In what should have been a quiet week for financial markets, turmoil reined. The Fed started the holiday-shortened week by slashing the Fed Funds rate to 3.5% from 4.25%. The official position was that the move was in response to the weakening economy, but there may have been another reason. A rogue trader in one of France's largest financial institutions orchestrated a $7 billion fraud. The Fed's move likely helped mitigate the damage from this fraud and the global impact of unwinding the trader's positions in various international markets. Mortgage rates experienced a whiplash effect, first dropping, and then bouncing back upward as the week ended.
In addition to dealing with the fallout from last week, this week has an extremely full calendar of economic data releases. New Home Sales on Monday will kick off the excitement, followed by Durable Goods Orders and Consumer Confidence on Tuesday. Wednesday previews employment numbers with the volatile ADP Employment Report, along with advanced fourth quarter GDP and inflation data. Also on Wednesday, the Fed will release their formal policy statement and decision on interest rates, likely to be yet another cut. And as if that weren't enough action, Thursday will bring the Fed's favored measure of inflation - the Core Personal Consumption Expenditures Index - followed by the official Jobs Report on Friday.
What will make the end of the week particularly interesting is the inflation and jobs data coming out following the Fed's scheduled move on Wednesday. Will controlled inflation and/or higher unemployment make them look like heroes, who made the right moves over the past two weeks? Or...could healthy job growth or high inflation, which is likely to be exacerbated by cuts to the Fed Funds Rate, make the Fed look like goats? It's sure to be turbulent - so strap in, hold on, and stay tuned - and feel free to call me for updates as the week progresses
Monday, January 28, 2008
Wednesday, January 23, 2008
Surprise Fed Action and Mortgage Rate Response
Yesterday in a surprise move, acting over growing concerns of the US economy possibly moving towards recession, which resulted in crashing world stock markets yesterday, the Fed today has cut down interest rates to 3.5 from 4.25, the largest rate cut move since 1990. Also, the discount rate was lowered by 75 bps to 4%.
Market response to this action has not been typical of other Fed rate cuts. Typically investors view such moves as what the economy needs and start investing in equities, which results in less money in the bond market resulting in higher long term rates. Yesterday's move has been viewed as an act of desperation by some and the bond market is still strong and their has been a little improvement in fixed mortgage rates. This may be short lived and those looking to refinance or lock in a rate for a purchase should be locking or at least be ready to lock on a moments notice.
Friday President Bush came up with roughly a $140 billion economic stimulus package to provide pickup for a slowing economy. In addition, he has urged Congress to make his 2001 tax cut plan permanent. Federal Reserve Bank chairman Bernanke also stressed the need for quick implementation of a stimulus package in his testimony before the house budget committee. Bernanke admitted that the economy has a slow growth pace, but we’re not in a recession.
The last three weeks have gone well for the mortgage market, as 30-year mortgages dropped to 5.69%, the lowest rates in 2 and half years. 15-year mortgages were at 5.21%, compared to 5.41% last week as per Freddie Mac.
Market response to this action has not been typical of other Fed rate cuts. Typically investors view such moves as what the economy needs and start investing in equities, which results in less money in the bond market resulting in higher long term rates. Yesterday's move has been viewed as an act of desperation by some and the bond market is still strong and their has been a little improvement in fixed mortgage rates. This may be short lived and those looking to refinance or lock in a rate for a purchase should be locking or at least be ready to lock on a moments notice.
Friday President Bush came up with roughly a $140 billion economic stimulus package to provide pickup for a slowing economy. In addition, he has urged Congress to make his 2001 tax cut plan permanent. Federal Reserve Bank chairman Bernanke also stressed the need for quick implementation of a stimulus package in his testimony before the house budget committee. Bernanke admitted that the economy has a slow growth pace, but we’re not in a recession.
The last three weeks have gone well for the mortgage market, as 30-year mortgages dropped to 5.69%, the lowest rates in 2 and half years. 15-year mortgages were at 5.21%, compared to 5.41% last week as per Freddie Mac.
