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The stock market is staging a bit of a rally this morning after the jobs report for April came in somewhat better than expected.  After showing a loss of 699,000 jobs in March, those numbers dropped in April to to a much smaller loss of 539,000 jobs.  Much of this job loss reduction is due to the government hiring of census workers, while many large industries, such as Microsoft and Dupont are still announcing more layoffs.  And, of course, we can't forget the very probable continuation of layoffs in the auto industry.  The unemployment rate did rise to the expected 8.9% nationwide, the highest since September 1983.  The current tally of jobs lost so far in this recession now stands at 5.7 million.   

Economists in a Bloomberg survey predict that unemployment could rise to 9.5% by year end at the current pace of job losses predicted and announced. 

Fannie Mae has gone to the Treasury yet again for an additional $19B to offset more losses, as default rates on mortgages continue to rise.  On the upside, last week saw the first time in almost two years that loan applications for purchases were higher than applications for refinance transactions.  Approximately 30% of those purchases were foreclosed homes, or short sales.  Still, we are starting to see buyers coming out, as housing values are starting to show signs of stabilization (values are falling much more slowly - and in some areas not at all over the last 30 days).  With mortgage rates still under 5% for 30 year fixed rate loans, this is still very much a buyers market.  It remains to be seen how quickly the housing market will recover though.  It is forecast that roughly 30% of current homeowners would like to put their houses on the market once we see some stabilization.  That would mean that inventory will remain at 10 months or more for the foreseeable future.  But, it also indicates that there are many potential sellers out there who are unwilling to settle for these very low prices, which could further add to pricing stabilization.   

10 year bond yields continue to rise, up as high as 3.31% this morning, which is a rise of 15 basis points.  Most of the rise took place yesterday, which caused mortgage rates to rise several times yesterday afternoon.  Apparently there was a quick injection of Federal funds into the mortgage bond market, which has halted the rise this morning.  Nevertheless, the stock markets are anxiously watching the 10 year bond yield.  Everyone is aware that the pace of this economic recovery is dependent on a recovery in the housing market, which is relying on a continuation of low mortgage rates for the short term. 

We are continuing to see revisions to the Fannie mae/Freddie Mac loan programs, creating ever tighter lending guidelines for those loans designed to help homeowners who have loans owned by either Fannie or Freddie.  The most recent guideline restriction now limits loan amounts to a maximum of 110% of the appraised value of the house.  This 110% includes all mortgages against the house, regardless of the size of the loan being refinanced.  

If your home loan is owned by Fannie or Freddie, and you have not yet begun a refinance transaction, perhaps you should consider getting that started sooner rather than later.  We have seen multiple changes to the guidelines, each one eliminating more prospective borrowers, in the short month since this program was announced.  It is still a great loan program for those of you who qualify.  Still not sure if your home loan is owned by either Fannie or Freddie.  Drop me an email right now, and I'll do the searching for you.

shelby.tnc@comcast.net 

Enough doom and gloom.  This is Friday!  The sun is shining, and we have reason to celebrate this weekend.

Happy Mothers Day!

Bests

Shelby

503-819-6545