Vail Daily column: World events are helping homebuyers
Once upon a time, many years ago, mortgage rates were reflective of what was going on in the U.S. economy. News of economic events in other countries was slow in coming to impact the well-being of things here at home. At some point the whole world seemed to become one big global economy, and things changed and global economics became the new standard.
These days, a spat between Russia and one of its neighbors can send shock waves over the possible price of oil and gas to Europe six months from now; and the actions of a few thousand religious zealots in the Middle East can cause investors sleepless nights wondering what will happen to the public persona (as opposed to the substance) of the companies they have invested in if there were a successful terrorist attack. This can sometimes impact mortgage rates several times a day depending on what news channel investors are trusting at the given hour.
This level of uncertainty has proven to have a hidden benefit for U.S. homeowners. The U.S. economy is perceived by many big investors as at least being more resilient and less fragile than many places. And while our homeland security is far from perfect, at least there is significant record of stopping terrorist attacks on our soil, even though the feds really don’t talk about most of the successes.
This means an influx of foreign money into our bond markets, which has had a dramatic impact the past few months on keeping money for mortgages easily available and fairly cheap. Investors buy mortgage-backed securities, which are bonds used to raise money to lend out to homebuyers.
While for much of the past five years or so the Federal Reserve Bank has been a huge player in the mortgage-backed bond markets, to ensure liquidity they have dramatically slashed their participation and plan to be out of the markets by early next year. Many feared when this happened that money for mortgages would become scarcer and investors could demand a higher return on their money, which would be paid for in the form of higher interest rates for homeowners and homebuyers.
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What has happened recently is that foreign investors and large U.S. institutional players have replaced the Federal Reserve as key players in these markets. While rates are not at the rock bottom lows we have recently seen, they are still very respectable with rates in the 4 percent range for most programs.
Combine this with the advent of more portfolio lenders who are willing to get at least a little creative on qualifying individuals for a loan, and there are more players in the real estate markets, which will help to gradually inch up home values.
Chris Neuswanger is a loan originator at Macro Financial Group in Avon and may be reached at 970-748-0342. He welcomes mortgage related inquiries from readers. His blog and a collection of his columns may be found at http://www.mtnmortgageguy.com.