WHAT MOVES RATES?

Many people want to know why the rates aren’t lower since the fed cut the bank rates.

What makes them rise, or fall? Is it the Fed? The economy? Inflation? Is it the president?

Rates are moved by a number of factors. One of the main reasons is the consumer. Mortgage money can come from many different sources. Some of the sources are deposits at banks, brokerages, and in most cases, from investors. These investors purchase debt instruments such as bonds.

In order to attract investors, sellers of bonds must compete with one another to get their money. They do this by offering a variety of instruments (products, or loan programs) with differing structures of risk and return over a given period of time (i.e., stated loans with lower credit scores have higher risk, but higher reward; 30 year fixed loans have a low risk, but produce a lower return). The products compete with other investments which are reasonably similar in performance, i.e. US treasuries, corporate bonds, and foreign bonds.

What makes the investor purchase one instrument as opposed to another? Like you and I, they want the lowest payment and highest return on their money. Due to the increase of risk with some loans, investors are mainly purchasing low risk loans. Once again, these loans don’t produce strong returns. This forces the investor to purchase other investments that will produce the returns they are looking for. Investor demand for any given instrument plays a considerable role in moving market yields. Investors have hundreds of places to put their money. With many sellers of various products competing for those investor dollars, the market place gets crowded. Investor demand for specific products rises and falls with changes in investment strategies. When demand falls like it has, a change needs to be made to make the investment more attractive. In our industry raising the interest rates does this. So with 224 lenders going out of business since December 2006, mortgage options have become few. To make it more complex, the mortgage market has to attract two clients: 1) the homebuyer, who wants the lowest possible rate; and 2) the investor, who wants the highest possible returns. It’s a tough balance to create!

As interest rates decline, investment customers can become more or less interested, depending upon the direction of economic growth, inflation, appetite for the given product, and several other factors. Typically though, the lower the rates get, the fewer investors are interested in putting them on their books. Unlike many other investment opportunities, no one really knows how many mortgages will be originated, then made available for sale (in the form of bonds) in a given period of time. A quick drop in interest rates produces a large buildup of loans to be sold to investors as homeowners rush to refinance. This makes too much bond supply available in too short a time, and investors simply can’t absorb it all at once. Too much supply, not enough demand; prices will go down, and yields will go up to attract investors. In short, if you have an opportunity to lock a good interest rate – LOCK IT! Low rates will only last for a short period of time until they have to increase. They will go down again, but who knows when.

One tool to help track mortgage rates is the 10 year treasury. 30 year fixed rates rarely last longer than about 10 years before being paid off or refinanced. The 10 year treasury is the closest instrument which has similar risks.

OTHER INFLUENCES:

The impact of inflation affects treasury, mortgage and other fixed-income investments. Rising inflation reduces the actual return on a fixed interest rate investment, so with 2% inflation, that 6% mortgage note returns only 4% “real” interest. If inflation declines, mortgage rates will have some room to fall and vice-versa.

One thing that does NOT control mortgage rates is the Fed. The federal funds rate is the overnight interest rate which banks charge each other when a bank needs to borrow money to meet end of the day reserve requirements (that’s a scary thought in itself). The rules state that a bank must have so much cash on hand when the books close at the end of the day, and those funds can be borrowed from another bank at this interest rate. The best way to keep a handle on the Fed, is to remember that the Fed rate is a short term rate, and fixed mortgage rates are a long term rate. Two completely different animals. What the Fed does to help our industry is, by lowering the rates, it can help banks make certain kinds of loans more cheaply, and also certain kinds of consumer lending. This can help generate economic growth. If the Fed raises rates, it can cool demand and help keep inflation from forming.

In today’s economy, the Fed is taking steps to address economic weakness by lowering rates. This means a return to a faster growth, which also means a potential for inflation.

What moves rates? Supply, demand, competition for money, inflation, the economy, and expectations. Most importantly, the consumer.

