Rates started to level off from its volatile ups and downs we had in the recent few months since they start cutting rates.
This goes to prove a point again to the public that contrary to the popular believe that when the federal board cuts rates the so will happen to the mortgage rates.
NO THIS IS A MISTAKE
Rates go up on a scare of inflation
Rates go down when that scare tames off.
In addition to that, bonds and stocks compete for the same dollars. Therefore, when stocks goes up bonds have to go up and compete since when stocks experience growth and momentum money tends to flow out of bonds which is where money for mortgages are coming from.
Bonds however, have a strength that stocks does not have and that is security. Bonds might offer less momentum then stocks in the overall scheme of things but they offer a consistent leveled long term income for the investor. Therefore when the economy is shaky, bonds tend to pick up with the exception to inflation. inflation will kill the desire to own bonds.
Inflation is caused when the dollar loses its value
part of the value of the dollar is how much interest the fed will pay for its investors when invested in the fed bonds. since it is a global market and the euro also sells bonds and so does china. If the euro is paying 4.2% and tour fed is only paying 2% now you tell me who is more desirable?
In Summary
lower rates then our competitor the euro = weak dollar
Weak dollar= inflation
Inflation= higher mortgage rates
Higher mortgage rates= lower Real Estate market!
Thanks for you for taking the time to comment on this subject in the Active Rain network. AR is the new "cyber backbone" of the industry, and with it's uplink to Localism.com it is transforming the real estate marketplace. Agents who don't see which way the cyberwind is blowing are going to find themselves at a considerable disadvantage inside of three to five years.