Like everyone, I am out there trying to look over the horizon.
Have any of you seen the Ben Affleck movie “Paycheck?”
It largely derives from a highly improbable plot, where Ben Affleck, young engineer MIT-type
genius, is hired to reverse engineer a machine to see the future.
Of course, his memory is erased after the job is done, but he is successful.
Sadly, the movie is not.
Until a better movie is made, I won’t going to be able to suspend my disbelief about being able to see the future.
But, I’ll hold out hope that as of this upcoming weekend that I will search for a pill to make me much smarter, sold at Starbucks.
Until that day,
I’ll rely (somewhat) upon my mortgage brokers and investment banker brains.
Sometimes I can follow their logic, sometimes I can’t.
This month, I’m really struggling to understand how well correlated the mortgage rates and housing market in Manhattan are.
This impending Spring has brought out the buyers.
Is it the fear of inflation?
Fear of rising rates?
I’m not getting a clear picture that rates are the reason.
One of my mortgage experts feels that the global unrest in the Middle East is the main culprit.
High-priced oil is the friend of the housing market.
Gaddafi causes traders to pour out of stocks, into bonds, driving down rates.
“This flood of money into Bonds – including Mortgage Bonds – helps prices and home loan rates improve,”
says Olga Savelov of Universal Mortgage.
Yet she hedges by saying that the “positive picture for Mortgage Bonds and home loan rates won’t last long.”
The numbers of prequalifications has gone up for purchases, while the refinance boom has quieted a tiny bit.
Hmm… Let’s move on to other brokers’ views.
Frank Cronin of Guaranteed Home Mortgage has another fear- regulation.
New impacts from the Dodd–Frank Wall Street Reform and Consumer Protection Act may be felt soon.
His concern may not impact New York City as much as elsewhere, due to the high downpayments and flexibility of purchasers to move around their liquidity pre-purchase, requiring purchasers to park money with banks to get favorable mortgage rates.
Frank writes, “It could be the entry fee to certain institutions as a response to the risk retention formula that directly affects down payments.
Banks could ask for a relationship to access their portfolio of liquidity, this is not a negative for the consumer because the program and pricing will be better than the open market.”
David Pfefferman of TD Bank’s Private Lending tells me that his bank is making a concerted effort to lend in residential housing, because they have TOO MUCH MONEY in the bank!
So I’m getting conflicting information here.
Will you have to invest in the bank who gives you a mortgage?
Will it impact rates?
What’s right?
What’s wrong?
I think that Frank’s previous and interesting concern about new lending options and David’s bank having too much money come together around the potential dissolution of
Fannie Mae and Freddie Mac.
Does a
(truly) private group step up immediately to replace what they do for the market?
Frank
tells me “Fannie and Freddie account for an enormous amount of liquidity in the market, <and> you will see a decline in liquidity in the mortgage market if these groups are dwindled down.”
His concern surrounds the lack of competition
in the mortgage marketplace- but with 20-25% minimum downpayments in
Manhattan, as
well as rising prices, I would argue that the risk profile of the high-end Manhattan buyer continues to be pretty moderate.
What do you think?
We’re still seeing less than 200 foreclosures on the
whole of Manhattan at any one time!
I guess I have some concern about rates rising, but not that much just yet.