Mortgage Rate Update 09-01-2008

There are five relevant economic reports scheduled for release this week, but they are being posted over four days because the markets were closed today in observance of the Labor Day holiday.

The first piece of data this week comes tomorrow morning with the release of the Institute for Supply Management’s (ISM) manufacturing index at 10:00 AM ET. This index measures manufacturer sentiment and is expected to show a decline from last month’s reading of 50.0 to 49.5 in August. A reading above 50 means that more surveyed manufacturers felt business improved during the month than those who felt it worsened. An increase in the index would probably cause a rally in the stock markets and lead to mortgage rates rising tomorrow, while a reading below 49.5 should lead to lower rates.

The second report of the week is July’s Factory Orders data Wednesday morning. This report measures manufacturing sector strength and is similar to last week’s Durable Goods Orders, but includes orders for both durable and non-durable goods. This data is expected to show a 0.4% increase in new orders. A smaller than expected rise should lead to lower mortgage rates Wednesday.

Also scheduled for release is the Wednesday afternoon Federal Reserve release of its Beige Book report. This report details current economic conditions in the U.S. by region. It is believed to be a key source of data when the Fed meets for their FOMC meetings. It is usually released approximately two weeks prior to each FOMC meeting. If the 2:00 PM ET release reveals any significant surprises, we may see movement in the markets and mortgage pricing as analysts adjust their theories on the Fed’s next interest rate move. Most likely though, it will be a non-event and will not lead to a change in mortgage rates.

Thursday morning brings us the revision to the 2nd Quarter Productivity numbers, which measures employee productivity in the workplace. It is expected to show an upward change from the previous estimate of a 2.2% annual pace. Forecasts are currently calling for a reading of 2.9%, which would be good news for the bond market and possibly lead to slightly lower mortgage rates Thursday morning.

The big news of the week comes Friday morning. The Labor Department will post the unemployment rate, number of new jobs added or lost and average hourly earnings for August early Friday. The ideal scenario for the bond market and mortgage rates is rising unemployment, a smaller than expected rise in new payrolls and earnings to remain unchanged. If we are that fortunate, I expect to see mortgage rates drop considerably Friday morning. Analysts are expecting to see the unemployment rate remain at 5.7% and 70,000 jobs lost in the month. Weaker then expected readings would be very good news for bonds and mortgage rates.

Overall, I expect to see the most movement in rates Friday, but Tuesday should also be fairly active. I am holding the short-term lock recommendations for the time being as there still seems to be plenty of profit taking opportunities for traders if they choose to do so. This could lead to a spike in mortgage rates if traders sell holdings to capture those gains. This does not mean that I think rates will necessarily move higher. It means that I feel the risk versus the potential reward of continuing to float an interest rate is leaning heavily towards the risky side. Accordingly, locking seems to be the prudent position at this time.

If I were considering financing/refinancing a home, I would…. Lock if my closing was taking place within 7 days… Lock if my closing was taking place between 8 and 20 days… Float if my closing was taking place between 21 and 60 days… Float if my closing was taking place over 60 days from now… This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

Mortgage Market Rate Update April 29, 2008

Where We’ve been:
Tuesday’s bond market has opened in positive territory despite a stronger than expected economic reading. The stock markets are showing early losses with the Dow down 50 points and the Nasdaq down 9 points. The bond market is currently up 10/32, which with yesterday’s late strength should improve this morning’s mortgage rates by approximately .250 – .375 of a discount point.

The Conference Board gave us April’s Consumer Confidence Index (CCI) late this morning, revealing a stronger than expected reading of 62.3. However, an upward revision to March’s reading has actually worked favorably for bonds. The difference between forecasts and the previous March reading is extremely close to the difference between today’s reading and the revised March reading. This means that even though confidence was a little higher than thought in March, it dropped as much as it was expected to in April. The result is little impact on bond trading or mortgage rates.

