Paradigm change or polar bears?

Do you know someone who rents? Tell them about the $8,000 tax credit available to first time homebuyers* before it expires on November 30th! BB&T offers great programs and loans with little money down and no PMI for qualified borrowers. This is the best deal in town coming from the Best Bank in Town.
*The law defines "first-time home buyer" as a buyer who has not owned a principal residence during the three-year period prior to the purchase. For married taxpayers, the law tests the homeownership history of both the home buyer and his/her spouse. Consult your tax advisor.

Great Afternoon!
I haven't been sending my letter out lately but people were asking me for it so back by popular demand…
Its getting to be that time of year again when the summer is winding down, kids are shopping for school supplies, college students are moving into their dorms, and parents are ready for a nap. This is always an interesting time of year for a few reasons:
-We are moving out of summer and into fall meaning hurricane season, cooler weather, and less vacations.
-A "regular" schedule (whatever that means).
-FOOTBALL SEASON!!!
I can't speak for everyone, but at least two out of three reasons apply to most of you.

If you know anyone who wants to be added or removed from this letter please let me know.

Now onto the show…

Cash for Clunkers and Possible Paradigm Shift
The latest of the government's spending of the "bailout" money is the Cash for Clunkers program. Within the first six days of this program which started three weeks ago, the first one billion dollars was used. New legislation had to be passed for another two billion dollars to be spent. There are three ways of looking at this. The first way is the obvious… Why is the government spending OUR money for people to buy a new car? The second way is considering that this will help the environment by saving on gas mileage. The third way of thinking about it is that this could actually be the only program that has put money into the economy where people can actually see it making a difference on a personal level. "Main Street, not Wall Street."

Lets look deeper at all three ways of looking at this. First of all, yes, the government is spending about $4,500 of your money to help people buy cars. There is no way around that. Just like with everything else we have seen over the past year or so, this is part of the trillion dollar bail out package that was passed last year. Your money has already been spent. The second way of looking at this is helping the environment. While I agree to an extent that gas mileage could be better and that we need to get off of our foreign dependence on oil, this is not the way to do it. Sorry folks, two MPG isn’t going to save the polar bears either. Viewpoint number three is the most viable of the three that I listed in simplified terms. The car companies have sold more cars in the past three weeks than they sold in the previous three months. Why not if you can negotiate the price of the car, then when you are all finished STILL get another $4,500 off? There is no risk or assumed responsibility to the consumer (only to the dealership). We are lessening the supply of cars in the market, selling newer, safer, cleaner cars, and stimulating local economies.

With every good idea there is always going to be a negative to it. By default, if we are getting rid of these cars that are the "clunkers" then we are actually causing inflation in the auto industry. The cars that would have been traded will now not appear on car lots, therefore hurting those with lower incomes who would have under regular circumstances, purchased this inventory. Now they are forced to buy cars that were not part of the clunker program which, in reality, are going to be more expensive. Another negative effect that this will have is that future sales of cars are being diminished. This is just like back when the auto companies decided 0% financing was a good idea, and they sold lots of cars doing it. When they tried to raise interest rates, even to 1.9%, people rejected it expecting that the rate would eventually drop again, which it did. Demand goes down, supply goes up, prices are forced to drop again. That is basic economics and possible foreshadowing of a paradigm change not only in the auto industry but in other aspects of the economy as well. To add another factor, if people are driving newer cars we have to assume that they will last longer than older cars will meaning the car companies may not sell another car to that person for another year after they normally would have if the owner drove their old car to the end of the car's useful life. This program is a short term program showing short term results but it will take years to see the true long term value, if any.

Financial Update
In other news, Colonial Bank fell to the FDIC last week. The main benefactor of this collapse is BB&T. BB&T took Colonial over from the FDIC late Friday afternoon. This will go down as the largest bank failure of 2009 but at the same time, it will create an asset for BB&T making us the 9th largest financial institution in the country.

Over the past few weeks I have heard talk about the "recession being over" and the "bull market returning". While I am hopeful that we have seen the last of this economic disaster and financial crisis, I am not confident that we have seen the end of whatever it is that we are currently classified as. As the fed keeps printing more money we can assume that inflation will kick in. As that happens and jobs are still being lost, it is going to be a real issue creating stagflation. The federal reserve met last week and decided to keep interest rates at 0%-.25% but analysts say that they could start to rise again as early as January. Keep your eyes open for any drastic changes in the bond market. The stock market has been on an upswing lately hopefully signifying that we saw the bottom already. One important thing to watch is the fed said they would continue to purchase treasuries through October so that leaves a question as to what happens after that.

Mortgage rates are lower right now than they have been for a few weeks. They are nowhere near the fifty-year lows they were at six months ago yet still much lower than they were 12 months ago. If you are looking to refinance with a solid bank, BB&T Home Mortgage is the way to go. Even in this environment of tougher lending practices, money is readily available for qualified borrowers whether you are a first time homebuyer or retired and looking for a vacation home. Remember, I am not simply a loan officer at a big bank, I am a Mortgage Advisor looking out for the people who trust me to do so.

Please forward this message to people you know, maybe they want to be added to my mailing list. If you would like to be removed please let me know. You can also visit my blog at www.Jmassachi.Blogspot.com to see this and other letters and comment and discuss them.

Thank you for your attention!

Your waiting-for-football-season mortgage advisor

Jon's Mortgage Spotlight
Prequalification
Getting prequalified is the first step to purchasing a new home. Most people don't know how much house they can afford. Getting prequalified is the best way to do that so your realtor doesn't waste your time by showing you houses that you can't get. The process takes just a few minutes and can be done over the phone, in person, or by email. Ask me how!

