Ladies and Gentlemen, Elvis has Left the Building

Do you remember the old saying; 'Ladies and gentlemen, Elvis has left the building!' The reason that the saying exists is because after an Elvis concert the concert hall would stay packed and people would not leave. They would linger, not knowing what to do next. Would he come back, was it all over, they had no ability to make a decision.

Well, a similar thing has happened in the stock market and in the credit markets and everybody is milling around and wondering what to do. Wonder no more, some important changes are happening and you need to take advantage of them.

The recent take over of Fannie Mae and Freddie Mac and the failure of Lehman Brothers and even the lifeline thrown to AIG have a positive side. Even though our retirement accounts and stock portfolios are taking a beating, the stock market and bond market are finally working in unison.

Traditionally, when the price of stocks decline it causes the price of bonds to increase. This ying and yang of the financial world is caused by a desire by investor to find safe investments when the economy goes bad. Traditionally the fixed income Treasury Bond market has been the safe haven. But recent ‘structural’ problems related to the credit crisis had left investor with no place to hide.

Enter the Feds! The take over of Fannie Mae and Freddie Mac helped to right the markets. The take over caused a reduction in the spreads between the yields on Mortgage Backed Securities (MBS) and the Treasury Bonds. The actions by the government sent a clear message that our government would support our banking system and this caused the spreads to decrease to normal levels. Now this gobblee-gook doesn’t mean a whole lot too many people and explaining why this is important could take a whole day. We’re not here for an economics lesson so suffice to say that this is how the markets are supposed to work.

Many investors seeing that the markets are now working properly have begun to pour their dollars into the safety of government debt…..i.e. Treasury Bonds. As more and more investors purchase these bonds the price of the bond increases and as the price of the bond increases its yield decreases! Guess what happens to interest rates? That’s right, interest rates follow the yield. So as the yield decrease so do the interest rates.

This structural change in the market place has provided another great opportunity for home owners. Right now interest rates are below 5.5% - today they are as low as 5.25% on a 30-Year Fixed!(this is for a primary residence, of course the interest rates on an investment property would be slightly higher.) We don’t know how long this will last. Any sign of inflation, a weakening dollar or oil climbing above $110 per barrel could make all this opportunity melt away like butter in hot iron skillet.

If you know of any one looking to buy or who needs to refinance, they need to do it now. Don’t wait, get moving or get them moving before it’s to late. Elvis has left the building and the entertainment hall is in turmoil.

Don't look back and regret not making a decision. The exit signs are well lit. You can be the one outside standing beside Elvis' bus getting the autograph and adding value to your day just by being one of the first to make a decision.

If you have any questions please don’t hesitate to give me a call or to shoot me an email. I am here to serve.

Michael Gross is the President of Dividend America Mortgage and has been in real estate for over 20 years. He has been a builder, a Realtor, an appraiser, and currently he is a lender and an active real estate investor. He uses all of his experience and knowledge to show individuals how to properly use a mortgage as a tool to help create greater wealth through real estate investing. For more information on residential and small commercial loans please call him at 770-350-7373 or via email at mgross@dividendamerica.com