HOLY LOW RATES, BATMAN! (Wallowing in Wrongness)
For months now, I have been repeating the warnings of various pundits about runaway inflation and rising rates.
But rates seem to continually fall despite inflation concerns, and this week was another example as rates fell precipitously again.
I and many others (like Barry Habib) thought we’d see rates closer to 4.0% this summer as a result of short-term or transitory inflation.
I have explained why in previous blogs, illuminating such things like (1) Quantitative Easing (Fed buying bonds to keep rates low); (2) recession concerns remain; (3) Fed’s inability to raise rates; and (4) market is convinced inflation is temporary.
I touched on all of this only a month ago with this blog – What Does The Bond Market Know?
In any case, when I saw today’s rates, I had to beat the dead horse again, but with a new twist.
STIMULUS WILL END; TOO MUCH DEBT; SAVINGS UP
In this recent Real Vision Podcast, guest David Rosenberg lays out his case for another major recession (coming soon) and even lower rates!
He makes several points: (1) our current economic upturn will fade quickly when all of the government stimulus ends; (2) all of the debt in the world is a huge economic burden that will keep economies weak; and (3) nervous citizens will again start to save at record levels instead of spending.
Many people do not understand how much high savings rates can weaken an economy that is dependent on consumer spending (this has been a huge problem in Japan for decades now, for example); high savings rates also prevent inflation b/c money is not turning over in the economy (a requirement for inflation).
Anyway, I highly recommend the above podcast b/c it is so informative.
BEWARE OF VACATIONS! 😊
This is an issue for every lender during the summer, as borrowers tend to vacation more during the summer for obvious reasons.
But this year is particularly problematic b/c so many more borrowers seem to be taking vacations now that COVID is on the wane.
While we can often arrange for document signings in remote locations, setting them up still often results in a delay of a day or two.
But, more problematic is the fact that many vacationing borrowers are unable to access additional documents that lenders need in the final days of closing.
And, this sometimes delays transactions by several days until borrowers can return home to obtain the documents.
Our request/reminder to our agent partners is to always ask your clients about their vacation plans before submitting offers with tight closing periods.
Many borrowers mistakenly believe that they can manage their entire purchase from a smartphone on a beach, but not so much. 😊
Founder/Broker | JVM Lending
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