The simple answer is - who knows? It's a pretty complex and derrivative answer to come up it.
I've gotten A LOT of questions over the last 7-14 days asking me what is happening to cause mortgage interest rates to change so dramatically from where we were on 1/23/08. So, I put on my best John Maynard Keynes (famed 20th century British Economist) thinking cap and would like to share the following ideas with you...with a little bit of Rich Hayden flavor!
In short, things are pretty whacked. At the moment - based on where we've moved to, I don't see the likliehood of a return to the mid-5's for conforming 30 year fixed rate mortgage for a while (possibly late spring).
The following chart shows you what has transpired over the last 3 months back into late November. We've had 2 Fed rate cuts. The biggest key about those rate cuts is that the actually cause an INCREASE in long-term rates (30 year fixed) 60%-70% of the time. Why? Because that rate-cut has an INFLATIONARY impact on the broader economy by making it cheaper to borrow money. 
When people and companies can borrow more cheaply, the producers of the goods/services that those entities buy are inclined to raise the prices they charge. This is inflation. Gas, food, heat, electricity - all are in an inflationary mode right now (unless you're living under some enormous rock with your own economy). So, when inflation is an issue in the economy, long-term bonds (30 year mortgages) tend to get less "expensive" and have a higher yield (interest rate) for the purchasers of those bonds. Why? Because when the Fed Funds rate is so low, the "long-term money" has to compete for investors. To try to lure more investors to them, the bond issuers (Fannie Mae/Freddie Mac) must INCREASE the yield to make the investment profitable and attractive to the investor. We've already established that the yeild is the equivalent of the interest rate. So, you can see how this works. Fed cut = mortgage rate increase = Inflation. Inflation is a bond instruments WORST enemy. It will almost always drive the yield (interest rate) on that bond HIGHER - which, ultimately causes inflation to subside. WHAT? Yes, when things get too expensive (mortgages, cars, food, etc.) people buy less. Producers eventually have to lower their prices (see bonds above) to attract buyers - then the economy expands.
So, what you're seeing is that the Fed's activity of lowering the "Fed Funds Rate" - which is the shortest term rate on the market (the "term" on Fed Funds is 1 day, whereas your mortgage is 30 years), is having the negative impact of actually CAUSING greater inflationary pressures. Okay, that's actually pretty simple to figure out. But, we're in a bit of a Twilight Zone period economically that we haven't really seen since the mid-70's. You won't see this term in the broader media for a little bit, but, it will come about. Afterall, there is still wide-spread belief that we're not quite in a recession. Well, make no mistake about it, we're in a recession...and have been for nearly 2 months. Anyway, we have entered into a period of "Stagflation" in the economy.
This means the broader economy is suffering from inflation and stagnant economic growth (recession) at the same time. So, we combined the words in the early 70's to create "stagflation". Why this is imporant relative to our ideas about home mortgage finance and home selling is because we've got a real quandry on our hands in trying to forecast what's going to come about. What we have now vs. the 70's (oil embargo and manufacturing slow-down) is a declining housing market. We did not have that factor @ that time - at least not to the extent that we do today. So, we're into uncharted territory from an economic policy perspective and lawmakers are trying to "fix" housing - which means they are likely to hurt it as a result as most lawmakers are not economists. I don't mean that to submarine the efforts of our elected officials. Rather, it's pretty well accepted that markets are self-correcting and government intervention "typically" doesn't create economic sollitude. This is not to suggest that I am opposed to intervention.
That said, where do I think this is going? I EXPECT that long-term rates (30 year fixed) will see a bit of a rally in the spring once the most recent "fiscal stimulus package" signed by the President 2 weeks ago actually goes into effect. At that point, we should have better rates to work with. The question at that point will be what type of underwriting guideline changes will be in effect.
I hope this makes sense. It's a bit of a ramble. But, I think it's very important for EVERYONE to understand what the factors are behind this stuff so that you know it's not just some kind of "puff-here's your rate" type of idea-set. My clients are wondering if they should refinance or buy, when should they buy, how much should they buy and what they'll need to have to do it with. The answer to the question is evolving and will continue to be a fluid answer.
This information should rarely be looked upon as negative or glum. Rather, it's an analysis of data. Within that data is the power to positively impact outcomes. Historically, the greatest financial triumphs come out of the greatest failures. The key, then, is to understand the underpinnings of the system so that you can use its NEW growth to your advantage!
If you're trying to figure out what this all means to you and your financial profile - then give me a call. We will work through it together and you can get it going the way it should be so you can be an example, not a statistic.
Your Friend,
Rich Hayden
Financial Coach
rahaydenjr@yahoo.com
703.773.8409 - p
P.S.: Have a friend who could be helped by this info? Why not forward this on to them? That's what friends are fore!
P.P.S.: Starting to plan for college? Ask me how I can help.
