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I just “feel” that mortgage rates could drop, for a short period of time

Didn’t I just tell you mortgage rates will be rising,  ten days ago?

I sure did, and I think I offered a pretty solid, fundamental explanation of how the bond bubble will pop.  That hiss you heard, directly after my post, was the rapid escape of helium from the bond balloon.  Back then, the 4.0% FNMA bond was trading at 102.75, while today, that bond is trading at 101.50, after reaching a low of 101.25.

What’s that mean to your customers?

The very same $300,000 loan, they could have locked in with no points, on November 8, 2010, will cost that customer about $5,000 extra, in closing costs, today.

I “feel” they’ll have a shot at getting close to that no-point pricing before the month is over.  Let me explain the difference between “feeling” something and “being pretty certain about” something.  I’m pretty certain that the sun is setting over the yardarm of below 5% mortgage rates but I’m having a little difficulty reading the sun dial.  I know it’s sometime between 3PM and 8PM for this mortgage rates rally.

Still, before the last ray sinks into the sea, we’ll see some rallies.  Here’s why I “feel” that way:

  • The Fed is buying between $600B and $900B worth of bonds.  It is resolute that this sort of monetary policy is what is needed to lower unemployment.  So certain is it that it is fighting back against political criticism of QE2.
  • The GM public offering was received very well yesterday.  Investors jumped at the chance to own the electric car company so much that GM expanded it’s offering and is trading higher, post-offering.
  • The Irish bond bailout appears to be happening.

Traders are calming down, and trusting the power of central banks’ and governments’ bailouts again.  A trader’s loyalty is about as reliable as a lap-dancer’s love but, for the near-term, bond traders think  QE2 just might drive bond prices higher.  They ain’t selling too much and they ain’t buying too much.  Expect them to watch what happens through next week, then pile on the bond train, hoping to make a quick buck.  That’s good for mortgage rates, in the short-term.

Eventually, the bond traders will flatten Bacon, the dam will crack, and mortgage rates will be a lot higher than today.  There will be some opportunities to hold out for a better rate, though.

I think I feel that there’s a chance it just might happen this way…kind of…but don’t hold me to it.  I’m definitely not certain.  Call it a hunch.

Related posts:
  • Amaze Your Friends : Why The “Surprise” Fed Funds Rate Drop Isn’t Impacting Mortgage Rates
  • Why The Fed Matters to Real Estate
  • Why Won’t Mortgage Rates Drop Below 5% ?

  • 4 comments

    4 Comments so far

    1. [...] This post was mentioned on Twitter by Chris Johnson, Real Estate Feeds, Real Estate Ninja, Mark Risley, Patriot Connect and others. Patriot Connect said: On BHB: I just “feel” that mortgage rates could drop, for a short period of time http://ow.ly/1a2WOY [...]

    2. Yalda alawi November 18th, 2010 3:09 pm

      You know Brian, you need to stop talking about your feelings and give me the facts. I can take it :)

      Thanks for sharing, I always learn something new with you.

    3. Brian Brady November 19th, 2010 11:11 am

      Hey Yalda!

      FACT: The Fed is, for the first time in my life, facing a populist backlash against its actions (and to a growing extent, its existence).

      FACT: Traders know the people are ultimately right but know who butters their bread (The Fed).

      FACT: Traders think China has a big butter tub but aren’t sure they’ll be spreading it around anymore.

      FACT: Traders think the Fed’s butter is going bad.

      FICTION: Everything I write is 100% factual.

      That’s the best I can do :)

    4. Meg Hurtado November 19th, 2010 1:13 pm

      very interesting . . . . time will tell if you’re right!