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Posted by Mantooth on June 9th, 2021

Below is the list of three simple factors which directly affect rate movements.

Housing Market

This is the single most active factor that affects mortgage rates. The housing market of today is marked by numerous foreclosures which have helped drive home prices down and spur growing numbers of bargain properties. With numerous government programs aimed at spiking renewed interest in new home buying and directed to stop foreclosures, analyst remain upbeat about the future of real estate.

A simple understanding of what factors drive interest rates could go a long way in determining the best time of buying a new home. The rule of supply and demand states that when supply outpaces its demands, the price of a commodity drops down. Recent economic difficulties like growing foreclosures have seen an increase of available homes in the market. Making selling a home more difficult and leaving real estate companies with huge inventories of unsold and overpriced homes.

Real estate companies and mortgage services have offered lowered housing rates to address this concern. This together with bargain properties brought about by the increasing numbers of foreclosures has helped bring mortgage rates down.

Analysis:

Positive news regarding the surge of new home sales and an improving economy has seen mortgage rates stable at 5 percent figures. April saw record lows for mortgage with figures posted at high 4 percent levels. Gradually improving home market reports may result in future mortgage rate spikes.

The Secondary Market

Mortgage loan and services are usually channeled through banks. What homeowners don't see is that their mortgages are passed to larger mortgage services like Fannie Mae or Freddie Mac. Mortgage Bank Securities invest heavily in the home market and increase or decrease rates accordingly. With the onset of massive losses brought about by foreclosures and declining home values which have produced a great number of bargain properties Mortgage Bank Securities have lowered mortgage rates. Mortgage Bank Securities are also listed in the market and adjust their mortgage rates to increase investor interest or protect themselves from risks.

Analysis

With help from the federal government, Mortgage Bank Securities have phuket property been able to stabilize their portfolios of bad loans. Government efforts to stop foreclosure have assisted Mortgage Bank Securities recover and offer better mortgage rates.

Investor Market

Mortgage Bank Securities compete with other traditional stocks for investment. Mortgage Bank Securities historically have offered investors a good return for their investments. During the housing boom, real estate companies relied heavily on private and banking investments to fuel constructions.

When other stock options in the NASDAQ or DOW Jones they create competition for Mortgage Bank Securities and Real Estate companies. Investors may take up other stocks such as commodities (oil or gold) as an alternative to these stocks.

Analysis

Mortgage Bank Securities are finding stiff competition from other stock options. With the economy finally picking up investors are shifting from risky MBS and cashing in on recent gains from Wall Street. This has forced some Mortgage Bank Securities to inch up mortgage rates to lure investors back.

The decade of the 1980s has traditionally been viewed as a time of strong economic growth and innovation, mainly due to the smaller government, pro-deregulation policies of the Reagan administration. However, this decade also saw the setup of the housing market for a future crisis, with pieces being put into place at the Federal Reserve and throughout the banking system.

After the high inflation rates of the 1970s had been defeated by the Federal Reserve's monetary manipulations, the home foreclosure rate began to rise precipitously. In fact, this rate tripled during the 1980s, despite stronger economic growth in other sectors of the market and the fact that unemployment rates began to fall during the decade.

One main factor that drove the rising foreclosure rates seems to have been the stagnating or declining of real estate values in housing markets throughout the country. High inflation was no longer driving up prices for goods, while collapses in the oil, gold, and other commodities decreased the amount of financial protection a home could offer in the absence of rising prices every year. The lack of appreciation in the housing market generally began to contribute to rising foreclosure rates

Although unemployment actually fell during the 1980s, one important trend had emerged since the previous decade. More workers began to go into business for themselves, which meant that they were much more exposed to the direct working of the market. With the shift in the 1980s from production economy to a service-based one, as well, homeowners could face severe financial disturbances but still count themselves as employed, albeit in a failing business they owned. Moreover, business failure rates did increase during the 1980s.

Thus, more homeowners became business owners, tying their personal financial fortune directly to the sector of the economy they had entered into. A failure of the small business could quickly push the household into foreclosure, and changing market conditions throughout the deregulation period and beyond guaranteed that many companies would not be able to react to the new paradigm.

Two other trends that bear mentioning is the growing dependency on consumer credit and the declining savings rate that occurred during the 1980s. Americans began their love affair with credit cards, and had learned from the previous decade that saving money in a bank could result in the value of that account being wiped out due to inflation or bank failure. So consumers began borrowing money and spending their own incomes on paying off these loans instead of saving for any kind of emergency. When a business failed or property values decreased, foreclosure became more likely.

The mortgage industry had also begun to change in the 1980s compared to decades before. Savings and Loan institutions had been freed from most regulatory burdens and began to use the remaining laws to engage in fraudulent loan schemes, mostly on commercial property, while Wall Street's securitization of mortgages kicked into higher gear. The use of mortgage servicing companies by mortgage holders also grew during the decade.

These three trends virtually set up the economy for a deceptive end run around American homeowners, although the final piece of the puzzle had not been inserted yet. But it was waiting at the Federal Reserve as of 1987, with the appointment of Alan Greenspan as chairman of the Fed.

From opening the flood gates at every sign of economic slowdown and injecting liquidity into the market to lowering interest rates too far for too long, Wall Street banking firms had found a friend in Greenspan. Moral hazard was routinely rewarded in the subsequent decade, from the Mexican peso crisis, to the Asian crisis, to the LTCM crisis, to the Russian debt default.

But during the 1980s, the housing market was increasingly set up for failure, with a tripling of foreclosure rates in the decade. Deregulation meant that large corporations were freed from laws designed to protect consumers, although it also meant that the government would step back into the picture to protect these businesses from failure or accusations of fraud or corruption. For all intents and purposes, deregulation meant giving politically connected businesses free rein to prey upon Americans with no potential for public backlash against such practices.

It was not until the 1990s, though, that the housing market boom began, and not until the 2000s that it turned into the largest speculative bubble the world had ever seen. The 1980s, though, began the necessary trends in the economy, in government policies, and in the personal habits of Americans. Once a few other bubbles had burst, there was seemingly no other option left to obtain massive profits than to blow up the real estate market.