What a sad story coming out of Japan. The earthquake wasn't enough. Then a tsunami...still not enough. Now the potential melt down of their nuclear facilities. This massive disaster has investors pulling out of the equity markets and going to the safe haven of bonds as a way to protect their investment funds in such an uncertain time.
This is pretty typical behaviour during a time of uncertainty, but it is usually just a short term move as the uncertainty will eventually not be as 'uncertain.' Mortgage bonds have benefit ted tremendously over the past three weeks and we are seeing rates at the same levels we saw back in January. Though this is great for the still struggling housing market it will likely be short lived.
The trouble in Japan will be less cloudy and once the government of Japan and the insurance companies in Japan start pulling funds to clean up and rebuild the mortgage bonds and US Treasuries will take it on the chin. Japan is the 2nd largest owner of US Bonds. Japan will likely sell some of their holdings in US Bonds to pay for the repairs and clean up...the amount they will have to spend to repair the damage is going to be a very big number. Bonds will very likely fall when Japan begins to sell and investors feel the worst is behind them.
So those of you who may be celebrating these low rates and may be looking to buy a house in a few months or later this summer...don't get too carried away because rates may be back in the 5's on a 30-year fixed mortgage by the time you actually get ready to close.
Now is a great time for those homeowners who were going to refinance last year, but waited a little too long...don't wait any longer and miss this opportunity a 2nd time...you really will kick yourself in the backside if you wait for things to get better from here.
My thoughts and prayers go out to the families and communities affected by this disaster in Japan. I hope things improve each day and that country can begin the process of recovery.
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