Good morning
The stock market opened up this morning, but quickly turned into negative territory, in spite of better than expected retail stores earnings, and a word from the Feds that NO banks are in danger of insolvency as a result of the Stress tests. However, at least 10 banks did show less capital reserves than required and will have to take action to increase those reserves over the next 6 months. It is not anticipated that most of the banks will require more capital infusion from TARP funds, but those funds are available if the need arises. Most banks are being urged to seek capital from private money sources, which includes conversion of government (taxpayer) owned preferred stocks to common stock, or issuing more common stock to raise capital. Bank of America was found to require that most capital ($34B), followed by Wells Fargo (15B). Some banks, such as JP Morgan Chase, are fine, and need no further capital infusions at this time.
White house spokesman Robert Gibbs suggested yesterday that the Obama administration may seek management changes at some of the banks to ensure that the right people are in place to sustain the banks' viability.
Additionally, the markets are a bit on hold in anticipation of the release of April's employment statistics tomorrow morning. There have been several employment reports already released which hint at some improvement in the employment picture, and the economy in general. Still, the report tomorrow could be a major market mover, and could (keep your fingers crossed) drive mortgage rates down again. In the meantime, this morning the yield on the 10 year Treasury bond rose 10 basis points over yesterday's close. But, mortgage rates are holding steady so far, this morning. It is possible that the payroll report, due out tomorrow, could show another 600,000 workers lost jobs last month, and unemployment figures as high as 8.9% nationwide.
Ironically, some of the reporters on the financial news shows are heralding news such as worker productivity up for the month, as good news. If worker productivity is up, could it be because so many people have lost their jobs that the remaining workers are required to pick up the slack? Is that good news? And, if in fact, those fewer workers are able to keep pace with the business requirements, what does that say about the potential of rehiring all those workers who were let go? Just food for thought as my mind mulls over the news being released.
Ben Bernanke reported to lawmakers earlier this week, that the Feds expect the economy to continue its bottoming out process for the rest of this year. We also might begin to see an increase in GDP by the end of this year.
Keep your eyes on gas and oil prices. As of this morning, oil is trading at $58+ per barrel, the highest prices we've seen in 6 months. Wholesale costs for gasoline have also risen from $1.47/gallon just a couple weeks ago, to close to $1.70/gallon this morning. Prices are on the rise at the pumps.
On a lighter note - the weather forecasters are saying that the rain will cease for a few days, beginning this afternoon. We could see sunshine and possibly 70 degrees tomorrow and this weekend. Let's all celebrate our Moms! The weather is cooperating.
This morning I received a lovely surprise from my son in law. Did you all know that I'm Mother of the Year? If you would like to send your mother a "customized newscast" celebrating her as "mother of the year," click on the link below and create a surprise for her. It made me smile, and I'm sure will have the same effect on mothers everywhere.
http://news.cnnbcvideo.com/taf.html?p=moveon
Enjoy the day today - and Celebrate your Mothers this weekend. It's a lot of work, being a mom, but always rewarding.
Best regards,
Shelby Bateson
Town & Country Mortgage
503-819-6545 phone
Lic # ML-3604
* Best rates apply to borrowers with Loan to Value at or below 90% and credit scores of 740+. ** Best FHA rates apply to credit scores of 620 and up. There are upward rate adjustments for lower credit scores on all loan programs. All rates are subject to change without notice. These rates are NOT APRs - do not include closing costs.
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Yesterday we saw one of the most volatile days I can remember. It was like a nightmare watching rates JUMP higher and higher as the day progressed. By late afternoon, most of us in the business were in shell shock. Unfortunately we're still there this morning.
As the Administration continues to sell T bonds, investors are pulling out of that safe haven in search of better returns on their investments, AND fear that U.S. debt is getting out of hand. The bond sell off started with institutional investors (mutual funds, hedge funds, etc) dumping their portfolios, and banks and loan servicers followed suit. The end result is that the 10 year bond yield rose to a record high for 2009 (breaking through 2 support levels), and closed at 3.75%. Remember that just a week ago, that yield was down around 3.15%. Of course, mortgage rates followed with a vengeance. We opened the day yesterday with 30 year fixed rates at just under 5% - and closed with rates at 5.375%!! That's a major jump. And, what was so surprising yesterday was the rate of increase that occurred so quickly. We are more accustomed to a slow creep up, rather than a major jump.
