This Week’s Market Commentary

This week brings us the release of six economic reports to be concerned with in addition to some very important testimony from Fed Chairman Bernanke. Two of the reports are considered to be very important, but nearly all of the week’s releases have the potential to affect mortgage rates.

The week’s first data comes this morning with the release of January’s Personal Income ad Outlays data, which gives us an indication of consumer ability to spend and current spending habits. Current forecasts call for an increase in income of 0.3% while spending is expected to rise 0.4.

Since consumer spending makes up two-thirds of the U.S. economy, the bond market does better when spending is slowing. Good news would be a smaller than expected increase, or better yet, a decline in spending.

The Institute for Supply Management (ISM) will release their manufacturing index for February late Tuesday morning. This index measures manufacturer sentiment and can have a pretty large impact on the financial and mortgage markets if it varies from forecasts. It is expected to show a decline from January’s 60.8 to 60.5 this month. This is important because a reading above 50.0 means more surveyed manufacturers felt business improved during the month than those who felt it had worsened, meaning likely growth in the manufacturing sector. If we see a weaker than expected reading, the bond market could rally.

Fed Chairman Bernanke will deliver the Fed’s semi-annual testimony on the status of the economy late Tuesday and Wednesday mornings. He will be speaking to the Senate Banking Committee Tuesday and the House Financial Services Committee Wednesday.
The Fed Beige Book is the next report scheduled for release and it will be posted Wednesday afternoon. This report details economic activity throughout the country by region. The Fed relies heavily on this data during their FOMC meetings, so look for a potential reaction during afternoon trading Wednesday. It probably will not cause a major sell off in the stock or bond markets, but could cause enough movement in bond prices to possibly improve or worsen mortgage rates slightly if it reveals any significant surprises.
The biggest news of the week comes Friday morning when one of the single most important monthly reports we see will be posted. The Labor Department will release February’s Employment report at 8:30 AM ET Friday. Some of the important portions of the report will give us the unemployment rate, number of new jobs added or lost and the average hourly earnings reading.
The best combination for the bond market and mortgage rates would be an increase in the unemployment rate, a large drop in payrolls and little or no increase in earnings. Current forecasts are calling for 0.1% increase in the unemployment rate to 9.1% and approximately 180,000 jobs added during the month. Weaker than expected readings would be great news for the bond market and should lead to lower mortgage rates Friday.

January’s Factory Orders will be posted late Friday morning, which will give us another measurement of manufacturing sector strength. This data is similar to last week’s Durable Goods, except this report covers orders for both durable and non-durable goods. Current forecasts are calling for an increase in new orders of approximately 2.1%. A smaller than expected rise would be good news for the bond market and could lead to an improvement in mortgage rates.

Overall, look for a fairly active week for mortgage rates. Friday is undoubtedly the biggest day of the week, but Tuesday may also bring noticeable movement in mortgage rates.

Homeowners Turning To Home Improvement Projects

Homeowners across the country have started to spend more on home improvement projects despite a challenging housing market, according to a recent San Francisco Chronicle article.

This shows consumer confidence, which is a great sign for the mortgage market. Also, it shows that people are making further investments into their home.

Both Lowe’s and Home Depot have seen an increase in sales in the most recent quarter. Lowe’s said yesterday that their fourth-quarter profits increased by 39%.

While the spike in sales is not a complete economic recovery omen, “the positive results show home-improvement retailers are seeing signs of life from shoppers as they take on projects around the house that were delayed during the consumer spending slowdown and recession,” said the CEO of Lowe’s, Robert Niblock, in the Chronicle.

Read the full article here. Have you taken on any home improvement projects recently?

How Buying A Home Is Likely to Change

An interesting article by Rick Newman of US News and World Report.   http://yhoo.it/fkxIip

The article projects the changes to home financing we all will see once the government either winds down or greatly reduces the role of Fannie Mae and Freddie Mac in backing home mortgages.  Though Rick's predictions do project a slight change from our current system, and a major shift from the loose policies of the mid-2000s, it should be noted that what he envisions is a system very close to the current mortage lending environment in most other countries-- less government backing, modestly higher interest rates, shorter fixed rate periods.

This Week’s Market Update

February 21, 2011

This week brings us the release of six pieces of economic data for the bond market to digest along with two potentially influential Treasury auctions.

The financial markets will be closed today in observance of the President’s Day holiday, so don’t expect to see new mortgage pricing until Tuesday morning.
One of the six reports is considered to be of low importance, but since we have data being posted every day of the week except for today, it is likely that we will see plenty of movement in mortgage rates the next few days.

