Granite Funding - Leif Boyd's Industry Updates

Mortgage Market Update: March 7, 2011 - Unemployment & Oil Prices

2011-03-07T11:20:00.000-08:00

Could we be turning the corner with unemployment and the economy as a whole? Signs of significant economic recovery have been appearing throughout the many economic reports that were released this week. Of course housing continues to be the only area of the economy that is not improving, however I still believe there is much to be excited about.

Today the jobs report came in the strongest we have seen since May of 2010. National unemployment dropped from 9% to 8.9% and the addition of jobs exceeded expectations. Let's add that first time jobless claims came in at the lowest point we have seen in a long time at 368,000.

Although the stock market did not rally with the improved employment news, I truly believe that we may finally be on the right path to employment recovery. It will be a long gradual road, with some bumps, however none the less I feel we are headed in the right direction.

I have written in the past that in order for the economy to improve, the psychology of the nation must improve first. The numerous positive reports this week can be the beginning of that psychological shift we badly need.

The ISM Manufacturing and Non-Manufacturing Indexes came in strong once again. New orders, new export orders and backlog orders are all showing sizeable increases which simply means that demand for goods is increasing at a healthy pace.

Retail sales are continuing to improve as well. More and more we are starting to see consumers purchasing items that are not necessities which is another strong indicator that the economy is moving in the right direction. Factory orders all came in stronger than expected for the month of January as well.

Now for the news I don't want to report. Unless you have been living under a rock, or just have not had to go to fill up your car with gas, you are already aware that gas prices are rising rapidly. Turmoil in the Middle East is only partly to blame. Oil speculators are driving prices up as well. "Haven't we seen this before?"
Housing continues to be the one main sector of the economy that is not showing signs of recovery however I think that is going to start to change. With employment, manufacturing and retail sales all showing strong signs of growth, I believe that over time this will translate to the desire for people to want to purchase homes again. It is important to understand that making the decision to purchase a home is not something that will change overnight. Consumers must develop a sustained feeling that the economy is recovering and then that will translate into buying desire for real estate.

The barrage of snow storms and miserable weather that has plagued many areas of the country this winter has seemed to ease. A change in weather can be a catalyst for change in thinking.

Economic news on tap for next week is:
• Wednesday March 9th - MBA Mortgage Applications
• Thursday March 10th - Jobless Claims
• Friday March 11th - Retail Sales and Consumer Sentiment

Mortgage Market Update: February 7, 2011 - Is our economy stuck? Details here...

2011-02-07T15:11:00.000-08:00

Have you ever had your car stuck in the mud? You hit the gas, you rock the car back and forth, but you just don't seem to go anywhere. You may inch forward a little, but then you get stuck again. That is basically where the economy is.

I feel like a broken record when I say that parts of the economy are showing life while other parts are stuck deep in the mud with no signs of movement. That is exactly what we witnessed this week with the markets and economic reports.

The stock market continues it rally and finished Friday's session above the 12,000 mark. The total stock market gain for the week was 237 points. The recent positive corporate profit reports continue to excite investors and keep them coming back and investing more money into the markets driving the stock market higher.

Because the stock market is rising steadily, we have seen more and more investors moving their money from the safe haven of government bonds to stocks. The 10 YR Treasury finished the week at 3.65% which is the highest we have seen since May of 2010. As you may or may not know, the 10YR Treasury is an indicator on the movement of mortgage rates. Since mortgage rates started increasing, we have seen a steady decline in applications for refinances. The initial jump in rates in December seemed to fuel a flood of homebuyers to take action on purchasing in fear of rising rates which resulted in positive housing data in December. The big question is, will the recent jump stimulate buyers again, or will they hold off waiting to see what happens?

Manufacturing had been growing nicely in the last quarter of 2010 and January's report reinforced that this segment of the economy is going strong. The ISM Manufacturing Index increased by 2.5 points to the highest level it has seen in 7 years showing a nice surge in this sector.

The big, and very confusing news of the week, is that the national unemployment rate dropped unexpectedly from 9.4% to 9.0%. On the surface this looks great right?...However, the economy only added a net of 36,000 jobs in January. This anemic increase was far below expectations, and ridiculously below ADP's expectation of an increase of 187,00. (You may remember that ADP was way off last month also, so you can expect that basically the markets are going to start ignoring ADP's predictions)

Here is the big question...How can unemployment drop by .4% when we are not adding jobs to the workforce? The answer is...more and more people that are unemployed are giving up on looking for work. Remember, if unemployed people do not file for benefits, or they are no longer eligible to receive benefits, they are not counted. So in reality, although the unemployment rate improved, the truth is that we have even more people in this country unemployed in January than we did in December.

I have said this before and I will say it again, corporations have learned how to do more with less. They are not hiring in mass, yet corporate profits are improving every quarter. Bottom line is that companies have figured out how to increase productivity through technology which does not require the hiring of more staff. What is happening in the corporate world is a tell tale sign that the real level of unemployment in this country, despite what the government tells us, is not going to improve any time soon.

Reports due out next week are:
• Wednesday February 9th - MBA Mortgage Applications
• Thursday February 10th - First Time Jobless Claims
• Friday February 11th - Consumer Sentiment

Mortgage Market Update: January 28, 2010 - Housing Sales Up 2%!

2011-01-28T16:18:00.000-08:00

The bulk of the economic reports released this week continue to point to a slow but steady recovery. Without question, there will always be a report or two that will go against the grain, however all in all, things appear to be headed in the right direction.

The stock market has been doing well over the last month and has been marching up towards the 12,000 mark. The market which was on pace to finish the week on the positive side was derailed in the late morning Friday when news came out about political unrest in Egypt. Although nobody knows exactly how the events in Egypt will impact the markets, it appears that investors on Friday elected to pull money from the markets causing a decline of over 150 points. Investors biggest concerns about Egypt is that if anything happens over the weekend, the stock market can take it on the chin on Monday morning leaving investors to lose some of their recent gains that have come along with the recent run up in stocks.

Housing has been showing consistent improvement on a few levels. New Home Sales unexpectedly increased 18% in December. Additionally, Pending Home Sales also increased 2%. Many believe the these higher than unexpected increases are due to the fact that buyers took action on purchasing in December as mortgage rates began to rise. The only negative news regarding housing came in the form of house values and new mortgage applications.

The Case-Shiller House Value Index continues to show that home values are declining. The month of November showed a decline of .4% which follows October's 1% drop. Unfortunately this latest drop is the 4th consecutive month we have witnessed home values declining. To add salt to the wound, purchase mortgage applications dropped 8.7% and refinance apps dropped a whopping 15.3%. These consistent drops do not bode well for next month's housing reports.

The Federal Open Market Committee concluded their first meeting of the year electing to keep rates unchanged. Due to the fact that inflation is virtually non-existent on a retail level, economic growth is still very slow, and the labor market is still quite weak, the Fed decided to continue its implementation of the most recent economic stimulus package commonly referred to as QE2.

The economy as a whole continues to grow nicely. The GDP for last month showed economic growth of 3.2% which exceeded most analyst expectations. In addition, consumer optimism is at the highest level it has been since mid last year. Many people surveyed seem to be quite optimistic about the future.

Next week a number of economic reports are due out, however none more market moving than Friday's release of national unemployment. ADP will release its unemployment numbers on Wednesday, however we learned last month that ADP's numbers can sometimes be far away from reality and most likely the market will not pay much attention to them this time around.

Lastly we have been seeing an increase in weekly jobless claims as of late. Last week 51,000 more people filed for first time jobless benefits increasing the weekly number to 454,000 which is higher than we have seen in a month.

Reports due out next week are:
• Tuesday February 1st - Construction Spending & Manufacturers Index
• Wednesday February 2nd - MBA Mortgage Applications & ADP Employment Report
• Thursday February 3rd - First Time Jobless Claims, Non Manufacturing Index & Factory Orders
• Friday February 4th - Employment Situation

Mortgage Market Update: January 21, 2010 - Improving Market Conditions = BUYERS MARKET

2011-01-21T14:21:00.000-08:00

The stock market seems to be continuing its slow but steady climb as confidence in the markets continues to grow. IRA's, 401K's, Mutual Funds, and shareholders are all seeing an increase in their account balances which is certainly a catalyst for improving consumer confidence.

As promised, housing data was the main focus this week. Starting from the beginning of the week all the way through to yesterday, we received reports on The Housing Market Index, Housing Starts, Mortgage Applications, Existing Home Sales. The Housing Market Index, which measures home builder opinion's on the current and future state of new construction, showed that construction overall is showing no current improvement. Additionally, the majority of builders believe that demand for new construction will not improve any time soon.

Housing Starts declined in December which comes as little surprise to anyone involved in real estate. The question that is being pondered is: is the decline due to the weather, or just overall softness in the housing market? Many experts have stated that this time of year it is very difficult to gauge housing and that not much weight should be placed on new construction reports at this time.

Building Permits showed a sharp increase last month which was an unexpected surprise. Anyone reading this article might say, that does not make sense, if builders don't feel the market is getting better and new construction is not doing well, why would building permits increase? The answer is that although builders may not be breaking ground, they still need to prepare for an upswing in the market by having their plans and permits in place.

The Mortgage Bankers Association reported that applications for home purchases declined another 1.9% last week following the prior week's 3.7% drop. On the flip side, refinance applications increased 7.7% as mortgage rates have dropped slightly.
The biggest housing report of the week is Existing Home Sales which jumped an unexpected 12.3%. (Now here is where I need to clarify this report as the experts have got it wrong.) Please understand that I am very happy about the increase in home sales and I don't want to throw cold water on the parade.

Existing Home Sales measures closed transactions according the National Association of Realtors. Experts are attributing the increase in home sales to the fact that interest rates increased and that motivated many more buyers to jump into the market. "Not true says I":

Existing Home Sales have increased because the process of closing home loans is taking longer. In the late fall there was an increase in Pending Home Sales. We are now seeing them exit the system in bulk due to the delays that were caused by the initial increase in purchase transactions. (Please excuse what I am about to write) Simply put, the housing system has been "constipated". Sooner or later what gets shoved in, will come out) Think about what happens the days following Thanksgiving. (I truly apologize to anyone I may have offended)

Reports due out next week are:

• Tuesday January 25th - S&P Case-Shiller Home Price Index

• Wednesday January 26th - MBA Mortgage Applications, New Home Sales & FOMC Announcement

• Thursday January 27th - First Time Jobless Claims, Durable Goods Orders and Pending Home Sales

• Friday January 28th - GDP and Consumer Sentiment

Mortgage Market Update: January 14, 2010: New Economic Reports for Building Purchase Market

2011-01-14T14:33:00.000-08:00

The first real week of economic data for 2011 came as little surprise to most analysts and the markets.

The major economic reports released this week showed once again that we are going back and forth between optimism and pessimism. The reports that recap activity in 2010 plus the latest December readings are showing that industrial production continues to be the strong point of the economy while unemployment continues to be a major drag on the recovery.

The stock market has been moving up gradually in small increments. Investors are demonstrating belief in business and the future growth of corporate profits despite many negative forces on the economy such as unemployment and housing.

Is inflation a concern? It appears that on the wholesale level inflation may be starting to heat up. It is not a problem as of yet, however we have seen over the last couple of months a trend of higher wholesale prices. The rise in wholesale prices may eventually create a problem for the Fed. The challenge that lays ahead for the government is to control the rise of inflation without hurting job growth. This is no easy task as any move the Fed makes to quell wholesale inflation can have a negative impact on employment.

On the other hand, the Consumer Price Index showed that outside of volatile food and energy costs, inflation on the retail level is the lowest on record. Energy and food have been rising which is why many people feel that inflation may be worse than it really is. However, energy and food prices are always a wildcard in the inflation report. Simply put, retail companies have not been able to raise prices for goods and services outside of consumer necessities as the public has shown that they continue to be very frugal in their shopping.

Retail Sales showed a healthy jump for 2010. Overall sales rose 6.7% from the prior year which is the 2nd largest jump ever recorded.
Consumer Sentiment once again is showing that unemployment continues to be the major concern regarding the future growth of the economy. First time jobless claims increased significantly over the last 2 weeks, and once again the numbers are significantly north of 400,000 filings per week.

Housing purchases dropped 3.7% in the first week of 2010. Is this because of the time of the year, or a reflection of concern about the economy? My personal feeling is it is a little bit of both. Foreclosures for 2010 hit 1 million and the speculation is that in 2011 we will see the same or more. (Don't shoot the messenger please)

Next week housing is the main focus of the market reports. With 3 significant reports due to be released, this may very well set the tone for the movement of stocks and bonds. Recently mortgage rates have dropped slightly which can be directly related to some of the weaker economic reports that have been released.

Reports due out for the first week of 2011 are:

• Monday January 17th - Martin Luther King Holiday - Markets are Closed

• Tuesday January 18th - Housing Market Index

• Wednesday January 19th - MBA Mortgage Applications and Housing Starts

• Thursday January 20th - First Time Jobless Claims & Existing Home Sales

• Friday January 14th - No Economic Reports

Weekend Mortgage Market Update: January 7, 2010 : First Week Success & More 2011

2011-01-07T14:13:00.000-08:00

Happy New Year - I think???
I remember at the end of 2009 how everyone could not wait until 2010 got going. Everyone knew it was going to be a better year. What I found interesting is that the majority of people I spoke with are not sure if 2011 is going to be better than 2010, so there just seems to be a little less fanfare this year.

Expectations at least from a corporate side do seem to be far better than last year. As you have seen me write many times, corporate profits are up, overall sales as well as manufacturing are also increasing at a steady pace.

We know that housing continues to remain a drag on the economy and that is not expected to change in the near future. Typically people say that in order for the economy to improve, housing must lead the way. It has become clear that this time around, it will work in the opposite direction. Corporate profits and the reduction of unemployment will lead to the recovery in housing.

The bright side of housing is that the free fall of home values has ended so we are dealing with at least some semblance of stability. There are some doomsday advocates that are suggesting home values may continue to drop in 2011 however I am of the belief that the worst is definitely over.

The FOMC minutes released this week clearly indicated that the members are actually more optimistic about the recovery than they indicated in their statement a couple of weeks ago.

The Mortgage Bankers Association released their mortgage application report for the last 2 weeks on Wednesday as well. The last 2 weeks of the year purchase applications were up 3.1% and down .8% respectively. Refinance applications have been showing their sensitivity to the movements in rates. Refinance applications were up 3.9% and then down in the final week 7.2%. If you chart the movement of rates over the last month, you will easily see just how rate sensitive refinance borrowers are.

First time jobless claims rose back over 400,000 however the markets did not seem to pay this much mind as everyone was waiting for the national unemployment numbers that were released today. And here they are...

According to the government nonfarm payrolls increased by 103,000 which continues the trend of hiring that we have seen for the last few months. This latest report drops the national unemployment rate from 9.8% to 9.4%. The report is a positive sign for unemployment and hopefully the better than expected report will do some good from a psychological aspect. If people believe the employment picture is getting better, they will act as if it is, which will build momentum towards recovery. (By the way the ADP Employment Report released this week called for an increase in private payrolls of 297,000. Hmm - they were not even in the ballpark)

Reports due out for the first week of 2011 are:

• Wednesday January 12th - 10 YR Note Auction & MBA Mortgage Applications

• Thursday January 13th - First Time Jobless Claims & Producer Price Index

• Friday January 14th - Consumer Price Index, Retail Sales, Industrial Production, Consumer Sentiment

Mortgage Market Update: December 30, 2010 - Wrapping up 2010!