Before we all go into a panic, please try to think back to March of this year, when we saw rates almost this high. We know the Feds do NOT want to see mortgage rates this high because this could stifle any progress we are seeing in our housing market - so we do expect them to step back in (where were they yesterday?). Bond yields are down a bit this morning, but there is no improvement in mortgage rates yet. As rate sheets come out this morning, I am seeing most lenders with rates at 5.25% and UP. There are NO lenders offering rates at 5% or lower at this time. We know the Feds have more funds to throw at mortgage bonds. We do not know if institutional investors will follow. It still remains to be see whether the Feds or the markets will rule the day on bond yields.
Oil prices are moving up steadily - now at $64/barrel. OPEC announced yesterday that they have no plans to cut back on production because demand is up in China. However, they are looking for a $75/barrel price by year end.
New housing purchases were UP for April, driven by low mortgage rates, and low prices as builders try to sell off their 10+ month inventory of empty houses. But, for the first time during this economic crisis, foreclosure proceedings of prime loan holders now exceed foreclosures for those with sub-prime and alternative forms of financing. The surprising statistic about this news is that up to 50% of those homes are empty. The borrowers have simply walked away from houses and stopped making payments. No statistics have yet been compiled for the reason for the huge numbers of empty homes, but it is suspected that loss of jobs and loss of values are the major reasons.
Durable goods orders were up for April, surprisingly led by auto purchases and an increase in defense spending as the war heats up in Afghanistan.
First time claims for unemployment insurance dropped again last week, hopefully an indication that the biggest rounds of "layoffs" may be over. Still we do know that all Chrysler plants are idle as they work throught their bankruptcy, and General Motors will very likely be filing their own bankruptcy proceedings shortly. In addition, business orders for computers are way off, so more layoffs are expected in the technology sector, and Boeing announced a cut of an additional 10,000 jobs, even as their orders for May more than doubled those received in April.
The number of people still collecting unemployment rose to a new record again last week (for the 17th straight week).
It's Thursday - another week winding down. Another day, another dollar? Let's hope so.
Make it a great day today.
1-866-626-2828 fax
Is this more good news/bad news? You bet it is.
A report from the National Realtors Association showed that sales of existing homes ROSE in April. This is very welcome news indeed, as buyers are starting to purchase those existing homes. However, 50% of those purchases were distress sales (foreclosures and short sales). First time homeowners, taking advantage of the $8000 tax credit being offered this year only, account for approximately 40% of these purchases. Sales increased 2.9%, but this still leaves a 10.2 month supply of inventory out there. And, another twist is that a good portion of the homes being purchased were bought by investors - not new home owners. Prices on homes have now rolled back to values seen in late 2002! We are still waiting to see if prices will continue to drop, or if this is a sign of some level of stabilization in prices.
We are hearing more about the builder and bank auctions out there - potential buyers are attending these auctions thinking they will be "stealing housing, and bidding as low as 20 - 30 cents on the dollar of the asking prices. Builders and banks are rejecting these lowball offers. If you are going to an auction - be prepared to make offers at or very near to the asking prices, OR be prepared to walk away with no purchase. Sellers are still unwilling to GIVE the houses away.
The yield on the 10 year bond has risen dramatically in the last couple weeks - up from 2.92% to 3.56% this week. If the Feds were not out there doing their best to keep mortgage rates down, we would have seen HUGE mortgage rate increases. As it is, most of you will now be looking at rates closer to 5% for a 30 year fixed rate loan, as of this morning. For those of you contemplating a home purchase at some time in the near future, you need to understand that IF mortgage rates continue to rise, even with falling home prices, you may not be coming out ahead. Your buying power drops as rates rise.
Here's an example:
Current Purchase price $300,000 with a down payment of 10% = Loan amount of $270,000
Mortgage payment at 4.625% = $1388.18
(If values continue to drop) Purchase price $290,000 with 10% down payment = Loan amount of $261,000
Mortgage payment at 5% = $1401.10
As you can see above, while the price dropped $10,000, the mortgage payment actually increased with the higher rate! This means that while you may have qualified to purchase that house at the higher cost, you might not qualify to buy the same house at the higher rate. Be aware, as you continue to watch the market.
Even as purchases on existing homes is increasing, foreclosures continue to rise as well. Foreclosure filings rose to a record high in April as the unemployment rate continues to rise as well. Nationally, the unemployment rate is approaching 10% - but here in Oregon, we are almost leading the nation at 12.1%!!!
Still, some home improvement stores, such as Home Depot and Lowes are reporting increasing sales and believe that the worst may be behind us. AND, 90% of economists interviewed recently believe we will begin to see housing stabilization, and an end to this recession by the end of this year.
