Time to Get off the Fence!!!
We have had wonderful 5% and lower rates for sometime but the market is ticking up!!!
See the note from a good mortgage officer I know, David Katz. He just sent this so you are
on top of the news!!!
David's own words:
Everyone: Interest rates have risen dramatically over the last two days. Current interest rates are now 5.50% for both conventional and government loans. The increase in rates is due to the investment market believing the Federal Government can no longer support the artificially low interest rates we have had over the past two – three months without creating inflation.
Following is an article from the Wall Street Journal that details this belief. Please call me if you have any questions. Rise in Rates Jolts Markets Wall Street Journal, By Liz RappaportMay 28, 2009Treasury yields and mortgage rates surged Wednesday to their highest levels since November, dealing a blow to the Federal Reserve's efforts to stimulate the economy by keeping borrowing costs low.The gap between yields on two-year Treasury notes and 10-year notes, known as the yield curve, widened to 2.75 percentage points, its highest ever. Stocks also slipped as investors worried that the higher Treasury yield could jack up market interest rates, damping economic recovery. The Dow Jones Industrial Average dropped 173.47 points, erasing nearly all of Tuesday's 193-point gain, closing at 8300.02.The Fed has made low mortgage rates a priority in its strategy to stem the U.S. recession. To achieve that, the central bank has been buying mortgage-backed securities and Treasurys. Through programs announced since last fall, it has bought more than $460 billion of mortgage-backed securities and more than $125 billion of Treasury bonds.But the winds turned against the Fed in recent days, as investors worry the government's approach could lead to inflation. The government will sell nearly $2 trillion in U.S. Treasury bonds this year to fund its stimulus programs, and investors worry there won't be enough demand for it. Slack demand would send bond prices down and push up the government's cost of raising money."The market is looking at the over $1 trillion deficit and how we'll finance it and concluding it is too big to finance without Fed assistance. But Fed assistance is causing inflation worries," says James Bianco, president of Bianco Research. "We're caught in a vicious cycle."Likewise, signs of a recovery in the U.S. and across the globe have prompted investors to move out of the relative safety of the Treasury market and into securities that may yield more, such as corporate bonds, stocks and even emerging-market debt. While that's overall good news for the U.S., it makes it harder for the Fed to help reinvigorate the battered housing market, seen as a linchpin of any recovery.With higher interest rates on the horizon, investors have been moving out of longer-term Treasury bonds and into shorter-term debt to avoid the risk of rising rates. The 10-year Treasury bond yield rose Wednesday to 3.695%, reaching an intraday high of 3.732%, up from 3.491% Tuesday night. Its yield has been rising steadily over the past two weeks from 3.103% in mid-May.Treasury traders have expected the U.S. central bank to intervene to keep the 10-year Treasury bond yield at 3.5%. But the Fed has not been so exact in its purchases."The market has built an expectation that the Fed will step in and buy more Treasurys and expand its program to support the markets," says Christian Cooper, interest-rate strategist at RBC Capital Markets. "With that failing to materialize, investors are exiting."Higher interest rates, in turn, make existing mortgage-backed securities less attractive, because newer securities would be filled with loans that pay more interest. Once Treasury yields solidly surpassed 3.5%, investors sold nearly $10 billion worth of bonds backed by mortgage loans, analysts estimate.The yield on mortgage-backed securities over comparable Treasury bonds widened Wednesday to 1.59 percentage points, from 1.38 percentage points Tuesday, according to FTN Financial. That's the market's biggest sell-off since November.The average 30-year mortgage rate jumped Wednesday to 5.29% from 5.03% the previous day, according to HSH Associates, a mortgage-data publishing firm. That's the most dramatic swing since March 19, after the Fed announced its plans to buy more mortgage-backed securities and U.S. Treasury bonds."The perception prior to this month was that the Fed controlled the mortgage rates," says Stuart Spodek, co-head of U.S. fixed income for BlackRock Inc. But in recent weeks, the market has lost that sense. "The market is looking to see what the Fed does in response."Wednesday's rise in rates may put pressure on the Fed to increase its planned purchases of Treasurys beyond the $300 billion already earmarked, analysts said. At the late April meeting of the Fed's Open Market Committee, the central bankers considered raising the amount but held off. Some analysts and traders said the Fed may need to address the market's reactions before its next June 24 FOMC meeting.On Wednesday, the Federal Reserve Bank of New York announced its latest round of Treasury purchases, which include fewer purchases than in the prior two weeks. In the first two weeks of June, the Fed will buy Treasurys four times. In the last full two weeks of May it bought five times, the Fed said.To be sure, a 10-year interest rate at 3.7% is not historically high, and a steep yield curve can be seen as a sign of strength in the economy. It suggests that investors believe prices will rise, and they are willing to sell out of ultrasafe Treasury bonds and buy riskier debt. A steeper yield curve is also good for banks, because it allows them to borrow in the short term at lower interest rates and lend at higher rates for longer periods.But rising yields also make the government's rescue efforts more expensive. The government could have to borrow more to finance bailouts, and the Fed itself could lose money on the mortgage-backed securities and Treasurys it has already bought. The Fed has said it may buy as much as $1.25 trillion of mortgage securities.Wednesday morning, before the market sold off, the Treasury held a record $35 billion sale of five-year notes. The offer was met with relatively strong demand from foreign and domestic investors alike, traders said."We've seen very good reception for Treasury issuance," said Marcus Huie, Treasurys strategist for Deutsche Bank AG. "The market is testing the Fed to hold the current yield levels."The record purchases by the Fed and a general sense that the global economy is finding a bottom has also weighed on the dollar, which had been seen as a safe-harbor currency during the financial storm. Concerns about the U.S.'s long-term fiscal health have weakened the dollar since the U.K.'s triple-A credit rating was put on a Standard & Poor's watch list last Thursday.While the dollar strengthened Wednesday against the euro, its broader trajectory in recent weeks has been downward.Moody's Investors Service affirmed the U.S.'s triple-A rating on Wednesday, despite "significant deterioration in the U.S. government's debt position," according to a company statement. Moody's identified the dollar's underlying strengths. "The global role of the U.S. currency also contributes to the ability of the economy and government finances to rebound," said Moody's Vice President Steven Hess
Thursday, May 28, 2009
Saturday, May 9, 2009
Brighter Days Ahead
Not Only is the Sun Shining!!