2010-12-30T11:52:00.000-08:00

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

Mortgage Market Update: December 17, 2010 - Housing Stats You May Need to Know

2010-12-13T10:09:00.000-08:00

I am confused about housing...and if I am confused, then I can't even imagine as to how many others are confused.

One week the reports in the media talk about how foreclosures are increasing, rates are rising, new construction is stalling and potential home buyers are scared to make a purchase decision. Then this past week we see that purchase applications for mortgage loans are up for the 3rd consecutive week by another 1.8%. In addition, since last week's reported 10% jump in pending home sales, words like growth and recovery in housing are abound in the media. As a 25 year veteran of the real estate and mortgage business I am confused.

As an eternal optimist I truly want to believe that housing is improving. Unfortunately I just don't see it, especially when CNNMoney.com posted a front page article about how 1.7 Trillion dollars in home equity was lost in 2010 due to home values decreasing.
Do I believe the worst is over...absolutely! However I do have my concerns about the rapid increase in mortgage rates experienced this week. Since Monday we have seen a rise in rates of .375% - .50% and the odds on the increasing trend reversing itself is slim. Overall mortgage rates are up almost ¾% in the last month.

The government has pledged to purchase 600 billion dollars in treasuries to keep interest rates low and stimulate the economy. What is happening is the increase of government debt has many investors concerned about the value of the U.S. Dollar and therefore investors are weary of purchasing government debt. Bottom line is the government's plan is not working the way it is supposed to work - what a shocker!

The lackluster demand for 10 year treasuries at this week's auction is proof that investors are looking elsewhere to put their money. Although the stock market as of this report is basically flat from where it started the week, overall we are hearing about improving corporate profits. These positive profit reports will bring investors back into the stock market causing bond yields to continue to rise, which ultimately will mean even higher mortgage rates.

Although by historic measurements mortgage rates are still incredibly low, rising interest rates can certainly derail any potential housing recovery very quickly. Next week when the MBA reports on the purchase applications, we will get a sense of how homebuyers are reacting to the rising rates. We know refinances are dropping however let us wait to see about home purchasing.

First time jobless claims came in slightly lower than the previous week. Coming off the heels of the jump in national unemployment reported last week, the slight decline was met with little reaction in the markets.

There were not many economic reports this week which is one of the reasons for lackluster performance in the stock markets. In addition, as we come closer to the end of the year, trading volume declines which leaves the door open for more market volatility in the coming weeks simply because a few large trades can have a significant impact on the indices when trading volume is low.

As quiet as this current week was for economic news, next week could be one of the most volatile weeks we have seen in a while due to the extensive economic reports due out:

• Tuesday December 14th - Producer Price Index, Retail Sales and FOMC Announcement

• Wednesday December 15th - MBA Mortgage Applications, Consumer Price Index, Housing Market Index and Industrial Production

• Thursday December 16th - First Time Jobless Claims and Housing Starts

Mortgage Market Update: November 24, 2010 - Rates Dropping - Take Care of Your Family!

2010-11-24T11:55:00.000-08:00

One again mortgage rates are dropping. For a while rates were marching higher, of course higher being a relative term since mortgage rates are still at historic lows. The recent reversal of direction has nothing to do with the government's new stimulus package and Recent declines have everything to do with weak economic news, European debt issues, and let us not forget the latest, the escalating hostilities between, North Korea and South Korea. (I don't know if escalating is the right word because basically North Korea attacked South Korea and that in most circles is considered a declaration of war.)

The first thing that I want to caution you on is not to get caught up in any major market movements this week. Because of the Thanksgiving holiday, trading is light so investors have the ability to cause major shifts in the indexes which is not really reflective of the market.

Once again mixed reports fill the landscape reaffirming that we are trudging along ever so slowly. The news out of the Fed certainly put a damper this week on hopes for economic recovery anytime soon. The minutes of the FOMC meeting were released and it clearly states that the Fed is lowering their projections for economic growth in 2011 and beyond. Additionally, they are also painting a less optimistic picture about unemployment in the next year.

Originally the Fed has been stating that they expect unemployment to drop to 8.3 - 8.7% in the 4th quarter of next year. Their latest projections are that unemployment will only decline to 8.9-9.1% which is still very high for any type of recovery to really take hold.

In real estate news, existing home sales fell 2.2% after a healthy increase last month. The report indicated that the weakness in the market is broad based and that no one sector of the market is responsible for the drop. The National Association of Real Estate stated that part of the drop in home sales is due to the fact that qualified buyers are being rejected for mortgage loans. Of course the other part of the equation is fear about losing one's job still exists.

The supply of homes on the market for sale dropped from 12 months to 10.7 months which is a step in the right direction. The concern on the horizon is this new term being used called "shadow inventory". Shadow Inventory is the number of homes that are being held by banks that are not up for sale. At the present time, there are approximately 2.1 million homes that the banks are holding which brings total inventory up to 6.3 million.

New Home Sales declined a larger than expected 8%. This continues reinforce the fact that low mortgage rates is not enough to stabilize the housing market.
Great news for First Time Jobless Claims came out today. Jobless claims dropped to $407,000 which is the lowest it has been since July of 2008. Let us hope that this is the beginning of a positive trend in employment.
Lastly, Gross Domestic Production came in slightly higher than expected which shows that, although sluggish, the economy is still growing which is another positive for the country.

Significant market reports due out for next week are:
• Tuesday November 30th - S&P Case-Shiller Home Value Index

• Wednesday December 1st - MBA Mortgage Applications, ADP Employment Report, ISM Manufacturing Index, Construction Spending

• Thursday December 2nd - Jobless Claims and Pending Home Sales

• Friday December 3rd - Employment Situation

Mortgage Market Update: November 19, 2010 - Holidays around the corner - What should we expect?

2010-11-19T13:20:00.000-08:00

Once again it appears that we as an economy are going anywhere fast. The economic data being reported has resumed the pattern of pointing us in opposite directions. We are seeing data pointing to growth in some areas and declines in others.

On the positive side we learned this week that first time jobless claims remained pretty much little changed from the vast improvement that we saw reported last week. Additionally, retail sales increase by 1.2% which was higher than expected. It does seem that consumers are becoming a little more willing to spend on items other than the bare essentials.

Inflation on the wholesale and retail level continues to be a non-factor in the economy. The Consumer Price Index and Producer Price Index both came in lower than expected showing that it is has been very difficult for manufacturers or retail outlets to raise prices. The recession has taught most consumers how to be frugal and any attempt to get us to spend more money through higher prices is being resisted pretty much across the board.

What has me more concerned about the future of the economy, especially housing, is the data and other reports that are being released.
Housing Starts dropped 11.7% from the prior month indicating that builders are once again concerned about the ability to move inventory. Additionally, last months Housing Starts were revised from what was initially reported as an increase of .3%, to an actual decline of 4.2% making this the second consecutive months of builders slowing construction.

The Mortgage Bankers Association reported that purchase applications dropped 5% last week and refinances drop a huge 16.5%. Mortgage rates spiked last week and borrowers reacted quickly to the increases by holding off on purchases and refinances.
I am not trying to scare anyone reading this newsletter, however the following issues can have a significant impact on the recovery.

Congress on Thursday did not pass the unemployment benefits extension. What this means is that unless something else gets done, 4 million people will lose their unemployment benefits on November 30th. (Obama will like this from a reporting standpoint because when the 4 million people fall off the unemployment rolls, it will make the unemployment rate drop. Remember, people that are unemployed and do not receive benefits are not counted into the unemployment rate)

Maybe you saw this headline that said "Fewer Homeowners Behind on Their Mortgages". You have to love the headline but when you find out why fewer homeowners are delinquent, it may scare the daylights out of you. Fewer homeowners are delinquent on their mortgages because many more people have had their homes taken away from them by the banks. If you lose your home in foreclosure, you are no longer counted as delinquent. (You may get moved to the category of homeless, but at least you are not late on your mortgage right?)

Lastly, the number of foreclosures being filed on prime borrowers set a new record. What used to be a main problem with subprime borrowers, has now moved over to prime market.
When you combine 4 million unemployed people who will lose benefits in two weeks with an ever increasing number of people losing their homes to foreclosure, that has the makings for a housing disaster in the coming months.

Please understand that I am not assuming the doomsday scenario I described in the previous paragraph. There is a lot that can happen and I truly believe that through all of the challenges we have faced in the last few years, we as a country are more resilient. I just don't know how this will all play out, and the experts are not even talking about it.

Next week, although it is a holiday shortened week, there is a boatload of economic data coming out and quite a bit of it is related to housing. Let us hope that at least these reports are better than the housing data received this week.
Significant market reports due out for next week are:

• Tuesday November 23rd - GDP & Existing Home Sales

• Wednesday November 24th - First Time Jobless Claims, Consumer Sentiment, New Home Sales, MBA Applications, and FHFA House Price Index

Mortgage Market Update: November 12, 2010 - Increasing Refinance Market...What is YOUR Rate?

2010-11-16T18:11:00.000-08:00

Let's see, economists, analysts, and oh yeah, me, called for this week to be a quiet week in the markets given the fact there were so few economic reports due out and none of them were really game changers. Well....simply put, we were all wrong. Me personally, I blame all the analysts and economists because they are supposed to know more than me.

In a week absent of economic data, there were plenty of other market movers, such as little things like, the European debt crisis has come back to light and the second round of stimulus has begun on a sour note. The stock market got an unexpected beating this week dropping over 200 points as of the time of this report.

Fed Chairman Bernake has been taking a verbal beating by almost every financial person you can think of both in the U.S. and elsewhere in the world. There are many concerns about the latest round of stimulus hurting the value of the dollar in other parts of the world. Additionally, realists are all saying that there is no way the U.S. government can continue to sustain the ever growing deficit. Oh yeah, one more little concern that is being voiced: "most experts believe that the plan simply will not work." (We have to all remember that there are still lingering questions about the effectiveness of the first stimulus program and how much it really helped in the economy and here we are doing it again.)

The G-20 Meeting of Global Leaders finished their meeting this week in Seoul, South Korea. The statement from the meeting stated that they do not have any type of comprehensive plan to combat global economic woes. (Just want to make sure you are paying attention. The G-20 announced that they don't have any type of "comprehensive plan". Simply put, they don't have a clue on what to do and the only thing they agreed on is that they don't have a clue what to do)
In another blow to housing, it was reported that housing starts dropped 25% in the 3rd quarter ending September 30th. This drop indicates that the tax credit did in fact play a major role in the housing market earlier in the year. Hope remains that with the focus of the new stimulus program on purchasing 900 billion dollars in government bonds, we will see the recent rise in the 10YR treasury reverse direction. (I know we are in our first week of the launch of the new stimulus program so there is no telling if it will work and although I am usually very quick to throw the government under the bus, I will refrain from doing so for the time being.)

The Mortgage Bankers Association reported that for the past week purchase and refinance applications increased 5.5% and 6.0% respectively. Many are hopeful that this will be the beginning signs of a housing recovery. However if you have been reading my Weekender's on a regular basis, you will note that every time there is an increase in activity, we all try to grab on to the hope that this is the beginning of a housing market turnaround. Mortgage rates increased this week so we have to wait and see what impact it will have on applications next week.
Lastly, the U.S. Postal Service reported an 8.5 billion dollar loss for the fiscal year ending on September 30th. The post office is pushing to have Saturday delivery terminated in an attempt to close the gap on the growing losses. The prior year the post office lost 3.8 billion.

Significant market reports due out for next week are:

• Monday November 15th - Retail Sales

• Tuesday November 16th - Producer Price Index & Industrial Production

• Wednesday November 17th - Consumer Price Index, Housing Starts & MBA

Applications
• Thursday November 18th - First Time Jobless Claims

Mortgage Market Update: November 5, 2010 - What are market holds for 2010

2010-11-05T14:59:00.000-07:00

This week was certainly exciting for any economic data junkie. From housing, to employment, to an election, we had enough economic data and events to make your head spin.

Unless you have been living under a rock, you know that the House of Representatives is going to be under the control of the Republicans starting in 2011. What does this mean for the economy, housing and government?

The reality is that we are most likely facing government gridlock when it comes to legislative changes moving forward. Now that the Senate is controlled by the
Democrats and the Republicans control the House, passing laws will be much more difficult.

The Democrats pushed through virtually any piece of legislation they wanted in the first 2 years of the Obama presidency because of the power of controlling the House and Senate. Despite the objections of many Republican officials, two major bills were passed. (Excuse me, rammed down the throats of the American public) The Wall Street Reform Bill and the Healthcare Reform Bill. (Lots of bad blood was created between the parties over this)

Although elected officials, all the way up to the president, have pledged to get both sides of the aisle working together, the odds on that happening are slim to none. The Republicans have stated their #1 goal is to repeal the Healthcare Reform Bill. Since the Republicans are focused on getting rid of the flagship piece of legislation that the Democrats passed, how can there be a meeting of the minds?

The other big news of the week was the Fed's announcement on the launch of a new round of stimulus to bolster the economy. This new initiative is being called "QE2" which stands for "Quantitative Easing Round 2". The markets reacted very favorably to this announcement with the stock market rallying almost 200 points. The focus of QE2 is to decrease the cost of borrowing by driving interest rates lower.

On to the market news:

• The ISM Manufacturing Index and the Non -Manufacturing Index both showed
improvement. We are starting to see an improving trend in spending on both manufacturing and services which is a sign of economic growth.

• Unemployment remains at 9.6% nationally. The positive sign in the report is that the private sector added 151,000 last month which is hopefully an indicator that small and medium sizes businesses are doing better. The big concern regarding employment is that 2 million unemployed are set to lose their benefits in December unless Congress votes to extend them.

• Mortgage applications for purchases increased slightly last week increasing 1.4%. Refinance applications declined 6.4%.

• It was announced that homeownership is at the lowest point in the last decade. (I guess foreclosures and tight credit may have something to do with that)

• Pending Homes Sales unexpectedly declined 1.8% in September. This is just another indication that the housing crisis is going to take quite some time to mend.

Next week will be quiet as there are only a few significant reports due out plus a national holiday:

• Wednesday November 10th - Jobless Claims and MBA Applications
• Thursday November 11th - Market are closed for Veterans Day
• Friday November 12th - Consumer Sentiment

Mortgage Market Update: October 22, 2010 - Rates still at historic lows but now increase in housing

2010-10-22T15:04:00.000-07:00

Last week I wrote that the Fed policy makers had come out publicly in stating that there was not a consensus on what actions they should take to stimulate the economy. This past week's economic data as well as next week's should provide Fed policy makers with more than enough information to make a definitive decision on what to do.

The economic reports this past week continue to demonstrate that the economy is going nowhere. You will notice that I didn't even say "going nowhere fast", I just said "going nowhere". With every bit of positive news that an investor or consumer can grab on to, there is another piece of negative news sitting right behind it to quell any momentum that could be gained. The stock market this week is a perfect illustration.

This week in the stock market we saw some significant drops and rallies based upon daily economic reports. By the time the smoke cleared, we are almost exactly back to where we started the week. On Monday the DOW started the week at 11,137. After hitting highs of 11,205 and lows of 10,925, the market ended trading on Thursday at 11,135, exactly 2 points lower than where the week started. Friday no economic reports are due out so trading should be quiet.

The National Association of Home Builders monthly survey on the future of housing showed an unexpected increase. The survey which measures the feelings about the economy and housing as a whole showed a gain for the first time since the spring, which was the end of the 2nd round of housing stimulus.

Housing Starts also showed a surprise increase for the month of September with single family construction leading the way. Housing Starts increased .3% which piggy backs on the prior months 10% increase. Additionally, Housing Starts are up 4.1% from a year ago. On the opposite side of the coin, the future for new construction remains in question as new building permit filings declined 5.6%.

