Mortgage rates are still very low!

Mortgage rates are still very low!

I walked outside my front door this morning at 5:00AM and listened to how quiet it was.  It was a quick reminder of how quiet the markets have been this week.  Veteran’s Day contributed to the lack of craziness in market activity, however it was more due to the lack of any major economic headlines.

 

Ebola headlines have virtually disappeared from the media.  The threat of ISIS, although, not gone from our lives, has been pushed much further down in the news reports.  With the lack of economic news or world drama this week, we were able to find out own entertainment, or you might call it drama, right here in the United States.

 

The most talked about, and tweeted event of the week was the pictures of Kim Kardashian posing nude in the publication called the “Paper”.  I have never heard of this publication, but that does not necessarily mean anything, because now I have.  Because any and all possible comments have been either spoken, written or tweeted regarding the pictures, I find no reason for me to join in the fray at this time.

 

According to the Mortgage Banker Association, even though mortgage rates are still very low, it is not doing much in prompting refinance activity.  The MBA reported that applications for refinances declined another 11 percent after the prior week’s drop of 6.0 percent.  Purchase mortgage applications rose a miniscule 1.0 percent which is less than the 3.0 percent in the prior week.

It is getting towards holiday time and unfortunately housing activity seems to be slowing.  Next week a couple of housing reports will be released, however they will be reflecting activity from September which is not a true indicator of what is happening in the market right now.

First time jobless claims remain low at 290,000.  This is a 12,000 increase from the prior week’s report.  There are no special factors that are attributed to the increase.  This appears to only be normal fluctuations that occur in the weekly report.

A recent study from Moody’s Analytics is that Millennials are not saving any money.  In fact on average they are running at a saving deficit of 2% per year.  Workers from the age of 35 to 44 have a positive savings rate of 3%.  Part of the Millennials savings challenge has been related to recent years of hard to find jobs.  The labor market is improving so it is hopeful that this negative savings trend will reverse itself.  It is far too early to know how the Millennial’s savings rate will impact housing in the future.

(Since there is a lack of any other major market headlines, I find myself with extra room in my newsletter.  I guess I could go back to writing about my thoughts on Kim Kardashian’s photos.)

JJ Mack
916-517-1800 x 300
JJ.Mack@apmortgage.com
www.apmcroseville.com

Mortgage rates are now also at their lowest point of 2014!

Mortgage rates are now also at their lowest point of 2014!

If you like roller coasters, you don’t need to go to an amusement park.  Just watch the stock market over the last few days and you will get an incredible ride. However, if you want the full experience, then be an active investor.  This way you can get the full jolt of the markets biggest rises and falls of 2014.  And you get to do this all in the same week.

On Tuesday the market dropped 275 points.  Growing fears about the economies of Europe and China are becoming more widespread.  The latest economic data coming from these two countries has not been strong.  As we know, what happens in other economies can directly impact what occurs in the U.S.

Wednesday there was jubilation on Wall Street as investors cheered and celebrated the release of the Fed’s FOMC minutes.  The Fed has continues to maintain that they will keep interest rates ultralow until the economy shows significant signs of strength.  Given that economic data in recent months has been anything but strong, that is a clear indicator that rates will remain low for quite some time.  Investors love low rates because it is likely then that the stock market will continue to rise.

Then came Thursday’s market plunge of 334 points which virtually wiped away almost all the gains the market has made this year.  The stock market sits at about ½ percent above where it started January 1^st.  Thursday’s plunge was driven again by Europe’s and China’s week economies.

You may be asking yourself what changed between Tuesday and Thursday?  The answer is ridiculously stupid and simple.  On Tuesday a certain word was NOT used in the news feeds…on Thursday the word was used.  The word that can send a market into chaos is RECESSION.  Although neither economy is in a recession, the mere suggestion that it may happen is enough to freak out investors.

The one thing the stock market roller coaster has caused is to get investors to jump out of the stock market and over to the safe haven of the bond world.  Yields on bonds are at the lowest point of 2014 which means that mortgage rates are dropping.  Mortgagerates are now also at their lowest point of 2014.  With continued market turbulence it is likely mortgage rates will decline even further.  This could be a nice boost for the housing market on both purchases and refinances.

