Danny Salas

Archive for March, 2010

Chico, CA Interest Rates Market Report – Economic Influences – March 31, 2010

The Market Is One Nervous Nelly!

This Is The End

My Only Friend…The End, of purchasing Mortgage-Backed Securities (MBS) by the Federal Reserve.  The Doors have been closed, on the $1.25 Trillion that the government set aside to buy these securities.  It was “my only friend”, due to keeping mortgage interest rates low for an unprecedented amount of time.  Now, the Fed is going to have to start selling those MBS to the private sector.  They’re not quite ready to do that, however, doing so, they will have to increase the yields, of these Bonds, to be profitable for those investors.  Therefore, higher yields equates to higher interest rates.

A.D.P Is O.F.F.?

American Data Processing (ADP) is the nations largest payroll company.  The have a tendency to report inaccurate figures, and today, the market interpreted what ADP said as bad news for the job market.  Twenty-three thousand jobs were lost, in March, in the private arena.  The government expects 40,000 private sector jobs created in March.  So, the discrepancy is wide.  Also, the ADP numbers do NOT take into consideration government jobs and the temporary census jobs created.  So, total numbers are expected to be an additional 190,000 jobs reported tomorrow.  So, when ADP reports a loss, Stocks suffer on the news, and Bonds and interest rates benefit.  However, once the market absorbed the fact that ADP is often incorrect, coupled with the fact that the ADP numbers do not account for government jobs or census jobs, interest rates suffered.

Take Advantage And Lock While Ya Can!

Locking Advice

Mortgage-Backed Securities have managed to wriggle their way down below all trend line levels of support.  The only support, they current have, is a trading level that the market hasn’t been at for quite some time.  So, we’ve been squeezed into a very small area of trading back and forth, between support and resistance.  With tomorrow’s jobs numbers, truly not expecting to be a huge surprise, I would take advantage of the opportunity to lock.

Related Must Reads

The First Extension of The $1.25 Trillion MBS Government Purchase Program
2007 Example of A.D.P being O.F.F.
Trend Lines: How They Support or Resist Interest Rates

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Freddie Mac Event A HUGE Success

Over 100 Real Estate Agents poured into The Big Room, at Sierra Nevada Brewing Company, to listen and learn from one of the nations largest purchaser of real estate loans; Freddie Mac’s, Governing Board Member, Scott St. John.  Sponsored by Access Real Estate Lending, the event lured participants from Red Bluff, Orland, Willows, Chico, Paradise, and as far away as Roseville, California.  Sr. Partner of Access, Daniel C. Salas, said, “It’s a real pleasure to have Scott St. John, here, to educate the real estate agents in our area.  With the exception of the Federal Open Market Committee Members, you don’t get much bigger than this!”

St. John discussed the reason banks are having more difficulty closing loans, these days.  He also talked about reasons why banks are slowly releasing their foreclosure inventory, as opposed to releasing it all at once.  Another key subject he talked about was where the lending and real estate industry is expected to go, through the remainder of 2010 and even into 2011.

Some of the positive points, brought up by St. John, were that even though the United States Government would stop buying Mortgage-Backed Securities, at the end of March, Freddie Mac felt as though there were many investors, sitting on the sideline, waiting to get into the market, and purchase these investments.  Therefore, even though rates are expected to move upwardly, resulting from this buying halt, it shouldn’t be too worrisome; as these investors haven’t been on the sidelines for years, and now we’re seeing them start to sit on the sidelines.  Another positive point was that Mortgage Insurance Companies are starting to become more flexible with their underwriting guidelines, and even have relaxed their loan amounts, compared to real estate prices, in Santa Cruz County.  This could just be a precursor to the rest of California.  ”It’s been difficult to obtain conventional financing with less than 10% Down (excluding FHA loans), until this recent development, in Santa Cruz.  It’s quite promising,” stated Salas.

St. John noted the lending industry saw about $3.5 Billion in loans, in 2009, while the industry expects anywhere from $1.3 – $1.6 Billion for 2010.  Eighty percent of these loans will be first-time home buyers.  ”What’s interesting about the eighty percent figure,” stated Salas, “is that seventy percent, of that eighty percent, is categorized as ‘first-time home buyers,’ because the industry’s definition of ‘first-time’ is somebody who hasn’t owned a home in the last three years.  So, people who owned a home, then lost it during the mortgage credit crisis, will be eligible to purchase another home, with only 3.5% down (FHA).  It’s an interesting situation, as these buyers were of the old-style qualification standards, and they’ll have to be ready to understand that loan qualifications have changed.  But, we’re ready to educate them.”

