Daily Quotes Nov. 12 2010!
"No matter how good an idea sounds, test it first. "
-- Henry Bloch, H&R Block co-founder
"To some degree, you control your life by controlling your time. "
-- Conrad Hilton, hotel executive
"The hours we pass with happy prospects in view are more pleasing than
those crowded with fruition."
-- Oliver Goldsmith, writer
"Every memorable act in the world is a triumph of enthusiasm. Nothing
great was ever achieved without it because it gives any challenge or any
occupation, no matter how frightening or difficult, a new meaning.
Without enthusiasm you are doomed to a life of mediocrity but with it
you can accomplish miracles."
-- Og Mandion
"Being smart is an elusive concept. There's a certain sharpness, an
ability to absorb new facts, to ask an insightful question or relate to
domains that may not seem connected at first."
-- Bill Gates, Microsoft co-founder
All "Betts" on Brian! The Only Relator you want!
Friday, November 12, 2010
Wednesday, November 10, 2010
For the week of November 8, 2010
For the week of November 8, 2010
INFO THAT HITS US WHERE WE LIVE
Market Update
Last Friday the National Association of Realtors (NAR) reported that their gauge of Pending Home Sales dropped 1.8% in September from an upwardly revised August reading. The pending sales index reflects signed contracts. Since it typically takes a few months to get from contract to closing, this reading forecasts actual existing home sales toward the end of this year.
The NAR's chief economist made an insightful point: "We've added 30 million people to the U.S. population over the past ten years, but sales are where they were in 2000, so there appears to be a sizable pent-up demand that could come to the market once the economy gathers momentum." Other analysts commented that "decade low mortgage rates and near record highs in affordability should help stabilize sales in the near term, however it will take meaningful improvement in the labor market to drive housing going forward."
Review of Last Week
UP WE GO AGAIN... Stock market investors pushed the Dow UP to its highest level since September 8, 2008, which was just before the economy headed south. In fact, all the major market indexes registered two year highs last week, as Wall Street reacted to the midterm elections on Tuesday, the Federal Reserve's announcement on Wednesday, and the October Jobs report on Friday.
The week began on a bit of a sour note, with September Personal Income down 0.1% and Personal Spending up only 0.2%, both missing expectations. But consumer inflation was up just 0.1% for the month and up 1.4% over a year ago. Core inflation, excluding food and energy, was up only 1.2% from a year ago, well within Fed guidelines. October ISM Manufacturing and ISM Services indexes were both UP, beating expectations and showing business growth.
Tuesday's election results were expected, with Republicans taking the House and Democrats keeping control of the Senate despite losing six seats to Republicans. Wednesday the Fed announced their second round of quantitative easing (QE 2). The Fed will be purchasing $600 billion in long-term Treasury securities from now till the middle of next year to help further stimulate the economy. The big upside surprise was Friday's employment report. 151,000 new jobs were created in October, versus the mere 60,000 expected. The private payroll gain was 159,000, which puts the private sector up by more than 100,000 jobs for each of the last four months. Unfortunately, the workforce increase kept the unemployment rate at 9.6%.
For the week, the Dow was UP 2.9%, to 11444.08; the S&P 500 ended UP 3.6%, at 1225.85; and the Nasdaq was UP 2.9%, to 2578.98.
It was a movable feast last week in the bond market, with prices moving up on the Fed's announcement, then pulling back with the unexpectedly positive jobs report. Nonetheless, the FNMA 30-year 4.0% bond we watch ended UP 17 basis points for the week, closing at $103.19.
According to Freddie Mac's weekly survey of conforming loans, national average rates for fixed-rate mortgages remain at historic lows, even lower than predicted for this time frame.
This Week’s Forecast
QUIET TIME... What a change from last week. No economic reports on Veteran's Day Thursday and the rest of the week is fairly sedate. Wednesday, we'll want to keep an eye on Initial Weekly and Continuing Unemployment Claims, although they're forecast to stay pretty much where they've been. This is still not at a level that will start reducing the Unemployment Rate, which is the good news we need for the housing recovery. The week will close out with preliminary November Michigan Consumer Sentiment, expected to rise just a bit.
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.
