Juicy Estates: Mortgage Blog

Get Your Ducks In A Row

This is going to be a bit technical but you don’t need an economics degree to understand it and you will be the most well informed among your peers for taking the time to read it.  A little understanding of yield curves and there relationship to economic cycles can go a long way….and think about how smart you will sound!  I can’t say it any better than the good people at Bespoke Investment Group so the following is an excerpt from their article.

 

“The yield curve is an often quoted measure of the relationship between short and long term interest rates on US Treasuries.  While there are many variations, the most often quoted measure is the difference in the yields between the 10-Year and 3-Month US Treasuries.  While the curve is normally positive (ten-year yields more than three month), there are times when the three month yields more than the ten-year, causing the curve to invert.  When this occurs, monetary conditions are considered to be tight and the market is anticipating a slowdown in economic activity.  In most periods when the curve becomes inverted, a recession is typically not far behind.” 

“While an inverted yield curve has been a reliable precursor of impending economic weakness, steeply sloped yield curves have historically been a sign that the market is anticipating strength in the economy……The current difference between the yields on the 10-Year and 3-Month Treasuries is 360 basis points, which is near the highest levels of the credit crisis as well as the highest levels of the last ten years.”

These are unprecedented times and there are many bargains to be had in both the real estate markets and stock markets.  10 Years from now you will be telling your friends….”in 2008 you could purchased that home (or stock) for a fraction of it’s current value”.

So if you are shopping for a foreclosure in Coral Gables, New Construction in Pinecrest or any one of the many luxury homes for sale in South Florida now may be the time to make your move.  As a result of normalization of the yield curve and thawing credit markets, jumbo mortgage rates have fallen about 125 basis points (1.25%) in the past 6 weeks with 5/1 adjustable rate mortgage for loan amounts over $1 million being in the mid 6% range.

Get your ducks in a row because the smart money is buying now!

This entry was posted on Tuesday, November 25th, 2008 at 10:23 am and is filed under Home, Mortgage News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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