On Friday mortgage bonds traded over a 134 point spread on a better than expected jobs report and lower unemployment readings. Though we believe these jobs numbers along with the lower unemployment to be optimistic and should correct for the worse over the next two months, it took investors most of the day to reach the same conclusion. Earlier in the week the Fed cut the benchmark short term interest rate to 2.0% and the vote was not unanimous. The Fed indicated that inflation is a growing concern and future rate cuts are not a forgone conclusion, as they have been over the past several quarters. This is actually beneficial for mortgage interest rates as inflationary concerns push investors into the security of bonds.
The 30 year fixed mortgage interest rate continues to trade below 6.0% for AAA borrowers (certain terms and conditions apply and rates subject to change), however because of higher than expected inflation due to fuel prices, recovery in real estate has been slower than expected. We continue to view this as a significant buying opportunity with solid long term equity gains for investors and homeowners, alike. Also, we continue to see the rewards of razing and rebuilding, and renovating homes in highly desirable micro-markets throughout the country.
Based on questions and comments from our clients we would like to further define the phrase “significant buying opportunity with solid long term equity gains”. In many markets throughout the country gains in real estate over the past several years reached 70-100% at their peak. Although this is not the norm, we believe a real estate purchase 20%-30% below market value in certain markets, in today’s economy could realize those same types of gains over the next 7-10 years.
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Stay tuned and stay in touch with your mortgage professional. Thank you for the opportunity to serve you and your clients. David. 919.851.0999.
