My Blog

2012-03-02T13:15:00.000-08:00

The European Debt crisis has been noticeably absent from the news this week. No the crisis is not solved…however it does seem like the imminent reports of a Greek debt default have gone away. The stock market investors don’t know what to do with themselves. The market continues to trade within a very narrow range. Gas prices are hurting at the pump but not enough to really have consumers changing their spending habits.

The housing market continues to be mixed in the recently released reports. Depending on how you look at the data, you can either feel that housing is improving, or it is worsening. Let me explain…

Contract signings for existing home purchases increased 2.0 percent in January which points to strength ahead for homes that actually reach the stage of a final sale. We must recognize that not all transactions reach the point of closing due to factors such as borrower loan rejections and low appraisals. However, if contracts are increasing, home sales should actually increase as well in the coming months. The greatest strength in housing is in the South. Contracts have jumped 10.5% from a year ago and so far in 2012 they are up 8.0%.

As I mentioned before, the mixed feelings on housing comes from the preliminary Existing Home Sale data confirmed by today’s S&P Case-Shiller Report. This report shows a very steep ½% decline in home prices for their 20-city index. Additionally the report indicates that home prices are down from the same time last year by 4%. My one comment about the S&P Report is that we have seen other housing reports in the past contradict their findings. The best thing you can do is look at what is happening in your neighborhood, or even better yet, speak to your local real estate professional and see what they say about your local market.

Some home purchasers believe that home prices will keep falling making a home purchase even more affordable. In my opinion the only catch to this is that housing inventory is continuing to drop. Sooner or later the critical mass of homes available for sale will drop below the necessary supply and that will ultimately reverse the trend of declining home values. I personally think we are closer to this equilibrium point than most people believe.

Despite the S&P Case-Shiller report showing declining home values, there are areas in the country in which we are already seeing multiple offers on properties and home values rising. Believe it or not, these bidding wars are not on amazingly low priced homes, they are on homes that are priced properly to sell at market value. Here is a real estate truth. A home priced right from the beginning, will sell within 30 days or less. Further evidence that home prices may soon begin a broad based increase, the Mortgage Bankers Association reported that last week applications for home purchases increased 8.2 percent.

Housing Recommendation: In my area of the country, I am seeing many more homes going up for sale. What excites me most is that underneath the “for sale” signs, I am seeing the sign riders that say “In Contract”. This tells me that demand for housing is returning and that the spring buying and selling season may be starting a little bit earlier than normal. Mortgage rates are still amazingly low and home affordability is at a record high. If you are looking to purchase a home, waiting to see if home prices will drop another ½% or 1% before taking action in my opinion will most likely backfire. History has proven time and time again that unless we are in a recession, home prices always rise in the spring. We are not in a recession and we are on “Spring’s” doorstep. It’s time to ring the bell.

2012-02-24T12:13:00.001-08:00

The housing market continues to improve however it is not without is challenges. Existing Home Sales climbed another 4.3% above last month’s increase. The increase in sales is coming at a cost...the median price of homes declined 4.6% and the average home price dropped 4.0%.

Mortgage rates continue to remain historically low however they are starting to creep up and borrower rate sensitivity is evident in the latest figures released by the Mortgage Bankers Association. Mortgage rates have risen slightly in the last week and the MBA has reported that applications for purchase applications declined 2.9% and refinances dropped 4.8%.

The only negative in housing is Friday’s New Home Sales Report. New home sales in December fell 2.2 percent to a disappointingly soft annual rate of 307,000. While the number fell short of expectations, the dip did follow three consecutive gains-4.1 percent in September, 1.7 percent in October, and 2.3 percent in November. It is not surprising to some that the number declined, as mentioned before, the continued reduction in median and average home prices works better for the existing home sale market versus new construction.

The stock market has been steadily increasing at a modest pace. The upward movement in the market is contributed to mainly positive economic news. In recent months manufacturing, retail sales and many of measurements of economic performance have all been improving steadily.

In addition, the employment picture continues to improve with First Time Jobless Claims remaining the same from the prior week. The current level of claims bodes well for the next highly anticipated jobs report to be released in 2 weeks. Almost all experts predict a further decline in national unemployment.

As great as the improving trend of economic news has been lately, there still remains two potential economic storms that can create havoc for the economy. The first is the rising gas prices which we all have been experiencing at the pump. So far we all seem to be taking it in stride and no large economic impact is being felt. The big question is at what price point will consumers once again begin curtailing spending? There is no agreement amongst experts as to what this number is. My feeling is simply let’s hope we don’t hit it whatever that number is.

The second potential economic storm is the continued uncertainty in Europe. For the last two weeks Greece potential debt default has been the focal point of the markets. For now, the good news is that it appears that many of the pieces are in place to avoid a default.

Housing Recommendation: Home prices are at the lowest point in 10 years. When you combine low mortgage rates with low home prices, affordability is now at one of the highest points on record. With the continuing improvement in home sales along with the improving employment picture, this can lead to more purchases and ultimately a reduction in home inventory. A reduction in inventory will cause home prices to rise. If you are thinking about purchasing a home, you may want to start your search now. If you own a home and have yet to refinance, it is likely that rates will rise impacting your potential interest rate savings. ACT NOW!

2012-02-10T12:21:00.000-08:00

As promised, this week was absent of any real significant economic news and the lack of market movement reflected that. The main focus of investors has been the meetings in Greece working to avoid a default on the countries debt. It appears that they are making progress in coming up with a plan however it is a painfully slow process and undoubtedly once an agreement is reached, many will speak up in objection to the plan. Unfortunately we have seen this scenario play out over and over in many European nations for the past year.

The big headline announced on Thursday is the 26 billion dollar settlement reached between the nation’s 5 largest banks and 49 state attorney generals. The settlement is to compensate and assist homeowners that have been either foreclosed on improperly, or homeowners that owe significantly more than the value of their home.

The basics of the plan are as follows:

17 billion dollars will be used to reduce principle balances for underwater borrowers and assist homeowners that are behind on payments.
3 billion dollars will go towards refinancing mortgages for borrowers that are underwater but current on their payments. This will enable these borrowers to take advantage of the incredibly low mortgage rates.
5 billion dollars will go to state and federal governments to enable them to fund payments to homeowners that have lost their homes due to improper foreclosure proceedings.
The remaining 1 billion dollars will be paid directly by Bank of America to the Federal Housing Administration to settle charges that its subsidiary, Countrywide Financial, defrauded the housing agency.

The final piece of the settlement is that the banks will eliminate robo-signing all together and use proper legal procedures in completing foreclosures.

It has been a while since you have heard me be critical of anything, however I must break down this settlement for you so you can see what a joke this settlement really is. If you don’t like sarcasm, I suggest you stop reading now.

The settlement states that borrowers that are “severely underwater” will receive money for principal reduction. The irony is that the average principal reduction will be about $20,000. If a borrower is “severely underwater” isn’t their negative equity much greater than that? Do you really think $20,000 is going to incentivize a borrower that is $80,000 or more under water to start making payments?

Secondly, imagine you are a homeowner that was improperly foreclosed on, you lost your home, your life has been uprooted illegally, and now you receive a check for no more than $2,000. Let’s see, your house was illegally taken from you but you now have $2,000 in your hand…yep I know I would feel so much better. NOT! (I am not suggesting that homeowners that lost their homes illegally in foreclosure, would not have eventually lost them, however the law needs to be followed and the banks have not been punished for wrong doing.)

Lastly, 20 billion of the total settlement will be paid out gradually as claims are approved. None of the 5 banks are writing checks for anything more than 1 billion up front. All other money to be paid out will come as claims are settled and agreed upon. To put it in perspective, think for a moment how long does it take for these banks to approve short sales, or properly process a foreclosure, or complete a loan modification? (Average on all counts is 6 months or more) Do you really think they are going to process these claims quickly? Not a chance in this world they will do it. They will let this drag on as long as they can. That is how they do business.

I apologize for the rant today. Next week I will be better. I guess you know how I feel about the big banks huh?

As your mortgage professional, I am happy to assist you with any information you may need regarding mortgage or real estate information. I welcome the opportunity to serve you in any way I possibly can. Please feel free to reach me at (916) 517-1800.

2012-01-06T17:24:00.000-08:00

2012 is starting off with a nice bang in that the economic news highlight of the week is the better than expected unemployment report. The nation’s unemployment rate dropped from 8.7% down to 8.5%. In past recessions it was always housing that led the economy out of the recovery, however for the first time ever, it appears that employment is going to be the catalyst for a housing recovery.

We are still a long way away from a strong labor market and there are still many signs of weakness in the employment sector. The addition of 200,000 jobs in the month of December, which is a nice jump from the 100,000 added in November, is a positive sign pointing towards economic recovery. I believe that it is just a matter of time before the home buying public starts believing more in the recovery and be willing to step into the realm of homeownership.

I am not sure if I have said this before or not, but I believe Lawrence Yun, the chief economist for the National Association of Realtors (NAR), may also be working at ADP. You may remember that that just two weeks ago Mr. Yun, announced that NAR had been over counting existing home sales by over 14% for a period of 5 years. Well just yesterday ADP predicted new job creation for December would be 325,000. As you just read in the previous paragraph the real number is 200,000. It appears that ADP either has Mr. Yun working for them, or there is someone else in the workforce who gets paid regardless of how wrong they always are.

Outside of unemployment, the economic indicators continue to show gradual strengthening in many areas. Construction Spending rose another 1.2% last month when experts were expecting only a modest increase of .5%. Month after month we have been seeing the trend of increasing spending in construction. When you combine this with the recent positive report from homebuilders showing that they are becoming more confident in the future of homebuilding, it may be sooner than later that potential homebuyers jump on the home purchase bandwagon.

Mortgage applications for purchases in the previous two weeks declined a more than expected 9.2%. Although mortgage rates remain at lows, the main culprit for the purchase decline appears to be related more to holiday celebration than anything else. The next few weeks of reports will be more of a real indicator.

The Federal Open Market Committee announced that they intend to me more forthcoming and transparent with the information they release regarding their future plans for interest rates. Up until this new change going into effect at the next Fed meeting this month, the Fed always would use vague language in explaining where they expected interest rates to be. Moving forward the Fed is going to be much more specific in that they will actually be providing expected interest data for the coming months, versus using the traditionally vague language that has become their cornerstone in their reports.

Factory Orders once again continue their month after month rise. The most recent increase of 1.8% is an indication that orders for durable and non-durable goods have become stronger each and every month since the start of the 4th quarter of last year. Additionally, manufacturing as well continued to accelerate in December continuing the growth momentum from November

First Time Jobless Claims remain well below the 400,000 mark coming in at 372,000 last week. The claims numbers seems to coincide with the improving employment picture.

2011-12-30T11:06:00.000-08:00

Here we are, the final Friday of 2011. Today’s newsletter will be a combination of both the latest economic news along with some news highlights of the year.

This week the Case-Shiller Home Value Index showed that home prices are still declining. The index reported an average drop in home values in 20 major cities by 1.2% in the month of October. Additionally, the report indicates that values are down 3.4% from a year ago. The one saving grace in this report, and the reason why I don’t put too much emphasis on it, is that the numbers reflected are for October. We are now at the end of the year and in the last two months we have had mortgage rates hit all time lows as well as many real estate firms reporting an increase in activity recently. I believe that January and February reports will show significant improvement.

To reinforce my feelings about future reports, the National Association of Realtors released the November data on Pending Home Sales. The upward trend continues with a strong increase of 7.3% which follows October’s increase of 10.4%.

Consumer Confidence continues to improve month after month. The latest reading shows that consumers feel more optimistic about the economy today than they have in the last eight months. I guess nobody is watching the political ads and debates otherwise they wouldn’t be feeling this way. (Sorry, you know I couldn’t finish the year without at least one piece of sarcasm)

First Time Jobless Claims reversed their downward trend with an increase of 15,000. Although this increase was more than anticipated, I see no reason to worry about this one report. The trend for claims has been steadily declining. In fact, the 4 week moving average for new jobless claims along with on-going claims are both at the lowest point since the beginning of the recovery from the recession.

The DOW Jones Industrial Average is slated to finish the year with total gains of approximately 9%. The NASDAQ and S&P are both very close to where they began the year. They are down .47% and up .43% respectively.

Some Headlines from 2011 to reflect on…

Car sales increased 10.3% from 2010 showing a strong recovery for the automobile sector.
Congress has the lowest approval rating in the history of government. (As Ricky Bobby said in the movie Talladega Nights, “If you ain’t first… your last”)
Washington DC has the distinction and honor of being known as the region in which it takes the longest to complete a foreclosure with an all time high average of 1053 days. Florida is second with an average of 1027 days and New York a close third with 906 days.
The National Association of Realtors over estimated homes sales by more than 14% since 2007. Lawrence Yun, the chief economist for NAR was told 3 years ago that NAR was over counting sales yet he did nothing to fix it the reporting. Despite the huge error, he remains employed by NAR. (Just how long and how many times do you have to make the same mistake to get fired from NAR?)
The Euro Debt Crisis wreaked havoc on the global markets with the constant back and forth of reports that the problem was isolated. (Fortunately the crisis is solved...no its not…yes it is…no its not…)
Bank of America still tops the list of America’s Most Hated Bank.
Casey Anthony acquitted of murdering her daughter however is currently on probation for check fraud.
Osama Bin Laden is killed.

Last but certainly not least, the passing of Steve Jobs. A man who set out to change the world, and did exactly that. Thank you Steve for your vision, you passion and all you gave to us.

As your mortgage professional, I look forward to a great 2012 and I wish you a very happy healthy and safe new year.

2011-12-23T09:49:00.000-08:00

It is the Friday before Christmas and the markets are barely stirring. As is normal, market action is somewhat subdued as many investors have started their holiday vacations. Although you may still see movements in the stock market, it is based upon low trading volume. At this time of year, those that remain trading in the markets have the ability to impact significantly the indices, however any movements are less reflective of true investor sentiment.

For the most part, the economic data continues to show signs that the economy is improving at a slow but steady pace. For now, the euro debt crisis is not contained, however it seems to be one of those things that after so long… we just seem to ignore it.

First Time Jobless Claims hit the lowest level since April 2008. At 366,000, this represents a significant improvement in what we have seen over the last 9 months. Additionally, the trend of claims going down has been sustained now for a month. It seems as if finally the job picture is legitimately improving. By no means are we out of the woods yet however we are heading in the right direction.

The housing market continues to show slow signs of improvement with three key reports all pointing a more promising housing picture.

The Housing Market Index, which indicates builder sentiment on the future of new construction, came in at the highest reading since May of 2010.
Housing Starts jumped a healthy 9.3% in November. Overall the data is quite strong however the only part of the report which limits my enthusiasm is the breakdown of the type of building being done. Multi-family construction represented the majority of the new building, whereas single family home construction only increased 2.3%. The heavy weight on multi-family construction reinforces the sentiment that the demand for rental units is very strong throughout the U.S.
Lastly, Exiting Home Sales rose 4.2% continuing the growth pattern of home sales. Despite the fact that the National Association of Realtors restated home sales figures for the last five years down by average of 14%, the trend for housing is still improving. All the revision by NAR means is that we were worse off than we originally thought we were. The revision does not change the trend of improvement.

Durable Goods Orders continue to improve as well. The consistent increase in this measurement indicates that not only is economic growth happening, but the prospect for economic growth in the coming months remains positive as well.

