We will be open Saturday to accomadate the overwelming demand to Apply and Lock into these historically low rates. 

Call 877-794 5363

Mortgage Bonds ended higher for the week today even while loosing a bit of ground today. The 3.5% coupon moved lower by 22 basis points  to end the week at 104.47, just below the all time closing price of 104.69, seen on Thursday.  Mortgage Rates which move in the opposite direction of Bonds have done very well with the 30 Year Fixed Rate at 3.57% and the 15 Year Fixed at 3.117%.

Mortgage Bonds and Mortgage Rates have done well partly due to the financial crisis in Europe. The Euro continues to decline and the US Dollar continues it’s move higher as  funding to some Greek banks was halted, making the situation more tense. The ECB will not bail out Greek banks at the detriment of their balance sheet.  Greece will need to recapitalize themselves.Spain could be next  “too big to fail” and “too big to save” country, due to their high debt and their troubled banking sector.  The big concern is contagion, especially here at home.

Looking ahead to next week there are few economic reports.  The Treasury will sell a total of $99B in Notes Tuesday and Thursday at very low rates. A poor buying session for these Notes could be bad for Bond Prices and Mortgage Rates. Technically, Bonds longer-term uptrend is still intact.  I continue to recommend Floating rates long term and locking short term.

It’s important to note that lenders are very busy writing mortgages at these low rates and are limited in taking on more volume, so they have little incentive to lower rates further.

Economic News

Home Prices Rise for Third Consecutive Month

In the 53 metropolitan areas surveyed by RE/MAX, home prices increased 3.2% from last month, and were up 5.9% from April 2011. Inventory also fell considerably over year-ago figures, indicating a potentially stronger market for home prices going forward.

More Good News For Housing

Is Housing on the mend? Housing Starts are up 30% over last year and rose last month 2.6%. Single Housing Completions are up over 20% compared to the same time last year.

Permits for New Construction are up 23.7% from last year.  Home Builder confidence hits a 5five year high.  Seriously delinquent loans are down to 7.4% from last years 8.32%.

Jobless Claims remained were reported at 370,000, they were expected to fall by 1,000.

Euro drama and news of J.P. Morgan’s $2B losses continued to keep Mortgage Bond prices at all time highs, which is good for Mortgage Rates.  The 3.5% settled at 104.03 up 9bp.  I  recommend locking short term and floating longer term.

Tips for Mortgage Shopping

When shopping for mortgage rates it’s important to know that not all rates advertised are locked for the same period of time. Many lenders advertise rates that are locked for 10 days.  Well, if you loan application is not already approved and cleared to close, then a 10 day rate lock does you no good.  Many lenders turn time for a mortgage commitment is taking at least 30 days and in many cases 45 days.  The longer the rate lock, the higher the rate. Keep this in mind when locking into a rate.

Also be sure to check if there is an additional fee to lock in the rate or a commitment fee.

Experience and service are just as important if not more so than the interest rate, because if your loan is not approved or delayed, then you may not get that low rate or the loan.

Also be sure the loan originator you are dealing with is educated, tested and licensed.    As odd as this may sound, only mortgage brokers and small mortgage bankers have been educated, tested and licensed.  Banks employees are not. Ask yourself, would you go to a doctor that has not been educated or tested in their field?

Finally, check for complaints against the organization you intend to use.  You can do this very easily by going to google and typing in the company’s name and the phrase mortgage complaints, or by contacting the banking department within the state they are conducting business.

Housing Recovery is Underway

In an interview, CNBCs Jim Cramer said, the real leadership in today’s market is housing, Cramer said, noting most housing-related stocks are pushing higher.  Home Builder stocks are continually hitting new highs, which could boost the overall economy. After all, building and buying a house is an involving process.

Home Builders have to buy wood, appliances, dry wall, roofing plumbing and electric products. Companies that supply these products are beginning to recover, but their stocks would have to climb considerably before reaching pre-recession levels.

