Market Forecast for the week of 7/11

After taking a beating for most of last week, rates came back much stronger on Friday, and we are seeing continued gains today.  The big movers this week look to be the auctions taking place tomorrow, Wednesday and Thursday, and with the growing debt concerns in the EU we will hopefully see some good foreign demand.

As always, please call me with any questions!

Market Comment

Mortgage bond prices rebounded last week, which helped mortgage interest rates improve. Weaker than expected data resulted in positive rate movements. Factory orders and the employment report both failed to meet expectations. Factory orders rose 0.8% in contrast to the expected 1.0% increase. Unemployment came in at 9.2%, higher than the expected 9.1% mark. Payrolls increased 18k, considerably weaker than the expected 110k increase. Mortgage bonds ended the week better by about 5/8 of a discount point.

The Treasury will auction 3Y notes on Tuesday, 10Y notes on Wednesday, and 30Y bonds on Thursday. If foreign demand falters rates may come under pressure.

LOOKING AHEAD

Economic Indicator	Release Date & Time	Consensus Estimate	Analysis
Trade Data	Tuesday, July 12, 8:30 am, et	$43b deficit	Important. Affects the value of the dollar. A falling deficit may strengthen the dollar and lead to lower rates.
Fed Minutes	Wednesday, July 13, 2:00 pm, et	None	Important. Details of the last Fed meeting will be thoroughly analyzed.
Weekly Jobless Claims	Thursday, July 14, 8:30 am, et	420k	Important. An indication of employment. Higher claims may result in lower rates.
Retail Sales	Thursday, July 14, 8:30 am, et	Down 0.1%	Important. A measure of consumer demand. Weakness may lead to lower mortgage rates.
Producer Price Index	Thursday, July 14, 8:30 am, et	Up 0.2%, Core up 0.2%	Important. An indication of inflationary pressures at the producer level. Lower figures may lead to lower rates.
Consumer Price Index	Friday, July 15, 8:30 am, et	Up 0.2%, Core up 0.3%	Important. A measure of inflation at the consumer level. Lower than expected increases may lead to lower rates.
Industrial Production	Friday, July 15, 9:15 am, et	Up 0.2%	Important. A measure of manufacturing sector strength. A lower than expected increase may lead to lower rates.
Capacity Utilization	Friday, July 15, 9:15 am, et	76.8%	Important. A figure above 85% is viewed as inflationary. Weakness may lead to lower rates.
U of Michigan Consumer Sentiment	Friday, July 15, 10:00 am, et	71.8	Important. An indication of consumers’ willingness to spend. Weakness may lead to lower rates.

Jobs and the Economy

Our economy in the US is driven by consumer spending, which accounts for almost 70% of Gross Domestic Product (GDP). Three driving forces, high unemployment, high commodity costs, and a depressed housing market are currently hampering consumer spending and thus keeping the recession intact.

It is simple; a person without a job can’t spend money because they don’t have any. High food and energy costs, items that must be purchased to keep a household running, saps money that could be used for other "luxury" items like TV’s and cars. Lastly, many households relied on home equity to enhance lifestyles, pay for college, or make major improvements to the house.

The only way for the US to reduce our budget deficits and grow GDP is to get people back to work. We have a long way to go as the employment report showed last week. 

Mortgage Inquiries and Your Credit Score

The excellent Credit Sesame puts together a concise answer to one of the most frequent questions I get asked: "Will running my credit hurt my score?".  The short answer is "no", as outlined below:

1. Inquiries are all specifically coded by the credit bureaus to reflect the industry from which they came. That means if you apply for a mortgage, auto loan, credit card, personal loan, student loan, or any other type of loan the inquiry will likely clearly indicate the specific type of credit you’ve applied for. This is important because the type of inquiry plays a key role in how it’s evaluated.

2. Mortgage, auto and student loan inquiries are treated differently from all other inquiry types. If you don’t already know, these are the types of loan where you can shop around for the best interest rates and terms. As such, searching for any one of these loans can result on many lenders pulling your credit reports and scores. As such, your credit reports could get loaded up with multiple credit inquiries in a very short period of time because of your rate shopping activities.

3. FICO doesn’t want to penalize smart consumers for rate shopping, which is something we all should do when looking for funding for major purchases, like mortgages.  So, rather than assume each inquiry indicates a discreet and unique credit application, they built logic in their credit scoring model that identifies when you’re shopping for one loan rather than many loans.

Here’s how it works:

Mortgage related inquiries, which are very easy to identify because of #1 above, are ignored for the first 30 days they’re on your credit reports. So, if you apply for a mortgage loan on Jan 15^th it’ll take until Feb 15^th for that inquiry to become “visible” to the FICO score. That means you can apply for mortgage loans with 100 different lenders over a 30-day period and all 100 of those inquiries will be ignored.  That means they’ll have absolutely no impact on your FICO scores.

They go on to say that even if you go up to 45 days between the initial mortgage credit inquiry and the final inquiry, the bureaus will only count them as 1 inquiry instead of ignoring them altogether.  

