This Week’s Market Commentary!

This week brings us the release of four economic reports for the markets to digest, with three of them being considered important.

One of those three is one of the more important reports we see each month.

There is relevant data or events scheduled for each day except Thursday, so it will likely be another active week for mortgage rates.

May’s Personal Income and Outlays data will be posted early this morning. This report gives us an indication of consumer ability to spend and current spending activity. They are important because consumer spending makes up two-thirds of the U.S. economy.

Analysts are expecting to see an increase of 0.3% in income and a 0.1% rise in the spending portion of the report. Smaller than expected increases should be good news for the bond market and mortgage rates.

June’s Consumer Confidence Index (CCI) is the second report of the week. It will be posted late Tuesday morning. It is important to the financial markets because it measures consumer willingness to spend. If consumers are more confident about their own financial situations, they are likely more apt to make large purchases in the near future.

Current forecasts are calling for a reading of 60.3, down from last month’s 60.8 reading. The lower the reading, the better the news for bonds and mortgage rates.

Friday has two reports scheduled, with the first coming from the University of Michigan who will update their Index of Consumer Sentiment for May. This index gives us a measurement of consumer willingness to spend.
As with Tuesday’s CCI, if consumers are more comfortable with 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 U.S. economy, any related data has the potential to affect bond trading and mortgage rates.

The second report of the day and the last data of the week is the Institute of Supply Management’s (ISM) manufacturing index for June late Friday morning. This index measures manufacturer sentiment by surveying trade executives on current business conditions. A reading above 50 means that more surveyed executives felt business improved during the month than those who felt it had worsened.

Analysts are expecting a reading of 51.1. That would indicate that manufacturers felt business worsened from the previous month, when we saw a 53.5 reading. Good news for bonds and mortgage rates would be a weaker than expected reading, particularly something below the recessionary threshold of 50.0.
Overall, tomorrow and Tuesday’s data should bring some volatility in trading and mortgage rates, but Friday’s ISM report is definitely the most important of the week.

Mid-Week Market Update!

This week’s FOMC meeting has adjourned with no major surprises.

The Fed again reminded us that the economic recovery slowed recently and lowered their forecasts for the economy, but they do expect it to regain momentum in the near future.

Accordingly, they left key short-term interest rates alone and kept the reference in the post-meeting statement that key rates will remain at or near current levels for an extended period of time. They also said that their second round of quantitative easing (QE2) will wrap up this month as planned.
In a bit of good news for mortgage rates, the Fed did say that they were delaying the shedding of their assets from their balance sheet. This was a point of concern in the mortgage market because when the Fed begins selling their mortgage-related holdings, we could see the additional supply make current securities less appealing and lead to higher mortgage rates. The fact that they have clarified they are not starting to sell them doesn’t alleviate the issue, but does push it down the road somewhere.

Overall, today’s events had little impact on the markets. The initial knee-jerk reaction drove stock prices a little lower, but they have since rebounded to positive ground. The Dow is currently up 8 points while the Nasdaq is up 2 points. The bond market has given back some of its pre-adjournment gains, currently standing up only 2/32. However, I don’t see this as enough of a change to cause lenders to revise mortgage rates higher this afternoon.

I am continuing to watch the yield on the benchmark 10-year Treasury Note, currently at 2.98%. I still suspect that the market is not comfortable with it below 3.00% and think that it will move higher in the immediate future. Since mortgage rates tend to follow bond direction of bond yields, this would be bad news for the bond market and mortgage rates.

Tomorrow has two economic reports scheduled for release, neither of which is considered to be highly important. The first is last week’s unemployment figures. The Labor Department is expected to say that 413,000 new claims for unemployment benefits were filed last week. This would be little change from the previous week, indicating no change in employment sector strength. The higher the number of new claims filed, the better the news for the bond market and mortgage rates.

May’s New Home Sales will be posted by the Commerce Department late tomorrow morning. This report is similar to Tuesday’s Existing Home Sales report, but tells us how well sales of newly constructed homes were last month. It is expected to show a decline in sales from April, but will likely not have much of an impact on mortgage rates because this data tracks only 15% of all home sales.

This Week’s Market Commentary

This will likely prove to be another active week in terms of mortgage rate movement due to the economic data and other events that are scheduled, but we may see less intra-day swings than we did the past two weeks. There are four economic reports scheduled for release in addition to another Federal Open Market Committee (FOMC) meeting.

There is no relevant economic news scheduled for release tomorrow. Tuesday brings us the first data with the release of May’s Existing Home Sales report. The National Association of Realtors will give us figures on home resales late Tuesday morning. This data helps us measure housing sector strength and mortgage credit demand, but it usually takes a large variance from forecasts for it to cause a noticeable change to mortgage rates. It is expected to show a decline in home sales from April to May.

Wednesday’s only event is the adjournment of the FOMC meeting that began Tuesday. It is widely expected that Mr. Bernanke and company will not change key short-term interest rates at this meeting. But, as we have seen so many times in the past, it is the post meeting statement that often creates the most volatility in the markets. They could give an opinion of the overall economy or inflation, hinting at a possible future move or lack of one. Statements like these could cause a knee-jerk reaction in the markets and possibly mortgage pricing after the 12:30 PM ET adjournment.

Thursday’s only report is the release of May’s New Home Sales. It is similar to Tuesday’s Existing Home Sales report, but tells us how well sales of newly constructed homes were last month. It is also expected to show a decline in sales, but will likely not have much of an impact on mortgage rates because this data tracks only the 15% of home sales that Tuesday’s data does not.

