On Monday April 16, 2012, Louis Cammarosano, General Manager of HomeGain, was a guest on the Real Estate 360 Live radio show on The Big Talker 1580 WHFS AM, hosted by Ryan Sloper.
Listen to the show.
Part 1 (14:41)
Ryan reviews the weeks’ economic news. Louis notes, that when investors move their assets to a safe place, they chose US Treasuries and that drives interest rates down. Ryan notes that the Bank of America is looking to bulk sell many of their homes. Louis notes that BOFA’s actions may drive home prices lower. Louis and Ryan discuss the potential economic impact of the BOFA proposed sale.
On Monday August 29, 2011, Louis Cammarosano, General Manager of HomeGain, was a guest on the Real Estate Radio show on The Big Talker 1580 AM, hosted by Ryan Sloper.
Listen to the show.
Part 1 (15:06)
Louis and Ryan discuss the recent earthquake in the DC metro area and Hurricane Irene. Ryan and Louis discuss Ben Bernanke’s Jackson Hole speech. Ryan notes that the housing sector is normally the driver of economic recovery but this time the rate of new home construction is low. Ryan advocates that the Fed looses up credit. Louis notes that the Fed sets monetary policy but not the credit standards. Louis notes that the central banks are trying to put the burden of fiscal stimulus on the congresses of the various countries. Louis notes that the President will announce a stimulus package with infrastructure projects when he comes back from vacation. Louis notes that the Fed is saying we have to address our long term debt problems but that we also have to address our short term liquidity issues. Louis argues that the solution to the housing problem is to let it go and not try to prop up the market and notes that the homebuyer credit worked only during the time that the credit was in effect. Louis also notes that home builders have little incentive to build new homes in areas where those new homes would compete with foreclosures and short sales. Louis points out that Jackson Hole was not the place last year where they announced QE2 and notes that the next Fed meeting in September will be a two day meeting to discuss “various tools” to stimulate the economy. Louis asks Ryan whether it makes sense to buy a home now where the mortgage payments would be less than your current rent payments even if you think the value of the home will decline in value.
On Monday August 15, 2011, Louis Cammarosano, General Manager of HomeGain, was a guest on the Real Estate Radio show on The Big Talker 1580 AM, hosted by Ryan Sloper.
Listen to the show.
Part 1 (14:27)
Ryan notes the stock market volatility of the prior week. Ryan notes that mortgage interest rates are at record lows. Ryan talks about the cost of home ownership as being the primary determinate in home affordability and matching mortgage payments against rental payments. Ryan and Louis discuss the sales of US Treasuries in the prior week and note that demand for US Treasuries needs to remain high to keep interest rates low. Louis notes that demand for Treasuries needs to be created by the Fed and to be coordinated by the Fed with foreign sovereigns who finance their US debt purchases by taking out debt of their own. Louis notes that interest rates are being kept low artificially. Ryan notes that China is continuing to purchase US Treasuries while Russia is scaling back. Louis notes that China is sort of forced to buy US Treasuries so that the US can pay their interest payments. Louis notes that China and Russia are also purchasing hard assets, including silver and gold. Louis notes that Alan Greenspan recently commented that the US will never default on its obligations because it can always print money. Louis notes that Greenspan’s comments do not reflect encroaching senility but rather his position of no longer being the Fed chairman and notes that Bernanke holds the same view. Louis notes that the US will pay its debt even if they have to print the difference and notes that such a manner of payment is default by inflation rather than default by non payment as the currency so printed up is worth less. Louis notes that getting a low interest rate mortgage now is a benefit in that the dollars used in the future to pay off the mortgage will be worth less. Ryan notes that when markets are volatile, they rush to purchase US Treasuries. Louis notes that the reason there is volatility is because people are concerned about the US economy and the dollar and that ironically their investment decision is to purchase US Treasuries. Ryan notes that he would buy gold or silver as a safe haven rather than US Treasuries. Louis notes that the rate on US Treasuries is lower that the rate of inflation. Louis notes that while we can’t predict the direction of interest rates, we know that rates can only fall from 4% towards zero but they can rise many points higher. Ryan notes that the Fed thinks there is no inflation. Louis notes that there is inflation in the money supply and that it has already found its way into higher prices of commodities but not necessarily in the price of all finished goods. Louis notes that this stance gives the Fed cover to do QE3 and QE4. Louis notes that we are already seeing QE3 as the Fed is reinvesting the interest in the bonds they purchased during QE1 and QE2 back into US Treasuries
While I believe the higher mortgage rate cycle will be shorter than the 80-s style interest rate hikes, it’s clear to me that Bernanke is talking differently than he did in 2006 and 2007.
The effect? We could see mortgage rates rise as much as 2% in the next two years. I still believe that a five year ARM will offer the best solution because interest rates move in cycles; I think we’ll see mortgage rates under 6% again in 2011. Today? The trend looks like we’re headed higher.
I had a complete meltdown on my Twitter feed, yesterday. Bernanke told the House that he was concerned about inflation but more concerned about a recession.
I initially reversed my float recommendation and subsequently changed it back to lock because I thought Wall Street would hate Ben’s remarks; I was wrong. I violated the first principle; don’t fight the Fed.
The Federal Reserve is worried about a recession. I think we can expect the Fed to cut rates next month. The anticipation of that cut gives us a chance to see mortgage rates drift lower.
You should CAUTIOUSLY FLOAT your mortgage rate
If your closing is over 7 days away; I think you’ll have some room to get a mortgage rate that is .125% to .25% lower than it is today. Continue reading this post
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