Finally, Consumer Sentiment also continues to rise. Consumers are spending money and the feeling that 2012 will be better than 2011 has the consumer sentiment index growing steadily.

It is my wish to you reading this newsletter to enjoy whichever holiday you may celebrate. Enjoy your holiday weekend and I look forward to writing to you in my final newsletter for 2011 next Friday.

Great News for the Housing Market!

2011-12-16T14:32:00.000-08:00

Last week I wrote about Friday’s crazy stock market rally based upon the tentative agreement reached in Europe to avert the debt crisis. If you recall, I asked, let’s see how long the agreement will last? Although the agreement remains intact, after carefully digesting and analyzing the terms of the agreement, investors, economists, and almost anyone else you can think of, feel that the plan will not work and once again fear has gripped the markets.

The Federal Open Market Committee released their report on Tuesday, and with little surprise, they have reiterated their plan to keep interest rates exceptionally low through mid 2013. The FOMC reported that the economy continues to grow at a moderate pace however unemployment remains uncomfortably high and that a rebound in the employment sector will be a very slow process. (No surprises here)

On the positive side of the employment picture, First Time Jobless Claims dropped to 366,000 which is the lowest level since 2008. This second consecutive week of a drop in claims may point to an improvement trend.

Despite next week being one of the major housing data reporting periods of the month, The National Association of Realtors made sure we had some drama this week. NAR announced that they have been incorrectly reporting existing home sales data for the last 5 years. (Yes 5 years) NAR has issued an advisory that existing home sale data has been overstated since 2007. NAR is waiting until next week’s monthly report on the 21st to provide the latest housing data along with the 5 year correction figures. In NAR’s statement, they reported that the overstatement of figures was due to double counting of sales in certain regions. You may not remember, or even be aware of this, but NAR was accused of making this miscalculation about 4 years ago however they denied that there was an issue then.

It has been a while since I have written about foreclosure data so let me give you the latest. November foreclosure filings are down 3% from October and 14% below the same time a year ago. This could be good news for the housing market. The only downside to this latest report is that there is a 13% increase in the number of auctions scheduled. There is a slight possibility that if the auctions prices are lower than current home sale prices, values could be negatively impacted. On the positive side however, most experts don’t believe that this latest round of auctions will have a negative impact on home values.

In a final housing note, mortgage rates have tied the lowest level on record. Imagine a 30 year fixed rate below 4%. Despite these crazy low interest rates, fears and uncertainty about the economy and employment have many home buyers remaining on the sidelines. The good news is that despite the fact that the MBA reported that mortgage applications for purchases declined 4.2% last week, the real estate agents I have been speaking with have all said they have seen an increase in buyer traffic in their offices in recent weeks.

Finally, Retail Sales continued to show improvement in the month of November. The increase of .2% was less than experts forecasted however… improvement is still improvement right?. Does this mean that the kick off to the holiday season was not quite as strong as many had hoped? It is still too early to tell. The December final retail sales tally will be the true indicator on how the consumer opened their wallets for gift giving this holiday season.

Interest Rates are at an All Time Low! Heres My Mortgage Blog For The Week!

2011-12-09T16:00:00.000-08:00

After 3 consecutive weeks of mostly positive economic reports, this past week has fallen back slightly to more a position in the middle of the road. Although many positive reports were released this week, there has been some retraction in areas which had been going strong.

As mentioned in my last newsletter, this week has been light as far as economic reports. Any movement in the markets has been attributed to happenings in Europe. The craziness continues in the Eurozone continues…one day there seems like there is a plan to fix it, the next day there is a problem. Friday morning once again the headlines read that there is again hope for averting the debt crisis as a majority of the European leaders have agreed on a new deal. (Let’s see how long this agreement lasts?)

As I have mentioned so many times in the past, investors will always look for, or create movement in the markets, as that is the only way profits can be obtained. Unfortunately, when there is a lack of significant market impacting news, the media and investors will manufacture reasons to either be concerned or optimistic so the market changes.

Factory Orders for last month declined .4% which is the first reduction we have seen in months. I certainly would not look at this one month as any indicator in a reversal of the growth we have seen. It would be wonderful if growth took a straight line upwards however it never happens that way.

Mortgage rates continue to remain insanely low. In fact, once again refinance applications are increasing as they rose 15.3% last week. Refinance applications are not near their peak level however they are still going strong. What I find amazing is that there are still people that have not yet refinanced.

Mortgage applications for purchases have also been rising in recent weeks. Applications for the past week increased 8.3%. The recent data shows that housing, although still a major concern for the health of the recovery, is in fact improving slowly. Sales have been rising and housing inventory has been dropping which are both positive indicators for a housing recovery in the making. It will not happen overnight, but it will happen.

First Time Jobless Claims dropped 23,000 to 381,000. This is yet another positive trend for the economy. This recent report is the lowest claims have been in 9 months. The employment picture, like housing, is still in poor shape however the trends are heading in the right direction.

Next week we resume more significant economic reports which can have a great impact on the movement of the markets. Additionally, as mentioned earlier in this newsletter, as of right now Europe seems to have an agreement on dealing with the debt crisis, however we have heard this before only to see it burst into flames. The promising aspect today is that the plan and agreement appear to be more stable than any other one presented before.

2011-12-02T13:00:00.000-08:00

Make it week number three in a row that we have very strong economic data pointing to economic recovery. I know you are reading this and saying, “Huh…Recovery, What Recovery?” Here’s the deal, outside of modest employment improvement, there are signs everywhere that the economy is rebounding. Now you are probably asking yourself “how can we have improvement when un-employment is still so high?”…“The answer is simple my dear Watson”.

Technology is advancing so rapidly that the need to hire back people into the same positions simply does not exist. The great recession of the 2000’s taught major corporations and small business owners how to leverage technology. In addition, I am sure that you have also noticed that employees are being required to do more for the same money. Just as our parents that lived through the Great Depression learned how to save money, today those of us that lived through the Great Recession have learned how to maximize resources and technology.

As far as proof that the economy is improving for real, let’s take a look at the data that has been coming out for the last 3 weeks.

Housing data has been improving in that we have seen increases in Existing Home Sales, New Home Sales, Pending Home Sales, and New Construction.
Manufacturing has increased for the last 3 months and the demand for goods and services continues to rise.
Consumer Confidence is at its highest point all year.
Retail Sales have been increasing for 3 months straight.
Sales on Black Friday, as well as Cyber Monday set all time records. Not only did they break records, they blew through every analyst’s expectations.
Many major companies are showing increasing profits and sales.

As you can see there are many things improving in the economy. It may not feel like that to the average consumer but the data does not lie. Also remember the media focuses on reporting the negative, so no matter how much things are improving, negative headlines will always dominate the broadcasts which keeps us feeling that things are not getting better.

If you own a home, or are thinking about purchasing a home, right now I can’t tell you what is happening with home values because this week we have two reports on home values that contradict each other. The S&P Case-Shiller Home Value Index reported that home prices dipped another .6% in September for 20 major metropolitan areas. On the flip side, the Federal Housing Finance Agency reported that home values increased .9% during that same period. (In poker terms, I will call this a “push”)

National Unemployment for the month of November dropped a much larger than expected .4%, down to 8.6%. Although this is great news, the numbers don’t reflect the real picture. There are two reasons why unemployment dropped, the first being that the economy added 120,000 jobs in the month of November. The second reason is that the overall size of the workforce decreased which makes the increase in jobs have a more dramatic impact on the percentage of change. Regardless, employment has improved and this news is a great shot in the arm for the psychology of the country.

Your Mortgage Consultant,

JJ Mack
916-517-1800

2011-11-14T16:21:00.000-08:00

The Europe Debt Crisis is a problem, no it’s not…yes it is…no it’s not...yes it is………….

Never in my life have I seen the craziness of the media changing their story literally every single day. How in the world is it possible that a financial crisis of the magnitude Europe can change on a daily basis?

One day the stock market rallies because the media says the Euro crisis seems to be under control. The next day it seems like Italy is sure to default on their debt and the stock market plummets almost 400 points. Then the next day there is once again hope and the stock market goes up 275 points. (I just don’t get it) On the U.S. front, there was little economic news this week that moved the markets so we relied on Europe to give us an ulcer.

Mortgage rates once again started to rise slightly. However, the recent rate drops drove more buyers to purchase and more homeowners to refinance. The MBA reported that purchase applications increased 4.8% last week while refinances jumped 12.1%.

First Time Jobless Claims dropped 10,000 from the prior week down to 390,000. This is cause for optimism as this is this is the lowest we have seen claims since April. In addition, continuing claims have also been trending downward over the last few weeks. Let’s keep our fingers crossed that this trend continues.

Despite the stock market losing almost 400 point in one day, it will finish the week up approximately 150 points. The improvement in the employment picture combined with, at least for the moment, the latest plan for saving the Euro, is giving cause for market optimism.

Friday is Veteran’s day and government offices are closed however the stock market is open. Trading volume is lighter than normal as many schools and banks are also closed and many investors seem to making it a long weekend.

In a final note, do you remember all the political wrangling that went on in regard to the debt ceiling?

In addition, do you remember that in order for the debt ceiling to be raised, Congress created this Super Committee that would have to come up with a debt plan by November 23^rd otherwise massive Federal cuts would automatically be triggered?

Well…all indications are that the Super Committee is most likely not going to come to an agreement. So what does this mean? IT MEANS ABSOLUTELY NOTHING!!!

The November 23^rd deadline is virtually meaningless because Congress has the power to extend the date. So in other words, this drop dead date was nothing more than a political agreement that posed no real dooms day scenario for the Fed. (Please understand that Congress would have to agree to extend the date however the odds on them not doing that are slim to none.) With an economy as fragile as ours, do you think either party is going to let these massive Federal cuts go into place creating the real risk of us falling back into a recession?

This week there are many economic reports that may have a significant impact on market movement:

Tuesday November 15^th – Producer Price Index and Retail Sales
Wednesday November 16^th - MBA Applications, Industrial Production, CPI and Housing Market Index
Thursday November 10^th - First Time Jobless Claims and Housing Starts

Your Mortgage Consultant,

JJ Mack

916-517-1800

Mortgage Market Update - 10/21/2011

2011-10-21T10:24:00.000-07:00

I consider myself a well educated individual. I read as much as I can about what is happening in the economy and the markets so I can provide as up to date information to my clients on significant market happenings. As intelligent as I think I am…I have to tell you that I cannot for the life of me understand how every day the markets go back and forth regarding what is happening in Europe and the Debt Crisis.

One day the market is not worried about it and the stock market rallies. The next day the business headlines are that “Euro Debt Worries Investors” and the market goes down. This back and forth that goes on almost every day is making me sea sick. I have even gone as far as to speak to people who are very active in the markets and even they don’t understand the whiplash that is going on. Maybe, it is more about creating headlines so the market has large jumps so investors can make profits. We all know that unless the market moves in one direction or the other, profits cannot be made in stock trading. Yeah, that’s it, I have just put the Harvard MBA’s to shame because little ol me figured out how the market works.

The housing market continues to remain in the doldrums and the recent rise in mortgage rates seems to be the primary cause. Mortgage applications for purchases declined 8.8% last week while refinances dropped a whopping 16.6%. The one and only culprit is the rise in interest rates. It is often debated whether an increase in interest rates will spur fence sitting homebuyers into action or not. Well…if last week’s numbers are any indication, we know that rising rates will only delay homebuyers from taking action.

Additionally, existing home sales on single family homes declined 3.6% nationally. It appears the combination of appraisal issues and buyers changing their mind due to employment concerns are the main concerns driving the decline.

There were two small bright spots in the housing reports this week related to new construction. The National Association of Home Builders in a recent survey indicated that they are more optimistic about the future of home building in the coming months then they have been in over a year and a half. The second positive report is that Housing Starts last month jumped 15% which is a positive sign.

In other news, First Time Jobless Claims continue to remain above 400,000. It is clear that employers are afraid to bring on employees and there seems to be many factors creating this fear. In some areas of business the new regulations tied to the Wall Street Reform Bill and Health Care Reform are making the cost of doing business more onerous on business owners. In other areas companies are simply afraid to take on more expenses without knowing whether demand is going to increase.

A positive note in the economic data is that inflation continues to remain under control at the core level. Outside of volatile food and energy prices, wholesale inflation rose .3% and retail inflation .2%. Both reports clearly indicate that inflation is not a major factor in impacting consumer behavior outside of food and energy prices. I am not dismissing that we all know food prices have been soaring, however it is when food, energy AND consumer prices all go up, that is what can easily derail the economy and a recovery.

As the saying goes, we just keep limping along towards recovery. One more bright spot to mention. The talk of a double dip recession has virtually disappeared from the media so that can assist in improving consumer sentiment.

Next week’s market moving reports are:

Tuesday October 25^th – S&P Case-Shiller Home Value Index and Consumer Confidence
Wednesday October 26^th – MBA Applications, Durable Goods Orders & New Home Sales
Thursday October 27^th – First Time Jobless Claims, GDP & Pending Home Sales

As your mortgage 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.

Thank You,

JJ Mack

Your Mortgage Consultant

Mortgage Market Update - 10/14/2011

2011-10-14T11:19:00.001-07:00

I know I have toned down the sarcasm as of late in my newsletters at the request of some of my faithful readers. Unfortunately I must dip into the sarcasm well once again based upon some recent happenings.

By now you must have heard about the “Occupy Wall Street Movement” that is spreading throughout the country and the world. It has been going on for 27 days now. The movement is citizen’s exercising their right to free speech so I support them making their presence felt. My only question is “What are they trying to accomplish”? (Every time one of the protesters is interviewed on radio or TV they don’t seem to have a clue as to what they are actually trying to accomplish other than blaming Wall Street for them being out of work and for the real estate market crashing.)

In fact, when you really pay attention to what is being said by protesters, it appears that there are many different factions within the movement. It seems like different people have their own agenda’s and that the movement does not have a unified goal. However, according to the founders of the protest they state they have already accomplished their goal which is making people aware of the inequality of wealth in this country. This is something new? (By the way a recent survey shows that 66% of the people disagree with the protesters.)

OK my sarcasm is done for now and I do apologize for reverting back to my old self.

In the markets and economic news we have both good and not so good reports this week. Unfortunately mortgage rates have been rising lately which will certainly put the brakes on the number of people refinancing their homes. The bigger question is will the rising rates spur home buying or slow it? Mortgage rates remain very low and home affordability remains at one of the highest points in history. What is needed is for the media to continuously relay and reinforce the message to the public that now is a great time to purchase a home.

The Federal Open Market Committee released the minutes of their last meeting and it appears that the divide on what they should do to help the sputtering economy remains. Based upon the minutes it is clear that there still seems to be no agreement on whether another round of economic stimulus should be launched.

On the positive side is that Europe slowly but surely seems to be getting things in place to avoid the collapse of the financial system which is related to the debt crisis that we hear so much about. The governments in Europe have been working diligently on containing the crisis and have been working out solutions to avoid debt defaults.

Employment continues to remain a challenge to the recovery in that last week the national unemployment rate remained at 9.1%. Additionally, First Time Jobless Claims once again were reported over 400,000 which reverse’s the declining trend we had been seeing. Last week claims were also above 400,000 but it was the first time in many weeks so many experts though it may have just been a momentary rise rather than a trend.

The highlight of this week’s economic reports is the better than expected Retail Sales announcement. Last month sales increased 1.1% which was the second consecutive month of better than expected results. This is proof that consumers are continuing to increase spending and that the trend is improving little by little each month.

