Bernanke influences supply and demand on interest rates

We have some great things learned in this past week and if you take nothing else away from today’s email remember 2 things:

1. Rates are still unbelievably good, near 5.125% with no origination and 4.875% with normal origination and closing costs for conforming, conventional 30-yr Fixed, principal and second home purchases; and
2. Don’t sit by waiting for improvement in rates. If you have a friend or client who wants to sit by and see if they can get to 4.5% or 4.625% like we saw earlier last week, advise them to take anything near 5%.

The bond market (MBS) dropped off suddenly on Friday and while the big red bar in the chart below has some technical movement (30-day rollover) that makes it look worse than it is, it was still a rocket sled ride from 180 day highs we were enjoying. What happened? A few things:

1. • Stocks got a jump start on expectations for this week’s earnings season (buy on the rumor, sell on the news);
   • Jobless claims came in better at 521k than expected (but really! It is still ½ a million jobs lost);
   • Bernanke spoke about protecting against inflation (it’s all about inflation);
   • Ben also reiterated that unemployment will get to 10%; and
   • the unspoken and perhaps biggest factor: the lower rates of the past 17 days spurred more demand for MBS than buyers – a first real sign that the Fed tapering off over the next 180 days will put upward pressure on rates

In the commercial lending arena, the looming refi needs (>1 Trillion in next 18 months) continue to be a dark cloud on the horizon as lender credit is still limited. There is some hope for additional Treasury purchases of CMBS, but no real sign from them that it is forthcoming. We are still hoping the Goldman Sachs projection has legs that 10-year treasuries will get down to 3.0% before rising, but they snapped back up above 3.25% again this week and it is inflation and supply and demand there as well. We still have lenders making great commercial loans on Owner-User AND Investor properties with good economics and strong borrowers.

Quick update on the two key bills addressing the $8,000 homebuyer tax credit (if you missed the Thursday full report click here): The Senate bill only added one senator since last Monday, but it is Christopher Dodd, once again a very influential, power-broker. The Charlie Rangel bill focusing on servicemen added 11 Congressmen since Monday and is now up to 40 Co-Sponsors. Our expectation is that these two will be the ones to make it into conference for a battle that will determine if anything gets extended. The hope is still for action by Halloween, but there was not further indicator this week that this will be met. The White House remains mum on the topic.

Career advice: check out the discussion below on feedback and 360 reviews made easy at checkster.com. Something to consider with your bosses, peers, and key customers.

In the meantime, the rates are fantastic. Is there anyone you know who would benefit from receiving this kind of timely information? Please hit the reply button and let me know – I’ll be happy to help them make informed decisions in this important time. Or give me a call anytime at 541 318 0888. I look forward to helping you, your clients, family and friends get the best professional advice and service available. Make it a great week!