Fed Decision Shakes Things Up!
"BE WILLING TO MAKE DECISIONS." General George Patton. And that's exactly what the Fed did last week at their regularly scheduled Federal Open Market Committee meeting. But just what did they decide...and what do their decisions mean for home loan rates?
The Fed said they are going to ration out the remaining commitment of Mortgage Backed Security purchases through the first quarter of 2010. There will be no additional buying, but instead, a longer weaning off of the program. There was some speculation about the Fed increasing the amount of buying above the $1.25T committed to, and last week's statement is the Fed's nice way of saying "no." They will not be buying more in quantity, but what they will do is attempt to provide a smoother transition to normal market conditions.
It is a given that once the Fed ceases its purchases, that interest rates will climb significantly higher...most likely back above the 6% area. So instead of a hard transition with a large bump in rates, the Fed is attempting to allow rates to gradually rise. This means that waiting to purchase or refinance will very likely mean a higher interest rate.
Their decision also means that the Fed's remaining purchases will all be lower in quantity, as the remaining allotment for purchases will be spread over a longer period of time - and additionally, will not necessarily be spread out as evenly as their past purchases - which could lead to more volatility for rates in the near term.
In other news, Existing Home Sales and New Home Sales were reported slightly less than expected, but both reports continue to show signs of an improving housing market. The inventory of unsold existing homes fell to its lowest inventory level since April 2007, while the inventory of unsold new homes dropped to its lowest level since January 2007. While some of the decline in new home inventory may be due to builders constructing fewer homes - these reports indicate that the housing market is indeed showing signs of life.
Remember, with home loan rates still low - but slated to increase with the Fed's recent decision - as well as a juicy tax credit for First Time Home Buyers that is going to expire on November 30th, it makes sense to get off the fence if you've been considering a purchase or refinance. Or do you have a family member, neighbor, friend or coworker who might benefit from getting some good home loan advice? I'm always glad to get your referrals, so simply let me know who I might be able to help.
Monday, October 5, 2009
Week of September 21, 2009
INFO THAT HITS US WHERE WE LIVE
Housing starts for new single-family homes and apartments continued their steady rise, up 1.5% for August, their strongest pace in nine months. This puts housing starts at a seasonally adjusted annual rate of 598,000, their highest level since November of last year. This sign of steady improvement in home building made economists even more confident Q3 growth will be positive, signaling the recession is over.
Mortgage rates continue to remain at three-month lows. Freddie Mac's weekly Primary Mortgage Market Survey showed average long-term mortgage rates down for the third week in a row! The 30-year fixed rate mortgage is just above 5% with an average 0.7 point (including the origination fee). And the average rate for 15-year fixed rate mortgages hit a new record low in the Survey. These rates are for prime borrowers with an 80% or lower loan-to-value ratio on loans eligible for purchase by Freddie Mac.
Finally, please remember the $8,000 tax credit for first-time homebuyers is set to expire in just over two months. Those eligible need to close by November 30!
Review of Last Week
HAPPY DAYS ARE NEAR AGAIN... The stock markets continued their upward moves last week, posting gains in four of five sessions and for the week overall. The big news of the week was Fed chief Ben Bernanke announcing, "From a technical perspective, the recession is very likely over." This was followed by billionaire Warren Buffet effectively calling the recession's end, commenting that the economy has "sort of plateaued at the bottom right now." The world's most successful investor added: "I think we're certainly... through the worst of it in residential real estate in all probability."
In addition to these positive pronouncements, investors had some solid economic developments to ponder. Tuesday we had August Retail Sales shooting up 2.7%, easily beating expectations. Excluding the auto sales boost from the government's Cash for Clunkers program, we still had a 1.1% hike for the rest of retail. Retail in fact is up at a 14.3% annual rate over the last three months and up 5.1% if you take out auto sales.
Initial claims for unemployment fell again last week, this time by 12,000, to 545,000. The four-week average of continuing claims dropped too. Meanwhile, the Philadelphia Fed Index, which gauges manufacturing in that region, shot up to +14.1 in September from 4.2 in August. This harmonized nicely with Industrial Production now up two months in a row, at a 10.4% annual rate.
