Lonnie Glessner

I read an article this last week about the new RESPA changes coming into effect on January 16, 2009 and the revisions to "Required Use" definition will have HUGE implications to new home builders. How so?

Home builders will no longer be allowed to offer special financing or closing cost incentives to their clients if they use their preferred lender. Builders must offer these incentives to every buyer no matter what mortgage company the buyers choose! Yeah! Builders can no longer require the use of a certain settlement provider such as a mortgage company when offering any discounts or incentives.

Your buyers will soon be free to choose their lender when buying a new home!

Yesterday I was talking with Diane Evans at ReMax Professionals about our attitudes and I loved what she said-"Attitude is the first frontier to conquer."

Diane you are a genius!

If you desire for 2009 to be a great year, you MUST change your attitude first. Your suspects, prospects, and clients will pick up on your enthusiasm or lack thereof when they talk to you. Each of us is responsible for creating our own "market" within the Market. If the people in your "market" catch your enthusiasm for real estate, you will have a great 2009!

I will leave with this saying: "it's better caught than taught."

Will the people in your "market" catch your enthusiasm in 2009?

I have said for 11 years that the interest rate is more important than the price of a home when it comes to calculating the monthly payment of a home. Let me prove it to you-

On November 24^th when this HUGE mortgage bond rally started, FHA mortgage rates were at 6%. Today, they are at 5%, a decrease of 1%. Thus, on a $200k loan a buyer's monthly payment just dropped $127!

This is equal to a price drop of $21,182 in the last 22 days! This is GREAT news for your sellers and your buyers. Get the word out!!!!!!!!!!!!!!!!!

By their words it is obvious to me that the Fed is concerned about the "D" word. And the "D" word is not Depression; it is Deflation. The Fed did not explicitly mention deflation; but the fact that they did not mention the containment of inflation in their policy statement tells me they are concerned about deflation.

•· Deflation is a condition where prices are always dropping so why buy now? Imagine if every purchase we made was like the purchase of a high tech device like a laptop or HDTV-unless you "needed" it right now, why would you buy it right now? If you wait 3 months its price will be lower.

•· Japan has struggled with deflation for over 15 years and it is very difficult to eradicate from your economy once it sets in. Deflation is harder to fight than inflation; thus we prefer inflationary pressures over deflationary pressures.

•· We will most likely see the Fed Funds Rate at 2% or lower throughout 2009.

•· It appears that the Fed is committed to keeping mortgage rates super low. How low? I don't know for sure as they did not say. I would assume with 99% certainty a rate below 5.50% and with 60% certainty rates below 5%.

•· For how long? I could see this being the case for 6 to 9 months maybe. Why? Fewer people normally buy a home in the dead of winter and we are 4 months away from the beginning of the buying and selling season. Or until housing sales rebound nicely nationwide.

On Wednesday afternoon it was announced that the Treasury is considering a plan to lower mortgage rates to 4.50% to stimulate the housing market and our economy. And this was widely reported by the media as I have received several calls on Thursday and Friday about this.

How would they do this? It appears that the Treasury is considering buying more Mortgage Backed Securities from Fannie, Freddie, and Ginnie and financing these purchases by issuing new Treasury debt, probably 10 year T-bills which are currently yielding under 3%. Thus, creating a spread and making money just like a bank does. How I love the power of Arbitrage!

Personally, I believe the Treasury could accomplish this by saying just 1 additional word-explicit. If Hank Paulson and Ben Bernanke would just say that the Treasury "explicitly" guarantees the MBS' of Fannie and Freddie, mortgage rates would tumble without 1 penny spent. But, I don't know any politician who knows how to do anything without spending money. Ugh!