Real Estate Investment Consulting

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A Wicked Wednesday for Mortgage Rates

Today is Wednesday May 27, 2009  and it marks the single biggest drop in the price of mortgage backed securities in over 10 years.  Today we lost 206 basis points in the price of mortgage backed securities, however the bleeding actually began last Thursday when the markets began to slide, and since then we've lost over 360 basis points.   

Ok, Ok let me not get too technical..

I realize you don't watch the bond market everyday like I do, so you may be wondering what is a basis point and what does it mean to me?  Basically it refers to the price of mortgage backed securities as they are sold to investors on the free market.  If the bond price drops, interest rates go up.  Typically we'll see movement in the price of bonds within a 50 basis points window, so a 300 point slide in a few days is huge and it correlates to about a 1% interest rate increase.  The movement in today's market was so rapid that lenders couldn't keep their rate sheets current. One of my lenders issued 9 different rate sheets today, while others just closed their lock desk. 

  • So what caused this madness? 
  • Didn't the Fed just announce in March that they were buying mortgage backed securities so as to keep rates low and help the housing markets?
  • So why this sudden about face with interest rates and more importantly what will rates do as we go into the summer months?

Todays bond market collapse began last Thursday when Bill Gross of PIMCO (one of the biggest buyers of mortgage securities) questioned the AAA credit rating of the US.  The Fed then announced that it would slow its program for purchasing mortgage backed securities so they can extend the money (1.25 Trillion) allotted  well into 2010.   These items along with the better than expected Consumer Confidence report that came out yesterday and a slightly better Existing Home Sales Report today, and the notion that inflation could be a problem if the economy turns north, sent investors to an extreme selling panic today.

Again let me simplify.  If the US bond rating gets down-graded it means that the cost of raising funds for the US will go up.   With a 1 Trillion dollar budget deficit and the inability to raise funds it calls our solvency into question.  And when they keep printing money (as the Fed has been doing) they're staging a foundation for high inflation.  No matter how you look at it this, it's bad news for mortgages and the only solution (according to the Fed) is to keep doing more of the same.   So what do you say Ben?  Do you want to double down? 

I don't know where rates will be later this summer.  I do believe that we'll see a retreat from today's bond market lows, but I also know that we will not see rates below 5% again.  (at least not in the short run) 

So if you were planning to refinance at the proverbial 4.5% that was announced earlier this year, I'm afraid you may have just missed the boat.  You may have one more chance at getting a rate in the low 5's but its only a matter of time before rates move back up into a more normal range of 6-6.5%.   Buying down your rate with points might be a good option to lock a lower rate, but that advice needs to be handled on a case by case basis. 

If you're buying real estate or if you're planning to refinance you need to take action while you still can.

 

President, SCV Loan Solutions

1 comment • Martin Rodriguez - Senior Loan Consultant • May 28 2009 12:25AM

YEO - Maintaining Contact With Thousands. Why Do You Care?

I've had several discussions with Jeff Turner about managing one's online presence and creating meaningful relationships.  It's easy to get caught up with the numbers game and satisfy the ego by having thousands of followers, but what does it all mean? 

Lets face it if you have a thousand followers that dont give a rip what you have to say, then why bother.  The key to effective blogging or twittering is to have a community or network of followers who actually do care what you have to say and that have influence on your posts.  

Facebook is a good example of how people can have meaningless online relationships, yet its cool to call everyone a "friend" although you may not even know the person.  Yet, you're friends on facebook.

Managing a large network of true followers can be difficult, but Jeff's post on managing YEO and what it takes to manage meangingful online relationships is spot on..

Thanks for another great post, JT

Martin

Via Jeff Turner (Real Estate Shows):

The following conversation on Twitter inspired this post today.

  • HomesByThomas  yesterday

    @respres Jeff, with over 6000 followers, how hard is it to maintain any sort of contact with people? Did you notice that I sent you a Thank You?

    • respres  yesterday

      @HomesByThomas yes, I did, but hadn't responded yet. And a lot easier than you might think. You may have given me my YEO post for the week.

