Danny Salas

Chico, CA Interest Rates Market Report – Economic Influences – October 1, 2009

Welcome October…Very Welcome

OK, what did I tell you?  We’d be back in the 4%-ages in October.  Don’t know how long we’ll be here, but let’s enjoy it, while we’re here.  Not to mention, I am just LOVING THE WEATHER!  Tomorrow might be the last 80 degree day we see until next summer.  Wow!

Jobless Numbers

Mortgage-Backed Securities have crawled their way back up after ending the day, down, yesterday.  So, we’re back in the 4%’s.  NICE!  Unfortunately, it comes at the expense of Stocks and worse than expected employment information.  Keep in mind tomorrow’s numbers could REALLY shake things up.  Initial Jobless Claims rose by 17,000 claims to 551,000.  Now that just sucks!  551,000!?  They expected 535,000, so, not only was it worse than expectations, but if you read yesterday’s article, you’ll understand the severity of a half a million people losing their job in one week. 

End Of The Day Rates…?

Expect them to move a little bit higher!  The annoucement of another Treasury Auction should stir things up a bit.  So, this morning’s rates might be sacraficed, until tomorrow’s unemployment numbers hit.  Which could take us right back to this morning’s rates.  You can follow rates by logging onto the home page of the website at www.accessloans.net and moving down to the left a little.  It’s a close representation, but not exact, as every borrower is different. 

What’s Better…Low Rates or Low Unemployment?

Employment is the number one category for a healthy housing market.  So, if unemployment keeps hemmorhagging, can it continue to help housing?  It will be interesting to see.  I think that a general increase in interest rates, and a progression toward a better employment situation, in the U.S., is what will drive the housing market further than termporary tax incentives and government purchase programs. 

Personal Spending

This economic factor has not increased this fast in over eight years!  Generally, this would send interest rates skyrocketing because it could show that the economy is moving in record pace leaps and bounds.  But, keep in mind that the “Cash for Clunkers” program has come to an end.  So, it’s an interesting statistic.

Fed’s Favorite Gauge Of Inflation

The Core Personal Consumption Expenditure Index (PCI) chimmed in at a meager 0.1% reading.  This brought the Core PCI year-over-year reading to 1.3%.  The Fed’s desire is to keep this reading below 2.0% to stave off inflation (interest rate’s worst enemy).  This is very good news for interest rates, coupled with tomorrow employment figures, we could be in for very opportunitic times. 

All’s Good On The Housing Front

Pending Home Sales were WAY UP!  6.4%!  /The industry only expected a 1.0% increase, so Kudos to the $8,000 Tax Credit Incentive and Realtors that are understanding the current market and helping people move into wonderfully priced home and interest rates.  I expect that the tax credit will be extended.  There is already a bill, in Congress, to extend this to military personnel that did NOT have an opportunity to take advantage of the program, while out serving our country, overseas.  We’ll see!

Related Must Reads

Why I Thought Rates Would Move Down
$8,000 Tax Credit “FAX”
What Are The REAL Unemployment Numbers?

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Chico, CA Interest Rates Market Report – Economic Influences – January 15th, 2008

What’s A Revision-ary?

Daniel C. Salas … your Mortgage Market “Revision-ary!”

Have you not heard that it’s an excellent time to buy?  O.K., IT’S AN EXCELLENT TIME TO BUY! 

The Federal Reserve board is really in a precarious position as the economy slows down, but inflationary fears still seriously meander all around us.  Philadelphia Fed Prsident Charles Plosser indicated, “we must remain vigilant on the inflation front and be prepared to act as necessary to avoid the risk of undermining public confidence in the central bank’s commitment to price stability.”  So while we keep hearing of overnight rate cuts by the Fed, if inflation keeps rearing its ugly head, than forget about more cuts. 

Another Revision?

Pending home sales were reported down 2.6%, however there was a huge revision for October’s numbers from 0.6% to 3.7%.  Revisions in the market…don’t ya just love that!  It’s like…oh yea…sorry about that…your interest rate could have been .125% lower, saving you $8,853.98 on that $300,000 loan but the government reported those dang numbers incorrectly last month and so…too bad…!  THANK YOU…You’re such a “revision-ary!” 