Monday, January 21, 2008
Weekly Mortgage Rate Commentary
Mortgage rates dropped to near three-year lows last week with economic data continuing to point to a slowing economy and inflation data revealing a nearly stable inflationary environment. This should allow the Fed to drop interest rates again at the end of the month. Note that while there is clear evidence that the rate of economic growth has slowed, we do not appear to be in a recession. The economy faces significant challenges.
The Stock market has gotten hammered lower since the beginning of the year, and last week was no exception. But when Stocks move lower, money can flow over into Bonds, helping home loan rates improve. What caused last week's action was a combination of terrible earnings reports from Citigroup and Merrill Lynch; higher inflation numbers indicated in the Consumer Price Index; lower than anticipated Retail Sales; a weak report from the Philadelphia Fed showing a sharp contraction in manufacturing activity; and a Housing Starts and Building Permits report showing the worst levels of starts and permits in about 16 years.
The slowdown in new home construction is actually not bad news, as overbuilding has helped to create a glut of inventory in the real estate market. Less inventory coming on the market is actually a real positive as the housing market continues to settle. And with home loan rates at multi-year lows, now may be the time to act on that home purchase or refinance.
The week ahead has very little scheduled economic reports in store, with only Existing Home Sales and Initial Jobless Claims coming on Thursday. Remember that as Bond prices move higher, home loan rates move lower.
The Stock market has gotten hammered lower since the beginning of the year, and last week was no exception. But when Stocks move lower, money can flow over into Bonds, helping home loan rates improve. What caused last week's action was a combination of terrible earnings reports from Citigroup and Merrill Lynch; higher inflation numbers indicated in the Consumer Price Index; lower than anticipated Retail Sales; a weak report from the Philadelphia Fed showing a sharp contraction in manufacturing activity; and a Housing Starts and Building Permits report showing the worst levels of starts and permits in about 16 years.
The slowdown in new home construction is actually not bad news, as overbuilding has helped to create a glut of inventory in the real estate market. Less inventory coming on the market is actually a real positive as the housing market continues to settle. And with home loan rates at multi-year lows, now may be the time to act on that home purchase or refinance.
The week ahead has very little scheduled economic reports in store, with only Existing Home Sales and Initial Jobless Claims coming on Thursday. Remember that as Bond prices move higher, home loan rates move lower.
Monday, January 14, 2008
Weekly Mortgage Rate Commentary
by Paul Cantor
With very little economic data last week, mortgage rates continued to move downward after the previous week's lackluster employment report. The Federal Reserve's recent moves, in conjunction with several other countries' central banks' actions, are beginning to have a positive impact on interest rates. The Fed has already announced additional funding for its short-term auction facility, which allows banks to borrow from the Fed anonymously, enabling them to make more loans.
A flood of important economic data is due this week, including retail sales data, industrial production data, housing starts, and both the Producer and Consumer Price Indices. While all of these are very important, the CPI may be the big driver of mortgage rates this week and next. With clearer signs of economic slowing, the market has begun pricing in a ¼ point or better rate cut from the Fed. If inflationary pressures do not advance more than expected, the Fed will have an easy argument for a '/z point cut to stimulate economic activity, and rates should continue to drift downward.
With very little economic data last week, mortgage rates continued to move downward after the previous week's lackluster employment report. The Federal Reserve's recent moves, in conjunction with several other countries' central banks' actions, are beginning to have a positive impact on interest rates. The Fed has already announced additional funding for its short-term auction facility, which allows banks to borrow from the Fed anonymously, enabling them to make more loans.
A flood of important economic data is due this week, including retail sales data, industrial production data, housing starts, and both the Producer and Consumer Price Indices. While all of these are very important, the CPI may be the big driver of mortgage rates this week and next. With clearer signs of economic slowing, the market has begun pricing in a ¼ point or better rate cut from the Fed. If inflationary pressures do not advance more than expected, the Fed will have an easy argument for a '/z point cut to stimulate economic activity, and rates should continue to drift downward.
