This Week’s Market Commentary

by admin on September 27, 2011

This week brings us the release of six relevant economic reports for the bond market to digest in addition to two relevant Treasury auctions. Most of the reports are considered to be of moderate to fairly high importance to the markets, so they do have the potential to affect mortgage rates. We also have to consider stock market swings as they also can have a direct impact on bond trading and mortgage pricing, as we have seen over the past few weeks.

Generally speaking, stock market strength makes bonds less appealing to investors and leads to higher mortgage pricing. On the other hand, stock weakness often leads to safe-haven investing where investors move funds away from stocks and into bonds to escape the volatility. That translates into higher bond prices and lower mortgage rates.

The first release of the week is August’s New Home Sales late this morning. The Commerce Department is expected to say that sales of newly constructed homes slipped last month, indicating further housing sector weakness. This report will likely not have a significant impact on mortgage rates unless its readings differ greatly from forecasts. This is the week’s least important report in terms of potential impact on mortgage rates, partly because it covers only approximately 15% of all homes sales.

September’s Consumer Confidence Index (CCI) is next, coming late Tuesday morning. This Conference Board index will be posted at 10:00 AM ET and gives us a measurement of consumer willingness to spend. It is expected to show an increase in confidence from last month’s reading, indicating that consumers were more optimistic about their own financial situations than last month, therefore, more likely to make a large purchase in the near future. This is bad news for the bond market and mortgage rates because consumer spending fuels economic growth. Analysts are calling for a reading of approximately 46.7, up from August’s 44.5 reading. The smaller the reading, the better the news for the bond market and mortgage rates.

August’s Durable Goods Orders is the week’s most important data and will be posted early Wednesday morning. This report gives us an indication of manufacturing sector strength by tracking orders for big-ticket items at U.S. factories. Analysts are expecting to see little change July’s orders. A large drop in new orders could help boost bond prices and cause mortgage rates to drop Wednesday because it would point towards manufacturing sector weakness. However, a sizable increase would indicate a stronger than expected manufacturing sector and would likely help push mortgage rates higher.

The Treasury will sell 5-year Notes Wednesday and 7-year Notes Thursday, which will tell us if there is still an appetite for medium-term securities. If investor demand in these sales is strong, particularly from international buyers, the broader bond market should move higher, pushing mortgage rates lower. But a lackluster interest from investors could lead to bond selling and higher mortgage pricing. The results of the sales will be announced at 1:00 PM ET each day, so any reaction to the results will come during afternoon trading Wednesday and Thursday.

Thursday’s sole monthly or quarterly data is the final revision to the 2nd Quarter Gross Domestic Product (GDP). Since this data is aged now and the preliminary reading of the 3rd Quarter GDP will be released next month, I don’t see this revision having much of an impact on the financial markets or mortgage pricing. The GDP is important because it is the total sum of all goods and services produced within the U.S. and is considered the best measurement of economic activity. It is expected to show a 0.2% upward revision to the previous estimate of a 1.0% increase in the GDP. It will take a fairly large revision for this data to move mortgage rates Thursday.

Friday has two reports scheduled that may influence mortgage rates. The first is August’s Personal Income and Outlays early Friday morning. It gives us an indication of consumer ability to spend and current spending habits. This is relevant to the markets because consumer spending makes up two-thirds of the U.S. economy. Rising income generally indicates that consumers have more money to spend, making economic growth more of a possibility. This is negative news for the bond market and mortgage rates because it raises inflation and economic growth concerns, making long-term securities such as mortgage-related bonds less attractive to investors. It is expected to show no change in income and a 0.2% increase in spending. If we see weaker than expected readings, the bond market should react positively, leading to lower rates Friday.

The second report is the University of Michigan’s revised Index of Consumer Sentiment for September. The preliminary reading that was released earlier this month showed a 57.8 reading. Analysts are expecting to see a small downward revision, meaning consumer confidence was slightly weaker than previously thought. As with Tuesday’s CCI release, a lower than expected reading would be good news for bonds and should help improve mortgage rates.