Thankfully the rain has let up in some of the most rainy areas of the country and those ravaged by storms. If only California could get more rain and take out the fire!!!
I hope that you already caught the update on the sun shining on the economy also!
USA Today reported what many of us in Real Estate know....more home are getting multiple offers and/or getting contracts more quickly. Yes, in areas like California, it is due to prices being down 39% . But in strong areas like Hampton Roads(Virginia Beach, Chesapeake, Norfolk, Portsmouth, Newport News, Hampton, Suffolk and Smithfield), the improved "news reports" are the driving force. Consumer confidence is rising as the 5% mortgage rates and $8000 1st Time Home Buyer Tax Credit is talked up by the likes of Suzy Orman, Oprah and so many more.
The reduction in job losses, though still very tough on those losing their position, has given a bounce to the Stock Market, a leading indicator, that better days are ahead.
Historically, the Stock Market, Housing Market and Labor Market are linked as we all will spend money we have rather than that we don't have...or won't have as the job is gone.
Thus, don't sit on the sidelines and let a great housing market slip by. IF you have a solid job and have that downpayment, nows the time to lock in a 5% and lower rates that will save you money for years to come!!
Looking for Brighter Days Ahead!!!
Thankfully the rain has let up in some of the most rainy areas of the country and those ravaged by storms. If only California could get more rain and take out the fire!!!
I hope that you already caught the update on the sun shining on the economy also!
USA Today reported what many of us in Real Estate know....more home are getting multiple offers and/or getting contracts more quickly. Yes, in areas like California, it is due to prices being down 39% . But in strong areas like Hampton Roads(Virginia Beach, Chesapeake, Norfolk, Portsmouth, Newport News, Hampton, Suffolk and Smithfield), the improved "news reports" are the driving force. Consumer confidence is rising as the 5% mortgage rates and $8000 1st Time Home Buyer Tax Credit is talked up by the likes of Suzy Orman, Oprah and so many more.
The reduction in job losses, though still very tough on those losing their position, has given a bounce to the Stock Market, a leading indicator, that better days are ahead.
Historically, the Stock Market, Housing Market and Labor Market are linked as we all will spend money we have rather than that we don't have...or won't have as the job is gone.
Thus, don't sit on the sidelines and let a great housing market slip by. IF you have a solid job and have that downpayment, nows the time to lock in a 5% and lower rates that will save you money for years to come!!
Looking for Brighter Days Ahead!!!
Monday, April 20, 2009
Don't Miss Home Buyers Seminar
Time is Drawing Short!!!
With all the dynamic news in the press and now getting to the general public regarding the top reasons to buy a home now:
1. Great Inventory at all Price Ranges
2. Very Competitive Home Prices
3. 1st Time Home Buyers Tax Credit--$8000
4. 5% and below Interest Rates....Best Rates Ever
Based on these great factors, home buyers are really hitting the market to find a new home.
With this in mind, a Home Buyers Seminar designed to explain the Tax Credit, the steps to buying a home, how to be pre-approved by and to find a quality Mortgage Lender and related topics is planned for April 30th.
Reply to this Blog, email me at bcerny@roseandwomble.com or call me at 757 580-6546 to register.
Registration ends: April 27th.
Don't miss out!!!!!
Sunday, April 19, 2009
Market Update---Trends and Key Reports
With the help of a great mortgage officer, Jim Belote, I have this information to share on trends and data that will impact the overall market and home sales specificially. Find Jim's contact information below!!!
Keeping you updated on the market!
For the week of
April 20, 2009
MARKET RECAP
The latest economic releases indicate the economy remains a mixed bag of nuts. Fortunately, the good stuff – the cashews, almonds, and hazelnuts – are accounting for more of the bag. For instance, banks continue to earn their way out of the mess they got themselves into in 2007 and 2008. JP Morgan Chase, Goldman Sachs and Citigroup all posted stout earnings last week, indicating that last year's financial crisis may turn out to be more of an inconvenience from this point forward as the banks continue to successfully clean house.
Cleaning house is an apropos term. Most of the major banks, along with Freddie Mac and Fannie Mae, say they have increased foreclosure activity in recent weeks, lifting internal moratoriums that temporarily halted the process. The recent change in attitude is one reason the number of foreclosures jumped 175,200 last month, according to Foreclosures.com.
The news on the foreclosure front isn't as dire as you might think. The foreclosure problem was always there. You could say that everyone had been whistling past the graveyard for the past few months. Now, it appears that banks have the confidence and financial wherewithal to address the issue head on. The good news is that the sooner the issue is addressed, the sooner it can be resolved.
Mortgage rates are still low, and fueling a bit of a refinance boom as such. Depending on FICO score, income, debt-to-equity ratio, and down payment, a 30-year fixed-rate mortgage can easily be had for under 5 percent – a bottom from a historical perspective. What's more, recent data on consumer prices suggest rates should remain low, at least for the near future, given that inflation is currently a non-factor. Keep in mind though, the Federal Reserve has been flooding the market with money over the past six months, which will eventually stimulate inflation, and therefore stimulate rate increases.
Economic IndicatorRelease Date and Time Consensus
Estimate Analysis Leading Indicators(March) Mon, April 20,8:30 am, et, 0.2%(Decrease)
Moderately Important.
The indicators are pointing to an economic upturn.
State Street Investor Confidence Index(April)Tues, April 21,8:30 am, et 73 Index
Important.
Recent index increases are reflective of greater risk acceptance among investors.
Mortgage Applications Wed, April 22,7:00 am, et None
Important.
Low rates continue to fuel a refinancing boom.
Existing Home Sales(March) Thurs, April 23,10:00 am, et 4.67Million(Annualized)
Important.
