Archive for December, 2008

Market Comment

Monday, December 22nd, 2008

Market Comment

Mortgage bond prices rose last week, which helped mortgage interest rates improve, but only slightly. We saw a huge rally following the Fed rate cut Tuesday. Unfortunately the gains were short-lived and most were erased the following day. Trading remained volatile throughout the remainder of the week. The White House stepped in to help the troubled auto industry Friday, which sent stocks higher that morning at the expense of mortgage and Treasury bonds. For the week, interest rates on government and conventional loans fell by about 1/8 to 1/4 of a discount point.

The Treasury auctions will set the tone for trading this week. Foreign demand for dollar denominated assets will be the focus. The bond market will close early Wednesday ahead of the Christmas holiday Thursday. Trading will resume Friday. This shortened trading week may lead to mortgage interest rate volatility.

LOOKING AHEAD

Economic
Indicator

Release
Date & Time

Consensus
Estimate


Analysis

2-year Treasury Note Auction

Monday, Dec. 22,
1:30 pm, et

None

Important. Notes will be auctioned. Strong demand may lead to lower mortgage rates.

Q3 GDP final revision

Tuesday, Dec. 23,
8:30 am, et

Down 0.5%

Important. The aggregate measure of US economic production. A larger decrease may lead to lower rates.

Existing Home Sales

Tuesday, Dec. 23,
10:00 am, et

Down 1.0%

Low importance. An indication of mortgage credit demand. A significant decrease may lead to lower rates.

U of Michigan Consumer Sentiment

Tuesday, Dec. 23,
10:00 am, et

None

Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates.

New Home Sales

Tuesday, Dec. 23,
10:00 am, et

Down 3.0%

Important. An indication of economic strength and credit demand. A decrease may lead to lower rates.

5-year Treasury Note Auction

Tuesday, Dec. 23,
1:30 pm, et

None

Important. Notes will be auctioned. Strong demand may lead to lower mortgage rates.

Durable Goods Orders

Wednesday, Dec. 24,
8:30 am, et

Down 3.1%

Important. An indication of the demand for “big ticket” items. Weakness may lead to lower rates.

Personal Income and Outlays

Wednesday, Dec. 24,
8:30 am, et

Income unchanged,
Outlays down 0.8%

Important. A measure of consumers’ ability to spend. Weakness may lead to lower mortgage rates.

Revised GDPThe Gross Domestic Product (GDP) is one the most important reports during any given quarter. GDP is a measure of US economic output and spending. The report is significant in that it provides investors, analysts, traders, and economists with a comprehensive report of the direction of the economy. In addition, it also influences the decisions of Federal Reserve policy makers, Congressional budget employees, and corporate financial planners.

 

 

GDP is the sum total of goods and services produced by the United States. The four major components of the GDP release are consumption, investment, government purchases, and net exports. The initial report is often based on incomplete data. Therefore, additional revisions are released over the following two months. There are often substantial differences between the initial release and the revisions. The mortgage-backed security market generally responds favorably to weaker GDP growth.

The revised third quarter gross domestic product data this week has the potential to move mortgage bond prices, especially amid the thin trading that is likely.

 

 

Jennifer L. Newsom

Vice President/Sr. Loan Officer

51-53 Kenosia Avenue

Danbury, CT 06813

Check out our on-line Application

www.NEMmortgage.com/jennifernewsom

NE Moves Mortgage, LLC

 

MARKET COMMENT

Monday, December 8th, 2008

Market Comment

Mortgage bond prices rose last week pushing mortgage interest rates lower. Mortgage bonds were initially helped by reports the Treasury would try to get rates lower. Unfortunately, a lot of the gains seen mid-week were erased Friday following mixed employment figures. Unemployment was not as bad as anticipated and average hourly earnings showed a surprise increase. The payrolls component was bond friendly but it wasn’t enough to overshadow the headline figure. For the week, interest rates on government and conventional loans fell by about 1/8 of a discount point.

The retail sales data Friday will be the most important release this week. Look for any additional moves by the Fed, the US Treasury, and legislative developments to also result in mortgage interest rate movements. This will be the last full week of data before the next Fed meeting.

LOOKING AHEAD

Economic
Indicator

Release
Date & Time

Consensus
Estimate


Analysis

Trade Data

Thursday, Dec. 11,
8:30 am, et

$54 billion deficit

Important. Affects the value of the dollar. A falling deficit may strengthen the dollar and lead to lower rates.

Producer Price Index

Friday, Dec. 12,
8:30 am, et

Down 1.8%,
Core up 0.2%

Important. An indication of inflationary pressures at the producer level. Weaker figures may lead to lower rates.

Retail Sales

Friday, Dec. 12,
8:30 am, et

Down 1.4%

Important. A measure of consumer demand. Weakness may lead to lower mortgage rates.

U of Michigan Consumer Sentiment

Friday, Dec. 12,
10:00 am, et

58.0

Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates.

4.5% Rates Possible?The news is abuzz about the Treasury lowering home loan rates to 4.5% to stem the foreclosure crisis but details have been lacking. The Treasury Department stated it is looking for additional ways to help the struggling housing industry and believes lower rates are needed.