Federal Reserve Watch
Forecasting Federal Reserve policy changes in coming months The Fed has said their quantitative easing Treasury purchases can continue through the first half of 2011. So economists expect the Fed Funds Rate to stay at its rock bottom level during that time, unless inflation becomes a problem, which it hasn't up till now. Note: In the lower chart, a 1% probability of change is a 99% certainty the rate will stay the same.
All "Betts" on Brian! The Only Realtor you want!
INFO THAT HITS US WHERE WE LIVE
Market Update
Last Friday the National Association of Realtors (NAR) reported that their gauge of Pending Home Sales dropped 1.8% in September from an upwardly revised August reading. The pending sales index reflects signed contracts. Since it typically takes a few months to get from contract to closing, this reading forecasts actual existing home sales toward the end of this year.
The NAR's chief economist made an insightful point: "We've added 30 million people to the U.S. population over the past ten years, but sales are where they were in 2000, so there appears to be a sizable pent-up demand that could come to the market once the economy gathers momentum." Other analysts commented that "decade low mortgage rates and near record highs in affordability should help stabilize sales in the near term, however it will take meaningful improvement in the labor market to drive housing going forward."
Review of Last Week
UP WE GO AGAIN... Stock market investors pushed the Dow UP to its highest level since September 8, 2008, which was just before the economy headed south. In fact, all the major market indexes registered two year highs last week, as Wall Street reacted to the midterm elections on Tuesday, the Federal Reserve's announcement on Wednesday, and the October Jobs report on Friday.
The week began on a bit of a sour note, with September Personal Income down 0.1% and Personal Spending up only 0.2%, both missing expectations. But consumer inflation was up just 0.1% for the month and up 1.4% over a year ago. Core inflation, excluding food and energy, was up only 1.2% from a year ago, well within Fed guidelines. October ISM Manufacturing and ISM Services indexes were both UP, beating expectations and showing business growth.
Tuesday's election results were expected, with Republicans taking the House and Democrats keeping control of the Senate despite losing six seats to Republicans. Wednesday the Fed announced their second round of quantitative easing (QE 2). The Fed will be purchasing $600 billion in long-term Treasury securities from now till the middle of next year to help further stimulate the economy. The big upside surprise was Friday's employment report. 151,000 new jobs were created in October, versus the mere 60,000 expected. The private payroll gain was 159,000, which puts the private sector up by more than 100,000 jobs for each of the last four months. Unfortunately, the workforce increase kept the unemployment rate at 9.6%.
For the week, the Dow was UP 2.9%, to 11444.08; the S&P 500 ended UP 3.6%, at 1225.85; and the Nasdaq was UP 2.9%, to 2578.98.
It was a movable feast last week in the bond market, with prices moving up on the Fed's announcement, then pulling back with the unexpectedly positive jobs report. Nonetheless, the FNMA 30-year 4.0% bond we watch ended UP 17 basis points for the week, closing at $103.19.
According to Freddie Mac's weekly survey of conforming loans, national average rates for fixed-rate mortgages remain at historic lows, even lower than predicted for this time frame.
This Week’s Forecast
QUIET TIME... What a change from last week. No economic reports on Veteran's Day Thursday and the rest of the week is fairly sedate. Wednesday, we'll want to keep an eye on Initial Weekly and Continuing Unemployment Claims, although they're forecast to stay pretty much where they've been. This is still not at a level that will start reducing the Unemployment Rate, which is the good news we need for the housing recovery. The week will close out with preliminary November Michigan Consumer Sentiment, expected to rise just a bit.
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.
Federal Reserve Watch
Forecasting Federal Reserve policy changes in coming months The Fed has said their quantitative easing Treasury purchases can continue through the first half of 2011. So economists expect the Fed Funds Rate to stay at its rock bottom level during that time, unless inflation becomes a problem, which it hasn't up till now. Note: In the lower chart, a 1% probability of change is a 99% certainty the rate will stay the same.
All "Betts" on Brian! The Only Realtor you want!
Last Week in the News November 8, 2010
Last Week in the News
The Institute for Supply Management reported that the monthly composite index of manufacturing activity was 56.9 in October after reaching 54.4 in September. Economists had anticipated a reading of 54.5. A reading above 50 signals expansion. It was the 15th straight month of expansion.
Total construction spending rose 0.5% to $801.7 billion in September, following a revised 0.2% drop in August. Economists had anticipated a drop of 0.5% in September.
