INFO THAT HITS US WHERE WE LIVE Housing was more affordable in November than at any time in the last 40 years. So it should come as no surprise that Existing Home Sales were UP 5.6% for November, bringing them to an annual rate of 4.68 million, a tad above the expected 4.65 million rate. Sales were up for single-family homes, although down for condos and coops, and all regions of the country registered gains.
The median price increased to $170,600 in November (not seasonally adjusted) and that figure is UP 0.4% over a year ago. The FHFA index of prices for homes bought with conforming mortgages also was up 0.7% in October (seasonally-adjusted), its first gain since May. The months' supply dipped to 9.5, with a decline in overall inventories.
Thursday saw new single-family home sales UP 5.5% for November, to a 290,000 annual rate, a little short of expectations. The months' supply of new homes dropped to 8.2 from October's 8.8 level. The new homes inventory is now down to 197,000, 65.6% off its 2006 peak, and the lowest inventory level going back to 1968. The median selling price went up to $213,000, after dipping under $200,000 in October.
Monday, December 27, 2010
Wednesday, December 22, 2010
The Economy is Stronger!
The Final Reading for 3rd Quarter Gross Domestic Product (GDP) was reported this morning at a 2.6% pace, slightly better than the previous reading but a bit lower than the 2.7% anticipated. Some optimistic "whisper numbers" - or gossip in the trading pits - had called for a reading north of 3%. However, we think, a deeper look into the number does raise concerns, as the gains came mostly from an upward rise in inventories, which offset a downward revision in household purchases. Now think about that - rebuilding inventory just means restocking of shelves, which would be normal ahead of the holiday season, and this particular type of gain has a "shelf life" (ahh…no pun intended, of course). At some point, consumer demand is what is needed to fuel GDP moving higher in a sustainable fashion, and that will in turn help create jobs.
Looking back at last year - for 2010 overall, the economy grew 3.7% in the 1st quarter, 1.7% in the 2nd quarter and 2.6% in the 3rd quarter. In order to create meaningful jobs and put a dent in the unemployment rate, we need to see GDP consistently above 3.5% - and it is likely GDP will be coming in less than that for most of 2011.
It will be interesting to see how the tax cut package and the remaining $450B+ dose of QE2 can help GDP. We expect to see an improved economy - but how much and how soon remains to be seen. Fortunately for the economy, inflation expectations have already ticked higher, as experts believe the Fed will meet their goal of creating inflation. (However, this is not fortunate for Bonds and home loan rates, as we've all been experiencing in recent weeks.) Yet this story isn't over - we need to see how inflation, GDP and jobs fare over the next couple months, which will give us a much better idea of the strength of the economy, and how soon it might be self sustaining, free from government support.
Good news from the housing sector - Existing Home Sales numbers arrived for November at 4.68M, better than expectations, as well as a nice pick up from October's numbers of 4.43M. Additionally, the inventory of unsold homes declined to a 9.5 month supply, a good drop from the prior month's 10.5 month supply. Encouraging news, as it shows that sidelined buyers are starting to dip their toes in the water - and with rates still relatively low, combined with affordable home prices, it remains an incredible time to buy.
Looking back at last year - for 2010 overall, the economy grew 3.7% in the 1st quarter, 1.7% in the 2nd quarter and 2.6% in the 3rd quarter. In order to create meaningful jobs and put a dent in the unemployment rate, we need to see GDP consistently above 3.5% - and it is likely GDP will be coming in less than that for most of 2011.
It will be interesting to see how the tax cut package and the remaining $450B+ dose of QE2 can help GDP. We expect to see an improved economy - but how much and how soon remains to be seen. Fortunately for the economy, inflation expectations have already ticked higher, as experts believe the Fed will meet their goal of creating inflation. (However, this is not fortunate for Bonds and home loan rates, as we've all been experiencing in recent weeks.) Yet this story isn't over - we need to see how inflation, GDP and jobs fare over the next couple months, which will give us a much better idea of the strength of the economy, and how soon it might be self sustaining, free from government support.
Good news from the housing sector - Existing Home Sales numbers arrived for November at 4.68M, better than expectations, as well as a nice pick up from October's numbers of 4.43M. Additionally, the inventory of unsold homes declined to a 9.5 month supply, a good drop from the prior month's 10.5 month supply. Encouraging news, as it shows that sidelined buyers are starting to dip their toes in the water - and with rates still relatively low, combined with affordable home prices, it remains an incredible time to buy.
Monday, December 20, 2010
Markets and the Holiday
Last Thursday it was good to see that Housing Starts picked up for November, rising 3.9% for the month to an annual rate of 555,000 units. This beat expectations and was especially gratifying because all the gain came from a 6.9% increase in single-family starts. These have now been up three out of the last four months.
Multi-family starts were down for the fourth month in a row, but these are very volatile on a monthly basis. In fact, the 12-month moving average for multi-family starts is still trending higher, up 5.9% compared to a year ago. The demand for multi-unit residences should continue to grow, which is why some observers foresee a large rebound in multi-unit construction in the new few months. Although there are still excess housing inventories, they are falling quickly and experts expect them to drop further, even with a home building recovery.
>> Review of Last Week
THREE IN A ROW... Investors sent stocks higher for the third straight week on Wall Street. The markets weren't exactly on fire, as volumes were low, which is typical for this time of year, and investors remain guardedly optimistic, which has been their attitude since last month's elections. As happens so often, the week's festivities were driven by the economic headlines and there certainly were plenty to ponder.
The consumer appears to be showing up for the holidays, as retail sales went up 0.8% in November, up 1.2% excluding autos. Including revisions to September and October numbers, overall sales were up 1.5% for the month. Retail is now UP 7.7% over a year ago, and sales are up at a 12% annual rate for the past five months! On the worrisome side, the November Producer Price Index (PPI) showed wholesale inflation up 0.8%, although the Consumer Price Index (CPI) rose a benign 0.1%. Consumer prices are up 1.1% over a year ago, which is good, but wholesale prices are up 3.5% for the year, which isn't so good if you want to keep inflation in check and interest rates down.
The jobs recovery is key to the housing rebound, so it was good to see new unemployment claims falling again last week, to 420,000. This beat expectations and was the second lowest number this year for weekly claims, which have now fallen three times in the last four weeks. The Philadelphia Fed index showed manufacturing continues to grow in that region, as it was up nicely for December. Likewise, the Empire State index showed New York manufacturing coming back strong in December after last month's dip. November Industrial Production rose above expectations and capacity utilization showed factories at their highest volume levels since October 2008.
For the week, the Dow was UP 0.7%, to 11491.91; the S&P 500 was UP 0.3%, to 1243.91; and the Nasdaq was UP 0.2%, to 2642.97.
With investors feeling more upbeat about the economy, money flowed into stocks and out of the bonds that fund most mortgage loans. The FNMA 30-year 4.0% bond we watch ended down 78 basis points for the week, closing at $98.22. This inched mortgage rates higher once again. Freddie Mac's weekly survey of conforming mortgages had the average 30-year fixed-rate mortgage rate up for the fifth week in a row. Rates are still historically low, but people looking to purchase or refinance should be aware that the low-rate party may soon be over.
>> This Week’s Forecast
HOUSING, INFLATION AND THE OVERALL ECONOMY... This week we get to see how the economy is coming along in some key areas. We track the housing recovery with Wednesday's Existing Home Sales and Thursday's New Home Sales, both expected to be up a bit for November. Continuing the theme of a steady if slow recovery, the third estimate of GDP should show the overall economy growing at a 2.7% annual rate, up from the prior 2.5% estimate. Again, a slower rate of growth than economists would like to see, but growth nonetheless.
Thursday brings more inflation readings, with both Personal Spending and Core PCE Prices expected to remain under control. The final December reading on University of Michigan Consumer Sentiment may be up a small amount, while November Durable Goods Orders may be down a tad. The markets will be closed Friday.
Happy Holidays to you and yours during this joyous season!
Multi-family starts were down for the fourth month in a row, but these are very volatile on a monthly basis. In fact, the 12-month moving average for multi-family starts is still trending higher, up 5.9% compared to a year ago. The demand for multi-unit residences should continue to grow, which is why some observers foresee a large rebound in multi-unit construction in the new few months. Although there are still excess housing inventories, they are falling quickly and experts expect them to drop further, even with a home building recovery.
>> Review of Last Week
THREE IN A ROW... Investors sent stocks higher for the third straight week on Wall Street. The markets weren't exactly on fire, as volumes were low, which is typical for this time of year, and investors remain guardedly optimistic, which has been their attitude since last month's elections. As happens so often, the week's festivities were driven by the economic headlines and there certainly were plenty to ponder.
The consumer appears to be showing up for the holidays, as retail sales went up 0.8% in November, up 1.2% excluding autos. Including revisions to September and October numbers, overall sales were up 1.5% for the month. Retail is now UP 7.7% over a year ago, and sales are up at a 12% annual rate for the past five months! On the worrisome side, the November Producer Price Index (PPI) showed wholesale inflation up 0.8%, although the Consumer Price Index (CPI) rose a benign 0.1%. Consumer prices are up 1.1% over a year ago, which is good, but wholesale prices are up 3.5% for the year, which isn't so good if you want to keep inflation in check and interest rates down.