Mortgage rates remain at historic lows however once again we see that even the slightest increase in rates can have a dramatic impact on both purchase and refinance applications. Mortgage rates last week increased just over 1/8% and the market saw a drop in purchase applications of 6.7% and refinance apps declined 11.2%. It is my opinion, for what it is worth, that if next week we experience additional declines in the housing sector, the government will be compelled to act on executing another round of stimulus sooner than later.

First time initial jobless claims declined 23,000 last week. The markets showed virtually no reaction to this report as it seems that unless there is significant movement in the numbers, the market just looks at this as weekly variations with no real direction for un-employment.

As announced earlier this week, Bank of American and some of the other major lenders are resuming their foreclosure proceedings in many states. There are still many hurdles that the banks will need to clear in the courts regarding foreclosures so the story is not coming to a close. Although the banks insist that they have not made errors in who they have removed from homes, judges and regulators are quite skeptical about what the banks are stating. Let's face it, the banks have a history of not telling the truth.

Relevant economic news on tap for next week:

• Monday October 25th - Existing Home Sales

• Tuesday October 26th - S&P Case-Shiller Home Value Index & Consumer Confidence

• Wednesday October 27th - MBA Mortgage Applications, Durable Goods Orders & New Home Sales

• Thursday October 28th - First Time Weekly Jobless Claims

• Friday October 29th - GDP & Consumer Sentiment

Mortgage Market Update: October 8, 2010 - Largest increase of Loan Application since June!

2010-10-08T15:57:00.000-07:00

Could it be that housing is finally becoming more stable and predictable? - The latest data suggests that finally the worst of the nation's housing woes are behind us. Before we start the party, I am not suggesting that foreclosures are coming to an end or even that mortgage delinquencies are declining.

The latest reports on housing are continuing the trend that post stimulus housing activity is finally increasing consistently. Pending Home Sales were revised for August showing an increase of 8% from July. September's pending sales were up as well by 4.5% continuing the trend of modest gains in activity.

The Mortgage Bankers Association reported that purchase applications for last week rose 9.3% which is the largest increase we have seen since the tax credit expired earlier this year. Refinance applications dipped 2.5% however it is expected that this number will turn around with mortgage rates once again returning to the lowest point on record. As of last week the 30 year fixed rate was down to 4.25%.

The stock market coming off the best month of the year in September seems to be continuing its upward trend. Many other areas of the economy are still showing weakness however investors seem to like prospects for the future, at least for now.
Jobless claims overall have been dropping for the last 4 weeks. This week's first time jobless claims dropped 11,000 to 445,000. This report was better than expected. Remember, just 4 weeks ago we were experiencing first time claims in excess of 500,000.

National unemployment increased to 9.6%. Although this increase suggests further problems with employment, one needs to look into the numbers to see that things are not as bad as they seem. Overall payrolls dropped by 95,000, however much of the drop is contributed to census workers and other government employees. The private sector added to their payrolls by 64,000 which is the 9th straight month of private sector employment increases.

The ISM Non Manufacturing Index showed continuing improvement which is an important indication for second-half economic growth. The stock market reacted positively to this report driving the market higher by almost 250 points on Wednesday and Thursday.
Same store sales rose 2.8% which was more than expected. It is apparent that consumers are once again starting to spend money. The lagging question that remains is that if consumers are spending, why aren't companies hiring?

The answer to this question is simply that since companies have raised expectations of employee performance, these stores are able to sell more with less staff.
The anomaly that exists is that with all of the positive economic data coming out, why are mortgage rates continuing to fall?

It appears that although for the moment we see trends of economic improvement, many consumers and businesses continue to be weary of the future. We have seen in the past consistent economic improvement only to have it turn on a dime and reverse itself. This uncertainty lends itself to the investor behavior that bond investing is still the place to be. It is also important to understand that although the stock market has been rising, overall volume has been down which investors have the ability to cause large swings in the market averages.

Economic reports due out next week are:

• Wednesday October 13th - MBA Mortgage Applications and 10 YR Note Auction

• Thursday October 14th - Weekly Jobless Claims and Producer Price Index

• Friday October 15th - Consumer Price Index, Retail Sales and Consumer Sentiment

Mortgage Market Update: October1, 2010 - Purchase Application on rise! Get in your home quick!

2010-10-01T14:52:00.000-07:00

Have you ever been in a place in your life where you feel like you are taking two steps forward, and then two steps back? That is where the economy is right now. There is no other way to explain it.

It seems that every week the economic data points to us going nowhere fast. We get some positive news, and then negative news. For the most part, the news reports and data just continue to reinforce that the economy is very weak and that we are just chugging along ever so slowly with no real direction.

Day to day the stock and bond markets will react to economic data simply because traders and investors look to make a quick buck on the fluctuations in the markets. However if you plot the last 3 months, 6 months, even the whole year of economic news and data, we are not far from where we started the year. At least we are not going backwards right?

This week the S&P Case-Shiller Home Value Index showed a slight increase in home values for the 4th straight month. Before you go out and celebrate, the increase was .8% which is basically unchanged in my book. Additionally, home values are down .9% from the same time last year. Sum it up, the housing market is flat.

The Mortgage Bankers Association reported that purchase applications rose 2.4% and refinance applications dropped 1.6%. Purchases represented 19% of total applications and refinancing was 81%.

Mortgage rates have dropped back to just above the record lows set earlier in the year. Rates this low would normally stimulate a buying frenzy however concerns over unemployment continue to keep prospective purchasers on the sidelines.

Other data reported this week:.
• Consumer Confidence dropped to the lowest point since the start of the year.

• GDP increased slightly which is a positive indicator. However the overall number for Gross Domestic Production still remains at an anemic level.

• Jobless claims continued their slow decline. Just over 450,000 people filed first time claims last week which is certainly better than the 500,000 we had seen just a few weeks ago.

• Construction Spending dropped 1.0% in July. The prognosis for August is that we will see improvement.

• The ISM Manufacturing Index shows an increase manufacturing which is a positive economic sign.

• Consumer Spending rose more than forecast reinforcing the Fed's statement that the economy will continue to grow at a "modest" pace. (I still don't know what "modest" means)

• The Consumer Sentiment report for mid September indicates that feelings about the future of the economy are not very optimistic in the near term. However we have seen in the past that this can change quickly.

What's up with GMAC and JP Morgan Chase? In the last week both companies announced that they are suspending foreclosures in over 20 states. The reason, potential technical mistakes in the filings. Lawyers for homeowners are seizing the opportunity and petitioning courts in record numbers to have the initial foreclosure filings thrown out. This means that these companies could have to start all over with their filings.

Economic reports due out next week are:
• Monday October 4th - Pending Home Sales
• Wednesday October 6th - MBA Mortgage Applications and ADP Employment Report
• Thursday October 7th - Weekly Jobless Claims
• Friday October 8th - Employment Situation

Mortgage Market Update: September 17, 2010 - Our ever changing market, what next?

2010-09-17T12:57:00.000-07:00

I think the majority of the economic analysts and market prognosticators (sorry this is a big word for me) need to jump on a plane and head straight to Las Vegas. For the first time in as long as I can remember, almost every single economic forecast for the week was nailed on the head.

For many months you have been reading from me how I wonder where these economists and analysts get their weekly predictions from since week after week, they are not only way off the mark, some of them are in another world. Well... this week I take my hat off to them. (Next week will tell if this was a fluke, or maybe these experts have started finally asking people that actually know about the markets what is happening)
Although there was quite a bit of economic news this week, since the reports came in close to expectations, market movement was somewhat subdued. The economic reports this week have confirmed that the economy is indeed recovering. Although the recovery is very slow, this week's reports coupled with last week, have many believing, finally, that a recovery is taking hold.

• Retail Sales came in slightly higher than expected showing that consumers are spending money, not crazy money, but none the less, people are returning to the stores.

• Industrial Production rose .2% in August which was in line with expectations. Although the increase was less than previous months, that is being attributed to the changeover of the production plants in the automotive industry for the launch of the 2011 model year.

• Weekly Jobless Claims dropped once again giving life to the notion that companies are becoming more stable. We still have a long way to go with unemployment however the continuous weekly drops are very refreshing to see.

• The Producer Price Index was up slightly higher than expected. Experts were predicting a rise of .3%, however the report showed an increase of .4%. This slightly higher report did not impact markets because the numbers continue to indicate that inflation on the wholesale level is still very much under control.
With the continuing trend of stable economic reports, interest rates for mortgages are continuing to rise slowly. Over the last month we have seen mortgage rates increase and that is now starting to impact mortgage applications negatively.
The MBA reported that mortgage applications for refinances and purchases both dropped once again. Although mortgage rates are still incredibly, if not ridiculously low, every time there is an increase in rates, regardless of how small, we see mortgage volume drop. Last week purchase applications dropped .4% and refinance applications decreased by a larger than expected 10.8%.

Let's call next week "Housing Week". In addition to all of the regular economic news due out, next week we are going to be hearing a lot about housing. Be prepared in that if the trend of housing continues to improve, mortgage rates will jump. Also keep in mind that in recent months, the experts have been far off on most of their predictions and that can lead to strong reactions to any reports that come in that are not in line with expectations.

• Monday September 20th - Housing Market Index
• Tuesday September 21st - Housing Starts and FOMC Meeting Announcement
• Wednesday September 22nd - MBA Mortgage Applications, FHFA Housing Price Index
• Thursday September 23rd - Weekly Jobless Claims & Existing Home Sales
• Friday September 24th - New Home Sales and Durable Goods Orders

Mortgage Market Update: September 10, 2010 - Housing Market on the Rise!!!

2010-09-10T09:59:00.000-07:00

The positive news on the economy is gaining momentum. Adding on to last week's up beat reports, this week continued to show that the economy is slowly recovering and is headed in the right direction.

As mentioned last week, there were not many economic reports due out this week, however the reports we received were positive in nature and indicate that for now, the economy is moving towards recovery.

The positive housing report was one of the key areas that has many experts and analysts breathing a small sigh of relief. The Mortgage Bankers Association reported that the home purchase index rose 6.3% from the prior week. Home purchases are now at the highest point since May and this month's rise represents the 3rd consecutive increase in purchase activity. Many people are keeping their fingers and toes crossed that this may be the beginning of a slow but steady recovery in housing that the economy needs desperately.

Weekly jobless claims dropped by a more than expected 27,000 from the prior week. This week's claims are the lowest since July and this is also the 3rd straight week of decline in first time filers. The weekly moving average also held steady.

The only down side to the improvement in the economy is that with improvement comes a rise mortgage interest rates. We have already seen since the end of August that the 10YR Treasury Security has risen more than a 1/4%. Although treasuries and mortgage rates do not move hand in hand, the 10YR movement is certainly an indicator of rate direction. Mortgage rates have begun to rise off of their lowest point and as long as positive economic data keeps being reported, rates will continue to edge upward.
The biggest question relating to rising mortgage rates is will the increase slow purchases once again, or will buyers realize that the lowest rates are behind and rush to take action on purchasing now? Only time will tell how buyers and the markets interpret the future of mortgage rates.

It was announced this week that almost half of the home purchasers that made a claim on the tax credit will have to refund the credit back to the IRS. Thus far 1.8 Million homebuyers have claimed the tax credit and early indications is that many people have incorrectly claimed the credit. The confusion comes with that the rules for the tax credit changed from 2008 to 2009.

In 2008 the tax credit was not really a tax credit. The reality is that the credit was an interest free loan to homebuyers. In 2009 when the government extended the tax credit, they changed the program from an interest free loan to an actual tax payer refund.

What has happened is that many of the tax filers did not know the difference and claimed the refund in 2008. As I write this newsletter, the IRS is scouring through every tax return with a credit trying to determine which credit the homebuyer was eligible for. Once this is complete, the IRS will begin to notify the credit filers that they owe the IRS money. (We all know this is not going to go over well with homebuyers)

This week there will be a lot more economic news coming out which can impact the markets. Let us keep our fingers crossed that the trend of good economic news will continue.

• Tuesday September 14th - Retail Sales
• Wednesday September 15th - MBA Mortgage Applications
• Wednesday September 15th - Industrial Production
• Thursday September 16th - Weekly Jobless Claims & Producer Price Index
• Friday September 17th - Consumer Price Index & Consumer Sentiment

Mortgage Market Update: September 3, 2010 - Mortgage Applications On the Rise & Rates Staying Low

2010-09-03T11:39:00.000-07:00

What a difference a week makes. Where the economic news last week was primarily negative, this week we have seen a reversal of fortune. From positive reports on housing to the improving employment picture, things are looking up ever so slightly. We are still far from out of the woods however this week's positive reports and market movement brings a welcome sigh of relief.

The stock market rebounded nicely from last week's drop. As of this report the stock market is in positive territory and is expected to finish the week approximately 300 points higher than where it started. The main contributor to the stock market increase is the broad based positive economic news.

The S&P Case Shiller Housing Value Index showed an increase in values of 1.0%. This increase follows the previous month's rise of 1.3%. The housing market still has many challenges to overcome from increasing mortgage delinquencies, to increasing foreclosures. However, home values are stabilized despite the lackluster demand for housing.

The Pending Home Sales Index also rebounded this month with an increase of 5.2%. The increase in pending homes sales occurred in virtually every major region of the U.S. After months of post stimulus declining home sales, this increase was welcome news to the housing markets.

Additionally, mortgage applications for home purchases rose for the 3rd consecutive week. The increase of 1.8% is hoped to be part of a continuing trend. Record low interest rates are believed to be the main reason for the increase in housing purchases. 80% of all mortgage applications today are estimated to be for refinances which still indicates that although housing demand is increasing, we are far off from having a healthy purchase real estate market.

In Other News:

• First Time Jobless Claims declined from the previous week. This is the 3rd consecutive week of declines however the claim numbers are still very high.

• National Unemployment rose .1% up to 9.6%. Much of the increase is attributed to government layoffs primarily related to census workers. The private sector increased hiring slightly which hopefully indicates that private entities are starting to be a little more comfortable with the economy and hiring.

• Consumer Confidence also came in higher than expected. Overall consumers are feeling a little bit more at ease with the economy however the job market continues to remain the #1 concern.

• The Manufacturing Index ticked up in the prior month which was related to the increases in manufacturing orders earlier in the year.
As you can see, this week was filled with primarily positive news which had broad based positive impact on the markets. The only downer is that mortgage Interest rates increased about .25% - .375%. Good economic news is often bad for the demand of purchasing government securities which when demand drops, rates ultimately rise. Mortgage rates are still very low and are expected to remain low for some time.

Next week there is limited economic news however the demand for the 10YR Note Auction will certainly have an impact on the direction of mortgage rates.

• Wednesday September 8th - MBA Mortgage Applications and 10 YR Note Auction

• Thursday September 9th - Weekly Jobless Claims

Mortgage Market Update: August 30, 2010 - Incredibly Low Mortgage Rates & Other Financial News

2010-08-30T17:14:00.000-07:00

I want to start off this week's newsletter with the positive news and events that exist so I can build momentum when we move into the discussion of the negative news. (Remember, I am just the messenger)

Positive News for the week:

• First time jobless claims dropped 31,000 from the prior week. The 473,000 first time claims is still high however we will gladly accept any improvement.

• Mortgage rates are still incredibly low with the national average of a 30 year fixed mortgage at 4.55%

• Durable goods orders increased by .3%. There is still broad based weakness in manufacturing however the increase from last month is an improvement from the prior declines we have been experiencing.

