Good Morning
Everyone-
I went looking around some websites and found some interesting numbers on 2012.
The Federal Housing Administration (FHA) insured over 242 billion in mortgages
last year and VA insured 128 billion. This accounted for 20 percent of the
total 1.8 trillion origination mortgage market for 2012. Fannie Mae and Freddie
Mac accounted for 73 percent of the market at roughly 1.3 trillion. So what
this shows is that the mortgage market was thriving in 2012. 2013 is expected
to be a rebuilding year for many companies. Some companies are poised to grow
and expand, other companies have such large portfolios that they are just
looking to retain servicing.
More rules of Basel III are coming out. Basel III are rules and regulations
that are being put forth on banks to improve/limit risk regulation and
supervision. With Basel III there will be tougher capital requirements for
banks (stress test). So what that means is that companies with a 2 trillion
dollar servicing portfolio, such as Wells Fargo, are going to have to make sure
they have enough cash on hand to meet requirements set forth in the new laws.
Many of the laws in Basel III have to be fully complied with by early 2014.
So with the purchase market right around the corner, this is primetime to grow.
PNC is well capitalized and ready to lend. Were other companies are just
looking to maintain and raise cash to meet new requirements, we can look
forward to being able to go out and sell a bank that wants to lend.
So what is going on with our rates? The sequester is big news that is going on
right now. If a deal is not reached by Friday, then 85 billion in automatic
spending cuts will take place. On top of the social security tax increase we
all felt starting January 1, the total we would have had the Fed’s take from
the economy is 200 billion with increases in taxes and cuts. We have also had
some other issues going on. The United Kingdom’s debt problem was recently
downgraded and we had a crazy Italian Election. All of these items in some degree
do affect our mortgage rates. Ben Bernanke (Chairman of the U.S. Federal
Reserve), Mario Draghi (President of the European Central Bank), and Haruhiko
Kuroda (the head of the Asian Development Bank) all drive our interest rate
market in some form or another. Rates are predictable to some degree, however
when one of the people above make a statement on monetary policy,
predictability gets thrown out the window. The main thing we know is inflation
is tame (the nemesis of bonds) but as we are slowly starting to improve our
economy, rates will creep up.
We have had some decent and promising economic data come out. The Case-Shiller
Home Price Index was released Tuesday. It came in at 6.8% increase. Existing
Home Sales units for January came in at 437K instead of the expected 385K.
These are signs of a housing recovery.
How do we tackle this market? We just do. We know these low rates will not hold
for much longer. So if people are on the fence about refinancing they shouldn’t
be. If people are waiting for prices to go lower on that home, they won’t be.
The data does not show that things are getting worse. Things are starting to
improve…..modestly. That is all this market needs to truly rally…just a little
sign of hope. We are starting to see it, so let’s be ready to harness it.
Be aware of your market, educate your clients and let's close some deals.
Josh
Thursday, February 28, 2013
Friday, February 1, 2013
Market Update 2-1-13
Good Morning Everyone-
Today is Jobs Friday. Job's Friday is the first Friday of every month. On this day they will release the Non-Farm Payrolls number and the Unemployment Rate. Expectations are that we will have had 180K in jobs created and an unemployment rate of 7.7%. The actual numbers were 157K jobs created. The unemployment rate came in at 7.9%. Interest Rates will be better today. The prior Job numbers in November and December were revised higher. As we know, In November and December, we had a lot of seasonal hiring that happened for the holidays. So we are shedding those jobs right now. Also, last month we had 9K in government jobs loss. We can argue that this is a good thing as those jobs are based on tax revenue and they typically garner costly pension's that tax payers have to pay for.
On Wednesday we also had the first reading of Quarter 4 GDP. Estimates were that we had 1.0% growth but the actual came in at -.1%. Then we had the GDP Chain Deflator, which is inflation within GDP. Estimates were 1.6% and the actual reading came in at .6%. Inflation is the nemesis of bonds but has remained tame.
What we can derive from this week and these numbers, is the economy is sluggish. With the recent run up in stocks and equities that we have seen in the past week has caused our rates to have increased almost .250%. I believe this will be short lived. With the economic data that we have received, this proves that the situation in our country is just average. In order to truly grow, we need job growth around 250K to 300K. With that growth we will start chipping away at the unemployment rate.
Remember the rule of thumb, if stocks do well, interest rates will increase, if stocks do poorly, interest rates will decrease.
So were do we see our mortgage market moving? I think we will be at this level for a few more months. I think the days of having 30 year fixes at 3.25% are gone. We are still slowly improving and this year will most likely be the year of the investor. We will see many people moving more of their money into the market because the current portfolio they have is way too bond heavy. So basically with less money moving into bonds, it will be harder and harder for the FED's to keep the rates as low as they are/were. The lousy economic data will help keep it there but I think the trend over time, will be rates will move slightly higher.
Rates are still good though and they will remain at these levels for sometime. Remember, with one policy change from our government or one major announcement, it can erode or boost our market in a moments notice.
Be aware of your market, educate your clients and let's close some deals.
Josh
Today is Jobs Friday. Job's Friday is the first Friday of every month. On this day they will release the Non-Farm Payrolls number and the Unemployment Rate. Expectations are that we will have had 180K in jobs created and an unemployment rate of 7.7%. The actual numbers were 157K jobs created. The unemployment rate came in at 7.9%. Interest Rates will be better today. The prior Job numbers in November and December were revised higher. As we know, In November and December, we had a lot of seasonal hiring that happened for the holidays. So we are shedding those jobs right now. Also, last month we had 9K in government jobs loss. We can argue that this is a good thing as those jobs are based on tax revenue and they typically garner costly pension's that tax payers have to pay for.
On Wednesday we also had the first reading of Quarter 4 GDP. Estimates were that we had 1.0% growth but the actual came in at -.1%. Then we had the GDP Chain Deflator, which is inflation within GDP. Estimates were 1.6% and the actual reading came in at .6%. Inflation is the nemesis of bonds but has remained tame.
What we can derive from this week and these numbers, is the economy is sluggish. With the recent run up in stocks and equities that we have seen in the past week has caused our rates to have increased almost .250%. I believe this will be short lived. With the economic data that we have received, this proves that the situation in our country is just average. In order to truly grow, we need job growth around 250K to 300K. With that growth we will start chipping away at the unemployment rate.
Remember the rule of thumb, if stocks do well, interest rates will increase, if stocks do poorly, interest rates will decrease.
So were do we see our mortgage market moving? I think we will be at this level for a few more months. I think the days of having 30 year fixes at 3.25% are gone. We are still slowly improving and this year will most likely be the year of the investor. We will see many people moving more of their money into the market because the current portfolio they have is way too bond heavy. So basically with less money moving into bonds, it will be harder and harder for the FED's to keep the rates as low as they are/were. The lousy economic data will help keep it there but I think the trend over time, will be rates will move slightly higher.
Rates are still good though and they will remain at these levels for sometime. Remember, with one policy change from our government or one major announcement, it can erode or boost our market in a moments notice.
Be aware of your market, educate your clients and let's close some deals.
Josh
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