 

 

This idea is similar to the November 26th announcement from the Federal Reserve where they indicated the intent to purchase up to $500 billion in mortgage-backed securities from Fannie Mae, Freddie Mac and Ginnie Mae. In addition they would buy another $100 billion in direct debt issued by those firms. The November news caused bond prices to spike higher and forced mortgage rates lower. Just like any commodity, whenever tremendous buying interest exists, prices rise. Mortgage rates fell almost 1/2% in rate following the announcement. However, the following week market forces continued and rates spiked a bit higher from the recent lows.

It is important to remember that there are no details to the Treasury plan as of yet. The Federal Government does not directly dictate home loan rates. Rates are determined by price movements of Mortgage Backed Securities (MBS), which compete for investor funds in the open market. The Treasury can buy mortgage bonds on the open market but remember that they are not the only entity buying and selling these instruments.

The Treasury is in a very tough position in trying to manipulate home loan rates. Creating a new Federal mortgage program could be very risky. How would rates be set, who would qualify, and can the funds be used for purchases and refinances are just some of the questions being asked. The other critical concern is implementing such a program without destroying the current mortgage securities market. Doing so could have the unintended consequence of causing additional economic turmoil.

Rates are not going to 4.5% with the wave of a wand by Hank Paulson or Ben Bernanke. As a matter of fact, the massive borrowing to fund the TARP program has a negative effect on rates. At this time, the announcement still leaves a lot of uncertainty. What we do know is that rates are at historic lows and house prices have moderated setting up a great scenario for people who need to refinance or are looking to buy a home. Waiting for rates to fall to 4.5% may leave people sorely disappointed.

 

 

Jennifer L. Newsom

Vice President/Sr. Loan Officer

51-53 Kenosia Avenue

Danbury, CT 06813

Check out our on-line Application

www.NEMmortgage.com/jennifernewsom

NE Moves Mortgage, LLC

 

860-916-8845 (c)

781-663-6736 (fax)

Returns for Home Rehabs

Friday, December 5th, 2008
2008 Cost vs. Value Report: Still Many Happy Returns for Home Rehabs

 

Remodeling magazine’s annual report shows that maintenance-related projects and moderately priced upgrades are providing stable paybacks, even in a slower market.

Despite home price drops in many cities, remodeling projects are holding their own as a way for owners to add value.

 

Many people are wondering where their money will be safest during these uncertain economic times. When home owners turn to you for your expert advice, counsel them that some things never change: Investing in their home still pays off.

 

NATIONAL ASSOCIATION OF REALTORS® statistics show that home prices have fallen by an average of 7 percent nationally in the past year. But the value of home owners’ investment in remodeling projects has declined only 3.86 percent on average between 2007 and 2008, according to Remodeling’s 2008–2009 Cost vs. Value Report.

 

Remodeling produces the Cost vs. Value Report each year in cooperation with REALTOR® magazine. REALTORS® responding to a survey in midsummer said home owners could expect to recoup a national average of 67.3 percent of their investment in 30 different home improvement projects. At the height of the housing boom in 2005, home owners could expect to recoup a national average of 86.7 percent on projects.

 

Remodeling remains hot in 10 cities, where, on at least some projects, home owners can recover 100 percent of their costs. In Charlotte, N.C., for example, decks, midrange kitchen remodels, vinyl siding, and window-replacement projects all would net more than they cost, in respondents’ estimation. High rates of recovery were seen in both strong real estate markets and weak ones. 

 

Many cities with the highest rates of recovery were smaller—Jackson, Miss., and Billings, Mont., for example—which may point to lower labor and materials costs that are easier to recoup. 

 

Seattle also made the list of cities with a cost recovery of more than 100 percent on decks and minor kitchen remodels. In fact, Pacific Coast cities recorded the best payback on remodeling by a wide margin, as they did in 2007. Although construction costs on the Pacific Coast are nearly 17 percent higher than national averages, the value of renovations at resale more than makes up for those higher prices. 

 

The result is an average cost-recouped percentage that’s 14.8 percent higher than in the rest of the country. The toughest place to get your money back: Midwestern cities such as Chicago, Cleveland, Indianapolis, and Milwaukee.

 

Top 10 Project Paybacks 

 

Once again, exterior remodeling projects lead the way for recovery on dollars spent in this year’s Cost vs. Value survey. When you compare the national averages, replacement projects that boost curb appeal—siding, windows, and decks—give you the greatest chance of recouping your money. Inside, only kitchen remodels can compare, at least on a national level.

 

1. Upscale fiber cement siding (86.7%)

2. Midrange wood deck (81.8%)

3. Midrange vinyl siding (80.7%)

4. Upscale foam-backed vinyl (80.4%)

5. Midrange minor kitchen remodel (79.5%) 

6. Upscale vinyl window replacement (79.2%)

7. Midrange wood window replacement (77.7%)

8. Midrange vinyl window replacement (77.2%)

9. Upscale wood window replacement (76.5%

10. Midrange major kitchen remodel (76.0%)