The jobs recovery is key to the housing rebound, so it was good to see new unemployment claims falling again last week, to 420,000. This beat expectations and was the second lowest number this year for weekly claims, which have now fallen three times in the last four weeks. The Philadelphia Fed index showed manufacturing continues to grow in that region, as it was up nicely for December. Likewise, the Empire State index showed New York manufacturing coming back strong in December after last month's dip. November Industrial Production rose above expectations and capacity utilization showed factories at their highest volume levels since October 2008.
For the week, the Dow was UP 0.7%, to 11491.91; the S&P 500 was UP 0.3%, to 1243.91; and the Nasdaq was UP 0.2%, to 2642.97.
With investors feeling more upbeat about the economy, money flowed into stocks and out of the bonds that fund most mortgage loans. The FNMA 30-year 4.0% bond we watch ended down 78 basis points for the week, closing at $98.22. This inched mortgage rates higher once again. Freddie Mac's weekly survey of conforming mortgages had the average 30-year fixed-rate mortgage rate up for the fifth week in a row. Rates are still historically low, but people looking to purchase or refinance should be aware that the low-rate party may soon be over.
>> This Week’s Forecast
HOUSING, INFLATION AND THE OVERALL ECONOMY... This week we get to see how the economy is coming along in some key areas. We track the housing recovery with Wednesday's Existing Home Sales and Thursday's New Home Sales, both expected to be up a bit for November. Continuing the theme of a steady if slow recovery, the third estimate of GDP should show the overall economy growing at a 2.7% annual rate, up from the prior 2.5% estimate. Again, a slower rate of growth than economists would like to see, but growth nonetheless.
Thursday brings more inflation readings, with both Personal Spending and Core PCE Prices expected to remain under control. The final December reading on University of Michigan Consumer Sentiment may be up a small amount, while November Durable Goods Orders may be down a tad. The markets will be closed Friday.
Happy Holidays to you and yours during this joyous season!
Saturday, December 18, 2010
Is the Party Over?
Is the low interest rate party over? No one can say for sure...but recently mortgage rates have begun to move up. What we can say for sure is that rates can’t stay at historic lows forever and now may be the perfect time to refinance or purchase your dream home. So if you or anyone you know may be thinking about home financing please have them contact us right away, because the party may be over soon!
Saturday, December 11, 2010
Money Facts
More about money – some interesting info...
Money might not buy happiness, but it does make the world go round and everybody seems to want to get their hands on it. Here are some intriguing details about our currency:
What's the biggest bill ever issued? The $100,000 Gold Certificate of 1934. President Woodrow Wilson's portrait was on these bills, which were only used by Federal Reserve banks and never went into general circulation.
How much of our money is in dollar bills? In fiscal year 2009, 42.9% of the bills printed were $1 notes.
How long does money last? Money may not stay long in your wallet, but it does hang around for a while out in the world. The government reports these average life spans for the various bills: $1 - 42 months; $5 - 16 months; $10 - 18 months; $20 - 24 months; $50 - 55 months; and $100 - 89 months. When bills are too worn, they're pulled from circulation and replaced. Coins last about 25 years.
How many pennies would it take to stretch across the country? It takes 84,480 pennies to cover a mile and over 250 million of them to go coast to coast. That adds up to over $2.5 million.
Did any bill ever have a picture of a woman? Martha Washington's portrait was on the face of the 1886 and 1891 $1 Silver Certificates and on the back of the ones issued in 1896.
Has a portrait of an African American ever been on U.S. currency? Commemorative coins in the 1940s had pictures of George Washington Carver and Booker T. Washington and a recent one honored Jackie Robinson. No paper money has had an African American's portrait, but the signatures of four African American Registers of the Treasury have been on our bills – Blanche K. Bruce, Judson W. Lyons, William T. Vernon, and James C. Napier – as well as the signature of one African American woman, Azie Taylor Morton, the 36th Treasurer of the United States, who served from 1977 to 1981.
What kind of paper do they use to print money? They don't. Our bills are a 75% cotton - 25% linen blend with silk fibers throughout. This is far more durable than paper when wet.
How tough is our money? Government tests show our bills can be folded forward and backward 4,000 times before they tear.
What is that eye at the top of the pyramid? The "all-seeing eye" is a symbol of divine providence.
E Pluribus Unum – what's it mean? This Latin motto means, "Out of many, one." It can be freely translated as, "Many uniting into one." It has been on the Great Seal of the United States since 1782, but didn't wind up on our money until 1902.
Is a torn bill still worth something? The U.S. Bureau of Engraving and Printing (BEP) says on their website: "The BEP redeems partially destroyed or badly damaged currency as a free public service....The Office of Financial Management, located in the BEP, uses experts to examine mutilated currency and will approve the issuance of a Treasury check for the value of the currency determined to be redeemable."
Our final point about money has to do with saving some on your mortgage. Please note that mortgage interest rates are still at historically low levels and many observers think there may never be a better time to purchase or refinance a home than now. Feel free to contact us about any matters relating to home financing or refinancing.
Most importantly, we wish you and your loved ones all the best this holiday season – and a happy and prosperous New Year!
... Have a great day!
Monday, December 6, 2010
For the week of December 6, 2010
For the week of December 6, 2010 –
>> Market Update
INFO THAT HITS US WHERE WE LIVE Last Thursday the National Association of Realtors (NAR) reported Pending Home Sales for October UP 10.4% over the month before. This index is a measure of signed purchase contracts, which bodes well for Existing Home Sales a couple of months out. The NAR's chief economist commented, "It is welcoming to see a solid double-digit percentage gain, but activity needs to improve further to reach healthy, sustainable levels. The housing market clearly is in a recovery phase and will be uneven at times, but the improving job market and consequential boost to household formation will help the recovery process going into 2011."
Tuesday, the S&P/Case-Shiller home price index was down 0.8% in September for the 20 largest metro areas in the country. This was the third month in a row the index dipped, but national average home prices are still up 0.6% versus a year ago. Prices are also 3.2% above the May 2009 bottom and some analysts do not expect prices to go below that level. Opinions differ, however. Check out this map on the risk of price declines in various parts of the country: http://www.smartmoney.com/tools/worksheets/?story=SMARTMONEYMARKET101115
>> Review of Last Week
BAD JOBS, GOOD WEEK... The week ended on a November Jobs report that delivered less-than-expected payroll gains and a slightly higher unemployment rate, but Wall Street basically shrugged it off. In fact, there was enough good economic news that investors sent all three stock market indexes UP solidly for the week.
Let's start with those disappointing employment numbers. Non-farm payrolls grew in November by 39,000, but the consensus expected 150,000. But September and October revisions added 38,000 jobs, taking the net gain to 77,000. Payrolls in the private sector were up 50,000, their eleventh straight monthly gain, and prior months' revisions added 6,000, for a net gain of 56,000. No one was happy to see the unemployment rate creep up to 9.8%, but with growing payrolls, more people are jumping back into an improving jobs market, so the workforce is growing. New weekly jobless claims also grew, but the four-week moving average dropped to its lowest level in over two years.
More obvious good economic news came in the form of the rising October Pending Home Sales figure reported above. Q3 Productivity was also UP 2.3% annually and UP 2.5% over last year. Both Chicago manufacturing and Consumer Confidence numbers were UP and the ISM Services index came in better than expected, as did same store retail sales. Even all the recent fears over European debt subsided, with the European Central Bank President hinting at more support for the region.
For the week, the Dow was UP 2.6%, to 11382.09; the S&P 500 was UP 3.0%, to 1224.71; and the Nasdaq was UP 2.2%, to 2591.46.
Even though bonds first benefited from the disappointing jobs report, prices eventually came under pressure from money flowing back into rallying stocks. The FNMA 30-year 4.0% bond we watch ended down 89 basis points for the week, closing at $100.20. National average rates for fixed-rate mortgages headed north a tad, according to Freddie Mac's survey of conforming mortgage rates. They're still at historically low levels, but wise buyers and refinancers shouldn't wait.
>> This Week’s Forecast
TAKING A BREAK... After last week's busy schedule of economic news, we'll be taking a bit of a breather this week. The weekly Initial Unemployment Claims and Continuing Claims will continue to hold our interest and are expected to show a slowly strengthening jobs picture. Friday's October Trade Balance is forecast to hold steady. Right after that, we'll see a reading on the University of Michigan Consumer Sentiment Index, which is expected to keep tracking upward.
>> The Week’s Economic Indicator Calendar
Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates.
Economic Calendar for the Week of December 6 – December 10
Date Time (ET) Release For Consensus Prior Impact
W
Dec 8 10:30 Crude Inventories 12/4 NA 1.07M Moderate
Th
Dec 9 08:30 Initial Unemployment Claims 12/4 430K 436K Moderate
Th
Dec 9 08:30 Continuing Unemployment Claims 11/27 4.250M 4.270M Moderate
F
Dec 10 08:30 Trade Balance Oct –$44.4B –$44.0B Moderate
F
Dec 10 09:55 Univ. of Michigan Consumer Sentiment Dec 72.5 71.6 Moderate
>> Federal Reserve Watch
Forecasting Federal Reserve policy changes in coming months All the experts still feel the Fed Funds Rate will stay at its super low level through the first half of next year. A threat of inflation, or a strengthening of the economic recovery, of course, could start rates back up. Note: In the lower chart, a 1% probability of change is a 99% certainty the rate will stay the same.
