Analysis: Unemployment claims data in today showed mixed results.  New claims were up, continuing claims were down.  The inflation data came in much higher than was expected, but nobody believes that data any more, so markets didn’t react to that.  There was a bond auction as well, and it stank, but nobody cared about the, either.  Nobody cares about anything until the Fed decides what it’s going to do about another round of “quantitative easing” (that’s marketspeak for “the Fed buying up government debt”).  It’s inflationary, which is bad for bonds, but it also reduces the risk of DEflation, which is also bad for bonds.  Right now, markets are focused on the Fed and on this foreclosure moratorium.  Herewith, an open letter to Senate Majority Leader Harry Reid, and his cohorts, on that subject:

Dear Mr. Reid:

I see that you have called for a moratorium on foreclosures across the nation.  While I clearly understand your desire to protect the homes of the Senators and Congressmen that are inevitably going to be chucked out on their ears this fall, I want to suggest that such a moratorium is a bad idea.

No, strike that.  I want to tell you that calling for such a moratorium shows that, as we have long suspected, you have half the intelligence of a hatful of lice.

A foreclosure is the remedy of last resort for a bank.  In most cases, this bank has sent hundreds of thousands of dollars out there on behalf of a homeowner, on the promise that the homeowner will pay the bank back.  When the homeowner does not, the lender has no other recourse other than to foreclose.

Now, it is true that in 23 states in our great nation, foreclosures are undertaken judicially; that is, the lender has to prove to the court that it has the legal right to foreclose, upon which the court lifts that automatic stay of foreclosure and allows the lender to seize the house.  It is also true that in many cases (but by no means even a large minority) the banks fudged the proof by having someone state that he had seen the documents proving the aforementioned right to foreclose, when no such thing had actually happened.  This is perjury.  The banks are being punished right now, even as we speak, by having mortgage notes invalidated in such cases, giving the homes in question to the individuals living there outright.

Perhaps this is justice.  The banks violated the law.  But the individuals that are now getting their homes given to them violated the contract under which the home loan was made.  Search all you want, and you will not find a single case in which the homeowner was sent into foreclosure despite having made all his payments.  The homeowner was derelict.  he violated a contract.  He will not, nonetheless, be punished for it.  In Nevada, perhaps, that is called justice.

Leaving that aside, in the other 37 states the lender hasn’t made even a technical violation of the law, but you’re calling for them to be unable to foreclose there anyway.  I know this is likely to get you votes from the deadbeat class, and maybe that’s the only reason you’re calling for it.  But I want to point out a couple of things that you probably missed, not having had to actually hold a job for three decades or so.

One is that there are a lot of people out there that need to get out of their houses so that housing stock can get back to producing returns.  Those people were going to be levered out through foreclosure, quite often.  Pass a moratorium, and those houses can sit there on the banks’ books as non-performing assets until their walls fall in.  This is a bad time to have stuff like that happen.  If there’s a moratorium on foreclosures, how many people are just going to stop paying those mortgages altogether?  That’s also going to be really good for the tottery financial industry.

But the second thing is worse.  If banks have only one recourse in a mortgage default, and you take that recourse away, what will banks do?  They will stop lending money.  Why would they?  What can they possibly gain from it?  The mortgage market is already in the ICU from all the other crap you guys have been throwing at it, and this would further reduce the already pitifully small number of people that can qualify for a mortgage in the first place.  Surely, SURELY, you can see this.  Your state’s unemployment rate is already well above the national average, and why is that?  Because of all the people there that used to be part of the homebuilding and homebuying industry that are now out going door-to-door selling vacuum cleaners.  What you’re suggesting will make that problem WORSE.

Since there’s nobody on your staff, apparently, that is able to understand this, you’ll just have to trust me.  Or trust the White House.  Nobody there has ever had a real job, either, but even THEY have this figured out.

We out here on the front lines of the market have only one request.  LEAVE US ALONE.  The sooner you do that, the faster things will get moving in the right direction again.

Or, you know, just wait a couple weeks, then you can make whatever decisions you want, and we won’t care.  We’ll see if Sharron Angle has a better grasp of third-grade economics.  Maybe you can get a new job selling vacuum cleaners.  You’re obviously a hell of a salesman.

Sincerely,

RateWatch

That appears to be over.

The last three days the market has moved in the wrong direction every day, and today is no exception.  RateWatch sees that the benchmark bond is off 38bps, which is enough to move rates higher when coupled with the loss of 70+bps over the last couple days.  I believe that we have seen the best pricing we’re ever going to see.