Overall, it is likely going to be a fairly active week in the markets and mortgage rates again, but probably not by last week’s standards. The most important day will likely be Wednesday or Friday, but Tuesday’s data can also influence mortgage rates. This is one of those weeks that I recommend maintaining contact with your mortgage professional if still floating an interest rate.

Real Estate Agent Safety Tips: New Clients

by admin on September 13, 2011

While new clients are a great thing, it is important to trust your instincts and stay on the safe side when meeting someone for the first time. Real estate agents have been tricked and hurt because they walked into dangerous situations, thinking it was a simple showing of a property to a new client.

THE RISK: Meeting with people you don’t know can put your safety at risk. You don’t know whether this person could potentially be a criminal, stalker, thief, or worse.

SAFETY TIPS

• Meet at the office first. Get them on your territory before you visit any property with them so you can learn more about them and collect personal information about them for your files.

• Ask for identification. The public is used to having their identification checked, so don’t be reluctant to ask because you’re scared you’ll offend someone, Siciliano says. Tell clients it’s company policy that all clients’ driver’s licenses are photocopied. “This will significantly reduce your risk because the bad guys don’t want to give you their I.D. or get their picture taken,” Siciliano says.

• Have all clients fill out a customer identification form. You can find an example of this at REALTOR.org. Click on “Prospect Identification Form” under the Office Safety Forms heading. The form asks for car make and license number, contact information, and employer information, and also requests a photocopy of the driver’s license.

• Introduce them to a coworker. When you meet them at the office, introduce them to at least one other person in your office. Criminals won’t like that others have seen them for identification purposes, according to tip sheets provided by the Washington Real Estate Safety Council.

This Week’s Market Commentary

by admin on September 5, 2011

This week brings us the release of only two pieces of economic data, but neither of them is considered to be highly important. In addition to the economic releases, we also have two speaking engagements that may influence the markets and possibly mortgage pricing.

The first release of the week comes Wednesday afternoon. The Federal Reserve will release its Beige Book report at 2:00 PM ET Wednesday. This report details current economic conditions in the U.S. by Federal Reserve regions. It is believed to be a key source of data when the Fed meets for their FOMC meetings and is usually released approximately two weeks prior to each meeting. If it reveals any significant surprises, we may see movement in the markets and mortgage pricing as analysts adjust their theories on the Fed’s next move.

July’s Goods and Services Trade Balance data will be posted early Thursday morning, giving us the size of the U.S. trade deficit. It is expected to show a deficit of approximately $51.5 billion, which would be a decline from June’s $53.1 billion. However, I would consider this the least important of this week’s events, meaning it will likely have little impact on bond trading or mortgage rates unless it varies greatly from forecasts.

Thursday also has the two speeches that we need to watch. The first is at 1:00 PM ET when Fed Chairman Bernanke speaks to the Minnesota Economic Club in Minneapolis. Anytime Mr. Bernanke speaks, there is a potential for his words to cause havoc in the markets. However, I don’t believe he will say anything that we did not see or hear in last week’s FOMC minutes or his speech in Jackson Hole the previous week. Still, he is speaking, so we are listening.

The one that is more likely to have a noticeable impact on the markets and mortgage pricing comes from President Obama Thursday evening. He will speak to the nation via a joint session of Congress at 7:00 PM ET about the economy and the current employment situation. He is looking for support in his ideas to boost economic activity and payroll numbers. It will be interesting to see what ideas he has, but there is little doubt that if anything substantive is proposed, we will see an active morning in the markets Friday. Since he will be speaking after market hours Thursday, his words will influence the international markets before the U.S. markets. That should give us an idea of what to expect Friday morning.

I think many believe that the current situation in Washington makes it very difficult for all parties to quickly pass any type of bill that will really lower unemployment and help the economy gain momentum. Therefore, it is unlikely that Thursday’s speech will unveil a plan that will make everyone happy, but hopefully it will at least get the ball rolling. After the debt ceiling debacle, maybe Washington learned to play a little nicer with each other. We will see.

