Why the Next Decade in Real Estate Finance Will Be Different

By John Doan, president, Miracle Mortgage

I frequently speak with people who fondly remember what their homes were worth two, three and four years ago. Many of them actually think their home will soon return to those previous levels of valuation. They talk about how that value inevitably will come back, because “real estate always goes up.”

I recall back in March 2000, when I was buying stocks while the NASDAQ was eclipsing 5,000, that I just knew my investments were going to pay off big time. And, I knew that this was going to be the easiest money I ever made. Today, the NASDAQ sits at 2,172, about 60% below that all-time high. 

My point here is that we don’t know if, and/or when, the value of an investment will even stabilize, much less go higher. This uncertainty is particularly true when it comes to real estate. But what we do know is that the next decade will be much different in terms of opportunity. Going into 2010, we have to ask ourselves what history tells us about where the opportunities will exist.

This is what we do know going into the next decade:

– Mortgage rates remain at all time lows with a conforming 30-year mortgage averaging about 4.75%.

– The federal budget deficit is projected to average $1 trillion annually over the next 10 years.

– The federal government will have to issue massive amounts of new debt to both pay off maturing Treasuries and to help fund our enormous federal budget deficits.

– To be able to drum up demand for this debt, the government will have to pay an increased interest rate on these new bond issues to entice investors, both domestic and foreign, to continue buying that debt.

– All of this is occurring as the U.S. dollar incurs one of its worst declines in history.  This means foreign governments buying our debt have a greater chance of losing principal when buying dollar-denominated debt with foreign currency.

– Mortgage rates historically correlate closely to 10-year Treasury yields.

– More than 10% of the mortgages in this country will switch from a fixed rate to a variable rate within the next 18 months.

All of these known conditions represent the plain and simple truth that mortgage rates are artificially low right now, and they surely will go up — and go up substantially — from where they are now. When will this happen, exactly? No one knows the exact answer, but what we do know is that you can take advantage of the current low mortgage rate situation — if you act quickly.

If your current mortgage rate tops 5%, or if you have any risk at all of a rate change at any time during the life of your loan, then you should take complete control of your financial well being today and contact us to get a free assessment of your current situation. 

Remember, the risk of rising rates and declining home prices is not the main issue facing many of us today. Rather, it’s the risk of inaction that truly is the biggest nemesis.
 
To contact me for your FREE mortgage assessment, go to my Web site at www.mymiraclelending.com, e-mail me at askjohn@miraclecorporation.com, or call me at (888) 536-3453.

P.S. As a special offer to all Doug Fabian Alert readers, if you qualify and lock in a loan with us in December, all points, fees and costs for that loan will be waived.