The Mortgage Man

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Archive for Real Estate

Friday October 24, 2008

Mortgage bonds move below 200 day average.

It is really amazing how much the global money markets are intertwined.  Overnight, Japan’s stock market plummeted after lower than expected earnings were reported for Samsung and Sony.  That ripple effect moved over to Britain’s markets where the economy shrank for the first time since 1992, signaling a confirmed recession.  The combination of the foreign markets having a really bad day led the Dow Futures to halt trading before the open this morning.  Halting trading on Dow Futures is extremely rare, and a sure sign of volitility.

In normal market conditions, a selloff in stocks would mean money was moving into bonds, and would typically signal a good day for mortgage rates.  Today, however, because of the continued liquidity issues with the market, the rush seems to be towards cash for safety.  Mortgage bonds moved below the 200 day moving average which is generally a sign of long term trends.  If you have an active mortgage file that has not yet been locked, it would be prudent to do so today ahead of uncertain volitility and worsening rates.

Some good news came out today.  Existing homes sales soared to a 13 month high signaling a boost in the real estate market.  And, Oil was trading as low at $64 per barrel.  This is due in large part to the strenghening dollar as compared to other global currencies.  But, when you are at the pump getting gas for $1 less than 3 months ago, few people care why, they are just glad to see it.


Worst Week Followed By Best Day Ever

After the stock market’s worst week in history, it closed yesterday with the highest gain in history.

What a roller coaster ride for investors.  After a record for the largest 1 week decline ever last week, investors came back with a vengence yesterday to close the DOW up 936 points.  That makes yesterday the largest single day point gain in history, and the 5th largest perecntage gain ever.  Activity like this begs the question of whether we have found the bottom in the equity markets or not.

No one will know where the bottom is until we have already passed it, but the level of volatility and panic in the sell offs last week suggest that we are either there now, or at least we are close.  Since this blog focuses primarily on real estate and mortgages, how will this affect housing?

There is no direct connection between the stock market in general and the real estate market.  But, they are all slices of the same economic pie.  The typical bear market lasts 13 months with a resulting decline of 30% to 40% in the stock market.  Right now we are in the middle of the 12th month of market decline from its highs in October 2007, and the total point decline is around 41%.  Based on this information alone (and there are many more factors at play), it would signal that we are at the bottom, or at least close to it.

The bigger problem in the real estate market is inventory vs. willing buyers.  Because foreclosures are still coming on the market in record numbers, we will have to remove some inventory before sellers can really make up any ground.  But, for buyers, this is the best buying opportunity that has existed in decades.  Locally (in North Florida), home prices are back to 2003 levels, and the deals available to buyers are jaw dropping now.  Nationaly, the numbers vary by area, but there are tremendous buying opportunities across the country.

Lending standards have tightened, but there is still mortgage financing available (contrary to the inpression that you might get from the news).  For more information on the financing options available to you, go to, or call me at 888-257-8383.

Where Do You Keep Your Money Safe?

In these historical times in the financial markets, how do you know that your money is protected?

Everyday there is a new headline about some other “sky is falling” scenario.  It was only a week ago that history was made when the government stepped in and took over operations of Fannie Mae and Freddie Mac, but that is old news now.  This week it was the nations largest insurer AIG being given an $85 Billion loan from your tax dollars to help keep them out of bankruptcy.  But hidden in all of the negativity are shining pockets of positive news.

If you ever watch CNBC, you may know that Jim Cramer likes to say “there is always a bull market somewhere”, and he is right.  In the constant yin and yang of the financial markets, where there is a loser, there is also a winner somewhere, you just have to know what to look for and where to find it.  For instance, if you bought into gold earlier this week, you are no doubt celebrating as the gold market had the largest dollar gain in history this week.  Equally, as confidence fades in the stock market, investors must forge ahead and put their money somewhere, and guess what just started looking really good…..real estate.  Thats right, real estate.  The dirty word that people have been scouling at for months just became one of the best places to put your money.

Think about it, if you have $1 million in the stock market and you don’t know if you will wake up one day to find that your top holdings are out of business, your money may be better served in a tangible asset that you can see, touch, get a tax break, and live in (or rent out).  At a time when real estate is at historically low prices, you could be getting in at the very beginning of a new bull market.

I find it interesting what an affect the media has on the markets.  They seem to give you just enough information to instill a panic without regard to how people will react.  I know that the AIG issue is big news, but did you know that there are 1000’s of people without homes or jobs in Galveston, TX after Hurricane Ike virtually wiped the town off the map.  Chances are pretty good that you didn’t because no one in the news is saying a word about it.

So back to the topic at hand, is your money safe in the bank?  Yes, if it is less than $100,000 per depositor per institution.  Is it safe in stocks?  I guess it depends on the stock and your level of exposure.

Even if you take away my obvious bias towards real estate (because I am an active mortgage banker), do your own home work in your local market to see if I am right.  If you haven’t looked lately, you might be shocked at the deals available now.  I my area of the Florida Panhandle, there are gulf front condos that can be stolen for prices that compare to 4+ years ago.

Good luck to you, and tell me how things are in your local real estate market.

Tuesday September 2, 2008

So, what happened with mortgage rates while you were weathering Gustav?

Well, the long weekend is over.  Summer has officially ended.  And, we are back at work to see what gifts were left behind by our friend Gustav.  Those who made the mass exodus from New Orleans are probably mad and irritated that they left.  But, it is that kind of thinking that gets people killed when the storm is worse than expected rather than weaker than expected.