For the week, the Dow ended UP 2.2%, at 9820.20; the S&P 500 shot UP 2.5%, to 1068.30; while the Nasdaq also pushed UP 2.5%, to 2132.86.
Bond prices declined in thin trading, with the market anticipating the record supply that will be on tap at next week's Treasury auctions. The FNMA 30-year 4.5% bond we watch finished down from the previous week's $100.78 close, settling at $100.44. Nonetheless, mortgage rates inched down a bit more, continuing at their historically low levels.
This Week’s Forecast
THE FED AND HOUSING WEIGH IN... The Fed meets this week and although there's no drama around whether they'll raise the rate (they won't), there's will be more than the usual interest in their FOMC statement, coming out Wednesday at 2:15. That's all because of Fed chief Bernanke's recession-ending comments last week. More key housing data comes with the Federal Housing Finance Agency's July Housing Price Index Tuesday, then August Existing Home Sales Thursday and New Home Sales Friday.
Housing starts for new single-family homes and apartments continued their steady rise, up 1.5% for August, their strongest pace in nine months. This puts housing starts at a seasonally adjusted annual rate of 598,000, their highest level since November of last year. This sign of steady improvement in home building made economists even more confident Q3 growth will be positive, signaling the recession is over.
Mortgage rates continue to remain at three-month lows. Freddie Mac's weekly Primary Mortgage Market Survey showed average long-term mortgage rates down for the third week in a row! The 30-year fixed rate mortgage is just above 5% with an average 0.7 point (including the origination fee). And the average rate for 15-year fixed rate mortgages hit a new record low in the Survey. These rates are for prime borrowers with an 80% or lower loan-to-value ratio on loans eligible for purchase by Freddie Mac.
Finally, please remember the $8,000 tax credit for first-time homebuyers is set to expire in just over two months. Those eligible need to close by November 30!
Review of Last Week
HAPPY DAYS ARE NEAR AGAIN... The stock markets continued their upward moves last week, posting gains in four of five sessions and for the week overall. The big news of the week was Fed chief Ben Bernanke announcing, "From a technical perspective, the recession is very likely over." This was followed by billionaire Warren Buffet effectively calling the recession's end, commenting that the economy has "sort of plateaued at the bottom right now." The world's most successful investor added: "I think we're certainly... through the worst of it in residential real estate in all probability."
In addition to these positive pronouncements, investors had some solid economic developments to ponder. Tuesday we had August Retail Sales shooting up 2.7%, easily beating expectations. Excluding the auto sales boost from the government's Cash for Clunkers program, we still had a 1.1% hike for the rest of retail. Retail in fact is up at a 14.3% annual rate over the last three months and up 5.1% if you take out auto sales.
Initial claims for unemployment fell again last week, this time by 12,000, to 545,000. The four-week average of continuing claims dropped too. Meanwhile, the Philadelphia Fed Index, which gauges manufacturing in that region, shot up to +14.1 in September from 4.2 in August. This harmonized nicely with Industrial Production now up two months in a row, at a 10.4% annual rate.
For the week, the Dow ended UP 2.2%, at 9820.20; the S&P 500 shot UP 2.5%, to 1068.30; while the Nasdaq also pushed UP 2.5%, to 2132.86.
Bond prices declined in thin trading, with the market anticipating the record supply that will be on tap at next week's Treasury auctions. The FNMA 30-year 4.5% bond we watch finished down from the previous week's $100.78 close, settling at $100.44. Nonetheless, mortgage rates inched down a bit more, continuing at their historically low levels.
This Week’s Forecast
THE FED AND HOUSING WEIGH IN... The Fed meets this week and although there's no drama around whether they'll raise the rate (they won't), there's will be more than the usual interest in their FOMC statement, coming out Wednesday at 2:15. That's all because of Fed chief Bernanke's recession-ending comments last week. More key housing data comes with the Federal Housing Finance Agency's July Housing Price Index Tuesday, then August Existing Home Sales Thursday and New Home Sales Friday.