“We’re still in the early innings of a nationwide housing recovery so there’s a lot more room to run,” Cramer said. “They may have too many homes in Spain, Portugal and Ireland, but here? We just aren’t building enough of them.”

National Association of Realtors® — (May 9, 2012) – Median existing single-family home prices are firming in many metropolitan areas, while improving sales and declining inventory are creating more balanced conditions, according to the latest quarterly report by the National Association of Realtors®.

The median existing single-family home price rose in 74 out of 146 metropolitan statistical areas1 (MSAs) based on closings in the first quarter from the same quarter in 2011, while 72 areas had price declines.  In the fourth quarter of 2011 only 29 areas were showing gains from a year earlier.  A new breakout of income requirements on a metro basis shows most buyers have the necessary income to buy a home in their area, assuming a favorable credit rating.

Lawrence Yun, NAR chief economist, said there is some volatility in the price performance.  “Home prices are more volatile than normal because of sudden upswings in buyer activity in some localities, and also are affected by the prevalence of distressed sales,” he said.  “Home prices lag sales activity because the transactions were negotiated mostly in the previous quarter.  Given the steadily dwindling supply of inventory and notably higher listing prices that are being negotiated today, prices are expected to show further improvements in the near future.”

Yun said a big part of the story is housing inventory.  “We now have broad shortages of lower priced homes in much of the country, with very tight supply in Western states for homes through the middle price ranges.  This is good news for many sellers who wish to list now, or for those waiting for prices to improve.”

Economic Reports

Consumer Sentiment Much Stronger than Expected at 77.8 in Mid-May, Estimates Called for Sentiment to Weaken to 76.0 from 76.4

Producer Price Index Unexpectedly Falls 0.2% in April; Core PPI Rises 0.2%, in Line With Estimates

Trade Deficit at $51.83 Billion, while Import Prices Fell 0.5% in April Vs. 1.5% gain in March; Export Prices Up 0.4% in April Vs. 0.8% Gain in March

Bank of England Keeps Rates at 0.5%, Leaves Asset Purchase Target Unchanged

Jobless Claims Fall More than Expected, Down 27,000 to 365,000; Survey Called for Decline of 10,000

Mortgage Bonds Closed higher, matching the best closing price ever for the 3.5% coupon.  While the drama in Europe and the weak U.S. Economy could mean more support for Bond prices and lower Mortgage Rates, we cannot ignore that the Bonds are at very lofty levels.  Technically, if Bonds can break above the current ceiling of resistance, we could be looking at a 3.50% 30 year mortgage.  I recommend floating, not locking mortgage rates at this time.  But be ready to pull the trigger, as a reversal can get very ugly.

As reported by the May 4th Kiplinger letter. Expect to see inflation and interest rates above where they are now.  They anticipate inflation to go to 4% from 2% and Mortgage rates for a 30-year fixed to be around 8% by 2020.

Economic News

The Unemployment Rate falls to 8.1% as April Nonfarm payrolls were reported at 115K and February and March numbers were revised higher by 53K.

The Europeon Central Bank leaves rates on hold at 1%.

Core Personal Consumption Expenditure (PCE) inflation data was a tame 0.2% in March, meeting expectations.

Personal Income rose 0.4% above the 0.2% expected.

Personal Spendng rose by 0.3% a bit slower than the 0.5% expected.

Mortgage Bonds are at the upper end of their trading range and could fall from here as history has demonstrated. I am recommending floating not locking into Mortgage Rates at this time, but be prepared to pull the trigger as the markets can change in a heart beat. Mortgage Bonds ended the week slightly higher than where they started leaving Mortgage Rates unchanged for the week. The 3.50% Coupon closed at $103.72. 

Next week’s big economic news will be Friday’s Nonfarm Payrolls report where it is expected that employers added 162K new jobs in March.

Remember Mortgage Bond prices determine Mortgage Rates and global and domestic news along with financial markets determine the price of mortgage Bonds.  Therefore, in order to time locking into a very low mortgage Rate you need to be working with someone that monitors these markets and can advise you when to lock into a rate or when to float.  The right advice can save a .25% or more in the interest rate.