New Orleans survived the storm, and for the rest of us on either side, it definately could have been worse.  But the markets today are reacting to the lack of any affect on the offshore oil platforms.  As reports from all of the companies with assets in the Gulf begin to come in, we are seeing that the damage is mininal if at all, and the oil traders are running for the hills because of it.

So what does this have to do with mortgages and real estate?  Well, the sell off in oil is creating a run on the stock market.  A run on the stock market is causing bond traders to sell bonds and buy stocks.  As the bonds fall from a sell off, mortgage rates rise.  Because of this, today is a great day to lock in your rate ahead of losses that are sure to happen this afternoon or tomorrow in mortgage rates.

Gustav Threatens The Gulf Coast

Here we go again!

Well, we don’t get wildfires or mudslides or earthquakes, but we do stand in the way of nature’s fury in the way of tropical hurricanes.  Just as most of Florida is still wringing out their shorts from the deluge of rain in Fay, we are again squarely in the cross hairs of Hurricane Gustav.  Many didn’t take Fay seriously because it never reached hurricane status, and yet it set records for rain fall and is the only named storm in history to make landfall 4 times in the U.S.

Gustav, however, commands out respect from the start.  Already reaching hurricane status before it even gets into the gulf, Gustav threatens to be a category 3 before making landfall somewhere along the gulf coast early next week.

In keeping with the theme of this blog, we will focus on the potential implications of this storm as it relates to real estate and the economy.

If you are purchasing a home, make sure that you have your insurance in place immediately.  A Citizens policy (in Florida) will not write new coverage, increase coverage, or make any policy changes “when a Tropical Storm or Hurricane Watch or  Warning has been issued by the National Weather Service for any part of the State of Florida.”  Other insurance companies have a map of the Gulf of Mexico and draw a dotted line border around a certain geographic area called “The Box”.  If a named storm (tropical or hurricane) enters that box, they will not write new policies or make changes to existing policies until the storm hits land.  In some situations, this could delay closing for a week or more until the storm runs its course.

If you already own your home, now is the time to prepare.  Even with the number of hurricanes that we are exposed to on an annual basis, there are a shocking number of people that do not prepare.  Preparing your house means:

  • Check the trees around your house for dead limbs, these are the first to come down
  • Make sure that you have adequate protection for doors and windows.  Taping the windows is a waste of time.  Either board them up, or spend your time on other things.  Tape will not stop debris and it will not keep the glass from shattering.
  • Take photos of your property for insurance purposes.  If you happen to be the minority that keeps receipts for everything you own, this may be less important.  Be as specific as possible, and a video recording of everything is the preferred method.
  • Pack up anything that can not be easily replaced.  This would include family heirlooms, photos, jewelry, etc.  Also take insurance forms and important paperwork such as deeds and wills.
  • Assume that when you get back to your home, there will be no power and no water.  Fill a bath tub full of water to use for flushing toilets and possibly boil for drinking water.

There are many more resources on how to prepare your family and pets at .

Existing Home Sales Better Than Expected

Does today’s existing home sales report mean that we have finally hit bottom?

Existing home  sales for July came in at 5.0 million ahead of estimates at 4.9 million.  Despite this seemingly positive news, stocks are down today fueled by uncertainty with Fannie and Freddie, and traders are moving money into mortgage bonds searching for more security.

Mortgage bonds are currently up slightly today, and we can continue to watch bonds to determine where mortgage rates are going to go in the next 24 hours.  Over the last few days of trading last week, mortgage bonds broke through both the 25 day and the 50 day moving averages.  This could be a positive trend longer term if they can hold these levels.  Currently, bonds are trading in a sideways channel between the 50 day and 100 day moving average.  Today is probably a good day to float your rate pending any major movement.  If stocks start to recover, it would be prudent to lock your mortgage rate to hedge against pending corrections in the futures market.

When Is The Best Time To Buy A Home?

The best time to buy a home is when buyers have more power in the transaction than sellers do.

Buy low and sell high is a simple concept, and it is the most important rule for investing.  When the market was “hot”, I have closed more than one real estate deal (dozens in fact) where the competition was so tight that they bought the unit sight unseen.  I found this fascinating at the time.  And while most transactions like this where done on vacation properties, it was still a bit surreal to see buyers buying a $500,000 condo unit entirely over the phone.  It was like a game of musical chairs, and those who were still speculators when the music stopped are either in foreclosure or bankruptcy or both.

That market is long gone, and that is a good thing.  When there is so much competition among buyers that they are willing to buy a condo over the phone, it is clearly a seller’s paradise.  It appears as though the opposite is true today.  In a time where sellers are giving aware cars and vacations and plasma TV’s as incentive to buy their home, there is no question that the tables have turned.

While I write this post from Pensacola Florida, it is near impossible for me to make a blanket statement that anyone reading this in any area of the country should run out and buy something now.  What I can say is that real estate is highly localized, and because it is localized, it is important for you to get the facts about your local market.  Over the next year, we will see a nationwide bottom in the housing market.  During that time, some savvy buyers are going to get into property at the lowest price they will ever see.  Real estate has not dropped in value this much since the great depression which was almost 80 years ago.  To think that this buying opportunity will repeat itself in your lifetime is unlikely.  Even one of the most famous real estate investors, Donald Trump, said on Good Morning America this morning that this may be the best buyers market that has existed ever.

If you are even considering buying a home to live in or for investment property, you need to get your finances in order now, TODAY, to be prepared when the right deal comes along.  Lenders are more restrictive on credit criteria today than they have been in years, and the days of buying a home with no money down are virtually dead (with the exception of VA and USDA Rural Housing loans).  Check back in the coming days as I will be adding more buyer resources such as how to save money for down payment, and how to improve your credit scores.