If you have been holding your fire on doing a refinance, or you are purchasing a home but have not locked your rate yet, you had best get on it quickly.  Rates will have moved to 4.5% this morning, edging toward 4.625%.  If your credit isn’t perfect (or your loan has other quirks), your rate will be higher yet.

Sorry to be the bearer of bad news.  But we all knew this wasn’t going to last forever.

Welcome to RateWatch for Thursday, August 05, 2010.  Here’s what’s happening:

Employment again is the news of the day, with new claims up another 20,000 or so to 479,000.  Continuing claims were down, though, to 453,700.  That was not as far down as the markets were expecting, however, and that’s meant that bonds have stayed strong.

Not too strong, though.  There really is no upside here.  Unless we get a truly shocking number tomorrow from the unemployment people, showing unemployment at, say 10.5%, there just isn’t any confidence in the bond market to cause a buying wave.

What that means for rates: nothing.  We’re down 6bps, which might just as well be flat.  There is no upside without huge news, and no downside because what news there is is bad.  So we’re hanging out with rates in the 4.5% range.

Anything else?: yep.  Sure is.  The big news today comes out of Washington, surprise surprise, with the Senate passing a bill that changes FHA fees.  Up-front MI will move from the current 2.25% down to 1%, a positive change, but more than made up for by the increase in monthly MI from an annual .55% to .9%, and the FHA gets authority to go all the way to 1.5%.

Bottom line: on a $200,000 loan, you are paying right now $4500 in UFMIP and $91.66/mo in monthly MI.  When these changes take effect, you’ll be paying $2000 UFMIP but $150/mo in MI.  For more commentary on that, see the blog at thechrisjonesgroup.com.

I’m Chris Jones, aka Agent Zero.  That’s RateWatch for today.  Until next time, we’ll be watching the rates.

Welcome to RateWatch for Thursday July 29, I’m your host, Chris Jones, and here’s what’s happening:

Today’s market: The benchmark bond is up 12bps today.  We’re trading in a very narrow channel.  Economic news today was all about employment, as in, there isn’t much of it.  Unemployment benefits have been extended, so continuing claims were up, which did not surprise anyone.  New claims were down, but not very much.  The recovery continues to fail to do the one thing that would really get the economy moving again – create jobs.

What that means to you: rates are holding steady.  It’s generally acknowledged that banks would like to raise rates, but competition is making that very difficult.  Remember, they don’t make money unless they lend it out to people.  Rates are therefore critical to attracting business.  There’s no central rate-making authority in mortgages.  The banks take their cues from the bond market and from each other.  So today’s rates are in the 4.5% range on conventional and FHA, with 15-year rates in the 4% range.

At some point, obviously, this is going to change.  We’ll have a terrorist attack (which would be mixed for bonds) or we’ll have IBM invent cold fusion (which would be very, very bad for bonds), and the market will break out of this channel and start moving, almost certainly upward.  We are trading right now at the bottom of the historical range, as in, it’s never been this good.  Ever.  So it isn’t as if there is a lot farther down we can go.

How long will it last? That’s the billion-dollar question.  Here’s the answer: NO ONE KNOWS.  Only one thing is certain: rates in this range will go away.  Do not wait to talk to a professional.  You can call us.  That’s what we’re here for.

That’s RateWatch for July 29, I’m your host, Chris Jones.  You can find us at thechrisjonesgroup.com or text us at 801-850-378.

Welcome to RateWatch for Thursday July 22, and here’s what’s happening:

Today’s market: The benchmark bond is down 15bps today.  We’re trading in a narrow channel.  It’s a huge day for economic news, with jobless claims coming out worse than expected – at least, worse than the experts expected – and existing home sales numbers showing the housing market still weak but not as weak as expected. All that bad economic news is bad for stocks and good for bonds.

What that means to you is worse mortgage rates, but not very much worse.  We’d need to be down 30-40 bps before banks would react with worse rates.  There’s a certain fatigue on the part of banks, who don’t really want to make loans in the low 4% range, so they’re not going lower on rates unless we have a huge move in the market.  That’s not happening.  Moves higher are very possible, however, so stay tuned.  To you all this means that rates are holding steady in the 4.5% range on most loans, down in the 4% range on 15-year terms.  Those rates are truly ridiculous, by the way.  At 4.5%, you can buy 20% more house than you can at 6% for the same payment.  An example:

6%, $200,000 loan, payment $1200/mo

4.5%, $240,000 loan, payment $1216/mo

So let’s all be grateful.