Current Fed Funds Rate: 0%–0.25%
After FOMC meeting on: Consensus
Dec 14 0%–0.25%
Jan 26 0%–0.25%
Mar 15 0%–0.25%
Probability of change from current policy:
After FOMC meeting on: Consensus
Dec 14 <1%
Jan 26 <1%
Mar 15 <1%
>> Market Update
INFO THAT HITS US WHERE WE LIVE Last Thursday the National Association of Realtors (NAR) reported Pending Home Sales for October UP 10.4% over the month before. This index is a measure of signed purchase contracts, which bodes well for Existing Home Sales a couple of months out. The NAR's chief economist commented, "It is welcoming to see a solid double-digit percentage gain, but activity needs to improve further to reach healthy, sustainable levels. The housing market clearly is in a recovery phase and will be uneven at times, but the improving job market and consequential boost to household formation will help the recovery process going into 2011."
Tuesday, the S&P/Case-Shiller home price index was down 0.8% in September for the 20 largest metro areas in the country. This was the third month in a row the index dipped, but national average home prices are still up 0.6% versus a year ago. Prices are also 3.2% above the May 2009 bottom and some analysts do not expect prices to go below that level. Opinions differ, however. Check out this map on the risk of price declines in various parts of the country: http://www.smartmoney.com/tools/worksheets/?story=SMARTMONEYMARKET101115
>> Review of Last Week
BAD JOBS, GOOD WEEK... The week ended on a November Jobs report that delivered less-than-expected payroll gains and a slightly higher unemployment rate, but Wall Street basically shrugged it off. In fact, there was enough good economic news that investors sent all three stock market indexes UP solidly for the week.
Let's start with those disappointing employment numbers. Non-farm payrolls grew in November by 39,000, but the consensus expected 150,000. But September and October revisions added 38,000 jobs, taking the net gain to 77,000. Payrolls in the private sector were up 50,000, their eleventh straight monthly gain, and prior months' revisions added 6,000, for a net gain of 56,000. No one was happy to see the unemployment rate creep up to 9.8%, but with growing payrolls, more people are jumping back into an improving jobs market, so the workforce is growing. New weekly jobless claims also grew, but the four-week moving average dropped to its lowest level in over two years.
More obvious good economic news came in the form of the rising October Pending Home Sales figure reported above. Q3 Productivity was also UP 2.3% annually and UP 2.5% over last year. Both Chicago manufacturing and Consumer Confidence numbers were UP and the ISM Services index came in better than expected, as did same store retail sales. Even all the recent fears over European debt subsided, with the European Central Bank President hinting at more support for the region.
For the week, the Dow was UP 2.6%, to 11382.09; the S&P 500 was UP 3.0%, to 1224.71; and the Nasdaq was UP 2.2%, to 2591.46.
Even though bonds first benefited from the disappointing jobs report, prices eventually came under pressure from money flowing back into rallying stocks. The FNMA 30-year 4.0% bond we watch ended down 89 basis points for the week, closing at $100.20. National average rates for fixed-rate mortgages headed north a tad, according to Freddie Mac's survey of conforming mortgage rates. They're still at historically low levels, but wise buyers and refinancers shouldn't wait.
>> This Week’s Forecast
TAKING A BREAK... After last week's busy schedule of economic news, we'll be taking a bit of a breather this week. The weekly Initial Unemployment Claims and Continuing Claims will continue to hold our interest and are expected to show a slowly strengthening jobs picture. Friday's October Trade Balance is forecast to hold steady. Right after that, we'll see a reading on the University of Michigan Consumer Sentiment Index, which is expected to keep tracking upward.
>> The Week’s Economic Indicator Calendar
Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates.
Economic Calendar for the Week of December 6 – December 10
Date Time (ET) Release For Consensus Prior Impact
W
Dec 8 10:30 Crude Inventories 12/4 NA 1.07M Moderate
Th
Dec 9 08:30 Initial Unemployment Claims 12/4 430K 436K Moderate
Th
Dec 9 08:30 Continuing Unemployment Claims 11/27 4.250M 4.270M Moderate
F
Dec 10 08:30 Trade Balance Oct –$44.4B –$44.0B Moderate
F
Dec 10 09:55 Univ. of Michigan Consumer Sentiment Dec 72.5 71.6 Moderate
>> Federal Reserve Watch
Forecasting Federal Reserve policy changes in coming months All the experts still feel the Fed Funds Rate will stay at its super low level through the first half of next year. A threat of inflation, or a strengthening of the economic recovery, of course, could start rates back up. Note: In the lower chart, a 1% probability of change is a 99% certainty the rate will stay the same.
Current Fed Funds Rate: 0%–0.25%
After FOMC meeting on: Consensus
Dec 14 0%–0.25%
Jan 26 0%–0.25%
Mar 15 0%–0.25%
Probability of change from current policy:
After FOMC meeting on: Consensus
Dec 14 <1%
Jan 26 <1%
Mar 15 <1%
Thursday, December 2, 2010
Mortgage Rates and bonds.
"Mortgage Bonds opened sharply lower, but have recovered from their worst levels. Yesterday, a wild sell-off in Bonds was sparked by good economic news from China, speculation that the European Central Bank would consider more Quantitative Easing of their own to aid their troubled member countries and better than expected ADP numbers.
This morning, Initial Jobless Claims were reported higher than expected but the closely watched 4-week moving average moved to a low not seen since August of 2008. This is an encouraging sign and tells us that the labor market is getting better.
I feel that tomorrow's government jobs report will come in at or better than expectations, so at this time I am recommending a Locking bias."
This morning, Initial Jobless Claims were reported higher than expected but the closely watched 4-week moving average moved to a low not seen since August of 2008. This is an encouraging sign and tells us that the labor market is getting better.
I feel that tomorrow's government jobs report will come in at or better than expectations, so at this time I am recommending a Locking bias."
Wednesday, November 17, 2010
Rising Tide!
Interest Rates rise over .25% in less than one week. Hello QE2! Mortgage rates are still at historical lows but with the Fed pouring money into Mortgage Backed Securites and inflation looming, Rates will move higher. Homeloanapproval.com
Friday, October 22, 2010
Todays Market Update
Mortgage Bonds are starting the day slightly lower, but much improved from their worst levels seen earlier today. Yesterday’s “Closing Technical Signal”, which we highlight each day in the Market News feature, did show a weak or negative candle…and so far this morning, prices are following through to the downside. A look at the Bond Page shows how this morning, Bond prices dropped down and hit exactly on support at the 25-day Moving Average, then rebounded higher from the lows.
There are no economic reports due for release today - but the Fed speak continues, as Philadelphia Fed President Charles "Three Swing Charlie" Plosser will be talking at 1pm ET today, and could be yet another Fed Member helping to spread the love regarding the next round of Quantitative Easing (QE2) – and perhaps he’ll even drop some clues on how much and what the Fed will be buying, as they are expected to make a formal announcement about QE2 on Nov 3rd.
Just yesterday, St. Louis Fed President James "Raging" Bullard said that the Fed may want to purchase Treasury Securities in $100B monthly increments to improve conditions...this is the third source saying the Fed will purchase $100B a month in just the past 48 hours. It sure looks to us like the Fed is trying to show their hand, and get the market somewhat prepared and positioned ahead of the formal Fed announcement, so as not to rattle the markets into more volatility with any surprises.
But the Fed members aren’t presenting a totally united front just yet – vocal Kansas City Fed President Thomas "BBQ" Hoenig is still warning that excessive liquidity, or pumping of more money into the system, could lead to some very bad unintended consequences. And we happen to agree – this is a bit of a dangerous game, and the amount of debt being pumped into the system is historically unprecedented.
And speaking of pumping more money into the system...yesterday, the Treasury announced that it will be selling a fat $109B in additional government debt next week, and although not a record, the announcement of this additional supply is also weighing on the market.
This weekend there is an important G20 Meeting, which brings government financial leaders of the 20 largest economies together to discuss key issues. And one of the key issues we are seeing is the actions being taken by many countries to devalue their own currencies, in order to help boost their exports…and thereby improve their economies. We would not want to see a currency devaluation war as it could spur massive global inflation down the road.
And in an effort to set a calming tone heading into these meetings, Treasury Secretary Tim Geithner said yesterday that the major currencies around the globe are "roughly in alignment" now…meaning that there is no need for countries to try and manipulate or devalue their currency. But as countries may all shake hands at the meeting and take a “Boy Scout” style pledge of honor not to do such a thing…their primary concern is their own countries economic strength, so they may be keeping their fingers crossed behind their backs as they all agree not to manipulate currency.
This morning, Bonds have successfully tested the floor of support at the 25-day Moving Average a couple of times. The last time we tested this floor, Bond prices improved over the next few days.
By MMG Barry Habib
There are no economic reports due for release today - but the Fed speak continues, as Philadelphia Fed President Charles "Three Swing Charlie" Plosser will be talking at 1pm ET today, and could be yet another Fed Member helping to spread the love regarding the next round of Quantitative Easing (QE2) – and perhaps he’ll even drop some clues on how much and what the Fed will be buying, as they are expected to make a formal announcement about QE2 on Nov 3rd.
