MARKET RECAP

The week was light on housing and mortgage data, which was a good thing; most of what was released offered little cheer. For instance, Capital Economics reported that 2.5 million households are going through the foreclosure process, while 5.4 million households have missed at least one mortgage payment. Capital Economics also expects another three million homes to be added to the foreclosure rolls by the end of 2011. In short, Capital Economics is calling for a housing-market double-dip.

Problems persist aside from the above mentioned, to be sure. According to more than a few sources, housing prices are under pressure. ZipRealty.com, for one, has noted that more than 43 percent of home sellers cut their home’s list price in May, dropping the national median “for sale” price 2 percent to $265,000.

Of course, we can always question the usefulness of national data. But if we are going to talk nationally, it’s worth broaching the positive as well. On that front, Integrated Asset Services (IAS) reported that its house price index rose 0.9 percent in April from March. IAS also reported that three of the four US census regions showed home-pricing gains for the month.

The expiration of the federal homebuyer tax credits remains the elephant in the room, according to the commentaries, though it appears to be less of a concern for people who actually earn a living in the housing sector. Publicly traded homebuilders are seeing sales recover after an initial drop-off following April 30. A recent analyst’s report from JMP Securities noted that sales at several homebuilder communities in California, Texas, and Phoenix – those notoriously hard-hit regions – have begun to improve and are approaching pre-April numbers. JMP’s report also noted that many builders are raising prices and that higher-priced homes are moving briskly.

We noted in last week’s edition that the housing market could easily follow the automobile market’s lead, where sales initially drop after tax-credit expiration but then regain momentum. We’ve also noted – quite frequently in many past editions – that employment is the real cure to what ails us. Even though last week’s employment report was tepidly received, we remain encouraged. Job openings jumped to the highest level in 16 months in April, with the number of jobs advertised rising to 3.1 million from 2.8 million. The fact that private employers accounted for the entire gain was a particularly encouraging sign.

An improving jobs outlook is good news for the economy, but less so for mortgage rates. Yes, rates continue to hold at historical lows (with improvements being marginal at best), but Federal Reserve rumblings on raising rates continue to build, which is why we continue to counsel against procrastination on a refinance or a home purchase. We also counsel that money is available: little- or negative-equity does not exclude a favorable refinance.

Another Round of Reasonable Perspective

There is no question that we face formidable, long-term structural problems – problems that have made US markets less attractive in recent years. But these problems are surmountable. We have no qualms saying that the spirit of innovation and entrepreneurship that has defined America in past crises will prevail today.

Though housing remains tepid and debt and deficit levels are rising, compared to the rest of the world the United States is in good shape. Our economic fundamentals are sound: manufacturing levels are up and interest rates and inflation are low. What’s more, the broader economic recovery is translating into meaningful employment improvements and corporate-profit growth that could potentially reach a record high in this year’s third quarter.

Risks clearly remain, but markets are always fraught with risks: there are no perfect markets. To the contrary, when markets seem the most perfect, that’s when they are the most risky, as the housing and mortgage markets post-2006 have so painfully revealed. Things still aren’t so rosy today, but that’s okay, because we’re sure that better days lay ahead.

Graph Courtesy from NY Times in an article by Bob Tedeschi June 9, 2010.  Data and Commentary provided by Fred Ashe, from DE Capital Mortgage.

Mortgage rates again moved downward as European debt concerns continued to mount. In addition to Greece’s issues, Spain saw its debt downgraded last week. All of this continues to drive a major international “flight-to-quality” with US treasuries seen ns one of the safest places to stash money. Economically, our recovery does appear to be gaining some traction. While GDP was adjusted down slightly, we still have significant strength in manufacturing. Additionally, government stimulus has kicked home sales higher, with hopes that it can continue to hold its own without more intervention. While consumer moods have a long way to go to recovery, we’re seeing better readings.

Mortgage rates could easily move either way this week, or not at all. Analysts are expecting to see both ISM indices remain strong, and consensus estimates are calling for 500.000 new jobs to have been created last month. However, even with great domestic economic news, we could have continued concerns over Europe’s debt situation holding mortgage rates low.

