Tuesday, May 31, 2011

Weekly Mortgage Update for week of 5/30/2011...Here's Joe!


This holiday-shortened week brings us the release of five important economic reports for the markets to digest. Two of the five are considered to be of very high importance to the bond market and mortgage rates. The remaining reports are considered to be of moderate importance to the markets. The financial and mortgage markets will be closed tomorrow in observance of the Memorial Day holiday and will reopen Tuesday morning.



The Conference Board will start the week's more important releases by posting their Consumer Confidence Index (CCI) at 10:00 AM Tuesday. This is data measures consumer willingness to spend. If the index rises, it indicates that consumers feel better about their personal financial situations and are more apt to make large purchases. If confidence is sliding, analysts think consumer spending may slow in the near future. The latter is good news for the bond market because consumer spending makes up two-thirds of the U.S. economy. A decline in the index should boost bond prices and push mortgage rates lower Tuesday morning. It is expected to show a reading of 66.3, up from April's 65.4 reading.



The Institute for Supply Management's (ISM) manufacturing index will be posted late Wednesday morning. This highly important index measures manufacturer sentiment. A reading above 50 means that more surveyed manufacturing executives felt that business improved during the month than those who felt it had worsened. Analysts are expecting to see a 57.6 reading in this month's release, meaning that sentiment fell during May. A smaller reading will be good news for the bond market and mortgage shoppers while an unexpected increase could contribute to higher mortgage rates Wednesday.



The revised 1st Quarter Productivity and Costs data is the first of two reports that will be released Thursday morning. This data measures employee output and employer costs for wages and benefits. It is considered to be a measurement of wage inflation. It is believed that the economy can grow with low inflationary pressures when productivity is high. Last month's preliminary reading revealed a 1.6% increase, but I don't think this piece of data will have much of an impact on the bond market or mortgage pricing unless it varies greatly from that reading.



The second release of the day will come from the Commerce Department, who will post April's Factory Orders data during late morning trading. This manufacturing sector report is similar to last week's Durable Goods Orders release, but also includes orders for non-durable goods. It can cause some movement in the financial markets if it varies from forecasts by a wide margin, but it isn't expected to cause much change in rates this month. Current forecasts are calling for a decline in new orders of 1.0%.



Friday's sole report is arguably the single most important report that we see each month. The Labor Department will post May's Employment data early Friday morning. This report gives us key employment readings such as the U.S. unemployment rate and the number of jobs added or lost during the month. Analysts are expecting to see the unemployment rate remain at 9.0% this month with approximately 185,000 jobs added to the economy during the month. A higher than expected unemployment rate and a smaller number than 185,000 in new payrolls would be great news for the bond market. It would probably create a sizable rally in bonds, leading to lower mortgage rates Friday. However, stronger than expected numbers may lead to a spike in rates Friday morning.



Overall, Wednesday or Friday is likely to be the most important day of the week as they bring us the two most important reports on the agenda. If they give us weaker than expected results, we could close the week with lower mortgage rates than Tuesday's opening levels. However, if we see stronger than expected readings in those two releases, I expect mortgage rates to move higher on the week. But that is very much dependent on seeing a relatively calm week in stocks. As we have seen the past two weeks, stock market volatility can heavily influence bond trading and mortgage rates and significantly minimize the impact that these economic reports normally have on rates. Accordingly, it would be wise to maintain contact with your mortgage professional if still floating an interest rate.

 



 



Information supplied by Joe Patterson with Princeton Capital joepatterson@princetoncap.com


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Saturday, May 28, 2011

Thursday, May 26, 2011

Memorial Day Recipes

http://bit.ly/iYHNw9


Memorial Day is the day we join together as nation to remember all those who gave their lives defending our nation. It’s also a day that many families travel from far and wide to get together and enjoy good company and good food.


Tuesday, May 24, 2011

10 insider grocery savings secrets

http://on.today.com/jNVc7W


Besides couponing, there are so many different ways to save money on your grocery bill — if only you knew the ins and outs of your favorite store's policies and promotions. And how do you find that out?


Monday, May 23, 2011

Weekly Mortgage News for the week of May 23rd....Here's Joe!


