Market Update 11-30-12

Good Afternoon All-

What a crazy month we had. Sandy, Obama, "Cliff", it never ends.

We have seen our rates, post Sandy, come down about .125%. Now the big debate we have going on is the Fiscal Cliff. Be aware of what the outcome will be when we have clear direction from our government. For example, if we go over the cliff, our interest rates will get much lower. There will be job loss, and panic which will cause money to flood the bond markets, raising prices of bonds, thus lowering interest rates. If we strike a deal, which most likely we will, rates will move higher, and the stock market will in turn rally. We have 31 days until this date so, as usual, plan on everything going down to the wire as we know our politicians will be going back and forth.

One item that it is very important that you need to be aware of is that Fannie Mae and Freddie Mac have just imposed some higher fees (guaranty fees)  for purchasing loans. This becomes effective December 1st. They have increased their fees 10 basis points. What this means is all companies who sell loans to Fannie and Freddie will be making 10 basis points less. After doing some research on this, it appears that many of the larger banks have already anticipated this and have preemptively planned for this. However, what we can gain from this is many of the brokers and correspondent lenders will suffer. We might see their rates increase a little bit to account for this which bodes well for us. As we know all increases in goods are passed off to the consumer. In a multi-trillion dollar mortgage industry, this increase will give fannie and freddie hundreds of billions of more revenue.

The economic data we have had released recently has been average at best. Inflation has been tame, jobless claims are in-line, retail sales are so-so, GDP is hovering around 2%. These are all signs of a sluggish and stagnant economy.

Our interest rates will probably remain at this level for the upcoming months however we will get a pop either way when a decision is made for the fiscal cliff.

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

Josh

Market Update 11-9-2012

Good Morning Everyone-

And the winner is......Lower Mortgage Rates.

We have had a busy couple of weeks. My last update I sent on Halloween. As stated in that update, Sandy has bode well for our interest rates. Devastation is not something we seek out, but when it does happen it helps the bond market.  It is estimated that it has/will cost the US economy close to 20 billion. United Airlines alone reported that Sandy has cost the company close to 90 million with cancelled flights and lost revenue.

The other main event that we just had was our presidential election. Whether you agree with the outcome or not, the general rule of thumb was that if Romney won the stock market would have rallied which would have increased interest rates, and if Obama won the market would sell off and which would lower interest rates. Well we obviously know that Obama won and with him winning as well as Sandy, we have seen our rates decrease over the past week. Rule of thumb again is when stocks do well, rates move higher, when stocks sell off, rates become lower.

The one main event that the news will not stop talking about and that I touched on in the 10-31 update, is the Fiscal Cliff. Remember the "cliff" is a set of tax hikes and cuts that are set to take affect. The drop dead date for these changes is January 2nd. This will be running our market for the next few months. Basically if these tax hikes do take affect, it is perceived that business development, hiring, and job creation will be halted and we will be pushed into another recession. There is some truth to this belief. Also the "cliff" has layoffs for government workers, cutting of school spending and infrastructure built into the cuts/hikes.  The next few months our politicians will be battling. With a president that is adamant on raising taxes on the wealthy, and business, we know politicians will be vocal. Remember were politicians get most of there campaign money.

We had some huge news this morning with Q3 earnings from JC Penny which had a 93 cents a share loss with sales lower by 26% under expectations. They are one of the largest retailers and going into our Holiday season with retail sales lower, this is not a good sign. Retailers are expected to hire 100 to 150K of seasonal employees. So in order to keep the economy moving, we need good retail sales.

Jobs and extending the tax cuts will be the number one discussion and with this, we hope to avoid the cliff. Obama will even be speaking about this today. The economy is fragile and with the baby boomers retiring in masses, pulling pensions and social security, jobs need to be created to help pay for this and cliff needs to be avoided.

Mortgage Interest rates will open lower (better) today so please take advantage of the analysis and educate your clients.

I personally do not feel that rates can get much lower but we will see a little more improvement in rates until we hit a wall.

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

Josh