The rates are still staying low this week. We hit our lowest rates in over 37 years on Wednesday with a slight uptick in rates this morning. The 10 year treasury bill is trading at 2.10 this morning. Investors are still in dismay as they wonder how the banks continue to lend at the largest spreads ever on mortgages.

If we look at the spreads between the 10 year treasury and 30 year mortgages, I believe you can historically expect about a 180 basis point spread. So basically, you would add 1.8% to the 10 year treasury yield. Today the 10 year treasure is 2.1, hence our rates should be at 3.9% or so. The banks are currently at a spread of 275 or so over the 10 year treasury with rates trading around 4.875.

The investors for mortgage backed securities are demanding higher returns due to the risk of mortgages and the default ratios. The banks are also working on retrieving their losses by adding their spread to the treasury to rebuild their coffers. Make no doubt about it, the banks never lose!! The public will always pay for it in the long run. But, if they did just “absorb” the losses, they would become insolvent and then our money would be worth nothing. Banks are a for profit business and have to pay dividends to their investors. Therefore, the spreads will remain high until their balance sheets rebuilt.

Having said that, the rates are still fantastic and buyers are now coming out of the woodwork. Finally.

                                        Source for statistics: California Association of Realtors

         Are you “On The Fence” About Buying a Home?

• It helps transform the mortgaged-back securities.
  This keeps access to capital for borrowers high and
  interest rates low.

• Conforming/jumbo conforming rates should drop in
  the coming weeks by as much as a percentage point.

• It improves confidence in the stock market allowing
  investors to once again realize profits, which they in
  turn can re-invest in mortgages.

• Credit will flow again bringing new, qualified buyers
  into the market to take advantage of the investment
  opportunities currently available.

• Modified mortgages will allow some homeowners to
  restructure their mortgages and avoid foreclosure.

If you’re on the fence, now is an excellent opportunity to realize
dramatic savings on a home purchase before the market shifts,
and we begin the next ‘UP’ stage of the cycle.

On CNBC’s Parting Shot on June 27, 2008 Dennis Kneale’s commentary tried to put some perspective on the reality of the housing crisis compared to the way the news media likes to glamorize doom and gloom. He provides a refreshing approach, rather than the gloom and doom that the media has provided. CLICK HERE to watch video.

Here is an outline of his talk.

1/3 of all homes are owned outright, no loans
1/2 of all homes were purchased prior to 2000 and have equity.
95% of homeowners are paying on time.
which leaves 5% or 4,000,000 of homeownes at risk.

Teledyne is a local high tech company here in Orange County. Owning their stock has made quite few of their employees and other local people Millionaires. I figured that everybody could understand making money this way. You simply bought Teledyne stock in the beginning and sold it after the price went up (way up).

Last Friday it closed at $65.17 per share. Back in March of ‘03 you could have bought some Teledyne stock for around $15.00. Now my question to you is, “Would it really have mattered to you if you had paid $14.50 or even $15.50? Sure, you want to make as much as you can, but if you had tried to “time the market” to buy it at $14.50 you might have missed it completely and had to pay upwards of $20.00 per share if you wanted in.

My advice to you is to buy when you can. Don’t worry about picking up every nickel off the table. Just get what you can. You would have gotten over 400% growth in the share price. Why be greedy? (more̷

The housing market is soft. Hard times for some can mean opportunity time for others. Could now be a good time to step into the housing market and pick up a bargain?

Generally, it is a better time to be a buyer than a seller, but this is not so in every market. In San Francisco, for example, there are still more buyers than sellers for prime upper-end properties. You’re not likely to pick up a bargain there.

Many more markets are suffering from too much inventory and too few buyers. These markets would seem to offer the best opportunities. However, this is not necessarily so. Even though the price you pay is relatively low, it could take some time before the value of your investment increases.
(more̷

1 Interest rates on long-term, fixed, and adjustable mortgages are at historically low levels. The rate on a 30-year, fixed mortgage is hovering just below 6 percent, while, by comparison, interest rates were hitting 8 percent and higher during the last market downturn in the late 1990s, and were between 10 and 12 percent at the height of the last housing boom in the 1980s. Lower interest rates make it easier to qualify for a loan, and your monthly payments are more affordable. 

2 No one can put a price on the intrinsic value of homeownership. Home prices also reflect financial worth and, the good news is, across California the median sales price for a single-family home has been consistently rising for several decades. In short, housing remains a solid, long-term financial investment. While the pace of home appreciation has slowed over the last year, historical data suggest home prices will continue to appreciate over time. The projected median home price for a single-family home in California in 2008, for example, is $553,000.
By comparison, the median price in 2000 was $241,350; $193,770 in 1990, and $99,550 in 1980. (source: C.A.R.)

3 The length of time a home remains on the market before it is sold has increased from roughly two weeks in 2004 to between eight and nine weeks in 2007. According to the unsold inventory index provided by the CALIFORNIA ASSOCIATION OF REALTORS®, it would take 16.3 months to sell all the homes on the market at the current sales pace, compared with 6.4 months in 2006. With more homes on the market for longer periods of time, you have more choices when it comes to selecting a home today. 

4 The multiple-offer frenzy that dominated the latest housing boom has subsided, and there is less pressure on today’s home buyers to outbid one another. REALTORS® in California reported that in 2007 only 28 percent
of homes sold had multiple offers, compared with 57 percent in 2004. (source: C.A.R.) 

5 The credit industry crisis that has made securing a home loan difficult for many has led to heightened scrutiny of mortgage lenders. As a result, state and federal agencies have created protections for home buyers that were not in place a year ago. The U.S. Federal Reserve, for example, has proposed a plan to require lenders to confirm a borrower’s ability to afford a mortgage before making a loan and establishing guidelines for explaining sub-prime loan terms in order to better educate buyers. Many new public education and awareness campaigns, such as Freddie Mac’s “Don’t Borrow Trouble®” campaign, have been developed to help you achieve the dream of homeownership without the financial risks that led so many borrowers into trouble in recent years. Buying a home in today’s market may be challenging, particularly for those with credit problems or little saved to put toward a down payment. But there are many factors impacting the current housing market that make buying a home today a viable option.