This week brings us the release of five important economic reports in addition to two Treasury auctions that may influence rates. Only two of the five reports are considered to be of fairly high importance to the bond market and mortgage pricing. The remaining reports are considered to be of moderate or low importance and will likely not heavily influence mortgage rates.



There is nothing of importance scheduled for release tomorrow, so expect the stock markets to influence bond trading and mortgage pricing. April's New Home Sales data will be released late Tuesday morning. This report gives us a measurement of housing sector strength and future mortgage credit demand. However, it is actually the least important release of the week and probably will not have much of an impact on mortgage pricing because it tracks only approximately 15% of all home sales. It is expected to show little change in sales from March’s level, meaning the new home portion of the housing sector was flat last month.



Wednesday has one of the week’s more important reports scheduled with April's Durable Goods Orders being posted. This data gives us an indication of manufacturing sector strength by tracking orders at U.S. factories for big-ticket products. It is currently expected to show a decline in new orders of approximately 2.0%, indicating manufacturing sector weakness. That would be good news for the bond market and mortgage rates, but this data is known to be quite volatile. Therefore, a small variance from forecasts would likely have little impact on mortgage rates Wednesday.



The first of two revisions to the 1st quarter Gross Domestic Product (GDP) will be released at 8:30 AM Thursday. The second revision to this report comes next month but isn't expected to carry much importance. The GDP is the sum of all goods and services produced in the U.S. and is considered to be the best indicator of economic growth. Last month's preliminary reading revealed a 1.8% increase in the annual rate of growth. Analysts expect a slight upward revision to this reading with the consensus being a 2.0% rate of growth. If the upward revision is much stronger than expected, we may see the bond market react negatively and mortgage rates move higher because it would mean the economy was stronger than thought last quarter.



April's Personal Income and Outlays data is the first of two reports due Friday. It will be posted at 8:30 AM and gives us an indication of consumer ability to spend and current spending habits. An increase in income means that consumers have more money available to spend. Since consumer spending makes up two-thirds of the U.S. economy, this data can cause movement in the financial markets and mortgage rates. Current forecasts are showing a 0.4% increase in income and a 0.5% rise in spending. Weaker readings would be considered good news for bonds and mortgage rates.



The second report of the day and the last relevant data of the week will come from the University of Michigan who will update their Index of Consumer Sentiment for May. It is forecasted to show a small increase from this month's preliminary reading of 72.4. A reading above 72.6 would be considered negative for bonds and mortgage pricing.



Overall, I think we have a fairly busy week ahead of us. The big report of the week is Wednesday's Durable Goods Orders. If Thursday's GDP revision varies greatly from forecasts, it can also lead to sizable changes in rates. There are also a couple of Treasury auctions that are worth noting. The 5-year Note sale is Wednesday and the 7-year Note auction will be held Thursday. Both may influence bond trading and possibly mortgage rates if they are met with an exceptional demand or if there is lackluster interest from investors.



The bond market will close early Friday afternoon ahead of next Monday's Memorial Day holiday. With all this, there is a pretty good possibility of seeing mortgage rates change several times this week- especially if there is more volatility in the stock markets. Accordingly, please proceed extremely cautiously if still floating an interest rate.



Information courtesy of Joe Patterson with Princeton Capital (408-674-7438)


Tuesday, May 17, 2011

Buy vs. rent: These days, buying wins


Description: cnnmoney



 



Les Christie, On Friday May 13, 2011, 8:37 am EDT



For the first time in years, buying a home may beat renting.



Two factors are at play, according to researchers who recently crunched the numbers, Ken Johnson of Florida International University and Eli Beracha of East Carolina University for a paper to be published in Real Estate Economics.



First, rents, though mostly stagnant the past few years, are expected to head higher as more people bitten by the housing bust turn to renting. Rents could rise 7% in each of the next two years, according to Peggy Alford, president of Rent.com.



Second, home prices have finally dropped enough to create a buying opportunity. Nationally, prices are down 32% from their peak, set in 2006.



The net result is that home price gains would need to average only 3.25% annually to beat renting, according to Beracha and Johnson. To make the math work, you have to stay in the home for at least eight years. (Buy or rent? 10 cities rated)



Beracha and Johnson compared the cost of owning with the cost of renting.



