We should all be grateful that this week is a holiday week. Because of the holidays, trading has been very light and the barrage of negative economic news hitting the wires this week has had little impact on the markets.
On a high note, the stock market is set to finish the year at the highest point we have seen in 2 years. Without question corporate profit are growing and this is a major driver of the stock market rise. Many companies have figured out how to do more with less which ultimately improves company's bottom line profits. (Investors love that - however the millions of unemployed hate it)
As much as I would love to finish 2010 with nothing but optimism and positive words, the economic data this week is not making that easy for me to do.
The housing data as well as housing projections released this week all point to another challenging year in real estate ahead of us. If you have been watching the news, you will see that housing is once again taking center stage.
Housing inventory is up 50% from the same time last year. Shadow inventory, which is made up of all the properties owned by banks but not yet released into the market for sale, is increasing rapidly due to rising foreclosures. Foreclosures are expected to set a new record in 2011.
Between shadow inventory, increasing foreclosures, rising mortgage rates, talk is resuming about how housing may be heading for what is being called a double dip. With this week's release of the Case-Shiller Home Value Index showing home prices unexpectedly dropping 1.3% in October, many are fearful that home prices may decline another 5% to 7% in 2011. Only time will tell if homebuyers believe this and remain on the sidelines. The one bright spot in housing is the rise of 3.5% in Pending Home Sales.
When you add high unemployment that is showing no signs of improvement, higher gas prices, and declining consumer sentiment, the stage is set for more challenges ahead of us. Oh yeah, don't forget about the east coast blizzard that is going to impact post Christmas sales. Despite everything I just wrote, I remain very optimistic and I want to tell you why.
MY WORDS OF WISDOM: No matter what happens this year, it will not be worse than anything we have experienced in the last 2 years. The challenges in the economy are not new so we are now better prepared to deal with them mentally. Time and time again we have shown our resilience in the way we always manage to adapt to what happens. The key to persevering is to avoid stacking up all the negative news. Take each piece of news separately and ask yourself, "How does this impact me?" You will find that most of the news does not impact you at all. Just make sure you don't let the media suck you into the world of negativity because that is what they want to do. Remember -for every challenge that exists, an equal or greater opportunity for you to succeed is always right next to it. You must remain committed to finding opportunities and acting on them.
Reports due out for the first week of 2011 are:
• Monday January 3rd - ISM Manufacturing Index & Construction Spending
• Tuesday January 4th - FOMC Minutes
• Wednesday January 5th - ADP Employment Report & MBA Mortgage Applications
• Thursday January 6th - First Time Jobless Claims
• Friday January 7th - Employment Situation
Your Mortgage Consultant,
JJ Mack
916-517-1800
Thursday, December 30, 2010
Friday, December 17, 2010
Mortgage Market Update - 12/17/2010
As promised, this week had no shortage of economic reports, and I am happy to say, that for the most part, they are almost all pointing to better times ahead. Is this just a momentary holiday present for the country or is it for real? Who knows, 2011 will ultimately tell us the answer but I am hopeful it is a trend.
The holiday season started out with a bang with retail sales reporting a much stronger gain than anticipated. Retail sales rose .8% in November following an upwardly revised 1.7% for October. Consumers are spending more money and there definitely seems to be more optimism and excitement about shopping.
Inflation on the wholesale level is starting to increase however it is still very much a non-threat to significant inflation in the coming months. Wholesale prices increased .8% however the Consumer Price Index, which measures inflation on the retail level, only rose.1%. This disparity between wholesale and retail continues to demonstrate that consumers are not willing to pay higher prices for goods.
The Federal Open Market Committee, to no one's surprise, did not increase interest rates. Additionally they reiterated that it will be some time before any rates are raised since the economy still continues to be very sluggish. The FOMC went on to specify that retail sales, although showing signs of improvement, are still remaining very sluggish overall. Housing also continues to remain a drag on the economy in that foreclosures are still very high and that overall housing data is still showing sales are anemic.
Speaking of housing, the Mortgage Bankers Association reported that purchase applications for the prior week dropped 5% and refinance applications declined .7%. These drops do not even reflect the more recent increase in interest rates that took place this week which leads many to believe that the numbers will continue to decline in next week's report.
Housing Starts rose a better than expected 3.9%. Housing over all is still very weak however the trends as of late seems to be indicating that housing may be rebounding. It is important to realize that any improvement in housing can have a positive impact on the psychology of the potential buyers in the market. If buyers perceive that the market has hit bottom, they are more likely to act. Additional urgency to purchase may also be stimulated by the recent increases in interest rates. 6 weeks ago the 30 year fixed rate was hovering around 4%. As of yesterday the same loan program is a full point higher at 5%.