Where We’re At:
Tomorrow is going to be a very interesting day as brings us the release of two important reports along with the FOMC meeting results. The first is the preliminary version of the 1st Quarter Gross Domestic Product (GDP). This is arguably the single most important report that we see on a regular basis. The GDP is the sum of all products and services produced in the U.S. and is considered to be the best indicator of economic growth or contraction. I expect this report to cause major movement in the financial markets tomorrow and therefore the mortgage market also. Analysts are expecting to see output at an annual rate of 0.5%. A smaller increase would be ideal for mortgage rates a sit would fuel recession concerns. But, a larger increase would almost certainly cause inflation concerns in the bond market that would push mortgage rates higher tomorrow morning.

The next report of the day is the 1st Quarter Employment Cost Index (ECI), which tracks employer costs for wages and benefits. This gives us a measurement of wage-inflation. If it shows a large increase, we may see inflation concerns cause the bond market to fall and mortgage rates to rise. A smaller than expected increase would be good news for the bond market and mortgage pricing. Current forecasts are showing a rise of 0.8%.

Where we’re Going:
This week’s FOMC meeting will began today but will not adjourn until tomorrow afternoon. It will likely adjourn with an announcement of another rate cut to key short term interest rates. Just how much of a reduction is open for debate. Look for another round of volatility following the 2:15 PM ET post-meeting statement.

Forecast:
If I were considering financing/refinancing a home, I would…. Float if my closing was taking place within 7 days… This is only an opinion of what one may do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

If rates should fall lower or we revert to a recommendation to float, you’ll find out about it here at The Property Tip. So check back and check back often!

Mortgage Rate Update April 21, 2008

Where We’re At:
This week is fairly light in terms of economic news scheduled for release. There are four reports scheduled, but only one of them is likely to cause much movement in mortgage rates. Accordingly, there is a fairly decent possibility of seeing a fairly calm week in the mortgage market.

The week’s first piece of data is one of the least important of all four. The National Association of Realtors will post March’s Existing Homes Sales numbers Tuesday morning, which are expected to show a drop from February. A similar report to this one and actually the week’s least important data- March’s New Home Sales will be released Thursday morning. Both of these releases give us an indication of housing sector strength and mortgage credit demand, but unless they vary greatly from analysts forecasts, I don’t think they will cause much movement in mortgage rates.

Where we’re Going:
March’s Durable Goods Orders will be posted early Thursday morning. This report gives us an indication of manufacturing sector strength by tracking orders for big-ticket items at U.S. factories. Current forecasts call for a small increase in orders. A smaller than expected increase could help boost bond prices and cause mortgage rates to drop Thursday morning. However, a stronger than expected reading would indicate that the manufacturing sector is gaining strength quicker than many had thought. This would be negative news and would probably help drive mortgage rates higher.

Also Thursday is a 5-year Treasury Note auction. These sales sometimes bring volatility to the bond market ahead of the actual sales as investors prepare for them. However, that weakness is usually only temporary and will correct itself after the sale is complete as long as it was met with a decent demand from investors. If there was a strong demand, bond prices should rise during afternoon trading. But, lackluster interest could lead to weakness and upward revisions to mortgage rates.

Forecast: Overall, look for Thursday to be the most important day of the week with the Durable Goods report being posted and the Treasury auction. The rest of the week will likely be heavily influenced by the stock markets. If the major stock indexes continue to rally, bonds will likely suffer and mortgage will move higher. If stocks pull back, we could see mortgage rates move lower this week.

If I were considering financing/refinancing a home, I would…. Float if my closing was taking place within 7 days… This is only an opinion of what one may do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

If rates should fall lower or we revert to a recommendation to float, you’ll find out about it here at The Property Tip. So check back and check back often!

Mortgage Rate Update April 16, 2008

Where We’ve been:
Yesterday afternoon’s weakness in bonds was mostly the result a sizable stock rally, but inflation concerns that were mentioned in the Fed Beige Book also contributed. The report showed that the economy continued to weaken and that prices paid for raw materials spiked since the last report. The higher costs for materials usually means higher prices passed on to consumers. That inflation threat is a concern to bond traders because inflation erodes the value of a bond’s future fixed interest payments and leads to selling in bonds. That translates into higher mortgage rates for borrowers.