• GDP grew at a rate of 1.6% for the 2nd quarter which, although down from the first quarter, it still is showing that country is experiencing at least some type of economic growth.
Negative News for the Week: (Buckle up for this)

• Existing home sales dropped 27.2% from the prior month and they are down 25.2% from a year ago.

• New home sales dropped 12.4% from a month ago. The median home price dropped .6% to $204,000 which is the lowest point since 2003. (Normally I would say that the drop in the median price would increase home affordability. However with the never ending tightening of lending guidelines, home affordability is not increasing because a borrower's ability to qualify is decreasing at a faster pace)

• Mortgage applications rose .6% with refinances leading the way. The good news in this report is that consumers are applying for mortgages however the purchase market remains virtually stifled. 82% of mortgage applications taken were for refinances which is a clear indicator that people are not jumping into the housing purchase market.

• The stock market took a beating this week. As of the time of this report the DOW is sitting below the 10,000 mark and the talk of double dip recession is heating more and more each day.

Commentary:

Although the majority of the news over the past few weeks has been primarily negative, my fears about the future have gone away. The reason I say this is because time and time again we have demonstrated as a country, what first is uncomfortable and abnormal, we eventually learn to accept as reality.

We have been in this recession for quite some time and we are starting to accept the fact that we are not coming out of this anytime soon. This is our reality for the foreseeable future and we need to accept it and plan accordingly. The world is not coming to an end, it is just a different world and we as a country are adapting to it. We will continue to thrive and prosper we just have expect that it will take longer. There is money and opportunity whenever there are challenges and adversity. It is up to you to take advantage of what is happening.

Next week is going to be a busy news week with many market impacting reports:
• Tuesday August 31st - S&P Case-Shiller Home Value Index & Consumer Confidence

• Wednesday September 1st - MBA Applications, ISM Manufacturing Index, Construction Spending

• Thursday September 2nd - Weekly Jobless Claims and Pending Home Sales

• Friday September 3rd - Employment Situation

Mortgage Market Update: August 23, 2010 - Record low rates!

2010-08-23T15:56:00.000-07:00

Unfortunately the only real positive news being reported these days is that corporate profits overall are up across the U.S. Because of all of the cost cutting measures that big corporations have been taking for the last 2 to 3 years, companies have been able to increase returns for stockholders and increase profits.

Outside of corporate profits, I am sorry to say that the majority of economic news is not where we would like to see it. The first half of the week we saw the stock market rising nicely based upon corporate profits and the fact that many of these same companies have been able to sock away lots of cash for a rainy day. Overall sales have not been increasing which is the driving force to a recovery however investors are focused on profits more than on sales right now.

Thursday the stock market did an about face dropping 144 points as weekly first time jobless claims were reported much higher than expected. The 500,000 claims reported are the highest we have seen since November of 2009. Additionally, the 4 week moving average, which has been rising as well, hit the highest number since December.
Companies, especially in the private sector, are not hiring as fear of a faltering recovery is taking hold. More and more people are believing that once again the economy is heading in the wrong direction and that recovery is much further away than originally anticipated.

The housing market has not been fairing much better these days. The Housing Market Index reported a 3rd monthly decline as builders see tight credit, lousy appraisals and distressed properties as a hindrance to selling new construction.

On a positive note, Housing Starts increased 1.7 in July which was a nice respite from June's 8.7% decline. Multifamily construction was the key to leading the index higher. Single family construction continues to struggle as that part of the index declined by 4.2%.

Fortunately mortgage rates continue to remain at record lows. The Mortgage Bankers Association reported that applications for mortgage are rising. Refinancing is the driving force in the application increase. Refinances currently represent 81% of all applications. Applications for home purchases continue to falter as they dropped 3.4% from the prior week despite the record low interest rates. The bottom line is that with the unemployment picture remaining very unstable, consumers are afraid to make a commitment to purchasing a new home.

Industrial Production increased 1%, which was higher than expected, showing that there is at least some positive activity in the manufacturing sector. Additionally, the Producer Price Index increased .2% which was in line with expectations. The PPI was driven higher primarily by an increase in food prices on the wholesale level. However, last week's report on CPI showed that the increases in prices on the wholesale lever are not being passed on to consumers.

Economic reports due out next week are:
• Tuesday August 24th - Existing Home Sales
• Wednesday August 25th - MBA Applications
• Thursday August 26th - Weekly Jobless Claims
• Friday August 27th - Consumer Sentiment and GDP

Mortgage Market Update August 13, 2010 |

2010-08-13T10:34:00.000-07:00

OUCH! - What a Week! The question that has come back to life once again is "are we heading for a double dip recession?"

This week's economic news has been dismal for the most part, with the exception of a little bit of positive housing news. Unfortunately once again experts are talking about a double dip. The only saving grace in what the experts are thinking and saying is that history has shown us that these experts are no better at forecasting market behavior than you or I.

The part that is most troubling is that when the talk of double dip increases, then consumers and businesses react to the talk creating a self fulfilling prophecy. The saving grace is that given the market vast fluctuations as well as the up and downs week to week of good news - bad news, one week will not determine our economic future.

The week started with the FOMC announcement that they have downgraded the pace of the recovery. (Translation: The economy is heading in the wrong direction right now and the government does not have much in their bag of tricks to change it.)

However, the government is not sitting doing nothing. The government has announced that they will begin a new round of "quantitative easing". This means that they are going to be holding the assets they have purchased over the last year and a half and not put them back into the market in hopes of adding some stability to the economy.

The Mortgage Bankers Association reported that mortgage applications increased in the week of August 6th. Purchase applications rose .3% and Refinances increased by .6%. The record low interest rates are stimulating some purchasers to take action. Any increase in purchases is welcome. It is expected that interest rates will remain low for some time and it is my belief that sooner or later, these incredibly low rates will spur people back into purchasing real estate. (Click your heals together three times and say "I believe, I believe, I believe")

On the other side of the fence, foreclosures and bankruptcies are headed to new records by the end of 2010. The job market continues to remain incredibly week as first time jobless claims for the week rose to the highest level since February. Unfortunately, the 4 week moving average has also been increasing.

The Retail Sales report came in slightly lower than expected. The decline of .5% for the month of June was still an improvement over the 1.1% decline that occurred in May.
On a final positive note, we don't have to worry about inflation. The Consumer Price Index was reported today showing a modest increase of .3% which was directly in line with expectations. Inflation continues to remain a non-factor at the present time which means the government will be able to continue to keep interest rates low.

Economic reports due out next week are:
• Tuesday August 17th - Housing Starts
• Wednesday August 18th - Industrial Production, Producer Price Index & MBA Applications
• Thursday August 19th - Weekly Jobless Claims

Mortgage Market Update: July 6, 2010 - Unemployment rate drops and refinances are in demand!

2010-08-06T12:27:00.000-07:00

I was very hopeful that I would be able to make it two weeks in a row in the reporting of nothing but positive economic news. Unfortunately I have the same luck in this as I do at the gambling tables in Las Vegas - No such luck!

Today some positive news was reported on the employment front. The national unemployment rate dropped from 9.7% to 9.5% and the private sector added 71,000 jobs. Although non-farm payrolls dropped 131,000, many of the job losses are related to government census workers being let go from their temporary jobs. The employment numbers indicate that the job market is recovering slowly, but none the less, it is recovering. Continuing unemployment claims also dropped as well.

The manufacturing index showed that new orders slowed abruptly in July. The reading on manufacturing is pointing to a significantly slower rate of growth as this month's numbers are the lowest since December.
C
onstruction spending in June rose .1% which was an improvement from the revised May drop of 1%. On a comparison from the same time last year, overall construction outlays are down 7.9% from the same time last year.

In housing news, the MBA's Purchase Application Index rose for the 3rd straight week. Government purchase applications rose 3.4 percent while conventional purchase applications were flat. The refinance index was up 1.3 percent. Refinancing made up 78 percent of all applications. Mortgage rates continue to remain at historic lows whereas the 30 year fixed rate mortgage is averaging 4.60%.

Pending home sales fell 2.6 percent in June which represents a drop of 18.6 percent from the same time last year. The National Association of Realtors is warning that near-term sales of existing homes are likely to be "notably lower" in contrast to the spring surge which was fed by government stimulus.

As the economy continues to move along, we can expect to see economic reports that are mixed. The economy is recovering at a much slower pace than most experts predicted. Many of the forecasts of future economic growth have been revised downward, however the good news is that the talk of a double dip recession has been quieted for the time being.
Economic reports due out next week are:

• Tuesday August 10th - FOMC Announcement
• Wednesday August 11th - MBA Purchase Applications and 10 YR Note Auction
• Thursday August 12th - Weekly Jobless Claims
• Friday August 13th - Consumer Price Index, Retail Sales & Consumer Sentiment

Mortgage Market Update: Housing Sales Increasing - Rebuilding Our Normal Housing Market

2010-07-30T10:39:00.000-07:00

I am very excited today! I finally get to write something positive about housing. It has been a while but today I will relish the opportunity to deliver some good news.

It appears, at least for now, the free fall in house prices has ended. The Case-Shiller Housing Value Index rose 1.2% showing that stability to house prices in major cities across the U.S. is taking hold.

In even more positive housing news, New Home Sales rebounded 23.6% from May's previous drop of 36.7%. It seems that the tax credit hangover is starting to dissipate and we are on a slow road to rebuilding a normal housing market. (I'm not exactly sure what "normal" is, or what it will be in the future, however it feels good for the moment to be able to use the word "normal")

Housing inventory dropped from 9.6 months down to 7.6%. This significant drop is a welcome sign, however, and it is a big however, let us not be naïve. We all know the banks are sitting with over 3 million properties that they have not placed on the market. So in reality the supply is more like 5 years however we know the banks are going to drip these properties out for sale in order to keep house prices stable.

In other areas of the economy, news was not quite as optimistic. Consumer Confidence continues to erode due to the job market. Finding jobs is very difficult for the unemployed and the number of people that are part of the on-going claims is rising again. Keep in mind that on-going claims is rising and there are more people falling off the unemployment rolls so in fact the job market is really worse than the numbers indicate.

Corporate profits this week showed many companies are increasing their bottom line which is the foundation for future economic growth and the recovery of the jobs market. I have said it before, and I will say it again, although profits are increasing, until sales increase, which is still not happening, we will not see a huge change in the unemployment picture. The good news is that stronger bottom lines mean the government will be able to stay on the sidelines in regard to bailing out companies again.

Mortgage applications for purchase transactions declined 4.4% for the prior week and refinance apps declined 5.9%. These numbers are not anything to be concerned about in that for the most part, the decline represents the typical mid-summer real estate slow down.

Jobless claims dropped slightly less than expected but none the less they dropped. (Do I have to keep writing about Jobless Claims because the market is not paying attention to them right now so why should I?)

Economic reports due out next week are:

Monday August 2nd - Construction Spending
* Tuesday August 3rd - Pending Home Sales
* Wednesday August 4th - MBA Purchase Applications
* Thursday August 5th - Weekly Jobless Claims
* Friday August 6th - Employment Situation

Mortgage Market Update: Current Updates and Economic Reports

2010-07-19T12:42:00.000-07:00

As I have promised in the past, my goal is to balance economic optimism with the reality of what is happening in the markets. This is no easy task as the pace of the recovery continues to slow.

Because of the amount of news reported this week, I am providing it to you in bullet point format for easier reading and digestion.

• Mortgage rates rose earlier in the week, only to do a complete reversal in the second half and once again return to record lows. The Mortgage Bankers Association reported this week that despite amazingly low rates, mortgage applications for home purchases declined 3.1%. Even refinance applications dropped 2.9%.

• Retail Sales dropped .5% however inside the numbers it is showing that consumers are spending more money on personal items such as cell phones, HDtv's, clothing, etc...

• The Producer Price Index and the Consumer Price Index both are showing clear signs that inflation is not an issue or concern on the wholesale or retail level.

• Jobless Claim reporting seems to be a non factor in impacting the markets as many people have realized that these weekly reports are not indicative of what is really happening in the employment sector. Initial jobless claims dropped a significant 29,000 which was nice to see. Continued unemployment is where the numbers are not representative of reality as the number of people falling off the unemployment rolls is growing and they are no longer being counted in any of the statistics

• Corporate profits reported significant increases in many sectors. Although sales have not increased which means that profits increased due to cost cutting measures, the fact that company profits are growing is a very good sign and the necessary first step before companies resume hiring.

• The stock market is targeted to finish modestly higher for the week based upon the better than expected profit reports.
As far as analysts predicting the future of the economy, it is clear that the so called experts don't have a clue as to where we are headed. I actually find it entertaining to watch because recent history has shown us that over the last 24 months, the so called experts have not even been close in their predictions. (Weren't mortgage rates so supposed to 6% by now?)

The bottom line, don't try to predict the future and don't listen to anyone that says they know where the market and economy is headed. The key to survival and thriving is to adapt quickly to any changes in the market and economy and remain committed to persevering. Do not bet the farm on any forecast or prediction because odds are, it will be far from what actually happens

Buckle up, The Wall Street Reform Bill is about to be signed. Enter the new age of Socialism!

Economic reports due out next week are:

• Monday July 19th - Housing Market Index
• Tuesday July 20th - Housing Starts
• Wednesday July 21st - MBA Purchase Applications
• Thursday July 22nd - Existing Home Sales & Weekly Jobless Claims

Mortgage Market Update: June 29, 2010

2010-06-29T16:26:00.000-07:00

Mortgage Market Update - June 14th, 2010

2010-06-14T13:43:00.000-07:00

Mortgage Market Update - June 7th, 2010

2010-06-07T13:40:00.000-07:00

Mortgage Market Update - June 1st, 2010

2010-06-01T11:59:00.000-07:00

Weekend Market Update: New Homes Sales Rates Are Rising!

2010-05-28T11:42:00.000-07:00

We all knew the bond market rally had to come to an end. The rapid decline in the 10 Year Treasury heading toward the 3.00% mark came to a screeching halt this week. Given the amount of economic data that was released this week, we should not be surprised.

After hitting a low of 3.18% on May 25th, the 10 Year Treasury closed out the month of May at 3.31%. The rapid drop in the treasury yield was due mainly to concerns over the European debt crisis which fueled a flight to quality for investors.Despite many concerns that remain over international debt, positive news in housing fueled some of the rebound of the 10 YR Treasury this week.

The one question that remains is that although mortgage rates are not tied directly to the movement of the 10YR treasury, many experts were surprised that the drop in mortgage rates did not mirror the drop in the 10YR more closely.

Existing home sales jumped 7.6% which exceeded analyst's expectations. As we all know, the tax credit stimulus plan is assumed to have played a major role in the larger than expected increase. Housing inventories also jumped dramatically by 11.5% to a supply of 8.4 months. The existence of the heavy supply of homes combined with the absence of any housing stimulus, point to the risk of price erosion in the months ahead.

In other housing news, the Case-Shiller House Value Index showed that overall home prices have remained flat for the month of March. It is expected that in April the prices should rise given the consumer's rush to lock in their home purchase prior to the expiration of the 2nd round of economic housing stimulus. Predictions for home prices beyond April are uncertain.

New Home Sales surged 14.5% beating analyst's expectations. In addition, new housing inventory also dropped to a 42 year low which shows that the area of new construction housing is showing signs of rapid recovery. Granted that we have seen major declines in the amount of new construction spending since the start of the recession, the current trend indicates the lure of purchasing new construction is rebounding faster than the existing home market.

In other news, the stock market roller coaster ride continues. After the free fall earlier this week, the stock market regained some of the losses and closed out the week above the 10K mark.

