Danny Salas

Chico, CA Interest Rates Market Report – Economic Influences – March 11th, 2008

New Median Priced Home Values

March 6, Housing and Urban Development announced their new median priced home numbers and for Butte County.  We moved from $304,000 to $320,000.  So, 125% of $320,000 moves FHA loan limits to $400,000 until December 31, 2008!  Interesting that California is in a declining market, but HUD increases our median priced home from $304,000 to $320,000.  Media frenzy?  Or is nice Butte County protected a little bit?  Either way, it’s a huge opportunity for a lot of people in our area.

Last week finally saw some good news on the inflation front.  Unit Labor Costs in the 4th quarter were reported at 0.9%.  This indicated that labor-based inflation might be easing a bit.  And as you’ve read in this article many times, interest rates hate inflation more than you know who hates Harry Potter. 

The 200-Day moving average, again, has been our friend.  Prices just keep hanging right around this important level of support.  The last time we broke through the 200-Day moving average trend-line was in May of 2007, and when it did, it took over five months to claw its way back above it. 

Jobless Claims Down

Interestingly, initial jobless claims moved down to 351,000.  The lowest reading since January, but the four-week average was still holding at 360,000.  Remember that the last time it hit 362,000 we hit a recession, twice. 

I keep mentioning volatility.  Three days in a row, this past week, we saw mortgage backed securities move up and down over 100 basis points…talk about trying to keep up and lock at the right time.  It’s important to note, also, that two times this past week mortgage backed securities and the 10-Year Treasury Note moved in opposite directions.  So, many of my fellow competitors out there that follow that Note instead of Mortgage-backed securities could have ended up costing you a lot of money!  As a matter of fact, if you study Mortgage Bonds and the 10-year Note you will see evidence that they move exactly the same only 1 out of 100 trading days. 

Mortgage Holders Forced To Sell Securities…Watch This CLOSELY…

Another interesting thing happened this past week.  The Carlyle Capital Group and Thornburg Mortgage had to sell many of their mortgage loans to make a margin call to some of their cash backers.  What’s that mean?  Well, the cash backers wanted to receive a payment on their investment with these firms…problem was…these groups didn’t have the money to pay them, so they were forced to sell loans to make their margin calls.  This pushed mortgage backed securities way down…causing their yields and interest rates to rise.  But just as soon as this occurs that the Fed announces another two $50 Billion TAF or Term Auction Facilities to raise more capital for the secondary market.  This help rates ease a bit and come down, however, on Monday; there was a rumor that the Fed was going to have another surprise decrease of the overnight rate.  This caused rates to spike up again.  It’s just so hard to keep an eye on what’s going on that if you don’t watch closely; you’re bound to make a costly mistake.  So, know that you’re working with a professional that knows this stuff thoroughly!  Until next week…

This entry was posted on Tuesday, March 11th, 2008 at 6:32 pm and is filed under Chico Home Loans, Interest Rates, Weekly Market Report. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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