Next week important statistics will be released on housing and inflation.

Monday October 17^th – Industrial Production
Tuesday October 18^th – Producer Price Index
Wednesday October 19^th – MBA Applications, Consumer Price Index & Housing Starts
Thursday October 20^th – First Time Jobless Claims and Existing Home Sales

JJ Mack

Sales Manager/Mortgage Consultant

Housing is the driver to economic recovery!!!

2011-09-16T08:24:00.000-07:00

We have all the heard the expression "you must seize opportunity when it presents itself". Well...that is exactly what I am going to do right now. There is finally some good news about housing and I am going to write about it.

I am excited to announce that for the first time in many, many months, we experienced an increase in mortgage applications for both purchases and refinances. The MBA reported that purchase applications increased by 7% while refinance apps went up 6%. Mortgage rates remain incredibly low and most likely the absence of stock market insanity helped to move homebuyers in to making a decision to purchase.

In addition, reports from real estate and mortgage professionals all over the country are coming in showing that activity in real estate has dramatically increased. Many people that I personally spoke with from coast to coast have indicated a significant jump in homebuyer activity. ("Now that's what I am talkin about")

Next week is what I like to call real estate report week. Get ready for a barrage of real estate data regarding new construction, house values, existing home sales and mortgage applications. As much as you know that sometimes I can be a cynic, regardless of what the reports say next week I am going to remain optimistic about housing because as far as I'm concerned, next week's housing reports will be old news.

Next week's housing data will be for the month of August. Being a mortgage professional I can tell you that I would be shocked if these reports come in at all positive. The August real estate market was very slow in most parts of the country and I don't expect the reports to reflect anything much different than that. However, that was then and this is now... and now is looking better than it has in a very long time.

I have always said that the economists need to consult with real estate and mortgage professionals in the street to know what is really happening in the market. They always talk to the bean counters that sit behind a desk all day looking at a computer screen. I consider myself and expert in real estate and I can say for certain that there has been a jump in real estate activity this month and that is going to be reflected in next month's reports. (It feels soooo good to be writing positive news about housing and I am not going to let any other news ruin my mood)

Other reports about the economy remained mixed. Inflation on the wholesale level has eased significantly. Despite the fact that consumer prices on the retail level show inflationary pressure, it is likely that the wholesale price decrease this month will translate into reduced retail inflation next month.

Unfortunately First Time Jobless Claims seem to be on the rise again. Not only did we see that last week's numbers were revised upward by 3000 claims, this week claims jumped another 11,000 to 428,000 which is the highest we have seen in quite some time. Lately I have been hearing on the news that some large companies have started laying off people and that more layoffs may be on the way. Bank of American announced they will be cutting jobs by 30,000 over the next couple of years.

I have said it before and I will say it again, housing is a driver for the economic recovery. Let's keep our fingers crossed that increased activity is real, as I believe it is.

These "claims" really dont mean a thing to investors..

2011-08-26T08:52:00.000-07:00

Call me "slow", call me "dumb", call me whatever...but I just figured out that the stock market has nothing to do with reality when it comes to the true direction of the economy. The stock market used to be a real indicator of economic direction, or let me say that the market used to react to the true direction of the economy. However, today, the stock market is nothing more than the world's largest gambling casino playing with the money we place in mutual funds and retirement accounts.

This week the stock market had its ups and downs, but the reason for the movements is what is not only surprising, but shocking. It is for this reason I finally learned that logic does not prevail in any way in the stock market today.

Despite the fact that we had a week of poor economic reports on housing, jobless claims, and other areas (I will provide you the details of these reports in a moment) it is clear that these reports just do not matter. When you read the next paragraph, you too will realize the stupidity of the markets and how it is nothing more than a game.

Investors this week primarily focused on the fact that they believed on Friday at 10:00AM when Ben Bernake speaks, he would give an indication that a 3^rdround of economic stimulus may be coming. Please understand that he has not indicated in any way that there will be a stimulus announcement. It is all speculation on the part of market investors.

Well... the stock market posted a nice rally on Wednesday in hopes of his stimulus announcement. On Thursday the stock market dropped because the European Debt Crisis was back in focus. (I didn't know that it ever should have stopped being in focus) Then on Friday, Bernake announces, essentially that the economy is going nowhere fast. In addition, he made it clear that the government has minimal resources to assist in the recovery. So what do you think the stock market did? It tanked over 200 within minutes of the announcement. (Am I the only sane person that realizes that all the market movement on Wednesday and Friday was based upon nothing but, well... nothing)

To further illustrate my point, I heard an interesting quote by an investor just yesterday. He said, "The market does not even verify the validity of any rumors. We trade on the rumors and then look to see if they are true later on, but by then we don't even care because we have moved on to other rumors".

Another day trader was quoted as saying "the current state and movements of the market can give a traditional investor a heart attack. However what is happening today in the market is a day trader's dream". The reality is that almost everyone seems to be day trading and that traditional long term investing principles do not exist.

The major economic reports that the market did not pay much mind to this week were that New Home Sales declined .7% last month. The MBA reported that applications for purchase mortgages declined 5.7%. Mortgage Rates rose ¼%, and First Time Jobless Claims continue to remain above 400,000.

By the way, if Bernake stated that the government is limited in what it can do to stimulate the economy, then do you really think President Obama's announcement after Labor Day will be of any substance?

Let us see what reports the market has on tap for us next week that investors will not give any attention

I'm telling it like it is!

2011-08-19T08:47:00.000-07:00

Here I was thinking that this week I get to write about something other than the stock market...then Thursday came. Monday - Wednesday the markets were stable and fairly quiet. All of a sudden on Thursday, once again people started talking about the global economic slowdown and reduced expectations for future growth. Once that started we all know what happened... the stock market tanked 420 points.

Someone please, please, please (I'm begging) tell me how the economic picture can change from day to day. I am desperate for someone to explain this to me. I look at the economic numbers and reports just like everyone else and I cannot for the life of me see how the expectations for economic growth change day to day.

Here is the deal, the economy is struggling, the European debt crisis is not going away anytime soon, and housing remains in the toilet. (Sorry I am just telling it like it is) Oh yeah, I almost forgot about unemployment...that stinks as well.

Just as I predicted last week, the prior report on first time jobless claims was increased from 395,000 to 399,000.(Do you remember I wrote last week about how the market celebrated 395,000 people losing their jobs?) Bloomberg.com even went as far last week to state that the employment picture was improving. Well this week claims are back up to 408,000. I guess things are getting worse again huh? When are these prognosticators going to stop making judgment on the direction of the economy or employment based on a single report? (Hey Mom, I used a big word "prognosticator"...you see all of your money you spent on my college education did not go to waste)

Housing reports this week were worse than expected. Well...actually the reports would have been dead on accurate if the people making market predictions had bothered to ask mortgage and real estate professionals what is happening in the real estate market versus asking the bean counters at the National Association of Realtors who sit behind a computer all day and are completely out of touch with what goes on day to day.

Housing Starts declined by 1.5% in July after an unexpected jump in June. Existing Home Sales dropped 3.5% in July and the supply of housing has increased up to 9.4 months. Median home prices continue to decline and are down 4.4% from the same time a year ago.

Open Message to the President: "Hey Mr. President, It's housing that drives everything else. I know you don't understand that because you are clueless on general business practices, however as President you have the power to surround yourself with people that actually DO understand business.

Anyway, I digressed (Look Mom, I used another big word) Inflation remains in check. Despite a larger than expected increase in wholesale prices, retail prices remain stable outside of the volatile fuel and energy costs that change radically month to month.

Lastly, I hope you are as excited as I am about the President announcing that he is going to announce a new job and economic stimulus plan in September. Why would he make an announcement about an announcement?

Why you should choose a DIRECT LENDER!

2011-08-17T15:50:00.000-07:00

A big question that many home buyers are facing today is which loan program they should go with, and who do they choose to be their Loan Officer. Big Bank? Broker? Or Direct Lender?

People often confuse the lender types, however it is important to understand the difference between the three types of lenders, so you know what to expect from them before, during and after the application process. The three types of Loan Officers we will be discussing are: A Big Bank, A Mortgage Broker, and A Direct Lender.

The first thing you think of when you’re looking at a home you love is making an offer!! But in today’s market, with the housing prices being so low, and interest rates where they are now, the only way to make a strong offer is to get pre-approved first! Choosing who you get pre-approved with for your Loan is important!

A Big Bank Loan Officer is usually an unlicensed representative of a lending institution, the bank, who works to sell and process mortgages and other loans originated by their employer. They usually are limited in what they can offer to only their own products, severely limiting your loan rate, cost, and product options. These Loan Officers represent the borrower to just their lending institution and will guide them through the selection, processing and closing of the mortgage loan. Loan officers can be paid a commission or salary for their services. They are NOT required by any state or federal law to have an individual license.

A Mortgage Broker is a personally licensed individual or firm that is the middle man between you and the actual lending institution, which can be a bank trust company, credit union, mortgage corporation, or finance company. They will originate your loan; collect your information, then submit your application to one or more lenders, and work with the chosen lender until the loan closes. They have no money of their own, and no underwriters. Mortgage brokers CAN NOT issue loan commitment letters. (Only the actual lender can --- although most brokers do anyway). Brokers can receive their fee from the borrower, or be paid from the “lender” if the loan closes.

A Direct Lender/ Mortgage Lender is a personally licensed individual or firm that originates, processes, underwrites, issues loan commitments, closes and funds their own loans with their own money. Most have in-house underwriters, and have direct access to loan products from all the big national players. If a loan product exists, they can usually offer it. Loan Officers with a direct lender will analyze your financial situation to determine which loan is the best fit for your financial needs. Direct Lenders typically bundle and sell your loan after closing to giant Fannie Mae or Freddie Mac servicing companies. Most are also able to broker loans if needed, giving you, the client, best of both worlds.

Because Home Buyers have so many choices for their lending needs, here at Granite Funding Group, your #1 Direct Lender, it is important for our clients to realize that we are here to provide nothing but superior service. From the time we discuss your application information, to the day we get to congratulate you on your new home! We want our clients to know that choosing us for your Mortgage needs is something we cherish. We are grateful to work with our clients, passionate about our expertise, and determined to meet your needs!

Why RENT, when you can OWN and save money!!

2011-08-16T10:19:00.001-07:00

According to real estate web site Trulia, buying was cheaper than renting in 74% of the country's 50 largest cities in July. In just 12% of the cities, including New York, Seattle and San Francisco, renting was cheaper. In the remaining 14% of cities, renting was less expensive but close to the cost of buying.--- CNN MONEY

What a wonderful time to take advantage of this opportunity!

Please read this great article from CNN Money about the great news on owning your own home and SAVING money!!

http://money.cnn.com/2011/08/16/real_estate/buy_rent/index.htm?iid=HP_LN

Believe it or not there are a few bright spots to the carnage taking place on Wall Street!!

2011-08-05T08:42:00.001-07:00

Is there anything for me to even discuss other than what is happening in the stock market? Well...I'm going to try.

It is rare when you can look at an event in the marketplace and know that no one, and I mean no one predicted it. I consider myself well versed on market happenings as I daily review as many economic reports and news stories as I can so I may keep everyone updated on market happenings.

Not one article predicted the meltdown we are seeing in the stock market. You haven't even seen a single person on a financial TV show say they knew this was coming. Everyone figured that once the debt ceiling was raised, business and consumers would go about their business and the economy would keep chugging along.

The debt ceiling accord was supposed to provide for a stock market rally, mortgage rates were supposed to rise and confidence in the U.S. Government was to be restored. Not one of these predictions came true. In fact, the exact opposite has occurred. Mortgage rates have dropped just about ½% in one week; the stock market is down 856 point through Thursday's closing bell and down over 1300 points in 2 weeks.

On Wednesday ADP released their estimate of unemployment stating that 157,000 jobs were created in July. Normally the market would have reacted positively to this news however ADP has been notorious for being far off on their estimates so the market no longer pays attention to them.

Anyway, as you must have already heard by now, the national unemployment rate dropped from 9.2% - 9.1% with the economy adding 117,000 jobs which exceeded most analyst's expectations. The better than expected report is jump starting the stock market in a positive direction. Let us hope that the momentum carries through the day and we can head into the weekend on a positive note.

First Time Jobless claims remain above the 400,000 level. Last week there was some jubilation in that claims dropped below 400,000 to 398,000. However the numbers, as they always are, were revised back up to 401,000. This week claims were reported at 400,000 which in all likelihood will also be revised upward next week.

Believe it or not there are a few bright spots to the carnage taking place on Wall Street. Oil prices have plummeted to well below $90 a barrel which should make gasoline prices at the pumps drop within a week or two. Additionally housing may get a boost from all that is happening.

Mortgage rates are approaching all time lows once again. Where housing may benefit is that that economy is in a much better position today than it was the last time mortgage rates were at this level. A better economy, combined with low mortgage rates and stabile home values can be the catalyst to move some fence sitting homebuyers back into the housing market.

I am not expecting a buying frenzy, however I do expect to see an increase in home purchasing activity. Even before the additional rate drops of this week, we have already experienced an increase of 5.1% and 7.8% in mortgage purchase and refinance applications With even lower rates now, more activity should be coming.

Investors purchasing government bonds, Keeping our mortgage rates low!!

2011-07-29T08:10:00.000-07:00

Wow- last week I said that I had confidence in our government to resolve the debt issue. I hate to say this but I am beginning to have my doubts. If the Democrats and Republicans are as far apart in reaching an agreement as they say they are, then we have a potential economic train wreck on our hands. As I wrote last week, in the event that there is no agreement, the cost of borrowing will increase. In turn, if the ratings agencies lower the credit rating of the U.S. Government, then the interest rate increases could be significant.

Investors have been running scared out of the stock market purchasing government bonds in fear that the stock market will get hit hard if Congress does not resolve this issue in the next couple of days. You may ask, "Why would investors purchase government securities when there is fear of the government defaulting on debt and interest payments"?

The answer is that even though there is risk of default in the near future, ultimately once the debt ceiling is raised, the government will make good on all the payments and interest owed. This keeps investors comfortable in purchasing government debt. As long as investors continue to purchase government debt, mortgage rates will remain low.

The low rates for mortgages may play a part in the fact that this week we did receive both positive and only slightly negative reports on housing. The S&P Case-Shiller Home Value Index showed that home prices remained little changed in the last 30 days. Slightly negative news contained in the report is that overall home prices were lower by 3.6% from the same time last year. Although home prices remain lower, the gap is nothing significant.

The New Home Sales Report showed mixed information in that on one side it was reported that new home sales declined 1.0% from the prior month. The positive news in the report is that the median price of new homes being sold is actually higher by 7.2% from a year ago. That is a significant jump.

Mortgage applications were down slightly from the prior week. Purchase applications dropped 3.8% and refinances were down 5.5%. I personally am not paying much attention to this report in that the purchase drop can be something that fluctuates from week to week.

The most positive report on housing came from the Pending Home Sales Report. This report showed that sales increased 2.4% in June and that we also have 19.8% more homes in contract for purchase than the same time last year.

The true reading to determine if housing is moving in the right direction is the Existing Home Sales Report that will come out in July. This report will be a clear indictor of whether all these pending transactions actually make it to closing. Recently we have seen articles that have been talking about buyers backing out of contracts. July's report will tell us the real deal.

I believe that once the government takes care of the debt ceiling, housing reports will improve towards the latter part of the year. Let's remember, right now we are in the summer months and traditionally housing slows down.