The Labor Department released weekly unemployment claims, saying that 372,000 new claims for benefits were filed. This was up form the previous week, but was close to forecasts. Therefore, it also had no impact on this morning’s rates.

Where We’re At:Thursday’s bond market has opened down slightly as yesterday’s late weakness carried into this morning’s trading. The stock markets are showing losses with the Dow down 31 points and the Nasdaq down 15 points. The bond market is currently down 5/32, but weakness late yesterday will push this morning’s mortgage rates higher by approximately .375 of a discount point over yesterday’s morning rates.

Where we’re Going: There is no relevant data scheduled for release tomorrow. Look for the stock markets to be the biggest influence eon bond trading and mortgage rates. If stocks move higher, binds will likely fall and mortgage rates will inch up. If we see stock weakness, mortgage rates should improve tomorrow.

Forecast: Mortgage interest rates remain historically favorable and taking advantage of rates at these levels to lock in a low interest rate for years to come would be prudent. If I were considering financing/refinancing a home, I would…. Lock if my closing was taking place within 7 days… This is only an opinion of what one may do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

If rates should fall lower or we revert to a recommendation to float, you’ll find out about it here at The Property Tip. So check back and check back often!

L.A.Times: ‘Mortgage Payoff on Steroids’ with Randy Ramirez Contributing

So on Wednesday, April 9, 2008, the article I was interviewed for on the new Mortgage financing products was published in the Los Angeles Times, Business section front page. Although, previously being contacted by Telemundo and Tribune, as an avid Los Angeles Times Reader, this one was close to my heart! Well, although the interview was long, my published contribution resulted in a minor nod. But hey, to be considered is always an honor.

More importantly, the fact that the housing industry and property has received such bad press lately, its important to learn and understand the cutting edge ways that are out there on how to understand financing tools, what the affluent use, and if it is in everyones interest to use these as debt reduction vehicles (like cutting 10-15 years off your mortgage in a 2 year year period). If you ever are interested in discussing these items further, I am always available. I’ll let you read the article on the L.A. Times website….

L.A. Times: Business: Mortgage Payoff on Steroids, April 9, 2008

Mortgage Rate Update April 10, 2008

Where We’re At:
This week brings us the release of only two relevant economic reports in addition to the minutes from the last FOMC meeting and a Treasury auction. Both of the relevant reports are scheduled for release late in the week, so the most movement in rates may come the latter part of the week.

So far this week Mortgage prices are roughly unchanged, and aside from the WaMu news (opting out of the wholesale market) there is little news. The release of the minutes of the March 18th FOMC meeting, along with February’s pending home sales (expected to have decreased -1% following January’s unchanged) were as follows: Fed minutes release actually gave us favorable news. The Fed was clearly concerned about economic growth and likelihood of a recession during the last FOMC meeting. They indicated that the economic slowdown could continue well into next year, which surprised many analysts. This is generally good news for bonds because weak economic conditions make stock less appealing to investors. As a result, funds are shifted into bonds, leading to lower mortgage rates.

Where we’re Going:
Thursday’s bond market opened in positive territory but has since fallen into negative ground as stocks have gained strength. The stock markets are now showing noticeable gains with the Dow up 80 points and the Nasdaq up 30 points. The bond market is currently down 8/32, but we likely will see mortgage rates improve by approximately .125 – .250 of a discount points as a result of strength in bonds late yesterday and early this morning. We could see some weakness in bonds ahead of the sale as investing firms sell current holdings to prepare for it. This weakness is usually only temporary if the sales are met with a decent demand. The results of the sale will be posted at 1:00 PM ET. If the demand from investors was strong, the bond market could rally during afternoon trading, If the sales were met with a poor demand, the afternoon weakness may cause upward revisions to mortgage pricing tomorrow afternoon.leading to lower mortgage rates.

Forecast:
If I were considering financing/refinancing a home, I would…. Lock if my closing was taking place within 7 days… Float if my closing was taking place between 8 and 20 days…

If rates should fall lower or we revert to a recommendation to float, you’ll find out about it here at The Property Tip. So check back and check back often!

