6/11/09 Market Report
After a nice rally yesterday, prices of mortgage backed securities (MBS) have moved lower this morning, indicating a probably rise in rates. Remember, as price goes DOWN, investors supplying the money for mortgages are essentially demanding a higher return in order to buy. That “return” correlates to rates. Around the globe, stock markets are in rally mode after global consumer confidence improved for the 3rd month in a row leading many around the world to believe the worst is over. But stocks don’t even need to rise in order for mortgages to feel the ill effects of a bullish global economy. Why? Basically, markets have “planned for the worst” by investing in low rate, long term bonds such as the 10yr treasury. Lower rate mortgages (which tend to last the longest as they’re less likely to be refinanced) come along for that ride as an alternative or compliment to treasuries. So when sentiments arise that the recovery may be taking shape sooner and better than expected, these long term, low rate positions get hammered because they would vastly underperform in a “recovered” economy.
We do have some economic data to digest this morning. The Mortgage Bankers’ Association Index reported Purchase Applications fell 7.2% for the week ending June 5th. Purchases showed a slight improvement of 1.1% while the refinance activity fell 12%. With the sharp and sudden increase in mortgage rates, it is not surprising to see the refinance activity drop substantially. The overall reading is the lowest level since February. It is the stated goal of the Fed to keep mortgage rates down to help the housing sector to recover which will also help the overall economy. The Fed continues to be very quiet in regards to this sharp increase in mortgage rates. Do you feel they are doing the right thing by remaining quiet? Or is there anything they can do at this point?
In other scheduled data this morning, the U.S Department of Commerce reported that the trade balance worsened from April growing to $-29.2 billion following last month’s revised $-28.5 billion gap. Our exports dropped by 2.3% while imports declined 1.4%. The drop in our exports is a sign of weakness in our manufacturing sector which is somewhat of a negative for stocks, but this report in and of itself is not enough to dictate market direction on the day.
The big event taking place today is the 2nd of 3 treasury auctions for the week. Treasury will be auctioning $19 bln in 10 year treasury notes at 1pm eastern. Since the supply is known in advance, the most important aspect of the auction will be the demand. Yesterday’s 3 yr treasury auction was received fairly well, with good overseas demand. The 10 year auction is much more related to MBS because of “duration,” which measures how long a mortgage lasts before being paid off (via refinancing, selling, foreclosure, etc…) Bottom line, the average is much closer to 10 yrs than to 3. In somewhat negative news for our treasuries, Russia announced last night that they might pull some of their reserves out of treasuries. This caused treasuries to sell off last night increasing their yields, bringing MBS down with them. The MBS Commentary blog will have complete coverage of the auction after it is completed.
Later today we do get the release of the Beige Book which is a report on economic conditions and is one of the many tools used by the Fed to decide monetary policy. In general, the stronger the indications the fed has about future economic growth, the more likely they are to raise rates in order to prevent the excessive and/or inflationary growth. The Fed has 3 policy’s, accommodative(lowering rates), neutral(keep things steady) and restrictive(higher rates). Since investors appear to be buying into “the worst is over” mentality, I suspect that this report will carry a little more weight today than in previous months and may impact the markets even though much of the data from this report is already known.
Other than speeches from a few members of the Fed, that is it for the economic data. Any time we get Fed speak, it can result in a unexpected tape bomb (sudden unexpected movement in securities’ prices). With the various things going on today, stay seated with your seatbelts in full lock position. We are probably in for a bumpy ride. Currently, all markets are looking for some direction.
Early reports are indicating that the par 30 year fixed rate mortgage to be in the 5.5% to 5.75% range for the best qualified consumers. This is slightly worse than yesterday. In order to qualify, you must have a FICO credit score 740 or higher, a loan to value of 80% or less and pay all closing costs including 1 point loan origination/discount/broker fee.
|
|
Yesterday |
Today |
|
30 Yr FRM |
5.21% |
5.26% |
|
15 Yr FRM |
4.68% |
4.69% |
|
FHA 30 Year Fixed |
5.19% |
5.24% |
|
Jumbo 30 Year Fixed |
5.39% |
5.44% |
|
5/1 Yr ARM |
3.94% |
3.98% |
|
|
Cutosey of the Mortgage News Daily
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Thank you,
Nathan D. Goodman
Real Estate Loan Officer
Guild Mortgage Company
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Where To Find The Best Quality of Life
G Scott Thomas, bizjournals.com
AUGUST 7, 2006 - Seven of the 10 highest-ranked cities that offer the best quality of life are in Western states, according to a new study by Bizjournals.
Topping the list is Bozeman, Mont., where it can get awfully cold -- even dropping below freezing on the occasional summer night -- but there are plenty of compensations.
Like the stunning view of the Rocky Mountains. And the strong local economy. And the intellectual and cultural activity at Montana State University.
The Bizjournals study compares the performances of America's 577 micropolitan areas in 12 statistical categories. The 10 communities with the highest scores have been designated as "dreamtowns," indicating that they offer an outstanding quality of life.
Bozeman tops the list because of its strong showings in several categories:
* Its number of small businesses grew by almost 28 percent during the past five years, topping all but two of the communities in the study group.
* Bozeman's population increased by 15.3 percent in half a decade, ranking 11th in micropolitan America.
* The local share of adults with bachelor's degrees, 41 percent, is sixth among all of the nation's small communities.
Profiles to the top 10 dreamtowns are here.
Bizjournals' study was inspired by the heavy public interest in small-town life and business opportunities. More than 1.7 million people move from metropolitan areas to small cities or rural counties each year, according to U.S. Census Bureau research.
The study identifies the small communities that would be most attractive to people considering such as move. The highest scores go to well-rounded places with strong economies, light traffic, moderate costs of living, first-class educational systems, and good access to big-city attractions. Click here for the study's methodology.
The study group was the nation's 577 micropolitan areas, which are defined as regions that are economically dependent on central cities with 10,000 to 50,000 residents. All metropolitan areas have specifically been excluded from the report. Click here for the top-to-bottom standings of all micropolitan areas.
Bizjournals has also identified the communities with the highest quality-of-life rankings for America's four major regions. Click here for a region-by-region breakdown.
These are the three best small communities in each part of the country, according to the study:
- East: Easton, Md.; Barre, Vt.; and Lebanon, N.H. - Vt.
- South: Kill Devil Hills, N.C.; Oxford, Miss.; and Hilton Head Island-Beaufort, S.C.
- Midwest: Pierre, S.D.; Rolla, Mo.; and Hays, Kan.
- West: Bozeman, Mont.; Jackson, Wyo - Idaho; and Durango, Colo.
The raw data used in Bizjournals' study comes from two federal agencies, the U.S. Census Bureau and the U.S. Bureau of Economic Analysis. All of the figures are the latest, most comprehensive statistics available at the micropolitan level.
Los Alamos, N.M. leads three of the study's 12 categories: most management or professional jobs, most college degrees and most advanced degrees. The only other multiple winner is Palm Coast, Fla., which has seen the strongest population growth and the biggest increase in the number of small businesses. (Click here for the leaders in the categories.)
