Jan. 13 Tahoe Mortgage Update
January 13th, 2010Concerns are increasing: We may see a spike in interest rates and, at the same time, a plunge in the prices of some commodities. It is surely worth making this possibility clear to potential homebuyers…because now, when rates are attractive and prices have stopped falling and the $8,000 and $6,500 tax credits for homebuyers are in place–now is surely a great time to buy a personal residence. And it isn’t necessarily a good bet to wait for a better time.
We hope homebuyers can understand this. Like you, we wish as many people will be able to take advantage of this incredible buyer’s market as possible.
Current interest rates are as follows:
30 year fixed conforming rates (for well qualified buyers who are purchasing a primary or secondary residence): 5% with no points.
Jumbo 5/1 ARMS with 30% down (primary residences) are 4% with no points up to $850,000. With 25% down, the interest rate on the 5/1 ARM is 5.25% (no points).
Steve Peterson
Branch Manager, Sierra Pacific Mortgage
Office: 888-232-7687 Cell: 775-219-7151 Fax: 866-649-3235
January 13, 2010
KEY INDICATORS
Gold $1129.10/ounce [up]Crude Oil (Brent) $79.00/brl [down]U.S. Dollar to… Euro .6900 [down] Japanese Yen 90.90 [down]6-mo Treasury Bill Yield 0.12%10-yr Treasury Note Yield 3.82%[6-mo down 3 bps, 10-yr up 7 bps]11th Dist Cost of Funds 2.094%[+]30-yr Fixed-rate Mortgage 5.48%15-yr Fixed-rate Mortgage 4.94%1-yr ARM 4.50%[HSH averages rates: 30-yrdown 10 bps,15-yr down 9 bps; 1-yr ARM down 22 bps]
Mortgage Bankers Association Mortgage Applications Index week ending 1/1[Index plunged in week ending 12/25/09] Overall 462.2 (up 0.5%; down 22.8%the week prior) Purchase Money Loans 212.1 (up 3.6%; down 4.0% the week prior) Refinancing Loans 1976.9 (down 1.6%; down 30.5% the week prior)
Jobless Claims 1/2 434,000 – prior week 433,000 – continuing claims fell to 4.802 m
ISM Non-Mfg Index Dec Up from 48.7 to 50.1
Employment Report Dec 85,000 payroll jobs lost – unemployment remained at 10%
Weekly Commentary
A 10% unemployment rate understates actual unemployment because it doesn’t take into account the unemployed who have simply given up looking for work for the moment. A more accurate assessment is 17.3% unemployment.
This is grim, and it is chained to the current recovery like an anchor, keeping personal spending from rising significantly. It is worth noting, too, that personal bankruptcy filings rose by 32% in 2009. And worth noting that, with people combining their living spaces and moving in with family, the vacancy rate for apartments rose to 8% in 2009, a 30-year high. Landlords, in response, have thus far lowered rents by 3%.
In other words, we seem to be bouncing along the rocky bottom of this recession. Though we can detect a probable rising trend for the economy, the final results of the recession are far more visible to the naked eye. Speaking of rising trends, though, The Economist, the London newsweekly, noted this week that the unveiling of the new skyscraper in Dubai—the Burj Khalifa, now the world’s tallest building—was in keeping with past skyscrapers, which were “commissioned when money is cheap and optimism about economic growth is at its height,” but are “often finished when the champagne has gone flat.”
The Economist, along with other analysts, worries as well that the prices of many commodities are rising too high thanks to the cheapness of borrowed money today. Money is so inexpensive to borrow, remember, because of the support provided to the credit markets by the federal government. Last week, the 2-year Treasury note yield actually fell below 1%. No wonder banks have been slow to make riskier loans when they can borrow nearly-free money and take the gains from placing that money in nearly-risk-free investments.
But the risks are growing. The yield curve, if defined as the gap between the 2-year T-note and the 30-year T-bond rates, has never been this high before. That suggests something is going to snap.
“Interest rates will stay low only if growth remains slow,” The Economist observes. “But if economies grow slowly, then profits will not rise fast enough to justify current [stocks’] share prices…. If, on the other hand, the markets are right about the prospects for economic growth, and the current recovery is sustained, then governments will react by cutting off the supply of cheap money later this year.”
Either eventuality could disrupt the economy. We’ll watch closely.