If you have any other questions about credit or lending, please feel fee to contact me anytime!

June Market Trends for Portland Area

Here are this month's market trends for the Portland Area.  We are currently working on getting more areas represented, so expect those to come soon

Good Article about Improving Real Estate Market Conditions

Here is a link to some promising news from Lawrence Yun, Chief Economist at the National Association of Realtors.  In addition to anticipating a better year in real estate sales, he says "The problem isn't with interest rates, but with the continuation of unnecessarily tight credit standards that are keeping many creditworthy buyers from getting a loan despite extraordinarily low default rates over the past two years."

Yes, it stands to reason that the extraordinarily low default rates probably stem from the unnecessarily tight credit standards.  However, if we really want a true housing recovery we need to be more aggressive with eliminating the current inventory and shadow inventory of people waiting to sell when/if conditions approve.  It is good to see more people calling out for more aggressive financing options for those that should be able to qualify a loan, but can't under today's often time unrealistic lending guidelines.

Source: http://www.marketwire.com/press-release/housing-and-economic-forecasts-point-to-rising-activity-1513897.htm

Four signs that your Housing Market is Recovering

Reposted from mint.com

The bad news just keeps piling up for homeowners. Home values, according to the most recent data from Zillow.com, dropped by 3% in the first quarter of 2011: the largest decline since the first quarter of 2008.

In fact, thanks to the decline in values in the first quarter this year, Zillow has pushed back its expectations for housing recovery. Previously, the company expected home values to bottom out by the end of this year. Now, it envisions that to happen in 2012, at the earliest.

But the news isn’t all bad: depending on where you live, you may be able to dig out of the hole sooner. You just need to follow several critical indicators that will give you an idea of where your real estate market is headed. (And you know that when it comes to real estate, it all depends on three things: location, location, location.) Here are four factors to watch.

1. Foreclosures in your area

Many parts of the country are still in the middle of a deep foreclosure crisis that floods the market with low-priced housing. But once the number of new foreclosures in a particular area starts slowing down and those homes get absorbed by deal-seeking buyers, homeowners can reasonably expect that the value of their properties will at the very least stop going down. Since the value of any given home derives in part from the sale price of similar homes nearby, after all, fewer or no foreclosed homes will help the values of all other properties in the area. Track foreclosure listings and trends through RealtyTrac.com.

2. Indicator cities

With any cyclical trend, including housing prices, certain areas inevitably see the impact earlier than others. San Francisco and Miami were two of the first markets to see house prices crash back in 2006 and 2007. As a general rule, the areas hit the earliest also tend to be the first to recover. Miami and San Francisco are doing just that, experiencing an upturn in home prices during first quarter 2011, according to a report by Calculated Risk Finance & Economics. Some of the later-hit areas like Arizona, on the other hand, will likely continue to see stormy weather for a while.

3. New home sales

New homes have always been a problem for people trying to sell their current houses. After all, why would a home buyer pick a used home when they can buy a new one in a better-groomed neighborhood? Real estate, like most markets, responds to supply and demand. As a result of the real estate crisis, the supply of new homes to the market since 2008 has slowed down considerably — though, of course, in foreclosure-flooded neighborhoods that doesn’t matter much. As soon as you see those foreclosed and new properties in your area start selling out, hope is near that your own home’s value will start recovering.

4. Interest rates

Many people in an upside-down mortgage fear that when their home values do finally rise, the interest rates will go up right along with them. If that happens, a new loan or an interest rate reset (if they have an ARM) might actually increase their mortgage payments — leaving them in the same tough situation they’ve lived with for years. Robert Ward of the Economic Intelligence Unit does not anticipate a significant rise in US interest rates during 2011 or 2012. This means advantageous interest rates are likely to still be available when home values reach a point that qualifies for refinancing — or putting your home on the market.

The relief boat hasn’t sailed yet

Gradually rising home values is good news for some, but for those caught with untenable mortgage payments it may be a case of too little, too late. Fortunately for those in that position, foreclosures are expensive for banks and bad for the economy at large. Credit and mortgage counselor Tony Saenz reports that private banks are continuing, and are expected to continue, to negotiate with home buyers and settle with lower interest rates and partial forgiveness of the principal on home loan

Market Forecast 05/02-05/06

Not as much movement today as would be expected with the big OBL news, but at least rates held steady.  Here are the big market movers for this week.  Feel free to call me with any questions!

Market Comment

Mortgage bond prices rose slightly last week pushing mortgage interest rates lower.  The Fed meeting resulted in no interest rate adjustments at this time despite continued talk of inflation fears.  The data was mixed.  Durable goods orders came in higher than expected pushing rates higher Wednesday morning.  Weekly jobless claims came in at 429k, higher than the expected 390k and helped rates recover and rally Thursday.  Mortgage bonds ended the week better by about 1/2 of a discount point.

The employment report will be the most important release this week.  The weekly jobless claims and ADP data will also shed light on the state of employment.