New Home sales Fall to 13 year Low… what this housing crisis data means to you!

Commerce Department released estimates today for Sales of new homes in the United States which fell to a 13-year low in February. This trend has continued over the past four months for Sales and are off about 30% in the past year. This news was higher than projected by Economists which sent a chill through the industry.

Well, the fact that sales are down, has led to lower prices … which should be good news for buyers. So… if prices are down and there seems to be inventory out there, what is the problem you ask? Why aren’t people buying at record lows to consume this supply of homes??

The problem is simple cause & effect. The Cause: It is the old street theory of waiting for the bottom till you jump in! Problem with that is that you only know that the bottom is here when it has come & gone. Remember we are getting these figures a month later (February numbers were released). But the psychology of buyers is “I am going to wait for them (home prices) to go down!”

Really!? The Effect: When this psychology only hurts the economy & their own home values they are purchasing. Because Sellers continue to get pressured to sell lower. Making these figures of home sales to go lower and lower – really only hurting us all (consumer buying decreases due to fears of economic lows)! Its a vicious, vicious cycle.

Not to mention what is going on with credit lending guidelines. They are so tight right now that these figures we discussed above may actually be worse off then we know. Why you ask? Well, the numbers are based off of sales contract figures… failing to include the canceled contracts due to lack of qualifying for financing or whatever other reasons! Its no secret that cancelled contracts are rising because the lending institutions will not lend out or ease thier guidleine untill they know the full extent of their sub prime losses and write downs are done. Even with the FED lowering the discount rates and Fannie/Freddie willing to buy more this has just kept mortgage backed securities from rising, but mortgage rates have only been affected by continuing their roller coaster of volatility (not nearly the drop that the average home buyer expected)!

My point is that this data only proves the psychology of buyers and the resistance of banks to allow a market to easily correct itself. So, I am often asked the question when will the housing market crisis end and why has it not improved… well, there you have it. In my opinion, it took about 1 year for home prices to drop 10%, and it may take another unfortunate 10% to have the buyers demand consume the supply and this marketplace re-correct the housing industries previously overinflated status (including prices and outrageous lending).

Email me for any further questions or call at 626.914.0796.

Mortgage Rate Update March 24, 2008

Where We’ve been:
Monday’s bond market has opened down sharply following an early stock rally and stronger than expected housing news. The stock markets are kicking the week off quite strong with the Dow up 212 points and the Nasdaq up 60 points– which will likely push this morning’s mortgage rates higher by approximately .500 of a discount point over Thursday’s rates.

Where We’re At:
The first report of the week came late this morning with the release of February’s Existing Home Sales. It showed a 2.8% increase in home resales last month when it was expected to show another decline. This is good news for the housing sector, but considered bad news for bonds.

Where we’re Going: The rest of the week brings us the release of six more reports for the bond market to digest. The next one is the first important data of the week when March’s Consumer Confidence Index (CCI) is posted late in morning. This index gives us an indication of consumers’ willingness to spend. Bond traders watch this data closely because consumer spending makes up two-thirds of our economy. If this report shows that confidence is falling, it would indicate that consumers are more apt to delay making large purchases. If the report reveals that confidence looks to be growing, we may see bond traders sell, pushing mortgage rates higher tomorrow morning. It is expected to show a decline from February’s reading of 75.0 to 73.4.

Forecast:
Overall, it is difficult to label one particular day as the most important of the week. I am expecting the CCI or Durable Goods Orders reports to have the biggest influence on mortgage rates, so by default we can declare tomorrow or Wednesday to be of high importance. The truth is that rather than a significant change in rates one or two days, we will most likely see a slight change several days. Accordingly, the risk of floating an interest rate this week is not as great as last week, but with a low expectation of much improvement in rates the next several days, I am holding the lock recommendations for the time being.

If rates should fall lower or we revert to a recommendation to float, you’ll find out about it here at The Property Tip. So check back and check back often!