Overall, this week looks like it may be a little less active for mortgage rates than last week was. With the financial markets closed tomorrow, we only have four days of trading. There is no particular data that is important enough to label its day of release as the most important of the week, but Thursday’s speeches make that day the best candidate. The lack of important economic news may allow the stock markets to heavily influence bond trading and mortgage rates this week. As long as the stock markets do not stage a sizable rally or sell-off, the likelihood of seeing significant changes to mortgage rates before Thursday or Friday morning is fairly minimal.

Prepare for an Earthquake: Making a Disaster Kit

by admin on August 26, 2011

In California, earthquakes can and will happen here quite often. If a big one strikes on this earthquake-prone area, it is important to be prepared and keep you and your family safe.

Creating a disaster kit for your home is not difficult and could make all the difference one day, as well as providing peace of mind. The California Emergency Management Agency (CalEMA) emphasizes that the first 72 hours after a major disaster are critical.

“Electricity, gas, water, and telephones may not be working. In addition, public safety services such as police and fire departments will be busy handling serious crises. You should be prepared to be self-sufficient – able to live without running water, electricity and/or gas, and telephones – for at least three days following a major emergency.”

In order to prepare for three days, create a Disaster Kit with supplies for three days and place it in a central location. Most importantly, make sure you have one gallon of water per person, per day. This is the amount of water needed for survival.

Other supplies, including food, essential medications, and a freshly stocked first aid kit are essential in a proper disaster kit

Shopping Around for a Mortgage

by admin on August 24, 2011

It is important that while shopping for a mortgage to not solely focus on rates, but to shop for a great loan consultant. Anyone can quote a rate, but knowing you’re with a true professional that can deliver makes all the difference.

Also, many lenders will quote rates without taking into account where the property is, what your credit rating is, or other very important factors that may affect the actual rate you and your property qualify for.

Here’s the inside scoop on how to do it right.

Always make sure you are working with an experienced, professional lender. The largest financial transaction of your life is far too important to place into the hands of someone who is not capable of advising you properly and troubleshooting the issues that may arise along the way. But how can you tell?

Here are four simple questions your lender absolutely must be able to answer correctly. If they do not know the answers immediately leave and go to a lender that does.

1. What are mortgage interest rates based on?

The only correct answer is Mortgage Backed Securities or Mortgage Bonds, not the Fed or the 10-year Treasury Note. While the 10-year Treasury Note sometimes trends in the same direction as Mortgage Bonds, it is not unusual to see them move in completely opposite directions. Do not work with a lender who has their eyes on the wrong indicators.

2. What is the next Economic Report or event that could cause interest rate movement?
A professional lender will have this at their fingertips. To receive an up-to-date weekly calendar of weekly economic reports and events that may cause rates to fluctuate, contact us today.

3. When Bernanke and the Fed “change rates,” what does this mean… and what impact does this have on mortgage interest rates?
The answer may surprise you. When the Fed makes a move, they are changing a rate called the “Fed Funds Rate”. This is a very short-term rate that impacts credit cards, credit lines, auto loans and the like. Mortgage rates most often will actually move in the opposite direction as the Fed change, due to the dynamics within the financial markets.

4. What is happening in the market today and what do you see in the near future?
If a lender cannot explain how Mortgage Bonds and interest rates are moving at the present time, as well as what is coming up in the near future, you are talking with someone who is still reading last week’s newspaper, and probably not a professional with whom to entrust your home mortgage financing.

Be smart… Ask questions… Get answers!

More than likely, this is one of the largest and most important financial transactions you will ever make. You might do this only four or five times in your entire life but we do this every single day. It’s your home and your future. It’s our profession and our passion. We’re ready to work for your best interest.

This Week’s Market Commentary

by admin on August 16, 2011

This week brings us the release of six reports that may influence mortgage rates, but only two of them are considered to be highly important. With no relevant auctions or speeches on tap, I suspect we will see much less movement in mortgage rates this week compared to the past couple of weeks.

