Mortgage Market Update - 10/21/2011

I consider myself a well educated individual. I read as much as I can about what is happening in the economy and the markets so I can provide as up to date information to my clients on significant market happenings. As intelligent as I think I am…I have to tell you that I cannot for the life of me understand how every day the markets go back and forth regarding what is happening in Europe and the Debt Crisis.

One day the market is not worried about it and the stock market rallies. The next day the business headlines are that “Euro Debt Worries Investors” and the market goes down. This back and forth that goes on almost every day is making me sea sick. I have even gone as far as to speak to people who are very active in the markets and even they don’t understand the whiplash that is going on. Maybe, it is more about creating headlines so the market has large jumps so investors can make profits. We all know that unless the market moves in one direction or the other, profits cannot be made in stock trading. Yeah, that’s it, I have just put the Harvard MBA’s to shame because little ol me figured out how the market works.

The housing market continues to remain in the doldrums and the recent rise in mortgage rates seems to be the primary cause. Mortgage applications for purchases declined 8.8% last week while refinances dropped a whopping 16.6%. The one and only culprit is the rise in interest rates. It is often debated whether an increase in interest rates will spur fence sitting homebuyers into action or not. Well…if last week’s numbers are any indication, we know that rising rates will only delay homebuyers from taking action.

Additionally, existing home sales on single family homes declined 3.6% nationally. It appears the combination of appraisal issues and buyers changing their mind due to employment concerns are the main concerns driving the decline.

There were two small bright spots in the housing reports this week related to new construction. The National Association of Home Builders in a recent survey indicated that they are more optimistic about the future of home building in the coming months then they have been in over a year and a half. The second positive report is that Housing Starts last month jumped 15% which is a positive sign.

In other news, First Time Jobless Claims continue to remain above 400,000. It is clear that employers are afraid to bring on employees and there seems to be many factors creating this fear. In some areas of business the new regulations tied to the Wall Street Reform Bill and Health Care Reform are making the cost of doing business more onerous on business owners. In other areas companies are simply afraid to take on more expenses without knowing whether demand is going to increase.

A positive note in the economic data is that inflation continues to remain under control at the core level. Outside of volatile food and energy prices, wholesale inflation rose .3% and retail inflation .2%. Both reports clearly indicate that inflation is not a major factor in impacting consumer behavior outside of food and energy prices. I am not dismissing that we all know food prices have been soaring, however it is when food, energy AND consumer prices all go up, that is what can easily derail the economy and a recovery.

As the saying goes, we just keep limping along towards recovery. One more bright spot to mention. The talk of a double dip recession has virtually disappeared from the media so that can assist in improving consumer sentiment.

Next week’s market moving reports are:

• Tuesday October 25^th – S&P Case-Shiller Home Value Index and Consumer Confidence
• Wednesday October 26^th – MBA Applications, Durable Goods Orders & New Home Sales
• Thursday October 27^th – First Time Jobless Claims, GDP & Pending Home Sales

As your mortgage professional, it is my pleasure to be a resource to you for all of your mortgage financing and real estate needs. Please feel free to contact me at any time with any questions you may have. I can always be reached at 916-517-1800.

Thank You,

JJ Mack

Your Mortgage Consultant

Mortgage Market Update - 10/14/2011

I know I have toned down the sarcasm as of late in my newsletters at the request of some of my faithful readers. Unfortunately I must dip into the sarcasm well once again based upon some recent happenings.

By now you must have heard about the “Occupy Wall Street Movement” that is spreading throughout the country and the world. It has been going on for 27 days now. The movement is citizen’s exercising their right to free speech so I support them making their presence felt. My only question is “What are they trying to accomplish”? (Every time one of the protesters is interviewed on radio or TV they don’t seem to have a clue as to what they are actually trying to accomplish other than blaming Wall Street for them being out of work and for the real estate market crashing.)

In fact, when you really pay attention to what is being said by protesters, it appears that there are many different factions within the movement. It seems like different people have their own agenda’s and that the movement does not have a unified goal. However, according to the founders of the protest they state they have already accomplished their goal which is making people aware of the inequality of wealth in this country. This is something new? (By the way a recent survey shows that 66% of the people disagree with the protesters.)

OK my sarcasm is done for now and I do apologize for reverting back to my old self.

In the markets and economic news we have both good and not so good reports this week. Unfortunately mortgage rates have been rising lately which will certainly put the brakes on the number of people refinancing their homes. The bigger question is will the rising rates spur home buying or slow it? Mortgage rates remain very low and home affordability remains at one of the highest points in history. What is needed is for the media to continuously relay and reinforce the message to the public that now is a great time to purchase a home.

The Federal Open Market Committee released the minutes of their last meeting and it appears that the divide on what they should do to help the sputtering economy remains. Based upon the minutes it is clear that there still seems to be no agreement on whether another round of economic stimulus should be launched.

On the positive side is that Europe slowly but surely seems to be getting things in place to avoid the collapse of the financial system which is related to the debt crisis that we hear so much about. The governments in Europe have been working diligently on containing the crisis and have been working out solutions to avoid debt defaults.

Employment continues to remain a challenge to the recovery in that last week the national unemployment rate remained at 9.1%. Additionally, First Time Jobless Claims once again were reported over 400,000 which reverse’s the declining trend we had been seeing. Last week claims were also above 400,000 but it was the first time in many weeks so many experts though it may have just been a momentary rise rather than a trend.

The highlight of this week’s economic reports is the better than expected Retail Sales announcement. Last month sales increased 1.1% which was the second consecutive month of better than expected results. This is proof that consumers are continuing to increase spending and that the trend is improving little by little each month.

Next week important statistics will be released on housing and inflation.

• Monday October 17^th – Industrial Production
• Tuesday October 18^th – Producer Price Index
• Wednesday October 19^th – MBA Applications, Consumer Price Index & Housing Starts
• Thursday October 20^th – First Time Jobless Claims and Existing Home Sales

As your mortgage professional, it is my pleasure to be a resource to you for all of your mortgage financing and real estate needs. Please feel free to contact me at any time with any questions you may have. I can always be reached at 916-517-1800

JJ Mack

Sales Manager/Mortgage Consultant