The purchase index according to the Mortgage Bankers Association is up 2.0 percent.  The refinance index jumped 5.0 percent for the week of October 3^rd which is occurred prior to the significant rate declines from this week.  It is highly likely that we will see significant jumps in both indexes next week given the bond rally that has been occurring with the stock market craziness.

JJ Mack
916-517-1800 x 300
JJ.Mack@apmortgage.com
www.apmcroseville.com

First time home buyers! Now is the time to buy!

First time home buyers! Now is the time to buy!

When bonds do well, it is usually a sign of market and economic instability.  This week the bond rally has been driven by concerns about the global economy.  The economic concerns in Europe and Asia are beginning to take their toll on the U.S. stock market and the mindset of investors.

 

There is the index called the “Vix” which is used to measure investor fear about the current economic climate.  The higher the Vix, the great the fear.  This week the index has been in similar territory as when the great recession was beginning to take hold.  The Vix is a very volatile index and it can change dramatically in the span of a week.  The reason it has been rising is because there are more and more reports coming out about the potential for another economic slowdown.  However this one is NOT being driven by the United States.  However we cannot remain insulated from it.

 

In the U.S. there are also signs of growth slowing as factory orders, manufacturing, and construction spending were all reported unexpectedly down.  The numbers are not terrible however they are concerning in that all of the reports showed declines.

 

The previously mentioned reports all coming in negative seems to coincide with the latest report on consumer confidence.  In recent weeks the measure of confidence has been rising.  This latest report however shows a reversal in direction that was not necessarily expected.

 

On the home front the major economic news for the week was the monthly employment report for September released by the Labor Department.  The report came in much better than expected with new jobs for September coming at 248,000.  The unemployment rate declined to 5.9 percent.

 

In the housing market the number of pending home sales continues to remain flat.  Sales declined 1.0 percent for the month of August.  Additionally sales are down 2.2 percent from the same time last year.  The challenge to the market appears to be the lack of first-time buyers and the increased demand for rentals.

 

As is expected, with the decline in demand for homes, home prices dropped 0.5 percent for the month of July according to the Case-Shiller Home Price Index.  This is the 3^rd straight month of declines and the steepest decline dating back to November 2011.  The one bright side to the report is that values continue to remain above the levels from the same time last year by 6.7 percent.

 

The Mortgage Bankers Association of American reported that for the week ending September 26^th applications for purchase applications remained stable.  Refinance applications declined 3.0 percent which is normal considering the uptick in mortgage rates last week.  This week rates are once again declining.

 

JJ Mack

916-517-1800 x 300

JJ.Mack@apmortgage.com

www.apmcroseville.com

 

The stock market took it on the chin in a big way on Thursday!

The stock market took it on the chin in a big way on Thursday!

The stock market took it on the chin in a big way on Thursday with a drop of 265 points, which comes on the heels of additional declines on Monday and Tuesday.  The cause of the steep decline this week is focused on 3 main areas, global economic slowdown, rising tensions with Russia, and the Middle East.

The tech heavy Nasdaq tumbled 100 points on Thursday led down by Apple.  It seems that the initial concerns about the bending and warping of the new Iphone 6 and 6 Plus is becoming more and more of a problem.  What started out as a few random comments on social media, is now becoming larger and more vocal day by day.

Apple, while trying to figure out what they will need to do to address the problem, they are doing their best towards social damage control. Apple has set new sales records with the release of the new phones, however if the issue of bending continue to grow, it is likely that future sales will be hurt significantly until Apple redesigns the casing, This of course will cut into sales and profits.

Russia this week was vocal in stating that the U.S, does not have the authority to engage in the bombing in Syria according to international law.  The U.S, differs in opinion and the disagreement is further ratcheting up tensions between the two superpowers.

