Archive for the 'Market News' Category
Average gas prices reached an all-time U.S. high Tuesday, touching $3.40 per gallon. San Francisco and Tulsa are the nation’s bookends at $3.94 per gallon and $3.11 per gallon, respectively.
But before you wonder if relief is coming to your family budget, remember that “rising gas prices” is a conversation we have every April.
Using data from gasbuddy.com and looking back to 2004, we can see that gas prices tend to rise during the Spring season.
If the pattern holds, we’ll should see another 10 percent increase at the pump before gas prices settle back down over the summer and fall months.
Brought to you by Tucson Mortgage Blog.
Between Tuesday and Thursday, mortgage rates rose as much as during any three-day period in recent memory before settling back a bit on Friday’s jobs data.
Fourteen speeches from members of the Federal Reserve were partly to blame for the mortgage rate chaos, but several other factors played a part, too.
One of the biggest other factors last week was that multiple big-name investors were “margin-called”.
Now, margin is a basic financial concept, but to do a good job explaining it requires a lot of numbers and math. So — if you’re curious — visit Wikipedia for the complete run-down.
Or, just know that last week’s margin calls forced the investors to sell ther mortgage bond holdings into a falling mortgage bond market. This accelerated the mortgage bond markets freefall for home buyers and rateshoppers alike.
The extra supply from the margin calls created a stronger push downward on mortgage bond prices than markets would have seen without the margin calls.
This, of course, caused mortgage rates to rise faster than they would have without the margin calls, too.
Only after February’s weak job numbers were reported Friday did mortgage rates recover. Overall, rates were higher on the week and — at one point Thursday — touched their highest levels in several months.
This week will be fairly light on data and lacking of Federal Reserve speakers. Therefore, watch for momentum trading to take hold.
The two data points to watch this week are:
- Thursday’s Retail Sales data
- Friday’s Consumer Price Index
Both are reasonable gauges of inflation in the U.S. economy and both are expected to show slowing from their previous readings. Strength will be interpreted as inflationary and should cause mortgage rates to rise.
(Image courtesy: The New York Times)
Yesterday, the Office of Federal Housing Enterprise Oversight released its fourth-quarter housing data.
The OFHEO report color-coded each state according to its annual price changes. The states shown in red lost value, and everyone else gained. Overall, the OFHEO measured a 0.8% national increase.
Also hitting the wires yesterday was the Case-Shiller Home Price Index.
This report focuses on the 20 largest metropolitan statistical areas in the United States and painted a much more grim outlook for housing. According to Case-Shiller, prices declined 8.9% nationally.
Both reports are imperfect but one notable difference is that the OFHEO report measures all 291 MSAs in the United States and its data showed that two-thirds of them appreciated last year.
Once again, this just reminds us: real estate is a local phenomenon. Every market is unique with its own price trends, independent from the rest of the country.
It’s a big week for mortgage markets (again) and that should cause rates to fluctuate wildly (again).
The volatility we’ve seen since December has not been for the faint of heart. Even this past Friday, as mortgage rates were poised to end the week lower, a late-afternoon stock market rally reversed it.
In the last 45 minutes of trading, the Dow Jones Industrial Average swung 225 points. Mortgage rates rose, too, peeving Americans who planned to go house-hunting over the weekend.
This week, mortgage rates will take direction from a handful of economic reports including the Federal Reserve’s preferred inflation marker — the Personal Consumption Expenditures report. PCE is a Cost of Living index.
The biggest story, though, is Fed Chairman Ben Bernanke’s Wednesday testimony to Congress.
While he’s not expected to say “the economy is in a recession”, or “the economy is doing just fine”, markets expect Bernanke to give guidance about how far the Fed would cut the Fed Funds Rate to stimulate the economy.
The Fed Chairman won’t say outright, “The Federal Reserve intends to lower the Fed Funds Rate to 1.000%”. Therefore, it will be the guessing of how low the Fed will go that should cause markets to buck.
But remember: Cuts to the Fed Funds Rate do not necessarily lead to lower mortgage rates. To the contrary: Since the Fed started cutting the Fed Funds Rate in 2008, mortgage rates have moved higher. As they cut, though, ARM interest rates should become more attractive versus fixed-rate mortgage rates.
This is because additional cuts the Fed Funds Rate will fan inflation fires longer-term and inflation erodes the value of long-term mortgage bonds.
(Image courtesy: West Linn Tidings)
Early last week, mortgage rates rose on strong consumer spending and Warren Buffett’s offer to assume $800 billion in debt from three major bond insurers.
Both reports were interpreted as signs of long-term strength in the economy, leading mortgage rates higher for long-term products such as the 20- and 30-year fixed rate mortgage.