Just yesterday, St. Louis Fed President James "Raging" Bullard said that the Fed may want to purchase Treasury Securities in $100B monthly increments to improve conditions...this is the third source saying the Fed will purchase $100B a month in just the past 48 hours. It sure looks to us like the Fed is trying to show their hand, and get the market somewhat prepared and positioned ahead of the formal Fed announcement, so as not to rattle the markets into more volatility with any surprises.
But the Fed members aren’t presenting a totally united front just yet – vocal Kansas City Fed President Thomas "BBQ" Hoenig is still warning that excessive liquidity, or pumping of more money into the system, could lead to some very bad unintended consequences. And we happen to agree – this is a bit of a dangerous game, and the amount of debt being pumped into the system is historically unprecedented.
And speaking of pumping more money into the system...yesterday, the Treasury announced that it will be selling a fat $109B in additional government debt next week, and although not a record, the announcement of this additional supply is also weighing on the market.
This weekend there is an important G20 Meeting, which brings government financial leaders of the 20 largest economies together to discuss key issues. And one of the key issues we are seeing is the actions being taken by many countries to devalue their own currencies, in order to help boost their exports…and thereby improve their economies. We would not want to see a currency devaluation war as it could spur massive global inflation down the road.
And in an effort to set a calming tone heading into these meetings, Treasury Secretary Tim Geithner said yesterday that the major currencies around the globe are "roughly in alignment" now…meaning that there is no need for countries to try and manipulate or devalue their currency. But as countries may all shake hands at the meeting and take a “Boy Scout” style pledge of honor not to do such a thing…their primary concern is their own countries economic strength, so they may be keeping their fingers crossed behind their backs as they all agree not to manipulate currency.
This morning, Bonds have successfully tested the floor of support at the 25-day Moving Average a couple of times. The last time we tested this floor, Bond prices improved over the next few days.
By MMG Barry Habib
Monday, September 13, 2010
Buyers and the News!
Last week included a few interesting takes on where things are at in the housing market. We first got the news that purchase mortgage applications last week were at their highest level since May, UP 6.3% over the week before. It's nice to see buying interest starting to rebound after the tax credit expiration. But we do have a bit of a way to go, as last week's number was still 38.8% below where it was a year ago, according to the Mortgage Bankers Association.
One source of new buyers for sure is the huge number of people for whom homes are now way more affordable. For families making the national median income, the share of homes they can afford stayed above 70% for the sixth quarter in a row as tracked by the Housing Opportunity Index (HOI). The National Association of Home Builders, which co-sponsors the HOI, said this affordability was the result of low home prices and favorable mortgage rates. The NAHB chairman commented, "Homeownership is within reach of more households than it has been for almost a generation...with house prices starting to stabilize, conditions are beginning to draw homebuyers back into the market..."
>> Review of Last Week
SQUEAKING UP... We had just four days of trading last week for investors to show us how they feel about the economic prospects going forward. Coming back from Labor Day, stocks sank on Tuesday, with the Dow 147 points down. But during the next three days, traders slowly pushed prices back up enough that all three major stock indexes squeaked into positive territory for the second week in a row. And the Dow remains UP for the year.
One source of new buyers for sure is the huge number of people for whom homes are now way more affordable. For families making the national median income, the share of homes they can afford stayed above 70% for the sixth quarter in a row as tracked by the Housing Opportunity Index (HOI). The National Association of Home Builders, which co-sponsors the HOI, said this affordability was the result of low home prices and favorable mortgage rates. The NAHB chairman commented, "Homeownership is within reach of more households than it has been for almost a generation...with house prices starting to stabilize, conditions are beginning to draw homebuyers back into the market..."
>> Review of Last Week
SQUEAKING UP... We had just four days of trading last week for investors to show us how they feel about the economic prospects going forward. Coming back from Labor Day, stocks sank on Tuesday, with the Dow 147 points down. But during the next three days, traders slowly pushed prices back up enough that all three major stock indexes squeaked into positive territory for the second week in a row. And the Dow remains UP for the year.
Sunday, September 5, 2010
Old vs New GFE
I couldn't talk long enough about the constant roll out of new guidelines affecting home loans on a daily basis. Its certainly an interesting way to start a week knowing what you know today may be little use to anyone tomorrow! The good new is that everyone is becoming more comfortable with the technicals that have become the new standards resulting from the financial reform act. Some of the better points here are old vs new. Here is one of my favorites.
Old Good Faith Estimate vs. The New Good Faith Estimate
The Old was a general list of fees that varied in style, size, shape, definition of terms, costs etc. A constantly moving target that had no responsibility other than to give you an idea of what the loan terms and costs possibly could be. The lender was under no obligation to disclose any change in terms, costs, points or fees and buyers were often shocked at closing with little or no options but to close and bear it.
Move over Old and in with the New. The new is actually a very clear and standard form which gives the the precise costs in one lump sum, broken down between lender charges and title/escrow charges. It must be exact and can not change in any way once disclosed or unless there is a changed circumstance affecting either the costs or the rate. These changes are very specific and the home buyer must be informed a minimum of three working days prior to closing of the loan. The catch here is that lenders can opt to disclose fees from a title/escrow company that the buyer would never use. Since the new laws require most title fees to be shown as the buyers responsibility even if the seller is paying them, the title services can be chosen by the buyer. Choosing to close some place other than the one listed on the Service Providers list on the Good Faith Estimate does not hold the lender responsible to the fees of the selected company. If choosing the title company listed on the GFE then each fee calculated in the title services total must be within a tolerance of 10%. Hallelujah! I'm a huge fan of the new process and how the consumer is given the access to his loan costs upfront. Additionally, the GFE explains important details, like Pre-Payment Penalties, escrow account, interest rate, fixed or ARM, if payment can change etc.
The best part of all this is that you can ask lender A for a quote and see that his fees are x all in, you are now able to compare x to lender B's x and C's and...Well you get the picture. Comparing title/escrow fees is not really what this is all about. Often times you must close where the contract in a home purchase situation requires you too. Title fees vary slightly between each provider and their total fees, as is the lenders are now wrapped into one big number. Yes!
The only thing the New GFE does not show is your payment. Really? Who wasn't thinking? OK, Ill go for it and ask my Loan Officer to calculate it for me or even better go to homeloanapproval.com and use the payment calculator. Its fun!
Home buying, It's not what it used to be but just a whole lot clearer!
homeloanapproval.com
Old Good Faith Estimate vs. The New Good Faith Estimate
The Old was a general list of fees that varied in style, size, shape, definition of terms, costs etc. A constantly moving target that had no responsibility other than to give you an idea of what the loan terms and costs possibly could be. The lender was under no obligation to disclose any change in terms, costs, points or fees and buyers were often shocked at closing with little or no options but to close and bear it.
Move over Old and in with the New. The new is actually a very clear and standard form which gives the the precise costs in one lump sum, broken down between lender charges and title/escrow charges. It must be exact and can not change in any way once disclosed or unless there is a changed circumstance affecting either the costs or the rate. These changes are very specific and the home buyer must be informed a minimum of three working days prior to closing of the loan. The catch here is that lenders can opt to disclose fees from a title/escrow company that the buyer would never use. Since the new laws require most title fees to be shown as the buyers responsibility even if the seller is paying them, the title services can be chosen by the buyer. Choosing to close some place other than the one listed on the Service Providers list on the Good Faith Estimate does not hold the lender responsible to the fees of the selected company. If choosing the title company listed on the GFE then each fee calculated in the title services total must be within a tolerance of 10%. Hallelujah! I'm a huge fan of the new process and how the consumer is given the access to his loan costs upfront. Additionally, the GFE explains important details, like Pre-Payment Penalties, escrow account, interest rate, fixed or ARM, if payment can change etc.
The best part of all this is that you can ask lender A for a quote and see that his fees are x all in, you are now able to compare x to lender B's x and C's and...Well you get the picture. Comparing title/escrow fees is not really what this is all about. Often times you must close where the contract in a home purchase situation requires you too. Title fees vary slightly between each provider and their total fees, as is the lenders are now wrapped into one big number. Yes!
The only thing the New GFE does not show is your payment. Really? Who wasn't thinking? OK, Ill go for it and ask my Loan Officer to calculate it for me or even better go to homeloanapproval.com and use the payment calculator. Its fun!
Home buying, It's not what it used to be but just a whole lot clearer!
homeloanapproval.com
Thursday, August 26, 2010
Todays Markets
Initial Jobless Claims unexpectedly dropped by 31,000, the first decline in a month, to 473,000. The number of continuing claims dropped by 62,000 to 4.46 million, while those getting extended benefits climbed.
Treasuries Erase Advance as Initial Jobless Claims Drop More Than Forecast. Bond prices are little changed today after yesterday's bond market rally faded as the stock market rallied and in front of the$36 billion sale in five-year notes which were auctioned off at a record low yield of 1.374%, smashing the previous low of 1.54. Tomorrow, GDP revisions for 2Q10 could be key for the markets as the initial report of 2.4% growth in 2Q10 could be revised sharply lower.
MBA: Foreclosures Fall but New Delinquencies Rise. Mortgage delinquency rates declined in the second quarter to 9.85%, from 10.06% in the first quarter. The pace of foreclosures declined as servicers continue to work on mortgage modifications. More than 4 million mortgages are more than 90 days delinquent or in the foreclosure process and many of these homes will be foreclosed on later this year, putting downward pressure on home prices. The percentage of loans in the foreclosure process declined last quarter to 4.5% from 4.63% in the first quarter. The pipeline of delinquencies and huge rise in bank owned properties last quarter has aggravated concerns that the critically important housing sector will drag the U.S. economy back into recession.