The recent sales numbers are suggesting the market has bottomed.
Durable Goods Orders(March) Fri, April 24,8:30 am, et 1.5% (Increase)
Important.
Increased buyer incentives are stimulating big-ticket sales.
New Home Sales(March) Fri, April 24,10:00 am, et 340,000 (Annualized)
Important.
New home sales have likely bottomed, but show few signs of improving anytime soon.
Focus on the Long-Term--- When times are tough, the first course of action is to cut back spending on personal and business expenses. In short, we are reacting to a distinction between risk and uncertainty, first noted by economist Frank Knight. Risk, according to Knight, describes a situation where you have a sense of the range and likelihood of possible outcomes. Uncertainty, in contrast, describes a situation where it’s unclear what might happen, let alone how likely the possible outcomes are. Uncertainty is always a part of business, but in a recession it dominates everything else; no one’s sure how long the downturn will last or whether we’ll go back to the way things were.
Uncertainty overwhelms the economy with a sense of “short-termism.” We lose the ability to see the forest through the trees. Short-term considerations trump long-term potential, so we cut back on investment, advertising, and overall business activity. But there’s a trade-off for doing so: numerous studies have shown that businesspeople who keep spending and keep working to build their business do significantly better when the economy recovers than those who made deep cuts during the downturn.
Today, most people are far more worried about sinking the boat than about missing it, and that creates opportunities for those of us who are far more concerned about missing it.
Thanks, Jim, for a great information!!!
Jim Beloite, 757 395-Loan , Union Mortgage
1206 Laskin Road, Suite 250, Virginia Beach, VA 23451
Keeping you updated on the market!
For the week of
April 20, 2009
MARKET RECAP
The latest economic releases indicate the economy remains a mixed bag of nuts. Fortunately, the good stuff – the cashews, almonds, and hazelnuts – are accounting for more of the bag. For instance, banks continue to earn their way out of the mess they got themselves into in 2007 and 2008. JP Morgan Chase, Goldman Sachs and Citigroup all posted stout earnings last week, indicating that last year's financial crisis may turn out to be more of an inconvenience from this point forward as the banks continue to successfully clean house.
Cleaning house is an apropos term. Most of the major banks, along with Freddie Mac and Fannie Mae, say they have increased foreclosure activity in recent weeks, lifting internal moratoriums that temporarily halted the process. The recent change in attitude is one reason the number of foreclosures jumped 175,200 last month, according to Foreclosures.com.
The news on the foreclosure front isn't as dire as you might think. The foreclosure problem was always there. You could say that everyone had been whistling past the graveyard for the past few months. Now, it appears that banks have the confidence and financial wherewithal to address the issue head on. The good news is that the sooner the issue is addressed, the sooner it can be resolved.
Mortgage rates are still low, and fueling a bit of a refinance boom as such. Depending on FICO score, income, debt-to-equity ratio, and down payment, a 30-year fixed-rate mortgage can easily be had for under 5 percent – a bottom from a historical perspective. What's more, recent data on consumer prices suggest rates should remain low, at least for the near future, given that inflation is currently a non-factor. Keep in mind though, the Federal Reserve has been flooding the market with money over the past six months, which will eventually stimulate inflation, and therefore stimulate rate increases.
Economic IndicatorRelease Date and Time Consensus
Estimate Analysis Leading Indicators(March) Mon, April 20,8:30 am, et, 0.2%(Decrease)
Moderately Important.
The indicators are pointing to an economic upturn.
State Street Investor Confidence Index(April)Tues, April 21,8:30 am, et 73 Index
Important.
Recent index increases are reflective of greater risk acceptance among investors.
Mortgage Applications Wed, April 22,7:00 am, et None
Important.
Low rates continue to fuel a refinancing boom.
Existing Home Sales(March) Thurs, April 23,10:00 am, et 4.67Million(Annualized)
Important.
The recent sales numbers are suggesting the market has bottomed.
Durable Goods Orders(March) Fri, April 24,8:30 am, et 1.5% (Increase)
Important.
Increased buyer incentives are stimulating big-ticket sales.
New Home Sales(March) Fri, April 24,10:00 am, et 340,000 (Annualized)
Important.
New home sales have likely bottomed, but show few signs of improving anytime soon.
Focus on the Long-Term--- When times are tough, the first course of action is to cut back spending on personal and business expenses. In short, we are reacting to a distinction between risk and uncertainty, first noted by economist Frank Knight. Risk, according to Knight, describes a situation where you have a sense of the range and likelihood of possible outcomes. Uncertainty, in contrast, describes a situation where it’s unclear what might happen, let alone how likely the possible outcomes are. Uncertainty is always a part of business, but in a recession it dominates everything else; no one’s sure how long the downturn will last or whether we’ll go back to the way things were.
Uncertainty overwhelms the economy with a sense of “short-termism.” We lose the ability to see the forest through the trees. Short-term considerations trump long-term potential, so we cut back on investment, advertising, and overall business activity. But there’s a trade-off for doing so: numerous studies have shown that businesspeople who keep spending and keep working to build their business do significantly better when the economy recovers than those who made deep cuts during the downturn.
Today, most people are far more worried about sinking the boat than about missing it, and that creates opportunities for those of us who are far more concerned about missing it.
Thanks, Jim, for a great information!!!
Jim Beloite, 757 395-Loan , Union Mortgage
1206 Laskin Road, Suite 250, Virginia Beach, VA 23451
Saturday, April 18, 2009
What Are Short-Sales
Today's topic is one of great confusion. It it has only gotten more confusing in the past few weeks since the latest Stimulus Package was passed.
By definition, a "short sale" is caused by a seller need to sell a home for less than he/she owes on the mortgage. Sounds pretty cut and dry. Yet it isn't.
GROUP 1: If you would be looking to sell and you are aware that you can't get what you paid for the house, you are a rare "short sale" and may not be defined as a short sale to boot. To be a short sale, you must owe more than the house is worth and not have the assets/job necessary to continue to make house payments. Yet, the key party in this definition will be the bank or mortgage servicer that is receiving your mortgage payments.
