December 10th, 2010 9:08 AM by BILL WILBANKS
The last couple weeks have almost worn me out. Spending two weeks in the recent rate market has had more ups, ups, down, ups than a marathon ride on a roller coaster over the Rocky Mountains trying get up the great divide, all while listening to a looped concert of "Whadoyathinkratesaregonnado" set to the music of "Suwannee River". Until a day or two ago, based on the bond market gyrations the answer has been Go Up. Of course after 6 months of relative stability at still unbelievable sub-basement levels some did miss the recent bottom, but as is typically the case still hope for a better tomorrow. Well I'm with you there.
After 3 decades of various recessions with the boom and bust markets that bookend them I can pretty much say this one has once again proven to me that more often than not my first boss in this business was right. When I started out a loan officer was expected to start their training by doing account collections (not true today and that's another story). On the very first day on my job my first boss explained 'you can't make a good loan until you've had to collect on one of your bad decisions'. Truer words were never spoken. 'And at some point in the decision process', he said, 'you have to make a decision. If you've done the homework, you've reviewed the options available, sooner or later it comes down to it and you have to make a decision". The same can generally be said for rate shoppers. Unfortunately it's been a case of jumping on a moving train the last two weeks. Those that could do it have benefited for sure. This time however there are admittedly several differences from the previous cycles 'norm' whatever that was.
The first difference is that we've experienced the first real estate market valuation decline in most of our lifetimes unless we were around pre-WWII and as we all know it's been significant. So, many who may have wanted to refinance in the last 2 to 3 years may not have been able to since their home value had declined to levels below what they paid for it or owed on it now. That refinance safety net that for years had reorganized the household finances of so many (consolidated their credit run ups) has been taken away from us at least in the short run.
Secondly and probably carrying just as much weight on the refinance question is the fact that we've already seen significant refinancing done in the last 12 to 24 months as we saw rates (30 year fixed) dip then to the unbelievable level of 5% +/-. So, who would have put any money on our ever seeing them dip ever so briefly to below 4% this last summer on purchases and just over 4% on refinances to highly qualified borrowers. But then a time worn question began to creep in the market mind, 'Well it went this low, why not let it go a little lower before I jump in'? This leads to the "shoulda, woulda, coulda's". Whenever I'm asked I honestly bring out my crystal ball comment, you know...the one I don't have, and fall back on the I know what I have today. I don't know what tomorrow will bring, But in my experience they go up like rockets and down like feathers on a calm day, followed by a brief run through on what we know at the moment. Never found a better comparison. And if you tell someone you would lock your own loan today or that you would wait a little longer, more often than not folks believe you must have an ulterior motive and do what they want anyway...which they should do. So, what are rates going to do today? I think they will...
Some serious coments.