It was reported this week that foreclosures in the 3rd quarter of 2010 declined by 21%. Before we all jump for joy you must understand that the 3rd quarter is when the scandal of inappropriate foreclosure signings was discovered. During this period of time many of the nation's largest lenders placed a moratorium on foreclosures which is the cause of the massive 21% drop. Lenders are now back in full swing of the foreclosure process so undoubtedly we will see the foreclosure numbers jump at the next quarterly report.
First time jobless claims declined slightly continuing the recent trend for the last 4 weeks. Overall unemployment seems to be stabilizing however the private sector is still showing much resistance to hiring new employees.
It has been nice the last few weeks to be able to report more and more about positive signs in the economy. We certainly have a long way to go, however remember the old adage, "How do you climb a mountain...one step at a time".
Reports due out for the holiday week are:
• Wednesday December 22nd - MBA Mortgage Applications, GDP and Existing Home Sales
• Thursday December 23rd - First Time Jobless Claims, Consumer Sentiment and New Home Sales
Your Mortgage Consultant,
JJ Mack
916-517-1800
The holiday season started out with a bang with retail sales reporting a much stronger gain than anticipated. Retail sales rose .8% in November following an upwardly revised 1.7% for October. Consumers are spending more money and there definitely seems to be more optimism and excitement about shopping.
Inflation on the wholesale level is starting to increase however it is still very much a non-threat to significant inflation in the coming months. Wholesale prices increased .8% however the Consumer Price Index, which measures inflation on the retail level, only rose.1%. This disparity between wholesale and retail continues to demonstrate that consumers are not willing to pay higher prices for goods.
The Federal Open Market Committee, to no one's surprise, did not increase interest rates. Additionally they reiterated that it will be some time before any rates are raised since the economy still continues to be very sluggish. The FOMC went on to specify that retail sales, although showing signs of improvement, are still remaining very sluggish overall. Housing also continues to remain a drag on the economy in that foreclosures are still very high and that overall housing data is still showing sales are anemic.
Speaking of housing, the Mortgage Bankers Association reported that purchase applications for the prior week dropped 5% and refinance applications declined .7%. These drops do not even reflect the more recent increase in interest rates that took place this week which leads many to believe that the numbers will continue to decline in next week's report.
Housing Starts rose a better than expected 3.9%. Housing over all is still very weak however the trends as of late seems to be indicating that housing may be rebounding. It is important to realize that any improvement in housing can have a positive impact on the psychology of the potential buyers in the market. If buyers perceive that the market has hit bottom, they are more likely to act. Additional urgency to purchase may also be stimulated by the recent increases in interest rates. 6 weeks ago the 30 year fixed rate was hovering around 4%. As of yesterday the same loan program is a full point higher at 5%.
It was reported this week that foreclosures in the 3rd quarter of 2010 declined by 21%. Before we all jump for joy you must understand that the 3rd quarter is when the scandal of inappropriate foreclosure signings was discovered. During this period of time many of the nation's largest lenders placed a moratorium on foreclosures which is the cause of the massive 21% drop. Lenders are now back in full swing of the foreclosure process so undoubtedly we will see the foreclosure numbers jump at the next quarterly report.
First time jobless claims declined slightly continuing the recent trend for the last 4 weeks. Overall unemployment seems to be stabilizing however the private sector is still showing much resistance to hiring new employees.
It has been nice the last few weeks to be able to report more and more about positive signs in the economy. We certainly have a long way to go, however remember the old adage, "How do you climb a mountain...one step at a time".
Reports due out for the holiday week are:
• Wednesday December 22nd - MBA Mortgage Applications, GDP and Existing Home Sales
• Thursday December 23rd - First Time Jobless Claims, Consumer Sentiment and New Home Sales
Your Mortgage Consultant,
JJ Mack
916-517-1800
Friday, December 3, 2010
Mortgage Market Update - 12/3/2010
With the holidays fast approaching, one would have thought that the economic reports delivered this week were an early present to the nation. Many of the reports came in stronger than expected and the feeling of recovery was all throughout the air. Then came the jobs report on Friday...
Today it was reported that the national unemployment rate increased from 9.6% up to 9.8%. Experts were virtually unanimous in the expectation that unemployment would remain the same or decline slightly. (So much for being an expert) - The initial reaction by the stock market was less than expected. Typically when unemployment increases, the stock market panics and will sell off in droves causing the indexes to drop dramatically. As of the writing of this report, the stock market is flat which means the significant gains seen this week should remain and that the unemployment report is not being considered a major concern, at least for stock investors.