Group 2: The reason they will be a determining factor of this process is another group of possible "short sales" that the bank and the government(more later) aren't willing to help. These are the home owners that used the house to take two trips to Tahiti, buy two SUVs and 3 carat diamond with the "equity of their house" only to find out the "equity" has vaporized. Though being a Realtor, I can't say no one with this type of situation will be termed a "short sale"(Foreclosure would be more likely), but as I understand it, they will have great difficulty to get a bank or the government support for the bank to help with the loan.
Thus Group 1 must provide bank statements, credit card statements, past income filings and the like to a bank if seeking to modify their loan or to establish the need to sell short. The bank want to ensure the seller A) doesn't have the assest and job to continue to pay the mortgage or B) hasn't spent money "foolishly" allowing the house to be the "bank", thus spending their way into the crisis.
On top of it, due to the latest stimulus package, the Federal Govt has established a process to ensure that borrowers that are behind(but not due to excessive life style) can modify the loan to help a homeowner stay in their house or sell it short within in specific guidelines. As these guidelines vary among the various loan types, there isn't space here to discuss each program. Yet know that an "approved" short sale has involved detailed information from the seller to the bank describing the hardship causing the sale and why it should be defined as a short sale, the financial detail noted above and an appraisal for an "as is" sale to determine the selling price for the home.
Thus the Short Sale isn't mysterious!! It just has a lot of twist and turns that make any seller or buyer want to consult a Realtor to help them throught this ardous process.
Question???
By definition, a "short sale" is caused by a seller need to sell a home for less than he/she owes on the mortgage. Sounds pretty cut and dry. Yet it isn't.
GROUP 1: If you would be looking to sell and you are aware that you can't get what you paid for the house, you are a rare "short sale" and may not be defined as a short sale to boot. To be a short sale, you must owe more than the house is worth and not have the assets/job necessary to continue to make house payments. Yet, the key party in this definition will be the bank or mortgage servicer that is receiving your mortgage payments.
Group 2: The reason they will be a determining factor of this process is another group of possible "short sales" that the bank and the government(more later) aren't willing to help. These are the home owners that used the house to take two trips to Tahiti, buy two SUVs and 3 carat diamond with the "equity of their house" only to find out the "equity" has vaporized. Though being a Realtor, I can't say no one with this type of situation will be termed a "short sale"(Foreclosure would be more likely), but as I understand it, they will have great difficulty to get a bank or the government support for the bank to help with the loan.
Thus Group 1 must provide bank statements, credit card statements, past income filings and the like to a bank if seeking to modify their loan or to establish the need to sell short. The bank want to ensure the seller A) doesn't have the assest and job to continue to pay the mortgage or B) hasn't spent money "foolishly" allowing the house to be the "bank", thus spending their way into the crisis.
On top of it, due to the latest stimulus package, the Federal Govt has established a process to ensure that borrowers that are behind(but not due to excessive life style) can modify the loan to help a homeowner stay in their house or sell it short within in specific guidelines. As these guidelines vary among the various loan types, there isn't space here to discuss each program. Yet know that an "approved" short sale has involved detailed information from the seller to the bank describing the hardship causing the sale and why it should be defined as a short sale, the financial detail noted above and an appraisal for an "as is" sale to determine the selling price for the home.
Thus the Short Sale isn't mysterious!! It just has a lot of twist and turns that make any seller or buyer want to consult a Realtor to help them throught this ardous process.
Question???
Monday, April 13, 2009
Ever Too Busy To Post???
Somedays are just like that, aren't they?
Though I will always stay busy with Real Estate and work to keep you all up to date on the market action or simply to answer questions.
Yet, with Real Estate, I am also active with Crown Financial, a wonderful ministry that help individuals and families, get out of debt and on firm financial footing. With the economy as it is, you might imagine that I have have been busy with this as well as my commitment to Christian work at my church.
But that all being said, you can come back soon and find a new post!!!
Many of you need your questions answered or just a bit of help. Thus, see you soon!
Though I will always stay busy with Real Estate and work to keep you all up to date on the market action or simply to answer questions.
Yet, with Real Estate, I am also active with Crown Financial, a wonderful ministry that help individuals and families, get out of debt and on firm financial footing. With the economy as it is, you might imagine that I have have been busy with this as well as my commitment to Christian work at my church.
But that all being said, you can come back soon and find a new post!!!
Many of you need your questions answered or just a bit of help. Thus, see you soon!
Tuesday, September 16, 2008
What is the Latest View on Mortgages??
How quickly the Financial Markets continue to change???
Below is a recap of the market from a great mortgage guy, Jim Belote, just sent early today. Though Jim stays on top of what is happening, his review doesn't note the Lehman Brothers' Chapter 11 filing or Bank of America's purchase of Merrill Lynch.
You will note that even with all this news, mortgage rates continue to drop due to the Fed's taking over Freddie Mac and Fannie Mae. If you were on the fence to buy and have decent credit, it is time to make while rates are low.
If on the contrary, you are content where you live and don't plan any move for 5 years or more, don't loose sleep over the 500 pt. market correction. We have been gyrating greatly so anyone want to take a bet that the market doesn't go back up 500 or more points today as all the bargain hunters buy Bank of America, Wachovia and other dividend providing financial stocks that got slammed yesterday? Sure, I can't say were the money will be made but there will be money made!!!
Here are Jim's thoughts!
Keeping you updated
on the market!
For the week of
September 15, 2008
MARKET RECAP
Sometimes sacrifices must be made, though that sentiment is of little comfort when you are the one being sacrificed. Take shareholders in government-sponsored entities (GSEs) Fannie Mae and Freddie Mac, for instance. They saw their equity sacrificed after both entities were taken over by the federal government last week.
The effects of the takeover were immediately salubrious – for the mortgage market. Rates tanked after the announced takeover. Bankrate.com's latest survey showed that the 30-year fixed-rate mortgage fell 40 basis points to 6.15%, the 15-year fixed-rate mortgage fell 28 basis points to 5.81%, and the 5/1 adjustable-rate mortgage fell 21 basis points to 6.08%.