Tuesday morning brings us the first of this week’s data with the release of February’s Consumer Confidence Index (CCI) during late morning trading. This Conference Board index measures consumer confidence in their personal financial situations, giving us a measurement of consumer willingness to spend.
If consumers are feeling good about their own financial situations, they are more apt to make large purchases in the near future. Since consumer spending makes up two-thirds of the economy, related data is considered important in terms of gauging economic activity. It is expected to show an increase in confidence from 60.6 in January to 65.0 this month. A lower reading would be considered good news for bonds and mortgage rates.
The National Association of Realtors will post January’s Existing Home Sales report late Wednesday morning. It tracks home resales throughout the country, giving us a measurement of housing sector strength. It is expected to show a small decline in sales of existing homes, meaning the housing sector remained fairly flat during the month.

Thursday has two reports scheduled to be posted. The first is January’s Durable Goods Orders data that gives us an important measurement of manufacturing sector strength by tracking orders at U.S. factories for items expected to last three or more years. A smaller increase than the 3.0% that is expected would be good news for the bond market and mortgage rates. This data is quite volatile from month-to-month, so large swings are fairly normal.
January’s New Home Sales report will be posted late Thursday morning. This is one of the least important reports of the week, and is the sister report to Wednesday’s Existing Home Sales release. They measure housing sector strength and mortgage credit demand, but usually do not have a significant impact on bond trading or mortgage rates unless they show significant surprises. This report is also expected to show a decline in sales.

The first of two revisions to the 4th Quarter GDP reading is scheduled for release Friday morning. Analysts’ forecasts currently call for an annual rate of growth of 3.3%, indicating that the economy was slightly stronger in the last quarter of the year than initially thought. It will be interesting to see where this figure falls and what its impact on the markets will be. Generally speaking, higher levels of activity are bad news for the bond market, while a sizable downward revision would be good news and could lead to improvements in mortgage pricing.

In addition to this week’s economic reports, there are two relatively important Treasury auctions that may also influence bond trading enough to affect mortgage rates. There will be an auction of 5-year Notes Wednesday and 7-year Notes on Thursday.
Neither of these sales will directly impact mortgage pricing, but they can influence general bond market sentiment. If the sales go poorly, we could see broader selling in the bond market that leads to upward revisions to mortgage rates. However, strong sales usually make bonds more attractive to investors and bring more funds into bonds. The buying of bonds that follows usually translates into lower mortgage rates.
Overall, look for plenty of movement in bond prices and mortgage rates this week. We will see the most movement either Tuesday or Thursday, but Friday may be fairly active also. This would be a very good week to maintain contact with your mortgage professional, especially if still floating an interest rate.

13 Tax Changes for 2010 That Could SAVE You Money!

Check out this great article on tax changes that could save you money in 2010!

 

http://bit.ly/hqgrW0

By Stacy Johnson | Feb 04, 2011-Money Talks News

Check out the topics!!!!

1. Tax credit of up to $8,000 for first-time homebuyers, $6,500 for existing homeowners.

2. Payroll tax credit.

3. Higher standard and itemized deductions.

4. Free parking.

6. Earned income tax credit

7. Deductible IRAs

8. Roth IRA conversions

9. Estate tax exemption

10. Higher annual gift tax exemption

11. Credit for energy-saving home improvements

12. Educators’ deduction

13. Tuition and fees deduction

Public Records Errors and Real Estate Transactions

A recent Inman News article explains how mistakes in public records can hurt sellers without due diligence. While paperwork isn’t the most glamorous part of selling a home, the article is clear about the dangers of not knowing the legal usable square footage of your home as defined by the public record.

Buyers want to know the actual square footage, not just what is reported by the seller. If the numbers don’t match up, it could cause a problem.
For example, the article hypothesizes that “if the sellers say their house has 3,000 square feet of living space, but the public record reports only 2,300 square feet, the buyers expect an explanation for the discrepancy.”
Many appraisers are now only taking legal public record square footage into account when making their evaluations of a home’s worth.
It would be wise to check that the record on your home is correct, and make adjustments to it if not to prevent any transactions from falling apart over this detail. As the article points out, it can take months for changes to show up in the public record, so it is best to start fixing any mistakes early on.
Read the Inman News article here. Do you know what the public record says about your home?

This Week’s Market Insights

There There are six economic reports worth watching this week that are likely to affect mortgage rates in addition to the minutes from the last FOMC meeting and two speaking appearances from Fed Chairman Bernanke.

This is a far cry from last week’s schedule, making it very likely that we will see plenty of movement in mortgage pricing this week.

is no relevant economic data scheduled for today, so look for the stock markets to be the biggest influence on bond trading and mortgage rates. The week’s first release is one of the highly important ones when the Commerce Department posts January’s Retail Sales data. This report is very important to the financial markets because it measures consumer spending. Since consumer spending makes up two-thirds of the U.S. economy, any related data is watched quite closely.

