Mortgage rates have been creeping up!

Mortgage rates have been creeping up!

Ouch, here we go again????...The stock market is taking it on the chin this week, especially on Wednesday and Thursday in which the market posted the biggest losses so far this year.  Is it time to panic? I don’t believe so.

One of the reasons for the stock market declines is that Europe is once again back in the picture as economic data reports from the other side of the Atlantic are continuing to show signs that the European economy is slowing down.   Before we were dealing with the threat of European countries defaulting on debt, this time around it is simply that their economy is slowing.  Because we exist in a world that is a global economy that is all connected, whatever happens in Europe will impact the U.S.

Additionally, in the U.S, we once again are dealing with Congress’s inability to play nice in the sandbox and they are pushing the country to the brink of major funding cuts because they still cannot come to an agreement on spending cuts.  Although Congress has the power to pass another piece of legislation that will prevent the across the board spending cuts that will occur on March 1^st, right now they are not even discussing it so the odds that the cuts will happen grows with each passing day.  The real drop dead date for Congress to take action is March 27^th.  That is the day that the current government funding bill expires, and if the government doesn’t have a new spending bill in place, the government will shut down.

The bright spot in the U.S. economy continues to be housing, however even that is heading into some tough times once again. Existing home sales increased .4% in January which continues the growth trend.  However, that direction will more than likely reverse itself in the coming months because housing inventory is at a 13 year low.  There are not enough homes for sale compared to the demand.  This is once again driving prices higher in certain areas of the country and simultaneously mortgage rates have been creeping up.  Ultimately this will reduce home affordability.

The bigger bright spot in housing this week is that there has been a large increase in housing permits which means that home builders plan on breaking ground to construct homes that will invariably have high demand and assist in compensating for the lack of existing homes available for sale.

This week’s report may sound a little more doom and gloom than we have seen in a while, however I want to leave you with some positive thoughts.  There will be good weeks and bad weeks of economic trends.  Right now we are in a slightly negative cycle but the fact that real estate demand remains high and that is very promising.  Housing is the key to our economy in so many ways.  As long as people are willing to enter the housing market, that holds great promise for the future.

JJ Mack
916-517-1800
jj.mack@apmortgage.com
www.apmcroseville.com

Mortgage rates have been rising!

Mortgage rates have been rising!

The stock market on Wednesday came within 200 points of the all time record high.  Unfortunately some weaker than expected economic news coming out of China and Europe put a damper on investor excitement.   Both countries are showing slower growth than anticipated and that has investors concerned about whether it is a sign of things to come in the U.S.

Right now Housing seems to be where it’s at…Stocks related to the improving housing market continue to rise rapidly and there seems to be no lull in sight.  Homebuilder stocks have increased 77% through early December.  Lumber has risen 74% and home-improvement stores have jumped 55%.  These areas of the stock market were the top-performing industries in 2012, according to Morningstar.

Mortgage rates have been rising over the last few weeks and the numbers are reflected in the most recent figures released by the Mortgage Bankers Association.  The purchase index declined by 10% last week and refinancing dropped 6%.  Some analysts are already making predictions that these numbers reflect a slowing in the housing market.  (I don’t understand how after one week of data they can make this analysis).  We have seen blips in the upward movement in housing over the last few months however the overall trajectory has remained very positive.  Next week there is much more significant housing data being released which will give a far more accurate picture of the status of the real estate market.

First time jobless claims along with continuing claims are at their lowest levels since the start of the recovery.  The claim numbers seem to be pointing to the continued building and improvement of the job sector.  Last week initial claims fell 27,000 to a 341,000, a level that is nearly 20,000 below the Econoday consensus. The four-week average, at 352,500, is about 10,000 below the month-ago trend which offers an early indication of strength for the February employment report.

Mortgage rates declined late Wednesday into Thursday based upon the results of the most recent 10 year government note auction.  The demand for these securities was slightly better than expected and that seemed to momentarily stem the tide of rising rates.

Foreclosures and mortgage delinquencies are at the lowest point since the recession began and that continues to provide fuel to the idea that housing is really beginning to significantly improve.  Housing inventory is very low and that is driving home prices higher in almost every area of the country.

JJ Mack
916-517-1800
jj.mack@apmortgage.com
www.apmcroseville.com

Mortgage rates have been declining from their recent peak

Mortgage rates have been declining from their recent peak

The stock market has been eerily quiet as of late.  The markets have pulled back off of their most recent high’s and it appears that the decline is more about financial uncertainty than about specific economic events or data here in the United States, however Europe is playing a part in the declines.