So why the sudden rate drop? The takeover means that the Treasury Department is promising to buy mortgage-backed securities issued by the aforementioned GSEs. This promise assures private investors in mortgage-backed securities of repayment of both principal and interest, which is why mortgage rates dropped so precipitously. In essence, the government assumed the roll of buyer of last resort. This guaranteed demand provides a floor for mortgage-backed securities prices. That floor, in turn, elevated prices, and when mortgage-backed securities prices rise, yields fall.
It remains to be seen whether the mortgage market's windfall will eventually blow over to the housing market, which is certainly due a small windfall of its own. Pending home sales remain flat, with the pending home sales index holding at 86.5. NAR Chief Economists Lawrence Yun says, rather discouragingly, that “even with the direct intervention in the secondary mortgage market, it is unclear if we will go back to sound normal underwriting criteria, or if it will remain overly stringent.”
Let's root for normal underwriting criteria.
Economic IndicatorRelease Date and TimeConsensus EstimateAnalysis
Industrial Production (August) Mon, Sept 15,9:15am, et 0.3% (Decrease) Moderately Important. Production has been weakening over the past two months, suggesting business isn't immune to the economic slowdown.
Consumer Price Index(August) Tues, Sept 16,8:30 am, et All Goods:
No Change Core: 0.2% (Increase)Very Important. Falling consumer prices often translate to falling credit prices.
Housing Market Index(September) Tues, Sept 16,1:00 pm, et 16 Index Important. Sentiment remains sour and continues to hold at multi-year lows.
Federal Reserve FOMC Interest Rate Announcement Tues, Sept 16,2:15 pm, et
2.0% Federal Funds Rate Very Important. The Fed is expected to hold short-term rates, but pressure is building to raise them.
Mortgage Applications Wed, Sept 17,7:00 am, et None Important. Applications surged on the recent drop in mortgage rates.
Housing Starts(August) Wed, Sept 17,8:30 am, et 955,000 (Annualized)Important. Starts are expected to continue along the downward trend, though the rate of descent is slowing.
Leading Indicators(August) Thurs, Sept 18,8:30 am, et 0.2% (Decrease) Moderately Important. Indicators are expected to confirm what we already know: The economy remains sluggish.
Winners and Losers
Not everyone associated with Fannie Mae's and Freddie Mac's capital structure was sacrificed last week. The U.K. Telegraph reported that the Treasury Department's move to place Fannie and Freddie into conservatorship netted PIMCO, a bond investing outfit, an immediate $1.7 billion profit. What's more, PIMCO wasn't the lone winner. Nomura Asset Management, T. Rowe Price Group Inc., RiverSource Institutional Advisors and FAF Advisors also netted a tidy profit, having bought nearly $1 trillion in both agencies' debt this past July.
Perhaps a similar replay will unfold this week. Lehman Brothers Holdings, another financial firm buried under low-quality subprime mortgage paper, is actively shopping itself to potential buyers, aided by both the U.S. Treasury and Federal Reserve, meaning the U.S. Government is orchestrating its second major bailout in as many weeks. Goldman Sachs and Bank of America are the current front-runners in the Lehman stakes. Regardless of who eventually wins, Lehman shareholders are sure to receive the short-end of the stick, while certain Lehman bondholders could find themselves receiving the long-end.
A Lehman bailout won't have the same mortgage market impact as the Fannie Mae and Freddie Mac bailouts, but it will affirm the notion that government can, and does, game winners and losers. Let's just hope the government's willingness to be the financial sector's savior will help the mortgage and housing markets remain long-term winners. It will be reassuring to know that the current machinations will benefit more than just your well-connected bond trader.
So read widely, invest wisely and know that real estate remains a great investment for long term wealth(see the Realtor Ads...they are true).
Questions???
Below is a recap of the market from a great mortgage guy, Jim Belote, just sent early today. Though Jim stays on top of what is happening, his review doesn't note the Lehman Brothers' Chapter 11 filing or Bank of America's purchase of Merrill Lynch.
You will note that even with all this news, mortgage rates continue to drop due to the Fed's taking over Freddie Mac and Fannie Mae. If you were on the fence to buy and have decent credit, it is time to make while rates are low.
If on the contrary, you are content where you live and don't plan any move for 5 years or more, don't loose sleep over the 500 pt. market correction. We have been gyrating greatly so anyone want to take a bet that the market doesn't go back up 500 or more points today as all the bargain hunters buy Bank of America, Wachovia and other dividend providing financial stocks that got slammed yesterday? Sure, I can't say were the money will be made but there will be money made!!!
Here are Jim's thoughts!
Keeping you updated
on the market!
For the week of
September 15, 2008
MARKET RECAP
Sometimes sacrifices must be made, though that sentiment is of little comfort when you are the one being sacrificed. Take shareholders in government-sponsored entities (GSEs) Fannie Mae and Freddie Mac, for instance. They saw their equity sacrificed after both entities were taken over by the federal government last week.
The effects of the takeover were immediately salubrious – for the mortgage market. Rates tanked after the announced takeover. Bankrate.com's latest survey showed that the 30-year fixed-rate mortgage fell 40 basis points to 6.15%, the 15-year fixed-rate mortgage fell 28 basis points to 5.81%, and the 5/1 adjustable-rate mortgage fell 21 basis points to 6.08%.
So why the sudden rate drop? The takeover means that the Treasury Department is promising to buy mortgage-backed securities issued by the aforementioned GSEs. This promise assures private investors in mortgage-backed securities of repayment of both principal and interest, which is why mortgage rates dropped so precipitously. In essence, the government assumed the roll of buyer of last resort. This guaranteed demand provides a floor for mortgage-backed securities prices. That floor, in turn, elevated prices, and when mortgage-backed securities prices rise, yields fall.
