Mortgage Market Update

Information in this post is provided by Ron McGowan, Senior Mortgage Consultant with PrimeLending.  He is a guest blogger who provides us information from a lender’s perspective.  For additional information on Ron, please visit his website at ILoanSanDiego.com.

Inside Lending Newsletter from Ron McGowan for the week of August 2, 2010

Market Update
INFO THAT HITS US WHERE WE LIVE…Last week began nicely with June New Home Sales UP 23.6% to an annual rate of 330,000, well ahead of expectations. This was a sharp rebound from May when New Home Sales sank to record lows not seen since 1963. This volatility of course is all about the homebuyer tax credit (requiring a contract by April 30 and a closing by June 30, now extended to September 30). Consequently, new homes sold at a 422,000 pace in April, fell to a 267,000 pace in May, then went to 330,000 in June.

Demographic trends say sales should continue to rebound, as we eventually need to sell new homes at a 950,000 annual rate to meet population growth and replace teardowns. The supply of unsold new homes is now down to 7.6 months, just above the ideal 6-month level. Actual inventories are down to 210,000, their lowest level since 1968, when there were 35% fewer people around.

We also saw that home prices rose 4.6% in May, year-over-year, as tracked by the Standard & Poor’s/Case-Shiller National Home Price Indices. The 20-city index was UP 1.3% over the prior month, with 19 of the 20 metros showing gains during that period.

Review of Last Week
A HOT MONTH, JULY… The trading month on Wall Street ended Friday with the markets really heated up for July. The Dow Jones Industrial Average was UP 7.1% for the month, while the broadly based S&P 500 finished UP 6.9%. This was the first positive month for U.S. stocks since April. May and June had investors worrying over China’s attempts to slow its growth and a European debt crisis which still hasn’t had much impact in the U.S.

The week had a few negatives to please the bears. For example, the Conference Board’s Consumer Confidence Index went to 50.4 in July, its second monthly decline. Yes, consumers are concerned about jobs and the pace of recovery, but the fact is, the economy is growing and businesses are making profits, which they will ultimately invest in more jobs. Gloomy types also jumped on the 1.0% drop in Durable Goods for June, yet “core” capital goods (take out defense and volatile aircraft shipments) were UP 0.2% — their ninth gain in the past ten months!

But the biggest encouragement came from strong second-quarter corporate earnings. With about two-thirds of the S&P500 companies reporting, Thomson Reuters says Q2 operating earnings are on their way to a 36% gain, with revenues UP 9% compared to a year ago. Friday, advanced Q2 GDP came in with real GDP expanding 2.4% annually, UP 3.2% in the last year. So much for the “double-dip” recession. The week ended with the Chicago PMI registering another monthly increase for Midwest manufacturing and University of Michigan Consumer Sentiment also UP from the month before.

For the week, the Dow ended UP 0.4%, to 10465.94; the S&P 500 was down 0.1%, to 1101.60; and the Nasdaq was off 0.7%, to 2254.70.

Even though July was a good month for stocks, the final week was fairly flat. This sent investors to bonds, bolstering prices. The FNMA 30-year 4.0% bond we follow gained 66 basis points for the week, ending at $102.41. Not surprisingly, Freddie Mac’s weekly survey of conforming loans showed national average rates for conforming mortgages down for the sixth week in a row, some hitting record lows.

This Week’s Forecast
THE FED’S FAVORITES…The two things the Fed watches most are inflation and jobs. As long as jobs lag in the recovery, the Fed wants to keep rates down to encourage the economy. But with all the cheap money around, if inflation picks up, the Fed will start hiking rates. Tuesday’s PCE readings are expected to show inflation is still not a problem. Friday, we get July’s Employment Report, with payrolls forecast to be down, but by a smaller number than in June, and the Unemployment Rate remaining around 9.5%.

Tuesday’s June Pending Home Sales are expected to be off slightly from their May drop following the expiration of the homebuyer tax credit. Q2 corporate earnings reports continue, including Dow components Procter & Gamble, Pfizer, and Kraft.

The Week’s Economic Indicator Calendar
Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates.

Federal Reserve Watch
Forecasting Federal Reserve policy changes in coming months  The big surprise for economists would be if the Fed touched rates at all from now to November. The central bank first wants to see the economy growing at a far faster rate, with payrolls back on the rise. Note: In the lower chart, a 1% probability of change is a 99% certainty the rate will stay the same.

Subscribe to Ron’s Inside Lending Newsletter at his website at ILoanSanDiego.com and click on the “Contact Me” page.

Look for future posts at www.NoBullAgent.com every Monday on issues to watch for in the mortgage market from local lenders in the San Diego area. When choosing a lender, we suggest you talk with a few to make sure you find a representative and company that works for you.  Having a strong relationship with your lender, especially in this market, can be crucial to a successful home buying experience.