Graph Courtesy from NY Times in an article by Bob Tedeschi May 25, 2010.  Data provided by Jeff Carpenter, Director of Finance, GFI Mortgage Bankers, Inc.

Mortgage rates again moved downward last week, as financial markets continued to absorb the reality of the challenges in Europe, especially in Greece. Additionally, concerns over other countries’ debt levels generated some introspection here over our burgeoning debt levels. On a brighter note, economic news continues to point toward recovery. Last week, Retail Sales rose 0.4%, which was slightly better than expected. Industrial Production also climbed by 0.8%, with factory usage again moving closer to pre-recession levels, fueling hopes for a sustained recovery.

Next week, markets will get some insight into inflationary pressures with both the Consumer and Producer Prices Indices. With most experts expecting very little, if any, inflation, a surprise increase in either index could move mortgage rates upward. Even with more and more signs of economic strength here in the US, any additional concerns regarding the situation in Europe will very likely help contain any sizable increase in mortgage rates, at least for the time being.

Graph Courtesy from NY Times in an article by Bob Tedeschi May 12, 2010.  Data provided by Jeff Carpenter, Director of Finance, GFI Mortgage Bankers, Inc.

Mortgage rates continued to remain fairly flat last week, even as the recovery seemed to solidify its footing. The Federal Reserve left interest rates unchanged, as expected.  The accompanying policy statement did note that “economic activity has continued to strengthen and that the labor market is beginning to improve.” while the Fed believes that it will keep interest rates low for an “extended period” of time, it is worth noting that interest rates below 1.0% can be considered low.  With the Fed Funds rate at 0.25%, the Fed could begin lifting rates at any time.  GDP came in at 3.2%, the third quarter in a row in positive territory.

Two reports will probably dominate this week’s economic news: the ISM Manufacturing Index, and the Employment Report.   If the ISM Index climbs above 60 and unemployment shrinks with more than 200. 000 jobs created last month, we could see mortgage rates moving upward.  However, even very positive reports will continued to be tempered by international concerns over Greece’s bailout.

Graph Courtesy from NY Times in an article by Bob Tedeschi April 28, 2010.  Data provided by Jeff Carpenter, Director of Finance, GFI Mortgage Bankers, Inc.

Mortgage rates moved link last week, even as economic data released during the week as slightly better than expected. Optimism that the economy may be getting some solid footing and moving from a technical recovery to a more broad-based recovery seems to be growing. The two largest areas that continue to hold out are the housing and employment markets. Last week, both new and existing home sales moved higher than expected. However, the expiring tax credit may be the reason for the underlying improvement. It will be a few months before we know for sure whether housing is really starting to improve, or is still struggling mightily.

This week is packed with important items for financial markets. We’ll get our first look at first quarter GDP numbers, two important consumer attitude surveys, and the Fed meets again. While rates are unlikely to be changed, analysts will scour the announcement looking for clues as to when rates could be lifted. The closer that event appears, the more likely mortgage rates will go up.

Graph Courtesy from NY Times in an article by Bob Tedeschi April 21, 2010.  Data provided by Jeff Carpenter, Director of Finance, GFI Mortgage Bankers, Inc.

Last week’s economic data continued to be mostly positive, but mortgage rates slid downward. This manufacturing-lead recovery continues to maintain its pace, with Industrial Production numbers revealing solid gains for manufacturing and mining issues. While the housing and labor market will likely be a major drag on the recovery for some time, retail sales did tick upward more than expected.  As economically positive as most of last week’s news was, inflation at the consumer level of the economy is all but absent.  This should enable the Fed to maintain its stance regarding low interest rates for the foreseeable future.

With the Dow moving over 11,000 last week and Treasury Secretary Timothy Geithner’s remarks this weekend about the economy growing faster than expected, we could see some additional volatility in the bond market.  If we get encouraging news, especially if it includes positive news on new and existing home sales, we could see mortgage rates begin moving upward again.