It remains to be seen whether the mortgage market's windfall will eventually blow over to the housing market, which is certainly due a small windfall of its own. Pending home sales remain flat, with the pending home sales index holding at 86.5. NAR Chief Economists Lawrence Yun says, rather discouragingly, that “even with the direct intervention in the secondary mortgage market, it is unclear if we will go back to sound normal underwriting criteria, or if it will remain overly stringent.”
Let's root for normal underwriting criteria.
Economic IndicatorRelease Date and TimeConsensus EstimateAnalysis
Industrial Production (August) Mon, Sept 15,9:15am, et 0.3% (Decrease) Moderately Important. Production has been weakening over the past two months, suggesting business isn't immune to the economic slowdown.
Consumer Price Index(August) Tues, Sept 16,8:30 am, et All Goods:
No Change Core: 0.2% (Increase)Very Important. Falling consumer prices often translate to falling credit prices.
Housing Market Index(September) Tues, Sept 16,1:00 pm, et 16 Index Important. Sentiment remains sour and continues to hold at multi-year lows.
Federal Reserve FOMC Interest Rate Announcement Tues, Sept 16,2:15 pm, et
2.0% Federal Funds Rate Very Important. The Fed is expected to hold short-term rates, but pressure is building to raise them.
Mortgage Applications Wed, Sept 17,7:00 am, et None Important. Applications surged on the recent drop in mortgage rates.
Housing Starts(August) Wed, Sept 17,8:30 am, et 955,000 (Annualized)Important. Starts are expected to continue along the downward trend, though the rate of descent is slowing.
Leading Indicators(August) Thurs, Sept 18,8:30 am, et 0.2% (Decrease) Moderately Important. Indicators are expected to confirm what we already know: The economy remains sluggish.
Winners and Losers
Not everyone associated with Fannie Mae's and Freddie Mac's capital structure was sacrificed last week. The U.K. Telegraph reported that the Treasury Department's move to place Fannie and Freddie into conservatorship netted PIMCO, a bond investing outfit, an immediate $1.7 billion profit. What's more, PIMCO wasn't the lone winner. Nomura Asset Management, T. Rowe Price Group Inc., RiverSource Institutional Advisors and FAF Advisors also netted a tidy profit, having bought nearly $1 trillion in both agencies' debt this past July.
Perhaps a similar replay will unfold this week. Lehman Brothers Holdings, another financial firm buried under low-quality subprime mortgage paper, is actively shopping itself to potential buyers, aided by both the U.S. Treasury and Federal Reserve, meaning the U.S. Government is orchestrating its second major bailout in as many weeks. Goldman Sachs and Bank of America are the current front-runners in the Lehman stakes. Regardless of who eventually wins, Lehman shareholders are sure to receive the short-end of the stick, while certain Lehman bondholders could find themselves receiving the long-end.
A Lehman bailout won't have the same mortgage market impact as the Fannie Mae and Freddie Mac bailouts, but it will affirm the notion that government can, and does, game winners and losers. Let's just hope the government's willingness to be the financial sector's savior will help the mortgage and housing markets remain long-term winners. It will be reassuring to know that the current machinations will benefit more than just your well-connected bond trader.
So read widely, invest wisely and know that real estate remains a great investment for long term wealth(see the Realtor Ads...they are true).
Questions???
Monday, September 8, 2008
The Big Bail Out!!
Newsflash!!!
Fannie Mae and Freddie Mac, America's two underwriters/purchasers/bundlers of home mortgages, is being bailed out by the Federal Government. Here we go again...the taxpayer being asked to pay for a "company's mistakes" remember Chrysler a couple of decades ago. Will Fannie and Freddie be as Chrysler is today in a few years...on the brink of extinction.
I would hope not. Our housing market depends too strongly on these two entities, now government controlled, for stabilizing the market and ensuring first time home buyers and many other buyers can get the mortgages they seek at competitive rates.
Check back for more updates!!!
Fannie Mae and Freddie Mac, America's two underwriters/purchasers/bundlers of home mortgages, is being bailed out by the Federal Government. Here we go again...the taxpayer being asked to pay for a "company's mistakes" remember Chrysler a couple of decades ago. Will Fannie and Freddie be as Chrysler is today in a few years...on the brink of extinction.
I would hope not. Our housing market depends too strongly on these two entities, now government controlled, for stabilizing the market and ensuring first time home buyers and many other buyers can get the mortgages they seek at competitive rates.
Check back for more updates!!!
Thursday, September 4, 2008
What are the Candidates Thinking???
Be wise and know what your next President is thinking??? Got an opinion on who is the right man?? Does the below responses soothe you or iritate you??
Guide to presidential candidates platforms
2008 PRESIDENTIAL CANDIDATE COMPARISON TALKING POINTS
ISSUE JOHN McCAIN BARAK OBAMA
Favors new drilling offshore US Yes No
Will appoint judges who interpret the law not make it Yes No
Served in the US Armed Forces Yes No
Amount of time served in the US Senate 22YEARS 173 DAYS
Will institute a socialized national health care plan No Yes
Supports abortion throughout the pregnancy No Yes
Would pull troops out of Iraq immediately No Yes
Supports gun ownership rights Yes No
Supports homosexual marriage No Yes
Proposed programs will mean a huge tax increase No Yes
Voted against making English the official language No Yes
Voted to give Social Security benefits to illegals No Yes
CAPITAL GAINS TAX
MCCAIN
0% on home sales up to $500,000 per home(couples). McCain does not propose any change in existing home sales income tax.
OBAMA
28% on profit from ALL home sales. (How does this affect you? If you sell your home and make a profit, you will pay 28% of your gain on taxes. If you are heading toward retirement and would like to down-size your home or move into a retirement community, 28% of the money you make from your home will go to taxes. This proposal will adversely affect the elderly who are counting on the income from their homes as part of their retirement income.)