With the wild swings in the markets last week, a calmer week won’t be too difficult to accomplish. We will still likely see more movement in the major indexes and mortgage rates, but probably to a lesser degree.

There is no relevant data scheduled for release today,so look for the stock markets to drive bond trading and mortgage rates. Tuesday has two of the week’s six reports scheduled to be posted. The first is July’s Housing Starts data. This report gives us an indication of housing sector strength and future mortgage credit demand. However, it isn’t considered to be of high importance to the bond market or mortgage pricing and usually doesn’t cause much movement in mortgage rates unless it varies greatly from forecasts.

July’s Industrial Production is Tuesday’s second report with a release time of 9:15 AM ET. It gives us a measurement of manufacturing sector strength by tracking output at U.S. factories, mines and utilities. It is considered to be moderately important to the markets and can influence mortgage rates slightly if it is a dead day for other news or events. Current forecasts are calling for a 0.4% increase in production, indicating some strength in the manufacturing sector. Good news for the bond market and mortgage rates would be a decline in output, signaling sector weakness.

One of the week’s key inflation indexes is July’s Producer Price Index (PPI) that will be posted early Wednesday morning. It will give us an indication of inflation at the producer level of the economy. There are two readings in the report- the overall index and the core data reading. The core data is more important because it excludes more volatile food and energy prices that can change significantly from month to month. Current forecasts call for no change in the overall reading and a 0.2% increase in the core data. A larger increase in the core data could push mortgage rates higher Wednesday morning. If it reveals weaker than expected readings, we may see mortgage rates improve as a result.

The PPI will be followed by the even more important Consumer Price Index (CPI) early Thursday morning. The Consumer Price Index is one of the most important reports we see each month as it measures inflation at the consumer level of the economy. As with the PPI, there are also two readings in the report. Current forecasts call for a 0.2% increase in the overall index and a 0.2% rise in the core data reading. Declines in the readings, especially in the core data, should lead to lower mortgage rates. However, stronger than expected readings will likely cause an increase to mortgage pricing Thursday July’s Existing Home Sales report will be posted late Thursday morning. The National Association of Realtors will release this report, giving us a measurement of housing sector strength. It covers approximately 85% of home sales in the U.S., but usually does not have a major influence on bond trading and mortgage rates unless it varies greatly from analysts’ forecasts. It is expected to show an increase from June’s sales, meaning the housing sector strengthened last month. This would generally be bad news for the bond market and mortgage rates because a strengthening housing sector makes a broader economic recovery a little easier.

The third report of the day Thursday will come from the Conference Board, who will give us its Leading Economic Indicators (LEI) for July. This index attempts to measure economic activity over the next three to six months and is considered to be moderately important. A higher than expected reading is bad news for the bond market because it indicates that the economy may be strengthening more than thought. However, a weaker than expected reading means that the economy may not grow as much as predicted, making stocks less appealing to investors. This also eases inflation concerns in the bond market and could lead to slightly lower mortgage rates Thursday if the stock markets remain calm and the day’s other data does not show any surprises. It is expected to show an increase of 0.2 % in the index, indicating minor economic growth over the next couple of months. The CPI will be the focus of the morning, so it will take a sizable difference between forecasts and its actual reading for this report to influence mortgage rates.

Overall, look for Thursday to be the busiest day of the week with the CPI being released, but Wednesday’s PPI can also cause plenty of movement in the markets and mortgage rates. Friday looks to be the lightest day. The rest of the week will likely be influenced by stock prices in addition to the moderately important economic data, which can be quite volatile as we have seen over the past couple weeks. Therefore, keep an eye on the markets and maintain contact with your mortgage professional if you have not locked an interest rate yet.

This Week’s Market Commentary

by admin on August 1, 2011

There are four relevant reports scheduled for release this week that are likely to affect mortgage pricing, but it may end up being news out of Washington that may have the biggest impact on the markets and mortgage rates. As of this evening, there appears to be much more progress being made on the debt ceiling issue than we have seen yet. There actually have been rumors of an agreement in general between the House and Senate, which could mean a finished deal by Tuesday’s default deadline is possible.