The housing reports this week were filled with some nice surprises!!

2011-07-22T09:10:00.000-07:00

Outside of the fact that our government has yet to come to an agreement on raising the debt ceiling, I am excited to announce that this week we have had primarily positive news on almost all fronts.

The stock market as of this report is up over 300 points for the week. Many investors believe that although Congress has yet to ink a debt deal, confidence remains that our that our elected officials will come through at the 11^th hour.

Everyone knows that a failure to increase the debt ceiling would have terrible economic consequences. Even our government officials are smart enough to realize that creating another financial and economic crisis, because they didn't come to an agreement, would be political suicide. Can you imagine not one single government official getting re-elected? (Hmmm, something to think about)

The housing reports this week were filled with some nice surprises. The Housing Market Index showed increased optimism from builders that future demand will increase. Exactly why they feel this optimism is not quite clear however we will gladly accept a positive outlook on housing from anyone at this point.

Housing Starts jumped 14.6% in June exceeding most analyst predictions. Additionally, housing starts are 16.7% higher than a year ago. Although the biggest jump was in multifamily construction, single family starts rose a healthy 9.4%. Increases in housing took place throughout all regions. The Northeast saw the largest increase of 35.1%. The Midwest increased 25.3%, the South 10.6% and the West rose 5.4%.

Existing Home Sales dropped slightly by a minimal .8%. Despite the slight drop, the good news in this report is that the median home price rose 8.9% in June and prices are slightly higher than a year ago. Without question if we can sustain home prices rising, it will bring buyers into the market as they perceive that we have hit bottom and they better act fast. It is still early and we will need a few more positive reports in the coming months before we can determine if a rising trend actually exists.

Mortgage applications for purchases declined slightly. Many people believe that homebuyers are afraid to make a commitment to purchase a home at this time given the uncertainty of the government negotiations on the debt ceiling, and continued uncertainty regarding unemployment. Unfortunately lately there have been some headlines of layoffs appearing in the media of government employees and Cisco Systems that are scaring buyers.

First Time Jobless Claims rose 10,000 from the prior week. A rise in claims was not unexpected however the increase was more than anticipated. As I mentioned in the previous paragraph, the announced government layoffs along with Cisco's layoff announcement may increase first time claims in the coming weeks.

Oil prices have been rising slowly and are sitting at just under $100 a barrel. Since we have seen these oil prices before it is not believed that the rising prices are going to set back the economy however many more consumers are certainly keeping their summer travel plans closer to home to save money.

What are they thinking???

2011-07-15T08:53:00.000-07:00

Hey ALL!

It is no wonder the economy can't seem to get going. We have a government that has become almost completely dysfunctional. You may event want to add on top of that schizophrenic.
It is becoming clearer that business, and even consumers are becoming more and more concerned about the daily news and warnings regarding the government defaulting on their debt unless the debt ceiling is raised. To be honest, when it comes to this whole debt ceiling thing, I understand just enough to be dangerous, which I think puts me in the same category as most of the citizens of the U.S.

What I do know is that the government needs to borrow more money. The Republicans say they won't approve additional borrowing unless Congress commits to reducing expenses and not increasing taxes. The Democrats say they want to reduce expenses and increase taxes and that is the only way to balance a budget. Although I am all for not increasing taxes, I can't see how the government will balance a budget without doing both.
As far as the Fed, it is no wonder the country and economy is on pins and needles. The Fed is clearly confused about what they will or won't do to help the recovery and Bernake is the king "confuser".

On Tuesday the FOMC minutes that were released indicated that some people in the committee believe that another round of stimulus may be necessary to spur the economy, or at least get it moving again. On Wednesday Chairman Bernake stated that the Fed is prepared to offer more assistance if the economy continues to falter. On Thursday Chairman Bernake stated that the Fed is not willing to launch another stimulus program.

Well Ben which is it...are you going to help or not?

In other news, mortgage rates continue to remain very low and little changed from the prior week. The Mortgage Bankers Association reported that despite very low rates, mortgage applications still declined. Purchase applications dropped 2.6% while refinances declined 6.2%.

Foreclosures for the first half of 2011 showed a significant drop of 29% from the same time a year ago. That is the good news. The not so good news is that it appears the drop is more a reflection of the banks slowing the process of initiating and completing foreclosures than anything else. The banks are already overloaded with properties they own and they are clearly in no rush to add more houses to their real estate owned inventory. Either way, keeping people in their homes has to be a good thing for the economy both financially and psychologically.

Inflation continues to remain under control. Prices on the wholesale and retail level came in showing that inflation pressure is virtually non-existent and will most likely remain that way for some time.

Lastly, first time jobless claims edged lower to 405,000. This is the closest we have been to the 400,000 mark in eight weeks. The question that needs to be answered is...is the drop related to an improving employment picture, or is it because it was a holiday week? Next week's report should shed some light on what is really going on.
Economic Reports on tap for next week:

o Monday July 18th - Housing Market Index
o Tuesday July 19th - Housing Starts
o Wednesday July 20th -MBA Mortgage Applications and Existing Home Sales
o Thursday July 21st - First Time Jobless Claims

Mortgage Market Update - 7/1/2011

2011-07-01T15:50:00.001-07:00

It is such a great day for writing my newsletter. We are heading into the July 4th holiday weekend and, believe it or not, I did not have to search hard to find good economic news to write about this week.
Now that the Greece Debt Crisis seems to be resolved, Wall Street is loving it. This week alone, the Dow rose over 550 points as of Friday morning. In fact this week is responsible for almost all of the gains in the market for the entire first half of the year.
Housing continues to send mixed signals as to which direction it is heading, however there seems to be a light shining on it for the moment. Although growth in mortgage applications has been virtually stagnant for both purchase and refinances, that does not mean there is no good news in housing.
The Case-Shiller House Value Index reported the first increase in home prices in 8 months. Although the gain is minimal, breaking the trend of house price declines is a very important milestone. Sometimes it is something as little as this that can move fence sitting buyers to take action so as not to miss out on the bottom of the market.
None of us know if we have hit bottom, however the recent increase in mortgage rates combined with the improvement in home values can have a strong psychological impact on the housing market. Even the media is finally beginning to discuss housing in a positive way. (It is a miracle)
As I mentioned in last week's newsletter, the National Association of Realtors alluded to the fact that this week there would be good news about housing. Well NAR did not let us down as they reported that Pending Homes Sales for the month of May jumped 8.2%, which is more than any so called experts had expected.
The other major change to housing is that with all of the positive momentum in the stock market, many investors are taking their money out of government bonds and dumping them into the stock market. When investors sell bonds, that causes mortgage rates to rise. In the last week we have seen mortgage rates jump almost ¼% which can be a positive or negative for the housing market.
The positive is that fence sitting homebuyer may jump into the market if they perceive that mortgage rates are on the way up. The potential negative to housing is that qualifying for a mortgage is challenging enough. Higher rates reduce home affordability which can once again have a negative impact on values in the future.
I personally am not concerned about rates at this time in that one week does not set a pattern for any direction on housing or mortgage rates.
Next week the markets will turn their focus to employment. Between the ADP Employment Report and the National Unemployment numbers to be released on Friday, these reports will warrant the attention of most investors.
Outside of the major employment reports, there is not much activity on tap for next week. Additionally, this is a big vacation week so although the markets can move radically, it can easily be driven by just a few investors because of the expected low trading volume.
Economic Reports on tap for next week:
o Wednesday June 6th -MBA Mortgage Applications and ADP Employment Report
o Thursday July 7th - First Time Jobless Claims
o Friday July 8th - National Unemployment

Your Mortgage Consultant,

JJ Mack
916-517-1800

2011-06-17T15:42:00.000-07:00

Many months ago I had written that how given enough time, we get will get used to anything. Additionally, the more adversity we go through, the easier we are appeased. Well... this week my theory was proven true.
For nine straight weeks we have seen First Time Jobless Claims in the 420,000 to 430,000 range. This week they dropped to 414,000 which represents a 16,000 drop from the prior week. Any drop is good, however 414,000 claims is still very high. To prove my point about what we can get used to, Bloomberg.com reported that the drop of 16,000 is, and I quote, "very good news for the economy". (Since when is 414,000 people losing their job considered "very good news"?)
Housing is showing a little sign of life. Housing starts for new single family home construction rose 3.7% in May. This increase is a reversal from April's 3.3% decline. Most experts believe the increase is related to seasonal building as well as that some parts of the county have been facing abnormally harsh weather which delayed some builders from starting construction in the prior months. Housing permits also increased 8.7% in May which may lead to even more new construction later in the year. Future housing demand will determine if builders ultimately break ground on their permits.
Foreclosures have declined for the 8th straight month. In May they were down 33% from a year ago. Additionally the number of homes repossessed by banks declined 29% from a year ago as well.
Most of the other economic reports don't solidify that the economy is really going in one direction or the other. You may have been hearing in the media that there are many signs that the economy is once again slowing down. However, when you look into the actual reports, it appears that the economy is more like moving two steps forward and then two steps back.
Industrial production and manufacturing both showed modest increases in May. Although the increases did not meet economist expectations, overall manufacturing is fairly healthy. The main reason for the lower than expected production numbers is due to the March earthquake in Japan. Because of the damage to Japan's infrastructure, there continues to be a shortage of available automotive parts which has a direct impact on overall manufacturing.
Inflation on both the wholesale and retail levels remains very much in control. In recent months we were seeing that prices have been rising faster than we would have liked. Volatile fuel and energy prices contributed to the increases however we have seen recently that energy prices have declined somewhat. Oil prices have remained below $100 for more than a week, and now are actually below $95 which is the lowest we have seen in months. Can someone tell me why gas prices have not declined in line with oil price drops? (I really know the answer but I thought I would put it out there for comment)
In case you don't know the real answer...the reason gas prices are not dropping in line with oil prices is because the oil companies are padding profits. They will do this until Congress questions them about it. Unfortunately Congress has been unavailable to worry about gas prices because they have been focused on getting Anthony Weiner to resign, which finally happened. (Hallelujah, I will sleep better now - my apologies for the sarcasm)
Economic Reports on tap for next week:
o Tuesday June 21st - Existing Home Sales
o Wednesday June 22nd - FHFA House Price Index, FOMC Meeting Announcement & MBA Mortgage Apps.
o Thursday June 23rd - First Time Jobless Claims & New Home Sales
o Friday June 24th - Durable Goods Orders and National GDP

Your Mortgage Consultant,

JJ Mack
916-517-1800

Mortgage Market Update - 5/13/2011

2011-05-13T15:49:00.001-07:00

If you are in the market to purchase a home, there is no better time than the present. The National Association of Realtors reported that foreclosures are crushing the values of home prices. NAR announced that in the 1st quarter of 2011 home prices were down 4.6% from the same point a year ago. The national median home price is down 30% from the high of 2006 and home values are down 7% already this year. (For home buyers this is all great news. Home seller, not so much - sorry)
Mortgage rates are almost all the way back down to the historic lows which makes home buying very attractive. The average 30 year fixed rate is at 4.58% and low down payment loans are still available. The combination of low mortgage rates and reduced home prices make purchasing now, especially for first time buyers, very attractive.
Other areas of the economy continue to improve at a steady pace, once again showing that housing is not a critical component to a sustained economic recovery. Whereas in months and years past so called experts would say we can't have an economic recovery without a housing recovery, well...that doesn't seem to be quite true now does it?
Although the economy is improving, without housing, the recovery can only be moderate at best. However, I believe that as the economy improves in all of the other areas, it will eventually move over to housing.
Despite high gas prices putting a damper on some consumers, Retail Sales are still going strong. Retail Sales reported another monthly increase of .5% indicating that consumer spending is continuing at healthy pace.
Oil prices have dropped below $100 and seem to be returning to a more reasonable level. In fact, where high gas prices are having an impact is in the way consumers are traveling. For the second week in a row, a higher than expected gas surplus was reported which has been showing that the public is either traveling less, or simply using more mass transit. The good news is that the recent drop in oil prices has seemed to stop the march towards record gas prices which is where we were headed up until a week ago.
First Time Jobless Claims dropped from 474,000 to 434,000. The drop is a welcome relief from the prior 3 weeks which have showed first time jobless claims rising rapidly. Jobless claims remaining above 400,000 for the 3rd week in a row has many experts concerned that the pace of the recovery is slowing and that unemployment figures may worsen in the coming months.
The Producer Price Index continues to show that inflation on the wholesale level is increasing however it is remaining under control. The main driver of the .8% rise reported for April has been volatile food and energy prices. When you remove this from the equation, core wholesale inflation remained the same as the prior month at a modest .3%. The Consumer Price Index released this morning showed that prices on the retail level are rising at the fastest pace since October of 2008. The inflation rate of 3.2% is due in part to the rapidly rising gas prices. The core inflation rate was up to 1.3% however still far below the target rate of 2% set by the Fed.
Reports due out next week are:
• Monday May 16th - Housing Market Index
• Tuesday May 17th - Housing Starts and Industrial Production
• Wednesday May 18th - MBA Mortgage Applications and FOMC Minutes
• Thursday May 19th - First Time Jobless Claims and Existing Home Sales

Your Mortgage Consultant,

JJ Mack
916-517-1800

Mortgage Market Update - 5/6/2011

2011-05-06T15:06:00.001-07:00

"Houston, we MIGHT have an economic problem"!
James Lovell knew they had a big problem when there was an explosion on Apollo 13. The United States economy is not quite sure if we have a problem or not, hence the reason I changed Lovell's famous quote slightly.
Some economic indicators are pointing to the fact that the recovery is slowing. However un-employment is not one of them. This morning it was reported that job growth continues to recover nicely in that April the economy added 244,000 jobs. This piggybacks on the growth numbers we experienced of 68,000, 194,000 and 216,000 in January, February and March respectively.
Do not be alarmed that the national unemployment rate increased from 8.8% to 9%. This is related to the number of people filing unemployment claims. The most important number regarding unemployment is always the net number of jobs being added to the economy. As much as the economy added 244,000 jobs in the last month, we have been seeing a continuing trend of rising first time jobless claims which can ultimately derail economic growth if the trend continues.
Outside of the improving employment pciture, the economic data is showing signs of a slowing recovery. Corporate profit reports have been mixed throughout the last two weeks and many other reports are showing mixed signals. This week the ISM Manufacturing Index for April showed that manufacturing has slowed. Although back orders are still significant, new orders are beginning to slow down.
Oil prices have dropped from their recent high's however consumers have yet to see any drop at the pumps. Unfortunately it can often take weeks before gas prices follow the drop in oil prices. (Isn't it ironic that gas prices go up fast but they always drop much slower?)
Part of the economic slowdown is being attributed to the idea that consumers are finally beginning to change their spending habits because of higher gas prices. I do know that for the last two weeks I have written about the resolve of the American consumer and how they are still moving on with their lives despite rising prices at the pump. At this point it seems that consumers are starting to watch what they are spending and changing their travel habits to reduce the amount of gas they need. This is evidenced by the fact that this past week gasoline reserves increased by 2% which is one of the major reasons gas prices declined significantly this week.
Mortgage applications for the prior week remained flat despite the fact that mortgage rates have been steadily declining for the last couple of weeks. The real estate market continues to struggle and there is little expectation that the housing recovery will really take hold in the next few months. Housing prices in some areas have actually declined to lowest point since the recession began which lends credence to the idea that the housing market is in a double dip.
Reports due out next week are:
• Wednesday May 11th - MBA Mortgage Applications
• Thursday May 12th - First Time Jobless Claims, Producer Price Index and Retail Sales
• Friday May 13th - Consumer Price Index and Consumer Sentiment