Renting has usually come out ahead, they say. Buying typically leads to higher monthly and annual bills once all costs are factored in -- mortgage payments, property taxes, maintenance and transactional costs.



Those higher costs can be offset if the home gains in value. But renters -- the researchers assume -- can invest the savings. And that is a big part of why the professors say renting has typically been the better deal. "I was shocked at how often renters won," said Johnson.



Another reason had been the push to homeownership, which resulted in a premium on home values. "My dad always told me not to 'throw my money away on rent,'" said Johnson. "This mania toward homeownership tends to drive prices up."



But that's changing: Homeownership has dropped to 66.4% from a peak of 69.1% in 2005, according to the Census Bureau. (See "Home prices in 'Double-Dip'")



How much better buying will be depends on location. Of the 23 cities Beracha and Johnson looked at, Seattle is the best place to buy right now. When renters invest in portfolios that include stocks, the appreciation rate required over the next eight years there is 4.84% and the area's historical average is 6.06%.



For several cities, including New York, Boston and Dallas, renting is still preferable. In New York, for example, homeowners would need a 7% annual rise in home values to beat renters. (See "Fastest growing cities in the South")



Buyers should beware the assumption that home prices will rebound, even from these depressed levels, said Dean Baker, co-director of the Center for Economic and Policy Research.



Hiring has been slow and there are tons of potential foreclosures that could flood the market with distressed homes, depressing prices.



Even in cities where people are, theoretically, better off renting, they may not be in reality. Paying off a mortgage is a forced savings plan, said Baker. The mortgage bill comes in every month, the homeowner pays it and the mortgage balance goes down.



Renters, meanwhile, are just as likely to spend their savings. They'll wind up with less money than homeowners, which is kind of what your dad was saying all along.


Why does the stock market plunge when the dollar value goes up? Here's Joe with the weekly market update!


I asked him this question because to me (as I am sure to some of you as well) it seems rediculous.  Why would the stock market take a dive when we get good news?  The reason, the cost of exports goes up, that affects the bottom line of the companies that trade on the stock market...now I see!  Let's see what this week holds in store...



 



This week brings us the release of four pieces of relevant economic news in addition to the minutes from the most recent FOMC meeting. None of the economic reports are considered to be highly important to the markets or mortgage rates, but they do carry enough significance to influence mortgage rates if they show a wide variance from forecasts.



Nothing of importance is scheduled for tomorrow, so look for the stock markets to be a major influence on bond trading and mortgage pricing. If the stock markets open the week with sizable gains, bonds will likely suffer and mortgage rates will probably move higher tomorrow. However, more stock weakness could translate into slightly lower rates tomorrow. The mortgage market took a small turn for the worse Friday afternoon, so unless your lender revised pricing higher late Friday you may have a slight increase in rates waiting for you.



The week’s first data comes early Tuesday morning when April's Housing Starts will be posted. This data measures housing sector strength and mortgage credit demand by tracking newly issued permits and actual starts of new home construction. It is expected to show an increase in new starts from March's readings. Since this report is not considered to be of high importance to the bond market, it likely will have little impact on mortgage rates unless it varies greatly from forecasts.



The second report of the day is April's Industrial Production at 9:15 AM ET. It measures manufacturing sector strength by tracking output at U.S. factories, mines and utilities. It is expected to show a 0.5% increase in production, indicating that manufacturing activity is growing. A smaller than expected increase in output would be good news for the bond market and mortgage rates because it would indicate that the manufacturing sector is not as strong as thought. This report is equally important to the markets as the earlier housing report, so they both will likely need to show unexpected strength or weakness for them to cause a sizable movement in mortgage rates.



Wednesday’s only relevant release is the minutes of the last FOMC meeting. Market participants will be looking for how Fed members voted during the last meeting and any comments about inflation concerns in the economy and economic growth. The goal is to form opinions about when the Fed may make a move to key short-term interest rates. Since the minutes will be released at 2:00 PM ET, if there is a market reaction to them it will be evident during afternoon trading.



