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March 29, 2010
>> Market Update
INFO THAT HITS US WHERE WE LIVE February existing home sales were down for the third month in a row, but the 0.6% drop was less than expected. We had severe winter weather putting a damper on things and we’re still seeing the hangover from sales pushed into October and November when everyone thought the homebuyer tax credit was going away. February new single-family home sales were down 2.2%. But the median price of $220,500 was UP 5.2% over last year and the average price of $282,600 was a strong 9.3% UP from a year ago. The Mortgage Bankers Association (MBA) expects existing home sales to be UP almost 4% this year to 5.34 million, going to 5.72 million in 2011. They see new home sales hitting 398,000 in 2010 and 528,000 the following year.
The Federal Housing Administration (FHA) announced new measures that will go into effect for borrowers next Monday, April 5. Here’s what they mean: 1) The upfront Mortgage Insurance Premium (MIP) will go from 1.75% to 2.25%. 2) Even though FHA’s official FICO score minimum is less, borrowers need a score of 620 or higher to have a realistic chance of getting an FHA loan with a minimum 3.5% down payment. 3) The maximum seller contribution has been reduced from 6% to 3%. So FHA borrowers will now have to look better on paper and pay a little more upfront MIP. We’re happy to answer any questions on these new FHA requirements.
To take advantage of the homebuyer tax credit (along with today’s low mortgage rates) buyers have just one month left to sign a contract -- that’s April 30. And they have to close by June 30.
>> Review of Last Week
UP AGAIN... It was another week that ended UP for all stock indexes. The market hit an 18-month high during the week, although Friday saw just a 9-point gain. Investors are still worried about Greece’s debt, but their European neighbors announced a bail-out plan that sounded encouraging.
Wall Street took the above housing news in stride. Then February Durable Goods came in UP 0.5% and up at an 18% annual rate in the past six months, a healthy level of business investment. Initial unemployment claims dropped by 14,000, to 442,000, and the four-week moving average fell to 454,000, the lowest since September 2008. Continuing claims dropped to 4.65 million, the lowest in fifteen months, spurring further talk that this Friday’s Employment Report will show substantial job gains.
Friday, real Q4 GDP was revised from a previous 5.9% estimate to a 5.6% annual rate, still a booming number. Many economists expect this rate to decline in Q1 because of the harsh winter weather, but some still see GDP growth for the first six months of 2010 at a healthy 4.5% rate. The report showed Q4 corporate profits increased at a 36% annual rate and are up 31% over a year ago. Observers say this spurred the increased equipment investments we’ve seen and will soon give us a big improvement in the job market.
For the week, the Dow headed UP 1.0%, to 10850.36; the S&P 500 was UP 0.6%, to 1166.59; while the Nasdaq went UP 0.9%, to 2395.13.
It was a tough week in the bond market, though prices recovered a tad on Friday. There is understandable uncertainty around the Fed’s ending their purchases of Mortgage Backed Securities this Wednesday. The FNMA 30-year 4.5% bond we watch ended down 43 basis points from the week before, closing at $100.41. Average mortgage rates, as reported in the Freddie Mac Survey, were up a smidge, but still at historically low levels for now.
March 22, 2010
March 15, 2010
>> Market Update
INFO THAT HITS US WHERE WE LIVE There wasn’t a ton of housing news last week, but one can always find a few significant items. For example, foreclosure filings in February were down 2% from January and up just 6% from a year ago -- their smallest increase in four years. Most significantly, in the six states that made up 61% of the national total for February, foreclosure filings were down 15% from a year ago. We’re definitely heading in the right direction.
On the mortgage front, the Mortgage Bankers Association reported applications for purchase loans were up a seasonally adjusted 5.7% from the week before. It looks like people are trying to take advantage of today’s historically low rates before the end of the month. That’s when the Fed stops buying mortgage bonds, which has helped keep rates low, and no one knows what will happen once that Fed buying program ends. Mortgage applicants also have their eye on the homebuyer’s tax credit, which requires a signed contract by April 30.
Finally, current buyers are getting today’s great prices, which may not be headed much lower. One property search site announced that sellers had lowered prices on less than 20% of their listed homes, for the first time since they started tracking price reductions last April.
