Market Update 10-31-2012

Good Afternoon All-
Happy Halloween!

We have seen a crazy few days. We have had one name that has been resonating in our ears.....SANDY. Hurricane Sandy has devastated many areas of the east coasts. For the first time since 1888 our stock market was closed for 2 consecutive days. The damage that Sandy has caused is estimated at over 20 billion and growing. Today the markets are open but they are running on a "skeleton crew" which means the volume is very light w.  Volatility will be rampant.

So how does this affect our mortgage world?

Understand that these catastrophic events, although they result in carnage and death, they pose to be very good for interest rates. Investors tend to move away from stocks and push money into bonds thus lowering rates. Remember what happened March 11th, 2011 when the Tsunami hit Japan? We saw a decrease in our rates of about .250% in a week. This disaster might very well have that effect as the days and weeks go on. Insurance funds will have to unload there equity positions to raise cash to pay for all of this damage. We should see stocks moving lower and bond prices pushing higher.

Due to the markets being closed all of our economic data has been delayed. So we have an interesting few days ahead.

We have consumer confidence reports, income reports, manufacturing surveys, etc . Then on Friday (the first friday of every month) we have the Non-Farm Payrolls and the Unemployment Rate. So tomorrow and Friday will be very choppy. None of these recent events will be taken into account for Friday's numbers. Based on the mediocre earnings we have been seeing the numbers shouldn't be anything to write home about but you never know.

Nov 6th will be a huge day (election day) and expect some major movement on Nov 7th following the results.

Remember volatility is the new normal in our lives. Expect nothing less.

Be aware of your market, educate your clients and let's close some deals.

Josh

Stock Markets Closed

Breaking News: Stock Markets will be closed today due to Hurricane Sandy. This is the first closure since 1987. This storm could cost up to 20 billion in damage according to CNBC . If any of the east coast oil refineries are hit, gas will go up.

Per last week's post, originators need to take advantage of the recent lowering of rates. Tomorrow should be lower as well with the hurricane going on.

Josh

Market Update 10-26-12

Good Morning All-

We have had a busy few weeks with our market. We had our rates at an all time low and now we have seen them creep up around .375% over the past 3 weeks. As I stated before (9-27 update), rates fundamentally could not get lower at that point. There was too much resistance. That proved to be correct.

We need to understand that the main entity purchasing Mortgage Backed Securities (the investments that mortgage rates are based off of) is the Fed. That's it. Many of the bond funds who used to buy MBS's, have unloaded their positions because they know they have a guaranteed buyer waiting in the wings. So it will be harder and harder to for rates to be pushed lower.

If you have those clients waiting around for lower rates, be sure to educate them on what is really happening in our market. Do not let them get caught in the media hype about "low rates" as greed can backfire.

I do truly feel that we will see rates come down a little bit (.125% or so) over the next week. The main reason is corporate earnings. Right now we are in the midst of Earnings Season. This is when all corporations release their 3rd quarter earnings. Many of them have been lack luster. With earnings there is an estimate that the street has (the market) and then based on were the actual numbers come in, we will see movement. Many companies have been missing earnings and the most recent and one of the most powerful.....Apple.

So with this plethora of missed earnings, it shows that our economy is weak, and still very fragile.

Plus we have something coming up which we need to consider.....the Fiscal Cliff. The fiscal cliff is rapidly approaching. Now what this is is a bunch of tax increases that are set to take affect at the end of 2012. Raising taxes in a fragile economy can have dire consequences. However, if we do hit this "cliff" expect rates to improve drastically. So be aware as we are only about 45 days away from the cliff. Expect there to be no real talk about this until Nov......7 one day after our presidential election. Then our government will get back to business dealing with the issues at hand.

Lastly, we just had some economic data that just hit the wires a few minutes ago. We had Q3 GDP (gross domestic product). The market estimated that we would have a 1.8% growth. The actual number came in at 2%. On the surface, that number looks good, however when the number is dissected, this is were issues arise. The Business growth portion of this number is actually negative and the personal consumption portion (what we buy and consume) was flat. Understand there will be 3 more readings of Q3 GDP. Above I talked about corporate earnings, however not all companies have released their earnings. So basically, the government estimates roughly a third of this Q3 GDP number. The final reading for Q3 GDP will not be in for another month. To really sustain growth and put an end to our recession, we need around 3% growth overall. We have a lot to go.

So what to take away from this is mortgage rates should open up better today. My feeling is that we should see an improvement in rates over the next week, but as we know volatility is the new normal.

Be aware of your market, educate your clients and let's close some deals.

Josh