Good Morning Everyone-
I will keep this short.
Today was Jobs Friday. We just had a huge jobs number today. The market estimated that we would should have 165K new jobs created for February, the real number came in at 236K. The unemployment rate dropped from 7.9% to 7.7%. Many components go into the unemployment rate, however for simplification purposes, its better than what it was.
We did have some revisions to old jobs numbers and it turned out the economy shed 15K more than expected. This is peanuts compared to the huge number we just received.
Mortgage Rates will open up most likely .125% worse (roughly .375 to .500 in price). Make sure your clients know why the markets have had this huge move in the past 60 days and note to them how the stock market has been on an absolute tear since the start of 2013.
Be aware of your market, educate your clients and let's close some deals.
Josh
Friday, March 8, 2013
Thursday, February 28, 2013
Market Update 2-28-13
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
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
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
Wednesday, January 2, 2013
Market Update 1-2-13
Happy New Year to All-
I started to write this update last night. I wanted to hold off sending it out as to wait to see what our leaders passed and what avoiding the cliff really will do/did to our markets.
There are things that us as mortgage professionals need to be aware of. First, we did avoid the cliff even though we did go over it for one day. If we truly did go over the cliff, 800K civilian employees who work for the pentagon nation wide, would have lost there jobs and secondly 98% of Americans would have experienced tax increases. Congress voted and we passed a package that avoided the cliff. However, like any compromise, both sides are not happy. The deal that was passed by congress offers little to no cuts and a increase of taxes on the wealthy and investors. The new rates for the "wealthy" are at 39.6% for 400K (450K or more for couples), 45% for estate taxes up from 35%. Capital gains on dividends went up to 20% from 15%, and it extended unemployment benefits for another year. We have done nothing for entitlement spending and little to help our budget.
Stocks are rallying huge today and bonds are selling off. That means mortgage rates are higher today. But please understand this; nothing has changed with our market. We have done nothing to work our way out of the huge debt problem, nothing to stop the wasteful spending, and nothing to move to be fiscally responsible. So this little "pop" the market is feeling today and the increase we will see on our mortgage rates, I truly believe will be a short term event. If the deal was to cut entitlements, cut spending, and to raise taxes a bit, I think the market would have loved that much, much more and we would have seem a huge rally in stocks and a large sell off in bonds for the long term.
In February we have another huge fiscal issue coming up, the debt ceiling. What the debt ceiling is this: Every year our federal government is allowed to take on a certain amount of debt, if our debt becomes too much, we approach the "ceiling." When we approach the ceiling, we have two options, the government has to immediately stop spending, or the government has to vote to raise it. Obama is already stating that he is not negotiating with it and says that he is not cutting spending at this time (thus he is demanding that it be raised), and the republicans are saying they will not budge and only vote to raise it, if numerous cuts are made. So we will have our politicians battling this out over the next few weeks.
So what this means for us...as usual we need to be increasingly aware of what is happening. Rates will remain low over time; however, it is going to get pretty jittery as we approach all of these constant issues.
Be aware of your market, educate your clients and let's close some deals
Josh
Wednesday, December 12, 2012
Market Update 12-12-12
Good Morning
Everyone-
We have 19 days left to the Fiscal Cliff and 10 days left to the end of the world (based on the Mayan calendar). Assuming we make it through the end of the world, then the Fiscal Cliff will have to be dealt with.
In the next few weeks, if a deal is struck, please expect our market to rally. Some experts feel we could see a 1000 point rally on the DOW, others feel if a deal is reached, we might see one or two days of a rally and then we will return to business as usual. No matter what happens though, when a deal is reached our mortgage rates will go up. So make sure you are watching the TV business channels everyday. A deal can happen at anytime as negotiations typically go through the night.
On Friday of last week we had the Non Farm Payrolls released. This number came in about 40K better than expected and the unemployment rate came down to 7.7% which caused our interest rates to open up higher on Friday. However, after the initial sell off in Mortgage Bonds we gained half of it back before the market even opened. The main reason is that the previous months jobs number was revised higher by 45K. So when we received the October jobs number in November, it was adjusted higher by 45k (30%). That's why when data is released we see movement but it takes time for the market to "digest" everything as typically numbers are revised 3 to 4 times before they are finalized. The only reason why the unemployment rate fell is many Americans are falling out of the unemployment survey (by not getting unemployment benefits anymore), or taking early retirement.
Also what is going on is the FOMC (Federal Open Market Committee) meeting ends today. These meetings happen 8 times a year were short term interest rate policy and bond purchases are discussed. Ben Bernanke will be speaking around 11:30 our time. What is expected that he will say is another round of bond buying will be announced as the last round, called Operation Twist, will be ending. We might see a relative flat market until he makes his announcement. At this meeting here, they will also decide whether to raise prime. Prime is expected to stay put until late 2014.
One more item on the Cliff, if we do go over it, the average tax hike on the American household is said to be around $3500. So that is $3500 less of disposable income or income to pay bills and live on depending on the health of that household. The only positives that could possibly come with going over the cliff is lower rates and it is forcing our government to cut spending and get closer to balancing our budget.
So what to take from all of this, is that the market is going to get choppy. We will not see the stability in our rates until we have more certainty about the Fiscal Cliff.
Be aware of your market, educate your clients and let's close some deals
Josh
We have 19 days left to the Fiscal Cliff and 10 days left to the end of the world (based on the Mayan calendar). Assuming we make it through the end of the world, then the Fiscal Cliff will have to be dealt with.
In the next few weeks, if a deal is struck, please expect our market to rally. Some experts feel we could see a 1000 point rally on the DOW, others feel if a deal is reached, we might see one or two days of a rally and then we will return to business as usual. No matter what happens though, when a deal is reached our mortgage rates will go up. So make sure you are watching the TV business channels everyday. A deal can happen at anytime as negotiations typically go through the night.
On Friday of last week we had the Non Farm Payrolls released. This number came in about 40K better than expected and the unemployment rate came down to 7.7% which caused our interest rates to open up higher on Friday. However, after the initial sell off in Mortgage Bonds we gained half of it back before the market even opened. The main reason is that the previous months jobs number was revised higher by 45K. So when we received the October jobs number in November, it was adjusted higher by 45k (30%). That's why when data is released we see movement but it takes time for the market to "digest" everything as typically numbers are revised 3 to 4 times before they are finalized. The only reason why the unemployment rate fell is many Americans are falling out of the unemployment survey (by not getting unemployment benefits anymore), or taking early retirement.
Also what is going on is the FOMC (Federal Open Market Committee) meeting ends today. These meetings happen 8 times a year were short term interest rate policy and bond purchases are discussed. Ben Bernanke will be speaking around 11:30 our time. What is expected that he will say is another round of bond buying will be announced as the last round, called Operation Twist, will be ending. We might see a relative flat market until he makes his announcement. At this meeting here, they will also decide whether to raise prime. Prime is expected to stay put until late 2014.
One more item on the Cliff, if we do go over it, the average tax hike on the American household is said to be around $3500. So that is $3500 less of disposable income or income to pay bills and live on depending on the health of that household. The only positives that could possibly come with going over the cliff is lower rates and it is forcing our government to cut spending and get closer to balancing our budget.
So what to take from all of this, is that the market is going to get choppy. We will not see the stability in our rates until we have more certainty about the Fiscal Cliff.
Be aware of your market, educate your clients and let's close some deals
Josh
Friday, November 30, 2012
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
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
Friday, November 9, 2012
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
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