Week of September 14, 2009
INFO THAT HITS US WHERE WE LIVE
Last week mortgage applications surged 17%, according to the Mortgage Bankers Association. And it wasn't just re-financings taking advantage of the latest dip in our already low interest rates. Applications for purchase loans were up a very healthy 9.5% from the week before. According to the MBA, the average contract interest rate for a 30-year fixed-rate mortgage was down to just over 5%, with average points inching up to 1.23 (including the origination fee) for 80% loan-to-value mortgages. These rates are of course for prime borrowers with 20% downpayment.
Freddie Mac's weekly survey of conforming mortgages showed rates dropping to similar levels, which is very nice considering a 30-year fixed-rate conforming mortgage averaged 6.35% just a year ago. The benefit to the real estate market is clear. As Freddie Mac chief economist Frank Nothaft put it, "Low mortgage rates are helping to keep housing very affordable." First-time homebuyers enjoy even more affordability, thanks to the $8,000 tax credit, but be sure to remind them they need to close by November 30!
Prices may even be stabilizing. The listing and valuation site Zillow.com reported buyers are getting smaller discounts off seller's listing prices. July purchasers paid just 3.3% below list price vs. an average of 3.5% for June and 4.6% back in January.
Review of Last Week
SHORT WEEK HITS NEW HEIGHTS...There were just four trading days last week, but the stock market made gains on three of them, sending the Dow to a fresh high for the year. The S&P 500 and Nasdaq indexes were also UP for the week, as investors seemed ready to accept more risk in what increasingly appears to be a recovering economy.
But all is not well just yet, as the Fed's Beige Book on Wednesday alleged that employment, consumer spending and construction remain weak. This of course justifies the Fed keeping the funds rate low. But the Beige Book did note the rate of economic decline is slowing and manufacturing shows improvement, as reported here last week. The Trade Balance offered an interesting mixed message. The trade deficit expanded the most in a year. Economists say this shows trade won't add as much to Q3 GDP growth as it has in the past. On the other hand, exports and the overall volume of international trade are up now three months in a row. This revival in exports, some economists feel, signals the US economy is in recovery.
Initial claims for unemployment dropped 26,000 for the week, to 550,000, the second lowest level in the recovery. Continuing unemployment claims dropped by 159,000 to 6.09 million, the lowest level in five months. Both FedEx and Texas Instruments raised their earnings outlooks for the current quarter. Treasury Secretary Geithner told Congress to remove bank bailout money from his budget! And Friday saw the University of Michigan's Consumer Sentiment Index registering a way-higher-than-expected 70.2.
For the week, the Dow ended UP 1.7%, to 9605.41; the S&P 500 shot UP 2.6%, to 1042.73; while the Nasdaq pushed UP 3.1%, to 2080.90.
The bond market held up for the week, with the auctions that went on helping to support prices. The FNMA 30-year 4.5% bond we watch finished up from the previous week's $100.50 close, ending at $100.78. As mentioned above, mortgage rates dipped a trifle more, to near historic levels.
This Week’s Forecast
BUYING AND BUILDING... On the buy side, we'll have August Retail Sales telling us how the all-important consumer is aiding the economic recovery. The August Consumer Price Index (CPI) will show if inflation is hurting that consumer's buying power. Building will be measured on Thursday with August Housing Starts and Building Permits revealed to all
Last week mortgage applications surged 17%, according to the Mortgage Bankers Association. And it wasn't just re-financings taking advantage of the latest dip in our already low interest rates. Applications for purchase loans were up a very healthy 9.5% from the week before. According to the MBA, the average contract interest rate for a 30-year fixed-rate mortgage was down to just over 5%, with average points inching up to 1.23 (including the origination fee) for 80% loan-to-value mortgages. These rates are of course for prime borrowers with 20% downpayment.
Freddie Mac's weekly survey of conforming mortgages showed rates dropping to similar levels, which is very nice considering a 30-year fixed-rate conforming mortgage averaged 6.35% just a year ago. The benefit to the real estate market is clear. As Freddie Mac chief economist Frank Nothaft put it, "Low mortgage rates are helping to keep housing very affordable." First-time homebuyers enjoy even more affordability, thanks to the $8,000 tax credit, but be sure to remind them they need to close by November 30!
Prices may even be stabilizing. The listing and valuation site Zillow.com reported buyers are getting smaller discounts off seller's listing prices. July purchasers paid just 3.3% below list price vs. an average of 3.5% for June and 4.6% back in January.