It seems that every day brings more good news/bad news.
But, the sun is shining, and is expected to keep shining for the next 10 days or so
So - make it a great day today. And, please feel free to call anytime you have questions or concerns about your personal situation.
Happy Friday, and for most of us, Happy 3 day weekend!! The bond market will close early today, so lock desks for all lenders will close early as well. Monday is a holiday for all lenders.
This week has been quite the roller coaster ride, in terms of the stock market, the yield on the 10 year Treasury bond, and unfortunately, mortgage rates. Early yesterday morning, we hit that coveted 4.5% rate on the 30 year fixed rate mortgage for about 20 minutes. THEN, the S & P downgraded UK debt, and with an announcement that our own feds were going to issue an additional $100 billion in bonds, the fear that our own debt would be downgraded as well, drove the stock market down almost 200 points, accompanied by a massive sell off of our bonds. The yield on the T bonds opened at 3.14% yesterday, but closed at 3.45%! Mortgage rates followed. We saw no less than 5 rate increases during the day - the last one posting late yesterday afternoon.
This morning we were reassured that the rating for U.S. debt remains AAA (very solid), so the markets have settled down a bit. The yield on the 10 year bond is now at 3.42%, which means rates are still up over the open yesterday morning, but we are still solidly below 5% for the 30 year fixed. The outlook for the rating on U.S. debt remains uncertain as our national debt approaches 80% of our GDP.
Oil has moved up to $61/barrel. This, of course, will translate into higher prices at the pump, which of course, is not unusual for a holiday weekend. We've been hovering around that $60 mark for several weeks now anyway, but if you need to fill your tanks for the holiday weekend, it might not be too late this morning. All major indexes for the stock market are down this week, but commodity prices are on the rise.
Other news was mixed this week. New unemployment claims dropped, but the number of unemployed continues to rise in this difficult job market. Businesses continue to announce more layoffs in attempts to regain profitability. Consumer sentiment has dropped again.
Today is the beginning of the Rose Festival! The big fireworks show is tonight at Waterfront Village. We have been promised some surprises in terms of more spectacular fireworks this year. There will be special events on Memorial Day to honor our veterans. Events will include a parade, marching band, music, guest speakers, special memorial services, a 21 gun salute, National Guard fly-over, Portland Police Highland Guard bagpipe band, and more.
Can you remember the last time we had sunshine and the Rose Festival over the Memorial Day weekend?
Make it a safe and special weekend for you and your loved ones! Enjoy. We'll be back next Tuesday.
Who said this would be a quiet week for news and mortgage rates?
Mortgage applications dropped 8% last week, not surprisingly, since rates climbed with the yield on the 10 year Treasury bond. After months of yields below 3%, the yield on the 10 year bond shot up to 3.38% last week, and mortgage rate increases matched those yields. Today the yield is at 3.12%, down approximately .25%, and mortgage rates are following.
Several Federal spokespeople, including Ben Bernanke and Alan Greenspan, have tried to make it very clear that the intent is not to shoot for an specific interest rate, but more to keep rates at a point where there is apparent consumer interest. From my personal observations, it seems that when rates are below 5%, there is interest. When we see rates start to hit that 5% mark, the interest fades.
The stock market is DOWN again this morning, on the back of a lot of bad news. First, and perhaps foremost, is the huge issuance of new stock by banks and businesses with the need to raise new capital. With at least 50% of the investing public still on the sidelines (not investing now), the issuance of billions of dollars in stock is causing a glut on the market, which is driving prices down for almost all stocks.
And - in case you have not heard - Secretary of the Treasury Tim Geitner held a news conference this morning affirming the steps being considered to constrain executive pay, not just in the financial markets, but in virtually all industries. I was surprised to learn that in the 1990s, the average executive compensation was only approximately 2.5 times the average worker compensation in most industries. The exponential rise to the levels we saw just before the economic crash have been unprecedented, and were perhaps the reason for this economic crisis. So, in addition to increased regulations, we are likely to see a huge roll back in executive wages as well.
It should be interesting to see how this affects our economy.
And this is a quiet week?
Enjoy the day today. We're warming up for the weekend with temperatures expected in the mid 80s.
Warm regards,
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
The stock market is rallying again today, as many who have been sitting on the sidelines are anxious to get in on this rally. More good news this morning was the report of better than expected pending existing home sales nationwide.