DIVIDEND TAX
MCCAIN
15% (no change)
OBAMA
39.6% - (How will this affect you? If you have any money invested in stock market, IRA, mutual funds, college funds, life insurance, retirement accounts, or anything that pays or reinvests dividends, you will now be paying nearly 40% of the money earned on taxes if Obama becomes president. The experts predict that 'Higher tax rates on dividends and capital gains would crash the stock market, yet do absolutely nothing to cut the deficit.')
INCOME TAX
MCCAIN
(no changes)
Single making 30K - tax $4,500
Single making 50K - tax $12,500
Single making 75K - tax $18,750
Married making 60K- tax $9,000
Married making 75K - tax $18,750
Married making 125K - tax $31,250
OBAMA (reversion to pre-Bush tax cuts)
Single making 30K - tax $8,400
Single making 50K - tax $14,000
Single making 75K - tax $23,250
Married making 60K - tax $16,800
Married making 75K - tax $21,000
Married making 125K - tax $38,750
Under Obama, your taxes could almost double!
INHERITANCE TAX
MCCAIN
- 0%(No change, Bush repealed this tax)
OBAMA
Restore the inheritance tax
Many families have lost businesses, farms, ranches, and homes that have been in their families for generations because they could not afford the inheritance tax. Those willing their assets to loved ones will only lose them to these taxes.
NEW TAXES PROPOSED BY OBAMA
New government taxes proposed on homes that are more than 2400 square feet. New gasoline taxes (as if gas weren't high enough already) New taxes on natural resources consumption (heating gas, water, electricity) New taxes on retirement accounts, and last but not least....New taxes to pay for socialized medicine so we can receive the same level of medical care as other third-world countries!!!
You can verify the above at the following web sites:
http://money.cnn.com/news/specials/election/2008/index.html
http://www.cnn.com/ELECTION/2008/issues/issues.taxes.html
http://elections.foxnews.com/?s=proposed+taxes
http://bulletin.aarp.org/yourworld/politics/articles/mccain_obama_offer_different_visions_on_taxes.html
http://blog.washingtonpost.com/fact-checker/candidates/barack_obama/
http://blog.washingtonpost.com/fact-checker/candidates/john_mccain/
Guide to presidential candidates platforms
2008 PRESIDENTIAL CANDIDATE COMPARISON TALKING POINTS
ISSUE JOHN McCAIN BARAK OBAMA
Favors new drilling offshore US Yes No
Will appoint judges who interpret the law not make it Yes No
Served in the US Armed Forces Yes No
Amount of time served in the US Senate 22YEARS 173 DAYS
Will institute a socialized national health care plan No Yes
Supports abortion throughout the pregnancy No Yes
Would pull troops out of Iraq immediately No Yes
Supports gun ownership rights Yes No
Supports homosexual marriage No Yes
Proposed programs will mean a huge tax increase No Yes
Voted against making English the official language No Yes
Voted to give Social Security benefits to illegals No Yes
CAPITAL GAINS TAX
MCCAIN
0% on home sales up to $500,000 per home(couples). McCain does not propose any change in existing home sales income tax.
OBAMA
28% on profit from ALL home sales. (How does this affect you? If you sell your home and make a profit, you will pay 28% of your gain on taxes. If you are heading toward retirement and would like to down-size your home or move into a retirement community, 28% of the money you make from your home will go to taxes. This proposal will adversely affect the elderly who are counting on the income from their homes as part of their retirement income.)
DIVIDEND TAX
MCCAIN
15% (no change)
OBAMA
39.6% - (How will this affect you? If you have any money invested in stock market, IRA, mutual funds, college funds, life insurance, retirement accounts, or anything that pays or reinvests dividends, you will now be paying nearly 40% of the money earned on taxes if Obama becomes president. The experts predict that 'Higher tax rates on dividends and capital gains would crash the stock market, yet do absolutely nothing to cut the deficit.')
INCOME TAX
MCCAIN
(no changes)
Single making 30K - tax $4,500
Single making 50K - tax $12,500
Single making 75K - tax $18,750
Married making 60K- tax $9,000
Married making 75K - tax $18,750
Married making 125K - tax $31,250
OBAMA (reversion to pre-Bush tax cuts)
Single making 30K - tax $8,400
Single making 50K - tax $14,000
Single making 75K - tax $23,250
Married making 60K - tax $16,800
Married making 75K - tax $21,000
Married making 125K - tax $38,750
Under Obama, your taxes could almost double!
INHERITANCE TAX
MCCAIN
- 0%(No change, Bush repealed this tax)
OBAMA
Restore the inheritance tax
Many families have lost businesses, farms, ranches, and homes that have been in their families for generations because they could not afford the inheritance tax. Those willing their assets to loved ones will only lose them to these taxes.
NEW TAXES PROPOSED BY OBAMA
New government taxes proposed on homes that are more than 2400 square feet. New gasoline taxes (as if gas weren't high enough already) New taxes on natural resources consumption (heating gas, water, electricity) New taxes on retirement accounts, and last but not least....New taxes to pay for socialized medicine so we can receive the same level of medical care as other third-world countries!!!
You can verify the above at the following web sites:
http://money.cnn.com/news/specials/election/2008/index.html
http://www.cnn.com/ELECTION/2008/issues/issues.taxes.html
http://elections.foxnews.com/?s=proposed+taxes
http://bulletin.aarp.org/yourworld/politics/articles/mccain_obama_offer_different_visions_on_taxes.html
http://blog.washingtonpost.com/fact-checker/candidates/barack_obama/
http://blog.washingtonpost.com/fact-checker/candidates/john_mccain/
Tuesday, August 12, 2008
Tax Credit????
Know Some 1st Time Homebuyers???
It is time to talk with them about buying a house. Though the lingo and the means to get the new $7500 tax credit is still fuzzy, it looks to be a great opportunity for 1st time buyers that plan to stay in their house for a few years.
If you haven't heard it is a bit unusual of a tax credit: you have to pay it back in over 15 years. You pay 6.67% of the "tax credit" back each year. Thus,
if you are a 1st time homeowner that buys a home from April 2008 to July 1, 2009, you get that tax credit on your 2008/2009 taxes and begin paying back in the following tax year. It's interest free!!!
