Bear-Stearns, the Fed, OFHEO, Gold, the Dollar…
Contributed by David Reed, CD Reed Mortgage Bankers, Austin, www.cdreed.com, author of the just released “The Real Estate Investors’ Guide to Financing” (AMACOM 2008)
So many factors, many are simply guessing…but last months’ inflation numbers came in flat. In a recent issue of mine I said that rates wouldn’t go below 6.00 percent as long as inflation loomed large.
Well, last month’s inflation data essentially came in flat. That was in concert with:
The Bear-Stearns panic made way for a flight to quality, and mortgage bonds benefited
The Office of Federal Housing Enterprise Oversight (OFHEO) and the GSEs have reached an agreement to pump out an additional $200 Billion for the purpose of providing lenders with more money to make loans (good loans, the Fannie and Freddie kind)
The Fed’s rate cut of 3/4 percent instead of a full point is seen as anti-inflationary helping to restore confidence in the Dollar again and to help keep a lid on Gold and other commodities.
While this is temporarily pushing rates lower, we’re simply in uncharted territory. Investors don’t have a road map for this kind of thing and there’s a lot of guessing going on.
In times of uncertainty, investors who want their money to work for them place it in bonds; and now that the Fed and OFHEO have come to the aid of conventional mortgages we could see rates drift lower.
Repeat after me: “As long as inflation is held in check!”