Danny Salas

Chico, CA Interest Rates Market Report – Economic Influences – October 15, 2010

The members of the Federal Open Market Committee, for the first time in a long time, have come out publicly in disagreement on what the next step for helping the ailing economy should be.  The FOMC Meeting minutes clearly show that there is disagreement on how the next phase of government stimulus / quantitative easing should be implemented.  Some members feel that more data needs to be accumulated before action is taken while others are saying that action needs to be taken sooner than later.  Regardless it appears highly likely that some type of action will be taken by the November elections. (Can’t imagine why that might occur, can you?)

Mortgage rates are hitting record lows and with the prospect of more government stimulus, the expectation is that rates will fall even further.  As of last week the national average for the 30 year fixed rate was 4.21%.  Mortgage applications for last week saw a surprising decline of 8.5% fir purchase applications.  No real explanation has been offered as to the cause of the slowdown however some people speculate that the barrage of news regarding the suspensions of foreclosures may have pushed buyers to the sidelines.  Additionally, some transactions that were started were also halted due to the foreclosure filing mess.  Refinance applications are going strong as they represent 83% of all mortgage applications for the past week.

Economic reports outside of housing continue to show no real direction for the economy.  The positive news reported this week was that inflation on the wholesale and retail levels are not a concern at all.  On the flip side however is that talk is starting to surface that the level of inflation is becoming almost to low which can be an indication that we may enter a deflationary economy.

On the surface some may say, “Hey if prices are going to drop, that is great news for me”.  However what happens in a deflationary economy is that if consumers recognize that prices are falling, then they will start to keep their money in their wallets and wait for lower prices.  If people start to hold off on purchases, then the whole recession cycle starts all over again.

Before anyone reading this begins to panic, it is important for you to know that last month retail sales came in higher than expected.  So at least for right now, consumers are spending money and that concerns about deflation, at least on the consumer level does not exist.

Employment still continues to be a drag on the economy.  First time jobless claims came in higher than expected and actually rose by 13,000 from the previous week.  This is the first increase in jobless claims in a month.  Continuing jobless claims continue to drop and some government officials are trying to leverage this news for political gain.  The truth of the matter is that the only reason why continuing jobless claims are declining is because more and more people are dropping off the unemployment rolls as their benefits run out and that no more extensions are available.

One of the ironic reports this week is Consumer Sentiment.  This report came in worse than expected and showed that people are becoming more concerned about the future of the economy.  The irony is in that Retail Sales continue to improve which is not what one would expect to occur if people are not optimistic.

What to Subscribe To:

Get Our Twitter Updates
Get Our Blog Blast
Become A Fan On Facebook
Connect With Us On Linkedin

Freddie Mac’s Automated Engine Gets A Facelift

LP Changes

Loan Prospector has updated it’s automated underwriting engine to accept only ratios to 50.33% of a client’s income, when qualifying for a loan.  Previous to the current announcement, Freddie Mac would allow a 55% of a client’s income to pay monthly obligations.  The announcement, from Freddie Mac, is another example of the changes in the lending industry, and the more stringent guideline requirement that the industry in going through.

What To Subscribe To:

Get Our Twitter Updates
Get Our Blog Blast
Connect With Us On Facebook

Chico, CA Interest Rates Market Report – Economic Influences – April 23, 2010

Greece Is Being Rescued...AGAIN

Greece IX

Things are looking better for Greece, and therefore the safe-haven for US Treasuries and Mortgage-Backed Securities has been abandoned, causing rates to increase.  Here is where we must be patient.  Most of our pipeline is locked, however, with some of the new applications taken, we’re risking not locking in order to see if Stocks have, indeed, moved to an level below their April 16th low of 10,973.  If they ignore this level, and are able to remain above the high’s of 11,154, than I will have been wrong, and interest rates will struggle with moving below their current levels.

Greece IX 1/2

Greek Prime Minister George Papandreou has asked the European Union (EU) and International Monetary Fund (IMF) for their $45 Billion Bailout funds.  Yesterday, I reported on Greece’s financial status, according to Eurostat.  This $45 Billion is a bandaid for their incredible deficit and watch this closely, as Greece will have to plan and cut to get out of their financial struggles.  Sound familiar?

First Time Tax Credit Boosts Home Sales

Home Sales were up 27% from the last month’s record lows.  The First Time Home Buyer’s Tax Credit had a lot to do with it, however, good weather played into the numbers, as well.  Remember, that if you’ve owned a home, five of the last eight years, you would also qualify for $6,250 for just buying a new primary residence.  So, this benefit, also helped increase sales.  411,000 new homes sold, compared to last months 324,000.  The rate in which homes sell, also accelerated to a 6.7 month holding period, as opposed to the 9.2 month reading that we saw in February.  It will be interesting to see how these numbers fare when the stimulus packages expire.

Durable Goods Orders

Durable Good Orders fell by 1.3%, however, when stripping out volatile transportation statistics, it actually gained a promising 2.8%, dominating the expected 0.7% increase, set by the market.

With Lock Barrel's Cocked...We're Still Floating

Locking Advice

At this point, I think we better continue to float, and watch what the Stock Market will do.  We lost some value, and Greece has been rescued, just in time to possibly have a negative effect on the Treasury Auctions this coming week, however, the Stock Market will play a larger roll, in where rates go.  Our loans are registered for locking…with an itchy finger on the lock button, and I warned of this volatility…expect more.

Related Must Reads

Greece’s Problems: What Eurostat Reported
Tax Credit Extension: Do YOU Qualify?

What To Subscribe To:

Get Our Twitter Updates
Get Our Blog Blast
Connect With Us On Facebook

Chico, CA Interest Rates Market Report – Economic Influences – April 19, 2010

We Have Already Bounced Off The 25-Day Moving Average

One More Opportunity?

Patience will be the name of the game, as we go through April and into May.  Expect the market to continue to be very jittery and interest rates to follow.  I do believe that the Stock Market is stagged to correct itself, into a downward trajectory, in the next week or two…staging a scene to slightly lower interest rates for a small amount of time, at the end of April and into the middle of May.  It might be the last hoorah, to lock into sub-five percent interest rates!

Will Resistance Prevail?

We managed to bounce directly off the 25-Day Moving Average, this morning.  However, Mortgage-Backed Securities (MBS) are sitting just below the 40, 50, 100, & 200-Day Moving Averages…that’s an extremely tough barrier to break through, so that resistance will have to complete with the Stock Market, as mentioned in the above paragraph.

Fed’s Evans Comments On “Extended Period”

This morning, the Federal Reserve Board’s Charles L. Evans reported that he expects an accommodative monetary policy, for “quite some time.”  He also confirmed that the “Extended Period” of time, that I have been writing about for weeks now, means three to four FOMC meetings.

Float While the 25-Day Holds

Locking Advice

With the 25-Day Moving Average already pushing back against the fall of MBS, I feel it’s safe to float into the day.  Long Term Escrows should feel comfortable with the stage being set for lower interest rates, in May.  Short term clients should be happy that rates are where they are at.  It’s an excellent time to buy!

What To Subscribe To:

Get Our Twitter Updates
Get Our Blog Blast
Connect With Us On Facebook