Plunge in Home Sales Stokes Economy Fears, and the decline in mortgage rates in recent months appears to be doing little to stimulate demand. Analysts say the big risk to real estate values is that consumers lose any urgency to buy homes because of new concerns that prices will continue to fall.
Is America the next Japan? What are the chances the U.S. will face "Japanification" of the economy with deflation, a bear market for stocks and housing, and relentless recessionary pressure much like Japan's 20 year battle. This would be dismal: Interest rates would remain near 0% through 2020; the economy would grow at an average annual rate of just 1% over the next 20 years; the Dow would drop below 4,000; and home prices would fall an additional 46% by 2030.
Economic Indicator News Release Calendar for the weeks ahead
Thursday, August 26
United States
Date Value Consensus Forecast Previous
8:30 AM Jobless Claims 8/21/2010 n/a n/a 464,000
11:00 AM Kansas City Fed Manufacturing Survey August n/a n/a 3
Friday, August 27
United States
Date Value Consensus Forecast Previous
8:30 AM GDP 2010Q2 2.5% 2.0% 2.7%
10:00 AM University of Michigan Consumer Sentiment Survey August n/a n/a 66.5
10:30 AM ECRI Weekly Leading Index 8/20/2010 n/a n/a 120.7
Monday, August 30
United States
Date Value Consensus Forecast Previous
8:30 AM Personal Income July n/a n/a 0.4%
9:00 AM S&P/Case-Shiller® Home Price Indexes June n/a n/a 4.6
10:30 AM Texas Manufacturing Outlook Survey August n/a n/a -21.0
Tuesday, August 31
United States
Date Value Consensus Forecast Previous
7:45 AM Chain Store Sales Snapshot 8/28/2010 n/a n/a 0.6%
8:30 AM ISM - NY Report August n/a n/a 458.9 index
9:45 AM ISM-Chicago August n/a n/a 59.1
10:00 AM The Conference Board Consumer Confidence August n/a n/a 50.4
2:00 PM FOMC Minutes August n/a n/a N/A
5:00 PM ABC News/Washington Post Consumer Comfort Index 8/29/2010 n/a n/a -48
Consensus Estimate Source: Thomson Reuters
Treasuries Erase Advance as Initial Jobless Claims Drop More Than Forecast. Bond prices are little changed today after yesterday's bond market rally faded as the stock market rallied and in front of the$36 billion sale in five-year notes which were auctioned off at a record low yield of 1.374%, smashing the previous low of 1.54. Tomorrow, GDP revisions for 2Q10 could be key for the markets as the initial report of 2.4% growth in 2Q10 could be revised sharply lower.
MBA: Foreclosures Fall but New Delinquencies Rise. Mortgage delinquency rates declined in the second quarter to 9.85%, from 10.06% in the first quarter. The pace of foreclosures declined as servicers continue to work on mortgage modifications. More than 4 million mortgages are more than 90 days delinquent or in the foreclosure process and many of these homes will be foreclosed on later this year, putting downward pressure on home prices. The percentage of loans in the foreclosure process declined last quarter to 4.5% from 4.63% in the first quarter. The pipeline of delinquencies and huge rise in bank owned properties last quarter has aggravated concerns that the critically important housing sector will drag the U.S. economy back into recession.
Plunge in Home Sales Stokes Economy Fears, and the decline in mortgage rates in recent months appears to be doing little to stimulate demand. Analysts say the big risk to real estate values is that consumers lose any urgency to buy homes because of new concerns that prices will continue to fall.
Is America the next Japan? What are the chances the U.S. will face "Japanification" of the economy with deflation, a bear market for stocks and housing, and relentless recessionary pressure much like Japan's 20 year battle. This would be dismal: Interest rates would remain near 0% through 2020; the economy would grow at an average annual rate of just 1% over the next 20 years; the Dow would drop below 4,000; and home prices would fall an additional 46% by 2030.
Economic Indicator News Release Calendar for the weeks ahead
Thursday, August 26
United States
Date Value Consensus Forecast Previous
8:30 AM Jobless Claims 8/21/2010 n/a n/a 464,000
11:00 AM Kansas City Fed Manufacturing Survey August n/a n/a 3
Friday, August 27
United States
Date Value Consensus Forecast Previous
8:30 AM GDP 2010Q2 2.5% 2.0% 2.7%
10:00 AM University of Michigan Consumer Sentiment Survey August n/a n/a 66.5
10:30 AM ECRI Weekly Leading Index 8/20/2010 n/a n/a 120.7
Monday, August 30
United States
Date Value Consensus Forecast Previous
8:30 AM Personal Income July n/a n/a 0.4%
9:00 AM S&P/Case-Shiller® Home Price Indexes June n/a n/a 4.6
10:30 AM Texas Manufacturing Outlook Survey August n/a n/a -21.0
Tuesday, August 31
United States
Date Value Consensus Forecast Previous
7:45 AM Chain Store Sales Snapshot 8/28/2010 n/a n/a 0.6%
8:30 AM ISM - NY Report August n/a n/a 458.9 index
9:45 AM ISM-Chicago August n/a n/a 59.1
10:00 AM The Conference Board Consumer Confidence August n/a n/a 50.4
2:00 PM FOMC Minutes August n/a n/a N/A
5:00 PM ABC News/Washington Post Consumer Comfort Index 8/29/2010 n/a n/a -48
Consensus Estimate Source: Thomson Reuters
Thursday, August 5, 2010
Refinancing
Tis the season. Refinacing is in full swing once again. With the current rate climate elevating the rush to save thousands of dollars in monthly mortgage payments, anyone with a rate above 5% should consider the option. When contacting your lender be prepared to offer up a bit information. Items necessary will include:
Your current loan(s) balance
Your annual costs for Taxes and Insurance
The last date your property was financed
The type of loan you have, FHA, VA, Conventional, Home Equity, etc
Do you escrow for taxes and Insurance
Your estimated property value in the current market
Will you pay your closing costs out of pocket or prefer to roll them into the loan
What term are you considering, 30,25,20,15,10?
What is your goal? Lower Payments or faster payoff or a combination of both?
Be prepared and be proactive. The results will be worth it.
Alan
Your current loan(s) balance
Your annual costs for Taxes and Insurance
The last date your property was financed
The type of loan you have, FHA, VA, Conventional, Home Equity, etc
Do you escrow for taxes and Insurance
Your estimated property value in the current market
Will you pay your closing costs out of pocket or prefer to roll them into the loan
What term are you considering, 30,25,20,15,10?
What is your goal? Lower Payments or faster payoff or a combination of both?
Be prepared and be proactive. The results will be worth it.
Alan
Wednesday, July 21, 2010
What a Market!
Stock earnings reported last night and so far this morning were mostly positive, but it failed to give the overall Stock Market a big boost.
President Obama is scheduled to sign the Financial Regulation Bill into law at 11:30am ET this morning. As we have been discussing with you, the impact of the 2300 pages of legislation are very far-reaching, and could be devastating. Many are already incurring significant expenses to pay teams of attorney’s huge sums of money, just to try and understand what the impact on their business and sector will be. No doubt that the signing of this Financial Regulation will come with much fanfare and applause – but most business leaders and economists, including Alan Greenspan himself, are very concerned.
That said – the pending legislation is already driving unintended consequences. And this morning, Bond rating agencies Moody’s, Fitch, and Standard and Poor’s all announced they would not allow their Bond ratings to be used in new Bond offerings out of concern for potential legal liability resulting from Financial Reform. The new law will make ratings firms liable for the quality of their ratings decisions, effective immediately – and the agencies are saying that until they have a better understanding of what their exposure may be, they will refuse to let Bond insurers use their ratings. It remains to be seen how this will impact Bond pricing and salability.
At 2pm ET this afternoon, Federal Reserve Chairman Ben Bernanke will begin his testimony on monetary policy in front of the Senate Banking Committee. This testimony has been pushed back from its normal 10am start because President Obama wants center stage for his signing of the Financial Reform Law. We expect Mr. Bernanke to say that the economy has indeed slowed but will not slip into another recession. And if Mr. Bernanke does not comment on what additional measures the Fed might take to prevent a double dip, it is likely to come up during the Q & A session with members of the Senate. One question that will likely come up is whether the Fed will continue to pay interest on excess reserves. By eliminating interest paid on these reserves, it is thought that the funds may find their way back into the economy.
Another question that may come up for Bernanke, is whether the Fed would consider more quantitative easing. The Fed already purchased $1.25T of Mortgage Bonds, as well as several hundred Billion in Treasuries. These purchases have helped drive rates down towards historic low levels - and yet, the housing market is not responding. This begs the question, would more of the same tactic cause a different result? The Fed's balance sheet is already bloated. And we feel that the Fed, like most in Washington, is missing the target. The problem, as we see it, is not that rates need to be lower. Many individuals would either purchase or refinance but are unable to do so because of tighter underwriting guidelines, as well as low valuations. One example - no income verification loans, which have been called "liar loans", have been placed in a negative spotlight and virtually eliminated. But there has been a good track record for those loans in the past when underwritten with LTVs at 75 or less and excellent credit scores. If the government were to direct some resources towards reestablishing some of these more reasonable lending tools, the results might be better.