Finally, Japan, China and Europe, are all showing signs of economic slowdown.  Although the United States is continuing to slowly chug along, declines in the 3 largest economies behind the U.S. is creating fear within the investment community.  One thing that became clear during the great recession is that when something happens in one large economy, it will have significant impact throughout the world.

The latest housing data was disappointing with existing home sales falling 1.8 percent in August to a lower-than-expected annual rate of 5.05 million.  Sales are also down from the same time last year by 5.3 percent.  This is greater than the previous month’s difference of 4.5 percent.  Limited supply continues to be a factor holding down sales which remained stable at 5.5 months.

Appreciation of home prices is stalling according to the Federal Housing Finance Agency.  The most recent report for July indicated that home prices rose only 0.1 percent versus 0.3 percent in the prior month.  Additionally, the year-over-year rate declined from 5.1 percent in June to 4.4 percent in July.

The one housing report that was a highlight for the week is the new homes sales report.  New home sales jumped 18.0 percent for the month of August.

JJ Mack
916-517-1800 x 300
JJ.Mack@apmortgage.com
www.apmcroseville.com

Despite mortgage rates rising over the last couple of weeks, applications for loans has risen!

Despite mortgage rates rising over the last couple of weeks, applications for loans has risen.

Investors are loving the latest news from the Fed regarding interest rates.  This week there was tons of speculation on whether the FOMC minutes released on Wednesday afternoon would have different wording in them regarding the Fed’s plan for the future of interest rates.

Many experts believe that the stock market has been steadily rising to new records because business loves borrowing money at low rates.  It makes it easier for companies to turn profits which is what investors want.  Concern this week was that the Fed might change their language towards when they might increase rates since the economy has been doing better.

Well…the Fed held steady with the course and plan for interest rates and they believe that increases will not occur until the summer of 2015.  At that time increases are expected to be very gradual in nature as to not disrupt economic growth.  This is the news that markets were hoping for and they got it!  The Dow Jones Industrial Average has risen 284 points for the first 4 days of the week.

Mortgage rates on the Fed news, have risen to their highest point in 4 months.  As investors feel more confident in the future of the stock market, this will continue to drive money out of government bonds and into the stock market.  This shift in where investors place their money causes bond yields and mortgage backed securities to rise which mortgage rates are based upon.

Despite mortgage rates rising over the last couple of weeks, applications for loans has risen.  The Mortgage Bankers Association of American reported that applications for purchases and refinances jumped 5.0 percent and 10.0 percent respectively.

It appears that homebuilders are being a little cautious about the future of housing as indicated by August’s housing starts and permits.  Starts on new home construction declined 14.4 percent which is in stark contrast to July’s jump of 22.9 percent.  Permits for new construction declined 5.6 percent after a rise of 8.6 percent in the prior month.  The multifamily component made up the majority of the decline in the latest data which means that single family construction has not contracted significantly.

In other news, inflation continues to be a non-factor which is one of the reasons the Fed has elected to keep interest rates where they are.  For the longest time the Fed has indicated that if inflation shows a pattern of rising, they might need to change their interest rate policy sooner than expected.

First time jobless claims came in much lower than expected.  At 280,000 for the week ending September 18^th, this number is far below anyone’s expectations and shows an improving labor market.

JJ Mack
JJ.Mack@apmortgage.com
916-517-1800 x 300
www.apmcroseville.com

Mortgage rates have hit new lows for 2014!

Mortgage rates have hit new lows for 2014

 

Are we headed back into a refinance boom?

Is the decline in mortgage rates a good thing for the housing market?

The answer to the first question may certainly be a “Yes”.  However the answer to the second question regarding it being a good thing for the housing market…the answer is “not necessarily”.

Mortgage rates have been tumbling over the last week and mortgage rates have hit new lows for 2014.  In fact mortgage rates currently are about at the same level as October of last year.  Applications for refinances jumped in the prior week by 7.0 percent according to the Mortgage Bankers Association.  Expectations are that refinance applications will rise again in next week’s MBA report because mortgage rates declined further this current week and that drop is not reflected in the current spike in refinance applications.