Earlier this week the U.S. markets followed the European markets lower as political instability made headlines in Spain and Italy.  There are new allegations of corruption against the Prime Minister of Spain combined with a banking scandal in Italy.  (We should be used to this type of behavior shouldn’t we because here in the U.S. this is standard operating procedure isn’t it?)

Despite the recent increases in mortgage rates, purchase and refinance applications rose in the prior week.  Purchase application increased 2.0% while refinancing rose 4%.  You can expect that most likely next week’s MBA report will show even stronger gains in application activity because mortgage rates have been declining from their recent peak.

To no-one’s surprise, the government has sued Standard and Poor’s rating agency over what is believed to be their inaccurate ratings on investments that were tied to sub-prime mortgages.  Simply put, the government has taken issue with S&P on how they could rate specific mortgage backed securities as “safe” for investors when the security being evaluated was made up of mortgage loans in which borrowers…

·         Ability to repay the mortgage was never verified.  (No Income Verification loans)

·         Assets were never verified, and in many cases not even required.

·         Credit scores for qualification were on the lower range.

·         And to cap it off, the properties were financed at 100% to 106% Loan to Value.

The government is accusing S&P of disregarding investor protection in exchange for being paid hefty sums of money for favorable ratings on investments made up of these very risky loans.  One thing is for sure, the U.S. government doesn’t take on cases like this unless they know they are either going to win, or the company they are suing will settle the case by paying billions (with a “B”) in fines.. 

As if we didn't have enough in-fighting in this country, Texas Governor Rick Perry has launched a high-profile battle for California companies to move to Texas.  Perry has been running radio ads in California touting the Lone Star State's low taxes and favorable business climate.  The ads start with “Building a business is tough, but I hear building a business in California is next to impossible. This is Texas Gov. Rick Perry, and I have a message for California businesses: Come check out Texas."

JJ Mack
916-517-1800
JJ.Mack@apmortgage.com
www.apmcroseville.com

Housing is becoming the bright spot in the economic recovery!

Housing is becoming the bright spot in the economic recovery!

The stock market has been steadily rising throughout the month of January increasing over 750 points.  Investors have been slowly starting to believe in the viability of investing in stocks once again which has been illustrated by the amount of money that has been coming out of Treasury bonds.

 

If you have been wondering why mortgage rates have been rising, it is simply that more and more people are feeling better about the future of housing and money is moving out of bonds into the stock market.  The reality of things is that housing is fast becoming the bright spot in the economic recovery.

To make things even better, the future of home building looks very strong.  The reason is that there is a lot of pent up demand for housing.  The challenge is that inventory of existing homes for sale is quite low.  The National Association of Realtors most recent report on existing home sales showed an unexpected decline.  However the reason is that there is not much in the way of inventory for sale.  The drop has very little to do with buyer demand as that remains very strong.  If there is not much existing inventory on the market for sale, then builders need to build, and they are certainly starting to do that now.

Applications for mortgage refinances dropped 10% in the last week.  The decline is most likely a direct reflection that interest rates have risen approximately ¼%.  Rates are still ridiculously low however borrowers have become very sensitive to slight rate movements.

The Case-Shiller Home Value Index reported that home prices for the nation’s 20 major cities increased by .6 percent.  Additionally home prices are up 5.5% from a year ago which continues to support the facts that a housing recovery exists.  We are still a long way off from recovering the lost equity from the housing meltdown however now that demand is increasing, we are starting to slowly recover some of the value lost.

To no one’s surprise the Fed announced that they will continue to keep rates low and that they will continue their bond purchasing program to artificially keep mortgage rates down.  The one thing to realize is that if housing continues to improve at the current pace, mortgage rates will increase despite the Fed’s efforts.

ADP reported that there was increase in private payrolls of 192,000.  On Friday it was reported that national unemployment is 7.9% and the economy added 157000 jobs which was less than anticipated.  The employment picture shows steady improvement but at a very slow pace.

There does continue to be signs that the economy is not quite as strong as we would like to believe.  We have all heard time and time again that housing takes us into a recession and it takes us out of it.  It appears that housing has started the process of healing the economy and things should keep improving. 

JJ Mack
916-517-1800
JJ.Mack@apmortgage.com
www.apmcroseville.com