Visionaries

Goldman Sachs predicted a recession in 2008 and for the unemployment rate to reach 6.5% by 2009.  They also are indicating that the Federal Reserve will lower their overnight rate to 2.5% by the third quarter of this year to help the economy cruise to a “soft landing.”  So, while the inflation concerns are warranted, Goldman people are, generally what you might call visionaries, as opposed to “revisionaries!”

 S&P 500 Companies are expected to lose 9.8% over the third quarter of 2008.  Remember, if Stocks are losing value, bonds generally benefit and therefore interest rates.  But with inflation lingering (interest rates worst enemy) it will be interesting to follow. Capital One Financial Corporation said it will be taking a $1.9 Billion fourth quarter loan loss.  Merrill Lynch, the United States’ largest brokerage firm, will report losses of approximately $15 Billion next week, primarily due to bad mortgage investments. 

B of A Buying Countrywide

The big news of the week is that Bank of America announced that they are buying Countrywide Financial for $4 Billion.  This should keep Countrywide out of bankruptcy, however, $4 Billion?  That seems like one heck of a buy to me!  I mean…check out CitiGroup…they’re writing off potentially ANOTHER $24 Billion in sub-prime mortgage related losses alone…so BofA spending $4 Billion to save Countrywide…I’m just a few dollars short, but to me it sounds like one heck of a buy. 

Thank goodness Bush asked for OPEC to lower their prices.  Whew!  The balance of trade widened by 9.3% in November to a whopping negative $63.1 Billion.  Primarily due to high oil prices, but our fearless leader, I’m certain, can convince these oil nations to lower there price per barrel.  I’m certain of it!  Remember…I’m a “revisionary!”

Term Auction Facilities

The Fed Auctioned off $30 Billion of 28-day Term Auction Facility Funds (TAF).  We’ve talked about this in the past too.  Since doing these special auctions, LIBOR has moved down over 100 basis points.  LIBOR is an index tied to many adjustable rate mortgages.  And it the index is 1% lower (100 basis points), then when a loan adjusts, it will be 1% lower than before these TAF started. 

The economic figures keep looking bleaker.  Next week we will report of the Consumer Price Index and its inflationary potential.  There are also rumors about an emergency meeting of the Fed, to lower rates before their January 30^th meeting…we’ll see next week…

Emergency FED Meeting?

What’s A Revision-ary?

Daniel C. Salas … your Mortgage Market “Revision-ary!”

Have you not heard that it’s an excellent time to buy?  O.K., IT’S AN EXCELLENT TIME TO BUY! 

The Federal Reserve board is really in a precarious position as the economy slows down, but inflationary fears still seriously meander all around us.  Philadelphia Fed Prsident Charles Plosser indicated, “we must remain vigilant on the inflation front and be prepared to act as necessary to avoid the risk of undermining public confidence in the central bank’s commitment to price stability.”  So while we keep hearing of overnight rate cuts by the Fed, if inflation keeps rearing its ugly head, than forget about more cuts. 

Another Revision?

Pending home sales were reported down 2.6%, however there was a huge revision for October’s numbers from 0.6% to 3.7%.  Revisions in the market…don’t ya just love that!  It’s like…oh yea…sorry about that…your interest rate could have been .125% lower, saving you $8,853.98 on that $300,000 loan but the government reported those dang numbers incorrectly last month and so…too bad…!  THANK YOU…You’re such a “revision-ary!” 

Visionaries

Goldman Sachs predicted a recession in 2008 and for the unemployment rate to reach 6.5% by 2009.  They also are indicating that the Federal Reserve will lower their overnight rate to 2.5% by the third quarter of this year to help the economy cruise to a “soft landing.”  So, while the inflation concerns are warranted, Goldman people are, generally what you might call visionaries, as opposed to “revisionaries!”

 S&P 500 Companies are expected to lose 9.8% over the third quarter of 2008.  Remember, if Stocks are losing value, bonds generally benefit and therefore interest rates.  But with inflation lingering (interest rates worst enemy) it will be interesting to follow. Capital One Financial Corporation said it will be taking a $1.9 Billion fourth quarter loan loss.  Merrill Lynch, the United States’ largest brokerage firm, will report losses of approximately $15 Billion next week, primarily due to bad mortgage investments. 