Blair Lamphier

Annette Cucco Tammy Reynolds

Brent Courtney Viviana Gaddis

Courtesy of Guest Blogger

Community Mortgage Solutions

Blair K. Lamphier

Blair@CommunityMortgageSolutions.com
President
386.445.4111

Kristi Ross - REALTOR - With over 12 years of experience in buying, selling, managing & investing in real property personally in addition to being a very active, full time REALTOR in Palm Coast/Flagler County, Florida for 7 years come this October....I have learned that information is power and I am an advocate for customer empowerment.

Please feel free to search the MLS for free at my website www.Palm-Coast-Hot-Properties.com. You can sign up to be on the list of first to know when properties meeting your ideal criteria are newly listed, go pending or are sold.

After several months of stagnation in the Saltwater Canal Sales...I am very happy to report a significant change is beginning to occur. Not only have I been receiving multiple requests everyday regarding the best values on the canals...but Inventory levels are dropping, bank -owned properties are disappearing and short sales are finally being taken off the market.

So here is a quick update of what has been happening on the Saltwater canals lately....along with my top Ten best value picks of the week...enjoy. And feel free to contact me for any additional information.

The Top Ten Saltwater Canal Best Buys under $400K

Palm Coast Market Statistics - Saltwater Canal Homes

Total Active for Sale - 129 homes

(Considering the amount of Saltwater Homes in Palm Coast on over 23 miles of canals...that number is staggeringly low and falling quickly.)

For sale with 70' or more of waterfront - 83 homes

(The rest of the SWC Homes have 60' or less of waterfront - very important to consider waterfront in feet when selecting waterfront property....it does effect the value of the property significantly)

Currently Pending Sales on the Saltwater Canals - 13 Homes

Recently Sold Homes on the Saltwater Canals - 19 Homes

Saltwater Canals - Palm Coast - When designing Palm Coast in 1969, ITT development group put in a unique 23 mile navigable Saltwater Canal system with access to the Intracoastal Waterway. The saltwater canal neighborhoods are divided up into sections and most of the street names begin with the letter "C". Most of the saltwater canals are 80' wide and can accommodate large boats. The Saltwater Canals are all within the City limits of Palm Coast and do not have HOA fees or boat dock fees. You can just pull your boat up behind your home at your own private dock.

When choosing a saltwater canal property, many things must be taken into consideration:

#1 Rule of Real Estate - Location-Location-Location. Everything else about a home can be changed. Waterfrontage in feet and time/distance traveled to the ICW will not change.

Kristi Ross - REALTOR - With over 12 years of experience in buying, selling, managing & investing in real property personally in addition to being a very active, full time REALTOR in Palm Coast/Flagler County, Florida for 7 years come this October....I have learned that information is power and I am an advocate for customer empowerment. (386) 931-5822

Please feel free to search the MLS for free at my website www.Palm-Coast-Hot-Properties.com. You can sign up to be on the list of first to know when properties meeting your ideal criteria are newly listed, go pending or are sold.

*DISCLAIMER: The above statistical data was gathered from the Flagler county MLS and is not to be guaranteed reliable or accurate and is for informational purposes only.

**Disclaimer: The search homes information is provided through IDX. Kristi L. Ross PA, Hawk Beach Realty, My Broker or associates are not in anyway responsible for any mistaken information provided.

Most of my readers are not aware that I also have a separate blog that is purely personal, filled with my writings, stories, pictures, experiences, poetry, travels, hobbies,  views, opinions, failures, passions, losses, joys, politics, beliefs,  pains and lessons learned.... that have absolutely nothing to do with Real Estate...yes, even though real estate is an addiction for me and a huge part of what I do...it is not necessarily always what I am.....and it is very rare that I ever combine the two....but this is going to be an exception. 

Everyone can at one time or another benefit from a motivational pick me up or a slap in the face reality check These are some of my favorite videos and quotes....a little peak into my personal preferences and what moves me...the words and actions of others that inspire me to be a better person everyday.   So enjoy, laugh, shed a tear and just sit back in your chair for a minute and just take it all in.....graciously.....