Prop 60/90: Super Senior Tax Savings When Relocating

I was recently told that a senior would love to downsize their current home and retire,  but when they saw how much the new taxes on the new smaller home would be, they put that plan to rest quickly. True, a new tax rate can be a hefty increased obligation,  especially if you have had a residence for many years at a low tax rate, as many seniors commonly do. However,  in California, tax relief for seniors 55 and older helps ease the cost of moving and finding a replacement home by transferring the taxable value on the senior’s original home to the replacement home.

Here’s how it works: If you or your spouse who resides with you is age 55 or older, you may buy or construct a new home of equal or lesser value than your existing home and transfer the trended base value to your new property. This is a onetime only benefit. You must buy or complete construction of your replacement home within two years of the sale of the original property. Both the original home and the new home must be your principal place of residence and file the necessary application with the Tax Assessor.

This is a huge benefit for those seniors that are held back by the property tax increases. Now, the main difference between Proposition 60 and 90 is that 60 requires that you remain in the same county, while following the other requirements. Proposition 90 allows you to transfer the current taxable value into a different participating county! However, it’s important to understand a few other specifics of Proposition 60/90 Reappraisal Exclusion for Seniors.

For instance, no partial exclusions are allowed. So if you decide to buy a home that is of a higher value than your current home, you will not qualify for the program. A notable benefit is how the value limits work (to get the most for your tax rate). Some counties (such as San Diego) will allow you to buy a replacement  property before you sell your current home then limit is 100% of the market value of your original property. But if you sell your original property, and purchase another within the first year the limit increases to 105%, and to 110% if the purchase is within the second year. Another other significant benefit with this program is that if an addition is made to a replacement home it may qualify for a reassessment exclusion.

If you’re considering using Proposition 60/90, be sure to check with your  local county tax assessor for more specific details and restrictions about the program and participating programs.

Weekly Mortgage Rate Update March 17, 2008

Where We’ve been: This St Patrick’s Day Monday Mortgage rates began the day improving after weaker than expected economic news and EARLY stock losses. These losses on the stock markets are a result of the news of the Bear Stearns bailout raised concerns about the stability of the U.S. banking system. Not to mention the news of the Fed’s rare Sunday evening announcement to lower the Discount Rate by a quarter-point. The discount rate is the rate that the Fed charges banks for loans and is considered less important than the benchmark Federal Funds rate that will be addressed at tomorrow’s FOMC meeting.

Where We’re At: This holiday-shortened week is moderately active in terms of economic releases scheduled to be posted, however, it does bring us another Federal Open Market committee (FOMC) meeting. There are four reports due to be released this week, with one of them considered to be of high importance. The first piece of data came mid-morning today when February’s Industrial Production report. This report measures manufacturing sector strength and revealed a drop in output. This is good news for the bond market and mortgage rates since it adds fuel to the theory that the economy is in a recession already.

Where we’re Going: The FOMC meeting begins early tomorrow and is expected bring another sizable cut short-term interest rates. Many analysts are predicting a .50 cut, but the .75 is a possibility. This cut could go either way, if it’s a .75 rate cut then bonds will rally the bond market and lead to lower mortgage rates, while only a .25 drop could be considered as bad news for bonds and lead to higher mortgage rates. Let’s watch this one closely.

What will likely cause volatility in the markets is the post-meeting statement. Traders are hoping to pick up an indication of future Fed moves, particularly if the Fed expects to cut rates again anytime soon. It is often the post-meeting comments that cause the most volatility because the Fed move is often predicted. However, there are plenty of different opinions on what the Fed will do at this meeting, therefore, the move itself and the following statement could both cause significant movement in the markets.

Forecast:
Overall, look for tomorrow to be the most important day of the week due to the FOMC meeting and PPI release. The rest of the week will likely be driven by outside factors such as stock movements. If the stock markets stage a significant rally or sell-off, we should see bonds move in the opposite direction (which = lower rates). The bond market will close early Thursday and remain closed Friday in observance of the Good Friday Holiday. There is a possibility of seeing additional volatility in the markets as investors prepare for the long weekend. If considering financing/refinancing a home, I would Lock if my closing was taking place within 7 days.

If rates should fall lower or we revert to a recommendation to float, you’ll find out about it here at The Property Tip. So check back and check back often!