Steve Peterson, Sierra Pacific MortgageOffice: 888-232-7687 Cell: 775-219-7151 Fax: 866-649-3235
Conforming 30 year fixed rates are currently 5.00% with no points (primary residence with 20% down on a single family dwelling, excellent credit, etc.).
The best jumbo rates are 4.00% with no points for 5/1 ARMS for loan amounts up to $850,000 (Primary residence, SFD, 70% loan to value, Nevada, etc.).
The stock markets gave a relatively weak performance in January, especially after the strength of 2009. Tradition has it that a poor January forecasts an ailing market for most of the rest of the year. And indeed, I suspect it will be a rougher path for at least the first half of this year than it was for the second half of last year.
One of the main problems is that the federal support of interest rates and lending must be withdrawn as soon as possible. The White House is talking (yes, houses can sometimes talk) about supporting today’s weak lending to small businesses, but we aren’t likely to see many new lending/support programs. Indeed, the Fed’s support of low mortgage rates is scheduled to cease at the end of March. You can already feel the worries about this in the inclination of the stock markets to decline.
Interest rates are hanging in there, but it’s difficult not to believe that the end-of-March withdrawal of support will push rates a bit higher. Respected mortgage analysts see rates rising at least a half a percent, which won’t bring down the real estate recovery, such as it is–but won’t help, either.
The path to recovery is indeed a rocky one. Thankfully, it still seems to be headed in the right direction.
February 3, 2010
KEY INDICATORS
Gold $1115.30/ounce [up]Crude Oil (Brent) $75.10/brl [up]U.S. Dollar to… Euro .7166 [up] Japanese Yen 90.38 [up]6-mo Treasury Bill Yield 0.16%10-yr Treasury Note Yield 3.65% [6-mo up 2 bps, 10-yr up 3 bps]11th Dist Cost of Funds 1.828%[-]30-yr Fixed-rate Mortgage 5.39%15-yr Fixed-rate Mortgage 4.81%1-yr ARM 4.61% [HSH averages rates: 30-yr down 3 bps,15-yr down 5 bps; 1-yr ARM down 12 bps]
Mortgage Bankers Association Mortgage Applications Index week ending 1/22 Overall 513.9 (down 10.9%; up 9.1% the week prior) Purchase Money Loans 215.6 (down 3.3%; up 4.4% the week prior) Refinancing Loans 2260.4 (down 15.1%; up 10.7% the week prior)
Jobless Claims 1/23 470,000 – prior week 482,000 – continuing claims edged to 4.602 m
New-Home Sales Dec Down 7.6% from Nov – down 8.6% from Dec 2008
Gross Domestic Product (GDP) 4th quarter 2009 Up 5.7%
Weekly Commentary
“The United States economy saw very strong expansion in the fourth quarter [of 09], but that is unlikely to persist through most of 2010. Instead, the economy will see a period of weak growth until demand fundamentals start to improve toward the end of this year.” [Augustine Faucher, Moody’s Economy.com]
Personal income rose by 0.4% this past December. It had risen a revised 0.5% the month before. As a result, consumer spending was up 0.2% in December—but the savings rate rose once again to 4.8%. Instead of running out and spending the bit of extra cash most Americans are experiencing, they’re saving it, it appears.
At the same time, mortgage applications remain very weak, indicative of little to no improvement for real estate sales volume in the immediate future. The December Pending Home Sales Index, which keeps track of how many new purchase contracts are signed in a given month, rose a tepid 1% after its 16.4% plunge in November.
Mortgage rates are very slightly lower, as the credit markets fearfully anticipate the Fed’s withdrawal from its season of buying up mortgage-backed securities. The Fed, as you doubtless know, has been helping to keep rates low by making sure the massive supply of mortgage-backed securities available for purchase doesn’t exceed the demand from buyers…by being a buyer. As of the end of March—unless the Fed changes its mind—those mortgage-backed securities will have to be purchased by investors. The Fed will remove the training wheels, so to speak.
Analysts have suggested that mortgage rates will climb by at least a half a percent as a result of the Fed’s withdrawal of support. It’s difficult to predict. The Fed’s move, after all, could be perceived as a signal of confidence in the MBS market. But it is probable that we’ll see the markets stirred up, with a tendency toward slightly higher rates, as we move toward the end of March.
It is a test of an as-yet-unanswered question: Can this economy continue to recover without massive federal support? Most economists believe it can—though you don’t have to search hard to find someone who thinks we’ll slip back into recession. Still, we’ll probably see rates rise a bit, plateau at their new level, and hold for a few months. Today’s lowest rates may vanish relatively soon.