>> Review of Last Week
SLOWLY RISING... Like bread dough in the pan, the markets kept rising, though ever so slowly, last week. Basically, investors remained positive if not exactly exuberant. There were no big market moves to speak of, the result of no big news coming out of a fairly sparse economic calendar.
Economic readings included January’s trade deficit shrinking to $37.3 billion, with the total volume of imports plus exports finally falling after months of rebounding. But experts weren’t worried, since this happens in normal times and total trade volume remains up at a 26% annual rate since last Spring’s bottom. We had new unemployment claims down by 6,000 last week. Continuing claims increased 37,000, but the four-week average stayed at its lowest level in around fourteen months. Some observers expect a large payroll increase in March. Let’s hope they’re right.
Friday’s February Retail Sales report was a stunner. Overall retail sales were UP 0.3% -- way better than expected -- and sales excluding autos were UP 0.8% -- way WAY better than expected! These are amazingly strong numbers, considering they’re for the year’s shortest month, whose shopping days were shortened even more by record snow storms and other forms of harsh weather in several regions of the country. Those worried about the consumer’s participation in this recovery, please take note!
For the week, the Dow headed UP 0.6% to 10624.69; the S&P 500 hiked UP 1.0%, to 1149.99; while the Nasdaq climbed UP 1.8%, to 2367.66.
A ton of supply hit the bond market last week, but demand was pretty strong too. Treasuries did well selling at lower-than-expected yields. There were also successful offerings in the municipal and corporate markets. The FNMA 30-year 4.5% bond we watch ended the week down just a tad, 31 basis points, closing at $100.88. On average, mortgage rates remain at their historically low levels, dipping slightly in last week’s Freddie Mac Survey.
March 1, 2010
>> Market Update
INFO THAT HITS US WHERE WE LIVE New home sales fell 11.2% in January to a record low level.
Existing home sales weren’t very pretty either, down 7.2%, though they’re UP 11.5% over a year ago. Let’s remember that last Fall we all thought the tax credit was going away at the end of November. Many sales got pushed into October and November, causing sales drops the next two months. But the median new home price is down just 2.4% year over year and the average price is now UP 3.7%. For an existing home, the median price is unchanged from a year ago and the average price is UP 2.6%. More evidence home prices are stabilizing, with some analysts expecting modest gains for the year. Supporting this, the Case-Shiller home price index was UP 0.3% in December, its seventh straight monthly rise.
Even more interesting was the news that this has actually been a very good decade for home prices. From January 2000 to December 2009, prices were UP 46%, making residential real estate a clearly profitable investment. And that’s not even factoring in the mortgage interest and real estate tax deductions homeowners get!
Finally, we’ve reported that the Fed will stop buying mortgage bonds at the end of this month and experts feared rates may edge up. Now analysts say mortgage rates might not move much at all. This stems from the fairly calm market reaction to last week’s hike of the Fed’s discount lending rate (which is NOT the key Fed funds rate). Seeing little or no move in today’s low mortgage rates is good news for the near term.
>> Review of Last Week
MINOR SLIP... Another volatile week on Wall Street, as investors drove stock prices down two days, then up two days, with all three major indexes slipping just slightly for the week. Things got off to a weak economic start with Consumer Confidence dropping sharply in February, much like the temporary drop in January 1996 when, curiously, there was another big blizzard on the East Coast.
Folks didn’t much like the drop in new home sales either, but good news did come with the Richmond Fed Index, which showed that manufacturing in the mid-Atlantic region went from -2 in January to +2 in February. Then there was Fed Chairman Ben Bernanke’s monetary policy report to Congress, which he serves up every six months. Bernanke assured everyone rates will remain low, a message loved by investors.
The up-and-down news continued with durable goods UP a solid 3.0% for January, showing business is investing in equipment, usually a precursor to their investing in jobs. Not just yet, though, as weekly unemployment claims edged up a tad. Then Friday we had the blockbuster news that real GDP for Q4 was revised UP to a 5.9% annual growth rate. People who still can’t see a recovery should also look at the Chicago PMI. This gauge of Midwest manufacturing hit a five-year high of 62.6 for February.
For the week, the Dow was down 0.7%, to 10325.26; the S&P 500 was down 0.4%, to 1104.49; while the Nasdaq skidded down 0.3%, to 2238.26.