The Mortgage Bankers Association said its seasonally adjusted composite index of mortgage applications for the week ending October 29 fell 5%. Refinancing applications decreased 6.4%. Purchase volume rose 1.4%.
Factory orders rose 2.1% in September to a seasonally adjusted $420 billion. The increase follows a 0.5% drop in August. The increase was largely due to a 15.8% rise in demand for commercial aircraft. Excluding the volatile transportation sector, orders rose 0.4%.
The Institute for Supply Management reported that the monthly composite index of non-manufacturing activity rose to 54.3 in October from 53.2 in September. A reading above 50 signals expansion.
The National Association of Realtors reported that its pending home sales index, a forward-looking indicator based on signed contracts, fell 1.8% in September after a revised 4.4% increase in August. On a year-over-year basis, pending sales are down nearly 25%.
Initial claims for unemployment benefits rose by 20,000 to 457,000 for the week ending October 30. Continuing claims for the week ending October 23 fell by 42,000 to 4.34 million, the lowest level since the recovery began. Non-farm payroll employment increased by 151,000 in October, a reading much higher than the 60,000 anticipated.
Upcoming on the economic calendar are reports on wholesale trade on November 9 and consumer sentiment on November 12.
All "Betts" on Brian! The Only Realtor you want!
The Institute for Supply Management reported that the monthly composite index of manufacturing activity was 56.9 in October after reaching 54.4 in September. Economists had anticipated a reading of 54.5. A reading above 50 signals expansion. It was the 15th straight month of expansion.
Total construction spending rose 0.5% to $801.7 billion in September, following a revised 0.2% drop in August. Economists had anticipated a drop of 0.5% in September.
The Mortgage Bankers Association said its seasonally adjusted composite index of mortgage applications for the week ending October 29 fell 5%. Refinancing applications decreased 6.4%. Purchase volume rose 1.4%.
Factory orders rose 2.1% in September to a seasonally adjusted $420 billion. The increase follows a 0.5% drop in August. The increase was largely due to a 15.8% rise in demand for commercial aircraft. Excluding the volatile transportation sector, orders rose 0.4%.
The Institute for Supply Management reported that the monthly composite index of non-manufacturing activity rose to 54.3 in October from 53.2 in September. A reading above 50 signals expansion.
The National Association of Realtors reported that its pending home sales index, a forward-looking indicator based on signed contracts, fell 1.8% in September after a revised 4.4% increase in August. On a year-over-year basis, pending sales are down nearly 25%.
Initial claims for unemployment benefits rose by 20,000 to 457,000 for the week ending October 30. Continuing claims for the week ending October 23 fell by 42,000 to 4.34 million, the lowest level since the recovery began. Non-farm payroll employment increased by 151,000 in October, a reading much higher than the 60,000 anticipated.
Upcoming on the economic calendar are reports on wholesale trade on November 9 and consumer sentiment on November 12.
All "Betts" on Brian! The Only Realtor you want!
What Are Discount Points?
What Are Discount Points?
Discount points are fees paid to a lender in order to purchase a lower interest rate. This process is also known as a "rate buydown" and the net result is a lower monthly mortgage payment over the life of the loan.
One point is 1% of the loan amount. So the cost — paid at closing — for one point on a loan of $100,000 is $1,000. Typically, one point will lower the interest rate .25% to .375%, depending on the type of loan.
Does it make sense for your clients to consider purchasing discount points? That depends on a number of factors. Usually, it is best to avoid discount points if a client will be in the home less than four years, is applying for an adjustable rate mortgage or plans to refinance within a few years. Discount points are generally a good idea if the homebuyer plans to remain in the home over five years and is not planning on refinancing in the near future.
When considering discount points, it's best to conduct a break-even analysis. This is done by calculating the monthly mortgage payment with no points, then subtracting the monthly mortgage payment with points. The difference is the monthly savings. Then divide the cost of the discount points by the savings. The result is the number of months until the homebuyer breaks even.
Discount points for residential property are tax deductible in the year they are paid. Discount points are available when refinancing, but those are deductible over the life of the loan. It's best to advise your clients to consult with a tax advisor regarding the details of these deductions
All "Betts" on Brian! The Only Relator you want!
