2008 Mortgage Forecast

Mortgage Market Forecast 2008
By Barry Habib and Sue Woodard

We’re not sure if we are happier about 2008 being here…or that the historical events of 2007 have finally come to a close. One thing is for sure – 2008 promises to be exciting, full of changes, and most of all…volatile. We humbly hope our forecast for 2008 will help give you an edge in the year ahead.

Looking back, we are very proud of our previous years forecasts, and hope that our accurate track record can remain intact. And by the way…don’t miss the accompanying conference call to this article, as we have assembled some of the very best and brightest financial minds in the country including Knight Kiplinger, Tom LaMalfa, Frank Nothaft and John Mauldin. Listen in to hear their fascinating – and sometimes surprising – insights and predictions for 2008.

Economy: Hot or Not?

Fed Chairman Big Ben Bernanke says we will not have a recession in 2008 – but we feel there is a 75% chance that there will indeed be a recession. Remember, the textbook definition of a recession is two consecutive quarters of negative GDP growth.

The health of any economy is often judged by its Stock Market…and while we had correctly forecast the upside moves of the past two years, we now see a lower Stock Market for 2008. A 5 – 10% drop appears to be in the cards. But that will be nothing compared to the bubble that will burst in the Chinese Stock Market, up 97% last year, and more than 350% for the past two years…the Chinese Stock Market is due for a drop.

Our stock pick for this year is FXP ($76), which is a double short on China…but not for the faint of heart.

One Hand Tied Behind Their Back

Typically, the Fed fights off a recession with rate cuts – and while rate cuts help the economy, they can also spark higher inflation. And we believe inflation is actually a much bigger problem than most out there realize.

The new hawkish makeup of the Fed’s voting members means the Fed remains concerned about inflation too – but is now in the difficult position of fighting off the potential of a recession with one hand tied behind their back…as they will be restricted in the amount of their stimulating rate cuts, by the inflation those cuts will inevitably exacerbate.

While many people see a Fed Funds Rate in the low 2’s, we see it landing around 3.25%.

Gold, Oil, and the Wimpy Dollar

Gold has reached a record high and will probably move even higher before settling back. Oil has finally reached the $100 per barrel mark…but the rise isn’t over yet. The oil industry is so delicate that any geopolitical crisis could have a major impact on production and distribution. And even without a crisis, demand for oil is still high in the US…and is growing every day in burgeoning countries like China and India. We see oil prices reaching $115 per barrel – and gasoline hitting $4 per gallon at the pump this summer.

The US Dollar has gotten pummeled in the last year against other foreign currencies, but during 2008, the Dollar should bottom out and see a slight rebound.

Housing – Deal or No Deal?

Home prices dropped between 5 – 10% in 2007, but there was no “bubble”. 2008 will be another down year for housing with similar declines in prices – but will also mark a bottoming out. The thing of it is…you can’t see a bottom until you are already past it, much like how we always see refinance activity pick up when rates start rising from their lowest levels!

2008 will see great deals for housing and real estate. Rising incomes and lower home prices will make real estate more affordable, as some of the excesses are washed out. Now more than ever, make sure you stay in touch with your client database and referral partners to educate them on what’s happening, and how the present market creates opportunities for them.

Drum Roll Please…

Mortgage Rates for 2008 will be…volatile. We see a much wider range than in the past few years, with sharp moves and intra-day repricing becoming commonplace. This gives you, our valued Mortgage Market Guide family, an enormous advantage over your lesser-equipped competitor, who will certainly be whipsawed time and again throughout the year.

In 2007, we correctly forecast the range to be from 5.875 – 6.625%, which was narrower than the range in 2006. But this year, 30-Year Zero point Conforming loans will likely touch a bottom near 5.5%, and approach a spike near 7%. As inflation creeps in, 2008 will see a slightly higher sweet spot than 2007, somewhere around 6.25%.

But one important development for rates in 2008 will be the rebirth of Adjustable Rate Mortgages – the old fashioned kind. 3 and 5-Year ARM’s will benefit from the Fed Rate cuts…and so will you, especially those in Jumbo markets.

As rates remain volatile, make sure you’re keeping your clients and prospects educated on what’s happening and why. Read the Daily Updates, use the Daily Script, build your database and pound the phone. When your clients and referral partners see that you have your thumb on the pulse and are a real professional, this will translate into more business and more referrals.

Success in 2008

For you, 2008 will be exactly what you make of it. If you listen to the media and the whiners, it will be a tough year. But if you look for the opportunities, and use the tools at your fingertips, 2008 will provide you with enormous opportunity to build your database and your bank account. Consider this: 60% of your competitors are now gone. The Fed will be cutting. Home prices are cheaper. And almost everyone in your database will become a refinance candidate.

The mortgage business is in a radical transition – but if you make the right moves in the coming year, you will look back and see 2008 as the turning point in your successful career. Team, stay alert, stay strong. Keep your eyes and ears open. Be the expert, and hit the streets with your insight.

The coming year will be full of changes and volatility…but remember that whoever says it can’t be done, is generally interrupted by someone doing it. It can be done. Don’t let anyone stop you from making this a great year. We at the Mortgage Market Guide appreciate you – our family of subscribers – and we will keep doing our part to help keep you informed and advised every step of the way during 2008.

Interested? Call me at 702-277-4605 or fill out my interest form.

Real Estate Las Vegas - Michael Campbell is the professional, honest, and experience Real Estate Consultant you can trust!
Please download the latest version of the Flash Player Plugin to view this page correctly.