Gains in mortgage backed bonds were offset this past week by economists’ inflationary fears. A new record of $126/barrel of oil rekindled inflationary fears throughout the markets. This week’s retail sales and consumer pricing index reports for April may confirm these fears and further push our economy into a deeper recession. Increased fuel and food cost on consumers will greatly prolong any recovery. The Fed’s .25 point rate cut a week ago and President Bush’s tax rebate have gone virtually unnoticed due to a greater than 100% increase in fuel cost over the past twelve months.
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). This as a result of credit markets reopening and consumers being forced to cut spending and concentrate on debt payments which has increased their ability to obtain credit at competitive rates. 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.