Category — Off The Cuff

First off I want to stress that I am not a licensed Real Estate Agent nor am I a licensed Appraiser but I want to take a quick view at the 3 most recent home sales in a neighborhood in Midlothian, VA. I just could not resist posting this as its such a glaring example of hiring a professional not only for real estate but hiring a professional in any field. Its so much cheaper in the long run.

There were three recent home sales in the Lenox Forest Section of Riverdowns. Two of the sales were full service listed homes and one was For Sale by Owner. Riverdowns subdivision is located off Robious Rd. in Midlothian, VA about a .5 mile east of Rt 288. [Read more →]

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Its said that most of the general public believe what they read. I was taking a look at The Wall Street Journal’s Real Estate portal called Real Estate Journal and noticed and article on “What Moves Mortgage Rates” written by Teri Cullen. It always gets my curiosity when I see articles like that because 50% of the time they get it wrong, although its predominately fellow peer loan officers are the ones that really get it wrong I did not think the Wall Street Journal, “The King of Finance Media” would.

I will let you read the article but basically Teri Cullen answers the question from a reader named Victor. “Victor, mortgage rates actually follow the bond market, not the Fed-funds rate. The interest rate on a 30-year fixed-rate mortgage tracks the yield on the 10-year Treasury note (at Tuesday’s close 4.383%.).”

This is just not accurate. First, the 10 year treasury is a government backed instrument and has no direct effect on the direction of mortgage rates. Second, mortgage rates follow mortgage backed securities or MBS’s which are issued by Fannie Mae and Freddie Mac. While sometimes interest rates and the 10 yr tsy may move in the same direction, one does not affect the other. Very often they trade in completely opposite directions. You will notice by this quote that 6.0% mortgage bonds where up 6bp’s points and the 10-Year was down 72bp’s.

This brings me to another point. When I talk to prospective borrowers one of my handouts lists “questions to ask your loan officer” and one of the questions on the sheet to ask “What are mortgage rates based on?” Its the very basic of knowledge. This is the largest transaction of your life and far too important not to be handled by a competent, quality professional that’s trained to advise you properly. If they do not answer correctly run…do not walk to a loan officer that does know the correct answer. It always amazes me when talking to borrowers how indifferent some seem at the quality of professionals advising them on such a large transaction. Its like using a stock broker giving you quotes out of yesterdays Wall Street Journal.

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One of my first cars was a yellow 1966 Ford Mustang coupe. When I first got it it looked like a 25 year old car. I can remember when I got home from Marine boot camp at Paris Island my mother, as a present for my return, had totally renovated it and it was a beauty. Painted a glowing yellow, brand new carpet on the inside with beige leather seats. Everything was replaced, the dashboard, all the chrome inside and out. Everything was as original, even the radio. She did a tremendous job.

This car ran on regular gas, I do not think there is a station now that even sells regular gas, but even then, I had to hunt for the few that did. Gas then ranged .95 to .99 per gallon. Those were the days.When I look at gas prices today being at around $2.65 although it sounds like a lot the incremental increase over 20 years, yes I am showing my old age, from that time is not. I am guessing less than 5% a year. Now this is taking a picture of a specific time period and maybe the year before that was .65 or $1.50. I can only remember that Mustang!

So even if it is actually 5% price increases that is just a tad above normal and I do not think its reason to sound the alarm bell. What alarmed me was paying $5.65 for a gallon of milk last week. Now that is high. I have to say, I think its the only gallon of milk I have ever bought as I do not shop unless its for a 1/2 pound Hershey Bar, but how outrageous is that? Almost $6 bucks! For a gallon of milk? I think the fed should keep an eye on those milk prices, forget the gas.

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