Your Mortgage Consultant,

JJ Mack
916-517-1800

2011-04-29T11:18:00.001-07:00

William and Kate were married this morning. They kissed on the balcony for all to see, so now I, along with the estimated 2 billion people that watched can now resume normal life once again. Oops, no we can't...I forgot that the media is going to video their every move of their Honeymoon, and what they can't film, they will make up.
There are increasing indications that the economy is on the path to sustained recovery. It may not be at an earth shattering pace, but evidence certainly points toward an improving economy. Of course there will continue to be set backs every so often, but the recovery trend seems to have really taken hold.
New Home Sales are starting to show signs of life. The increase of 30,000 units over last month was more than expected. Although the pace of new home sales is still at historic lows, the trend of improvement seems to be starting. As promising as this report is, it is important not to put much weight on the new home sale report for the simple fact that until existing home inventory declines significantly, home buyers will continue to gravitate towards existing home purchases. Existing homes tend to be more affordable due the fact that short sales and foreclosures make up almost 40% of all sales.
Existing Home Sales, which is the key to reducing existing housing inventory, showed a nice 5.1% jump for the month of March. The National Association of Realtors attributes the jump to improved job creation and rising rents. More and more renters are starting to realize that for a few dollars more per month, they can own a home instead of paying someone else's mortgage by renting.
The Mortgage Bankers Association reported a 13.6% decline in purchase applications for the prior week. Although this decline may seem significant, it is important to remember that the recent increases in mortgage purchase applications was mainly driven by home buyers trying to apply for their loan prior to the increase in FHA Insurance Premiums which took effect on April 18th. Now that the premiums have taken effect, we should see mortgage applications numbers moderate.
Mortgage rates have been declining again as concerns about significant inflation have subsided. The FOMC reiterated that the concern about inflation has decreased somewhat in their recent meeting as the FOMC continues to use "extended period" in their language in regard to keeping rates low. In fact for the first time in many months, the entire committee was in agreement about their assessment that the economy will continue to grow at a moderate pace.
Once again the American public is showing its resolve in that consumer spending habits have not been changing as radically as expected due to rising gas prices. Like anything else, if you experience it enough, you get used to it and accept it. (By the way Exxon reported an 11 billion dollar first quarter profit but yet they said that they don't make much money on gasoline. Please wish me a happy birthday because obviously Exxon thinks I was born yesterday.)
Reports due out next week are:
• Monday May 2nd - ISM Manufacturing Index & Construction Spending
• Tuesday May 3rd - Factory Orders
• Wednesday May 4th - MBA Mortgage Applications & ADP Employment Report
• Thursday May 5thth - First Time Jobless Claims
• Friday May 6th - National Unemployment

Your Mortgage Consultant,

JJ Mack
916-517-1800

Mortgage Market Update - 4/22/2011

2011-04-22T09:19:00.001-07:00

Housing week came and went without much fanfare. As promised this was real estate reports week, and just like so many months past, the reports were very mixed.
The Housing Market Index, which measures the present and future anticipated health of new construction, showed that the state of new construction is moderate at best. Existing sales are slow and future sales appear to be slow as well. The bright spot in the report is buyer traffic has increased in recent weeks and that has builders hopeful about the future.
Housing Starts showed that although sales have not been where builders would like them to be, it is appears they believe things will improve. The increase in starts of 7.2% for the month of March was a drastic reversal of direction from February's decline of 18.5%. Overall the numbers remain at very low levels however any breath of optimism by builders will gladly be accepted.
The Mortgage Bankers Association reported that purchase applications jumped 10% in the week of April 15th and refinance applications increased 2.7%. The jump in purchase applications is believed to be related to both the recent drop in mortgage rates along with buyers rushing to apply for their home loan before the FHA Insurance Premiums take effect.
The National Association of Realtors reported that Existing Home Sales increased 3.7% from the prior month. Additional good news is that the average home price increased 2.2%. Home prices are still 5.9% lower than the same time last year however the gap in home prices between 2011 and 2010 seems to be closing. 35% of all purchases last month were "all cash sales". Additionally, 40% of all existing home sales were distressed properties.
First Time Jobless Claims are once again sitting back around the 400,000 per week. Last week there were 416,000 first time filers and this week it dropped 13,000 to 403,000. It seems that the gradual reduction of claims we had seen over the 1st quarter of 2011 has stopped. We are not experiencing significant increases in claims either which leads to a feeling that maybe the job market is stabilized.
The stock market has recovered nicely since last week as it has risen over 300 points for the week. The markets will be closed for Good Friday. As mentioned in last week's report, corporate profits were being released this week. The profit reports have been mixed.
Lastly, President Obama announced this morning that the overall health of the economy is improving however real estate continues to be a major drag on the economy. (I guess our President has not had to gas up his car recently to realize that skyrocketing gas prices are having a major impact on consumer spending habits)
Despite gas prices and housing, the economy continues to chug along growing little by little. Companies are hiring, raises are starting to come back into the picture, and overall company profits are improving. Even college graduates are starting to find jobs.
Reports due out next week are:
• Monday April 25th - New Home Sales
• Tuesday April 26th - Consumer Confidence
• Wednesday April 27th - MBA Mortgage Applications, Durable Goods Orders, FOMC Announcement
• Thursday April 28th - GDP, First Time Jobless Claims and Pending Home Sales

Your Mortgage Consultant,

JJ Mack
916-517-1800 x300

Mortgage Market Update - 4/8/2011

2011-04-08T18:06:00.001-07:00

I think I have decided that I am going to be an economic analyst or so called expert. The reason being is that they are like Weather Forecasters. Regardless of whether they are right or wrong, they are still going to get paid.
Does anyone really know which direction the economy is headed? Of course we can all look at headlines and see that economic indicators are improving. However despite this trend, this week we learned that the Fed can't even agree on the stability and growth of the economy.
The FOMC report released this week showed that in the last Fed meeting that the members were more divided in their sentiment about the economy than we have seen in a long time. Some of the members believe that sooner than later the Fed will have to start pulling back on the stimulus plan (commonly referred to as QE2) and begin raising interest rates.
Meanwhile other members believe that the economy still needs all the help it can get. Some committee members believe that stimulus will be needed well into 2012 and that any attempt to raise rates will hurt the fragile economy.
In the meantime the stock market has seemed to hit a wall. Last week I had mentioned that there are things happening all around the world that can impact the markets. Although in the U.S. we seem to be stabilizing (except the potential government shut down), unrest in North Africa, Thursday's 7.1 earthquake in Japan, and rising oil prices have many concerned that the recovery may come to a halt.
In recent weeks many economic reports have verified that the pace of the recovery is slowing. The good news is that there is still a recovery happening however slow it may be.
Mortgage rates have been rising and are up about .25% from a week ago. Purchase applications for mortgages increased 6.1% despite rising rates. The Mortgage Bankers Association believes that the main driving force for the increase is that FHA Insurance Premiums increased on April 1st and that mortgage companies were advising buyers to apply before the increase went into effect. Refinance applications dropped 6.2% which is a reflection of the rising mortgage rates and also evidence that the pool of borrowers that can still take advantage of refinances continues to get smaller and smaller.
Jobless claims continue to drop in small steps. Last week we saw that national unemployment dropped to .1% down to 8.8%. In addition, first time jobless claims are dropping little by little as well. The most promising indicator about employment is that on-going jobless claims have been steadily decreasing for many weeks now. Some believe that this is because employers are hiring people back into the work force. The "naysayers" will tell you that it is because people have given up trying to find work. I believe it is a combination of both but more so that employers are beginning to undue their hiring freezes and are once again increasing staffing.
Lastly, next week starts the corporate profit reporting season for the 1st quarter of 2011. That could play a major role in driving stocks up or down. Stay tuned...
Reports due out next week are:
• Wednesday April 13th - MBA Mortgage Applications, Retail Sales & 10 YR Note Auction
• Thursday April 14th - First Time Jobless Claims and Producer Price Index
• Friday April 15th - Consumer Price Index, Industrial Production and Consumer Sentiment

Your Mortgage Consultant,

JJ Mack
916-517-1800

Mortgage Market Update - 3/18/2011

2011-03-18T10:09:00.001-07:00

Before I even begin to write about the economy, let us not forget about the people who are suffering and struggling in Japan. My heartfelt wishes for their safety goes out from my heart daily.
The economy which has been on a roll for the last few months now once again seems to be in limbo as the focus on how Japan's nuclear emergency may take a toll on the world economies. Since Japan is not only the 3rd largest country in the world, they also produce many items for many countries. As you may know, production of these products whether it is automobiles, parts, electronics, or accessories has come to a virtual standstill.
Despite many areas of the economy that improve, housing continues to be that one area that just won't wake up. Housing Starts last month dropped 22.5% to the lowest point on record since 1959. Mortgage applications for housing purchases also dropped despite the fact that mortgage rates have dropped significantly over the last 2 weeks. Additionally there continues to be much speculation that home prices may continue to drop which will contribute to even more people waiting on the sidelines so they can secure an even better deal on purchasing a home.
A very misleading report was released stating that in many parts of the country the cost of owning a home could be less than what you pay in rent. The issue with the report is that when they compare mortgage payments to rent payments, they left out 2 critical items - the real estate taxes and homeowners insurance. (Since the report did not include taxes and insurance, does that mean I don't have to pay mine anymore?)
Inflation appears to be increasing rapidly when you read the headlines. However when you take out the volatile food and energy prices from the report, inflation on the wholesale and retail level seems to be increasing at very slow pace and remain very much under control.
The Fed announced this week that they intend on keeping interest rates low for, as they put it, "the extended future". Additionally the Fed went on to state that they see the speed of the recovery increasing slightly.
Overall when you look at all the reports as of late, with the exception of housing, we have seen a nice improvement in the markets. (Well up until this week anyway)
The stock market which had been rising rapidly gave back virtually all the gains this year in just a few trading days this week. Investors are very concerned about the potential impact the disaster in Japan can have on the world economies.
Lastly, my idiot report of the week goes to "Bloomberg.com". Bloomberg.com reported that First Time Jobless Claims came in at 385,000 this past week. The unnamed person who wrote the commentary indicated that this number shows a "continuing improvement" in the employment picture. (I'm sorry but 385,000 people losing their jobs and that being about the same number of people that lost their jobs about 2 months ago does indicate and improving trend).
Reports due out next week are: • Monday March 21st – Existing Home Sales• Tuesday March 22nd – Federal Housing Finance Agency House Price Index• Wednesday March 23rd - MBA Mortgage Applications and New home Sales• Thursday March 24th - First Time Jobless Claims• Friday March 25th – GDP and Consumer Sentiment

Have a good weekend!

JJ Mack
916-517-1800

Mortgage Market Update - 2/25/2011

2011-02-25T15:21:00.001-08:00

As promised, this week was loaded with plenty of headlines regarding the strength and weaknesses of the economy. As usual, the reports released showed that some parts of the economy are improving while others showed continued weakness in the recovery.
Unless you have been sleeping for a week, you know that the price of oil is the hottest topic you can find in the news. Due to the political unrest in Libya, oil prices have been rising and that has been translating into rapid increases in prices at the gas pump. Increasing gas prices run this risk of hurting the economic recovery if they get to a point that the price at the pump draws significant household money from other domestic spending.
Consumer Confidence (the measurement of consumers feeling about current economic conditions) and Consumer Sentiment (the measure of how consumers are spending money) are both at the highest point we have seen in 3 years.
GDP continues to show signs of economic growth although the country is not growing as fast as initially expected. None the less, there is positive growth and that will always be gladly accepted.
It appears that borrowers are finally realizing that mortgage rates are not going back down to 4%. The Mortgage Bankers Association reported healthy increases in purchase and refinance applications for the prior week. Purchase applications increased 5.1% while refinances increased 17.8%. Mortgage rates this week declined by ¼% so I would expect that next week we should continue to see another increase in applications.
Existing Home Sales rose 2.7% for the prior month which was less than expected, however positive none the less. The concerning part is that 32% of all transactions are cash. 37% of the transactions are for distressed properties.
On the not so good side of housing, we had a number of reports which continue to demonstrate the big challenges ahead for a real housing recovery. New Home Sales dropped 12.6% which was more than predicted. The Median Home Price for properties sold last month also dropped 5.9% to the lowest point in 9 year. The Case-Shiller House Value Index also indicated that home prices are dropping and that currently they are averaging about 1.2% below the same time last year.
An important note to the Case-Shiller House Value Index is that is does not take into account cash purchases. The reality of the home value price situation is that if you were to include the cash transactions, the house price decline would actually be more than reported.
First time jobless claims dropped back below 400,000 after we had seen a recent up-tick in first time jobless claims. Some people speculate that this drop could be a sign of good things to come however I am not ready to make that determination based upon only a single week's employment report.
Reports due out next week are:
• Monday February 28th - Pending Home Sales
• Tuesday March 1st - ISM Manufacturing Index and Construction Spending
• Wednesday March 2nd - MBA Mortgage Applications and ADP Employment Report
• Thursday March 3rd - First Time Jobless Claims
• Friday March 4th - Employment Situation (National Unemployment figures are released)

Your Mortgage Consultant,

JJ Mack
916-517-1800

Mortgage Market Update - 2/11/2011

2011-02-11T16:35:00.000-08:00

This week's light economic report calendar contributed to a less volatile ride in the markets than we have been observing lately. The stock market continues its slow but steady climb as investors continue to gain confidence in the business side of the economy.
Consumer Sentiment came out with a very mixed picture this week. Although consumer sentiment for "today" is at its highest point since June of 2010, the thoughts about the future remain uncertain. It appears that the people surveyed for this report feel that the economy is doing better than we have seen in quite a while. However many people showed pessimism as to where we may be in the coming months.
There were a few reports this week regarding housing which once again shows a very mixed landscape regarding the present and future of housing.
The Mortgage Bankers Association reported a 7.7% drop in purchase applications and a 1.4% drop in refinance applications. As we have seen over the last few weeks, purchase activity for mortgage lenders has been decreasing. Rising interest rates may be the culprit for the declines.
On the positive side of housing, The National Association of Realtors reported that there has been a 20% increase in home sales on the west coast. Overall housing activity is down 20% from 2009 levels which continues the pressure for home prices to remain where they are.
You may be reading this article and wondering if home sales have risen 20% on the west coast, why would mortgage applications for purchases go down? The answer is summed up with two words, "cash investors". A good portion of homes being purchased are being done so by investors who are not getting any type of financing.
First Time Jobless Claims came in surprisingly low. The drop of 36,000 from the prior week to 383,000 is the lowest we have seen in 2 ½ years.
Foreclosure news made headlines this week in that foreclosures and foreclosure filings were reported as being way down. The reason for the large decline is that banks are taking longer to execute foreclosures as they are trying to get through the existing backlog of filings that are already in process.
Zillow.com reported this week that 30% of all properties in the U.S. are currently "underwater" which means that more is owed on the house than it is worth. The one thing that has many people concerned is that with so many homes in this negative position, and property values declining in some areas, more homeowners may execute what is known as a "strategic default". This type of default is when a borrower has the ability to pay their current mortgage however purposely elects to not pay in hopes of the bank modifying their current mortgage terms.
Despite the challenges that persist in the housing sector, the economy is plugging along and I can say with 99% certainty that we are on a road to recovery. It will be bumpy, it will have some potholes, however in the end we will continue to grow and housing will follow along.
Reports due out next week are:
• Tuesday February 15th - Retail Sales & Housing Market Index
• Wednesday February 16th - MBA Mortgage Applications, Housing Starts & Producer Price Index
• Thursday February 10th - First Time Jobless Claims & Consumer Price Index