And as if that wasn’t enough from DC – the Unemployment Extension Bill cleared a procedural hurdle in Washington yesterday, and will go to a final vote in the Senate today. It must still clear the House of Representatives as well – but is expected to do so. This legislation will provide extended benefits for up to 2.5M people whose benefits expired before the 99 week cut off.
And here's an important developing story. China's reserves, which are held mostly in US Treasuries, as well as Mortgage Backed Securities, stand at $2.5T. But last quarter marked the first time in a long time that these holdings did not increase. Does this mean that China is slowing its US debt purchases? We will have to keep tabs on this because a slowdown in US debt purchases from China could adversely affect the Bond Market, as their purchases have contributed to the low interest rate environment in the US.
President Obama is scheduled to sign the Financial Regulation Bill into law at 11:30am ET this morning. As we have been discussing with you, the impact of the 2300 pages of legislation are very far-reaching, and could be devastating. Many are already incurring significant expenses to pay teams of attorney’s huge sums of money, just to try and understand what the impact on their business and sector will be. No doubt that the signing of this Financial Regulation will come with much fanfare and applause – but most business leaders and economists, including Alan Greenspan himself, are very concerned.
That said – the pending legislation is already driving unintended consequences. And this morning, Bond rating agencies Moody’s, Fitch, and Standard and Poor’s all announced they would not allow their Bond ratings to be used in new Bond offerings out of concern for potential legal liability resulting from Financial Reform. The new law will make ratings firms liable for the quality of their ratings decisions, effective immediately – and the agencies are saying that until they have a better understanding of what their exposure may be, they will refuse to let Bond insurers use their ratings. It remains to be seen how this will impact Bond pricing and salability.
At 2pm ET this afternoon, Federal Reserve Chairman Ben Bernanke will begin his testimony on monetary policy in front of the Senate Banking Committee. This testimony has been pushed back from its normal 10am start because President Obama wants center stage for his signing of the Financial Reform Law. We expect Mr. Bernanke to say that the economy has indeed slowed but will not slip into another recession. And if Mr. Bernanke does not comment on what additional measures the Fed might take to prevent a double dip, it is likely to come up during the Q & A session with members of the Senate. One question that will likely come up is whether the Fed will continue to pay interest on excess reserves. By eliminating interest paid on these reserves, it is thought that the funds may find their way back into the economy.
Another question that may come up for Bernanke, is whether the Fed would consider more quantitative easing. The Fed already purchased $1.25T of Mortgage Bonds, as well as several hundred Billion in Treasuries. These purchases have helped drive rates down towards historic low levels - and yet, the housing market is not responding. This begs the question, would more of the same tactic cause a different result? The Fed's balance sheet is already bloated. And we feel that the Fed, like most in Washington, is missing the target. The problem, as we see it, is not that rates need to be lower. Many individuals would either purchase or refinance but are unable to do so because of tighter underwriting guidelines, as well as low valuations. One example - no income verification loans, which have been called "liar loans", have been placed in a negative spotlight and virtually eliminated. But there has been a good track record for those loans in the past when underwritten with LTVs at 75 or less and excellent credit scores. If the government were to direct some resources towards reestablishing some of these more reasonable lending tools, the results might be better.
And as if that wasn’t enough from DC – the Unemployment Extension Bill cleared a procedural hurdle in Washington yesterday, and will go to a final vote in the Senate today. It must still clear the House of Representatives as well – but is expected to do so. This legislation will provide extended benefits for up to 2.5M people whose benefits expired before the 99 week cut off.
And here's an important developing story. China's reserves, which are held mostly in US Treasuries, as well as Mortgage Backed Securities, stand at $2.5T. But last quarter marked the first time in a long time that these holdings did not increase. Does this mean that China is slowing its US debt purchases? We will have to keep tabs on this because a slowdown in US debt purchases from China could adversely affect the Bond Market, as their purchases have contributed to the low interest rate environment in the US.
Monday, July 19, 2010
Markets Update
Market Update
INFO THAT HITS US WHERE WE LIVE Some analysts feel the homebuyer tax credits artificially boosted the housing market by pushing forward home sales that would have happened later. Others feel most buyers would have bought anyway. In any case, there's now concern about a coming drop in sales. Well, June sales figures should still benefit from activity spurred on by the tax credits. And tax credit sales should even help monthly reports through September, now that buyers in contract on April 30 have been given until September 30 to close.
Nonetheless, we ought to keep an eye on monthly Pending Home Sales, which track signed contracts that turn into sales a few months out. Even though we may have a sales dip after the tax credit, the fact remains that near historic low mortgage interest rates are getting people back into the market. These rates, combined with today's prices, have made homes more affordable than they've been in years, letting many buyers move up to better neighborhoods with more choices.
But buyers shouldn't wait. The National Association of Realtors chief economist sees the median home price rising nationally 2% to 3% this year. The NAR's CEO feels sales will pick up in the fall and that the down-cycle has run its course. The chief economist at Moody's Economy.com also believes the housing crash is nearly over. And we all know mortgage rates won't stay at their current levels indefinitely. In other words, this could be one of the best times to buy a home in decades.
INFO THAT HITS US WHERE WE LIVE Some analysts feel the homebuyer tax credits artificially boosted the housing market by pushing forward home sales that would have happened later. Others feel most buyers would have bought anyway. In any case, there's now concern about a coming drop in sales. Well, June sales figures should still benefit from activity spurred on by the tax credits. And tax credit sales should even help monthly reports through September, now that buyers in contract on April 30 have been given until September 30 to close.
Nonetheless, we ought to keep an eye on monthly Pending Home Sales, which track signed contracts that turn into sales a few months out. Even though we may have a sales dip after the tax credit, the fact remains that near historic low mortgage interest rates are getting people back into the market. These rates, combined with today's prices, have made homes more affordable than they've been in years, letting many buyers move up to better neighborhoods with more choices.
But buyers shouldn't wait. The National Association of Realtors chief economist sees the median home price rising nationally 2% to 3% this year. The NAR's CEO feels sales will pick up in the fall and that the down-cycle has run its course. The chief economist at Moody's Economy.com also believes the housing crash is nearly over. And we all know mortgage rates won't stay at their current levels indefinitely. In other words, this could be one of the best times to buy a home in decades.
Thursday, July 15, 2010
Home and Wealth
Update your home insurance and save money too!
Once a year it's a good idea to update your homeowners insurance. You want to make sure you have adequate coverage if you experience a loss. And you want to check on all the options insurance companies offer to reduce annual premiums. Here are the steps to take.
Calculate the coverage you need on the house itself. Homeowners insurance pays what it will cost to rebuild your house. You can arrive at this amount by multiplying your home's square footage by the building cost per square foot for homes in your local area. Get this number from realtors, local homebuilders' associations, and insurance agents. Be sure to check on the building cost number each year, as it can change, leaving you with inadequate coverage.
Make sure your home's contents are adequately covered. Check your policy to see if you have "full replacement value" coverage for your home's contents. If you don't, the insurance company can give you a pro-rated value for these items -- a reduced amount that accounts for age and wear. In any case, valuable items such as jewelry, art, and antiques should be insured for their actual replacement value on a separate rider. You pay more for this coverage, but you will get full value for the item in case of a loss.
Take photos and videos of your home and contents. Cover every nook and cranny and put the pictures and videos in a safe deposit box. You might also save them online. Then if you have a loss, you have proof of the quality and condition of your home and its contents before the disaster.
Ask about premium discounts. There are many ways insurers discount their annual premiums. Higher deductibles or a good credit rating can earn you discounts. Purchasing your auto insurance from the same company may reduce premiums. Discounts can also come from: smoke detectors, sprinkler systems, fire extinguishers, being over 55 or a longtime policy holder, security alarms connected to an outside service, or hurricane shutters. But don't let price be your only concern. First and foremost, make sure you're dealing with one of the reputable, reliable insurers operating in your area.
BREAKING NEWS!
• Mortgage rates hit historic lows. Mortgage rates are back where they were in the 1960s when cars had tailfins. So if you or someone you know may be in a higher interest rate mortgage, call or email us today to see if there's money to be saved!
• Low rates and today's home prices also make homes more affordable than they've been in years. So anyone thinking of buying might want to make a move now.
Once a year it's a good idea to update your homeowners insurance. You want to make sure you have adequate coverage if you experience a loss. And you want to check on all the options insurance companies offer to reduce annual premiums. Here are the steps to take.
Calculate the coverage you need on the house itself. Homeowners insurance pays what it will cost to rebuild your house. You can arrive at this amount by multiplying your home's square footage by the building cost per square foot for homes in your local area. Get this number from realtors, local homebuilders' associations, and insurance agents. Be sure to check on the building cost number each year, as it can change, leaving you with inadequate coverage.
Make sure your home's contents are adequately covered. Check your policy to see if you have "full replacement value" coverage for your home's contents. If you don't, the insurance company can give you a pro-rated value for these items -- a reduced amount that accounts for age and wear. In any case, valuable items such as jewelry, art, and antiques should be insured for their actual replacement value on a separate rider. You pay more for this coverage, but you will get full value for the item in case of a loss.