Should you decide to sell the house after living there for 5 years, yikes!! If you make money on the sale, you will owe the remainder of the tax credit. IF you bought poorly and lose money on the sale you can have the payment "forgiven". No word on the impact of the "forgiven" money. Yes there are details to work out!!!
Before you get real excited about the Tax Credit, talk with your accountant!!!
Get a Realtor on your side....you don't want to think you get the credit and you won't or buy that house that will lose value. Wouldn't it be smarter to have a house that after 5 years goes up $40,000 and you just pay the Federal Govt for the tax credit you owe and take the rest of the money and run???
More news later?? Questions are welcomed!! Opinions???
It is time to talk with them about buying a house. Though the lingo and the means to get the new $7500 tax credit is still fuzzy, it looks to be a great opportunity for 1st time buyers that plan to stay in their house for a few years.
If you haven't heard it is a bit unusual of a tax credit: you have to pay it back in over 15 years. You pay 6.67% of the "tax credit" back each year. Thus,
if you are a 1st time homeowner that buys a home from April 2008 to July 1, 2009, you get that tax credit on your 2008/2009 taxes and begin paying back in the following tax year. It's interest free!!!
Should you decide to sell the house after living there for 5 years, yikes!! If you make money on the sale, you will owe the remainder of the tax credit. IF you bought poorly and lose money on the sale you can have the payment "forgiven". No word on the impact of the "forgiven" money. Yes there are details to work out!!!
Before you get real excited about the Tax Credit, talk with your accountant!!!
Get a Realtor on your side....you don't want to think you get the credit and you won't or buy that house that will lose value. Wouldn't it be smarter to have a house that after 5 years goes up $40,000 and you just pay the Federal Govt for the tax credit you owe and take the rest of the money and run???
More news later?? Questions are welcomed!! Opinions???
Monday, July 21, 2008
Always a Great Time to Invest
Been Listening to the airways- T.V. and Radio???
Have you noticed how euphoria over the reduction in sweet crude among the commentators?? Only a few cautious optimists were to be found. Perhaps we will see a reduction in the price of heating oil, natural gas and gasoline in the coming months!!!
With the reported increased pressure on prices, the Fed has found its hands tied to reel in the "loosen" money policy reflected in the current 2.5 % discount rate. With inflation up, you are now hearing the concern that the finance markets will tighten up even more as interest rates will go up with the inflation as business activity tends to slow down at time of high inflation.
We should not be surprised at this correlation as the U.S. economy is driven by consumer's buying power. Yet, as has been stated in some financial magazines and papers, a correction in the market only means the market will stabilize and rebound. So it is also with real estate!
New homes starts are down(and have been down) as the market finds a new foundation for renewed growth. The reduction in sales doesn't mean there aren't individuals and families seeking housing. Presently, there is simply a "unwillingness to buy" due to the negative publicity regarding housing. Know anyone that has ever told you how they found "the greatest deal I ever found in a home"? Ask them if they found that in an up market or a down market!
Every market, stock, housing and/or business, is different but opportunities always exist to make a very wise investment. For example, if your renting today or in a house too small for your family(0r simply too large due to the family leaving), housing prices are great and banks want to loan you the money.
So if renting, why give up a 15% to 25% tax break on your monthly housing cost? If you itemize(or could if your bought a house), this is possible!!!
If the house isn't "right-sized" for you, can you afford to wait until interest rates go up?? Or for home prices to rebound significantly???
If you have a home to sell as you buy the new one, remember the market will be "fair". You may get a bit less for the house and give more concessions now than say in 2004, but you will buy the new house without competing with 12 other buyers, find the seller willing to negotiate and concede on a few points which also would have been impossible in 2004. Thus, the market conditions have changed but you can come out ahead.
So whether you are seeing the 401K give up some of its gain or the mortgage market tighten up a bit, you need not fear. The silver lining is there for those willing to look for it!!!!
Keep your chin up!! Let the wind blow through your hair!! Know now is the the time to act!!!
Have you noticed how euphoria over the reduction in sweet crude among the commentators?? Only a few cautious optimists were to be found. Perhaps we will see a reduction in the price of heating oil, natural gas and gasoline in the coming months!!!
With the reported increased pressure on prices, the Fed has found its hands tied to reel in the "loosen" money policy reflected in the current 2.5 % discount rate. With inflation up, you are now hearing the concern that the finance markets will tighten up even more as interest rates will go up with the inflation as business activity tends to slow down at time of high inflation.
We should not be surprised at this correlation as the U.S. economy is driven by consumer's buying power. Yet, as has been stated in some financial magazines and papers, a correction in the market only means the market will stabilize and rebound. So it is also with real estate!
New homes starts are down(and have been down) as the market finds a new foundation for renewed growth. The reduction in sales doesn't mean there aren't individuals and families seeking housing. Presently, there is simply a "unwillingness to buy" due to the negative publicity regarding housing. Know anyone that has ever told you how they found "the greatest deal I ever found in a home"? Ask them if they found that in an up market or a down market!
Every market, stock, housing and/or business, is different but opportunities always exist to make a very wise investment. For example, if your renting today or in a house too small for your family(0r simply too large due to the family leaving), housing prices are great and banks want to loan you the money.
So if renting, why give up a 15% to 25% tax break on your monthly housing cost? If you itemize(or could if your bought a house), this is possible!!!
If the house isn't "right-sized" for you, can you afford to wait until interest rates go up?? Or for home prices to rebound significantly???
If you have a home to sell as you buy the new one, remember the market will be "fair". You may get a bit less for the house and give more concessions now than say in 2004, but you will buy the new house without competing with 12 other buyers, find the seller willing to negotiate and concede on a few points which also would have been impossible in 2004. Thus, the market conditions have changed but you can come out ahead.
So whether you are seeing the 401K give up some of its gain or the mortgage market tighten up a bit, you need not fear. The silver lining is there for those willing to look for it!!!!
Keep your chin up!! Let the wind blow through your hair!! Know now is the the time to act!!!
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