B of A Buying Countrywide

The big news of the week is that Bank of America announced that they are buying Countrywide Financial for $4 Billion.  This should keep Countrywide out of bankruptcy, however, $4 Billion?  That seems like one heck of a buy to me!  I mean…check out CitiGroup…they’re writing off potentially ANOTHER $24 Billion in sub-prime mortgage related losses alone…so BofA spending $4 Billion to save Countrywide…I’m just a few dollars short, but to me it sounds like one heck of a buy. 

Thank goodness Bush asked for OPEC to lower their prices.  Whew!  The balance of trade widened by 9.3% in November to a whopping negative $63.1 Billion.  Primarily due to high oil prices, but our fearless leader, I’m certain, can convince these oil nations to lower there price per barrel.  I’m certain of it!  Remember…I’m a “revisionary!”

Term Auction Facilities

The Fed Auctioned off $30 Billion of 28-day Term Auction Facility Funds (TAF).  We’ve talked about this in the past too.  Since doing these special auctions, LIBOR has moved down over 100 basis points.  LIBOR is an index tied to many adjustable rate mortgages.  And it the index is 1% lower (100 basis points), then when a loan adjusts, it will be 1% lower than before these TAF started. 

The economic figures keep looking bleaker.  Next week we will report of the Consumer Price Index and its inflationary potential.  There are also rumors about an emergency meeting of the Fed, to lower rates before their January 30^th meeting…we’ll see next week…

Chico, CA Interest Rates Market Report – Economic Influences – September 4th, 2007

Market Jitters

As expected, it has been grueling, trying to get past that stubborn 200-day moving average.  The stock market started to rebound, which hurt interest rates earlier last week.  Also hurting rates was the fact that the Federal Reserve Board’s Minutes, from their last meeting, didn’t give us any hints as to what they will do on their September 18^th meeting.  Most expect the Fed to lower the overnight rate from 5.25%, however, the market’s a little jittery right now, as you can imagine. 

Jobless Claims Increasing?

This week’s Initial Jobless Claims numbers were reported at 334,000.  It wasn’t too long ago that the expected weekly number was coming in at approximately 300,000.  The week before we hit 325,000.  We’re watching this closely because recently, waged-based inflation was a real concern with the Federal Reserve.  If the unemployment numbers start to grow, there isn’t as much pressure to pay people more for the same services, easing these inflationary concerns.  Remember, inflation is interest rate’s nemesis! 

Fed’s Favorite Inflation Gauge Keeping Things Cool

The Gross Domestic Product numbers were revised to 4.0% for the second quarter.  Lower than the expected 4.1%, however not a recessionary figure.  We’re still experiencing positive economic growth.  The long awaited Core Personal Consumption Expenditure Index came in less than expectations at 0.1%.  Keep in mind that this is the Federal Reserve’s favorite gauge on where inflation is.  The PCE tame reading on inflation should have helped bonds, however, interestingly, the stock market read this as support that the September 18^th meeting would surely have a cut, and the move to the stock market actually hurt bonds…what a catch 22, hey? 

FHA Refi’s To The Rescue?

Now, what’s all over the news is President Bush’s speech on tackling the mortgage credit crisis that we have been alluding to in past articles.  While some of the proposals may be beneficial or helpful to many homeowners, any proposed government bailout for struggling homeowners will have to go through Congress and could be a significant burden on the US taxpayer.  Basically, one of the elements in Bush’s plan would allow homeowner’s with good past credit history, and were recently struggling with their mortgage payments, to refinance with a Federally Insured FHA loan to 97% of the home’s value.  Now, keep in mind that FHA loan limits, currently in Butte County are only $304,000.  So, as disused in last week’s article, an increase in that loan amount could potentially help thousands more in our area.  They are asking for easier qualification guidelines for the loans as well.  This will be an interesting story to follow in the weeks ahead. 

What Will Next Friday Show?

Friday is going to be a big day.  The Jobs Report information will be released and this report could move rates vigorously.  Remember how I have been talking about the 200-day moving average (or trend line) being a very tough level of resistance to break through?  Well, we have not been able to get mortgage bonds to move past this level.  Also, the 100 day moving average has been a level of support.  So try and follow this…the 200-day moving average has been moving downwardly and the 100-day moving average has been moving upwardly.  When bond values move up, rates move down, and vice-versa.  So, with the 100-day moving up toward the 200-day trend line…where will interest rates go?  Will the level of support move bonds up past the 200-day, or will the level of resistance bring bond values down below the 100-day moving average causing rates to increase?   We’ll see in next week’s article.  Until then…