Review of Last Week
SHORT WEEK HITS NEW HEIGHTS...There were just four trading days last week, but the stock market made gains on three of them, sending the Dow to a fresh high for the year. The S&P 500 and Nasdaq indexes were also UP for the week, as investors seemed ready to accept more risk in what increasingly appears to be a recovering economy.
But all is not well just yet, as the Fed's Beige Book on Wednesday alleged that employment, consumer spending and construction remain weak. This of course justifies the Fed keeping the funds rate low. But the Beige Book did note the rate of economic decline is slowing and manufacturing shows improvement, as reported here last week. The Trade Balance offered an interesting mixed message. The trade deficit expanded the most in a year. Economists say this shows trade won't add as much to Q3 GDP growth as it has in the past. On the other hand, exports and the overall volume of international trade are up now three months in a row. This revival in exports, some economists feel, signals the US economy is in recovery.
Initial claims for unemployment dropped 26,000 for the week, to 550,000, the second lowest level in the recovery. Continuing unemployment claims dropped by 159,000 to 6.09 million, the lowest level in five months. Both FedEx and Texas Instruments raised their earnings outlooks for the current quarter. Treasury Secretary Geithner told Congress to remove bank bailout money from his budget! And Friday saw the University of Michigan's Consumer Sentiment Index registering a way-higher-than-expected 70.2.
For the week, the Dow ended UP 1.7%, to 9605.41; the S&P 500 shot UP 2.6%, to 1042.73; while the Nasdaq pushed UP 3.1%, to 2080.90.
The bond market held up for the week, with the auctions that went on helping to support prices. The FNMA 30-year 4.5% bond we watch finished up from the previous week's $100.50 close, ending at $100.78. As mentioned above, mortgage rates dipped a trifle more, to near historic levels.
This Week’s Forecast
BUYING AND BUILDING... On the buy side, we'll have August Retail Sales telling us how the all-important consumer is aiding the economic recovery. The August Consumer Price Index (CPI) will show if inflation is hurting that consumer's buying power. Building will be measured on Thursday with August Housing Starts and Building Permits revealed to all
Week of September 7, 2009
INFO THAT HITS US WHERE WE LIVE
We had more good news for housing last week with Pending Home Sales UP 3.2% for July, gaining ground for the sixth month in a row!This positive number should point to yet another hike when August Existing Homes Sales numbers come out. There was also encouraging construction data, as July single-family home building was UP 7% – the largest monthly increase since 1983, when housing boomed coming out of the 1981–1982 downturn. The combination of affordability, low mortgage rates and the $8,000 tax credit for first-time homebuyers is having a terrific effect on the housing market. Unfortunately, that tax credit will expire November 30 unless Congress elects to extend it. Let's hope they do.
Speaking of mortgage rates, these dropped nicely last week, according to Freddie Mac's Primary Mortgage Market Survey. Nationally, the 30-year fixed rate mortgage averaged 5.08% with an average of 0.7 point. That was down from 6.35% a year ago! These rates are for prime borrowers who can put 20% down and who qualify for loans eligible to be purchased or guaranteed by Freddie Mac or Fannie Mae.
Review of Last Week
OFF FOR THE HOLIDAY... The market took a break from its steady move upward, dropping on good economic news, then rallying despite some negative employment data, but still closing a bit down for the week. For the year, the Dow is still UP 7.6%, the S&P 500 UP 12.5% and the Nasdaq UP a whopping 28.0%.
The good news that oddly sent stock prices south included the fantastic Pending Homes Sales and single-family home construction numbers mentioned above. You can add to that BOTH Chicago PMI and ISM Manufacturing readings showing US manufacturing is now expanding. That's right. Manufacturing is starting to grow. The ISM Services Index did not yet indicate growth but it did rise for August, showing business activity in the non-manufacturing sector increasing for the first time since September 2008.
August employment hit Friday. We'll do the worst first. The unemployment rate went to 9.7%, a new high we haven't seen since 1982, but still well below that year's 10.8%. But the 216,000 drop in non-farm payrolls was better than expected. And private-sector payrolls fell by 198,000, their smallest decline in a year. Other good signs included average hourly earnings up for the second straight month, registering their largest gains so far this year. Some economists feel payrolls could start expanding by year's end. They observe that with corporate profits up 24% annually in the first six months, businesses are now able to expand payrolls. We hope so.