The stock markets took a beating last week, even before the surprisingly weak GDP reading Friday morning. The potential for a default on our debt and the credit downgrade that would have followed was expected to have a huge negative impact on our economy. That led to stock selling most of the week, and support in the bond market, although we did see softness in bonds at times also. The big day for bonds came Friday after the 2nd Quarter GDP reading fell well short of forecasts and a significant downward revision to the 1st Quarter reading fueled a sizable rally in bonds that gained momentum during afternoon trading. The yield on the benchmark 10-year Treasury Note fell below 3.80%, causing many lenders to revise rates even lower late Friday.

Friday’s rally caught us off guard a bit. That is one way of describing it. Another is to use the word unjustified. We certainly got bond-friendly news out of the GDP report, but I think we saw more flight-to-safety buying than long-term buying due to weak economic conditions. That is evident by the afternoon surge in bonds Friday that pushed yields below recent levels. The flight-to-safety is a bonus for mortgage shoppers closing in the very near future, but extremely problematic for borrowers that need a couple weeks or months before they go to closing. Time and time again (duplicate that many more times), we see gains from several trading sessions of flight-to-safety buying unwind in a single day of trading. In other words, rates can give back last week’s gains, and some, much quicker than they were able to capture them as soon as stocks appear ready to head higher. A resolution to the debt ceiling issue is definitely a strong enough event to do this. If the threat of a credit downgrade and default dissolves, I would not be surprised to see a couple hundred point gain in the Dow over a single, maybe two, trading sessions. That would likely cause most of the flight-to-safety funds to shift away from bonds and back into stocks. And a noticeable upward move in mortgage rates.

In addition to the debt ceiling topic, we do have a couple of extremely important economic reports for the markets to digest. The first important release is the Institute for Supply Management’s (ISM) manufacturing index for July late tomorrow morning. This index measures manufacturer sentiment by surveying trade executives about business conditions during the month and is considered to be of fairly high importance to the markets. A reading above 50.0 means that more surveyed executives felt that business improved last month than those who said it had worsened.

Wednesday morning brings us the release of June’s Factory Orders data at 10:00 AM ET. It helps us measure manufacturing sector strength by tracking orders for both durable and non-durable goods during the month of June. It is similar to last week’s Durable Goods Orders report that tracks orders for big-ticket items only. Since a significant portion of the data was released last week, this report likely will not have as big of an impact on the markets as last week’s did. Analysts are expecting to see a decline in new orders of approximately 1.0%. A larger than expected drop would be considered good news for bonds and mortgage pricing.

There is no relevant monthly or quarterly economic news scheduled for release Thursday, but Friday is a different story. The most important piece of data this week and arguably each month is the monthly Employment report. This report gives us the U.S. unemployment rate, number of jobs added or lost during the month and the average hourly earnings reading for July. The ideal situation for the bond market is rising unemployment, a sizable loss of jobs and little change in earnings.

While the preliminary reading to the GDP is arguably the single most important report in general, it is posted quarterly rather than monthly like the Employment report. Friday’s report is expected to show that the unemployment rate slipped 0.1% to 9.1% last month while approximately 78,000 jobs were added to the economy. The unemployment rate probably will not be much of a factor unless it moved much more than the 0.1% that is expected. However, due to the importance of these readings, we will most likely see quite a bit of volatility in the markets and mortgage pricing Friday morning if they vary from forecasts.

Overall, I am expecting to see another extremely active week for mortgage rates. I think that the most important day is tomorrow due to the debt ceiling crisis coming to a head and the ISM index being posted. Friday is also a key day with the monthly Employment report being released. We may see some pressure in bonds mid to late week ahead of Friday’s employment numbers (assuming Washington puts the debt ceiling issue to bed), but we also need to watch the stock markets for significant moves that can influence bond trading. We are getting key economic data during a period of great uncertainty about our economy with a major national crisis climaxing at the same time. If still floating an interest rate, I would definitely maintain constant contact with my mortgage professional. And hold on tight, it’s going to be quite an interesting week!