Bonds ended the week pretty nicely as investors sought safety in a week featuring strong Treasury auctions. The FNMA 30-year 4.5% bond we watch ended UP 87 basis points, closing at $101.09. As a national average, mortgage rates inched up a little, but still remain at very low levels.
February 8, 2010
>> Market Update
INFO THAT HITS US WHERE WE LIVE The Pending Home Sales Index recovered from its November slump, increasing 1.0% in December, putting it 10.9% over its level of a year ago. National Association of Realtors chief economist Lawrence Yun sees "...a broad improvement over year-ago levels. December activity was the fifth-highest monthly tally in two years." The slump was attributed to the rush before November to grab the tax credit set to expire at the end of that month.
We now know the tax credit was extended to buyers who can sign a contract by April 30 and close on the home by June 30. It’s also been expanded, adding a $6500 credit for repeat buyers to the $8,000 credit for first timers. The NAR’s Yun estimates 2.4 million households should take advantage of the credit this year.
The NAR also released their adjusted overall outlook for this year and next. They estimate existing home sales will grow from 5.19 million in 2009 to 5.66 million in 2010 and 5.7 million in 2011. They see new home sales growing from 375,000 in 2009 to 446,000 in 2010 and 637,000 in 2011. They believe prices have bottomed, projecting a 3.4% hike in the median price for existing homes to $179,800 this year and then a 4.3% rise to $187,500 in 2011. New homes should go up 3.7% this year to a $221,300 median price and then 4.7% in 2011 to $231,700.
>> Review of Last Week
STILL NORTH OF 10,000... Last week, stocks took investors on a wild ride, but when all was said and done, the venerable Dow remained defiantly above 10,000. Investor concerns focused mostly on a "sovereign debt crisis" in Europe. Basically, Portugal had trouble selling its treasuries. Then, Spain, whose 19% unemployment is way worse than any European country except Latvia, raised its deficit forecasts. Finally, people questioned if the Greek government has the fiscal discipline necessary to pay back its loans. European markets tanked and Wall Street roller-coastered.
Investors also aren’t completely sold on our own recovery. The problem of course is jobs, the most lagging of all economic indicators. Weekly initial jobless claims rose by 8,000, a bit worse than expected. Then Friday’s January employment report showed a loss of 20,000 jobs, when a 13,000 gain was expected. But hey, the unemployment rate fell to 9.7%! Average hourly earnings were UP 0.2% for the month and UP 2.0% over last year. Also, total hours are up at a 1.8% annual rate in the last three months. This works out to about 200,000 jobs a month, showing there’s a growing demand for labor, which companies are meeting by increasing hours. Needless to say, they can’t keep that up indefinitely.
Now for some really good news. Personal income was UP 0.4% in December and personal consumption rose 0.2%. Over the past three months, real inflation-adjusted consumer spending is UP at a strong 3.6% annual rate. Not surprising, given that in the last nine months, compensation per worker is UP at a 4.7% annual rate. In line with that, several retailers announced same store sales, with most beating estimates -- some by substantial amounts! The ISM Manufacturing index hit 58.4, a five-year high, and ISM Services went to 50.5 in January, signaling expansion in the non-manufacturing sector too.
But for the week, the Dow was off 0.5%, to 10012.23; the S&P 500 slipped 0.7%, to 1066.19; while the Nasdaq was down just 0.3%, to 2141.12.
A volatile stock market, combined with sovereign debt worries, did wonders for bond prices. The FNMA 30-year 4.5% bond we watch ended UP a solid 38 basis points for the week, closing at $101.41. Mortgage rates stayed at the historically low levels we’ve been seeing. But homebuyers and owners looking to refinance should note that the Fed said it will stop buying mortgage bonds March 31. Experts feel this will send rates up a bit.
January 4, 2010
>> Market Update
INFO THAT HITS US WHERE WE LIVE Last Tuesday the
Case-Shiller Home Price Index for 20 cities came in UP a seasonally adjusted 0.4% for October. This was the fifth consecutive monthly increase for the index. Year-over-year, prices are still down 7.3%, but that’s a less steep rate of decline than we’ve been seeing.