Your Mortgage Consultant,

JJ Mack
916-517-1800

Mortgage Market Update - 1/21/2010

2011-01-21T13:22:00.000-08:00

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

Your Mortgage Consultant,

JJ Mack
916-517-1800

Mortgage Market Update - 1/14/2010

2011-01-14T10:20:00.000-08:00

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

Your Mortgage Consultant,

JJ Mack
916-517-1800 x300

Mortgage Market Update - 1/7/2010

2011-01-07T16:42:00.001-08:00

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)
I am starting a new award category: Idiot Expert / Analysts of the Year. Our first candidate of 2011 is Celia Chen, a housing market analyst for Moody's Analytics. According to CnnMoney.com, Celia predicted that housing in Las Vegas won't recover until 2032, Phoenix 2034, and Naples, FL 2038. Then Celia goes on to state something along the lines that these predictions must be taken with a grain of salt as the economy can impact these predictions. Duh?- What was the point of the prediction then? Congratulations Celia on being the first to make our list!
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

Your Mortgage Consultant,

JJ Mack
916-517-1800 x300

Mortgage Market Update - 12/30/2010

2010-12-30T15:46:00.000-08:00

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

Your Mortgage Consultant,

JJ Mack
916-517-1800

Mortgage Market Update - 12/17/2010

2010-12-17T14:46:00.000-08:00

As promised, this week had no shortage of economic reports, and I am happy to say, that for the most part, they are almost all pointing to better times ahead. Is this just a momentary holiday present for the country or is it for real? Who knows, 2011 will ultimately tell us the answer but I am hopeful it is a trend.
The holiday season started out with a bang with retail sales reporting a much stronger gain than anticipated. Retail sales rose .8% in November following an upwardly revised 1.7% for October. Consumers are spending more money and there definitely seems to be more optimism and excitement about shopping.
Inflation on the wholesale level is starting to increase however it is still very much a non-threat to significant inflation in the coming months. Wholesale prices increased .8% however the Consumer Price Index, which measures inflation on the retail level, only rose.1%. This disparity between wholesale and retail continues to demonstrate that consumers are not willing to pay higher prices for goods.
The Federal Open Market Committee, to no one's surprise, did not increase interest rates. Additionally they reiterated that it will be some time before any rates are raised since the economy still continues to be very sluggish. The FOMC went on to specify that retail sales, although showing signs of improvement, are still remaining very sluggish overall. Housing also continues to remain a drag on the economy in that foreclosures are still very high and that overall housing data is still showing sales are anemic.
Speaking of housing, the Mortgage Bankers Association reported that purchase applications for the prior week dropped 5% and refinance applications declined .7%. These drops do not even reflect the more recent increase in interest rates that took place this week which leads many to believe that the numbers will continue to decline in next week's report.
Housing Starts rose a better than expected 3.9%. Housing over all is still very weak however the trends as of late seems to be indicating that housing may be rebounding. It is important to realize that any improvement in housing can have a positive impact on the psychology of the potential buyers in the market. If buyers perceive that the market has hit bottom, they are more likely to act. Additional urgency to purchase may also be stimulated by the recent increases in interest rates. 6 weeks ago the 30 year fixed rate was hovering around 4%. As of yesterday the same loan program is a full point higher at 5%.
It was reported this week that foreclosures in the 3rd quarter of 2010 declined by 21%. Before we all jump for joy you must understand that the 3rd quarter is when the scandal of inappropriate foreclosure signings was discovered. During this period of time many of the nation's largest lenders placed a moratorium on foreclosures which is the cause of the massive 21% drop. Lenders are now back in full swing of the foreclosure process so undoubtedly we will see the foreclosure numbers jump at the next quarterly report.
First time jobless claims declined slightly continuing the recent trend for the last 4 weeks. Overall unemployment seems to be stabilizing however the private sector is still showing much resistance to hiring new employees.
It has been nice the last few weeks to be able to report more and more about positive signs in the economy. We certainly have a long way to go, however remember the old adage, "How do you climb a mountain...one step at a time".
Reports due out for the holiday week are:
• Wednesday December 22nd - MBA Mortgage Applications, GDP and Existing Home Sales
• Thursday December 23rd - First Time Jobless Claims, Consumer Sentiment and New Home Sales

Your Mortgage Consultant,

JJ Mack
916-517-1800

Mortgage Market Update - 12/3/2010

2010-12-03T13:48:00.000-08:00

With the holidays fast approaching, one would have thought that the economic reports delivered this week were an early present to the nation. Many of the reports came in stronger than expected and the feeling of recovery was all throughout the air. Then came the jobs report on Friday...
Today it was reported that the national unemployment rate increased from 9.6% up to 9.8%. Experts were virtually unanimous in the expectation that unemployment would remain the same or decline slightly. (So much for being an expert) - The initial reaction by the stock market was less than expected. Typically when unemployment increases, the stock market panics and will sell off in droves causing the indexes to drop dramatically. As of the writing of this report, the stock market is flat which means the significant gains seen this week should remain and that the unemployment report is not being considered a major concern, at least for stock investors.
Despite unemployment increasing, there was other news this week that has given us reason to cheer that the recovery is truly taking hold. Is it possible that we can sustain a recovery without housing playing a major role? Normally my answer would be "no", however, the stock market, retail sales and manufacturing seem to be ignoring housing based upon the reports released this week.
Consumer Confidence continues to increase indicating that more and more Americans are feeling better about the future of the economy. Although jobs continue to remain on many people minds, overall the public is beginning to believe that the economy is on the right path to recovery. Although we all know we are not out of the woods yet, the feeling that we are finally headed in the right direction does seem to exist.
Manufacturing once again showed significant growth. Production is increasing at a healthy rate and movement from production to shipping is also showing signs of growth. Simply put, more goods are being moved to the markets and consumers are purchasing them.
Sales reports from Black Friday show that consumers spent on average 6.2% more this year than last year. Although everyone is looking for a bargain, there certainly was no lack of people hitting the stores on Friday and the internet on Cyber Monday driving sales to the highest level we have seen in years.
Purchase applications for the past week rose 1.1% which is a positive sign that people are taking advantage of low house prices despite the fact that mortgage rates have been rising. The report of increased unemployment does threaten to derail purchases if people become even more fearful of losing their job based upon today's report.
The Case-Shiller Home Value Index indicated that home prices dropped nationally for the 3rd straight month. The drop of .7% from September to October was considerably more than expected. The continued decline of housing prices may also force more potential homebuyers to the sidelines waiting to see just how low prices will go.
What should be considered good news is that the National Association of Realtors reported that Pending Home Sales jumped 10.4%. As much as I am optimistic about this significant increase, I am tempering my enthusiasm only because I don't know if pending homes sales jumped because of more transaction, or did it jump because closing real estate transactions is taking longer than it has ever taken before creating a backlog?
Next week stands to be a quiet week regarding economic reports:
• Wednesday December 8th - MBA Mortgage Applications, 10 Year Note Auction
• Thursday December 9th - First Time Jobless Claims
• Friday December 10th - Consumer Sentiment

Your Mortgage Consultant,

JJ Mack
916-517-1800

Mortgage Market Update - 11/5/2010

2010-11-05T14:27:00.000-07:00

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

Your Mortgage Consultant,

JJ Mack
916-517-1800

Mortgage Market Update - 10/22/2010

2010-10-22T16:46:00.000-07:00

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

Your Mortgage Consultant,

JJ Mack

Mortgage Market Update - 10/15/2010

2010-10-15T14:01:00.000-07:00

The members of the Federal Open Market Committee, for the first time in a long time, have come out publicly in disagreement on what the next step for helping the ailing economy should be. The FOMC Meeting minutes clearly show that there is disagreement on how the next phase of government stimulus / quantitative easing should be implemented. Some members feel that more data needs to be accumulated before action is taken while others are saying that action needs to be taken sooner than later. Regardless it appears highly likely that some type of action will be taken by the November elections. (Can't imagine why that might occur, can you?)
Mortgage rates are hitting record lows and with the prospect of more government stimulus, the expectation is that rates will fall even further. As of last week the national average for the 30 year fixed rate was 4.21%. Mortgage applications for last week saw a surprising decline of 8.5% fir purchase applications. No real explanation has been offered as to the cause of the slowdown however some people speculate that the barrage of news regarding the suspensions of foreclosures may have pushed buyers to the sidelines. Additionally, some transactions that were started were also halted due to the foreclosure filing mess. Refinance applications are going strong as they represent 83% of all mortgage applications for the past week.
Economic reports outside of housing continue to show no real direction for the economy. The positive news reported this week was that inflation on the wholesale and retail levels are not a concern at all. On the flip side however is that talk is starting to surface that the level of inflation is becoming almost to low which can be an indication that we may enter a deflationary economy.
On the surface some may say, "Hey if prices are going to drop, that is great news for me". However what happens in a deflationary economy is that if consumers recognize that prices are falling, then they will start to keep their money in their wallets and wait for lower prices. If people start to hold off on purchases, then the whole recession cycle starts all over again.
Before anyone reading this begins to panic, it is important for you to know that last month retail sales came in higher than expected. So at least for right now, consumers are spending money and that concerns about deflation, at least on the consumer level does not exist.
Employment still continues to be a drag on the economy. First time jobless claims came in higher than expected and actually rose by 13,000 from the previous week. This is the first increase in jobless claims in a month. Continuing jobless claims continue to drop and some government officials are trying to leverage this news for political gain. The truth of the matter is that the only reason why continuing jobless claims are declining is because more and more people are dropping off the unemployment rolls as their benefits run out and that no more extensions are available.
One of the ironic reports this week is Consumer Sentiment. This report came in worse than expected and showed that people are becoming more concerned about the future of the economy. The irony is in that Retail Sales continue to improve which is not what one would expect to occur if people are not optimistic.
Relevant economic news on tap for next week:
• Monday July 18th - Industrial Production & Housing Market Index
• Tuesday July 19th - Housing Starts
• Wednesday October 20th - MBA Mortgage Applications
• Thursday October 21st - First Time Weekly Jobless Claims

Your Mortgage Consultant,

JJ Mack
916-517-1800

Weekend Mortgage Update - 10/08/2010

2010-10-08T15:04:00.000-07:00

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

Your Mortgage Consultant,

JJ Mack
916-517-1800

Weekend Mortgage Update 10/01/2010

2010-10-01T15:33:00.000-07:00

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

Your Mortgage Consultant,

JJ Mack
916-517-1800

Mortgage Market Update - 9/17/2010

2010-09-17T13:47:00.001-07:00

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

Your Mortgage Consultant,

JJ Mack
916-517-1800

Weekend Mortgage Update - 09/10/2010

2010-09-10T12:46:00.000-07:00

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 in last week's Warrior Weekender, 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

Your Mortgage Consultant,

JJ Mack
916-517-1800

Weekend Mortgage Market Update - 9/3/2010

2010-09-03T16:21:00.000-07:00

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

Your Mortgage Consultant,

JJ Mack
916-517-1800

Mortgage Market Update - 08/29/2010

2010-08-29T19:04:00.000-07:00

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

Your Mortgage Consultant,

JJ Mack
916-517-1800

Mortgage Weekend Update - 08/20/2010

2010-08-20T16:29:00.000-07:00

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

Your Mortgage Consultant,

JJ Mack
916-517-1800

Weekend Mortgage Market Update - 07/30/2010

2010-07-30T15:08:00.001-07:00

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

Your Mortgage Professional,

JJ Mack
916-517-1800

Weekend Mortgage Market Update - 07/23/2010

2010-07-23T09:47:00.000-07:00

Rather than write this report every week, I think I am just going to send out a one page picture of an arrow pointing either up, down or sideways. That by itself will give you a clear indication as to the direction of the economy. Please expect to see an arrow pointing sideways for the near future. A flat economy has been the name of the game for pretty much the entire year thus far.
The economic reports this week once again indicate we are going nowhere fast. The stock market continues to have its good days and bad days moving on any drop of news so investors can take a gamble to lock in profits for a day. It seems more like the stock market is all day traders than anyone believing in long term investments.
In regard to housing, let's start off with the "not so good", and then give you the optimistic side of housing. (Yes there is an optimistic side).
The Housing Market Index which dropped to the lowest point since April is an opinion of housing conditions released by the National Association of Home Builders. Although the index dropped sharply, you must remember it is only an opinion and not based upon any statistical data.
The Housing Starts report was a mixed message. New construction for homes dropped sharply however there was a very healthy increase for new building permits reported. Could this be a sign that builders see the 4th quarter being more productive? (I hope so)
Mortgage applications for refinances and purchases jumped as expected. Record low mortgage rates have been driving the last group of holdouts to finally submit applications to lower their rates. Purchase applications also rose 3.4% showing that the there are signs of life in the purchase market. We all know record low rates are the driving force behind the increase in applications. Given the last couple of months of declining purchases, any positive report should be embraced and personally I am excited about any increase no matter how large or small. Mortgage rates are expected to remain very low for the coming months.
Existing Home Sales also fell for the month however not as much as anticipated. The drop of 5.1% was not a market mover and the increase of inventory from 8.3 months to 8.9 was not a big surprise. The big positive side to the report is that median home prices rose 5.2% which some people are saying may indicate we have hit the bottom as far as home values. (I personally think it is crazy to make that prediction based upon one report however, any positive news in values can cause fence sitters to jump back in to the market.)
Jobless claims dropped more than expected. As stated last week, the jobless claims are not playing a major role in the movement of the markets. Until we begin to see a declining trend, you can expect the coming weeks and month to be up and down once again reinforcing my desire to just place an arrow pointing sideways on this report.
Economic reports due out next week are:
• Monday July 26th - New Home Sales
• Tuesday July 27th - Case-Shiller House Price Index & Consumer Confidence
• Wednesday July 28th - MBA Purchase Applications & Durable Goods Orders
• Thursday July 29th - Weekly Jobless Claims, GDP and Consumer Sentiment

