the usual 30's by the weekend, thank goodness.
Carl Salvo- Mid Oregon Lending- 541-728-0390 : Carl@midoregonlending.com ; www.midoregonlending.com
Brian Liebman- Community First Bank- 541-385-0569 : liebman@mycommunityfirst.com ; www.MyCommunityFirst.com