The optimists out there think that this rally is "real." The pessimists are waiting for the "other shoe to drop." One analyst this morning reported that this rally is artificial, based on trillions of dollars of U.S. government debt that resembles a "Ponzi scheme." We are literally borrowing from one entity to pay off a prior debt to another entity, and in the end, this will catch up with us - this "bubble" will burst, and the stock market will crash again. He added that statistics like California Real Estate losses of up to 59% in value mean that much of that mortgage debt will never be recovered. Regardless of which school of thought you believe, there is still a lot of news out there that can move the markets this week.
The Treasury will be auctioning $155 billion in 1, 3, 10, and 30 year bonds. This issuance represents yet another record week for US debt which competes for the available investment dollars. With the stock market rallying, the price of bonds is likely to be lower (which will raise yields, which will raise mortgage rates.) Last week, as we saw the stock market start to rally, we watched the yield on the 10 year bond rise 1/4%, and unfortunately, mortgage rates also rose 1/4%.
We all want to see the stock markets recover and rally so we can recover some of the huge losses we have taken. But, we also want to see mortgage rates remain low. Can we have both?
Stay tuned. It might be a LONG volatile week.
Stay dry this week. We aren't expecting anymore monsoons like the one on Saturday, thankfully. But that was some drama for us, wasn't it? I hope you all came through it unharmed.
Mortgage applications fell last week, led by a huge drop in refinance transactions, by 18% from a the week earlier. It was the biggest decline since the beginning of February.
On Tuesday, we saw some of the best mortgage rates we have ever seen, though these great rates lasted a very short time before the markets reversed themselves. We saw multiple rate increases throughout the day leaving us back where we have been for quite a while - still fantastic rates under 5% for 30 year fixed rate mortgages. But, we did see that 4.5% for just under an hour in the early morning. (Remember that most people will not qualify for the best rate due to "risk based pricing" adjustments. But, most people WILL still qualify for an awesome 30 year fixed rate mortgage. Current rates are more than 1% less than the average rates for mortgages just 1 year ago. This equates to an average savings of $86/month per every $100,000 borrowed. With average loan amounts in the $200,000 - $250,000 range here in the metro area, that's a monthly savings of $215 - $258.
On Wednesday morning, I have one lender announcing a rate of 4.125% on a 5 year ARM loan, for any of you this loan might benefit. Remember, if you think you will stay in your home for more than 5 years, this might not be the best loan for you. But if your time frame is short, give me a call and we can work out if this would be advantageous to you. This is a special offering, with only one lender, so when these funds run out - this offer will end. As of this morning (Friday) this offer is still running.
Some new home builders are reporting that their orders for new houses are showing a slight increase, for the first time in 3 years!
Not all the news is good though - the U.S. economy shrank at a 6.1% rate in the first quarter of 2009 = the worst performance for our economy in 50 years! This reflects a record slump in business inventories and further declines in housing.
The stock market has been up most of the week on news that approximately 69% of the companies that have reported earnings so far, are actually beating expected earnings numbers. Of course, the expectations were greatly reduced from more prosperous times. Still, this is the first quarter in almost 2 years where so many companies are making positive comments about the outlook for the second half of 2009. While few economists expect the economy to turn to positive for the second quarter, there are signals that the shrinkage will probably happen at a slower pace.
The Feds met this week to discuss interest rates, and left them unchanged again. So, overnight lending rates for banks remain near 0%, which equates to a prime rate for consumers at 3.25%. The stock market loved this news, and other positive remarks from the Feds indicating that it appears the worst is over in this recession. We saw a huge rally, which drove the yields on the 10 year bonds to the highest levels we have seen in months. Unfortunately, mortgage rates rose in tandem, and are still up on the week.
For most of you, mortgage rates remain below 5% for a 30 year fixed rate mortgage.
We do know, as mentioned in prior newletters, that the Feds have been working to keep mortgage rates low by buying mortgage bonds. At this point, they have spent approximately 50% of the funds that were allocated for this purpose. At the current rate of spending - which began this month, these funds will run out, and mortgage rates will begin to float with the market, as opposed to the more controlled float we are seeing this month. For now though, we are hearing that Feds are cutting back on their bolstering of rates to watch how the market moves on its own. There are some signs "green shoots" that the worst is behind us.
If you have not yet applied to refinance your current mortgage and are watching for a particular target rate before you act, be aware that it is better to get your loan in process now, so we CAN lock when that coveted rate hits. Please believe me that I am watching rates and news all the time. I will keep you advised of any changes or trends.
If you would like to be added to my mailing list so you have UP TO THE MINUTE news, call or drop me a line today. You'll be on my list immediately and receiving updates almost daily.
Make it a great day today - and a great weekend too.Best regards,
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