Your Mortgage Professional,

JJ Mack
916-517-1800

Weekend Mortgage Update - 07/16/2010

2010-07-16T17:02:00.000-07:00

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

Your Mortgage Professional,

JJ Mack
916-517-1800

Weekend Mortgage Update - 07/09/2010

2010-07-09T12:16:00.000-07:00

When you combine the light trading in the stock market with very little market impacting data being released, it was nice to have a non volatile trading week. As indicated in last week's Weekender, this week there were only two significant U.S. economic reports so the usual market hysteria was kept to a minimum.
This week the stock market experience significant gains and once again climbed above the 10,000 mark. Besides the lack of market moving news, the other reason for the gains is the low trading volume. Historically this week has one of the lowest trading volumes of the year. When low trading volume exists, it is possible to have larger moves in the various stock market indices due to the fact that any large trade can have can carry more weight in the movement of the Dow, Nasdaq and S&P.
The Mortgage Bankers Association reported that despite some of the lowest mortgage rates on record, purchase applications continued to drop, however the slide has dramatically slowed down. Purchase applications dropped a small 2.0% which hopefully indicates that purchasing volume is stabilizing. However, we will have to wait and see the application reports in the coming weeks to truly determine the direction of housing.
The MBA also reported a 9.2% jump in refinance applications which continues to indicate that there are many homeowners that have still not taken advantage of all of the previous refinance booms over the last few years.
First time jobless claims were reported to have dropped by 21,000. The stock market loved this news and rallied to a 120 point rise on the Dow Jones Industrial Average.
For the most part, news on the European debt crisis seems to indicate that concern is easing and that Europe is getting it under control. In recent weeks and months, the European debt crisis has been keeping traders on edge making U.S. Treasuries the investment of choice.
Next week the treasury is auctioning off 10YR notes and depending on the demand, that can have an impact on mortgage rates either up or down.
After a restful week of little economic news, next week plans to deliver a slew of economic reports. Buckle Up, it could get bumpy again.
Lebron James decided on going to Miami, lets watch to see how many people now sell their recently acquired MSG stock in hopes of it rocketing up if he came to NY.
Reports due out next week are:
• Tuesday July 13th - 10 Yr Treasury Note Auction
• Wednesday July 14th - MBA Purchase Applications
• Wednesday July 14th - Retail Sales
• Thursday July 15th - Producer Price Index
• Thursday July 15th - Industrial Production
• Thursday July 15th - Weekly Jobless Claims
• Friday July 16th - Consumer Price Index
• Wednesday July 7th - MBA Purchase Applications
• Thursday July 8th - Weekly Jobless Claims

Mortgage Market Update - July 6

2010-07-06T09:57:00.000-07:00

Unfortunately due to the second week of primarily negative economic reports and data, it is not easy to find many good things to write about as much as I am trying - sorry!
The talk of a double dip recession has been increasing due to increasing trend of negative economic reports hitting the market. It is becoming clear to many people that we are further from a recovery than most of us had hoped.
Housing received a reprieve this week when the Senate and House finally agreed to push forward the independent bill of extending the tax credit until September 30th. The credit extension is only for homebuyers that were in contract by the required April 30th deadline.
The Case-Shiller Home Values Index rose in the months of April by .7% which goes along with the increased activity of home purchases that was reported during the same month. On the opposite side of the spectrum, pending home sales fell off a cliff in the month of May with the National Association of Realtors reporting as 30% drop.
The Mortgage Bankers Association reported that last week purchase applications dropped 3.3%. On the bright side, refinance applications jumped 12.6% with the lowest interest rates on record available to homeowners, 4.67% and 4.06% for a 30 and 15 year fixed rate respectively.
Other significant news reports for the week are:
• The stock market continues to take a beating on concerns about the economic recovery as well as the weakness in overseas economies.
• ADP reported job growth of 13,000 which was is an improvement however far below the projected 61,000.
• Consumer confidence dropped considerably slowing purchases in housing and auto sales.
• ISM Manufacturing Index and construction spending both declined slightly however these declines are not alarming.
• The House finally voted to extend unemployment benefits for those whose benefits were to expire on June 30th. The Senate is expected to pass the measure in about 2 weeks when they return from summer vacation.
• The employment situation reported on Friday showed that the national unemployment rate dropped from 9.7% to 9.5% indicating that the employment sector is still recovering at a very slow pace.
Despite all of the negative news, I still remain optimistic for housing. With record low interest rates and no sign of them increasing, housing is becoming even more affordable and demand will increase.
Fortunately, there are very few significant reports scheduled for next week which will hopefully lead us to a less volatile week in the markets. News on tap for next week is:
• Wednesday July 7th - MBA Purchase Applications
• Thursday July 8th - Weekly Jobless Claims

Mortgage Markey Weekend Update - 06/25/2010

2010-06-25T15:18:00.000-07:00

Well the week was a data junkies dream. We had tons of economic reports come out, and in the end, mortgage rates continued to decline. The stock market had about a 350 point drop in total for the week as of the writing of this report however the main reason is for concern in Europe.
It has been a while, but I feel today it is necessary for me to put my sarcasm hat on and report the week's happenings strictly for entertainment purposes. If I take the reports to seriously I may go postal. (I will have to go beyond a one page report - sorry). I just need to vent about the nonsense that is being reported by the government. Please understand nothing I write is a political statement, it is strictly about government nonsense and their belief that we are dumb enough to fall for their propoganda.)
As you may already know, The Wall Street Reform Bill is a done deal. The President is expected to sign it into law by July 4th. Exactly when everything will take effect, is uncertain. However what is for sure is that this legislation is one of the most powerful and largest changes to laws and controls ever executed by the government. I believe the Constitution, The Bill of Rights and The Declaration of Independence are still more powerful. However I believe Barney Franks wants to change that also. As far as our rights in business, if you work in the financial industry, bottom line is that you don't have many of them anymore with this reform bill.
I was speaking with a friend yesterday and we discussed the definitions of Democracy, Socialism and Communism.
• Democracy: Freedom of choice and the opportunity for the people of the country to be able to engage in making decisions on their own with minimal government intervention.
• Socialism: You still have the right to choose, however your choices must adhere to government rules that eliminate virtually every choice except for those the government wants you to make.
• Communism: You are not allowed to think for yourself or choose.
The Wall Street Reform Bill now places the business sector of the country somewhere between Socialism and Communism. Depending on which industry you look at, your view may vary. Buckle up my friends, the cost of doing business in this country has just been increased significantly and our liberties of freedom of choice in business are being taken away.
Ok I'm done - now on to the main report:
The housing news reported this week was dismal however not unexpected. I have been writing for weeks about the end of the tax credit and how it will impact May housing numbers. Well here they are:
• New Homes Sales Plunge 33% (largest drop ever measured since 1963)
• Existing Home Sales Drop 2%. Over 30% of these homes sold are foreclosures and shorts sales.
• March and April's New Home Sales Report was revised downward by 108,000 units making those months much worse than reported previously. Remember, the tax credit was active during that period of time which is now increasing concerns about housing.
• Single family home starts drop 17%
• MBA Purchase Applications dropped 1.2% and Refinances dropped 7.3%.
• Housing supply inventory increased from 5.8 months in April to 8.5 months in May (This does not includes the 3,650,000 homes that the nation's major banks are currently holding off the market to stabilize values. In case you think I made a mistake with the zero's, I wrote 3 million six hundred and fifty thousand homes not being sold by the banks)
As positively natured a person I am, I truly don't enjoy writing about all of the bad news - I really don't. However, I am a little bit disgusted in how are government is perpetuating so many lies to us about the state of the economy just so they can say we are not going to have a double dip recession. Actually they are right, we are not going to have a double dip because the first recession never ended!
The FOMC stated that economy is "proceeding". (What does that mean?)
Of course the economy is "proceeding"! - As long as there IS an economy, it has to "proceed"! - I failed economics in college but even I know an economy has to proceed.
Sorry I digressed - The FOMC has continued to keep interest rates at or near zero with no expectation of when they will need to raise them. Inflation continues to be a non-factor so the concern for rate increases does not exist.
Jobless claims dropped 19,000 last week, however the previous weeks jobless claims were revised upward by 4,000. Overall first time jobless claims remain somewhat stable with only a slight rise in the 4 week moving average.
What is supposed to be good news is that 45,000 people came off of the unemployment rolls last week. The only question that nobody in government will answer is did they get jobs? - or did they give up on finding a job - or are they no longer eligible for unemployment?
GET THIS - The Obama Administration stated that they are responsible for the 45.9% increase in national corporate profits that took place over the last 12 months. Wow- I thought that firing employees and cutting expenses is what increased profits during this period of time. I say that because unless sales increase, which they haven't, the only way for corporate profits to increase is by cutting costs. Like I said earlier, I failed economics in college but.... Am I missing something?
The great news for the week is that mortgage rates are at the lowest point on record. 30 year fixed rates are in the 4's and I am cautiously optimistic that this will increase activity in home buying and refinances. The government is currently considering extending the tax credit however that has not been decided as of yet.
Once again I apologize for the tone of this newsletter. It is not like me to do this, however I now feel cleansed and I can go and enjoy my weekend knowing that I have bestowed my frustration on my loyal readers.
News on tap for next week:
• Tuesday June 29th - Case-Shiller Housing Value Index
• Tuesday June 29th - Consumer Confidence
• Wednesday June 30th - MBA Purchase Applications, ADP Employment Report
• Thursday July 1st - Pending Home Sale, Weekly Jobless Claims

Your Mortgage Professional,

JJ Mack
916-517-1800

Weekend Mortgage Update - 06/18/2010

2010-06-18T15:39:00.000-07:00

For anyone that is a market news junkie, you certainly got your fix this week. It has been quite some time since we have experienced a week with this much news and information on housing and the economy.
Housing Starts dropped 10% as home builders are showing caution as the tax credit expiration has seemed to place a damper on home purchase demand. The Mortgage Bankers Association reported for the first time in 6 weeks that home purchase applications have increased. Additionally, it was also reported that refinance applications jumped 21%.
The Senate and House have each passed a new amendment which would extend the time to take advantage of the tax credit. The current expiration occurs on June 30th. The current amendment is being reconciled between both branches of government and it is expected to be passed. The extension as proposed will extend the time home buyers have to close for an additional 3 months.
It was announced this week that an estimated 65 - 75% of all homeowners who have received loan modifications under the governments Home Affordable Modification Program will most likely default despite having lower mortgage payments. The main culprit causing the trend of high defaults is that many homeowners receiving modifications continue to have high balances on their other consumer debt with little or no reserves of cash in the bank.
The FBI announced a major crackdown on mortgage fraud. The FBI's program to fight mortgage fraud, called Operation Stolen Dreams, is in full swing with over 3000 investigations taking place nationwide. Already over 485 people have been netted in the operation. The driving force behind the FBI crackdown is that despite the lending industry tightening guidelines and underwriting criteria, studies have shown a significant increase in mortgage fraud from 2008 to 2009.
In other real estate news, the former CEO of failed lending institution Taylor Bean Whittaker was arrested this week while working out at his gym. He has been charged with defrauding the government and investors out of 1.5 billion dollars through the sale and transfer of bad mortgage loans.
Fannie Mae and Freddie Mac have both been delisted from the New York Stock Exchange due to their share prices continuing to remain valued below a $1. This does not impact the daily operations of these organizations.
The Consumer Price Index and Producer Price Index released this week continue to show that inflation is not an issue right now despite all of the government stimulus and low rates. Consumers have slowed spending on discretionary items once again due to uncertainty in the job market and economy. Jobless claims came in higher than expected this past week as well.
News on tap for next week:
• Tuesday June 22nd - Existing Home Sales
• Wednesday June 23rd - MBA Purchase Applications, New Home Sales, FOMC Meeting
• Thursday June 24th - Jobless Claims and Durable Good Orders
• Friday June 25th - Consumer Sentiment and GDP

Your Mortgage Consultant,

JJ Mack
916-517-1800

Mortgage Market Weekend Update - 06/14/2010

2010-06-14T18:44:00.000-07:00

The stock market rebounded nicely from its early week low's due to the strengthening Euro which has been beaten down over the last few weeks. The European debt crisis has been the primary reason for the devaluation of the currency and now that it seems like some stability is coming to the region, the Euro is gaining ground against the dollar.
Overall mortgage rates rose slightly for the week however nothing significant. The Mortgage Bankers Association reported that purchase applications dropped for the 4th straight week. This past week they fell 5.7% and overall in the last 4 weeks they are down 35%. Without question the expiration of the tax credit is having a major impact on housing.
Additionally, the MBA reported that refinance transactions have also dropped slightly despite interest rates being very low. Without a question, uncertainty in the economy and housing are continuing to slow home buyers, and even homeowners from taking action on financing for their current home.
It was reported on Thursday of this week that the number of foreclosure filings has dropped 3%. However what is very disturbing news is that the banks have significantly increased their repossessions of properties. In May, a new record was set for bank repossessions at 93,777.
The 10YR Treasury auction this week had modest demand. Given the uncertainty in the stock market, many are still investing in the safe haven of government securities.
In other news, Ben Bernake spoke a few times this week and has indicated that inflation continues to remain a non-issue and that he expects the Fed to keep rates the same possibly through 2012. However if inflation does begin to rear its ugly head anytime before, the Fed will certainly act to keep it under control by raising interest rates.
New filers for unemployment rose for the 4th straight week which once again exceeded analyst expectations. The perceived good news in the employment report is that continuing unemployment claims dropped a very large 225,000. The big question that remains is "are employers starting to hire, or is the drop related to many people becoming no longer eligible for benefits and they are being dropped from the calculations?" (I have my own opinion but I will let you draw your own conclusion about this)
Retail Sales unexpectedly dropped 1.2% in May, signaling consumers are focusing on boosting savings as the employment picture slowed and the stock market has been falling. Most of the economists surveyed expected a rise of .2%. Many experts believe that retail sales growth will be minimal in the coming months as signs of recovery are slower than anticipated.
News on tap for next week:
• Wednesday June 16th - Mortgage Bankers Association Purchase Applications
• Wednesday June 16th - Housing Starts, Industrial Production, Producer Price Index
• Thursday June 17th - Jobless Claims and Consumer Price Index
• Friday June 18th - Quadruple Witching Day which may lead to tremendous market volatility

Your Mortgage Consultant,

JJ Mack
916-517-1800

Possible Tax Credit Extension?

2010-06-11T11:40:00.001-07:00

NEW YORK (CNNMoney.com) -- First-time homebuyers looking to land an $8,000 federal income tax credit may have a little more time to close on their purchases if a Senate amendment unveiled Thursday makes it into law.
As it stands now, homebuyers must have signed contracts by April 30 and must close the deal by June 30. They could be eligible for an $8,000 tax credit if they are first-time buyers or a $6,500 credit if they owned and lived in their previous home for five of the last eight years.
The closing deadline, however, could be pushed back to Sept. 30 under an amendment offered by Senate Majority Leader Harry Reid, D-Nev., Sen. Johnny Isakson, R-Ga., and Sen. Chris Dodd, D-Conn. The senators said they want to make sure banks have time to process the transactions -- especially short-sales, which is a more involved process.
"By extending the transaction deadline, we can ensure that everyone taking advantage of this credit can complete the purchase of their new home, Reid said.
It remains to be seen, however, whether the amendment will go anywhere. It's part of a controversial jobs and tax bill that may be radically changed before the Senate approves it. Lawmakers are not scheduled to vote on the bill until next week at the earliest.