      • HomesByThomas  21 hours ago

        @respres Jeff, I'm glad to hear your response. I thinks it's awesome that you can respond like this and I'm excited I could inspire a Blog!

        • respres  12 hours ago

          @HomesByThomas well, let's hope I find the time to write it tomorrow. :)

If you're being followed by a lot of people, how hard is it to maintain any sort of contact with those people?

Not very hard at all. Why? The answer lies in how we define "contact" and "engagement." And that is different for the 6,000+ followers I have, people who have chosen to "listen" in on my stream, than it is for the nearly 4000 people I follow, people I have chosen to "listen" to.

In this context, "contact" can have a good number of definitions. Each time I post a status update, I have the potential of making contact with some percentage of those 6,000 people. There are many variables that influence what that number will be at any given time. It depends on who is online at the time and their level of interest in me and the content being delivered. It also has to do with the number of people they're following (their own stream noise level) and the pace at which others are posting status messages at that same time.

If I'm consistently delivering value to, the contact happens as part of my daily activities. There is no extra effort required. I call this "ambient presence." My followers are aware of me and what I say and can choose to engage in a conversation or take action on a request, but I don't have to reach out specifically to anyone specific each time I want to make contact.

The more critical question would be this: "How do you maintain any sort of contact with the 4000 people you are FOLLOWING."

Why is it more critical? Because what I have said by "following" those people is this, "I am listening to you." I'm saying that I want to have a conversation with them, that I want to engage with them. I'm saying they are of interest to me. I don't follow everyone back for one reason and one reason only. I want the people I follow to know that I have a desire to engage with them at a higher level.

Thomas sent me a welcome message shortly after I followed him and about 12 hours before the question that prompted this post. I knew this because I got a txt message update using a tool that we built at Zeek for Ben Martin called Twext.me. Twext.me sends a summary of the "mentions" I receive on Twitter and alerts me to the possibility that I might want to go pay attention. Ben expressed his need for a tool like that, so we built it. And it's free. I needed that tool too, because it IS hard to pay attention to 4000 people. It's not as hard as one might think, but it's still hard.

There is a need for better tools to manage our online relationships.

If we are attempting to engage with thousands, this may seem fairly obvious. But even if we're trying to engage hundreds, we will not be as effective if we don't use tools like Tweetdeck and Tweetgrid to our advantage. That's a fact. But even if we do, we are missing systems that would allow us to understand who we have and have not talked with in any given period of time. Current systems don't allow us to see who has and has not acted on requests we've made. They don't give us the tools to help us assess our reach with the messages we're promoting. And while the social side of me says, "who cares. Just engage and let it take it's course." The business analytics side of me says, "it would sure be nice to know."

So, Thomas, if someone mentions me on Twitter, I know about it. I have all the tools necessary to make sure that I can respond and engage appropriately. What's missing are the tools to help me beter categorize the people I'm following and help me me identify who I've not spent enough time conversations with. Sites like twitTangle attempt to make it easier for me to conentrate on certain people, but they don't go nearly far enough.

But this has me wanting to ask a different question.

If you are a local real estate agent, why would you need to follow thousands? Having thousands follow YOU may happen whether you like it or not. If you're interesting, it will probably happen. But why would you need to follow thousands?

I saw this tweet a few weeks ago from @anitamatys. She said, "I am new to twitter and my son told me I needed to get 2000 followers." To which i replied, "Why did your son pick the number 2000? Are there 2000 people on Twitter in Klamath Falls?" I never received a response. She now has her 2000 plus followers, but she has only posted 11 updates. I glanced through a few pages of her followers and who she was following. There was no rhyme or reason to the people she had chosen to listen to. Not that it matters. She isn't really talking to anyone. i don't get it.

Again, do YOU (not the universal YOU, but you specifically) even need to maintain contact with thousands of people in order to be successful in the social media space? What are your goals with Twitter? Facebook? Does the number of people you're listening to support those goals or interefere with them?

2 comments • Martin Rodriguez - Senior Loan Consultant • May 09 2009 02:20AM