Meanwhile, Fed Chairman Ben Bernanke painted a different picture about the economy’s health.
In his testimony to Congress, Bernanke called attention to credit market weakness and alluding to a need for future Fed Funds Rate cuts.
The chairman’s testimony, coupled with the worst consumer sentiment reading in 16 years, helped to hold short-term mortgage rates flat, even as long-term rates were rising.
In this holiday-shortened week, there is very little data and only one Fed speaker to influence the markets. Therefore, expect external pressures to weigh on market sentiments this week.
The lingering questions about the economy’s health remain and so long as that uncertainty exists, mortgage rates will stay unsettled.
We’ve seen extreme bouts with volatility since December and there’s little reason to suspect it will stop now.
(Image courtesy: Bankrate.com)
The $168 billion economic stimulus plan signed Wednesday includes a temporary increase to conforming loan limits in some parts of the country.
Currently, many homeowners whose loans exceed $417,000 are paying higher interest rates because their loans are not securitized the way that smaller loans are.
The loan limit increase is intended to make housing more affordable in certain “high cost” areas around the United States.
However, the loan limit changes are not immediate. The stimulus package grants HUD 30 days to determine which metropolitan areas should be designated as “high cost” and it should take another few weeks for Fannie Mae and Freddie Mac to remodel their mortgage pricing engines.
All told, it could be mid-April before the new limits are in place.
Author’s Note: There is a lot of speculation about which areas will be designated as “high cost” and nobody knows for certain until HUD decides. Rather than misreport the facts, we’ll save our coverage until something is concrete. However — if you’re in a “high cost” area, you probably already know it.
When the new limits are official, though, expect that many homeowners will take advantage. That will lead to underwriting delays because mortgage refinance activity will surge.
Therefore, consider being proactive about your financing options if:
- You suspect you live in a high-cost area
- You have liens on your home exceeding $417,000
If you don’t live in a high cost area, you can’t take advantage of the new loan limits; and if your outstanding liens total less than $417,000, you won’t want to be helped.
Converting from a jumbo home loan will not be appropriate for everyone, but it will be right for some. Get personal advice and figure out what’s best for you.
And then hope the HUD fingers your neighborhood as high cost.
Good news for First Mangus Financial Corp. Employees!
There was an article today in the AZSTARNET newspaper about the the bankruptcy approval. Looks as though Judge James Marlar will have a decision as soon as this week.
According to the AZSTARNET “First Mangus representatives have said that the employees would be completely repaid, up to $10,000 per person, under the plan.”
http://www.azstarnet.com/allheadlines/224662.php
If you only read headlines this past week, you may have missed two very important points.
The first story relates to Housing Starts. Housing Starts measure the number of new homes entering the construction phase. The headline blared “Housing starts plunge to 16-year low”.
If you are a homeowner, this is terrific news.
Because home values are governed by Supply and Demand, fewer homes built means that home demand has a chance to rebalance against home supply.
This places upward pressure on home prices nationwide.
When Housing Starts drop, it says more about weakness in builder sentiment that it does about the state of the housing nationwide. Housing Starts are at all-time lows because builders want to sell the product they have before putting more product on the market.
The second story was yesterday’s New Home Sales figures.
The headline read that “US new-home sales slide in record plunge” but, again, let’s look a little deeper.
New Home Sales are defined as homes that are newly built. Stated differently, it specifically counts the number of homes sold that were once classified as “Housing Starts”.
If Housing Starts falls, therefore, we can expect New Home Sales to fall, too. The two data points count the same housing inventory at two different points along a timeline.
These two stories are related but neither should be construed as bad news. As builders cut back on the supply of homes, it should create an increase in relative demand.
For homeowners, this is a positive development.
(Image courtesy: New York Times)
Mortgage rates change from day-to-day, but last week’s volatility was a record-breaker.
After drooping through Tuesday and then skyrocketing Wednesday and Thursday, mortgage rates retreated slightly on Friday.
By weeks’ end, rates were at their same levels from mid-December.
This is in contrast to Tuesday, just after the Fed’s rate cut and before the stock market rally. Mortgage rates had been touching near four-year lows for some home loan products.
This week could be equally hectic because heavy economic data it hitting the wires, and because the Federal Open Market Committee is meeting.
The major activity gets started Tuesday with the Consumer Confidence report.
Markets care about this survey because recessions tend to be self-fulfilling prophecies — if people believe it will happen, it generally does. Therefore, if average Americans are feeling worse about the economy, it may cause stocks to sell-off to the benefit of mortgage rates.
Notice from the graph above how confidence plunged through the second half of last year. Read the rest of this entry »