I would also like to give shout out to one of my favorite blogs ZenHabits...where I was first introduced to a couple of these videos.

"if you stand up, I'll buy you all Ice Cream"...Coldplay

"The Miniature Earth" - it is amazing how powerful a statement can be made by adjusting the concept to interpretable terms for the everyday person.

"A coward gets scared and quits. A hero gets scared, but still goes on."....Anonymous

Connecting the Dots - Stay Hungry - Stay Foolish - Steve Job's Commencement Speech at Stanford. - This was given after he was diagnosed with a rare form of Pancreatic Cancer.  Every future college student should view this...it should be a pre-enrollment speech...would be amazing to see what may be accomplished in life by dropping in instead of dropping out.

"It is very easy to forgive others their mistakes; it takes more grit and gumption to forgive them for having witnessed your own"....Jessamyn West

Short but Sweet - "The Most Famous Failures"

"A hug overcomes all boundaries. It speaks words within the mind that cannot be spoken."...Anonymous

"Free Hugs Campaign"   - I cannot lie...my day is not complete without a hug ;-)

"The world is a book, and those who do not travel, read only a page."...Saint Augustine

  "Wherethehellismatt" Having traveled extensively throughout the world and seen many of the places in this video in person...my only regret is that while I was there..... I did not dance. Sounds like a great reason to go back....soon.

"Only a life lived for others is a life worthwhile."... Albert Einstein

" The love of a Father"  - Have the tissues nearby when you watch this video.  This is one on the most selfless acts I have ever seen..

CINNAMON BEACH

Cinnamon Beach is a 65 acre private gated Community within the 1,100 acre gated Community of Ocean Hammock located in Palm Coast, Florida, just 25 minutes south of St. Augustine, 30 minutes north of Daytona Beach and 90 minutes North East of Orlando. With 2.5 miles of cinnamon colored beach, the community features a harmonious blend of 275 magnificent Ocean front, Ocean/Golf view & Lake view condominiums with West Indies architecture in mind and 111 home-sites. For site selection, you can choose areas with Oak Hammocks, Ocean front, Golf Course or Lake locations. All residences are less than 300 yards from the beach. The theme here is a "Seaside Village".

There is something undeniably alluring about ocean front property. The sound of the surf. The smell of the crisp salt air. The sight of moonlight shimmering on the ocean. And, when such a location is combined with world-class amenities and facilities, what results is the perfect environment in which to spend time and make lasting memories with family and friends.

Pricing

Prices for condominiums start in the $300K's , single family home-sites in the $200k's and resale homes begin around $1.2Million.

Amenities

Ocean-front multi-story Clubhouse with lap pool, spa, snack bar, observation deck and walkout to the ocean. A 2nd Lakeside Clubhouse compliments the community with a Café style restaurant, entertainment lounge, fitness center, kids fun room, water park, spa, and pavilion areas. All ocean front residences have direct walkovers to the ocean. All lakes are stocked for your fishing pleasure.

Golf

All property owners have the right to join the Ocean Hammock, Jack Nicklaus Signature Golf Course from a selection of memberships to fit both your lifestyle and budget. Cinnamon Beach is surrounded by the golf course on 2 sides and the ocean and lakes on the other 2 sides.

Condominium Sizes

Unit "A" - 2,318 sf, 3-bedroom/3-bath
Unit "B" - 1,910 sf, 3-bedroom/3-bath
Unit "C" - 1,624 sf, 3-bedroom/3-bath

For more information about Cinnamon Beach and other luxury waterfront properties, contact your Palm coast - Flagler County, Florida Real Estate expert Kristi Ross/Hawk Beach Realty@ (386) 931-5822

I have been having a little comment disagreement today regarding if REALTORS should wear flip flops when showing proprieties.  There seems to be alot of opinions on AR on how some agents feel others should dress in order to be professional.

So imagine how thrilled I was to stumble across this lovely documentary...with a very sharply dressed REALTOR conveying the utmost in professionalism...LOL

ENJOY!!!  I think I will stick with my flip flops ;-)