Take photos and videos of your home and contents. Cover every nook and cranny and put the pictures and videos in a safe deposit box. You might also save them online. Then if you have a loss, you have proof of the quality and condition of your home and its contents before the disaster.
Ask about premium discounts. There are many ways insurers discount their annual premiums. Higher deductibles or a good credit rating can earn you discounts. Purchasing your auto insurance from the same company may reduce premiums. Discounts can also come from: smoke detectors, sprinkler systems, fire extinguishers, being over 55 or a longtime policy holder, security alarms connected to an outside service, or hurricane shutters. But don't let price be your only concern. First and foremost, make sure you're dealing with one of the reputable, reliable insurers operating in your area.
BREAKING NEWS!
• Mortgage rates hit historic lows. Mortgage rates are back where they were in the 1960s when cars had tailfins. So if you or someone you know may be in a higher interest rate mortgage, call or email us today to see if there's money to be saved!
• Low rates and today's home prices also make homes more affordable than they've been in years. So anyone thinking of buying might want to make a move now.
Monday, July 5, 2010
Inf0 That Hits Us Where We Live
Last Thursday pending home sales, a measure of contracts signed for existing homes, were reported off 30% in May compared to the prior month. This of course was simply the result of the end of the homebuyer tax credit, which required a signed contract by April 30. Common sense tells us many of those April contracts would have happened in May or even later if it weren't for the pressure to qualify for the tax credit.
More good news on the price front, as the Case-Shiller home price index was UP 0.4% in April, seasonally-adjusted, and up a comfortable 3.8% versus a year ago. Case-Shiller tracks home prices in the 20 largest metro areas. This follows the prior week's FHFA home price index, which was UP 0.8% for April for homes financed with conforming mortgages. Buyers take note.
Friday, the President signed into law a bill that extends the closing deadline for claiming the federal homebuyer tax credit to September 30. The National Association of Realtors estimated that up to 180,000 homebuyers in contract by April 30 could have missed the June 30 closing because of processing delays due to the huge volume of buyers seeking the tax credit.
More good news on the price front, as the Case-Shiller home price index was UP 0.4% in April, seasonally-adjusted, and up a comfortable 3.8% versus a year ago. Case-Shiller tracks home prices in the 20 largest metro areas. This follows the prior week's FHFA home price index, which was UP 0.8% for April for homes financed with conforming mortgages. Buyers take note.
Friday, the President signed into law a bill that extends the closing deadline for claiming the federal homebuyer tax credit to September 30. The National Association of Realtors estimated that up to 180,000 homebuyers in contract by April 30 could have missed the June 30 closing because of processing delays due to the huge volume of buyers seeking the tax credit.
Tuesday, June 22, 2010
Condos, The New NO NO!
Last week we had to make a decision on weather or not to order an appraisal for a Condo being purchased by my borrower. If we ordered the appraisal before we determined project lending requirements, then our client would risk losing 425.00 on an appraisal (FHA). The issue stems from the crack down by both FHA and Fannie Freddie that requires upfront reviews of project documentation provided by the Condo HOA or management company running the project. In the old days, FHA would merely spot approve individual units based on a questionnaire, review of that questionnaire and adequate Blanket Liability insurance. Fannie, Freddie were more lenient. So long as the Insurance, Owner Occupancy and the no one entity owned 10% or more of the units all was right with the world. Fast forward and today the game has changed,dramatically. FHA now requires upfront approval of the entire project which will not happen unless approval is granted after review of all condo documents including Budget, Insurance, Questionnaire, Bi-laws, minutesof the last two meetings, etc. If the budget doesn't include a 10% reserve of the annual budget and is not collected and line items monthly, then its a no go. In our case we were missing the Signature page of the governing documents and since no one had needed to locate that document for over 20 years it was non existent. Btw, the HOA provided a random signature page with a different sequence (page) number than the documents they provided. I become the bad guy very quickly as the Realtors are trying to appease both buyer and seller and I'm protecting my buyer while the process takes 6-8 weeks to sort through. Many requests for documents from the HOA go unanswered for days at a time. The clock is ticking folks and FHA doesn't care. My advice is to avoid any Condo projects that you cant verify approval by either FHA or Fannie Freddie, upfront. Before any offer is made on a specific unit, this needs to be known. Order that appraisal and you've thrown away the cost and created a frustrated client. We did and now we wont!
Monday, June 21, 2010
News-Housing and the Economy
The big news of the week revealed housing starts down 10.0% in May to an annual rate of 593,000 units. Closer inspection of the report reveals that all the drop came from the South. In fact, housing starts were actually UP in all other regions of the country. The South suffered in May with the Gulf oil spill disaster and major flooding. It's understandable that these unfortunate occurrences would make everyone, including home builders, more risk averse than usual. In any case, starts are UP 24.3% above their low a year ago April, with single-family starts UP 15.3% in the last year.
A little more worrisome was the 5.9% decline in building permits, which was seen nationwide. Of course, any slowdown in building will help speed up the reduction in new homes inventory. Nonetheless, permits are UP 4.4% overall and UP 3.1% for single-family units from a year ago.
For more great information visit: HomeLoanApproval.com
Wednesday, Fannie Mae announced "Special Relief Measures" for borrowers whose properties or income are negatively impacted by the Gulf oil spill. Servicers may suspend or reduce these borrowers' mortgage payments up to 90 days to determine the impact of the disaster on the property or the borrower's financial condition. If you know someone who may qualify for this relief, please forward them this link: http://www.fanniemae.com/newsreleases/2010/5062.jhtml?p=Media&s=News+Releases
A little more worrisome was the 5.9% decline in building permits, which was seen nationwide. Of course, any slowdown in building will help speed up the reduction in new homes inventory. Nonetheless, permits are UP 4.4% overall and UP 3.1% for single-family units from a year ago.
For more great information visit: HomeLoanApproval.com
Wednesday, Fannie Mae announced "Special Relief Measures" for borrowers whose properties or income are negatively impacted by the Gulf oil spill. Servicers may suspend or reduce these borrowers' mortgage payments up to 90 days to determine the impact of the disaster on the property or the borrower's financial condition. If you know someone who may qualify for this relief, please forward them this link: http://www.fanniemae.com/newsreleases/2010/5062.jhtml?p=Media&s=News+Releases
Wednesday, June 16, 2010
Bond Market and Rates
After yesterday’s slide for Mortgage Bonds, which was driven by the rally in Stocks, we are seeing a bit of a reversal this morning – again driven by the action in Stocks, where a battle between the Bulls and Bears over the important 200-day Moving Average is being waged. Yesterday, both the Dow and the S&P500 indices were able to climb above their respective 200-day Moving Averages. Both Bulls and Bears know what an important line in the sand this level is…and the Bears aren’t relenting just yet. The Bears attempted to push Stocks back beneath the 200-day MA early in today’s trading session. This helped Mortgage Bonds achieve their highs around the same time. But then – the Stock Bulls mustered enough momentum to bring prices back above this important level, reducing both the losses in Stocks and gains in Bonds.
And this is where we are currently trading. We’ll keep an eye on this important battle throughout the day, as it will certainly influence the direction of Mortgage Bonds. A convincing break above the 200-day Moving Average would be troublesome for Bonds, as the next move higher for Stocks could be to test the January highs. This means that Mortgage Bonds could give up .25 - .50% in rate, should this take place. But another failed attempt at the 200-day Moving Average – and there have already been a couple in the past few weeks – should give Bonds a boost and help them move towards last week’s highs.
Also helping Bond prices this morning are investors growing concerned with Spain. There is speculation that a bailout is being prepared for the country, even though the European Central Bank insists that a scheduled meeting this Friday with the International Monetary Fund and Spain has nothing to do with a bailout package. However, the markets may not be buying the ECB's denial, as Spanish Bond prices fell sharply today. This news has sparked some safe haven buying in the US Bond market. News from Europe will continue to cause more volatility in the marketplace. It’s difficult to get Europeans to adopt meaningful austerity measures. Just today, France announced their big move towards austerity – an increase of retirement age from 60 to 62, by 2018. If you are laughing, we don’t blame you…but the situation is far from humorous.
Back at home, we had some economic releases, starting with the Producer Price Index (PPI). The headline number dropped 0.3%, when economists were looking for a 0.5% drop. Be mindful that energy prices have moved higher in recent weeks, so we may see a pickup in headline PPI next month. When stripping out volatile food and energy costs, the Core rate rose to 0.2%, above the 0.1% expected. On an annual basis, headline PPI rose 5.3% and in line with estimates. And the year-over-year core reading was 1.3%, slightly above forecasts but still near the lower range of the Fed's comfort zone. Tomorrow brings the more closely watched Consumer Price Index (CPI).
Housing Starts in May were 593,000, well below the 655,000 expected. That number is down 10% from the prior month's reading, but still up 7.8% year over year. Building Permits were 574,000, well below the 631,000 that were expected. Another interesting way to view these numbers is to take housing starts as a double edged sword. While more housing starts would show expected optimism from builders, fewer starts and permits are not necessarily all bad news. Adding less supply and inventory may be healthier in the long run, and aid in moving some of the existing homes in the marketplace.
Industrial Production and Capacity Utilization were both reported higher than expectations, suggesting a pickup in manufacturing and output. The positive readings did help Stocks recover from their worst levels, and this is a good leading indicator that could bode well for the future.
