1/27 Weekly Mortgage Update- Steve Peterson
Steve Peterson, Sierra Pacific MortgageOffice: 888-232-7687
Despite the weak existing sales report–relatively easily explained by
the timing of the $8,000 tax credit expiration–the real estate
recovery does seem to be moving forward, albeit very gradually.
It is worth paying close attention to economic indicators for quite
some time to come. They are virtually all the markets have to go on.
Their initial impact can push the markets up or down and then, as
reality seeps in and investors read the indicators a bit more closely,
the markets tend to correct slightly…and we wait for the next
indicator du jour to rock the boats.
This is not a terrible thing, as you’ve most likely noticed. Interest
rates have been running in a narrow channel that is blissfully low.
Stock markets have been edging up, mostly. And the occasional sound
and fury doesn’t clamp the lid shut on the housing market. Thus, it
appears, will the market wend its way back to health.
We hope your business is doing the same–getting healthier–only more
so.
Please find attached this week’s economic update. A copy of it is also at the bottom of this email in case you are not able to open the attachment.
Conforming 30 year fixed rates are currently 4.875% 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.).
January 27, 2010
KEY INDICATORS
Gold $1100.10/ounce [down]Crude Oil (Brent) $73.22/brl [down]U.S. Dollar to… Euro .7099 [up] Japanese Yen 89.70 [down]6-mo Treasury Bill Yield 0.14%10-yr Treasury Note Yield 3.62%[6-mo up 1 bp, 10-yr down 8 bps]11th Dist Cost of Funds 2.094%[+]30-yr Fixed-rate Mortgage 5.42%15-yr Fixed-rate Mortgage 4.86%1-yr ARM 4.73%[HSH averages rates: 30-yrup 3 bps,15-yr up 9 bps; 1-yr ARM up 78 bps]
Mortgage Bankers Association Mortgage Applications Index week ending 1/15 Overall 575.9 (up 9.1%; up 14.3% the week prior) Purchase Money Loans 223.0 (up 4.4%; up 0.8% the week prior) Refinancing Loans 2663.8 (up 10.7%; up 21.8% the week prior)
Jobless Claims 1/16 482,000 – prior week 444,000 – continuing claims edged to 4.599 m
Conference Board Index of Leading Indicators Dec Up 1.1% – Nov was revised up 0.1% to 1%
Existing Home Sales Dec Down 16.7% from Nov
Producer Price Index (PPI) Dec Up 0.2% – core unchanged
Weekly Commentary
“Under [the best] circumstances, this year will be the first time since 2005 that residential construction supports the nation’s economy rather than weighs on it. The support the economy will receive from homebuilding will be modest, however. Housing starts will run far below the trend pace this year and will not reach a normal pace until 2012.” [Celia Chen, Moody’s Economy.com]
The best of circumstances, in this case, would include “job losses abating, a number of foreclosure modifications working, and restored confidence in the economy and the housing market”—all of which is uncertain, at best.
Certainly, the nation’s mood regarding the housing market was not elevated by the 16.7% monthly decline in existing-home sales. But let’s look at this more closely. There’s good news to be found.
The existing-home sales report tells us about closed sales, not about newly-signed purchase contracts. So what we have here is the number of closings in the month after people stopped buying because they thought the $8,000 first-time homebuyer tax credit had expired. This is like the car sales in the month after the cash for clunkers program was finished. Or the sales in a department store after the two-week “80% off everything” discounting ceases and prices rise to their old levels.
With the $8,000 tax credit program extended and expanded (with a $6,500 tax credit program for “move-up” homebuyers), we already have evidence that sales are gradually starting to regain their momentum. (What happens in July, when this program has expired, remains to be seen.)
And notice the little-reported aspects of the existing-home sales report: “For the first time since 2006, the median existing-house price is up year over year.” This is a very positive sign, suggesting that home prices may soon start firming. And “on a year-ago basis, sales are up strongly, led by the Northeast with a 21% gain. The South and West follow with gains of about 15%, and Midwest sales grew by 9%.” [Quotations from Celia Chen.]
Clearly, there are many ways to read economic indicators. This report suggests that we look deeper into what the numbers tell us rather than merely at what the headlines declare, and that we look at what has happened over the longer-term, not just short-term changes. One other piece of data: fourth-quarter sales were 5% higher than were third quarter sales, even with this decline, and posted the first annual gain since 2005.