When shopping interest rates, be sure to ask  how long  the rate is locked for.  Most companies advertise rates that are locked for as little as 10 days.  Well, most are not going to close their loan in 10 days, as it takes longer to go through the underwriting process and get approved, unless you submitted your application without initially locking into the rate, got approved and are ready to close.  Most applicants want to lock into a rate at the time of application.  I am currently advising clients to lock their interest rate for 60 days;  hence, not risking losing their interest rate due to any delays in the process.

Pending home sales increased in March, much higher then a year ago, according to the National Association of Realtors. NAR’s Pending Home Sales Index, an index that measures contract signings, increased 4.1% to 101.4 in March from an upwardly revised 97.4 in February. That’s 12.8% above March 2011 when it was 89.9.
The index is currently at its highest level since April 2010 when it reached 111.3.

Lawrence Yun, NAR chief economist, said 2012 is expected to be a year of recovery for housing. “First-quarter sales closings were the highest first-quarter sales in five years. The latest contract signing activity suggests the second quarter will be equally good,” he said.

“The housing market has clearly turned the corner,” Yun added. “Rising sales are bringing down inventory and creating much more balanced conditions … which means home prices will be rising in more areas as the year progresses.”

Housing- The Case Shiller Home Price Index rose 0.2% in February, non-seasonally adjusted it was down 0.8% from January to February.  The report shows that U.S. home prices hit almost a decade low in February.

New Home Sales fall 7.1% in March to 328 units on an annual rate, above the 318K expected.  However, February was revised to 353k from 313k.

The Median price for a new home was $234,500 in March down 1% from February, but up 6.3% from a year ago.  There is a 5.3 months supply of inventory.

Consumer Confidence fell to 69.2 in April from 70.2 in March and below the 69.5 expected.

Federal Reserve said this week that it plans to continue holding interest rates steady ‘until late 2014′, as long-term inflation expectations remain stable.

The advice is to continue to float, not lock into Home Loan Rates, as the 3.5% Bond Coupon remains above support at the 50-Day Moving Average.    The 3.5% coupon closed unchanged 103.56 and just 13bp above the close on April 13.

The Head & Shoulders pattern in this week’s Bond chart could signal higher Bond prices, which would be good for Home Loan Rates.

Next week there will be much economic data including housing, durable orders, consumer confidence and sentiment, GDP, Initial Claims and the employment cost index. The Fed will hold its regularly scheduled FOMC meeting Tuesday and Wednesday with the monetary policy statement being delivered at 12:30pm ET.

The Federal Reserve remains on the fence with regards to interest rates.  It’s unclear whether the Fed will raise rates to keep inflation low, or will they buy more treasuries to keep home loan rates low and it will take two more months of poor job growth to warrant the Fed to ease and it will take several months of 4% inflation for the Fed to consider raising rates.

Economic News

The Mortgage Bankers Association reported that its Market Composite Index, a measure of loan application volume, rose 6.9% in the latest week.  The MBA’s Refinance business soared 13.5% while the Purchase Index fell 11.2%.

Initial Jobless Claims rise to 386K vs expectations of 375K.  The previous week was increased by 8K to 388K.

In a conference call with analysts, BofA CEO Bryan Moynihan said the mortgage business has reached a bottom and is ready for an upturn.  The bank reported charges of $4.8 billion related to changes in the value of its debt, partially offset by gains of $3.4 billion from equity investments and debt-related transactions.

Existing Home Sales are up 5.2% from March of 2011.  The inventory level is at a 6.3 month supply, up from January’s level of 6 months but down from the March of 2011 of 8.6 months.

With yet another week of volatility, Mortgage Bonds are trying to stabilize above the 50-day Moving Average. Giving Bonds a boost was China reporting their lowest growth in three years and worse than expected quarterly earnings from J.P. Morgan Chase.

Bonds also were helped with news of tame inflation as the Consumer Price Index (CPI) report was in line with estimates.  This mornings  3.50% coupon is currently at $103.38.