Scott St. John indicated, “financing a home, using FHA, will become more difficult, unless using a HUD Approved FHA Direct Lender, like Access Real Estate Lending.”  As one of the areas premier mortgage bankers, Access has financed over $665 Million in loans, in just ten short years.  ”We’re excited about the future, about the Chico Market, and that Scott St. John would come to our wonderful community, enjoy Sierra Nevada Brewing Company’s Big Room, and say such wonderful compliments about Access Real Estate Lending.  We’re quite honored.”

Chico, CA Interest Rates Market Report – Economic Influences – March 29, 2010

Volatility Is Back!

Whatta Week!

There is a lot occurring this week.  Wednesday ends the Fed $1.25 Trillion Government Mortgage-Backed Security Purchase Program.  Once that program ends, expect rates to climb a little.  We expect about .25% in rate, as we have already moved approximately .25% higher after last weeks taste of market nervousness, after a not-so-good auction of Treasuries.  Thursday will provide us with the new Jobless Claims Numbers.  This week, the Fed will announce next weeks auctions of 10-Year TIPS, as well as 3, 10, & 30-Year Treasury Note Auctions.  There are FINALLY investors, sitting on the sidelines, waiting to purchase these securities, however, without the U.S. Government purchasing some of them, we’ll have to see where the returns will have to be (yields), in order to capture investors’ attention.  Which translates to higher interest rates!  Finally, we’ll see the Jobs Report Number on Friday.  Due to market volatility, temporary hiring of census bureau workers, and weather across the country, getting better…these jobs numbers could be hot, so if you’re not locking…better have an itchy lock finger.

Inflation Vacation

The Fed’s Favorite Gauge on Inflation, the Core Personal Consumption Expenditure Index (PCE), came in at a tame 0.0%.  This left the year-over-year PCE at 1.3%.  The Fed desires to keep inflation between 1.0 and 2.0%.

Good Friday

With this Friday, being Good Friday, Stocks and Bond Traders will have a small window, in order to cash in, or buy their investments.  When this occurs, it creates shifts in the market that can’t handle the volume.  So, like a hose that gets smaller and smaller, pressure builds and rushes prices to next levels exponentially.  So, Friday’s gonna be a potential mover of markets.

Carefully Float Into The Day

Floating Advice

Careful floating (and I mean careful), could be the theme of the morning.  However, as mentioned earlier…you’d better have a finger on the lock button…volatility is the name of this game.

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Chico, CA Interest Rates Market Report – Economic Influences – March 26, 2010

The Big Room At Sierra Nevada Brewing Company

YOU DON’T WANT TO MISS THIS EVENT!!!

Scott St. John will be speaking at The Big Room At Sierra Nevada TODAY!!! Scott is a 3rd-Term Governing Board Member of Freddie Mac.  You’ll have an opportunity to inquire into the expected economic future of the United States, Real Estate and its REO future, and what’s happening behind the scenes that is making closing loans less timely and more difficult, these days.   REGISTER AT THE CHICO OR PARADISE BOARD OFFICES.  $10 includes appetizers. $15.00 AT THE DOOR!

We’ve Settled Down A Bit

Credit market participants are shaking their heads, and trying to recover form a horrible auction week for U.S. Treasuries.  Is the writing on the wall, here, too?  Remember, that without the United States’ Government purchasing Mortgage-Backed Securities (MBS), that’s a major buyer out there, that has left the building, so to speak.  And without a major buyer, in order to attract other investors, you have to offer a greater rate of return…and therefore, greater interest rates.  We lost 88 basis points, alone, on Wednesday.  That’s .875% Points on a loan.  UGLY!  Today, however, things are looking slightly better.  We’ve managed to creep up about 30 basis points.  That equates to approximately .25% Points on a long.  What have I been saying?  Rates will increase once the government stops purchasing MBS, and I suspected anywhere from .25% to .5% in RATE, not Points.

GDP

The Commerce Department reported that Gross Domestic Product (a statistical measure of the total market value of all final goods and services produced in the country) expanded at a 5.6% annual rate, instead of the 5.9% pace estimated earlier.

Non-Farm Payroll Figures

The big news will be the March Non-Farm Payroll figures, that will be release this next Friday.  This will be a touch call.  The expected number is 180,000 new jobs, and the unemployment rate to remain close to 9.7%.  Any move in any other direction could have an effect on rates, however, if unemployment moves down, and the new job creation number moves closer to the 200,000 range…it could have a real negative impact on rates.

I'd Float Into The Day, As We Somewhat Recovered

Locking Advice

It’s probably a good idea to lock your pipeline.  Particularly since the government census workers will be considered in this Friday’s employment numbers.  So, I think the risk is too great!  With the Market settling now, I’d float until we see signs of market worsening.  That could happen any time, next week.

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