On the flip side, applications for purchase applications declined by 1.0 percent during the same period of declining mortgage rates   Logic would suggest that if the cost of borrowing mortgage money is lower, housing should pick up.  Unfortunately that does not seem to be the case as the decline in rates is due to great uncertainty in the stock markets about future economic growth.

Concern about the housing market along with the overall health of the economy has investors very concerned on many levels.  The stock market has been on a tear upward over the last few months with new records being achieved.  Now investors are pulling their money out of the stock market and placing it in the bond market which has sent the stock market tumbling this week.  Money flowing into the bond market always lowers mortgage rates.

For the second question I posed in the beginning of this article regarding declining rates and the housing market, this may not be a good thing for housing.  When mortgage rates decline due to economic uncertainty, more potential home buyers will not take action because of fear regarding employment.  Although there has not been any signs of employment slowing presently, according to the labor department, corporate profits in this first quarter along with GDP and industrial production were far below expectations.  The signs of a possible slowing economy may ultimately lead to uncertainty in the labor markets which then keeps potential home buyers on the sidelines. (We have seen this before)

I cannot predict the future regarding housing nor will I try.  Anything can happen in the coming months and we need to hope that investor and employment uncertainty calm down so the markets do not continue to act in what appears to be a panic mode more than anything else.  My gut tells me this is just a temporary occurrence and things will stabilize in the coming weeks.

JJ Mack
916-517-1800x300
jj.mack@apmortgage.com
www.apmcroseville.com

Mortgage rates over the last couple of weeks have been dropping!

Mortgage rates over the last couple of weeks have been dropping!

It may have taken sever years, but the real estate market is closing in on getting back to a stable healthy market.  2013 was the rebound year for housing in that the industry marked the highest level of sales since the housing boom year of 2006.

The National Association of Realtors reported that 5.1 million previously owned homes were sold in 2013 which is an increase of 9.2% from 2012 and up nearly 20% from 2011.  December sales were up slightly from November.  As reported by most mortgage and real estate professionals, it is likely that January and February closings will decline due to a lack of purchase activity in December.  The good news is that these same professionals are reporting a surge in early purchase activity in January which should lead to more improvement in the housing data for March and April.
 

One slight concern about housing in the coming months is that inventory of available homes for sale has fallen sharply.  In November home supply was estimated at 5.1 months.  In December the supply declined sharply down to 4.6 months. The cold weather gripping most of the nation may very well be partly to blame for the significant decline.

Mortgage rates over the last couple of weeks have been dropping as the economic data has been rather lackluster and investors have been pulling out of the stock market more than usual and placing their money into government bonds.  The decline in mortgage rates is not very significant but it is certainly enough to increase refinance activity.
 

The Mortgage Bankers Association reported that for the week of January 17^th refinance applications jumped 10%.  Applications for purchase applications declined by 4% however many believe that incredibly cold temperatures along with major snow storms in the Northeast have played a role in slowing purchases.

The run up in home prices that took place in 2013 appears to be slowing.  The Federal Housing Finance Agency reported on Wednesday that home prices in November rose only a slight .1%.  This is the 22^nd consecutive monthly increase in home values however it is the smallest increase we have seen in almost 2 years.  Home prices are still 7.6% higher than the same time in the prior year.  Most real estate professionals remain very optimistic about the housing market in 2014.  Many believe that we are just returning to a more stable market demand and flow rather than spiking trends like we experienced in the summer of 2013.

JJ Mack

916-517-1800x 300
jj.mack@apmortgage.com
www.apmcroseville.com

The recent drop in mortgage rates created a surge in loan applications!

The recent drop in mortgage rates created a surge in loan applications!

It has been a rough and tumble week in the markets.  Although there were only a few economic reports released during the week, corporate earnings and projections seemed to play the most on the emotions of investors.

The Dow Industrial Average started the week at 16,424.  With a decline to as low as 16,254 and with a peak as high as 16,500, by the end of the trading day on Thursday the market closed almost exactly where it started at 16,417.