If Tuesday’s report reveals weaker than expected sales, the bond market should thrive and mortgage rates will fall since it would be a sign that the economy is not as strong as many had thought. However, a stronger reading than the 0.5% increase that is expected could lead to higher mortgage rates.
Wednesday brings us three economic releases in addition to the FOMC minutes. January’s Housing Starts will be posted early Wednesday morning, giving us an indication of housing sector strength and mortgage credit demand. It usually does not affect rates unless the results vary greatly from forecasts. Current forecasts are calling for an increase in starts of new housing.
The Labor Department will post their Producer Price Index (PPI) for January early Wednesday morning also. It measures inflationary pressures at the producer level of the economy and is considered to be one the two key measures of inflation we see each month. The core data is more important to market participants because it excludes more volatile food and energy prices. It is expected to show an increase of 0.7% in the overall reading and a 0.2% rise in the core data. Good news for bonds would be a decline in both readings, particularly the core data as it would ease concerns about inflation that make long-term securities less attractive to investors.
January’s Industrial Production data will be released mid-morning Wednesday. It gives us a measurement of manufacturing sector strength by tracking output at U.S. factories, mines and utilities and can have a moderate impact on the financial markets. Analysts are expecting to see a 0.6% increase in production from December to January. A smaller than expected rise in output would be good news and should push bond prices higher, lowering mortgage rates Wednesday. That is assuming that the PPI doesn’t give us any negative surprises.
The minutes from last FOMC meeting will be released Wednesday afternoon. Traders will be looking for any indication of the Fed’s next move regarding monetary policy. They will be released at 2:00 PM ET, therefore, any reaction will come during afternoon trading.
These minutes may indicate if there is a consensus amongst Fed members or if there is disagreement about their actions or inactions. This release may lead to afternoon volatility Wednesday, or it may be a non-factor. However, the minutes do carry the potential to influence mortgage rates so they should be watched.
The sister report to Wednesday’s PPI will be posted early Thursday morning when the Labor Department releases January’s Consumer Price Index (CPI). The difference between the two is that the CPI measures inflationary pressures at the more important consumer level of the economy. With exception to maybe the Employment report, the CPI is the single most important report that we see each month. Its results can have a huge impact on the financial markets, especially on long-term securities such as mortgage-related bonds. It is expected to show a 0.3% increase in the overall index and a 0.1% rise in the more important core data. If we see weaker than expected readings, bond prices should rise and mortgage rates would likely fall.
Also Thursday morning will be the release of the Leading Economic Indicators (LEI) for January. This Conference Board report attempts to predict economic activity over the next three to six months. It is expected to show a 0.5% increase, meaning that economic activity may rise in the near future.
A smaller than expected rise would be good news for the bond market and mortgage rates, but the CPI draws much more attention than the LEI. Therefore, for this report to influence mortgage pricing, it will have to show a sizable variance from forecasts and the CPI will have to match estimates.
Fed Chairman Bernanke will speak before the Senate Banking Committee Thursday morning and overseas Friday morning. Neither engagement is expected to bring any new theories or give an indication of the Fed’s next move to boost or limit economic activity. The markets always watch his words, but I would be surprised if either of these lead to changes in mortgage rates.
Overall, the most important day of the week will likely be Thursday with the CPI being released, but Tuesday and Wednesday will also be active days for mortgage rates due to the importance of the Retail Sales data and the number of events scheduled Wednesday. There is nothing of concern scheduled for today or Friday, so we can label them the best candidates for the calmest day.
In other words, be prepared for an active week in the markets and mortgage rates, particularly the middle part of the week.

