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Carl, I invest in real estate and I'm getting ready to re-finance three
properties, so I've been watching the rate situation pretty closely as well.
Mortgage rates have jumped up quite a bit over the past week. The
volatility in the treasury bond market has made investors more nervous about
buying any other debt instrument, such as mortgage-backed securities.
This has had the greatest effect on the commercial builders and investors,
who are having considerable trouble getting financing right now. However,
the residential housing market is still strong, and rates are still very low
in historical terms. Once the volatility calms down, residential mortgage
re-finances should shoot up significantly. This will give US consumers a
nice shot in the arm in higher disposable income. This should more than
offset any slowdown in the commercial sector.
Bruce
-----Original Message-----
From: Carl Soderholm <Carl@xxxxxxxxxxxx>
To: Omega List <omega-list@xxxxxxxxxx>
Date: Saturday, October 10, 1998 11:57 AM
Subject: Bond Market/Lending Rates/Real Estate/US Economy
>With the wild moves in the bond market of late, my trading partner called
>his banker (he had just refinanced a month ago) to see what had happened to
>mortgage rates. He was told that rates have gone up one full percentage
>point in the last week. He was also told that mortgage rates were actually
>creeping up as bond futures made their last lunge up. Interesting.
>
>I'm not much of an economist, but it seems that this sort of volatility
>will slam the brakes on a real estate market that should be thriving. With
>rates low, people (and companies) should be taking advantage of the
>opportunity to build, buy and expand, but I suspect banks and large
>builders will delay lending/borrowing plans for a couple of weeks to see
>where rates settle out. If you were president of a bank would you want to
>issue a big loan only to find out in a week that your rates were off by a
>full percentage point?
>
>Any bankers or builders out there?
>
>If real estate does suddenly stop, I suspect the impact on the economy will
>be significant.
>
>
>
>Carl
>
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