There are two reports being released Friday morning. The first is the final reading to the 1st Quarter Gross Domestic Product (GDP). The GDP is the sum of all products and services produced in the U.S. and is considered to be the best measurement of economic growth or contraction. However, this data is quite aged now (covers January through March) and will likely have little impact on the bond market or mortgage pricing unless it varies greatly from previous readings. Market participants are looking more towards next month’s release of this quarter’s GDP reading. Last month’s first revision showed a 1.8% rise in the GDP, which is what analysts are expecting to see again.

May’s Durable Goods Orders will also be posted early Friday morning, giving us an indication of manufacturing sector strength. It is known to be quite volatile from month to month and is expected to show an increase of 1.0% in new orders from April to May. A large decline would be the ideal scenario for the bond market and would likely lead to a decline in mortgage pricing because it would indicate manufacturing sector weakness.

Overall, today will likely be the quietest day of the week unless the stock markets stage a rally or sizable sell-off. The most active should be Wednesday with the FOMC meeting adjourning or Friday due to the Durable Goods report being posted that day. Tuesday’s news may also affect mortgage rates, but likely not as much as other days.

How to Decorate Using Feng Shui!

Feng shui is an ancient Chinese system of aesthetic arrangement believed to help improve life by receiving positive qi, sometimes spelled chi. In a new home, or when rearranging things in your current home, utilizing feng shui principles in decor is not very difficult.

The video below introduces concepts of arranging furniture using the principles of feng shui.

Watch the utube video below to learn more about how to arrange your furniture in a place that brings you wealth!

http://www.youtube.com/watch?v=ZmvsJcJForc&feature=player_embedded#t=156s

Loan limits are set to go down October 1, 2011!

The temporary loan limt for the temporary conforming loan limits is schedule to go down from $729,750 to $625,500 on October 1, 2011.  The higher limit is called agency jumbo or high balance conforming by most lenders.  The higher limit was increased to try to help stimulate the economy.  Santa Clara County and other high cost areas will definatly be affected by the reduced loan amount limits.

The change would put any loan over $625,500 in the jumbo category, which will require a down payment of 20% or more on any purchase transaction.  

A seller in the sales price range of $782,000 or more will need to find a buyer with 20% or more as a down payment as of October 1st.  Currently, a buyer can purhcase a home for $756,000 with a down payment of 3.5% obtaining a FHA loan. 

The amount of buyers who can come with 20% is very limited in today's economy. 

Now is the time to purchase a home!

This Week’s Market Commentary!

This week is very light in terms of scheduled economic reports that are relevant to mortgage pricing.

There are also two Treasury auctions taking place that may influence mortgage rates, but we may see the stock markets drive bond trading and changes to mortgage pricing a good portion of the week.

There is no relevant data scheduled for release today or Tuesday. Fed Chairman Bernanke will speak at the International Monetary Conference in Atlanta this afternoon, but I don’t believe we should consider this a highly important event.

There could be reference to the some of the current financial crises overseas. However, unless something said by Chairman Bernanke is highly surprising, I suspect that his speech will have a minimal or no impact on today’s afternoon rates.

The first economic report of the week comes Wednesday afternoon when the Federal Reserve will release its Beige Book. This data details economic conditions throughout the U.S. by region. It is relied upon heavily by the Federal Reserve to determine monetary policy during their FOMC meetings.

If it shows surprisingly softer economic activity, the bond market may thrive and mortgage rates could drop shortly after the 2:00 PM ET release. If it reveals signs of inflation growing or rapidly expanding economic activity in many regions, we could see mortgage rates revise higher Wednesday afternoon.

April’s Goods and Services Trade Balance report will be posted early Thursday morning. This data gives us the size of the U.S. trade deficit and will be released at 8:30 AM ET. It isn’t likely to cause much movement in the markets or mortgage rates, but nevertheless forecasters are expecting to see a $48.7 billion trade deficit. It will take a wide variance from this projection for the data to influence mortgage rates.
The two relevant Treasury auctions scheduled will be held the middle part of the week. The 10-year Treasury Note sale is scheduled for Wednesday while the 30-year Bond sale will take place Thursday. Results of both auctions will be posted at 1:00 PM ET on the sale days. If investor demand was high, we may see bonds rally during afternoon trading, however, weak demand could lead to selling and an increase to mortgage rates. It is common to see some pressure in bonds right before these sales as investors prepare for them, but as long as the sales are not weak those pre-auction losses are usually recovered once they are completed.

Overall, it likely is going to be a moderately busy week for the mortgage market. The most action will likely come during the middle days, assuming that the stock markets don’t go into heavy selling or buying. In weeks like these where there is little factual economic data being posted to drive bond trading, the stock markets often take center stage.

Sizable stock gains should lead to bond weakness and higher mortgage rates, while stock weakness will likely allow improvements to mortgage pricing. I am considering Wednesday the best candidate for most active day in rates, but that is relying on the assumption the stock markets remain relatively calm this week

Apartments are Getting Scarce and Rents are Rising!

It’s no secret that many underwater homeowners are losing their homes. At that point, they are renting apartments.

How big is the demand? In the 1980s, about 28 million people in the United States were living in rented apartments. By the 2010s, that number had risen to about 42 million.

It’s good news for apartment owners, who are seeing the values of their properties rise. Apartment values are also rising because the market is healthy, which makes financing cheaper.

It isn’t good news for renters. Rents are rising and vacancies are falling in some areas. For example, studio apartment rents in Chicago are increasing from an average of $720 to $765 a month.

Mainly because of foreclosures, the nation’s home-ownership rate fell by 2 percent between 2004 and 2010, according to the Census Bureau. Each 1 percent represents one million households moving into rentals.