GDP and Jobless claims showed gradual and steady improvement. Although neither number is earth shattering, none the less, they are both showing that the economy is improving at a very gradual pace.

Consumer confidence as well as consumer sentiment both are showing that the American public is feeling better about the economy as well. In addition, many Americans seem to feel that the job market will improve dramatically in about 6 months.

Economic news on tap for next week:
• Tuesday June 1st - Manufacturers Index
• Wednesday June 2nd - Pending Home Sales
• Thursday June 3rd - Jobless Claims
• Friday June 4th - Employment Situation

Weekend Market Update: Friday April 30, 2010 - Consumer Tax Credit Expires!

2010-04-30T15:25:00.000-07:00

Ok let the housing speculation begin! As everyone knows, the homebuyer tax credit expires at midnight tonight. In some parts of the country we have seen buyers racing to get contracts signed prior to the expiration. However in other parts of the U.S. we have seen only modest increases in purchases. I personally have met a number of prospective home buyers that have stated that "they are not going to make a rush decision on purchasing just to get the tax credit". These sentiments seem to be a lot more popular than many media outlets have been reporting.

I was hopeful that I could once again be writing about positive news in the housing market for a second consecutive week. However, my plans have been somewhat derailed. The Case-Shiller Housing Value Index dropped by .9% showing that housing values are not rebounding at all.

Traditionally in the spring, house values tend to rise based upon increased demand. What we have been witnessing is that values are not rising due to the fact that a high percentage of homes being purchased are either foreclosures or distressed sales. The pattern of declining prices has many worried that foreclosures and distressed sales are likely to increase as homeowners continue to see their equity deteriorate resulting in what is now being called "strategic defaults".

The one bright spot on housing is that mortgage rates are continuing to remain low despite the government's withdrawal from the mortgage backed security re-purchase program that ended in March. Many experts were predicting rising interest rates starting in April and that fortunately has not materialized. Demand for government bonds remains strong which is part of the reason that rates are remaining low.

Another catalyst to rates staying low is that in a 9-1 vote, the Federal Open Market Committee announced the intention to keep interest rates low for an extended period of time.

Thankfully other sectors of the economy are showing continued signs of promise and improvement. The stock market has been showing small increases as of late and has rebounded to rise back over the 11,000 mark. Additionally, initial jobless claims have been dropping slightly for the last two weeks as well.

A major area of concern in the stock market is that many investors are becoming increasingly concerned over the Goldman Sachs investigation. The government announced on Friday that the Goldman Sachs investigation may be turned into a criminal probe.

Promising reports on GDP, manufacturing and consumer sentiment all came in strong showing signs that many areas of the economy are improving. As said earlier, housing continues to remain a drag on the economy however we are fortunate to see that overall, the health of the economy is improving slowly.

Economic reports on tap for next week are:
• Monday May 3rd - Construction Spending
• Tuesday May 4th - Pending Home Sales
• Thursday May 6th - Jobless Claims
• Friday May 7th - Employment Situation

Weekend Market Update: Friday April 23, 2010 - Housing Economy On An Uprise!

2010-04-26T11:48:00.000-07:00

Finally a week that I don't have to search for something good to say about housing or the economy as there was plenty of good news to go around. The housing market reported data that is the strongest we have seen in quite some time.

The report of a 6.8% increase in existing home sales shocked the market as the expectation was for a slight decline. After weeks of commentary that the homebuyer tax credit had lost its steam, it appears that the surprise increase in existing home sales was directly attributed to the soon to occur tax credit expiration on April 30th. After months of pondering whether they should purchase or not, it appears that buyers are making a mad dash to take advantage of the tax credit before it is gone forever. It is very clear that the government has no intention of extending the credit for a second time.

In more great housing news, new home sales reported an increase of 26.9% from the prior month. This report is the strongest we have seen since July of 2009. The hope is that this rising trend will continue however nobody will know exactly what role the tax credit is playing in these better than expected numbers until the reports for May are released..

The housing reports are certainly providing long overdue optimism for the real estate market. Time will tell whether the increases are a true reflection of an improving market, or simply an aberration based upon the tax credit expiration. Regardless of the reason, I am personally very excited about the real estate reports and I am optimistic about the future even though challenges to the market still remain.

Mortgage rates were very stable this week in the absence of any significant economic news. Despite the positive housing news on Thursday and Friday, mortgage rates did not react with any major movement. Concerns about the Greek debt crisis are weighing on the minds of many investors as evidenced by their recent purchase of U.S. treasuries which has been part of the reason that mortgage rates have remained low.

The stock market has continued its rally and no let up is in sight. In this past week we experienced 5 straight days of increases of the Dow Jones Industrial Average.
Next week will be a moderate week for news. Many of the reports are expected to show stability and not have any major impact on the markets.

• Tuesday April 27th - Case-Shiller Home Value Index
• Tuesday April 27th - Consumer Confidence
• Wednesday April 28th - FOMC Announcement
• Thursday April 29th - Jobless Claims
• Friday April 30th - Consumer Confidence

Weekend Market Update: Friday April 16, 2010

2010-04-19T19:05:00.000-07:00

This week the housing market received a mixed bag of both positive and negative reports (this is nothing new). On the positive side as we break down the reports below we can see that there are certainly signs of economic improvement. On the negative side evidence still remains that we are far from being out of the woods and reminders continue to appear of just how fragile the economy still is.

In a welcome surprise, housing starts jumped 1.6% from February as builders increased filings for new construction permits. This increase beat forecasts and was welcome considering the decline reported in the prior month.

Foreclosure reporting this week was mixed in that actual home repossessions by banks dropped for the first time in four years. On the flip side of the coin, unfortunately in the first quarter of 2010 foreclosure filings rose 7%.

Additionally, foreclosure filings were reported 16% higher than for the same period in 2009.

At long last there is some positive news coming from the Obama administration's loan modification program. Month after month there are an increasing number of homeowners being moved from trial modifications into permanent ones. The process of obtaining a modification still remains challenging however the banks are certainly showing signs of being able move the process faster than ever before.

In other economic news, the mixed reports of recovery continue to come out.

• Retail sales increased by a more than expected 1.6% where as the consensus was that the increase would be 1.3%. Slowly consumers are opening their wallets and making purchases that go beyond bare necessities.
• Industrial production rose .1%. An increase of .8% was anticipated however any increase is still welcome.
• Fed Chairman Bernake announced that the economy continues to recover at a very slow pace and the government expects to keep interest rates low for some time and that no increase is forecast at the present time.
• The 10YR Treasury security has dropped back to 3.81% from a high of 4.00% and mortgage rates have also declined from their recent highs as well. Demand for treasuries remains strong as continued concern over Greece's debt crisis is keeping downward pressure on bond yields.
• Consumer prices increased 2.3% which was driven up primarily by rising energy costs. When you factor out the energy prices, the core CPI rose only.1% once again showing that inflation is not an issue at the present time.

Next week will be for the most part a quieter week however important housing data will be released on Thursday and Friday:

Weekend Market Update March 27, 2010

2010-03-27T14:14:00.000-07:00

This week did not come with any real surprises in regard to the economic data that was reported. On the housing front, the two major reports released were for existing home sales and new home sales.

Existing home sales slipped in the month of February by .6% from the prior month as reported by the National Association of Realtors. Despite the drop, existing home sales are 7% higher than February of 2009.

New home sales unexpectedly fell more than expected. The report for February is the lowest number on record and represents a drop of 13% from the same period in 2009. However, there are factors in the report that are indicative that housing is not as bad as it appears.

Due to the major snow storms in the Northeast and Midwest, many buyers held off making purchasing decisions while waiting for the weather to improve. This is a major contributing factor to the decline reported. However, in the western region of the U.S. there was a 20.8% jump in new home sales which is a strong report compared to what we have seen lately.

Mortgage rates began their slow but steady increase as expected. The media as well as the Warrior Weekender have been reporting for quite some time that as the government phases out their treasury re-purchase program, bond yields will rise unless other investors step in to keep demand high. Unfortunately at this week's bond auctions we witnessed lower demand from investors for bond purchases, especially lack of interest from foreign investors. The result was an increase in bond yields of about 25 basis points.

In other economic news, first time jobless claims dropped slightly showing that unemployment is still a concern however at least for now, the job market is showing signs of stabilization. Although the employment situation is not yet showing signs of improvement, deterioration of the job sector has appeared to have ended.

The U.S. economy expanded at a 5.6 percent annual rate in the fourth quarter of 2009, and corporate profits climbed, setting the stage for gains in employment that may broaden and preserve the expansion.

The rise in gross domestic product, while smaller than the government's previous estimate issued last month, marked the best performance in six years. Company earnings increased 8 percent, capping the biggest year-over-year gain in a quarter century.

It is to be expected that in the coming months we will see positive and negative news however more than likely the trend will be a slow but steady movement toward economic growth.

Economic data to be released next week:

• Tuesday March 30th - Case-Shiller Home Price Index
• Wednesday March 31st - ADP Employment Report
• Thursday April 1st - Weekly Jobless Claims
• Thursday April 1st - Construction Spending
• Friday April 2nd - Employment Situation

Weekend Market Update March 19, 2010: Unchanged Market

2010-03-20T14:10:00.000-07:00

The market volatility expected by many this week fortunately never appeared. With a week of so much economic news, it was expected to be a roller coaster of week of ups and downs. However, to our surprise, the markets were stable and the stock market continued is slow and gradual climb.

The real estate reports continue to indicate that housing is a drag on the economy and thus far no real indication of a strong recovery is in the making. The bright spot in the reports is that there are signs of stability and that is the first step in a housing recovery.

The Housing Market Index dropped 2 points which reaffirms that the housing market continues to remain weak. The Housing Starts report also came in worse than expected in that the report showed a decline of 5.9% after January showed a 6.6% increase.

When you break down the numbers in the report, overall activity is not as bleak as the reports indicate. The majority of the decline in housing starts is confined to the multifamily sector versus single family dwellings. The multifamily starts dropped 30.3% whereas single family declined only .6%. Additionally, many are attributing the declines to the extreme weather experienced in the North East and Mid Atlantic States during the month.

Other key economic reports making headlines for the week:

• Industrial Production had a small gain of .1%. The results were lower than expected especially after a strong report in January however weather is believed to be a factor in the results.

• The Producer Price Index and the Consumer Price Index both continue to show that inflation is not an issue at the present time. The PPI dropped .6% which was more than expected. The greater than expected decrease is being attributed to the lowering of energy costs during the month. The CPI continues to show that prices on the retail level are not increasing.

• First time jobless claims for the week dropped slightly however the drop is not considered significant. Continuing jobless claims continues to be a significant concern in the job market in that the quest to reenter the workforce by many of the unemployed continues to be a major challenge.

The bright side on the economic front is that the FOMC reported that overall growth of the economy seems to be continuing. The speed of the recovery is expected to remain slow, but steady. The FOMC did not change monetary policy and have voted to keep interest rates the same. The FOMC also indicated that they expect to keep interest rates low for some time into the future.

Economic data to be released next week:

• Tuesday March 23rd - Existing Home Sales
• Wednesday March 24th - New Home Sales
• Thursday March 25th - Weekly Jobless Claims
• Friday March 26th - GDP and Consumer Sentiment

Weekend Market Update March 13, 2010: Market Conditions & Are You Going "Green"?

2010-03-13T14:32:00.000-08:00

As expected, this week was void of any major economic data that could cause wide swings in the markets. For the entire week the stock and bond markets have been trading within a narrow range bringing a little emotional reprieve from the wild market movements we have been experiencing over the last few weeks.

It appears for now that the economy is recovering as expected at a slow but steady pace. Economic optimism has been the primary contributor to the slight increase in overall stock indices this week.

The government held a 10YR Treasury auction on Wednesday in which demand was higher than expected. Normally in this situation the bond yield would have declined resulting in a reduction in mortgage rates. However, given the lack of any other significant economic data, treasury yields remained virtually unchanged all week with the exception of Friday.

Friday it was reported that retail sales increased by .3% which exceeded analyst expectations. The higher than expected rise is retail is reinforcing the fact that consumers are our coming out and making purchases despite the challenging employment market.

In other housing news, as the country makes a larger push to become "green" and more and more homeowners and homebuyers want energy saving technology placed in homes, there appears to be a valuation issue rising up.

At the present time, many of the "green housing" initiatives are being completed by new home builders and that is where the challenge exists.. What is happening as of late is that appraisers are struggling to give increased valuation credit to the green properties due to a lack of data available. The foreclosure plague continues nationwide and it has become increasingly difficult for an appraiser to support a higher value on a property regardless of how much "green" technology may be incorporated.

As of late, we have seen that unemployment has been stable in that the pace of workers losing their jobs has slowed dramatically. As this news continues and is certainly welcome, the challenge that many of the current unemployed face remains high in that this week it was reported that continuing unemployment claims rose unexpectedly.

Economic data to be released next week:
• Monday March 15th - Industrial Production & Housing Market Index
• Tuesday March 16th - Housing Starts & FOMC Meeting Announcement
• Wednesday March 17th - Producer Price Index
• Thursday March 18th - Consumer Price Index & Weekly Jobless Claims
• Friday March 19th - Quadruple Witching Day

Weekend Market Update Mar. 5, 2010

2010-03-06T14:50:00.000-08:00

The housing data released this week was not as good as we would have liked to see. The National Association of Realtors reported that pending homes sales dropped 8% from the prior month. This decline continues to demonstrate the weakness that exists in the housing sector.

It is important to note however that pending home sales are still up from a year ago and many believe that the drop is related to the harsh weather that has plagued the northeast this winter. In addition, many experts feel that the impending expiration of the tax credit will put a spark into the fence sitters and move more people to action in home buying.

The media as of late has actually been assisting the housing market to become more active versus their normal M.O. of being a market killer. Fortunately the news and media have been reminding potential home buyers about the tax credit expiration and they have been urging buyers to take action.

More positive news for the economy is that national unemployment remained the same at 9.7%. This report was better than expected as the markets were anticipating an increase to 9.8% given all of the weather related issues that have occurred. The economy is still shedding jobs on a monthly basis however the pace in which jobs are being lost is the slowest it has been in almost 2 years.

Interest rates on mortgages had been stable all week until the news report Friday morning regarding national unemployment. The better than expected report set off a rally in the stock market which has resulted in upward pressure on the 10YR Bond Yield. The yield, which was at 3.61 for virtually the entire week, rose to 3.68 by the end of the trading day resulting in a slight increase in mortgage rates.

In other positive economic news, the manufacturing activity index rose for the 7th straight month. Although the rise in the index was not as much as we have seen in previous months, the fact that it has continued to rise indicates a slow but steady recovery for the sector.

Mortgage rates continue to remain low, and housing prices have shown that they are not going up any time soon. Foreclosures still remain a big concern for the housing market and will continue to weigh on house values for quite some time. Since foreclosures make up a high percentage of home sales taking place across the country, it is very likely that the home affordability index will continue to remain at one of its highest points in the last 10 years.

Next week stands to be a quieter news week as there appears to be only a few economic reports due out. The majority of the reports, on face value, should not have a major impact on the markets.

Economic news that can move the markets on tap for next week is:

• Wednesday March 10th - 10 YR Note Auction
• Thursday March 11th - Jobless Claims
• Friday March 12th - Retail Sales and Consumer Sentiment

Weekend Market Update Feb. 20, 2010

2010-02-20T19:02:00.000-08:00

After many weeks of trying to pull good news out of dismal economic reports, this week has been far more positive and the economy is showing clear signs of recovery.