I am recommending floating, not locking interest rates at this time.  But be prepared to lock, as any positive economic news can move rates higher.

Economic News

Initial jobless claims increased 13,000 to 380,000 for the week ending April 7. This is the highest level since January, and the second highest for 2012.

Good Friday became Great Friday for Bonds.  A poor Jobs Report pushed Bonds higher by 78 basis points which put lenders in a position to reprice rates lower.  Heavy selling pressure on Tuesday literally reversed all of the gains from previous 6 trading days. Once again, there has been a host of technical damage with Prices falling below a series of important moving averages. This was due to the Fed minutes which were released and made no mention of QE3.  The 3.5% lost 72 basis points Tuesday to close at 102.22.

Investors came back to the Bond Market on Wednesday & Thursday on renewed debt concerns from Europe and concerns that Stocks may be due for a correction.  Fridays Jobs Report  showed 120,000 new jobs created in March, less than expectations which pushed Bonds higher to finish the week at $103.53 .  The 30 year Fixed Rate is currently 3.906% APR. The volitilty continues to provide opportunities to lock into low mortgage rates.  But you must be nimble and be prepared.

Economic News

Jobless Claims Fell by 6,000 to 357,000;  Estimates Called for Gain of 1,000

Bank of England Leaves Interest Rate at 0.5%; Quantitative Easing Program Unchanged

ADP: Private Sector Added 209,000 Jobs in March, An Increase of 200,000 Was Expected

Stocks ended the week logging their worst decline this year.

Bonds started a move into positive territory (good news for mortgage rates) on Monday and followed through with the rally on Tuesday; marginally taking a step off the down escalator. Helping bonds prices improve was Tuesday’s  $35B 2-yr note auction, earning a B+.  Bonds finished the week below resistance at the 35-Day Moving Average and closed at 102.72 down 19 basis points and near support at the 100 -Day Moving Average. The best mortgage rates were realized on Thursday.

PIMCOs Bill Gross said this week, that the Fed will start hinting at QE3 at the next Fed Meeting on April 25th. I agree with Bill, that the Fed will do a QE3 and will site the housing market as the reason. We need to be listening closely to the rumors of QE3; which could move the Bond Market higher.  However, once an official announcement is made, it is more than likely that the Bond market will react negatively; hence,  mortgage rates could suffer as they did when QE2 was rolled out.

Federal Reserve Chairman Ben Bernanke spoke on Monday about the labor markets, saying he was encouraged by the declining unemployment rate of 8.3%, :continued accommodative monetary policy will be needed to make further progress” In other words, keep rates low and maybe do a QE3.

New York Real Estate Sales Gets a Double Digit Bounce
According to the New York State Association of Realtors, existing single-family home sales in February grew by 9.6% to 4,521 from 4,124 year over year.
The median sales price remained above $200,000 since May 2011.
Duncan MacKenzie, CEO of the trade group said “Despite some fluctuation, the monthly statewide median has remained above $200,000, providing a positive indicator for the market.”

Economic News

The NAR index lowered 0.5% to 96.5 in February from 97.0 in January but is 9.2% above February 2011 when it was 88.4. The data reflects contracts but not closings.

The Case Shiller Home Price Index fell 0.8% in January from December for the 20-city composite.

Fed’s Lacker: Recovery Will Be Uneven, Growth Will Be Faster in 2013, GDP Growth May Rise to 3% Next Year, Sees ’12 Growth at 2%-2.5%

Personal Income Up 0.2%; Consumer Spending Rises 0.8%, Topping Estimates, in February; Largest Gain Since July

This  publication is written by John Sauro and may not be posted, published, reproduced or distributed in any other manner, either electronically or in print.

Mortgage Rates and Bonds got a much needed boost Friday morning from the weaker than expected housing data, as new home sales unexpectedly Fell 1.6% in February to 313K units annually, estimates called for 323K units. Bonds Prices continue to be on a longer-term Down Escalator as they sit between resistance at the 100-day Moving Average currently at $102.68 and support at $101.81 which was the level it closed at today.   I recommend locking into a mortgage rate if your transaction is shorter term (days & weeks) and floating (not locking) if your transaction is longer term (weeks & months).

