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If ‘diamonds are a girl’s best friend’ then ‘fear’ is a bond’s best friend.  The fear factor this week involved both Europe and banks globally.   Worries over Greece pulling out of the Euro, worries over Spain’s banks going under, and the déjà vu of “I don’t know how it happened” regarding Chase’s loss of what now might be 5 billion dollars due to hedge trading, all sent investors running for safety.  As I have said before, I don’t have to pay you as high of rate of return if you are going to give me your money anyway, and so bond traders, including Fannie and Freddie, were able to lower their rates slightly. Keep Spain and Europe on your radar.  A melt down there would pull our economy off its recovery tracks, and that could lower rates even a bit more.

But before you get too excited, Freddie Mac’s survey came in just four 100^ths of a percent lower this week – that’s .0004 lower than last week.  Historical bottom, yes.  Way lower than before, no.  So we are still bumping against a floor that just doesn’t have much give.

And while the buzz about Facebook going public makes me wish I had an IPO of my own, I’m happy to be in the best mortgage lending environment in the past 3 years.  By my way of thinking, you just can’t loose buying a house in today’s market.

This week Freddie Mac’s 30 year fixed rate remains basically unchanged at 3.79% paying .8% in discount points.   Have a great weekend and have your buyers call us so we can get them approved to buy.

How often have you made the decision after the first contact with a prospect that it is not worth any more of your time? Does call reluctance stop you for making follow up calls? If you answered yes to either of these questions consider the statics:

• 48% of sales people never follow up with a prospect.
• 25% of sales people make a second contact and stop.
• 12% of sales people only make three contacts and stop.
• Only 10% of sales people make more than three contacts.
• 2% of sales are made on the first contact
• 3% of sales are made on the second contact
• 5% of sales are made on the third contact
• 10% of sales are made on the fourth contact
• 80% of sales are made on the fifth to twelfth contact

So let me ask you now how valuable is following up?

This week wholesale inflation (the Producer Price Index or PPI) came in a lot cooler than expected at -0.2%, thanks to lower energy prices.  The Core PPI came in at 0.2% matching expectations.  Overall, this means that inflation is low and that is always good for Bonds.   The recent weak jobs numbers, below 150,000 net new jobs per month, also added to the ‘no inflation’ economy.  So rates for mortgage backed securities and US treasuries continue to stay at their recent low levels.   Will they go lower?  Not if the recent 6 month rate floor continues to hold…which looks likely.

But, it doesn’t look like rates will go up much either.  Europe is still struggling with Greece and Spain.  Greece is must less of an issue though as MOST of the institutions have already written off  the majority of their Greek holdings.  But SPAIN is much larger and when a country has 24.4% unemployment – YEP 1 out of 4 employable people in Spain don’t have a job – it spells disaster.  That more than anything will keep the US bond market a safe-haven and keep rates low for the rest of 2012 and into 2013.

This week Freddie Mac’s 30 year fixed rate remains basically unchanged at 3.83% depending on program, credit and points.  

115,000 jobs were created in April, which was below consensus expectations of 162,000.  Since this number is not really enough to lower unemployment in the US, then WHY did the unemployment rate drop to 8.1%,  the lowest since January 2009?   The reason for the decline was the labor force shrinking instead of jobs growing - it shrank by 300,000.  We are starting to hear more and more about the Labor Force Participation Rate (LFPR) which has dropped to 63.6, the lowest ratio since December, 1981. 

What this less than robust economic news means is that rates remain at their all time lows.  The interesting thing though is that even WITH this slow spot in the recovery we aren’t seeing rates drop any further.  There is a floor of resistance that we just cannot break through.  The reason for that is the fact that the economy is still positive and there is a limit to what investors will accept for a rate of return on mortgage backed securities.  The people who lend the money to Fannie and Freddie simply aren’t willing to settle for a lower rate when they consider the risk.  So, there is really no reason to wait to buy…at least not on account of rates going lower.  The dream that rates are going to drop further doesn’t seem to be coming true. Tell your buyers to stop dreaming and start buying.

This week Freddie Mac’s 30 year fixed rate remains basically unchanged at 3.84% depending on program, credit and points.   Have a great weekend and have your buyers call us so we can get them approved to buy.

Have you ever seen a child who has just learned to swim take their 1st trek across the pool?  You know they can make it but, in the middle of the pool when they are struggling to take a breath, you still are worried that they might NOT make it.  Well that is the gist of the economic reports today.  Gross domestic product numbers (what we use to determine the growth of the economy) came in at 2.2 % growth for the 1st quarter vs. 3.0% growth for the last quarter of 2011.  This is very close to that 1-point-something number that scares investors.  But, buried in the GDP numbers is the fact that housing grew by 19% and government shrank by 5% vs. last quarter.  That’s not all bad since many feel that housing is the key to the recovery and that government production has less effect on overall growth than private production.

So, deep down, most investors know that we will continue our recovery, but times like this make us afraid that we might not.  Spain’s debt was downgraded which tells us that Europe continues to go the wrong way.  That worries investors too. 

Will the kid make it across the pool?  Yes.  The question is when.  What I see is that we are on the beginning edge of steadily increasing economic recovery that will continue to gain speed.  Get your business ready for growth because, who knows, maybe by the time the kid learns to really swim, he’ll turn out to be Michael Phelps.

This week Freddie Mac’s 30 year fixed rate remains basically unchanged at 3.88% depending on program, credit and points.   Have a great weekend and have your buyers call us so we can get them approved to buy.

This week existing home sales fell beneath expectations for March, but the year over year numbers show existing home sales increased by 5.2 percent. With the gradual improvement in sales  we also see signs of firming prices. According to the National Association of Realtors,  the median sale price of an existing home was up 2.5% from a year ago.  That’s good news.

This is a question I get asked all of the time. The article below from MSN Money highlights potential rewards and pitfalls of buying foreclosed property as a primary residence or for investment.

Whatever you decide make sure you are fully aware of what you are getting into! Good luck and let me know if I can answer any questions for you regarding financing options.

http://money.msn.com/family-money/tips.aspx?cp-documentid=6913972