The government this week raised the Federal Discount Rate unexpectedly by .25% which is probably the greatest indicator that things are improving economically. The government wants to return to what would be considered standard economic policy versus the "crisis policy" that we have seen for over 2 years.
Housing has shown positive signs with two significant reports announced this week:'

• Housing Starts rose 2.8% which was more than expected
• Building Permits declined by 4.9% however most of the decline was related to a multi-family drop.

Single family permits increased by .4%
In addition to the housing reports, there were a number of other reports which have suggested that the economy is getting stronger. The positive reports are a long needed respite from the barrage of negative news we have been hearing about in the economy and global markets for the last few weeks.

The Manufacturing Index rose more than expected indicating that the cost of production is on the rise. This month's report was also the 6th straight month of production gains which is indicative that consumers are starting to make purchases again.

The Producer Price Index rose 1.4% from December however when you subtract volatile food and energy prices, the core PPI was only .3% The Consumer Price Index rose 2.6% percent however once again when you factor out volatile retail energy prices, especially gasoline prices at the pump, the core CPI only increased .2% which was less than forecast. At the present time inflation still appears to be subdued and is a not a currently a major economic concern.

The stock market has been reacting positive to the economic news as of late and has been rallying for most of the week recovering many of the losses incurred from last week. In addition to the positive economic news being announced in the U.S., concerns over the European and Asian debt crisis have been easing as well.

With the economy remaining on fragile ground, the positive economic reports are welcome to many. The signs are starting to emerge that we are headed in the right direction and let us remain optimistic that the positive indicators of economic recovery will continue.

Economic news that can move the markets on tap for next week is:

• Monday February 22nd - Ben Bernake Speaks about Employment Growth
• Tuesday February 23rd - Case-Shiller House Value Index and Consumer Confidence Reports
• Wednesday February 24th - New Home Sales
• Thursday February 25th - Durable Goods Orders and Weekly Jobless Claims
• Friday February 26th - GDP, Consumer Sentiment and Existing Home Sales

Friday February 12th, 2010 Weekend Update

2010-02-12T14:30:00.000-08:00

This week presented many challenges to the market but when you dig deeper into the headlines and actually read the stories behind them, you will see that there is certainly signs of economic improvement, especially in the housing market.

It was reported that home prices declined 12% in 2009 from the previous year. This is not earth shattering news as anyone keeping any type of eye on real estate would not be surprised by this report.

Although a decline in values is usually not looked upon as favorable, the reality is that the drop of 12% is the smallest drop in 2 years. In addition, for a good part of 2009 we saw increases in average home prices, it was the 4th quarter in which housing prices dropped but the trend is not expected to continue.
Home sales in 2009 increased 27.2% from the prior year which is having an impact on housing inventories. Although a good portion of the increase is related to the purchase of foreclosures and short sales, none the less, the increase in home sales is starting to take a bite out of the excessive inventory on the market. We all know that the reduction of inventory is one of the key ingredients to house price stabilization.

Banks are also starting to get more creative in working with homeowners in trouble. Citibank announced a new program which will give homeowners that are being foreclosed on the opportunity to remain in the house for up to 6 months after foreclosure.

Mortgage rates had ticked up about 1/8th of percent earlier in the week due the positive home sales report. However, the continuing concern regarding the European markets has once again made treasuries the safe haven for investors. The 10YR Bond has dropped back to within 4 basis points of where it started the week.

In other economic news:

Retail sales for January rose .5% which was higher than expected. Many are hopeful that this slight increase is a sign that consumers are beginning to spend money on other things besides necessities.

Weekly Jobless Claims dropped more than expected. Although you cannot judge the employment trend by one week, it was nice to hear a lower than expected number for a change.

European financial concerns are still weighing on the U.S. stock market which was evident in the week of volatile trading. The stock market will finish the week about the same place it started.
Economic news that can move the markets on tap for next week is:

• Tuesday February 16th - Housing Market Index
• Wednesday February 17th - Housing Starts
• Thursday February 18th - Producer Price Index, Jobless Claims & Industrial Production
• Friday February 19th - Consumer Price Index

Weekend Market Update Feb. 5, 2010

2010-02-05T13:33:00.000-08:00

This week's news recap:

The U.S. economy is showing signs of stabilization however influence from the global economy is weighing on the U.S. markets. Asia and Europe markets have taken it on the chin this week over the debt crisis that is coming to bear in Portugal, Spain and Greece. In a global economy what happens elsewhere in the world must have an impact on us. The positive side is that although the U.S. stock market has also been impacted, we have witnessed movement of investment into the safe haven of government treasuries which has dropped mortgage rates approximately 1/8%.
National unemployment has dropped to 9.7% which was far better than analyst expectations of 10%. Although in recent weeks we have seen an increase in weekly first time jobless claims, the news of lower overall unemployment is a positive report that the economy sorely needs.

Finally big corporations are seeing an increase in sales growth. Up until now, the increases in corporate profits has been due to cost cutting measures. For the first time in over 2 years, companies are beginning to see increases in sales. Although most of the increase has occurred overseas, never the less, the news is positive and ultimately we will see the sales growth move over to the U.S.

Remember in the end, life is filled with choices. It is your decision to focus on positive or negative news and forces all around. Make the decision to be positive! Don't wait for positive news to happen to feel better, make your own news positive through your focus and actions.

Economic news week on tap for next week is:

• Thursday February 11th - Retail Sales
• Thursday February 11th - Jobless Claims
• Friday February 12th - Consumer Sentiment

Weekend Market Update Jan. 29, 2010

2010-01-29T12:49:00.000-08:00

This week has been loaded with a ton of economic news that at first glance appears negative. However, when you drill down into the information, you will see that appearances are misleading and that there is a positive light to be shed on the news.
On the real estate front, there were 3 major reports that came out this week:

1. New home sales decline to 9 month low.
2. Existing home sales drop 16.7%.
3. Case-Shiller Home Value Index drops for first time in 7 months.

As I mentioned, on first look these reports seem dismal however the driving forces behind these numbers explain why these numbers are not to be a significant concern at this time.

The declining reports of existing and new home sales can be directly attributed to the original expiration of the housing credit that was schedule to end on November 30th. In addition, the winter months are historically slower for housing than other times of the year. When you combine both forces, the housing number declines should not be unexpected or considered unusual.

The housing value index showing a decline can also be attributed to the time of year as well as the fact that banks have increased the number of foreclosed properties that they are placing on the market which in turn will have a negative impact on values. Although housing values have dropped, they are still more than 15% higher than a year ago. This tells us that overall housing values have stabilized. The downward spiral of values has ended and now we are just experiencing normal month to month vacillations.

The Federal Open Market Committee (FOMC) announced on Wednesday that the economy is improving at a moderate pace. The government expects the improvement to continue gradually and that overall the health of the economy is improving. For the foreseeable future the government does not believe that inflation is a concern therefore no the fed had no immediate plans to raise interest rates. The government remains committed to assisting in every way possible in the economic recovery and will continue to evaluate the impact and effectiveness of many of the stimulus plans currently in effect.

This week it was reported that unemployment claims dropped. The reported drop was short of analyst expectations, which once again is raising a little bit concern as to just how much we are recovering as an economy. However, on the bright side, a recent survey showed that over 90% of employers plan to expand their payrolls in 2010. The planned payroll increases indicate that in some cases employees will receive pay increases, while in other situations employers will increase their staff size hopefully resulting in driving down the national unemployment rate.
Economic news week on tap for next week is::

• Tuesday February 2nd - Pending Home Sales
• Thursday February 4th - Jobless Claims
• Friday February 5th - Employment Situation

Weekend Market Update January 22, 2010

2010-01-22T13:08:00.000-08:00

Hey All,

Here is some special financial market news for your interest. Hoping to keep you informed and up to speed on this fast changing market!

On January 21, 2010 HUD announced a major change to the FHA program. In addition, HUD has also been has been providing news of additional changes to the program to be announced in the near future. The changes will have significant impact on borrowers ability to qualify for FHA financing as these changes go into effect.

Changes Already In Effect:
HUD Mortgagee Letter 2010-02 states that any FHA Case number assigned on or after April 5, 2010, the FHA Up Front Mortgage Insurance Premium will be increased to 2.25% from 1.75%.

Click Here to Read Complete HUD Mortgagee Letter 2010-02

HUD Mortgagee Letter 2010-03 expands HUD's authority to monitor, suspend and terminate mortgagee's underwriting authority of FHA loans for exceeding HUD's loan delinquency thresholds.

Click Here to Read Complete HUD Mortgagee Letter 2010-03

Proposed FHA Changes:
Below is a list of some of the changes which have been proposed and are very likely to be passed and announced in future HUD Mortgagee Letters.

1. The Reduction of Sellers Concessions from 6% to 3% to be in line with FNMA and FHLMC lending standards.

2. Increased down payment requirements for borrowers with credit scores below 580. Initial reports are that the down payment required will rise to 10% down payment.
As more information is released from HUD, we will keep you informed and up to date on the latest breaking news.

Weekly Market Update - December 14th

2009-12-14T12:24:00.000-08:00

The week started off with Chairman Bernanke announcing that he feels the economy will grow moderately in 2010. What exactly that means, the average consumer is not sure. Bernanke stated that inflation is not an issue at the present time and that the government has no plans to raise rates any time soon

According to a CNN poll, despite most economist claims that the recession ended months ago, 84% of consumers believe that although things may be a little more stable, sentiment is that the recession is still upon us. High unemployment and fear of losing a job is stated as one of the main reasons for the feelings displayed. Consumers are still remaining reluctant to spend money beyond necessities.

On the housing front, things seem to be inching themselves in a positive direction although we are far from being out of the woods. As previously reported last week, housing sales in November rose more than expected however high foreclosure rates remain a huge concern.

Foreclosure filings dropped 8% in November which represents the 4^th consecutive month of decline. Filings are still up 18% from a year ago however the trend of declining foreclosures can be considered positive for the market.

Concern about housing in 2010 remains high. Thus far in 2009, Realty Trac has reported that 777,630 homes have been repossessed by banks. The chief economist for Moody’s Economy.com has stated that millions of homeowners are still in some level of foreclosure. Additionally there are millions of homeowners that have requested loan modifications. Based upon what we have been seeing, only a small percentage of these homeowners will actually receive permanent loan modifications. The lack of conversions to permanent modifications could very well create another foreclosure increase in 2010. Only time will tell…

Initial unemployment claims unexpectedly jumped last week to 474,000 from 451,000 the previous week. Despite this increase in claims, (bad news for the economy is usually good news for interest rates) the 10YR treasury yield has been rising. The moderate response to this week’s government auction is the main reason for rates rising. As investors continue to feel that the economy is improving, that will decrease the desire to purchase bonds which ultimately will force the yield to rise. Many experts are expecting that once the government reduces and eliminates their participation in bond auctions in the first 3 months of 2010, mortgage rates are expected to rise about 1%.

Retail sales came in higher than expected for November. As expected, the 10YR treasury is rising rapidly to this latest news. The 10YR started the week at 3.44 and the announcement of the latest retail sales figures pushed the yield up to 3.54 immediately after the retail announcement.

Economic news week scheduled for next week:

· Tuesday December 15th – Producer Price Index

· Wednesday December 16th – Consumer Price Index

· Wednesday December 16th – FOMC Announcement

· Wednesday December 16^th – Housing Starts

· Thursday December 17^th – Jobless Claims

Market Update For 11/20/2009

2009-11-20T16:32:00.001-08:00

Market Update for Friday 11/13/2009

2009-11-13T14:25:00.000-08:00

First Time Home Buyer Tax Credit Extended! Your Questions Answered...

2009-11-06T11:14:00.000-08:00

Here are some of the most frequently asked questions on the changes to the Homebuyer Tax Credit

Question: Existing homeowner credit: Must the new house cost more than the old house?
Answer: No. Thus, for example, individuals who move from a high cost area to a lower cost area who meet all eligibility requirements will qualify for the $6500 credit.

Question: I am an existing homeowner. On October 25, 2009, I signed a contract to purchase a new home. I have lived in my current home for more than 5 consecutive years and am within the new income limits. I will go to settlement on November 20. If President Obama has signed the bill by the time I go to settlement, will I qualify for the new $6500 tax credit?
Answer: Yes. The existing homeowner credit goes into effect for purchases after the date of enactment (when the bill is signed). There is no reference to the date of contract for the new credit. The provision looks solely to the date of purchase, which is generally the date of settlement.

Question: I am a firsttime homebuyer but was not within the prior income limits at the time I entered into my contract to purchase on October 30, 2009. I will be covered, however, by the new income limits. If the new rules have been signed into law by the time I go to settlement, will I be eligible for a credit?
Answer: Yes. The new income limitations go into effect as soon as the President has signed the bill. The income limit and other eligibility rules will look to your status as of the date of purchase, which is the settlement date. So if the new rules have been signed when you go to settlement,
you should be eligible for the credit (or a portion of the credit if you're within the phaseout
range).

Question: I am an eligible existing homeowner. I have a fair amount of equity in my home. I have found a home with a nonnegotiable price of $825,000. Will I be able to use any of the $6500 tax credit?
Answer: No. The $800,000 cap on the cost of the purchased home is firm at $800,000. Any amount above $800,000 makes the home ineligible for any portion of the credit. The $800,000 is an absolute ceiling.

Question: I owned my home for 10 years, but sold it two years ago year and have been renting since. If I purchase a home, will I be eligible for the $6500 tax credit if I meet all the other eligibility tests?
Answer: Yes. Because you lived in the home for more than 5 consecutive years of the previous 8, you will qualify for the $6500 credit. For example, Say John and his wife bought a home in 2000 and lived there until 2008 when he got a divorce. Whether John has been renting or bought in
the interim, he WOULD INDEED be eligible for the credit because he owned a home and
occupied it as his principal residence for 5 consecutive years out of the last 8 years. The
keyword here is "consecutive." As long as he lived in that house for 5 years straight what he
did since 3 years doesn't impact eligibility.

Question: I am an eligible firsttime homebuyer. I entered into a contract to purchase on November 1, 2009. Do I have to go to closing before December 1? How does the extension date affect me?
Answer: You do not have to close before December 1. Once the legislation has been signed, it will be as if the Nov 30 date had never existed. Therefore, so long as the contract settles before April 30 (or July 1, worst case), the purchaser will be eligible for the credit

Tax Credit on the Verge of Being Extended

2009-10-29T07:34:00.000-07:00

UPDATE......A Senate committee reached a compromise to extend the credit, and also tacked on a $6,500 tax credit for other primary-home purchasers and raised the qualifying income limits to $125,000 for single taxpayers and $225,000 for joint taxpayers. Under the Senate panel compromise, buyers must have sales agreements in hand by April 30, but they will have until June 30 to go to settlement, the sources said. The measure still faces votes in the full Senate and the House.

Weekend Update October 23, 2009

2009-10-23T14:42:00.000-07:00

The housing data is beginning to show signs of weakness once again. If you recall, it was widely reported within the real estate and mortgage industry that sales and activity dropped significantly in August. For the first time, we are now beginning to see this drop reflected in the economic data being reported.

It was announced this week that housing starts came in far less than analyst's expectations. Housing starts are not only sluggish, the numbers are trailing behind last year at the same time by 28.2%. Although this report may seem very bleak, there is some positive news. Housing starts for single family residences rose 3.9% which is a sign of new housing beginning to recovery.

Existing home sales jumped to the highest level since July of 2007 bolstered by first time home buyers. It is reported by NAR that they estimate that first time buyers represent about 45% of all purchases transactions being reported. On the down side to the report, house prices are continuing to slide and are currently averaging 8.3% below the same time last year.