U.S. Home Sales are Gradually Coming Back.  According to an article by the Associated Press earlier this week “A mild winter and a stronger job market have helped boost sales ahead of the crucial spring buying season.

The past two months made up the best winter for sales of previously occupied homes in five years, when the housing crisis began. And the sales pace in January was the highest since May 2010, the last month that buyers could qualify for a federal home-buying tax credit.

February sales dipped only slightly to a seasonally adjusted 4.59 million, the National Association of Realtors said Wednesday. That’s 13 percent higher than the sales pace last July and just below the revised 4.63 million in January”.

Ian Shepherdson, chief U.S. economist at High Frequency Economics, said the lower February’s numbers “should not detract from the key point, which is that sales are trending upward.”

Home Sales Rise Almost 10 Percent Year over Year

February existing-home sales declined from an upwardly revised January pace, but are well above a year ago. The median price of a home in the U.S. showed a slight gain, according to reports compiled by the National Association of Realtors (NAR). Sales were up in the Midwest and South, offset by declines in the Northeast and West. Total existing-home sales, fell 0.9 percent to a seasonally adjusted annual rate of 4.59 million in February from an upwardly revised 4.63 million in January, but are 8.8 percent higher than the 4.22 million-unit level in February 2011.
“The market is trending up unevenly, with record high consumer buying power and sustained job gains giving buyers the confidence they need to get into the market,” said Lawrence Yun, NAR chief economist. “Although relatively unusual, there will be rising demand for both rental space and homeownership this year. The great suppression in household formation during the past four years was unsustainable, and a pent-up demand could burst forth from the improving economy.”

Are improvements in jobs and housing here to stay?

A Bloomberg article states home purchases in the U.S. climbed in February to the highest level in almost two years, another sign that the real-estate market is stabilizing,
economists said reports this week will show. Combined sales of new and previously owned properties rose to 4.93 million at an annual rate, the strongest since May 2010, from 4.89 million in January, according to the median forecasts in a Bloomberg News survey.

New York Economy -Better than Expected

The Federal Reserve Bank of New York said revisions to its economic indicator report showed unexpected jumps in economic activity in New York.
New York realized a 6% jump in annual economic growth in January, up from 2% to 3% in both 2010 and 2011, still well below New York’s previous 2008 peak.
Meanwhile, New York City has recovered steadily since 2010, growing at a sustained pace of almost 5% in 2010 and close to 4% in 2011, with its current activity surpassing its prerecession level. The information released Wednesday show’s that the city’s economy remains on a stable growth track — up 3.5% over the past year.

 NY Fed’s Dudley says still too soon to conclude we are out of the woods.

Federal Reserve Bank of New York President William C. Dudley said signs the economy is improving don’t dispel “meaningful” risks to growth, including higher gasoline prices, fiscal cutbacks and a weak housing market. “The incoming data on the U.S. economy has been a bit more upbeat of late, suggesting that the recovery may be getting better established,” Dudley said today in a speech in Melville, New York. “But, while these developments are certainly encouraging, it is far too soon to conclude that we are out of the woods in terms of generating a strong, sustainable recovery.”

Housing Starts Rose 5.1% in February Vs. 1.6% gain in January.

Building Permits were hotter. 717K Vs. the 695K expected.

Existing Home Sales fell 0.9% in February to 4.59 million units, Vs. 5.7% gain in January. Unsold home inventory at 6.4 month supply.

New Home Sales Unexpectedly Fell 1.6% in February to 313K units annually, Estimates Called 323K units.

This  publication is written by John Sauro and may not be posted, published, reproduced or distributed in any other manner, either electronically or in print.

Were you caught by surprise when the Bond market changed direction and Bond prices fell, pushing Mortgage Rates higher?  You wouldn’t have been if you read my Alert to Lock email on Wednesday.

