Each year our Mortgage Partner and Certified Mortgage Planner with Pulaski Bank of St. Louis, Chris Simms, provides his predictions for us agents. We just happen to be Mom and Dad so we can sit on him a bit if they waiver too much but we figured you would appreciate some of his thoughts in his Crystal Ball for 2009.
Chris wrote:
I hope you all had great Christmas and a Happpy New Year!
Ok, it's that time again for my annual Crystal Ball. It's long and it's lengthy but its all good so please read up.
Last Year - I didn't do too bad - Ok, I missed rates not getting back to 5.25% in February after the little hit in January but they did get there by the end of November. The realestate market slowed as we expected and lending got even tighter and harder to place loans. Self employed and stated income loans are non existent. If you can't prove you make money then you can't get a loan and in some cases even if you can prove you make money then you can't get a loan. Lending has gone back to good jobs, ood income, good debt management, grat credit, and you need a down payment. In all honesty it needed to get back to the basics. So what lies ahead?
$ Rates - I could go on for days about this but I'm going to try to keep it short Here is what has happened and what lies ahead. In november the Fed confirmed that it was going to begin buying Mortgage backed securities 9MBS). It didn't appear likely util Dec 17 (dooms day for mortgage professionals) when they again confirmed but could not give a time ine but just said "soon". That drove rates fom 5.5% to 4.75% in a matter of seconds and then the mortgage back security market saidwai a minute they just said "Soon" not tomorrow. Lock deks around the country froze up and investors stopped buying paper that day. Since then investorsfizzles, took some profits and ratesjumped back up to 5.25%. Then today the Fed actually began buying MBSs. How much, we won't know until Thursday. The Fed has appointed 6 ifferent companies to manage the purchase of MBS over the next 6 months. They have 500 billlion at their disosal to do so. So how is this going to work you ask? The Fed is going to sloly purchase MBS, hoping investor sentiment will follow suit. Investors will hopefully buy knowing that the fed is going to buy and driv bond prices on MBS higher (rates lower, inverse relationship). The Fed is hopig that just a little at the begining will be enough to allow the market to do the rest. The gol rates between 4.5% to 4%. There is talk of less than 4% but that is pretty pricy and investors would be paying quite the premium for that price. The Fed then hopes they can play a larger part of trying to protect th prices by buying when investors are trying to sell. This will help provide some price stability and keep rates more constant and ot as volatile. Will that happen, your guss is as good as mine. Several factors will have to occur for that to happen. 1) economy needs to continue to weaken. Jobsneed to continue to get worse and stocks need to be a bad bet. 2.) Mortgage investors need to feel confident that they are goig to get their profits out of this dal. 3.) the Fed has to control inflation. As the market continues to weaken and the Fed continues to print money at its own discretion there is a huge potential for inflation. Note: Study the Japanese market for the past 15 years. If inflation begins to be a big worry because the fed has printed to mucvh money and the money isnt worth as mucvh as it was supposed o be, then investors will dup out of bonds and it won't matter how much the fed has because the money won't be worth anything. (see the dilemma). We do expect themarket to continue to weaen and jobless claims to continue to rise. That will hurt the economy but the infrastructure plans that Obamahas proposed is a good idea. If you create jobs and industry, then people will have money to buy things. So his plan does make sense and will help the economy if inflation remains under control. Again if it doesn't then it doesn't matter that you have a job paying $20 an hour because $20 wonn't buy anything. Stock market rise is possible by year end but not huge and will remain volatile through the second and possibly third quarters. Following that there could be a good rise for the US economyto see stronger signs sooner. Several factors will play into that including lower mortgage rates. Rates will get lower. I am predicting 4's. There is a possibility ofhigh 3's but not hugely llikely and probably not for a period of time, but with the volatility we have had and the way this market has been for the past 16 months, I wouldn't put it past the market to try. So what should you do as far as refinancing? First, if you just refinanced are are below 5.5, hold off. Let the market show some benefits before you go to jump iin again. If you haven't yeet then I would recommend looking to take a 30 year at 4.75% and a 15 at 4.5%. That should be possible in the next few weeks with the way today occurred. If rates do go considerably lower then it won't be until the middle to the end of the cycle (May or Jun) by all indications. By that time you could refinance again if it would make ense paymet wise. As for covering closing costs, investorshave not been paying a premium for rates. They are selling at the bare minimum the market will sustain because they are fearful of rates going lower and you refinaning again meaning they loose their money they were epecting to get over 30 years. If you refinance in 3 months. That's why we tell you, you an't refinance until 90 - 120 days has passed since your first payment. They will keep ou from getting lower rates if theycan't make any money (even if the bond market is lower, its about profit). So being able to cover closing costs has been extremely hard being we aren't getting any to do so with. So if you haven't refinanced and would like to gurantee 4.75% give mea call. If you want to gamble ok. If you have just refinanced, it is worth the gamble if youa re below 5.5.
Real Estate - With rates going down we will see some activity In all honesty with rates where they are, the tax credits, and prices where they are we will actually see a lot of activity. Will we get to numbers like in 2004 and 2005? Probably not just because the loans are harder to get and jobs could be an issue. But those that will qualify will be looking to move. This will probably be the year of all years to get the real estate deal of a lifetime! As for selling, with the increased activity and curiosity it will be good for listings. The difficult part will be the buyers trying to push for the deal of a lifetime. Remember 98% of the population buys on emotion. That means if they will probably buy because the paymets will make sense. This should cause a good pop in values. Not huge, just good. With gas being down you could see Warrento, Lincoln, Franklin, and Jefferson counties pick up as well. i wouldn't hold on to that though. We do expect gas prices to steadily go back up. (they have to in order for the oil companies to continue getting richer. They like that and we can't do anything about it because we won't drill in the ANMAR province or off shore). Needless to say oil prices towards the summer could begin to get back into the high 2's low 3's. This will also allow for harder drilling and exploration to be worth while. Now is the time to buy. Agents I don't plan on sleeping this year, neither should you.
Everyone have a great year and God Bless
If you would like to contact Chris regarding your mortgage planning he can be reached at 314-2294242 or by e-mail at csimms@pulaskibankstl.com. For information on selling a home call us at 314-749-0921 or register at www.StCharlesMarketValues.com for an analysis of the value of your home. Your home does not need to be located in St. Charles just the St. Louis Metropolitan area. If you are looking for a home you may register a search here on our Trails2OpenSpaces.com website by clicking on New Listing Alerts and completing your registration.