What’s in it for you? Money.  It’s going to take you 60-90 days to be able to complete a sale, so start the process right now.  For many of you it will take as much as six months.  Sound like a lot?  It isn’t.  And January is traditionally one of the cheapest times of the year to pull the trigger.  Do not wait to talk to a professional.  You can call us.  That’s what we’re here for.

That’s RateWatch for July 22, I’m your host, Chris Jones.  You can find us at thechrisjonesgroup.com or text us at 801-850-3781. ‘Til next time, we’ll be watching the rates.

Let’s get to it.

MARKET: the market is down a bit today, off about 25 basis points.  For those just joining us – hey there, Tyler, Corrine, and Taylor – what that means is that the bond we track, the FNMA 4.5% 30-year bond – is being sold off and its price is declining.  It also means that the yield on that bond is rising.  Since lenders hedge their lending by buying those bonds, when the yields on them rise, mortgage rates rise with them.  So today mortgage rates are increasing.  Not very much, but a little.  More than we’ve seen in a month.

ANALYSIS: Markets rise and markets fall.  The big news over the past few weeks has been the increasing probability that we’ll see a market slump over the last half of the year and into next year.  There is also a real fear that next year could be truly ugly.  With the Bush tax cuts sunsetting on January 1, businesses will be moving their cashflow into the latter half of this year to avoid the explosive tax increase.  Dividend taxes nearly triple, which will be terrible for pension funds, and every single tax bracket will see tax increases.

Anyone that thinks that won’t have a huge negative impact on economic growth is not a serious person.  There is a chance – really, a pretty good one – that Congress will do something about an extension for part of the cuts, especially those that will have the smallest economic, but largest political, impact.  As of this moment, however, it doesn’t seem a good time to invest in stocks.  Bonds, as a result, have been flourishing, driving interest rates to 4.5% and even lower on some programs.

ACTION: We may have hit the bottom of this trench in mortgage rates.  Those of you that have been thinking now might be a good time to buy, now might be a good time to buy.  For refinances, I’m willing to go out on a limb and say it’s now or never.

Until next time, we’ll keep up the RateWatch.

Cj

Analysis: Rates are sticky down, meaning that they stick on the way lower and don’t mirror market conditions exactly.  They are also slippery up, meaning that they rise faster than you would think when the market deteriorates.  I think that might explain the hysteria about interest rates, with everyone and their dog predicting a gigantic surge in rates when the Fed stopped buying mortgage-backed securities at the end of March.

Okay, not everyone.  As you know, faithful readers, I predicted that rates would not go higher, at least not by much.  And for once, I was right.  It just didn’t seem rational to me that with the global debt overhang we would have a massive flight out of mortgage-backed securities causing a huge rise in interest rates.  It has, in fact, not happened.  Rates remain in the range they have been for 18 months.

Additionally, there isn’t going to be any significant fallout – not for the next few months – from the expiration of the tax credit for homebuyers.  The market will adjust.  There was an extra $8k built into pricing on homes, which will now slowly vanish, and lower prices will start pulling the same buyers back into the market.  Not all of them, of course, because many of them were getting an $8000 “gift” from mom and dad that they were going to pay back from their government largesse, and that is gone.  But there will be other incentives.  The market wants to move.  Real estate wants to move.  And it will.

Action: if you’re in the market, stay there.  We’re about to see the best prices for houses and the best rates we’ve seen in many years.  Get with us, get into the PerfectHome program, and we guarantee when you find the house you want to buy, you’ll be able to buy it.  That’s right.  We guarantee it.

Cj

Analysis: Good employment data – we actually have seen some hiring in this report – makes it look more and more likely that the bottom of the recession has come and perhaps gone.  Couple that with looming $3 trillion deficits, and that means that bonds are doomed.  This time, there’s no Fed backstopping things.

So, it turns out that I was wrong, and that the end of the Fed purchases of mortgage-backed securities IS going to have a hugely negative impact on interest rates, as the conventional wisdom said it would.

Action: The only thing to do is to move as quickly as possible.  If you are considering a real-estate transaction (the government goosing of the housing market comes to an end on April 30, FYI), move now.  Nobody can lock your rate without an address, so get a contract in place as soon as you can.

Despite my small joke in the headline, I do know that there’s nothing in the housing markets that is anything like as important as the real events being commemorated this weekend, beginning today with Good Friday and culminating with Easter on Sunday morning.  I recall singing at many Easter sunrise services as a teenager, and the power of the commemoration of the Resurrection is with me as I write this.  RateWatch is about how important the market is, but all things considered, nothing that happens in the market is very important at all.  Take some time this weekend to appreciate how insignificant all this really is compared to the things that really matter.  I know I will.

Cj

801-850-3781