P.P.P.S.: Ask me about the Debt Melt Down (TM) Plan and how you could become 100% debt free...including your mortgage...within 9-11 years!
P.P.P.P.S.: If this has reached you at an undesirable address, please respond with "Update My Email To: rahaydenjr@yahoo.com and I will update your email accordingly.
P.P.P.P.P.S.: Want to receive a copy of my most recent newsletter in PDF format? Respond with "NEWSLETTER" in the subject line and I will forward it to you today!
Wednesday, February 27, 2008
Will The Feds Get Policy Toward Mortgage Lending Right?
Tuesday, February 19, 2008
Time - Friend or Foe?
Financial Coach
Monday, February 11, 2008
$100,000,000.00
I've come to the conclusion that I am now worth MORE than $100,000,000.00 as of this morning. I was looking at my portfolio and had been very frustrated because I have been working on breaking through the $100,000,000.00 level for a long time and I just couldn't get over the hump. What triggered it?
I'll gladly tell you - my latest UK Lottery notice in my email inbox! I finally got THE ONE notice that pushed me over the top. I've now either WON millions in world-wide lotteries, or been GRANTED millions from various fallen African government ministers so that I now have more than $100,000,000.00 in BOGUS wealth. Man, I gotta tell you, I was pumped!
What's wrong with this story?!
WISHES are great. They really are. We all need to wish for things. We need to dream. We need to think big. We have to look at the world through the unfiltered eyes of a child to be able to visualize the future we want to create. Stick with me here, because this is the most important thing. See, we have to go beyond the WISH to start to define things by first turning them into GOALS. Then, we need to turn that GOAL into reality through PLANNING.
In the 20th Century, Winston Churchill & Dwight D. Eisenhower both famously told us that Plans, in and of themselves, are not important. But, the ACT of PLANNING is everything. It is essential.
You see, this is where it all comes together. I don't care if you make $3.65 per hour working @ Wendy's, or if you make $365,000.00 in base salary as the CEO of your own company. If you don't begin PLANNING what will happen with that money - both income earners will end up at the EXACT same place...looking back on opportunity and fortunes missed. It really doesn't matter if a person is currently flush with cash, living paycheck to paycheck or bankrupt. If they don't have specific goals and a planning process to help them achieve those goals - they'll never reach any kind of success financially.
One part of your plan is understanding your DEBT. Knowing how to lever it, how to use it...and most importantly - HOW TO GET RID OF IT!!! I have THREE distinct ways that I help people just like you eliminate their DEBT in time frames that they find hard to believe. I use methods that the big banks use. I use their own tools against them to make them FINANCIALLY FREE.
Here's the great thing. FINANCIAL FREEDOM is well within EVERYONE's reach during their lifetime. But, they have to look back on the steps I've laid out in this blog to get beyond the WISH phase. Get in into the GOALS phase...then get their butt PLANNING now.
There are now less than three week until I turn 40. You can bet that I've got some GOALS set up for the coming years. You can also bet that I am PLANNING every day to turn my WISHES into REALITY via the achievement of my GOALS. What about you? Are you ready to get going? Are you finally fed up with being handed YOUR reality rather than creating if for yourself?
If you are, then give me a call @ 703.773.8409 to get started building your FINANCIAL FREEDOM today. Or, for a copy of my FREE REPORT: "How To Literally Melt Down Your Debt, And Discover What the Banks and Big Credit Card Companies DON'T Want You To Know" - call 1-888-267-0280 x 8600 and I'll get it out to you in the mail.
Your Friend,
Rich Hayden
Financial Coach
rahaydenjr@yahoo.com
703.773.8409 - p
P.S.: Have a friend who could be helped by this info? Why not forward this on to them? That's what friends are fore!
P.P.S.: Starting to plan for college? Ask me how I can help.
P.P.P.S.: Ask me about the Debt Melt Down (TM) Plan and how you could become 100% debt free...including your mortgage...within 8-10 years!
P.P.P.P.S.: If this has reached you at an undesirable address, please respond with "Update My Email To: rahaydenjr@yahoo.com and I will update your email accordingly.
P.P.P.P.P.S.: Want to receive a copy of my most recent newsletter in PDF format? Respond with "NEWSLETTER" in the subject line and I will forward it to you today!
Thursday, February 07, 2008
The Year of The Rat
The Chinese Year of the Rat should be a good one for those who are committed to getting out of debt.
Tuesday, February 05, 2008
Michael Strahan Was Right!
From The Desk of Rich Hayden - Financial Coach
207 South Alfred Street, Alexandria, VA 22314
703.773.8409 - o 703.832.6467 - f
rahaydenjr@yahoo.com www.richgetsitdone.com
Become 100% Debt Free (including your HOME) in as little as 8 years!
MICHAEL STRAHAN WAS RIGHT!