Market Commentary

There are only two pieces of monthly economic data scheduled for release this week; neither of them is considered to be highly important. There are two Treasury auctions on the calendar that may influence mortgage rates the middle part of the week, but no important economic data.
Nothing of concern is due today, Tuesday or Wednesday morning, leaving bond trading to be driven by the stock markets the first half of the week. If the major stock indexes move higher, we will probably see more funds move away from bonds and into stocks.
This would lead to higher mortgage rates as bond prices and yields move in opposite directions. Mortgage rates tend to follow bond yields, so we prefer to see bond prices go up, pushing rates lower.
The two important Treasury auctions come Wednesday and Thursday when 10-year Notes and 30-year Bonds are sold. The 10-year sale is the more important one as it will give us an indication for demand of mortgage-related securities.
If the sales are met with a strong demand from investors, we should see the bond market move higher during afternoon trading the days of the auctions. But a lackluster interest from buyers, particularly international investors, would indicate a waning appetite for longer-term U.S. securities and lead to broader bond selling. The selling in bonds would likely result in upward afternoon revisions to mortgage rates.
With little monthly and no quarterly economic reports being posted, Thursday’s weekly release of unemployment figures may end up moving the markets and mortgage rates more than it traditionally does.
The Labor Department is expected to announce that 413,000 new claims for unemployment benefits were filed last week, falling slightly from the previous week’s total. The higher the number of new claims for benefits, the better the news for the bond market and mortgage pricing.
The first monthly report comes early Friday morning when December’s Goods and Services Trade Balance data will be posted. This report measures the U.S. trade deficit and can affect the value of the U.S. dollar versus other currencies, but it usually does not cause enough movement in bond prices to affect mortgage rates. It is expected to show a $40.7 billion trade deficit.
February’s preliminary reading to the University of Michigan’s Index of Consumer Sentiment will be released late Friday morning. This index measures consumer willingness to spend and usually has a moderate impact on the financial markets. If it shows an increase in consumer confidence, the stock markets may move higher and bond prices could fall.
It is currently expected to come in at 75.5, up from January’s final reading of 74.2. That would indicate consumers were more optimistic about their own financial situations than last month and are more likely to make large purchases in the near future. Since consumer spending makes up two-thirds of the U.S. economy, this would be considered bad news for bonds and mortgage pricing.
Overall, despite being an extremely light week in terms of economic releases and relate events, it is still relatively crucial for the mortgage market. We saw the yield on the benchmark 10-year Treasury Note break above 3.50% and close at 3.65% last week. This should be of concern for mortgage shoppers as the 10-year was trading in a well-defined range until late last week. Since mortgage rates follow yields, we need to see some stabilization very soon or yields (and rates) may be moving higher.
I suspect it will be tough to fall below 3.5% unless we get some unexpected major news or a significant stock sell-off. Therefore, please be careful if still floating an interest rate this week as I believe we are set for a noticeable move in the very near future. However, the question is if it will be rates moving higher or lower from current levels.

Loan Pre-Approval and Turning Yourself Into a “Cash Buyer”

Being pre-approved for a loan puts you in a great position when buying a home. It puts you on equal footing with an all-cash buyer, in essence turning yourself into a cash buyer.

With a real pre-approval, the buyer is the next-best-thing to being a “cash buyer” because the seller can rest assured that the buyer will qualify for a loan.
A truly “all-cash buyer” does not have to worry about lender approvals, but will typically still be concerned with a property appraisal and an acceptable title report.
Being pre-approved for a loan puts a buyer in a better position with the seller of the property. It allows the buyer to understand the costs associated with the purchase as well as the monthly costs associated with the ongoing ownership.
The Pre-Approval Process
The pre-approval process simply means that a buyer is getting approved for a loan prior to reaching an agreement with a seller of a property. The buyer will provide the lender with current income, asset and credit documents and the lender will determine the loan amount for which the buyer will be able to borrower.
The pre-approval process can take anywhere from 2 – 30 days, depending on the variables surrounding the possible transaction (credit worthiness, location of assets, calculation of income, etc).
Once a loan amount and purchase price have been determined by the lender, the final approval will usually be subject to an acceptable purchase contract, property appraisal, title report and final interest rates.
While it will vary from borrower to borrower based in the individual characteristics, a lender will typically be able to pre-approve a buyer within 5 days of receiving all of the applicable income, asset and credit documents.

Real Estate Agent Safety: Marketing and Personal Information

By Jim Sullivan and Renee Morgan on February 1, 2011

Don't set yourself up to be victimized because of excess personal information in your marketing.

 

Flashy personal marketing can be a great tool, but beware of the information you include in these materials. Some predators target real estate agents, especially females, they find through the agent’s marketing.

THE RISK: Marketing materials that contain photos of yourself may attract the attention of criminals. Police have found criminals circling real estate professionals’ photos in newspapers and marketing materials (Read one agent’s account of this.)

SAFETY TIPS

• Avoid provocative photos in your marketing. Low-cut blouses, full-body photos, and looking over your shoulder in a sexy pose can send the wrong message to criminals. “Why do you have to have photos anyway? What are you selling?” asks one Realtor, who advises against ever using a photo for business reasons; she uses a caricature.

“You make a living meeting complete strangers in empty houses. They see your photo and if you’re exactly what they’re looking for — whether that be an older or younger agent, blonde hair, blue eyes, whatever — they know all it takes is one phone call to meet you in a house. A picture can be dangerous.”

• Watch what you wear. Only wear shoes that you can run in. Avoid short skirts, low-cut tops, and expensive jewelry. “Predators don’t have the same boundaries as you do. They look at you like that and say ‘She’s asking for it,’” according to a personal safety expert.

• Protect your personal information. Use your cell phone number and office address in your marketing so it can’t be tracked back to your home address. Never use your home address or home phone number. Also, don’t reveal to your client personal information about your children, where you live, and who you live with — you can still build a relationship with clients without revealing all of your personal information, recommends the Washington Real Estate Safety Council.