This reversal should remind us just how quickly things can change in the Bond Market.  Just when prices were trading in a sideways trend…people get complacent about rates…they delay making a decision…Whamo!  The Bond market drops and rates rise.  And as demonstrated this week the selloff was a week-long event. The Fed’s silence on QE3 did not please Bond traders and with Bond yields (interest rates) as low as they’ve been, it didn’t make sense for investors to buy Bonds when there were better gains to be had in other markets, like equities. All this resulted in multi day losses for Bonds, hence increasing Mortgage rates.  Remember Mortgage rates rise when Bond Prices fall.

This is exactly why you need a professional to analyze the economic reports and technicals, which have the potential to be highly market moving going forward.   The economy is indeed improving…hence why Mortgage Bonds remain under selling pressure.  If the economic news shows continued improvement, we could see rates move higher still.

Now What?  Look, there are still plenty of things that can renew the safe haven trade to Bonds, thus lowering rates back down. There’s the likelihood of Greece’s default and other countries like Portugal and Spain making waves.  Oh, and let’s not forget Israel and Iran.  There’s also the political uncertainty in the U.S.  Another important fact is that Stocks have risen sharply over the past few months and a correction or move lower is due.  Any of these can be a market mover for Bonds and Mortgage Rates.  The trick is staying informed regularly and relying on a professional to help you time locking into rates when they’re low.

So, there’s a lot to consider and lots of wild cards.  After such a quick decline, the Bond may be ripe for a rebound – but this may not happen today or tomorrow, as Traders play it safe and don’t rush back into the market. The chart below shows the recent decline in Bond prices.
I believe much of the pricing damage is already done.  However, prices do have plenty of room to fall to the next floors of support.  Mortgage Bonds ended the week  at 102.41 losing nearly 100bp for the week.

One Fed President Say’s Interest Rate Increase Necessary

U.S. Federal Reserve Bank of Richmond President Jeffrey Lacker, said on Friday, he doesn’t believe economic conditions are likely to call for an exceptionally low federal funds rate through late 2014.

“I expect that as economic expansion continues, even if only at a moderate pace, the federal funds rate will need to rise in order to prevent the emergence of inflationary pressures,” Lacker said in a statement. “This increase in interest rates is likely to be necessary before late 2014.”

Four of 19 bank holding Cos. Fail Portion of Stress Tests 

Four of 19 banks failed to meet at least one of the minimum capital ratios in the Federal Reserve’s stress tests.  The banks that did not meet all the standards are SunTrust, Citigroup, Ally Financial and MetLife.

Would you Get Your Mortgage From a Bank With Employee’s That Are Not Educated, Tested and Licensed?

Shocking? You bet. Employees at the big banks responsible for helping you apply for a mortgage are exempt from the licensing and testing requirements imposed on the rest of the industry.  You need to know this, as these are the people you think know what they’re doing.  You might as well have the counter person at McDonalds help you with your home loan.  No offense meant to McDonald’s employee’s, as I believe they would do a better job of it.  Seriously, next time you think you should apply for your mortgage at the big bank where you keep your checking account, think again.  All you need to do is to Google any of the big banks consumer complaints and you will read story after story of consumers who were extremely dissatisfied with the nightmare process and incompetence of these institutions. It’s a fact, Only State Licensed Mortgage Brokers are Educated, Tested & Licensed. 

Economic News

Initial Jobless Claims came in at 351,000, a bit lower than the 355,000 expected.

The Empire State Manufacturing Index, which is a read on manufacturing in the NYC area, came in at 20.2, nicely above the 15.0 expected.

Wholesale producer inflation as measured by the Producer Price Index came in at 0.4%, less than the 0.5% expected.  The Core PPI came in at 0.2%, meeting expectations.

Consumer Sentiment Falls to 74.3 in March from 75.3 in February: U of Michigan

This  publication is written by John Sauro and may not be posted, published, reproduced or distributed in any other manner, either electronically or in print.