Next Wednesday the Fed will release their interest rate decision and Policy Statement. There is speculation that the Fed may lower their 2010 and 2011 growth targets for GDP. It was just two months ago – in April – that the Fed raised their 2010 GDP projections to a range of 3.2 - 3.7%. A possible cause for the Fed to lower their target would be the significant slowdown in Europe and weakness in the Euro. This has caused the Dollar to gain strength, making our exports a bit more costly. And lowering the target – along with the most recent disappointing Jobs Report – may give the Fed enough consensus, amidst grumblings from its more hawkish members, to maintain their "extended period" language. In any case, it is all making for a very interesting and important Fed Meeting next week, as it could have an important bearing on the carry trade and the direction of mortgage rates.
And this is where we are currently trading. We’ll keep an eye on this important battle throughout the day, as it will certainly influence the direction of Mortgage Bonds. A convincing break above the 200-day Moving Average would be troublesome for Bonds, as the next move higher for Stocks could be to test the January highs. This means that Mortgage Bonds could give up .25 - .50% in rate, should this take place. But another failed attempt at the 200-day Moving Average – and there have already been a couple in the past few weeks – should give Bonds a boost and help them move towards last week’s highs.
Also helping Bond prices this morning are investors growing concerned with Spain. There is speculation that a bailout is being prepared for the country, even though the European Central Bank insists that a scheduled meeting this Friday with the International Monetary Fund and Spain has nothing to do with a bailout package. However, the markets may not be buying the ECB's denial, as Spanish Bond prices fell sharply today. This news has sparked some safe haven buying in the US Bond market. News from Europe will continue to cause more volatility in the marketplace. It’s difficult to get Europeans to adopt meaningful austerity measures. Just today, France announced their big move towards austerity – an increase of retirement age from 60 to 62, by 2018. If you are laughing, we don’t blame you…but the situation is far from humorous.
Back at home, we had some economic releases, starting with the Producer Price Index (PPI). The headline number dropped 0.3%, when economists were looking for a 0.5% drop. Be mindful that energy prices have moved higher in recent weeks, so we may see a pickup in headline PPI next month. When stripping out volatile food and energy costs, the Core rate rose to 0.2%, above the 0.1% expected. On an annual basis, headline PPI rose 5.3% and in line with estimates. And the year-over-year core reading was 1.3%, slightly above forecasts but still near the lower range of the Fed's comfort zone. Tomorrow brings the more closely watched Consumer Price Index (CPI).
Housing Starts in May were 593,000, well below the 655,000 expected. That number is down 10% from the prior month's reading, but still up 7.8% year over year. Building Permits were 574,000, well below the 631,000 that were expected. Another interesting way to view these numbers is to take housing starts as a double edged sword. While more housing starts would show expected optimism from builders, fewer starts and permits are not necessarily all bad news. Adding less supply and inventory may be healthier in the long run, and aid in moving some of the existing homes in the marketplace.
Industrial Production and Capacity Utilization were both reported higher than expectations, suggesting a pickup in manufacturing and output. The positive readings did help Stocks recover from their worst levels, and this is a good leading indicator that could bode well for the future.
Next Wednesday the Fed will release their interest rate decision and Policy Statement. There is speculation that the Fed may lower their 2010 and 2011 growth targets for GDP. It was just two months ago – in April – that the Fed raised their 2010 GDP projections to a range of 3.2 - 3.7%. A possible cause for the Fed to lower their target would be the significant slowdown in Europe and weakness in the Euro. This has caused the Dollar to gain strength, making our exports a bit more costly. And lowering the target – along with the most recent disappointing Jobs Report – may give the Fed enough consensus, amidst grumblings from its more hawkish members, to maintain their "extended period" language. In any case, it is all making for a very interesting and important Fed Meeting next week, as it could have an important bearing on the carry trade and the direction of mortgage rates.
Friday, June 11, 2010
Friday Closings
Need I say more? My advice would be to close any day but Friday. Consider this. There are many steps prior to you getting the keys that must take place before you go to closing. So, if your planning on having all weekend to have and to hold your new dream home then close Wednesday or Tuesday or any other weekday, just not Friday! Check out the list list of what will happen before your loan closes and funds. It's a mile from there until you get the keys.
Loan is Fully Approved
Closing documents sent to the Title company
Settlement statement is generated
Cross checking of same between Lender and Title Company
until fully approved. Multiple corrections will be made
Instructions for loan closing revised
Buyer and seller both sign
Documents faxed to review by lender
Final Documents or missing signatures requested
Loan Funds
You get the Keys, Assuming no bumps!
Close on any other day or you may lose the weekend.
You'll be glad you did!
Thursday, June 10, 2010
Locking in an Interest Rate
I'm asked this question so often I felt it needed some attention. What is locking in and when can I do it?
Lets start with Rate Lock time period.
Rate locks are based on the amount of time needed once you lock a rate until the amount of days needed for the loan to close and fund. So if your lock is good for 30 days then your loan must close and fund within that 30 day time period. If it does not, the lender can charge you a per day extension or take you to current market which could change your rate for the worse. Lets say you locked a rate and your rate was low and you miss your closing date and rates are now higher. In this case it would make sense to extend the lock and pay a per day charge to do so. Your lender will be able to tell you what that is. Lets say your closing is 45 days and you are worried that interest rates may rise.
You ask "Can I go ahead and lock my rate now and if rates move lower can I take that rate"? Some lenders offer a one time free float down so long as your within 20 days or less of the closing date. Normally some form of commitment is required to participate and is refunded at closing.
What is the difference if you lock 45 days vs. 30 days vs. 10 days? The answer is, the longer your lock, the higher the price for the rate.
Generally and I do mean generally, 15 days on a lock will cost about .25 percent of your loan amount.
If your interest rate was Zero Points at 4.75% on a 30 day lock, then a 45 day lock would have cost you .25% more. On a 100,000 loan that would mean 250.00 for the extra 15 days or .25% of the loan amount. For rate quotes visit me at homeloanapproval.com
Alan
Lets start with Rate Lock time period.
Rate locks are based on the amount of time needed once you lock a rate until the amount of days needed for the loan to close and fund. So if your lock is good for 30 days then your loan must close and fund within that 30 day time period. If it does not, the lender can charge you a per day extension or take you to current market which could change your rate for the worse. Lets say you locked a rate and your rate was low and you miss your closing date and rates are now higher. In this case it would make sense to extend the lock and pay a per day charge to do so. Your lender will be able to tell you what that is. Lets say your closing is 45 days and you are worried that interest rates may rise.
You ask "Can I go ahead and lock my rate now and if rates move lower can I take that rate"? Some lenders offer a one time free float down so long as your within 20 days or less of the closing date. Normally some form of commitment is required to participate and is refunded at closing.
What is the difference if you lock 45 days vs. 30 days vs. 10 days? The answer is, the longer your lock, the higher the price for the rate.
Generally and I do mean generally, 15 days on a lock will cost about .25 percent of your loan amount.
If your interest rate was Zero Points at 4.75% on a 30 day lock, then a 45 day lock would have cost you .25% more. On a 100,000 loan that would mean 250.00 for the extra 15 days or .25% of the loan amount. For rate quotes visit me at homeloanapproval.com
Alan
Wednesday, June 9, 2010
Leave Emotion Out of It.
Although I'm not sure this is even possible, consider your home loan to be like any other business transaction. Its just happens to be the largest financial decision you'll ever make! Remember, If you have a trusted advisor that keeps your best interest at heart, then you can feel good about your mortgage process and make the most of what normally drives some folks over the edge. Do you really want to look back and say, "Wow, that was the worst experience of my life?" Probably not. The key is to be proactive 100% of the time. If you think about something pertaining to your loan, call! If your not sure what is going on, call! If your Realtor tells you something that could impact your loan, closing costs, sales price, closing date, call! Call and then call again! Seriously, the communication effort you make will pay off in the end.
Alan Felch
HomeLoanApproval.com
Alan Felch
HomeLoanApproval.com
Tuesday, June 8, 2010
Take your Realtors Advice!
If your looking for the fastest way to home loan approval, then you should rely on your realtors referral partners for a proven track record. A warm referral buy your experienced Realtor to a Loan Officer they have had experience with is almost always the best way to get to closing with the least amount of delays.
Thursday, June 3, 2010
Getting Approved
So your loan Officer gives you the "List". These are the items you need to provide that will document your income, assets and any other information critical to the approval process. Think detail here. If your bank statements show you are overdrawn periodically an UW is not going to like that and will ask why. You better have a great excuse because this is seen as your ability to manage money. Never deposit large sums of money without clearing it with your loan officer first. Credit card advances, money from a friend are not good! Don't do it. Always talk to your loan rep about any movement of cash. Even its from one of your own accounts to another. You must document, document, document. One missed transaction by you can stop the closing. Closing ugly is not an option!
More to come!
Alan
More to come!
Alan
Wednesday, June 2, 2010
Closing Ugly! Most Common Mistakes to Avoid...
You ready? Here it is! The most common reason for not getting a loan approved is not being prepared with the minimum paperwork requirements. That's it. Nothing else comes close to being a game changer as the documentation you are providing your lender. Seriously, do you think a loan officer really wants to give you bad news two days before closing? An underwriter doesn't care. If its not documented it wont get approved. My next blog will address the most common documentation problems
Stand by.....
Alan
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