Good morning to a heads up – Corona Virus
Mortgage Rates: Time is Now .
– Don’t Miss Out –
Time to ride this wild bull called Cov-19 and try to quiet the ride. My goal: Provide a backstop of facts to provide some level-headed guidance, especially those involved in real estate and real estate finance. My thoughts will focus on money and how I can help you financing of it.
For great medical insight, a good suggestion is an interview with
Dr. Mike Rosen of the Cleveland Clinic. It’s about 90 minutes:
US Federal Reserve: The waiting is done, actions are happening:
Actions from last Sunday:
Fed Funds rate are now effectively zero (target rate now 0.25 %)
Adding / pumping liquidity into the market – approx $600 B
Buying Treasuries and buying Mortgages
Prepared to purchase close to an additional $200 B of mortgages.
Adding / pumping liquidity into the market – approx $600 B
Buying Treasuries and buying Mortgages
Prepared to purchase close to an additional $200 B of mortgages.
These are unprecedented actions and are so important they work in conjunction with most of the major Central Banks, prior to this Sunday afternoons announcement.
Goal: Provide greater confidence in the banking business and in their readiness to act now, not later. This immediate injection of liquidity – directly or by lowering interest rates – should keep the wheels turning and prevent any run on the banks.
Federal Government actions:
Remove liquidity restrictions on the banking industry, put in place by the Dodd-Frank bill. In short, money previously frozen by law, is now available for use – $1.5 Trillion.
Mortgages:
Underwriting – Rapid increase in demand is causing a tightening of standards to control absolute numbers, while some ‘newer’ higher leverage loan products are no more. Investors need certainty of execution and Buyer/Sellers need assurance as to closing dates. It is a tricky balancing act of many factors, so be ready today.
Staffing, appraisals, signing.. Technology is allowing most staff to work from home. Some appraisal companies have closed down locally. Many States allow for electronic signing of papers, and Washington DC is looking at making it legal Nationwide.
Pricing: For a comparative view, a 50 basis point – 1/8 in rate – movement was rare. In 9 of the last 11 days, we saw movements in excess of 100 basis points. Yesterday was 300 bps. The fact the market has not seized is remarkable. Good News: Action not just words!
Potential Strategies:
Refinance Strategies:
A) Debt consolidation reduces overall payments, puts cash in the bank, and builds a safety net. Home improvements can also increase home value and salability.
B) No Cash out / Lower rate loan. Get into the system now. Then let underwriting, appraisal, all.. do their thing, while you watch / wait / execute when interest rates hit a low point. Good News: Appraisals are good for 4 months, with a simple update. So too, all the paperwork with a quick update. Start today.
Purchases:
A) Fear creates opportunity, storms can create deals. Those ready are in the driver’s seat. I am a long-term Bull with California real estate market. The fundamentals remain the same – lack of Supply + one of the best places in the World to live, and home to high tech. These will continue to drive demand.
B) With rates this low, consider a low down payments options. Keeps you in control of your cash and remember, cash is king during an economic slow down. Even better, when the market kicks back in gear and rates double from here, you will be smile at your low rate, while enjoying your cash for other investments.
Stock Market:
Actual Company earnings are the big unknown. You have the corona-virus shut down while at the same time have very low oil prices, very low interest rates, and Congress throwing money at the problem. At the same time, the dropping oil prices are putting major financial stress across the entire oil sector, a stress that should benefit airlines, who instead are suffering cash-flow concerns, dues to corona-virus.
If you have not sold stocks, hang in there. My guess: The worst is over. If you have cash, let the market stabilize – become less volatile. Many so-called smart investors, trying to play the swings, have watched their money just disappear from their computer screens
For right now, there are very few safe havens. And please – Don’t let the low interest money tempt you to play the money game called Wall Street. Even such investments as Treasuries and Mortgage Backed Securities sold, as well as the king of safe havens, gold.
This strange, near Twilight Zone event, has increased ‘risk pricing’ of long-term mortgages, even with falling rates. It is the intricacies of this complex industry. Thus when we ‘lock’ a loan, note, the actual money to be used, is for now held as a derivative or in a margin account. It is why if time extensions are needed, the new pricing is hard to predict. Start today.
Market Predictions:
Stocks: No one knows where the bottom is. One day opens positive and closes weak. Next day, just the opposite. Opens down, closes strong. In the quicksand called the stock market, real estate may prove the better investment and the timing could not be better.
Unemployment: During the last Recession, new claims numbers hit 600,000. Thus be prepared for media panic when new claims numbers blow through 1 million. But keep in mind, it’s not a market failure, but a failure to anticipate the C-Virus firestorm – China lied and people died – and the drastic steps mandated to minimize harm to people. This Black Swan event will be short-lived and the Fed and Congress are doing whatever it takes and they and the President are doing it now!! Money and liquidity are in place.
Mortgage Rates: Near and dear to our hearts. Rates short-term: all over the board. Longer term: Lower, but not as dramatic as short-term money. But what a time to act.
Infections: Current estimates: Peak late April to mid-May. But the investment question and question to Small Business is how long before our government let’s this nation of free-loving people, be free again from current restrictions and limitations.
Because You Matter
As you read, if questions come to mind, let me know. Your thoughts and opinion are important. Why? Because people and their best interest, is where my work is focused. It is why I offer guidance – along with a complete set of tools – in finding the best answers. After 30 years, you know and learn many things about many different circumstances, situations, and people.
Call us, we know success.
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