It was reported by the Mortgage Bankers Association that mortgage applications for last week dropped 13.7% from the prior week. Rising interest rates and the looming end of the tax credit seem to be weighing on borrowers decision to purchase real estate.

The IRS reported this week that they are currently investigating an estimated 70,000 potential fraud cases of tax filers making false claims of tax credit eligibility. The IRS is expecting the claims to increase and it appears to be a daunting task to scour through all of the claimants to determine which are legitimate.

Economic News on tap for next week is:

Tuesday October 27th - Case Shiller Housing Market Index
Tuesday October 27th - Consumer Confidence
Wednesday October 28th - New Home Sales
Thursday October 29th - Jobless Claims
Friday October 30th - Consumer Sentiment

As your mortgage and real estate 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 x313 or by e-mail at: leif@granitefundinggrp.com

Weekend Update October 16, 2009

2009-10-16T14:14:00.000-07:00

The uncertainty in the economy continues to have an impact on stocks and bonds. The stock market rally up to 10,000 has seemed to hit a little bit of a wall today. The economic indicators being reported this past week are once again creating an uneasy feeling amongst investors and bond traders.

Overall corporate profits have been coming in higher than expected for many of the major companies issuing reports. However, today Bank of America and General Electric reported revenue below market expectations. These less than stellar reports have once again reignited concern about where we are in regard to exiting from the recession.

Although the Consumer Price Index, Industrial Production and Jobless Claims all reported better than expected results this week, the improvements were modest at best. Oil prices have been rising rapidly and once again the fear of high energy costs for the winter in the cold weather states is becoming news worthy. The rising oil and commodity prices have been one of the drivers of the recent stock market rally.

Despite government and lender initiatives to stem the tide of foreclosures, it was announced that 937,840 foreclosure filings occurred in the 3rd quarter of this year which is the highest amount ever on record. The 3rd quarter saw a 5%increase in filings from the previous quarter which is raising concerns regarding how long the housing crisis may actually linger. Some analysts are estimating that housing prices will not really begin to recover until 2012 or 2013..

Although the tide of foreclosures is not easing, many people have been asking “if so many houses have been foreclosed on, why aren’t they on the market?” - The answer is simple!

Banks are releasing their inventory of REO properties very slowly back into the market. The reason is that if the banks place all of the properties up for sale at once, home prices will drop further due to a glut of homes hitting the market all at once. The banks are doing everything they can to stabilize the values of their portfolios of real estate. Slowly releasing homes for sale is the only real mechanism they have available to them to try and keep prices where they are.

There has been a lot more reporting on Congress’s efforts to extend, and even modify the Home Buyer Tax Credit program. There appears to be arguments on both sides of the congressional aisle for extending the program as well as ending it. Some government officials believe that extending the credit will assist in the housing recovery while others are saying that the tax credit is only delaying the inevitable collapse in real estate values.

I am sure that in the next 30 days or so, there will be a tremendous amount of political jostling regarding the tax credit and the what needs to be done. – Stay tuned as nobody really knows who will win.

Economic News on tap for next week is:

• Tuesday October 19th – Housing Market Index
• Wednesday October 20th – Housing Starts
• Wednesday October 20th – Producer Price Index
• Thursday October 21st – Jobless Claims
• Friday October 23rd – Existing Home Sales
• Friday October 23rd – Ben Bernake Speaks – (uh oh…)

As your mortgage and real estate 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 x313 or by e-mail at: leif@granitefundinggrp.com

Weekend Market Update - October 2nd, 2009

2009-10-02T14:14:00.001-07:00

Rates are dropping and the stock market has reversed direction this week. Why?...

Some major market indicators are once again showing signs of economic weakness.

Unemployment has reached 9.8% which is the highest level since 1983.

Factory orders dropped unexpectedly

Deflation is once again becoming a concern in that consumers are still not spending money

On the good side of the economic aisle, it was reported that August pending home sales rose 6.4%. It is widely believed that the 1^st time buyer tax credit which is due to expire on December 1^st is fueling home buying activity.

Although the Obama administration has been mum on the possible intention of extending the tax credit, Congress is busy at work with a number of new proposals. Some of the proposals in Congress are for creating a tax credit that would not only apply to first time home buyers, but repeat buyers as well.

No one is sure what the outcome will be either from Congress or the Administration, however, the feeling is unanimous that stopping the tax credit will derail the housing recovery that is beginning to take shape.

Next month we are going to see the report for pending home sales and most likely the numbers are going to drop based upon the lack of activity that most mortgage lenders and real estate companies experienced in the month of August. If the August report shows a decline as expected, that will most probably be the catalyst for the government to act on extending the tax credit.

This week the Case-Shiller Home Price Index reported that housing prices in 20 major metropolitan cities for July increased 1.6%. The last few reports have begun to show stabilization in housing prices which can also be a stimulus for housing as homebuyers will not want to miss out on the bottom end of the market.

However…Talk of the impending increase in loan delinquencies is starting to take hold. More and more of the media is reporting about the 200 billion dollars in adjustable and option mortgages that are schedule to move upward in the next 12 months. These upward adjustments will cause many homeowners to default on their mortgage payments. The rate and payment increases threaten to create a whole new round of mortgage defaults and foreclosures if action is not taken by servicers of these lenders to prevent it.

Unfortunately, the government does not have any jurisdiction over the lenders servicing these loans. For this reason, all the government can do is request the lenders and servicers modify and assist homeowners, they cannot mandate it.

Next week is set to be a quiet week for economic news:

Wednesday October 7^th – 10 Year Treasury Auction

Thursday October 8th – Weekly Jobless Claims

As your mortgage and real estate 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 leif@granitefundinggrp.com or 916-517-1800 x 313.

Broker vs Banker vs Big Bank

2009-09-30T16:13:00.001-07:00

Broker vs Bank vs Direct Lender. What are the differences? Check out this brief video... http://bit.ly/eM5lh

The Recession is ..... Over?

2009-09-18T13:39:00.000-07:00

OK, so I don't want to be negative heading into the weekend. It's beautiful outside, my four year old has a game of Amoeba Soccer (kids all moving in one big blob) this weekend. in general, life is good! however, something needs to be said about some of the economic forecast being pushed to us by the folks up on the hill.

According to most of the market experts, the Recession is over! However, according to most consumers, they are saying “not a chance”. Despite the slow and steady climb of the stock market, many consumers are still struggling to pay their bills and have a significant fear of losing their job. Although the rate of people losing their jobs is declining, the economy is still not producing jobs. WE ARE STILL LOSING JOBS!

It was announced today that 5 states, Michigan, Nevada, Rhode Island, California and Oregon all have unemployment over 12%.

In addition, the government’s unemployment numbers reported on a national basis do not reflect the unemployed that have used up all of their unemployment benefits but still do not have a job. These people as far as being figured into the whole picture are not counted. They have fallen into the abyss of government reporting and do not show up on the radar at all.

New home building rose slightly in the month of August by 1.5% from the previous month. Additionally new building permits have risen 2.7% during the same period. – This is a good thing to see.

Without a question, there are signs of recovery however to make the statement that we are out of a recession, is simply ludicrous and an insult to the American people. There are still many clouds on the horizon, some of which can turn into a major storm and force right back into a recession.

There were 76,000 homes repossessed by lenders in the month of August. This is a drop in the numbers that we have been seeing however it is still a very significant amount. The system for loan modifications is overloaded and there is a whole new batch of potential loan defaults on the horizon.

It is estimated that by December 31st, there are 29 Billion (yes with a “B”) sub-prime mortgage loans that are due to adjust to their fully indexed rate. There is significant fear that there were will be a whole new crop of loan defaults in the coming months. In addition, between 2010 and 2011, there is another 200 Billion sub-prime loans scheduled to adjust to their fully indexed rate.

Unfortunately as we have seen, many of the sub-prime lenders have been very slow to complete loan modifications with their borrowers. Most of the sub-prime lenders loans do not fall under the Obama plan which requires lenders to meet certain modification targets. These sub-prime lenders are under no government pressure or obligation to work out modifications with their borrowers and based upon their reported result, we can see that they are not in any rush to assist homeowners.

The wildcard with these rate increases is that we do not know how many more people will go into default and foreclosure. We also do not know exactly how this new crop of loan defaults will impact an already flooded housing market? – It is an educated guess that it will force home prices lower.

Probably the most ironic event that happened this week, at least in my opinion, is that when Fed Chairman Bernake announced that the economy is in a recovery, the stock market and bond market paid absolutely no attention to his statements. The market had no reaction whatsoever.

Previously, the market hinged on every word Bernake would say. Today, people are questioning his real knowledge of the economy and ability to see what is really happening. As for now, we just need to sit back and enjoy the steady rise of the stock market and hope and pray that it can be sustained.
As your mortgage and real estate 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 x 313 or leif@granitefundinggrp.com.

Weekend Market Update

2009-09-11T15:00:00.001-07:00

The stock market is hitting new highs for 2009, and mortgage rates have dropped slightly, when is the last time we saw that happen?

Although the last couple of days the stock market has been relatively flat, overall there has been a rising trend in the DOW, S&P and NASDAQ. There is more and more talk about recovery, however, finally almost all the experts seem to agree that it is going to be slow ride back to financial health for businesses, consumers and the economy.

There are many economic reports that are indicating that we are at the cusp of a recovery. Although unemployment continues to increase, the pace in which people are losing their jobs has declined. The fear of job loss still has most consumers only spending money on what they would consider necessities.

Corporate profits are rising however the underlying fundamental that keeps the stock market from going crazy is that these companies are increasing profits due to cost cutting measures, not increased sales. Until the American people once again feel comfortable spending, corporations will not see significant increases in sales and profits.

The government had major bond auctions this week in which the demand for U.S. Treasuries was higher than expected. Many investors, although they believe that the recovery is slowly under way, are still demonstrating caution in their investment strategies.

Major economic news reports this week were:

· Initial jobless claims came in 10,000 less than expected

· Continuing jobless claims drop 119,000 (this number does not reflect people that have given up)

· The government bond auctions went better than anticipated.

It is nice to be able to write about a fairly stable market for this past week. Although there are still rough waters ahead, the markets are now beginning to function more normally. “Normal”, do we even know what that means? I was beginning to think that market “chaos” was the new “normal”.

Next week many potential market movers for both the stock and bond market will be released. The economic reports on tap for next week are:

· Tuesday September 15 – Producer Price Index

· Tuesday September 15 – Retail Sales

· Wednesday September 16th – Consumer Price Index

· Thursday September 17th – Housing Starts

· Thursday September 17^th – Jobless Claims

Mortgage Market Update - September 4th

2009-09-04T12:30:00.000-07:00

The stock market is set to finish the week off of its lows that were posted on Tuesday as the market is finishing the week with gains for about 90 points. The bond market rallied for most of the week in which mortgage rates dropped about .25%. However about half of the gains in the bond market rally were lost today based upon concerns about next week’s massive government treasury auction.

As the government continues to fund the various stimulus plans through the sale of debt, once again the question has arisen “is there enough demand in the market place to buy the all of the debt?” - Next week will give us the answer as to what investor’s appetite is for government securities. The government will be auctioning 75 billion dollars of all different term treasury bills ranging from 1 month to 30 year bonds.

The monthly jobless claims report had a mixed message today. Jobless claims for August dropped to 216,000 which was significantly below analyst estimates. This data demonstrates that the number of employers cutting payrolls is slowing. However, with these new figures, the national unemployment rate jumped from 9.4% to 9.6% which has many people concerned about how long it will take for a recovery to take hold.

Many experts are concerned that although there is increased optimism about the future, the underlying concern is that there are very few market indicators pointing towards a strong recovery. At least for this week, analysts believe that the recovery will begin to take hold in the 3^rd and 4^th quarter of 2009. However, many experts believe it is going to be very slow recovery.

This recession has changed the way Americans spend money. It is hard to think that anyone is going to immediately jump back to the spending habits they had when times were good. This recession has changed people’s priorities in a similar manner as to how we see people that lived through the recession of the 1930’s. Saving and debt reduction have become the priority and these habits are some of the biggest lessons from this recession just as in the 1930’s.

The only other significant economic news impacting the market was that pending homes sales continued to increase. For 5 straight months, we are seeing an increase in homes being placed into contract.

Major economic reports on tap for next week are:

· Monday and Tuesday September 8 and 9 – Government Auctions

· Thursday September 10th – Weekly Jobless Claims

· Friday September 11th – Consumer Sentiment

First Time Home Buyer Tax Credit - The Clock is TICKING!

2009-09-03T12:38:00.000-07:00

VERY IMPORTANT MESSAGE – In order for you to be eligible for the tax credit you must CLOSE on your home purchase by November 30th . Simply being in contract for a home does not make you eligible!

Even though the credit expires in 3 months, you must take into consideration the time it takes to locate a home and close on it. Right now from start to finish, the average home purchase is taking 60 to 90 days. That means if you don’t locate a home and start the buying process within the next 25 days, there is a very good chance that you will miss out on the credit. THE TIME TO ACT IS NOW!

Mortgage rates have dropped and house prices are still incredibly low. I encourage you to please give me a call so we can discuss the best course of action for you to take in order for you to benefit from:

The $8,000 tax credit

Very low mortgage rates

House prices that are 30 – 40% lower than 2 years ago.

If your goal is to purchase a great home at an affordable price with an affordable mortgage payment, then please give me a call right away.

I can always be reached directly at (916) 517-1800 x 313.

USDA Financing - What is it & Who Qualifies?

2009-08-26T12:42:00.000-07:00

http://bit.ly/GFGFaceBook

MDIA Rules - 45 is the New 30! (Escrow Days that Is!)

2009-08-21T08:20:00.000-07:00

MDIA and HVCC Create Additional Delays in Real Estate Transactions!

The face of real estate and mortgage lending is changing at a record pace. The government continues its relentless crackdown on the way we all do business and there are no signs that this trend of intervention is going to stop. As mortgage foreclosures and delinquencies show no signs of slowing or easing, it is predicted that government involvement in our business will continue to grow.

The latest proof of government intervention is the enactment of two separate pieces of legislation, the Home Valuation Code of Conduct (HVCC) and the Mortgage Disclosure Improvement Act. Separately each new piece of legislation slows down the process of purchasing a home, and or closing a refinance mortgage. However when you combine the two together, you can expect a transaction to take anywhere from ten days to two weeks longer to close.

Home Valuation Code of Conduct – On May 1, 2009 The Home Valuation Code of Conduct (HVCC) went into effect. This piece of legislation is designed to cease communication between appraisers and loan officers. The goal of this rule is to prevent the appraisers from being subject to any influence from loan officers when it comes to determining property values for appraisal purposes.

The main points of this new rule are 1) Contact is limited between loan originators and appraisers. 2) Loan origination companies have restrictions in the selection of appraisers therefore eliminating special relationships that may exist between them. 3) Borrowers must receive a copy of their appraisal no less than 3 days prior to closing of their loan. “Received” is considered 3 days after the appraisal has been sent to the borrowers.

It is estimated that the new HVCC rule adds approximately 5 to 7 days to the time it takes to close a transaction.

The Mortgage Disclosure Improvement Act (MDIA) – MDIA will have an even greater impact on delaying closing times for real estate transactions. MDIA creates additional timelines for borrower disclosure that must take place directly before closing. (Please see attached “MDIA Highlight Sheet on the next page)

The enactment of MDIA combined with HVCC is estimated to increase the time it takes to close purchase real estate transactions by a minimum of 10 to 14 days. Although the new rules themselves only increase the potential closing time up to 7 days, it is likely that as lenders scramble to make sure they are compliant, more delays in closing will occur.