Wednesday, January 9, 2008
Construction / Permanent Loans
Planning on building your dream home or renovating your existing home? Construction-to-Permanent Loan is a single loan for both construction and your permanent mortgage.
• Provides a single approval and closing for the three stages
of construction:
1.Land Acquisition
2.Construction Financing
3.Conversion into a permanent home loan
• No need to re-qualify for the permanent loan when
construction is finished
• Protection from changes in mortgage rates. Lock rate on permanent mortgage up front with float down option.
Although Construction / Perm (C/P) financing is the most popular way to finance the construction or renovation of a home other apes of construction financing are available. For more information on construction loans you may contact Paul Cantor at TrustMor Mortgage Co.
• Provides a single approval and closing for the three stages
of construction:
1.Land Acquisition
2.Construction Financing
3.Conversion into a permanent home loan
• No need to re-qualify for the permanent loan when
construction is finished
• Protection from changes in mortgage rates. Lock rate on permanent mortgage up front with float down option.
Although Construction / Perm (C/P) financing is the most popular way to finance the construction or renovation of a home other apes of construction financing are available. For more information on construction loans you may contact Paul Cantor at TrustMor Mortgage Co.
Monday, January 7, 2008
Weekly Mortgage Rate Commentary
After months of appearing to be only marginally affected by housing and credit challenges, both manufacturing and the labor market began to show signs of stress in December. The ISM Manufacturing Index came in at 47.7. Readings below 50.0 indicate that manufacturing is very likely to be contracting. The Employment report was also disappointing with a surge in the unemployment rate from 4.7°/0 to 5.0%, and only 18,000 new jobs were created in December. Mortgage rates fell across the board as the probability grew for a rate cut from the Fed at the end of the month. On a very positive note, existing home sales popped up to an annualized rate of 5 million units. The markets are beginning to see positive signs that the Fed's efforts to encourage lending are working.
Mortgage rates are likely to trend downward during this week with very little economic data due to be released. If their are signs in the next few weeks that inflation is moderating, the Fed may be able to aggressively cut rates, which would likely pull mortgage rates further downward and spur more home sales.
Mortgage rates are likely to trend downward during this week with very little economic data due to be released. If their are signs in the next few weeks that inflation is moderating, the Fed may be able to aggressively cut rates, which would likely pull mortgage rates further downward and spur more home sales.
Friday, January 4, 2008
Annual Mortgage Check-Up
Annual Mortgage Check-Up
by Paul Cantor http://www.PaulCantor.com/
Like an annual physical with a family physician, it is a good idea to perform an annual physical of a mortgage. For most a mortgage is the most important dent and when managed properly it is a an asset. When performing a mortgage check-up an experienced mortgage planner will look at a persons whole financial picture and in many cases will advise clients to maintain the course. However, life changes such as change in employment, health care, family status, and education needs may alter those plans. A good mortgage planner will help with these changes. Sometimes mortgage rates have dropped and taking advantage of lower rates may save one tens of thousands of dollars.
TrustMor Mortgage Company will be glad to perform a check-up on your mortgage, whether or not they originated it. You may find them on the Internet.
Wednesday, January 2, 2008
Good News For Richmond's Real Estate Market
A boom for the Richmond housing Market. The Richmond Times Dispatch reported this morning the results of a Manpower survey that the creation of new jobs will be strong in the first quarter of 2008. Thirty percent of the companies surveyed indicated they will increase the number of employees while only thirteen percent plan to eliminate some jobs.
This news is a very good sign for the Richmond residential real estate market. History has proved that when the job market is strong the strength flows through to housing. This combined with the Richmond areas low unemployment rate should keep the local housing market stable.
Read the Times Dispatch article.
This news is a very good sign for the Richmond residential real estate market. History has proved that when the job market is strong the strength flows through to housing. This combined with the Richmond areas low unemployment rate should keep the local housing market stable.
Read the Times Dispatch article.
Subscribe to:
Posts (Atom)