LOOKING AHEAD

Economic Indicator	Release Date & Time	Consensus Estimate	Analysis
ISM Index	Monday, May 2, 10:00 am, et	61.1	Important.  A measure of manufacturer sentiment.  Weakness may lead to lower mortgage rates.
Factory Orders	Tuesday, May 3, 10:00 am, et	Up 0.1%	Important.  A measure of manufacturing sector strength.  Weakness may lead to lower rates.
ADP Employment	Wednesday, May 4, 8:30 am, et	125k	Important.  An indication of employment.  Weakness may bring lower rates.
Weekly Jobless Claims	Thursday, May 5, 8:30 am, et	420k	Important.  An indication of employment.   Higher claims may result in lower rates.
Preliminary Q1 Productivity	Thursday, May 5, 8:30 am, et	Up 2.2%	Important.  A measure of output per hour.  Improvement may lead to lower mortgage rates.
Employment	Friday, May 6, 8:30 am, et	8.7%, +205k	Very important.  An increase in unemployment or a large decrease in payrolls may bring lower rates.
Consumer Credit	Friday, May 6, 3:00 pm, et	$7.5b	Low importance.  A significantly large increase may lead to lower mortgage interest rates.

ADP Employment

The ADP employment report is a measure of employment derived from data of roughly 500,000 US businesses.  The survey focuses on the private sector of the economy.  In contrast, the Bureau of Labor Statistics releases the regular employment report which includes both private and government employment statistics.

The ADP employment report has gained more prominence lately in that it is delivered prior to the Friday employment report.  This gives analysts an improved forecast heading into the payrolls component of the employment report later in the week.

The Fed is usually focused on keeping inflation in check.  Tightening employment conditions can result in wage inflation.  The ADP report provides solid data on these conditions.  Despite this, the data still can diverge from the regular employment report.  The employment report is derived from a household survey and an establishment survey.  These surveys often differ from one another and from the ADP employment report in that they are based on different data sets.  There are no guarantees that the most important employment report the first Friday of each month will mirror the ADP report released 2 days prior.  With this in mind floating into the data is always very risky.  Now is a great time to take advantage of mortgage interest rates at these historically favorable levels to avoid future market volatility.

Market Foreca

Not as much movement today as would be expected with the big OBL news, but at least rates held steady.  Here are the big market movers for this week.  Feel free to call me with any questions!

Market Comment

Mortgage bond prices rose slightly last week pushing mortgage interest rates lower.  The Fed meeting resulted in no interest rate adjustments at this time despite continued talk of inflation fears.  The data was mixed.  Durable goods orders came in higher than expected pushing rates higher Wednesday morning.  Weekly jobless claims came in at 429k, higher than the expected 390k and helped rates recover and rally Thursday.  Mortgage bonds ended the week better by about 1/2 of a discount point.

The employment report will be the most important release this week.  The weekly jobless claims and ADP data will also shed light on the state of employment.

LOOKING AHEAD

Economic Indicator	Release Date & Time	Consensus Estimate	Analysis
ISM Index	Monday, May 2, 10:00 am, et	61.1	Important.  A measure of manufacturer sentiment.  Weakness may lead to lower mortgage rates.
Factory Orders	Tuesday, May 3, 10:00 am, et	Up 0.1%	Important.  A measure of manufacturing sector strength.  Weakness may lead to lower rates.
ADP Employment	Wednesday, May 4, 8:30 am, et	125k	Important.  An indication of employment.  Weakness may bring lower rates.
Weekly Jobless Claims	Thursday, May 5, 8:30 am, et	420k	Important.  An indication of employment.   Higher claims may result in lower rates.
Preliminary Q1 Productivity	Thursday, May 5, 8:30 am, et	Up 2.2%	Important.  A measure of output per hour.  Improvement may lead to lower mortgage rates.
Employment	Friday, May 6, 8:30 am, et	8.7%, +205k	Very important.  An increase in unemployment or a large decrease in payrolls may bring lower rates.
Consumer Credit	Friday, May 6, 3:00 pm, et	$7.5b	Low importance.  A significantly large increase may lead to lower mortgage interest rates.

ADP Employment

The ADP employment report is a measure of employment derived from data of roughly 500,000 US businesses.  The survey focuses on the private sector of the economy.  In contrast, the Bureau of Labor Statistics releases the regular employment report which includes both private and government employment statistics.

The ADP employment report has gained more prominence lately in that it is delivered prior to the Friday employment report.  This gives analysts an improved forecast heading into the payrolls component of the employment report later in the week.

The Fed is usually focused on keeping inflation in check.  Tightening employment conditions can result in wage inflation.  The ADP report provides solid data on these conditions.  Despite this, the data still can diverge from the regular employment report.  The employment report is derived from a household survey and an establishment survey.  These surveys often differ from one another and from the ADP employment report in that they are based on different data sets.  There are no guarantees that the most important employment report the first Friday of each month will mirror the ADP report released 2 days prior.  With this in mind floating into the data is always very risky.  Now is a great time to take advantage of mortgage interest rates at these historically favorable levels to avoid future market volatility.