Discount points are fees paid to a lender in order to purchase a lower interest rate. This process is also known as a "rate buydown" and the net result is a lower monthly mortgage payment over the life of the loan.
One point is 1% of the loan amount. So the cost — paid at closing — for one point on a loan of $100,000 is $1,000. Typically, one point will lower the interest rate .25% to .375%, depending on the type of loan.
Does it make sense for your clients to consider purchasing discount points? That depends on a number of factors. Usually, it is best to avoid discount points if a client will be in the home less than four years, is applying for an adjustable rate mortgage or plans to refinance within a few years. Discount points are generally a good idea if the homebuyer plans to remain in the home over five years and is not planning on refinancing in the near future.
When considering discount points, it's best to conduct a break-even analysis. This is done by calculating the monthly mortgage payment with no points, then subtracting the monthly mortgage payment with points. The difference is the monthly savings. Then divide the cost of the discount points by the savings. The result is the number of months until the homebuyer breaks even.
Discount points for residential property are tax deductible in the year they are paid. Discount points are available when refinancing, but those are deductible over the life of the loan. It's best to advise your clients to consult with a tax advisor regarding the details of these deductions
All "Betts" on Brian! The Only Relator you want!
TOMORROW IS OFTEN THE BUSIEST DAY OF THE WEEK
"TOMORROW IS OFTEN THE BUSIEST DAY OF THE WEEK." Spanish Proverb. And it sure seemed that way every day of last week, with one of the busiest economic calendars seen in years. Friday’s Jobs Report capped off a week filled with election results and a big announcement from the Fed regarding the next round of Quantitative Easing (QE2). So what impact did all of this news have on Bonds and home loan rates? Let’s break it down.
On Friday, the Labor Department reported that 151,000 jobs were created in October, all in the private sector. This was much higher than the 60,000 job creations that were expected - and while the economy needs a lot more job creations to put a dent in the unemployment rate, this is a great start to a recovery in the labor market.
Adding to the positive tone of the report, there were upward revisions to both August and September's numbers, and the Unemployment Rate held steady at 9.6%. The Average Hourly Wage increased as well - and across the board, the numbers were stronger than anticipated. Should this trend continue in the coming months, it would support the notion that labor has not only stabilized - but is perhaps even expanding, which would be welcome news indeed.
And while this is great news for the economy, remember that when good economic news arrives, investors move money into Stocks... and this pulls money out of all types of Bonds, including Mortgage Backed Securities, which home loan rates are based on. When money moves out of Bonds, it causes Bond pricing and home loan rates to worsen - and that’s exactly what happened, following the better than expected Jobs Report. Although we all like to hear good news for the economy - any strong, positive economic news is bad news for Bond pricing and home loan rates.
Home loan rates were exceptionally volatile all last week - and likely to remain so ahead. While rates are still at very low, affordable levels - they won’t last forever, so please get in touch if you have questions about how the current rate climate might benefit your situation.
In other big news last week, the Federal Reserve Board made their much anticipated announcement regarding another round of "Quantitative Easing" or QE2, where the Fed will participate in purchasing Treasury Securities in a bid to keep the economic recovery on track. On Wednesday, the Fed announced that they intend to purchase $600 Billion in Treasuries, starting now and continuing through mid-2011, which equates to about $75 Billion in purchases per month. So how will this impact home loan rates ahead?
We need to be mindful that the Fed initiated QE2 for three reasons. One, to help lower interest rates in order to spur consumer and business spending... which in turn will create inflation. Two, to help lower the unemployment rate via an economic boost. And three, to help push Stock prices higher. And all three of these factors will cause headwinds for Bonds and home loan rates down the road.
As the Fed gets to work on putting their latest plan into effect - we can be sure that inflation readings in various economic reports will likely be more highly scrutinized by the markets. Upcoming reports will reveal whether the Fed will be successful in their quest to fight deflation, and create a level of Goldilocks inflation that is not too hot, not too cool... but juuuust right. Ultimately, if inflation expectations creep higher, interest rates for long-term Bonds - like Mortgage Bonds - will rise as well.
One thing is certain, the volatility we saw in the markets last week is sure to continue. If you have any questions about how you can take advantage of today’s historic low rates and fabulous home prices, please contact me, and let’s evaluate your current situation. And feel free to forward this email to any friends, family members, or colleagues who may have questions as well - I’m always pleased to talk with anyone you’d refer my way.