The roller coaster started the early part of the week on the upswing with the retail sales report coming stronger than expected.  In December the index rose .2% which was better than expected.  When you factor out gasoline and auto sales the index rose .6%.  The surprise comes in two places.  The holiday shopping season was slower than hoped by most retailers.  Combine that with the poor unemployment report from last week, the surprise was that retail increased at all.

The poor unemployment report had investors thinking mid week that the Fed may slow down the planned tapering of the government stimulus plan.  The irony of the whole stimulus focus is that mid last year the markets tanked when the Fed discussed starting the tapering.  In today’s market mindset investors want the Fed to taper the program.  The belief is that the tapering means the economy is healthy and growing which is good news for investors. 

To prove once again just how sensitive home owners and home purchasers are to interest rates, the recent drop in mortgage rates created a surge in loan applications according to the Mortgage Bankers Association.  Rates have been declining slightly over the last 2 weeks which created a 12% surge in mortgage applications for home purchases.  Home owners who have still yet to refinance elected to jump on the rate drop as well with refinance applications surging 11.0% for the week of January 10^th.

On Friday on the report on housing starts will be released at 8:30AM.  The expectations for the report is a decline in starts after a 22.7 jump in November.  The reason for the expected decline is that in November the number of permits filed to begin construction declined 3.1%.  Typically when there is a decline in permits in the prior month, the following month housing starts declines.

The privacy of the American consumer is fast becoming the hot topic.  After the latest security breach at target in which data from over 110 million consumers was stolen, privacy fears are growing like wildfire.  So much so that there was an article on CNNMoney.com that discussed growing fears of lack of privacy inside our motor vehicles.  Seriously, between GPS devices, smart phones, internet service providers, traffic light cameras, security cameras, store cameras…. Do you think the word “privacy” even exists? (Latest estimates are that our pictures are taken a minimum of 300 times a day)

JJ Mack
916-517-1800 x 300
JJ.Mack@apmortgage.com
www.apmcroseville.com

Mortgage rates for the most part have show little movement the last 2 weeks!

Mortgage rates for the most part have show little movement the last 2 weeks!

The stock market has been trading in a narrow range all week.  With a lack of any real market moving data this week it seems that all eyes are on today’s unemployment report being released at 8:30AM.  What increased the focus on employment data is that on Wednesday the Federal Open Market Committee released the minutes from their last meeting.  In the report it is clear that the Fed is watching very closely the labor markets to determine at what pace they will continue to taper the economic stimulus program.

As everyone knows by now the Fed has reduced their bond buying program by 10 billion a month starting with this month.  There is no set time table or schedule for future reductions as of right now and the employment reports, both today and in the future, are expected to play a major factor in the Fed’s monetary policy decisions in 2014.

Although the Fed and investors place most of the focus on today’s national employment statistics released by the department of labor, on Wednesday the ADP Employment Report was released.  ADP estimated 238,000 private payroll jobs were created last month.  This was slightly higher than expectations.  The stock market moved into positive territory on Wednesday based on this news however response was tempered due to ADP’s poor track record of employment predictions over the last year.  Truth be told, ADP estimates have been more in line with the national reports over the last few months however it seems that investors have not yet gotten over the massive employment miscalculations from ADP over the last few years.  First time jobless claims continue to remain in the 330k range.

(The expectation for the Employment Report this morning is that the unemployment rate will remain at 7.0% and that the economy will add approximately 200,000 new jobs.)

The big question is what is Congress going to do about the 1.3 million people that lost unemployment benefits on December 28th?  As is typical, both sides of Congress are not in agreement on what to do and the American public is caught in the middle.

Mortgage rates for the most part have been flat for the last 2 weeks.  Minor movement up and down has occurred but overall the rise in mortgage rate towards the end of 2013 is playing a role in housing.

Applications for purchase applications declined 1% in the prior week.  According to the Mortgage Bankers Association applications for purchase loans is down a whopping 20% from the same time last year.  Applications for refinances tipped up last week by 5% but that is not very significant since the total number of people refinancing at this point is much lower than in months and years past.

JJ Mack
916-517-1800 x 300
jj.mack@apmortgage.com
www.apmcroseville.com