Jon Massachi
Mortgage Advisor
Branch Banking and Trust
Office: 704-243-7590
Cell: 704-650-9568
Fax: 704-843-1863
JMassachi@BBandT.com
BBT.com/mlo/JMassachi
JMassachi.blogspot.com

Velocity of Money and the Triple Detroit Investment (from 12/11/08)

Tired of paying that high interest rate? Ready to move into a new house? Now is the time to apply for a mortgage because rates are incredibly low! If you are thinking about refinancing or moving into a new home make sure you take advantage of $250 off closing costs by coming to me for your mortgage. This is the best deal in town coming from the Best Bank in Town.

Great Afternoon!
It has been a while since I have sent out an email and I am going to try to be more consistent about it. In my last email I promised I would discuss velocity of money and that is what I am going to do. However, first I am going to talk about the economy and some current events and factors that are affecting the market… and of course the Panthers!

We are getting towards the end of the regular football season and there are playoff talks now. If anyone saw the Monday night game, the Panthers beat the Bucs to take first place in the division. If the Panthers can win the next three games, they will have the number one seed going into the playoffs and home field advantage all the way through.

My mailing list is growing quickly. If you know someone that wants to be added, just let me know and of course if you want to be removed let me know that too. Check it out in my blog at Jmassachi.blogspot.com. Start some discussion and let me know what you think. Feedback is appreciated.

Onto the show…

The Government's Triple Detroit Investment
The big talk this week in the news is the Big Three in Detroit. Yesterday, the house approved a $15 billion loan to GM and Chrysler with specific details of what they want to see these privately held companies accomplish by the end of the first quarter 2009. While $15 billion may not seem like a lot of money after hearing numbers over the past few months thrown around such as $700 billion, $850 billion, and $3 trillion. I promise you, all of those numbers are HUGE. The reason the government gave for saving the automakers is mainly the jobs that it provides. It is not just jobs in Detroit that build the cars that are at risk but jobs in all fifty states that are related to the auto industry that are at risk if the Big Three fail. I will follow up with this in my next letter. This is heavily related to my next topic which is velocity of money...

Velocity of Money - How The Economy Works
Velocity of money has nothing to do with how much ads cost in NASCAR. Or maybe it does. Money travels around micro and macro economies faster than most people understand. It is not you buying an item on EBay from someone in London, it is you buying a soda at Wal Mart. When you buy that soda the money gets distributed around the world multiple times. You buy the soda, Wal Mart pays their vendor, the vendor pays the wholesaler, the wholesaler pays the distributor, the distributor pays the soda company, the soda company pays their vendors which include sugar, water, and the hundreds of other ingredients that go into making one bottle of soda. Before you know it, part of your $1.50 soda is somewhere in Colombia on a sugar cane farm. Here is where the complicated part comes. Where does it go after that? Well the farmer then can plant more crops for next season to make sure you have soda in Wal Mart.
What happens if we skip some of those steps and go straight from the sugar cane farm to the soda company to Wal Mart? Now we have three steps in the middle that are out of jobs and those people may not be able to afford a bottle of soda at Wal Mart. That is how a recession happens. Money needs to float freely through the economy in order for it to work. As soon as one process gets removed there is bound to be another then another.

How does the economy spark back up?
When a new distributor comes along and tells Wal Mart that he can simplify their process so less of their energy goes toward getting soda and more goes towards selling it all of a sudden jobs are created and people can afford to spend money and buy those sodas that they are making, distributing, selling, and eventually consuming themselves. That is just touching the surface of how things work but a good example to think about. This is one of my favorite things to discuss so let me know if you want more information.

Financial Update
Since the DJIA highest close ever on October 14, 2007, the market has lost over 38% of its value. Why? A lot of people are still talking about being in a credit crunch. That is not the problem. The true problem is a liquidity crunch. There is simply no cash to be had, it is all tied up in bad investments OR it is being held because there are no strong investments to put it in right now.

Despite media reports, banks are still lending money. Car loans, credit cards, and mortgages are all still readily available for qualified buyers. Sure it might be nearly impossible to buy an investment property with no money down and no closing costs with no credit and no assets like it was back in 2006 but it is not impossible to buy a house to live in for a typical home buyer. Don't let the media fool you, there are still loans available and at low interest rates!

The Federal Reserve is meeting next week. The last time they met they cut the Fed Funds rate to 1% which gave the market a slight boost. There are talks of lowering the rate again by .5%. That would put short term money based on Prime Rate at 3.5% for qualified borrowers. It seems as though the fed is not worried about inflation (as much) these days because of the prices of commodities going down. Just this week oil hit a four year low at less than $40 per barrel which equates to gas well under $2 a gallon. I don't blame gas prices for this recession but I do believe it was high gas prices that drove the economy into a downward spiral as fast as it did. Could lower gas prices be what we need to spark the economy again? Only time will tell.

Mortgage rates are lower right now than they have been for years. If you are looking to refinance with a solid bank at a great rate and low closing costs BB&T Home Mortgage is the way to go. BB&T has won the JD Power award again this year. It is our second year in a row winning the award for the servicing of our mortgages. BB&T does not sell the servicing to anyone. Remember, I am not simply a loan officer at a big bank, I am a Mortgage Advisor looking out for the people who trust me to do so.

Please forward this message to people you know, maybe they want to be added to my mailing list.

Thank you for your attention!
Your money-moving mortgage advisor


Jon's Mortgage Spotlight
30 year fixed mortgage
BB&T has over 400 different mortgage products that we can offer to our clients. The most common is a 30 year fixed mortgage. Why? Right now, especially, because rates are so low this makes the most sense. The spread between a 15 year or even a 10 year mortgage is small enough that it makes more sense to spread the debt out over 30 years and take the additional cash flow and invest in a SAFE investment at a higher rate of return than the rate spread. If you need more information about terms, rates, or investments please let me know.