As always it is my goal to make sure that you remain up to date on all critical industry changes that can impact your business. Please feel free to contact me with any questions you may have about any of these new rules as well as other happenings in the industry that you need to be aware of. I can always be reached by calling 916-517-1800 x 313, or by email at leif@granitefundinggrp.com

To make MDIA easier to understand, we have created this reference guide so you can see the most common situations that can impact the estimated closing date of your real estate transaction.

No closing can be scheduled for at least 7 business days from the initial disclosure of the loan upon submission to the lender.

If any re-disclosure is required due to an APR change of .125% or more, a minimum of 3 additional days is required prior to closing.

As I am sure you have experienced before, the final numbers for a typical real estate transaction are not usually available until the day of, or the day prior to closing. Because, not only does the lender have to prepare figures, the title company and the settlement companies have to do so as well which is what creates the delays in getting exact closing figures prior to closing.

MDIA now requires that these figures are prepared in advance and in the event that the final tally of these numbers impacts APR by .125% or more, re-disclosure is required which automatically kicks in the 3 day additional disclosure time frame.

As you will see from the partial list below, the odds on re-disclosure are very high given the multitude of items that can create the need for re-disclosure.

The borrower decides to pay additional points to buy down their loan rate since initial application and disclosure.

The borrower reduces their points to save money which results in a higher interest rate.

The borrower changes their down payment which changes the loan amount.

The per diem interest will change based upon the actual closing date versus the initial estimated closing date.

The borrower opts to "float" their rate at time of application and when the loan is locked in during the process, or directly prior to closing, the interest rate has changed.

The initial estimated charges which impact the APR increase by more than $100.00. Some of the main items that can impact APR are:

Lender Settlement Fees

Points

Per Diem Interest

Lender Fees

A new borrower is added to the loan after the initial application.

The loan program changes which can cause settlement fees as well as lender fees to change. (Example: application fees, processing or underwriting fees, etc…)

The above are the most common, but certainly not the only scenarios that can impact the loan APR resulting in new disclosure being required based upon MDIA.

Due to the ever increasing penalties that lenders are subject to due to the new regulations, it is highly likely that all lenders will create strict time frames for loan closings that will lean toward being extra safe versus working on the bare minimum time frames designated in the MDIA rules.

2009-08-20T17:02:00.000-07:00

Rent vs. Own - What are the Benefits?

Click here for a simple side by side comparison: http://http//bit.ly/274gq2

FAQ on the First Time Homebuyer Tax Credit

2009-08-18T08:25:00.000-07:00

First Time Home Buyer Tax Credit Questions Answered

It is critical that we understand the First Time Home Buyer Tax Credit. There are a few stipulations that are key as well as some deadlines that cannot be missed. While the buzz is that there is an extension being pushed for we should not assume it will pass. I have found the best FAQ available - read on:

From the California Association of Realtors Website (verbatim):

A. FIRST-TIME HOMEBUYER TAX CREDIT

Q 1. What, in a nutshell, is the $8,000 tax credit for first-time homebuyers under the new law?

A A first-time homebuyer as defined may receive a refundable tax credit up to $8,000 for purchasing a principal residence in the U.S. from January 1, 2009 to November 30, 2009, inclusive (see Questions 5 to 16). No repayment is required if the buyer owns and occupies the property for 36 months (see Question 17). This new law enhances the preexisting $7,500 tax credit enacted in 2008 which still applies for purchases from April 9, 2008 to December 31, 2008 (see Questions 18 and 19).

Q 2. How will the new $8,000 tax credit affect REALTORS® and their clients?

A The new $8,000 tax credit provides a monetary incentive for first-time homebuyers to purchase homes. First time homebuyers represent a significant segment of U.S. homebuyers. According to the U.S. Department of the Treasury, nearly half of the homebuyers in 2008 were first-time homebuyers. Hence, the new tax credit for first-time homebuyers, along with affordable home prices and historically low mortgage rates, should help spur the housing market.

Q 3. What is a tax credit?

A A tax credit is a dollar-for-dollar reduction of tax owed. In contrast to a tax credit, a tax deduction is merely a reduction of taxable income. Hence, a tax credit is generally more valuable to the taxpayer than a tax deduction. To illustrate, an $8,000 tax deduction for a taxpayer in a 25% tax bracket would only save the taxpayer $2,000 in taxes, whereas an $8,000 tax credit would save the taxpayer $8,000 in taxes.

Q 4. What is the significance of a “refundable” tax credit?

A That a tax credit is “refundable” means that any credit amount not used to reduce the tax owed may be added to the taxpayer’s tax refund check. In other words, a taxpayer may receive a tax credit even if he or she has no tax liability to offset that credit.

As an example, let’s say a taxpayer filing his tax returns on April 15 would have owed $2,000 to the IRS. If the taxpayer can now claim an $8,000 refundable tax credit, he can expect to receive a refund check from the IRS for $6,000.

Q 5. Who is eligible as a “first-time homebuyer” for the $8,000 tax credit?

A For purposes of the $8,000 tax credit, a “first-time homebuyer” is defined as any individual (or spouse) with no present ownership interest in a principal residence during the 3-year period ending on the date of the purchase of the principal residence to which the tax credit applies (26 U.S.C. § 36(c)(1)). For income restrictions, see Question 9.

As an example, an unmarried buyer who closes escrow on a purchase on June 30, 2009, would qualify as a “first-time homebuyer” as long as the buyer did not own a principal residence during the period from July 1, 2006 to June 30, 2009. Even if the taxpayer owned another principal residence in the past, he or she can still qualify as a “first-time homebuyer” as long as the taxpayer transferred off title to that other home over three years ago.

Q 6. What constitutes a “principal residence” under the $8,000 tax credit?

A A “principal residence” is generally the home the taxpayer lives in most of the time (26 U.S.C. § 121). It can be a house, condominium, townhome, manufactured home, or similar type of property located in the U.S. To qualify for the federal $8,000 tax credit, the property can be new construction or a resale. It cannot, however, be a vacation home or rental property.

Q 7. What constitutes a “purchase” to be eligible for the $8,000 tax credit?

A A “purchase” for purposes of this tax credit is defined as any acquisition, except as set forth in Question 15 (26 U.S.C. § 36(c)(3)). For a home that the taxpayer constructs, the purchase date is the date the taxpayer first occupies the home (26 U.S.C. § 36(c)(3)(B)).

Because a purchase is defined as an acquisition, it generally occurs when escrow closes and title to the property transfers to the buyer, and not when the underlying purchase contract is signed. To illustrate, a buyer who enters into a contract to purchase a property on November 13, 2009, but closes escrow on December 23, 2009, would not qualify for the $8,000 tax credit because, based on the law as it is currently written, acquisition does not occur before the law expires on November 30, 2009.

Q 8. How is the amount of the tax credit calculated?

A The maximum tax credit for an individual first-time homebuyer is 10 percent of the purchase price, not to exceed $8,000 (26 U.S.C. § 36(b)(1)(A)). For married individuals filing separate tax returns, the tax credit is capped at $4,000 (26 U.S.C. § 36(b)(1)(B)).

For a purchase price over $80,000, as is often the case in California, the first-time homebuyer tax credit will be capped off at $8,000. “Purchase price” under this law is defined as the adjusted basis of the principal residence on the date such residence is purchased (26 U.S.C. § 36(c)(4)).

Q 9. Is there an income restriction to be eligible for the $8,000 tax credit?

A Yes. The first-time homebuyer tax credit may be restricted by the taxpayer’s income. The tax credit starts to phase out for an individual taxpayer with a modified adjusted gross income from $75,001 to $95,000 (or $150,001 to $170,000 for joint filers). The tax credit is eliminated entirely if an individual’s modified adjusted gross income is over $95,000 (or $170,000 for joint filers). (26 U.S.C. § 36(b)(2

Q 10. What is a modified adjusted gross income?

A First, a modified adjusted gross income or MAGI is a taxpayer’s adjusted gross income (AGI) plus certain items, such as IRA deductions, student loan deductions, higher education costs, foreign income, and foreign housing deductions, among other things. Second, an adjusted gross income (AGI) is a taxpayer’s gross income minus certain deductions, which are often called “above the line” deductions. Most tax deductions are “above the line” deductions, except itemized deductions from Schedule A and personal exemptions.

Q 11. When must a first-time homebuyer purchase a property to qualify for the $8,000 tax credit?

A To be eligible for the $8,000 tax credit, a first-time homebuyer must purchase a principal residence from January 1, 2009 to November 30, 2009, inclusive (26 U.S.C. § 36(f) and (h)). The deadline is November 30, 2009, and not December 31, 2009. That the deadline is not at the end of the year may work as a trap for unwary buyers.

For the first-time homebuyer tax credit for acquisitions from April 9, 2008 to December 31, 2008, see Question 18.

Q 12. When can a taxpayer claim the $8,000 tax credit?

A According to an IRS announcement on February 25, 2009, first-time homebuyers who qualify for the $8,000 tax credit by purchasing a home before December 1, 2009 have a special option of claiming the tax credit on either their 2008 or 2009 tax returns (IR 2009 14).

Q 13. Does a married person qualify for the $8,000 tax credit if his or her spouse has owned a principal residence in the last three years?

A No. For a married taxpayer to qualify for the $8,000 tax credit, both spouses must be “first-time homebuyers” as defined in Question 5. In other words, neither spouse qualifies for the $8,000 tax credit unless both of them have not owned a principal residence over the last three years.

Q 14. Are two unmarried individuals both eligible for the first-time homebuyer tax credit if they buy a house together?

A Yes. Two or more unmarried individuals can buy a principal residence together, but the maximum tax credit for all of them is only $8,000. If all co-owners qualify as first-time homebuyers, they must allocate the $8,000 tax credit between themselves in any reasonable manner. According to the IRS, a reasonable method is any method that does not allocate all or a part of the credit to a co-owner who is not eligible to claim that part of the credit (see IRS Form 5405).

Q 15. Who cannot claim the first-time homebuyer tax credit?

A The first-time homebuyer tax credit is not allowed under any of the following circumstances:

• The property is acquired from a related person as defined (26 U.S.C. § 36(c)(3)(A)) (see Question 16);
• The property is acquired by gift or inheritance (26 U.S.C. § 36(c)(3)(A));
• The buyer is a nonresident alien (26 U.S.C. § 36(d)(1)); or
• The buyer disposes of the property (or the property ceases to be the principal residence of the buyer and, if married, the buyer’s spouse) before the end of such taxable year (26 U.S.C. § 36(d)(2)).

Q 16. What acquisitions from related persons do not qualify for the first-time homebuyer tax credit?

A A buyer is ineligible for the first-time homebuyer tax credit if the property is acquired from certain related persons, including, but not limited to, the following:

• The buyer’s spouse, ancestors (such as parents and grandparents), or lineal descendants (such as children or grandchildren);
• A corporation in which the buyer owns more than 50% of the outstanding stock; or
• A partnership in which the buyer owns more than 50% interest.

(26 U.S.C. § 36(c)(3)(A) (citing §§ 267 and 707).)

Q 17. Is a first-time homebuyer required to repay the $8,000 tax credit?

A No, the tax credit need not be repaid if the buyer owns and occupies the property for at least 36 months. If, however, the buyer disposes of the property or it ceases to be the buyer’s principal residence within 36 months of purchase, the buyer may be required to repay the tax credit (26 U.S.C. § 36(f)(4)). This includes situations where the buyer sells the home, converts it into a rental property or business, or the home is destroyed, condemned, or disposed of under threat of condemnation. In these situations, the tax credit must generally be repaid by including it as additional tax for the year the home ceases to be the buyer’s principal residence (26 U.S.C. § 36(f)(4)(D)).

Q 18. What is the $7,500 first-time homebuyer tax credit for a principal residence purchased in 2008?

A With certain exceptions, a first-time homebuyer may receive a 10% tax credit not to exceed $7,500 for purchasing a principal residence from April 9, 2008 to December 31, 2008 (26 U.S.C. § 36(a) and (b)). This tax credit was enacted as part of the federal Housing and Economic Recovery Act of 2008. As with the $8,000 tax credit discussed above, the $7,500 tax credit phases out if an individual’s modified adjusted gross income exceeds $75,000 (or $150,000 for joint filers) (26 U.S.C. § 36(b)(2)). The $7,500 tax credit phases out completely if an individual’s modified adjusted gross income exceeds $95,000 (or 170,000 for joint filers) (26 U.S.C. § 36(b)(2)).

The $7,500 tax credit must generally be repaid like an interest-free loan in equal annual installments over a 15-year period, or in full if the homebuyer sells the property for a gain (26 U.S.C. § 36(f)). For example, to repay a $7,500 tax credit for 2008, about $500 should be added to the buyer’s income tax liability every year for 15 years starting 2010.

Q 19. What are the major differences between the new $8,000 tax credit and the previous $7,500 tax credit?

A The $8,000 tax credit is $500 more and applicable to first-time homebuyers who purchase a principal residence from January 1, 2009 to November 30, 2009. The $8,000 tax credit need not be repaid if the buyer stays in the property for 36 months.

On the other hand, the $7,500 tax credit applies to first-time homebuyers who purchased a principal residence from April 9, 2008 to December 31, 2008. The $7,500 tax credit must generally be repaid over 15 years.

Q 20. How does a first-time homebuyer apply for the tax credit?

A A first-time buyer may claim the tax credit on their federal tax returns using IRS Form 5405, which is available at http://www.irs.gov/pub/irs-pdf/f5405.pdf.

2009-08-17T08:47:00.000-07:00

Is the market giving you as much of a headache as it is giving me?

Last week all the way through Monday of this week, the talk was that the recession is over and we are beginning a recovery. Throughout last week we saw an increase of the 10YR treasury from 3.66 to 3.89. THEN, this week all of the news reverses itself and the 10YR has plummeted from 3.80 on Monday down to 3.51 as of noon on Friday.

All this week the topics of conversation have gone from “recovery” to “the overblown and over-valued stock market”. The belief now is that stock prices have run up to fast and that the current economic climate does not warrant the increases in value.

This week there has been quite a bit of economic data that has supported that we are NOT on the road to recovery as quickly as the analysts have been touting on the airwaves and in print. With that said, it is important for you to understand the difference between, “the end of the recession” and “recovery”.

Simply put, the end of the recession is when the decline in productivity, profits and job losses decreases to the point that we are no longer alarmed as a society that the world is coming to an end. (Sorry for the sarcasm). However “recovery” means that sales, production, corporate profits and employment are all increasing. The news this week does not indicate in any way shape or form that this is happening.

To illustrate my point, this is what has been reported this week:

· Gas prices are near 2009 peak raising fears that consumers will further pull back on spending.
· The government’s bond auctions sold better than expected indicating that many investors don’t believe in the rapid stock market increase of late.
· Home prices have dropped 15.6% percent from a year ago forcing more borrowers to be underwater.
· Consumer confidence declined more than expected for the month of July.
· New unemployment claims increased instead of decreasing. Additionally, the government reported that the overall number of people on unemployment declined however the statistic does not account for people that are still unemployed but no longer eligible for benefits, or people that have just given up and left the workforce.
· Consumer Price Index saw the largest drop since January of 1950.

The FOMC meeting reported that they believe a recovery is imminent however it is going to be slow and gradual and that we are not out of the woods yet. There are sign of improvement however the economy remains very vulnerable to a relapse if we are not careful.

Next week is another very active week with economic reports:

· Tuesday August 18th – Housing Starts
· Tuesday August 18th – Producer Price Index
· Thursday August 20th – Jobless Claims
· Friday August 21st – Existing Home Sales

As your mortgage and real estate 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, or at leif@granitefundinggrp.com