The National Association of Realtors will give us their Existing Home Sales report late Thursday morning. This data tracks resales of homes in the U.S. during April, giving us a measurement of housing sector strength. This type of data is relevant because a weakening housing sector makes a broader economic recovery less likely. Current forecasts are calling for a small increase in home sales between March and April. Ideally, the bond market would prefer to see a decline, indicating further housing sector weakness. A large increase in sales could lead to bond weakness and a small increase in mortgage rates Thursday morning.



The last data also comes late Thursday morning with the release of April's Leading Economic Indicators (LEI). This Conference Board report attempts to measure economic activity over the next three to six months. It is expected to show no change from March's reading, meaning that economic activity is likely to remain flat over the next few months. A decline would be good news for the bond market and mortgage rates, while an increase could cause mortgage rates to inch higher Thursday.



Overall, it looks like we may see a fairly calm week in mortgage rates unless something unexpected happens or the stock markets make a big move upward or downward. I can’t really label one particular day as the most important one. If the stock markets remain fairly calm, I would guess the middle part of the week will probably be the most active for mortgage pricing. However, sizable gains or losses in the major stock indexes could influence bonds and mortgage rates more than this week's economic data can.



 


Thursday, May 12, 2011

Relay for Life Team

http://bit.ly/izke0a


Click here to participate in this weekend Relay for Life, great event for a great cause!


What was it like to buy a home when rates were 18%?



Here is an interesting snapshot of interest rate history. Amazingly, when income rates were lower, interest rates were what we would consider astronomical and times were simpler, people were still buying houses. Would love to hear your thoughts.

Tuesday, May 10, 2011

Create A Garden Room: It's a Natural Choice

http://bit.ly/mxvTiq


Turn a common mudroom into a glorious and natural garden room.


Monday, May 9, 2011

Weekly Mortgage Update for week of May 9th, 2011...HERE'S JOE!


There are five pieces of relevant economic data scheduled for release this week that may affect mortgage rates, in addition to two important Treasury auctions. The four most important four reports will be posted over two days, meaning the markets will have to rely on factors other than economic news for direction several days. There is no relevant data due tomorrow or Tuesday, so expect the stock markets to help drive bond trading and mortgage rates those days.



March's Goods and Services Trade Balance report will be released early Wednesday morning. This report gives us the size of the U.S. trade deficit but likely will not have much of an impact on the bond market or mortgage pricing. It is expected to show a $47.8 billion trade deficit, but it is the least important of this week's data and likely will have little influence on Wednesday's mortgage rates.



The Treasury will hold a 10-year Note sale Wednesday and a 30-year Bond sale Thursday. Results of the auctions will be posted at 1:00 PM ET each day. If they are met with a strong demand from investors, we could see bond prices rise enough during afternoon trading to cause downward revisions to mortgage rates. However, lackluster bidding in the sale, meaning longer-term securities are losing their appeal, could lead to higher mortgage pricing those afternoons.



The first important piece of data this week is April's Retail Sales, which will be released at 8:30 AM ET. It is an extremely important report for the financial markets since it measures consumer spending. Consumer spending makes up two-thirds of the U.S. economy, so this data can have a pretty significant impact on the markets. Current forecasts are calling for a 0.6% increase in sales from March to April. A weaker than expected level of sales should push bond prices higher and mortgage rates lower Thursday morning as it would signal that economic activity may not be as strong as thought. However, a larger increase could fuel fears of economic growth that would lead to bond selling and higher mortgage rates.



April's Producer Price Index (PPI) will also be released early Thursday morning. It helps us measure inflationary pressures at the producer level of the economy. If this report reveals weaker than expected readings, indicating inflation is not a concern at the producer level, we should see the bond and stock markets rally. The overall index is expected to show an increase of 0.5%, while the core data that excludes more volatile food and energy prices has been forecasted to rise 0.2%. No change or a decline in the core data would be ideal for mortgage shoppers because inflation is the number one nemesis for long-term securities such as mortgage-related bonds.



