As promised, this week was loaded with plenty of headlines regarding the strength and weaknesses of the economy. As usual, the reports released showed that some parts of the economy are improving while others showed continued weakness in the recovery.
Unless you have been sleeping for a week, you know that the price of oil is the hottest topic you can find in the news. Due to the political unrest in Libya, oil prices have been rising and that has been translating into rapid increases in prices at the gas pump. Increasing gas prices run this risk of hurting the economic recovery if they get to a point that the price at the pump draws significant household money from other domestic spending.
Consumer Confidence (the measurement of consumers feeling about current economic conditions) and Consumer Sentiment (the measure of how consumers are spending money) are both at the highest point we have seen in 3 years.
GDP continues to show signs of economic growth although the country is not growing as fast as initially expected. None the less, there is positive growth and that will always be gladly accepted.
It appears that borrowers are finally realizing that mortgage rates are not going back down to 4%. The Mortgage Bankers Association reported healthy increases in purchase and refinance applications for the prior week. Purchase applications increased 5.1% while refinances increased 17.8%. Mortgage rates this week declined by ¼% so I would expect that next week we should continue to see another increase in applications.
Existing Home Sales rose 2.7% for the prior month which was less than expected, however positive none the less. The concerning part is that 32% of all transactions are cash. 37% of the transactions are for distressed properties.
On the not so good side of housing, we had a number of reports which continue to demonstrate the big challenges ahead for a real housing recovery. New Home Sales dropped 12.6% which was more than predicted. The Median Home Price for properties sold last month also dropped 5.9% to the lowest point in 9 year. The Case-Shiller House Value Index also indicated that home prices are dropping and that currently they are averaging about 1.2% below the same time last year.
An important note to the Case-Shiller House Value Index is that is does not take into account cash purchases. The reality of the home value price situation is that if you were to include the cash transactions, the house price decline would actually be more than reported.
First time jobless claims dropped back below 400,000 after we had seen a recent up-tick in first time jobless claims. Some people speculate that this drop could be a sign of good things to come however I am not ready to make that determination based upon only a single week's employment report.
Reports due out next week are:
• Monday February 28th - Pending Home Sales
• Tuesday March 1st - ISM Manufacturing Index and Construction Spending
• Wednesday March 2nd - MBA Mortgage Applications and ADP Employment Report
• Thursday March 3rd - First Time Jobless Claims
• Friday March 4th - Employment Situation (National Unemployment figures are released)
Your Mortgage Consultant,
JJ Mack
916-517-1800
Friday, February 25, 2011
Friday, February 11, 2011
Mortgage Market Update - 2/11/2011
This week's light economic report calendar contributed to a less volatile ride in the markets than we have been observing lately. The stock market continues its slow but steady climb as investors continue to gain confidence in the business side of the economy.
Consumer Sentiment came out with a very mixed picture this week. Although consumer sentiment for "today" is at its highest point since June of 2010, the thoughts about the future remain uncertain. It appears that the people surveyed for this report feel that the economy is doing better than we have seen in quite a while. However many people showed pessimism as to where we may be in the coming months.
There were a few reports this week regarding housing which once again shows a very mixed landscape regarding the present and future of housing.
The Mortgage Bankers Association reported a 7.7% drop in purchase applications and a 1.4% drop in refinance applications. As we have seen over the last few weeks, purchase activity for mortgage lenders has been decreasing. Rising interest rates may be the culprit for the declines.
On the positive side of housing, The National Association of Realtors reported that there has been a 20% increase in home sales on the west coast. Overall housing activity is down 20% from 2009 levels which continues the pressure for home prices to remain where they are.
You may be reading this article and wondering if home sales have risen 20% on the west coast, why would mortgage applications for purchases go down? The answer is summed up with two words, "cash investors". A good portion of homes being purchased are being done so by investors who are not getting any type of financing.
First Time Jobless Claims came in surprisingly low. The drop of 36,000 from the prior week to 383,000 is the lowest we have seen in 2 ½ years.
Foreclosure news made headlines this week in that foreclosures and foreclosure filings were reported as being way down. The reason for the large decline is that banks are taking longer to execute foreclosures as they are trying to get through the existing backlog of filings that are already in process.
Zillow.com reported this week that 30% of all properties in the U.S. are currently "underwater" which means that more is owed on the house than it is worth. The one thing that has many people concerned is that with so many homes in this negative position, and property values declining in some areas, more homeowners may execute what is known as a "strategic default". This type of default is when a borrower has the ability to pay their current mortgage however purposely elects to not pay in hopes of the bank modifying their current mortgage terms.
Despite the challenges that persist in the housing sector, the economy is plugging along and I can say with 99% certainty that we are on a road to recovery. It will be bumpy, it will have some potholes, however in the end we will continue to grow and housing will follow along.
Reports due out next week are:
• Tuesday February 15th - Retail Sales & Housing Market Index
• Wednesday February 16th - MBA Mortgage Applications, Housing Starts & Producer Price Index
• Thursday February 10th - First Time Jobless Claims & Consumer Price Index
Your Mortgage Consultant,
JJ Mack
916-517-1800
Consumer Sentiment came out with a very mixed picture this week. Although consumer sentiment for "today" is at its highest point since June of 2010, the thoughts about the future remain uncertain. It appears that the people surveyed for this report feel that the economy is doing better than we have seen in quite a while. However many people showed pessimism as to where we may be in the coming months.
There were a few reports this week regarding housing which once again shows a very mixed landscape regarding the present and future of housing.
The Mortgage Bankers Association reported a 7.7% drop in purchase applications and a 1.4% drop in refinance applications. As we have seen over the last few weeks, purchase activity for mortgage lenders has been decreasing. Rising interest rates may be the culprit for the declines.
On the positive side of housing, The National Association of Realtors reported that there has been a 20% increase in home sales on the west coast. Overall housing activity is down 20% from 2009 levels which continues the pressure for home prices to remain where they are.
You may be reading this article and wondering if home sales have risen 20% on the west coast, why would mortgage applications for purchases go down? The answer is summed up with two words, "cash investors". A good portion of homes being purchased are being done so by investors who are not getting any type of financing.
First Time Jobless Claims came in surprisingly low. The drop of 36,000 from the prior week to 383,000 is the lowest we have seen in 2 ½ years.
Foreclosure news made headlines this week in that foreclosures and foreclosure filings were reported as being way down. The reason for the large decline is that banks are taking longer to execute foreclosures as they are trying to get through the existing backlog of filings that are already in process.
Zillow.com reported this week that 30% of all properties in the U.S. are currently "underwater" which means that more is owed on the house than it is worth. The one thing that has many people concerned is that with so many homes in this negative position, and property values declining in some areas, more homeowners may execute what is known as a "strategic default". This type of default is when a borrower has the ability to pay their current mortgage however purposely elects to not pay in hopes of the bank modifying their current mortgage terms.
Despite the challenges that persist in the housing sector, the economy is plugging along and I can say with 99% certainty that we are on a road to recovery. It will be bumpy, it will have some potholes, however in the end we will continue to grow and housing will follow along.
Reports due out next week are:
• Tuesday February 15th - Retail Sales & Housing Market Index
• Wednesday February 16th - MBA Mortgage Applications, Housing Starts & Producer Price Index
• Thursday February 10th - First Time Jobless Claims & Consumer Price Index
Your Mortgage Consultant,
JJ Mack
916-517-1800
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