Calling a Bottom
There were suggestions last week that the federal government might drive rates down to 4.5%. No one knows who would get these low rates except that it will be for home purchases only. This is a story should have never been leaked and I truly believe that it will not take place. The news has died down and artificially decreasing rates would only encourage risk taking and debt consumption. Rates have dropped to the low 5 percents in the past 2 weeks due to the Fed buying up $600 billion in mortgage-backed assets and the only increase in my business has been from refinances, not purchases. This is not the solution to our problem. The low 5 percent range isn’t spurring buying and neither will 4.5%. If you are borrowering money anywhere in the 5 percent range that to me is free money. What we need to do is change the underwriting guidelines for self-employed borrower and help existing borrowers who are facing foreclosures.
The bottom line is that once everyone becomes more optimistic you won’t be able to low ball offers, get sellers to contribute towards closings costs, etc. We don’t know when the bottom will come but when it does it may be too late. Here is a great article that talks about buying now.