Friday has the remaining two reports. The first is April's Consumer Price Index (CPI) at 8:30 AM ET. It is similar to Thursday's PPI report, but measures inflationary pressures at the more important consumer level of the economy. These results will be watched closely and can lead to significant volatility in the bond market and mortgage pricing if they show any surprises. Current forecasts are calling for a 0.4% increase in the overall index and a 0.1% rise in the core data reading. As with the PPI, the core data is the more important of the two readings.



The last report of the week is May's preliminary reading to the University of Michigan's Index of Consumer Sentiment. This index measures consumer willingness to spend, which relates to consumer spending. If consumers are more confident of their own financial situations, they are more apt to make large purchases in the near future. This report usually has a moderate impact on the financial markets though, because it is not exactly factual data. It is expected to show a reading of 69.8, which would be no change from last month's final reading. If it shows a large decline in consumer confidence, bond prices could rise and mortgage rates would move slightly lower, assuming the CPI does not give us a significant surprise. The CPI is much more important to the markets than the sentiment index is, so look for it to be the biggest influence on Friday’s mortgage pricing.



Overall, it likely will be another active week for mortgage rates. Besides the week's important economic news, look for the stock markets to be a major influence on trading. The most important day of the week is Thursday with the Retail Sales and PPI reports on the agenda, but Friday’s CPI is extremely important to the bond market. It appears we will likely see the most movement in mortgage rates the latter part of the week unless the stock markets post sizable gains or losses the first part. With some very important data being posted this week, it would be prudent to be attentive to the markets if still floating an interest rate.



Information courtesy of Joe Patterson with Princeton Capital


Friday, May 6, 2011

U.S. Economy Adds 244K Jobs, Unemployment Ticks Back To 9%

http://onforb.es/kGU5Ls


The rise in the unemployment rate will surely get play in the headlines, but a modest increase can be a reflection that more out-of-work Americans are growing optimistic about the labor market and renewing their search for a job after giving up on prior efforts.


Wednesday, May 4, 2011

Remodeling at Highest Level in Four Years

http://bit.ly/kQqfnU


Consumer confidence returns and homeowners once again gear up for remodeling projects.


This week's weekly mortgage update...Here's Joe! Week of May 2-7, 2011


Wednesday’s bond market has opened in positive territory following early stock weakness. The major stock indexes are showing sizable losses with the Dow down 113 points and the Nasdaq down 28 points. The bond market is currently up 10/32, which should improve this morning’s mortgage rates by approximately .125 - .250 of a discount point.



There was no major economic news posted this morning, but a couple of less influential reports gave us favorable results. For example, the monthly employment update from payroll processor ADP showed a smaller number of jobs than was expected. And the ISM service index (sister to Monday’s ISM manufacturing index but much less important) showed a reading well below expectations. However, I believe this morning’s improvement in bonds is much more a result of the stock selling than the minor economic news.



If the major stock indexes continue to move lower, we could see mortgage rates follow suit later today. In fact, they are already down from where they were when lenders began pricing this morning. This means that a small rebound in the Dow and Nasdaq should not be of much concern as there is plenty of room to give before funds shift away from bonds and back into stocks.



Tomorrow has two reports scheduled for release, both form the Labor Department. They will release their 1st Quarter Productivity and Costs data early tomorrow morning. This information helps us measure employee productivity in the workplace. High levels of productivity help allow low-inflationary economic growth. If employee productivity is rapidly rising, the bond market should react favorably. However, a decrease could cause bond prices to drop and mortgage rates to rise slightly tomorrow morning. It is expected to show a 1.0% increase in productivity.



The second is last week’s unemployment figures, also at 8:30 AM ET. They are expected to say that 400,000 new claims for unemployment benefits were filed last week, down a fairly large amount from the previous week. That is worth noting because this data usually doesn’t have a heavy influence on mortgage rates unless it shows a large variance from forecasts, which this would qualify if forecasts are accurate. Another reason for watching tomorrow’s release is the fact that the entire week fell within April and therefore will be included in Friday’s monthly report. If last week’s claims did show a large drop (or increase), analysts may revise their projections for April’s monthly report that will be posted Friday. Accordingly, tomorrow’s weekly data may have a bigger impact on the markets and mortgage rates than it usually does.

 



Information courtesy of Joe Patterson with Princeton Capital (JoePatterson@princetoncap.com)