It looks like home prices could be stabilizing, though well below their peaks in most markets. This price decline, plus the dramatic drop in mortgage rates, have made homes more affordable than they’ve been in a long time. A writer for the Wall Street Journal compared home price index values, mortgage rates and average weekly earnings going back to 1987. The finding? On average, housing is as affordable now as it was in the mid-1990’s, when homes were a real steal. Of course, this conclusion is based on average prices, so affordability may be greater or less in individual markets.
Christmas Eve, the Treasury lifted the limit on the money it can put into Fannie Mae and Freddie Mac to keep their net worth positive over the next three years. Some economists point out that Fannie and Freddie could now replace the Fed as a big buyer of mortgage-backed securities to help keep mortgage rates down after March 31.
That would be great, but nothing is certain.
Smart buyers are taking advantage of TODAY’S low mortgage rates AND the expanded tax credit that requires a signed contract by April 30 and a closing by June 30!
>> Review of Last Week
SLIDING INTO 2010... The stock market was up for three out of the four days of trading last week, but New Year’s Eve saw a 120-point drop in the Dow, which left it and the other major indexes sliding down ever so slightly for the week. But for the year, the indexes were decidedly up, coming off the bottom stock prices hit last March. And there were other positive economic indicators to lift our spirits going into 2010.
Tuesday, Consumer Confidence for December came in at 52.9, continuing its upward move from the prior month’s 50.6 reading. This Conference Board survey showed consumers more optimistic, based on their expectations the economy will keep improving over the next six months. Wednesday, the Chicago PMI (Purchasing Managers Index) for November registered 60.0, way better than expected, reflecting continued growth in manufacturing in another key region of the country.
All this encouraging news was followed Thursday with Initial Unemployment Claims coming in at 432,000, well below consensus estimates and the lowest number we’ve seen in a year and a half! Continuing Claims also keep shrinking, now drifting into 4 million territory. Employment has always been closely tied to the health of the housing market, so positive moves like these should be noted by all interested parties.
For the week, the Dow was down just 0.9%, to 10428.05; the S&P 500 was down 1.0%, to 1115.10; while the Nasdaq was down 0.7%, to 2269.15.
The bond market, which closed early on Thursday, experienced a volatile week. When all was said and done, the FNMA 30-year 4.5% bond we watch ended the week up just 3 basis points, closing at $99.84. Mortgage rates still remain at historically low levels.
November 25, 2009
Due to a low interest rate and high number of condominiums in the marketplace, it should be a great time to buy a condominium right? But this year Fannie Mae, Freddie Mac and FHA have decided to tighten up their standards and reduce their risk and exposure to the condo market.
Full Story: http://realtytimes.com/rtpages/20091126_condos.htm
Looking to do a short-sale? Read Full article to avoid "Double Whammy".
http://realtytimes.com/rtpages/20091124_shortsale.htm
>> Market Update
INFO THAT HITS US WHERE WE LIVE Last week’s one housing report gave us the National Association of Realtors Pending Home Sales index, down 7.6% for January. But year over year, the NAR index is up 12.3%. Also, it’s now at 90.4 and a score of 100 equals the average level of contract activity for 2001, the base year, when activity was at a record high. So pending sales are still in pretty good territory.
Meanwhile, a quarterly report from a builders group and a major bank revealed that home prices are at near record levels of affordability. In the last three months of 2009, a family making the median income of $64,000 a year could afford to buy 70.8% of all homes sold during that time! According to this report, a home is affordable if a family making the metro area’s median income would have to spend no more than 28% of their take-home pay for housing. Of course, there are variations in affordability around the US, but this is a great overall trend.
Buyers, however, shouldn’t expect great affordability to last forever. According to a Freddie Mac index, in the last quarter of 2009 four out of nine regions showed home price gains! And the NAR’s monthly market forecast, out last Thursday, projected the median price of existing homes UP 2.8% for 2010 with the new home median price UP 2.0%. In addition, no one knows what will happen to mortgage rates once the Fed stops buying mortgage bonds at the end of this month. Smart buyers shouldn’t drag their feet, especially those wanting the tax credit, which requires a signed contract by April 30.
>> Review of Last Week
IN LIKE A LION... March came in and the markets roared, as the Dow clawed its way up to a 2.3% gain for the week that brought it to its highest level for the year. Investors were basically pleased with a slew of encouraging economic data that came in ahead of expectations, while credit market conditions continue to improve.
