In the greater Sacramento area there are many pockets of neighborhoods that have an unusually high percentage of homes in foreclosure. Then there is the stress of so many Mortgage Lenders folding over the last few years. Investors have little confidence in the financial markets. In Sacramento and its surrounding areas we’ve seen many mortgage lenders lose their warehouse lines and haven’t been able to honor their commitments to lend, even on locked loans. Overnight one lender ‘s FHA rates jumped, whether locked or not, from an average of around 5.0% at par to 6.875% with over a 1 point cost! That is a huge increase!!!

Supply and Demand also plays a huge role in the volatility in mortgage rates of the Sacramento based lenders. National lenders rate sheets pretty much follow suit although they seem to be not as heavily impacted as smaller Sacramento lenders. There are many economic factors that act as catalysts but the ultimate reason for these wild swings in rates is supply and demand of Mortgage Backed Securities (MBS). Simply put, these are long term bonds that are tied to Mortgage rates. There is a highly liquid market for MBS just like the stock market. When demand for MBS increase, mortgage rates should drop and vice versa. Money travels in and out of the stock and the MBS markets throughout the day causing rates to go up and down accordingly and often swinging both ways multiple times throughout the day.

As mentioned above, an increase in demand of MBS should cause all rates to go down but that’s not always the case. Lenders aren’t passing on the savings to brokers or consumers. There are a couple of reasons for this. Lenders aren’t really lowering the rates accordingly to the changes in the MBS. Instead they are keeping a larger percentage of the spread between their investor’s rate to them and the rate that they offer to brokers and to the public. For example, one of my Sacramento based lenders posts their FHA rates in the morning and during the day the demand for MBS increases their price by 1 point. Normally that would drop rates by let’s say .5%. Instead the lender only drops the rate by .125 to .25%. The lender is not dropping the rate by as much because it increases their bottom line.

Another reason that mortgage lenders aren’t passing on this saving is because those that have survived have done so by decreasing their staff and overhead. Now that the treasury has been buying up MBS increasing the liquidity and the demand, mortgage rates have become attractive again and home prices are low because of all the foreclosures. Consequently the lenders have more volume than they can handle. They cannot keep up and don’t want to hire more staff in case the market slows down so they raise their rates to drive away some of the business

When you add up all of the factors mentioned here you can see why the rates bounce around so much. The combination of an abundance of area foreclosures, the supply and demand of MBS, and lenders not passing on their savings to brokers and consumers are collectively causing the volatility of mortgage rates in Sacramento and the rest of the nation alike.

California has a lot of wonderful places to be envied and awed like Disneyland, Hollywood, mountains, beaches, bay, deserts, Redwood, Yosemite, Silicon Valley, Los Angeles, San Francisco, Santa Barbara and more. Another prized possession of California is Sacramento, which is the literal heart of California. Hidden in the shadow of so many great attractions of a golden state, it stands out as a little river city that is so modest and regal, vibrant and spectacular- all at the same time.

There are many reasons as to why should one invest in real estate in Sacramento. To begin with, it is perfectly located in California, at a two-hour drive from many of the greatest attractions of the world. Secondly, the greater Sacramento region is divided in to 7 counties namely Sacramento County, Placer County, El Dorado County, Sutter County, Yuba County, Nevada County and Yolo County, each of which is said to have a superb location and they also flaunt inhabitants with a rich lifestyle. Also each county is growing at its own pace holding terrific opportunities for investment in both commercial and residential sectors.

The great culture of the city, which is laid back and yet vibrant, combined with affordable housing, makes it hot in the real estate market. Being the state capital, the support structure for a favorable job market is very strong. Again, there are many high-tech corporations here and other corporations and one can afford to have more space for warehouses and manufacturing units as compared to other locations in the state.

Transportation facility is very strong in Sacramento. Along with North/South and East/West transportation there are also large rail carriers and major freight carriers present there. Presence of good schools and universities makes it a hot spot for real estate investment. The city also boasts of being the agricultural hub of California.

The province has seen growth from all quarters. Limited by the Sierra hills, the eastern region has limited but strong development potential. The west, which was initially dormant and overshadowed by industrial parks, also has grown. Biggest growth of South Sacramento has come with Elk Grove being limited only by the delta. North Sacramento is a huge area and is still developing giving a lot of opportunities to the real estate investors.

The average value of property is appreciating at around 17%, which is well above 20% for many. This gives a favorable position to the investor to profit from buying and holding property. There is a lot of empty land left here which is which is being swooped by the developers making it all the more lucrative for investment in real estate. Real Estate in the entire US has risen as people have pulled out their money to invest in more lucrative options and Sacramento stands out as one of the most viable option.

The Sacramento in California is supposedly the hottest real estate market in the whole of the United States seconded only by Las Vegas. So, whether you are a beginner or a pro in real estate investment you can make money by investing in the US’s most beautiful and yet affordable properties in this area.