All "Betts" on Brian! The Only Relator you want!
On Friday, the Labor Department reported that 151,000 jobs were created in October, all in the private sector. This was much higher than the 60,000 job creations that were expected - and while the economy needs a lot more job creations to put a dent in the unemployment rate, this is a great start to a recovery in the labor market.
Adding to the positive tone of the report, there were upward revisions to both August and September's numbers, and the Unemployment Rate held steady at 9.6%. The Average Hourly Wage increased as well - and across the board, the numbers were stronger than anticipated. Should this trend continue in the coming months, it would support the notion that labor has not only stabilized - but is perhaps even expanding, which would be welcome news indeed.
And while this is great news for the economy, remember that when good economic news arrives, investors move money into Stocks... and this pulls money out of all types of Bonds, including Mortgage Backed Securities, which home loan rates are based on. When money moves out of Bonds, it causes Bond pricing and home loan rates to worsen - and that’s exactly what happened, following the better than expected Jobs Report. Although we all like to hear good news for the economy - any strong, positive economic news is bad news for Bond pricing and home loan rates.
Home loan rates were exceptionally volatile all last week - and likely to remain so ahead. While rates are still at very low, affordable levels - they won’t last forever, so please get in touch if you have questions about how the current rate climate might benefit your situation.
In other big news last week, the Federal Reserve Board made their much anticipated announcement regarding another round of "Quantitative Easing" or QE2, where the Fed will participate in purchasing Treasury Securities in a bid to keep the economic recovery on track. On Wednesday, the Fed announced that they intend to purchase $600 Billion in Treasuries, starting now and continuing through mid-2011, which equates to about $75 Billion in purchases per month. So how will this impact home loan rates ahead?
We need to be mindful that the Fed initiated QE2 for three reasons. One, to help lower interest rates in order to spur consumer and business spending... which in turn will create inflation. Two, to help lower the unemployment rate via an economic boost. And three, to help push Stock prices higher. And all three of these factors will cause headwinds for Bonds and home loan rates down the road.
As the Fed gets to work on putting their latest plan into effect - we can be sure that inflation readings in various economic reports will likely be more highly scrutinized by the markets. Upcoming reports will reveal whether the Fed will be successful in their quest to fight deflation, and create a level of Goldilocks inflation that is not too hot, not too cool... but juuuust right. Ultimately, if inflation expectations creep higher, interest rates for long-term Bonds - like Mortgage Bonds - will rise as well.
One thing is certain, the volatility we saw in the markets last week is sure to continue. If you have any questions about how you can take advantage of today’s historic low rates and fabulous home prices, please contact me, and let’s evaluate your current situation. And feel free to forward this email to any friends, family members, or colleagues who may have questions as well - I’m always pleased to talk with anyone you’d refer my way.
All "Betts" on Brian! The Only Relator you want!
Daily Quotes Nov. 10 2010!
Daily Quotes Nov. 10 2010!
"No matter what it is, pick yourself up and go on to the next project."
-- Shelley Duvall, actress
"A man may fulfill the object of his existence by asking a question he
cannot answer and attempting a task he cannot achieve."
-- Oliver Wendell Holmes Sr., physician
"Our minds can shape the way a thing will be because we act according to
our expectations."
-- Federico Fellini, director
"All achievements, all earned riches, have their beginning in an idea."
-- Napolean Hill, author
"Kind words can be short and easy to speak, but their echoes are truly
endless."
-- Mother Teresa, charity worker
All "Betts" on Brian! The Only Realtor you want!
"No matter what it is, pick yourself up and go on to the next project."
-- Shelley Duvall, actress
"A man may fulfill the object of his existence by asking a question he
cannot answer and attempting a task he cannot achieve."
-- Oliver Wendell Holmes Sr., physician
"Our minds can shape the way a thing will be because we act according to
our expectations."
-- Federico Fellini, director
"All achievements, all earned riches, have their beginning in an idea."
-- Napolean Hill, author
"Kind words can be short and easy to speak, but their echoes are truly
endless."
-- Mother Teresa, charity worker
All "Betts" on Brian! The Only Realtor you want!
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