Here's the fine print:

Prices, financing, plans, specifications, square footage, product availability, and other terms are effective as of the date of publication and are subject to change without notice. Homes are subject to prior sale. Square footage is approximate. See your tax advisor for details regarding deductions. Rendering may be artist's conception or photograph of a model home from a previous Centex community with similar floorplans, and may be significantly upgraded and enhanced. Models do not reflect racial preference.

*0.875% Interest Rate / APR 6.053%. APR is subject to increase. Loan package consists of a first lien for 80% of the purchase price. First lien has interest-only payments for the first 5 years. Followed by 5/1 LIBOR ARM with 10 year interest only payments. The discounted rate of 0.875% will remain in effect for 12 months, followed by a rate of 1.875% that will remain in effect for 12 months (months 13 – 24), followed by a rate of 2.875% that will remain in effect for 36 months (months 25 – 60). Loan terms shown assume fully documented owner-occupied financing, no origination fee. Maximum of 3% seller contribution towards interest rate buy-down. APR and monthly payments may increase after consummation. On sample loan of $417,000, assuming a home price of $522,000 with 20% down – 12 monthly payments of $304, followed by 12 monthly payments of $652, followed by 36 monthly payments of $999, next 299 monthly payments of $3,150 and final month payment of $3,142. Buyer must close escrow by November 2, 2006 to obtain loan terms shown.
Loan terms shown for qualified buyers only on selected inventory homes and varies by community – financed through CTX Mortgage Company, LLC, which is licensed by the California Department of Corporations under the California Residential Mortgage Lending Act. See sales representative for more details. This advertisement does not constitute an offer of credit. Monthly payments do not include property taxes, insurance or applicable homeowner association fees.

**3.75% Interest Rate / APR 6.635% Loan package is based on a purchase price of $533,575 and consists of an 80% first loan of $426,850 and a 20% down payment. The loan payment shown is a monthly installment of $1,333.91 with an APR of 6.635%. Loan payments are interest-only payments for the first 10 years. During the first 12 months the interest rate is 2.0% below the note rate, resulting in a monthly installment of $1,333.91 the interest rate is 1.0% below note rate for months 13 through 24, resulting in a monthly installment of $1,689.61 , and the interest rate will be the note rate of 5.75% for payments 25 through 60, resulting in a monthly installment of $2,045.32. Years 6 through 10 are based on a fully indexed rate. The loan will be fully amortized for the remaining term of the loan, Loan terms shown assume owner-occupied financing, no origination fee and buyer with credit score of 680+. Maximum of 3% seller contribution towards interest rate buy-down and closings costs. Buyer must closed escrow by September 30, 2006 to obtain loan terms and pricing shown.

***0.875% / APR 6.010% Loan package is based on a purchase price of $715,240 and consists of an 80% first loan of $572,192 and a 20% down payment. During the first 12 months the interest rate is 2.0% below the note rate, resulting in a monthly installment of $1807.73 The interest rate is 1.0% below note rate for months 13 through 24, resulting in a monthly installment of $2079.35, and the interest rate will be the note rate of 2.875% for payments 25 through 60, resulting in a monthly installment of $2373.99. Years 6 through 30 are based on a fully indexed rate. The loan will be fully amortized for the remaining term of the loan, Loan terms shown assume owner-occupied financing, 1% origination fee and buyer with credit score of 680+. Maximum of 3% seller contribution towards interest rate buy-down and closings costs. Buyer must closed escrow by November 15, 2006 to obtain loan terms and pricing shown.

Why are people lending money to the Government in 10-year T-bonds at 4.8 % ? When they can make >5% in 1-year CD’s.The market currently “thinks” that rates are flat or coming down.

Possible theories :

1. Maybe these highly educated folks believe what the market is telling them.
2. Maybe they have high incomes (or other assets) relative to the debt and are willing to take on the added risk.
3. Maybe they are just taking whatever the loan broker is selling them.

Thoughts ???

There are many institutional investors and foreign central banks who are too large and too risk averse to be buying 1-yr CDs in any old bank. They prefer to buy govt bonds and treasuries. In addition to size and risk, these type of entities are also interested in matching maturity terms to their own needs.