Mortgage Market Weekend Update - 06/04/2010

2010-06-04T16:40:00.000-07:00

The week has been a reprieve from the crazy roller coaster ride we have been experiencing over the last month or so. The reality is that movement in the stock market of 100 to 200 points in a day, or a few hours for that matter, is now being seen as somewhat common place. (It is amazing what used to be crazy, is now the new normal)
Overall the economic news this past week has been quite positive in nature. Construction spending rose 2.7% in April from the previous month. What is especially optimistic about this increase is that the rise was driven primarily by investment in building single family residential properties.
Additionally, pending home sales in April rose another 6% from the 7.1% increase in March. The mad run for people to purchase prior to the tax credit expiration on April 30th seems to be the driving force behind the large increases. As always, not to be negative, we need to see what the numbers will be like for May. Many experts are predicting that we will see a reversal of the upward trend however that is to be expected.
Despite mortgage rates remaining below 5%, the Mortgage Bankers Association reported that purchase loan applications have declined for the 4th straight month. (Can anyone say "tax credit expiration"?)
Unemployment continues to remain an issue despite the fact that the national unemployment rate dropped from 9.9% to 9.7%. Although the drop is positive, the reality is that the bulk of the job additions for the month were related to the temporary hiring of 411,000 Census workers.
Outside of employment, there is economic news to be optimistic about that continues to point to slow and gradual growth of the economy. The increase in the ISM Manufacturing Index shows that employment and production in the manufacturing sector continues to grow at a healthy pace. In addition, factory orders continue to grow as well for both durable and non-durable goods orders at a strong rate showing that consumers and businesses are slowly starting to spend.
Economic news and activity next week has the potential to impact mortgage rates significantly. The 10YR Treasury Note Auction on Wednesday will shed light if investors are still seeking the quality and security of government treasuries, or if the appetite for stocks is returning - stay tuned!
News on tap for next week:
• Wednesday June 9th - Mortgage Bankers Association Purchase Applications
• Wednesday June 9th - 10 Year Note Auction
• Thursday June 10th - Jobless Claims
• Friday June 11th - Retail Sales
• Friday June 11th - Consumer Sentiment

Your Mortgage Consultant,

JJ Mack
916-517-1800

Mortgage Market Weekend Update - 05/29/2010

2010-05-29T11:36:00.000-07:00

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

Have a good weekend,

JJ Mack
916-517-1800 x300
jj@granitefundinggrp.com

Weekend Mortgage Markey Update - 05/21/2010

2010-05-21T15:10:00.000-07:00

The stock market blood bath has been the mortgage industry reprieve. Mortgage rates have been declining rapidly due to the tremendous inflow of investors leaving the market and moving their money into the safe haven of government treasuries.
The concern over the European debt crisis has investors very skittish about remaining in the stock market. Since we are in a world that is so intertwined in business, there is not a single country that can stand on their own if another country or region faces economic challenges.
Only time will tell if the decline in rates will stimulate purchasers to take action. Additionally, in a normal market with a rate decline like this, refinances would increase substantially. However, millions of eligible borrowers have already taken advantage of the previous low rates so nobody is sure how big the pool of remaining homeowners is who can still qualify to refinance.
Housing starts came in higher than expected. Builders are cautiously moving ahead with construction and are showing a willingness to begin building more homes. Many builders still remain concerned about how the termination of the tax credit will impact housing purchases. Unfortunately, we will not really know the answer to this question for at least another 30 days.
One of the driving factors in the mortgage rate decline is that the Producer Price Index and the Consumer Price Index both indicate that inflation is well under control. Both indexes unexpectedly declined in the last month. The bulk of the decline was driven by the decrease in energy costs. (I don't know about you, but I have not seen the decline in energy prices reflected at the gas pump. However, don't worry, in the next quarter the oil companies will show record profits once again and then Congress will call them up to Capitol Hill and slap them on the wrist for not passing any savings on to the consumers. We have seen this before and we will see it again)
Jobless claims came in unexpectedly higher this past week. In addition, last week's numbers were revised up by 2000 which indicates that new claims of unemployment are still a concern. On the bright side of the unemployment front, continuing jobless claims have been declining slowly and gradually. The big question is: "Is the decline due to people getting jobs, or because people are falling off of the unemployment rolls because they are no longer eligible to receive benefits?
After a fairly quiet week of economic reports, next week stands to be the exact opposite. A number of important housing reports are coming out as well as the consumers view on how the economy is doing. Normally I would say that these reports could have a major impact on rates and the stock market however given how everything in the U.S. markets has been primarily been driven by the concerns over Europe, it is hard to guess as to what impact the U.S. reports will have on the markets.
Economic reports on tap for next week are:
• Monday May 24th - Existing Home Sales
• Tuesday May 25th - Case-Shiller Home Value Index & Consumer Confidence
• Wednesday May 26th - New Home Sales
• Thursday May 27th - GDP & Jobless Claims
• Friday May 28th - Consumer Sentiment

Your Mortgage Professional,

JJ Mack
916-517-1800 x300

My Mortgage Weekend Update - 05/14/2010

2010-05-14T15:12:00.000-07:00

Rates are Falling - YIPPEE!!! - For months experts speculated that when the government exited the mortgage backed securities re-purchase program in March, mortgage rates would rise from ½ to 1%. Well the experts were clueless. (To be honest with you, I thought rates were going to rise as well, shows what I know right?)
It appears that global uncertainty, especially in Europe, is keeping demand for U.S. Treasuries high. Until there is a clear picture on exactly how the European debt crisis will play out, it seems that the U.S. Treasuries is the place that investors want to keep their money. The stock market this week has been taking it on the chin badly in that many investors are fleeing the stock market for the safe haven of government treasuries.
Mortgage rates have dropped for four straight weeks and the average for a 30 year fixed rate loan is now 4.95%. The big question is now that the tax credit has ended, are the lower mortgage rates enough to keep demand for housing strong.
New actions on foreclosures seem to be hitting a plateau. Finally there may be some light at the end of the tunnel in which the number of foreclosure actions seems to no longer be increasing. However, the number of bank repossessions has hit a new high and the odds of that continuing for the coming months remains likely.
The amount of inventory of bank owned properties continues to grow rapidly. For better or worse, the banks are very slow to release these properties for sale in the market as to not create an oversupply of housing inventory which would result in driving down house values rapidly. It is expected that the banks will continue this slow drip of properties for sale to keep housing prices somewhat stable.
Despite problems in Europe, many other areas of the U.S. economy are showing steady signs of improvement. Retail Sales continue to increase month over month as well as the demand for high ticket luxury items is rebounding as well. (I guess somebody is spending money)
Industrial Production is increasing rapidly. Although most of the increase is for the purchase of manufacturing equipment, the increase in spending points to the fact that many manufacturers are gearing up for an expected increase in consumer spending later this year.
Jobless claims continue to show small signs of improvement. Once again this week there was a slight drop in new unemployment claims. Although it is good news to see claims falling, concern remains that the number of existing unemployed is increasing. This rising trend shows that companies are still very slow to hire new staff.
Economic reports on tap for next week are:
• Tuesday May 18th - Housing Starts
• Tuesday May 18th - Producer Price Index
• Wednesday May 19th - Consumer Price Index
• Thursday May 20th - Jobless Claims

Your Mortgage Professional for life,

JJ Mack
Granite Funding Group
916-517-1800 x300

Mortgage Weekend Update - 04/30/2010

2010-04-30T10:40:00.000-07:00

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

Your Mortgage Professional,

JJ Mack
916-517-1800 x300

Weekend Update - 04/26/2010

2010-04-26T11:56:00.001-07:00

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

Your Mortgage Expert,

JJ Mack
916-517-1800 x300

Weekend Update - 04/16/2010

2010-04-16T13:47:00.001-07:00

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:
• Thursday April 22nd - Producer Price Index, Existing Home Sales and Jobless Claims
• Friday April 23rd - New Home Sales

Your Mortgage Professional,

JJ Mack
916-517-1800
916-390-2463

Mortgage Update - 04/09/2010

2010-04-09T10:10:00.000-07:00

In a week absent of much major economic news, we certainly have had more than enough reporting on the return of Tiger Woods to entertain us. I'm sorry but can someone please explain to me how what Tiger does every second of his life impacts my ability to earn a living? (Sorry I just had to vent for a moment) - Now let's move on to less important things like the markets, interest rates and the state of the economy.
Before I go any further, let me apologize in advance for any sarcasm you may see in this weeks report. I am coming to the realization that there are no experts in the prediction of the economy and my report below will prove that.
Pending Home Sales reported in the month of February increased 8.2%. Experts were expecting a decline of 1%. (Between me and you, I am wondering what information the experts use to make their predictions. I think almost anyone in the real estate or mortgage business could have told them that there was an increase in contract signings in February from January, but somehow the experts were predicting a decline.)
"Hey housing experts, try asking those of us in the business and you will be far more accurate in your predictions."
The rapid increase of mortgage rates running from last week into this week has subsided for the moment. Last week's better than expected economic reports were the driving force behind the increases. This week's economic reports have once again renewed concerns over the pace of the recovery and the global economy. The major reports contributing to the reversal in optimism are:
• Concerns over the stability of the Greek economy have the dollar rising in value and pushing investors toward the purchase of U.S. securities driving down bond yields..
• Jobless claims unexpectedly rose this week renewing concerns about employment.
• The 10YR treasury auction had much greater demand than expected driving bond yields lower.
In regard to the treasury auction, the concern has been that once the Fed stopped their bond re-purchase program, investors would demand higher yields driving up interest rates. Although it started out like that last week, the focus now seems to have turned back to the fact that the economy is still not very strong and the safety of U.S. treasuries is where institutional investors want to invest their money.
Ben Bernake also released a statement on the economy which was interpreted as the government still predicting economic growth and recovery to remain slow for quite some time. Additionally, housing continues to remain a big concern and a drag on the recovery as well.
Next week may be a very volatile week in the markets in that unlike this week which was quiet, next week a number of significant reports are being released. (Buckle up it could get rough)
• Wednesday April 14th - Consumer Price Index and Retail Sales Reports
• Thursday April 15th - Weekly Jobless Claims, Industrial Production and the Housing Market Index
• Friday April 16th - Housing Starts and Consumer Sentiment

Your Mortgage Consultant

JJ Mack
916-517-1800 x300

Weekend Update - 04/04/2010

2010-04-04T22:14:00.000-07:00

This week's economic data has shown a rising trend in the stock market, manufacturing and consumer confidence. As we have all witnessed, the stock market is hitting a new 18 month high and does not seem to be relenting on continuing to climb. The manufacturing index and consumer confidence have been showing small signs of steady improvement as well.
The questionable side of this week's economic report seems to be mostly real estate related. Depending on how you want to interpret the The Case-Shiller Housing Value Index report you can draw a conclusion that the news is either positive, or negative.
I consider myself reasonably astute in understanding the markets and economic reports, however I am at a loss with this latest report. For this reason I pasted the commentary from Bloomberg.com below so you can draw your own conclusion regarding house values.
From Bloomberg.com
Case-Shiller points to continued gains for home prices in January, gains that may be accelerating given more recent data on new and existing homes. Case-Shiller's adjusted reading for its composite 10 index shows a solid 0.4 percent gain in the month, the second straight 0.4 percent gain. The 20 index shows a second straight 0.3 percent gain. Note that home prices swing lower in the light demand months of the winter, a factor to keep in mind when looking at the unadjusted rates. Unadjusted data, which the news wires run prominently, show a third straight 0.2 percent monthly decline for the 10 index and a very deep 0.4 percent decline for the 20 index.
So, what do you think? Is it Positive or Negative? (I couldn't figure it out myself however when I drink a beer, or a few of them this weekend, I will revisit the report. Although by then it won't matter because it will be considered old news.)
Regardless of your interpretation of the above Bloomberg.com report, more and more concern is being expressed over the future of housing values. With the combination of the tax credit expiration only 30 days away, along with the end of the government's bond re-purchase program, housing is expected to be impacted. The end of the tax credit is expected to drive down already hurting housing demand. Additionally, if mortgage rates rise as is predicted, then that will be a double whammy impacting the housing market.
As much as the odds on housing being negatively affected in the coming months due to the above circumstances, the reality is that it will be more perception than financial. The reason is that lower house prices with higher interest rates have little impact on housing affordability as long as the changes are not extreme. Although a housing decline will not be favorable news to any existing homeowners, the news of lower housing prices will most likely bring more buyers into the market even if interest rates rise half to one percent.
Economic data to be released next week:
• Monday April 5th - Pending Home Sales
• Wednesday April 7th - 10 YR Note Auction
• Thursday April 8th - Weekly Jobless Claims

Your Mortgage Consultant,

JJ Mack
916-517-1800
916-390-2463

Weekend Blog - 3/26/2010

2010-03-26T13:57:00.001-07:00

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

Have A Great Weekend!

Your Mortgage Professional,
JJ Mack
916-517-1800 x300
916-390-2463

Weekend Update - March 19, 2010

2010-03-19T12:56:00.001-07:00

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

Have A Great Weekend!

JJ Mack
Mortgage Consultant
916-517-1800 x300

Weekend Update - March 12, 2010

2010-03-12T17:48:00.000-08:00

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.

JJ Mack
Your Mortgage Consultant
916-517-1800 x300

3/5/2010 - Weekend Update

2010-03-05T15:47:00.000-08:00

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.

Have a Great Weekend!!

JJ Mack
Your Mortgage Professional
916-517-1800 x 300

February 19, 2010 - Weekend Update

2010-02-19T14:00:00.000-08:00

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
**Special Note: The government will be holding bond auctions throughout the week. The appetite for bonds by investors can have a significant impact on mortgage rates.

Weekend Update - February 12, 2010

2010-02-12T14:59:00.000-08:00

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

Have a good weekend!

JJ Mack!

Weekend Blog - February 6, 2010

2010-02-06T21:03:00.000-08:00

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

Have a good weekend!

JJ Mack

Weekend Blog - January 29, 2010

2010-01-29T12:47:00.000-08:00

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

Have a good Weekend!

JJ Mack

Weekend Blog - January 22, 2010

2010-01-22T14:54:00.000-08:00

Another week, and another round of worse than expected economic news, that for the most part seems to be catching the economists, analysts, and any other so called experts by surprise. For months now we are told we are in a healing and growth period, yet there are more signs recently that have many investors concerned about the market.

The rumored announcement by China officials that the Chinese government is shutting down government lending for the remainder of January has many markets around the world in a panic. The Chinese market is showing signs of weakness and in this day of the existence of a world economy, problems in China would undoubtedly have an impact on world markets everywhere.

The Obama administration has proposed significant regulations to be placed on the nation's largest financial institutions. These proposed restrictions would limit any large financial institution in both size, and their ability to freely determine what they can invest in. The goal of such regulation is to prevent a repeat of the economic crisis we have just experienced. However, these same restrictions would cause banks to limit the amount of money they have to lend which would have a negative impact on economic recovery and growth.

Jobless claims hit a 2 month high last week exceeding analyst estimates by 42,000. Manufacturing dropped unexpectedly as well reversing the growth trend we have been seeing for many months.

The predominately weaker than expected economic news reports have been hammering the stock market with us seeing significant drops on Wednesday and Thursday. The bond market has been the benefactor of all this negative news as we have seen an almost ¼ point drop in mortgage rates in the last week.

In housing news, it was reported this week that housing starts dropped 4% which was much higher decline than expected, especially when experts were calling for an increase. On the bright side of housing, it was reported that new construction permits increased 10.9% which is a sign that builders are coming back into the market and that should hopefully translate into better housing numbers in the coming months. Only time will reveal the truth!!!

HUD has announced some sweeping changes to the FHA lending program. The changes will most certainly have a negative impact on a borrower's ability to qualify for FHA financing. The first change enacted and scheduled to go into effect on April 5, 2010 is the increase of the FHA Insurance Premium from 1.75% to 2.25%. Other changes being discussed but not yet formally announced are lower seller paid closing cost limits as well as higher down payments for lower credit scoring borrowers. It is expected in the next 30 days a number of announcements from HUD will be forthcoming on new policy and procedures regarding the FHA program. Stay tuned for more updates.

Economic news week scheduled for the week of January 25th:

• Monday January 25th - Existing Home Sales
• Tuesday January 26th - Case-Shiller Housing Price Index
• Tuesday January 26th - Consumer Confidence
• Wednesday January 27th - New Home Sales
• Thursday January 28th - Jobless Claims

Have a great weekend!

JJ Mack