Long Beach California Real Estate Loans

Long Beach, California.  I want to wish everyone a Happy New Year for 2009. 

Where there is confusion and chaos, there is also great opportunity.   The question that you must ask yourself:  How do you take advantage of market conditions? 

Home prices are extremely low and so are interest rates. Today, I booked two loan applications.  The funny thing is that there seems to be almost a 50%-50% chance that a home buyer will not show up for a loan application.   Today, both buyers not only showed up at the same time with all of the information in tow necessary to consummate the pre-qualification.  I see people, that intuitively sense that this is the time to purchase property.

The tone in the media has been obviously negative in regard to the status of the current market place.  As an experienced loan officer, I roll my eyes at the quickening of the changes in the market place.  One thing for sure, is that the market will be as bad as people think it is....as much of a realist as I am, and the following facts are definitely dismal, I would suggest everyone to think positively and practically about 2009 and the markets therein.   I say this because, I have seen experienced professionals, in all walks of life, simply shut down.  It's as if some of my friends have crawled under their desks and have died...

The index of leading U.S. economic indicators fell in November for the fifth time in seven months, reflecting the worsening outlook that led the Federal Reserve to slash interest rates and pledge unlimited purchases of securities.  "There is no end to the recession in sight," said Stuart Hoffman, chief economist at PNC Financial Services Group Inc. in Pittsburg, who correctly forecast the decline in the leading index. "The economy is likely to continue to fall hard."

Crude oil fell below $38 a barrel for the first time since July 2004 on speculation that OPEC hasn't trimmed production enough to bolster prices as demand drops.  JPMorgan Chase & Co., the largest U.S. bank by assets, reduced its 2009 average oil price forecast to $43 a barrel from $69 as a global economic slowdown causes a contraction in demand. The prospect of oil falling to $25 is "hard to dismiss amid a serious deterioration of economic conditions and building stocks," the bank said in a report released yesterday.

The labor market remained an albatross after a report showing more than 500,000 people filed for unemployment benefits for the first time last week. Buckling demand and deflation have combined to create an environment of layoffs and little new hiring. In Washington, as the Bush administration puts the finishing touches on the Detroit bailout, the Obama administration is authoring a broad stimulus package designed to inject roughly $850 billion into the economy of the next two years, the AP reported.

So where does that leave our mortgage rates?  Everyone keeps asking how low will rates go.  All of you know by now, the government intervention in the credit markets  has destroyed the normal differences between higher coupon and lower coupon bonds.  Why would anyone be willing to pay 102 for a 6% coupon when the governments says they want rates to go to 4.5% or lower.  So the government will continue to try and lower rates.  They should be lower if normal spreads for mortgage backed bonds and treasuries existed.  But they still do not.  I said earlier I thought we would see 4.75% at a par price.  If spreads can be compressed further, it is possible it will get below this to perhaps 4.5% at PAR.     But I think to achieve this the rest of the world finance ministers will have to lowers their rates as well.  The dollar is starting to weaken again against foreign currencies and will put a floor on how far this can go.  Not to mention since we are in debt as a Nation up to our high brows, we cannot expect the rest of the world to continue to say they will take these risks in buying our debt at such low rate of returns.  So my best advice, get on the phones to borrowers that can take advantage of these rate levels while they last.  There is one guy named to the incoming Obama economic team by the name of Paul Volker who is not afraid to raise rates when the time comes to stamp out inflation. For those of you not around in the1980  to 1982 time period, we lived through 18% 30 year mortgage rates.  This is a cake walk compared to that time period and economic issues.   Remember, inflation is the one big enemy of our bond market.   Right now, they are worried about deflation, but we would expect that to turn sometime next year and that is when they will be taking away the low rate punch bowl.  Your rate window can now be measured in hours compared to days, so you have to be ready to move in this artificial credit market environment.

Kirk Mulhearn can be reached at 562-989-4608 Ext. 110