Graph Courtesy from NY Times in an article by Bob Tedeschi April 14, 2010.  Data provided by Jeff Carpenter, Director of Finance, GFI Mortgage Bankers, Inc.

Mortgage rates began heading upward last week as markets continued to digest the positive economic news from the previous week, and reacted to more positive news last week. The ISM Services Index rose sharply last week on the heels of a larger than expected increase in the ISM Manufacturing Index. While manufacturing has lead much of this current recovery, the increase in the Services Index reveals that we may be on the verge of seeing an even larger portion of the economy, services, moving into a sustainable growth situation

Without the support of the Fed’s program for buying mortgage-backed securities, next week could be one of the more volatile weeks we’ve seen in a while for mortgage rates. Many very important economic reports are due including Retail Sales and Industrial Production. If these two reports come in near expectations, it is very likely that mortgage rates will continue moving upward next week. However, a 0.0% or 0.1% change in the CPI could help temper that upward movement.

Graph Courtesy from NY Times in an article by Bob Tedeschi April 7, 2010.  Data provided by Jeff Carpenter, Director of Finance, GFI Mortgage Bankers, Inc.

Last week saw mortgage rates move slightly upward as some more signs of economic recovery appeared.  The esteemed ISM Manufacturing Index surged to 59.6, the best reading since 2004, suggesting that manufacturing will not be tapering off as some analysts had feared.  Consumer Confidence also moved upward, but still remains low compared to better economic times.  The latest employment data also suggested better times ahead with 162,000 jobs created last month, and no change to the unemployment rate. Last week also marked the end of the Fed’s program of buying mortgage-backed securities.  While there was certainly no major impact to mortgage rates, it will take a few months to sort out whether the timing was good.  Without the Fed’s support, rates will be influenced more now by economic factors.  If the economy improves, rates will move upward.

This week is a fairly light week in terms or economic news and data. We’re likely to see some upward movement in rates as the market digests all the data from last week.

Graph Courtesy from NY Times in an article by Bob Tedeschi March 31, 2010.  Data provided by Jeff Carpenter, Director of Finance, GFI Mortgage Bankers, Inc.

Last week saw mortgage rates again staying mostly flat with some mixed economic news. GDP for the last quarter of 2009 was revised downward to 5.6%, which was still a good improvement over previous quarters. Housing numbers were down again, giving some analysts concern about how housing will fair over the next few months, especially if rates start moving upward.

This week has some very important economic news for the markets to digest, including employment data, the ISM Manufacturing Index, and Consumer Confidence. With more signs that the recovery is slowing, every bit of data that reinforces that will help to hold mortgage rates from moving upward. However, the end of March is the end of the Fed’s program of buying mortgage backed securities. While this may pass as a non-event, it could also set mortgage rates on an upward trend that may last for some time. If equities continue to rally with good economic news this week, especially a drop in unemployment and a positive increase in jobs, we may see rates climbing in the near future.

Graph Courtesy from NY Times in an article by Bob Tedeschi March 24, 2010.  Data provided by Jeff Carpenter, Director of Finance, GFI Mortgage Bankers, Inc.

According to some analysts, mortgage rates again “wandered about aimlessly” last week. It is becoming more apparent that the current economic recovery will be a very slow and muted affair, at least for the time being. With manufacturing issues appearing to cool, consumers remaining on the sidelines, and, in last week’s PPI and CPI, inflationary pressures seeming to be nearly nonexistent. The Fed will likely be able to maintain its low rates for some time. The Fed’s policy statement last week said as much, with the Fed leaving rates unchanged again.

This week could be another week of the same for rates, but there are some unknowns coming. While many have pointed out that the Fed continues to base many tools available to influence rates, its campaign of buying mortgage-backed securities will come to an end on March 31st. While there appears to be some significant stability to rates right now, markets can turn quickly. Hopefully it will not happen, but even a false rumor could lead to a spike in mortgage rates in the coming weeks.

Graph Courtesy from NY Times in an article by Bob Tedeschi March 17, 2010.  Data provided by Jeff Carpenter, Director of Finance, GFI Mortgage Bankers, Inc.