Despite unemployment increasing, there was other news this week that has given us reason to cheer that the recovery is truly taking hold. Is it possible that we can sustain a recovery without housing playing a major role? Normally my answer would be "no", however, the stock market, retail sales and manufacturing seem to be ignoring housing based upon the reports released this week.
Consumer Confidence continues to increase indicating that more and more Americans are feeling better about the future of the economy. Although jobs continue to remain on many people minds, overall the public is beginning to believe that the economy is on the right path to recovery. Although we all know we are not out of the woods yet, the feeling that we are finally headed in the right direction does seem to exist.
Manufacturing once again showed significant growth. Production is increasing at a healthy rate and movement from production to shipping is also showing signs of growth. Simply put, more goods are being moved to the markets and consumers are purchasing them.
Sales reports from Black Friday show that consumers spent on average 6.2% more this year than last year. Although everyone is looking for a bargain, there certainly was no lack of people hitting the stores on Friday and the internet on Cyber Monday driving sales to the highest level we have seen in years.
Purchase applications for the past week rose 1.1% which is a positive sign that people are taking advantage of low house prices despite the fact that mortgage rates have been rising. The report of increased unemployment does threaten to derail purchases if people become even more fearful of losing their job based upon today's report.
The Case-Shiller Home Value Index indicated that home prices dropped nationally for the 3rd straight month. The drop of .7% from September to October was considerably more than expected. The continued decline of housing prices may also force more potential homebuyers to the sidelines waiting to see just how low prices will go.
What should be considered good news is that the National Association of Realtors reported that Pending Home Sales jumped 10.4%. As much as I am optimistic about this significant increase, I am tempering my enthusiasm only because I don't know if pending homes sales jumped because of more transaction, or did it jump because closing real estate transactions is taking longer than it has ever taken before creating a backlog?
Next week stands to be a quiet week regarding economic reports:
• Wednesday December 8th - MBA Mortgage Applications, 10 Year Note Auction
• Thursday December 9th - First Time Jobless Claims
• Friday December 10th - Consumer Sentiment
Your Mortgage Consultant,
JJ Mack
916-517-1800
Today it was reported that the national unemployment rate increased from 9.6% up to 9.8%. Experts were virtually unanimous in the expectation that unemployment would remain the same or decline slightly. (So much for being an expert) - The initial reaction by the stock market was less than expected. Typically when unemployment increases, the stock market panics and will sell off in droves causing the indexes to drop dramatically. As of the writing of this report, the stock market is flat which means the significant gains seen this week should remain and that the unemployment report is not being considered a major concern, at least for stock investors.
Despite unemployment increasing, there was other news this week that has given us reason to cheer that the recovery is truly taking hold. Is it possible that we can sustain a recovery without housing playing a major role? Normally my answer would be "no", however, the stock market, retail sales and manufacturing seem to be ignoring housing based upon the reports released this week.
Consumer Confidence continues to increase indicating that more and more Americans are feeling better about the future of the economy. Although jobs continue to remain on many people minds, overall the public is beginning to believe that the economy is on the right path to recovery. Although we all know we are not out of the woods yet, the feeling that we are finally headed in the right direction does seem to exist.
Manufacturing once again showed significant growth. Production is increasing at a healthy rate and movement from production to shipping is also showing signs of growth. Simply put, more goods are being moved to the markets and consumers are purchasing them.
Sales reports from Black Friday show that consumers spent on average 6.2% more this year than last year. Although everyone is looking for a bargain, there certainly was no lack of people hitting the stores on Friday and the internet on Cyber Monday driving sales to the highest level we have seen in years.
Purchase applications for the past week rose 1.1% which is a positive sign that people are taking advantage of low house prices despite the fact that mortgage rates have been rising. The report of increased unemployment does threaten to derail purchases if people become even more fearful of losing their job based upon today's report.
The Case-Shiller Home Value Index indicated that home prices dropped nationally for the 3rd straight month. The drop of .7% from September to October was considerably more than expected. The continued decline of housing prices may also force more potential homebuyers to the sidelines waiting to see just how low prices will go.
What should be considered good news is that the National Association of Realtors reported that Pending Home Sales jumped 10.4%. As much as I am optimistic about this significant increase, I am tempering my enthusiasm only because I don't know if pending homes sales jumped because of more transaction, or did it jump because closing real estate transactions is taking longer than it has ever taken before creating a backlog?
Next week stands to be a quiet week regarding economic reports:
• Wednesday December 8th - MBA Mortgage Applications, 10 Year Note Auction
• Thursday December 9th - First Time Jobless Claims
• Friday December 10th - Consumer Sentiment
Your Mortgage Consultant,
JJ Mack
916-517-1800
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