To search available listings throughout San Diego County and Southern California, please click HERE.
To save your property searches and receive updates on new properties CONTACT US.

Mortgage Market Update

Information in this post is provided by Ron McGowan, Senior Mortgage Consultant with PrimeLending.  He is a guest blogger who provides us information from a lender’s perspective.  For additional information on Ron, please visit his website at ILoanSanDiego.com.

Inside Lending Newsletter from Ron McGowan for the week of July 19, 2010

Market Update
INFO THAT HITS US WHERE WE LIVE…Some analysts feel the homebuyer tax credits artificially boosted the housing market by pushing forward home sales that would have happened later.  Others feel most buyers would have bought anyway.  In any case, there’s now concern about a coming drop in sales.  Well, June sales figures should still benefit from activity spurred on by the tax credits.  And tax credit sales should even help monthly reports through September, now that buyers in contract on April 30 have been given until September 30 to close.

Nonetheless, we ought to keep an eye on monthly Pending Home Sales, which track signed contracts that turn into sales a few months out.  Even though we may have a sales dip after the tax credit, the fact remains that near historic low mortgage interest rates are getting people back into the market.  These rates, combined with today’s prices, have made homes more affordable than they’ve been in years, letting many buyers move up to better neighborhoods with more choices.

But buyers shouldn’t wait.  The National Association of Realtors chief economist sees the median home price rising nationally 2% to 3% this year. The NAR’s CEO feels sales will pick up in the fall and that the down-cycle has run its course.  The chief economist at Moody’s Economy.com also believes the housing crash is nearly over.  And we all know mortgage rates won’t stay at their current levels indefinitely.  In other words, this could be one of the best times to buy a home in decades.

Review of Last Week
UP AND DOWN…The stock market indexes were up nicely through Wednesday, continuing last week’s rally, then slipped slightly on Thursday before plunging more than 261 points Friday.  For the week, the declines hovered around 1%, not too bad considering the volatile atmosphere of the proceedings on Wall Street.

The problems Friday centered on a drop in the University of Michigan Consumer Sentiment number and soft top-line Q2 revenues from Bank of America, Citigroup, and GE, even though bottom-line earnings from these behemoths beat expectations.  The big disappointment came from Google, which missed earnings estimates even though revenue grew a faster than expected 25% for the quarter.  But Google was the ONLY major company reporting last week that did not BEAT earnings forecasts.

We also heard complaints about some of the economic data.  The trade deficit increased in May, but exports are UP 21.0% in the past year.  Yes, May retail sales were off half a percent, but the annual growth rate for retail in the last nine months remains a respectable 6.7%.  The Producer Price Index (PPI) and Consumer Price Index (CPI) showed wholesale and consumer inflation down a tad in June.  This got analysts fretting about deflation, but both PPI and CPI are actually up from a year ago.

Nonetheless, negative feelings prevailed, so for the week, the Dow ended down 1.0%, to 10097.90; the S&P 500 was down 1.2%, to 1064.88; and the Nasdaq was down 0.8%, to 2179.05.

As stocks slid, the bond market attracted a slew of investors on the proverbial flight to safety.  Prices headed north, as the FNMA 30-year 4.0% bond we follow cruised UP 41 basis points for the week, ending at $101.91.  Freddie Mac’s weekly survey reported that national average rates for conforming mortgages remain at record low levels.

This Week’s Forecast
BACK TO HOUSING… Last week’s tsunami of economic data lacked any info on the housing market.  This week’s reports make up for that, beginning with June Housing Starts and Building Permits on Tuesday. Starts are expected to be down slightly, with permits virtually flat.  Thursday we’ll see June Existing Home Sales, which may be down a bit. We’ll also look at the Leading Economic Indicators (LEI) Index, which could be a tad off for the month.

Q2 corporate earnings reports continue, including:  Amazon.com, AT&T, Caterpillar, Coca-Cola, Goldman Sachs, IBM, PepsiCo, and Texas Instruments.

The Week’s Economic Indicator Calendar

Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates.  Subscribe to Ron’s Inside Lending Newsletter at his website at ILoanSanDiego.com and click on the “Contact Me” page.

Look for future posts at www.NoBullAgent.com every Monday on issues to watch for in the mortgage market from local lenders in the San Diego area. When choosing a lender, we suggest you talk with a few to make sure you find a representative and company that works for you.  Having a strong relationship with your lender, especially in this market, can be crucial to a successful home buying experience.

To search available listings throughout San Diego County and Southern California, please click HERE.
To save your property searches and receive updates on new properties CONTACT US.