That’s not to say there weren’t a few disappointments, starting with the dip in pending home sales covered above. ISM Manufacturing for February also came in below estimates, at 56.5, but, hey, that’s still comfortably above the 50 level that signals expansion. On the other hand, ISM Services bested expectations, reporting a 53.0, its best reading since 2007.
Friday we had an employment report some experts feel shows an economy that’s poised to start adding jobs. Nonfarm payrolls were still down by 36,000 in February, but this was way better than expected. Even better than that, the unemployment rate held at 9.7%, avoiding an expected increase. And some observers feel the underlying data is pointing to job creation. We’ll see.
For the week, the Dow headed UP 2.3% to 10566.20; the S&P 500 hiked UP 3.1%%, to 1138.69; while the Nasdaq soared UP 3.9%, to 2326.35.
Bond prices came under a lot of pressure from the better than anticipated jobs report, a ton of supply coming next week and soaring stocks distracting investors from seeking a safe haven in bonds. But the FNMA 30-year 4.5% bond we watch held on, to end the week UP 10 basis points, closing at $101.19. Mortgage rates dipped a bit nationally, according to Freddie Mac’s weekly survey, and remain at very low levels.
>> Market Update
INFO THAT HITS US WHERE WE LIVE February housing starts were down 5.9%, to an annual rate of 575,000 units, but this was higher than consensus expectations and almost all the drop came from multi-family units. Single-family homes were off only 0.6% in February and are still up 39.8% over their low a year ago. Meanwhile, new building permits for February fell 1.6%, to an annual rate of 612,000, but that was also better than estimates and permits are still up an estimated 11.3% from a year ago. The experts all thought we’d see a MAJOR drop in home building given the record snow storms on the East Coast. But we didn’t. The Mortgage Bankers Association (MBA) estimates we’ll see 694,000 housing starts in 2010, a 20% hike from 2009 numbers.
At last week’s meeting, the Fed confirmed it would end its purchasing of mortgage-backed securities, as scheduled, on March 31. This buying program has helped keep interest rates historically low the past year. Even though the Fed will stop buying, they have no plans to sell the bonds they’ve bought, which may have put pressure on rates to go up. The MBA currently predicts rates to rise very gradually for the rest of the year and keep rising in 2011 and 2012. But let’s face it. If mortgages get into the 6% range, which is NOT being forecast until NEXT year, they would still be at a very attractive level which should in no way slow the housing recovery.
Buyers who want to take advantage of today’s low mortgage rates AND the homebuyer tax credit should note they need to sign a contract by April 30 and close by June 30.
>> Review of Last Week
NOW THAT’S MORE LIKE IT... Investors felt good enough about the economy to push stock market indexes up for the week, landing them at their highest levels in over a year. There was a modest drop in the markets on Friday, with India’s central bank hiking rates a bit and continued concern over Greek debt. But, hey, stocks had already gone up eight days in a row by that point. And for good reason.
Tuesday the Fed didn’t touch the rate and their statement still predicted "exceptionally low levels of the federal funds rate for an extended period." Corporations and investors like cheap money as much as you and I, so this kept stock prices heading up. We also had nice quarterly earnings from FedEx, Nike and Guess, plus General Electric’s forecast of an earnings turnaround at GE Capital, their financial division.
Both the Consumer Price Index and the Producer Price Index came in below expectations, showing inflation remains in check.
Initial unemployment claims met estimates. Industrial production, capacity utilization and the Philadelphia Fed Index of manufacturing all surpassed estimates. It’s interesting that in the last two weeks, the economic data has outperformed what you would have expected, given the harsh winter weather. Payrolls, retail sales, manufacturing measures and housing starts all beat expectations. Some observers now expect a payroll increase in March. Let’s hope they’re right.
For the week, the Dow was UP 1.1%, to 10741.98; the S&P 500 went UP 0.9%, to 1159.90; while the Nasdaq headed UP 0.3%, to 2374.41.
Investors focused on buying stocks for four days, though Friday the mood changed to selling. So bonds, which usually head in the opposite direction from stocks, finished with some strength. The FNMA 30-year 4.5% bond we watch ended the week virtually flat, off just 4 basis points from the week before, closing at $100.84. Average mortgage rates stayed at their historically low levels, as reported in last week’s Freddie Mac Survey.
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