Friday, February 01, 2008
Friday Night Lights
207 S. Alfred Street, Alexandria, VA 22314
703.773.8409 - o 703.832.6467 - f
rahaydenjr@yahoo.com www.richgetsitdone.com
Become 100% Debt Free (including your HOUSE!) in as little as 8 Years!
I gotta tell ya, I like this show. Now, I'm not a huge fan of network TV. Just ask my wife. But, I've got to say that anyone who grew up in the Midwest, south, or anywhere that football was "it" has got to love this show. I think I can say that with a bit of authority because I grew up in Nebraska (The Good Life!). Unless you've lived under a rock from a sports perspective, you're probably aware that we Nebraskans have a fondness for a little bit of smash-mouth football!
So, what is it about this show that makes it a hit? There's drama, there's action, there's tragedy - and there's STRUGGLE. Really, that's the thing that people rally around. At one time or another, this show makes every character an underdog. Americans LOVE the underdog! They love for the little guy, or the guy who gets unfairly put down, or the guy who can't catch a break, or the guy who loses it all - we LOVE for that person to STRUGGLE - and then overcome through some type of "movietone" justice system that lets the protagonist have their day. That's what small town football is all about....or any sport, for that matter.
Just ask Larry Bird. I mean, really, who even knew where French Lick, Indiana was before bird was 1979 other than college recruiters. Other than the Iran Hostage crisis of that same year, 1979 was the year that the small college Indiana State University Sycamores went to the Finals of the NCAA tourney and lost to Michigan State University (with one Earvin "Magic" Johnson). Many people don't remember that Bird first went to "the big school" @ the other Indiana University....the one in Bloomington w/ a certain Coach Knight...for one year before he got homesick and headed home. At that moment, Larry Bird - of all people - became "the little guy." He took odd jobs, worked for his hometown street department, before finally finding his way back to ISU and his ultimate success. We LOVE THAT STUFF because it's real, it tells us that WE CAN "BE SOMETHING" bigger than what we are if we just stick with that dream.
Silly, I know, for a guy who writes a blog about finances to be talking about this. But, isn't that really what it comes down to, too? Don't those dreams that everyone latches on to of their favorite sports figure, their favorite actor/actress, their favorite musician - doesn't a big component of our adoration amount to money? Let's take that a step further and say - doesn't that really translate to the belief that the money (a.k.a. FINANCIAL FREEDOM) we visualize can provide us with OPTIONS and OPPORTUNITY that we might not otherwise have?
Stick with me here. Money in-and-of-itself is worthless. What it is, though, is POTENTIAL power waiting to be unleashed. Just like the misconception of "knowledge is power" - there's a misconception that money is power, too. Not true, both money and knowledge are only POTENTIAL power waiting to be marshaled properly and intentionally.
Before you tell me I'm off my rocker - let's have a look-see @ how your money's workin' for ya. For most people, it's not that good. I mean, after-all, we're the country with a negative savings rate. We're the country with $920Billion in credit card debt...and climbing. We're the country...well, you get the point. See, the thing is...and this is the kicker...YOU'VE GOT MONEY...you really do...but, it's not working PROPERLY for you.
To change that, first, you've got to BELIEVE that you can be the LITTLE GUY who rises up from seemingly nothing and has choices. Then, you've got to have a DESIRE to take a little time to understand (be coachable) HOW it works to have the FREEDOM that it can bring. Without the belief and desire - you'll stay the little guy. Ask Larry Bird. Ask Magic Johnson. Ask Bill Gates. Heck, ask my old boss, Doug Lebda about starting LendingTree.com. They'll all tell you, "I believed that I could do it, and I had a desire to win." Guess what, they all did.
You are NO DIFFERENT that these people. You're really not. Are you ready to start winning? Are you ready to have a look @ your personal picture and change it? Are you ready to BELIEVE that it can be different? Do you have the desire to make it different? I know these things are all in my cross-hairs. What about you?
If the answer is yes, call me or email me today so we can get started. In January alone, I provided 5 different clients with an average savings of $427/mo, a reduction of their "in debt" timeline to 3.4 years for non-mortgage debt, and an average mortgage payoff in just under 10 years. Think about that for a minute . . . would that change your world a little bit? If so, then give me a call.
My very best to you!
Your friend,
Rich Hayden
Financial Coach
rahaydenjr@yahoo.com
703.773.8409 - p
P.S.: Have a friend who could be helped bythis info? Why not forward this e-mail tothem? That's what friends are for!
P.P.S: Starting to plan for college? Ask me howI can help.
P.P.P.S.: Ask me about the Debt Melt-Down(TM)Plan and how you could become 100% debt free..INCLUDING YOUR MORTGAGE..within 9-11 years!
P.P.P.P.S.: If this email has reached you at anundesirable email address, please respond with"Update my email to: joesmith@xyz.com" and Iwill update your email accordingly.
P.P.P.P.P.S.: Want to receive a copy of my most recent newsletter in PDF format, respond with "NEWSLETTER"in the subject line and I will forward it to you.