For the week, the Dow was down 1.1%, to 9441.27; the S&P 500 dropped 1.2%, to 1016.40; while the Nasdaq slid just 0.5%, to 2018.78.
Bond prices did OK most of the week, then sunk a bit Friday as the stock market rallied in spite of the not-so-great jobs report. Nevertheless, the price of the FNMA 30-year 4.5% bond we watch finished up from the previous week's $100.19 close, ending at $100.50. As noted above, mortgage rates were down for the week, to very nice levels.
This Week’s Forecast
SHORT AND SWEET... With Labor Day on Monday, we have just four days of trading and not a whole lot of economic news. The jobs story will continue, as we monitor weekly initial jobless claims and take a look to see if continuing claims will drop. The Trade Balance will tell us how we're doing in the global marketplace, then the week ends with another reading of the mind of the all-important consumer, this time using the University of Michigan Consumer Sentiment Index
Call me for any Help you need!
We had more good news for housing last week with Pending Home Sales UP 3.2% for July, gaining ground for the sixth month in a row!This positive number should point to yet another hike when August Existing Homes Sales numbers come out. There was also encouraging construction data, as July single-family home building was UP 7% – the largest monthly increase since 1983, when housing boomed coming out of the 1981–1982 downturn. The combination of affordability, low mortgage rates and the $8,000 tax credit for first-time homebuyers is having a terrific effect on the housing market. Unfortunately, that tax credit will expire November 30 unless Congress elects to extend it. Let's hope they do.
Speaking of mortgage rates, these dropped nicely last week, according to Freddie Mac's Primary Mortgage Market Survey. Nationally, the 30-year fixed rate mortgage averaged 5.08% with an average of 0.7 point. That was down from 6.35% a year ago! These rates are for prime borrowers who can put 20% down and who qualify for loans eligible to be purchased or guaranteed by Freddie Mac or Fannie Mae.
Review of Last Week
OFF FOR THE HOLIDAY... The market took a break from its steady move upward, dropping on good economic news, then rallying despite some negative employment data, but still closing a bit down for the week. For the year, the Dow is still UP 7.6%, the S&P 500 UP 12.5% and the Nasdaq UP a whopping 28.0%.
The good news that oddly sent stock prices south included the fantastic Pending Homes Sales and single-family home construction numbers mentioned above. You can add to that BOTH Chicago PMI and ISM Manufacturing readings showing US manufacturing is now expanding. That's right. Manufacturing is starting to grow. The ISM Services Index did not yet indicate growth but it did rise for August, showing business activity in the non-manufacturing sector increasing for the first time since September 2008.
August employment hit Friday. We'll do the worst first. The unemployment rate went to 9.7%, a new high we haven't seen since 1982, but still well below that year's 10.8%. But the 216,000 drop in non-farm payrolls was better than expected. And private-sector payrolls fell by 198,000, their smallest decline in a year. Other good signs included average hourly earnings up for the second straight month, registering their largest gains so far this year. Some economists feel payrolls could start expanding by year's end. They observe that with corporate profits up 24% annually in the first six months, businesses are now able to expand payrolls. We hope so.
For the week, the Dow was down 1.1%, to 9441.27; the S&P 500 dropped 1.2%, to 1016.40; while the Nasdaq slid just 0.5%, to 2018.78.
Bond prices did OK most of the week, then sunk a bit Friday as the stock market rallied in spite of the not-so-great jobs report. Nevertheless, the price of the FNMA 30-year 4.5% bond we watch finished up from the previous week's $100.19 close, ending at $100.50. As noted above, mortgage rates were down for the week, to very nice levels.
This Week’s Forecast
SHORT AND SWEET... With Labor Day on Monday, we have just four days of trading and not a whole lot of economic news. The jobs story will continue, as we monitor weekly initial jobless claims and take a look to see if continuing claims will drop. The Trade Balance will tell us how we're doing in the global marketplace, then the week ends with another reading of the mind of the all-important consumer, this time using the University of Michigan Consumer Sentiment Index
Call me for any Help you need!
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