Archive for the ‘Rate Watch’ Category

Markets: Bonds were up slightly today, trading up against a line of resistance.  For the uninitiated, a line of resistance is an average, usually a 25-day or 50-day or 100 day, or what have you, that cuts across the bond price chart.  Those lines form “resistance”, against which bond prices have to push in order to move higher.  They also form “lines of support”, which keep bonds from moving lower.  Generally speaking, the markets will need something unusual in order to punch through a line, some news that is unexpected.  Nothing like that was in the offing today.

Analysis: Tomorrow and the next two days are the real kickers, with the Fed Beige Book tomorrow, and the retail sales and consumer confidence numbers Thursday, followed by a blizzard of numbers Friday, headlined by the Consumer Price Index.  Weak numbers will be good for bonds, strong numbers will be bad.  Good for bonds means good for interest rates.  I realize that means that a bad economy is good for interest rates, and that’s not strictly true, but for rough purposes, that’s where we are.

Actions: Watch for RateWatch on Thursday.  That’s when we’ll know what direction the market is heading.  But if you’re in the market for a short sale, your real deadline for getting an offer in is the end of the month.  Banks are moving glacially on approvals for those.  Remember that you have to be under contract by April to get the first-time or long-time homebuyer credit.

Thursday RateWatch will be interesting, as that is the date of our seventh annual Twelfth Night Charity Ball, and even that we throw to help raise funds for a local charity.  This year it’s the Heart-2-Home Foundation, also known as Utah Home Makeover.  I’ve been on their board for a couple of years, and I really believe in the work they do.  If you go to the website – www.lehilender.com – there’s a link to more info.  If you’re out of state, and many of you are, you can buy a memorial ticket that will send some badly-needed funds to this great organization.  Please take a second.  I’d appreciate it.

Cj

Markets: We’re flat, again, down 6.25 bps (that’s basis points, meaning that the bond market for the FNMA 30-year 4.5% bond has fallen .0625%), which won’t have any impact on pricing.  Markets are waiting on the employment numbers coming out tomorrow.  If those are good, bonds will fall and rates will rise.  Right now we’re at about 5% on both the conventional and FHA 30-year fixed products, depending on a host of factors I’m sure you’re aware of.

Analysis: It’s a new year, and the stock markets are liking that, but the bond markets are not; at least, they have not been able to hold the gains of late 2009.  Not a big surprise, since, it bears mentioning, we’re at rates so ridiculously low that it defies all comprehension.  If you think the real-estate market is bad now, wait until you see what happens when rates rise to historical averages, around 7.6%, which we keep thinking is going to happen one of these days.

Action: If you’re looking at a refinance, and you’ve got a rate of 5.5% or more, especially if you’ve had something holding you back, like income or credit difficulties, PLEASE call us.  We will not be at 5% by the end of the spring.  I can promise you this.

If you’re looking to buy, the government will give you at least $6500 to do it, but you have to have the house under contract by the end of April, so waiting on that is also unwise.  Try our Guaranteed Approval Program.  If we accept you, we guarantee you a home loan, no matter how impossible your situation seems now.

As mentioned last time, we’re going to be on a regular Tuesday/Thursday schedule this year, so you can depend on RateWatch coming to you those days, and anytime the market moves hard, up or down.  Spread the word.  We’d like to get this information in as many hands as possible.

Here’s to a Prosperous New Year, for all of us.

Cj

Chris Jones, Branch Manager, City 1st Mortgage Services (801) 310-3407

Markets: The collapse of the dollar has driven rates slowly but surely to levels we haven’t seen in six months.  Seriously.  It would not be impossible to find 4.625% on some 30-year fixed loans, and we’re closing a 5/1 ARM tomorrow at 3.875%.

Analysis: Well, exactly a year ago today we watched as the mortgage market exploded and rates dropped by more than a full point in two hours.  I remember this well, as I logged on in a spare moment from a condo in Florida, where I was supposed to be on vacation, and spent the next two solid days on the phone because of it.  Not that I’m complaining, exactly, although it was surely most inconvenient.

But this is gratitude week, and I am spending it more or less being grateful.  I am truly grateful for all of you and your willingness to pass along the information I share here.  I depend on referrals for all of my business, and I don’t forget that you have to be thrilled with what you get from me, or you won’t refer me – and I wouldn’t want you to.

We’ll be making some changes to our operations here over the next couple of months that should improve our communications and expand the number of available channels for it, so that you can get this alert however suits you best, whether by Twitter or Facebook or email or text or what have you.  Watch for that, and in the meantime, give me suggestions on how I can make this alert more useful to you.  In turn, let me ask you to forward it on to someone – just one person – that might enjoy it, so that the reach of good, solid market information can grow.  Thanks in advance.

Action: And here is a suggestion from alert reader AmyJo in which she suggests that I add an action section to RateWatch, so here it is: if you’re interested at all in potentially refinancing or purchasing, hit reply to this email and let’s start the conversation.  Average lead time from first discussion to close is running at a career-high 84 days now.  It takes time to get things in place to qualify in this environment.  Do not wait and miss out, and yes, we’re still working in the holidays.  Let us work for you.

Cj

Chris Jones

Markets: The bond market has reversed itself the last two days and is headed higher once again.  It has broken through a couple of lines of resistance and is now trading at what my sources say is “an unsustainable level”.  More on that below.  Current levels on the FNMA bond correspond to 30-year fixed rates below 5%, though not very much below.  Still.

Analysis: What is the definition of “unsustainable”?  If you ask me, unsustainable means “you can’t keep doing this forever”.  These days, it seems to also mean “you can’t keep doing this for long enough to matter,” as when a football team grabs an early lead through fancy trick plays, but shortly runs out of those and cannot sustain the advantage.  It matters which we’re talking about, because the bond market certainly is in Unsustainable 1 territory, but not – again, just as clearly – in Unsustainable 2 territory.  We know this because we’ve been here before.

So we’re here, and we’re here long enough to matter, IF.  It is absolutely true that most lenders (and this is especially true with the new federal babysitting regulations) cannot react fast enough to help you take advantage of rates that will be abnormally low for only a few hours.  It is also true, however, that some lenders can, and the number that have that capability can be increased by your timely action.  DO NOT WAIT FOR RATES TO HIT YOUR TARGET ZONE BEFORE YOU START TALKING TO YOUR LENDER.  That’s not going to work, people.  For most, a couple of hours is just not enough time to get all the documents whizzed back and forth before a lock becomes possible, not with rates moving with this kind of volatility.

Since I already used the running analogy last time, let me use a hunting one here.  If you think you’re going to get the perfect shot on a deer by waiting for the deer to get in the right area, then going in after it, you’re crazy.  The way to make sure of a good shot is to get there first and wait.  Similarly, the way to make sure you get the rate you want – and 15-year rates are in the very low 4s right now, for instance, with 5-year ARMs in the mid 3% range – is to get your documentation together and go over it with your lender BEFORE you need to shoot.  That gives you the very best possible chance to get exactly what you want.

These days, a couple of extra days is a godsend.  Get moving now, and give yourself a break.

Cj

Market: So the economy is roaring back, eh? Weeeeellllll…. Some are beginning to wonder.  Mortgage-backed securities (these are the bonds issued by FNMA, etc. that directly link to mortgage interest rates – also abbreviated “mbs” in this space) are not reacting the way one would expect if everything was rosy going forward.  As the economy heats up, money should be flowing into stocks (it is) and out of bonds (it isn’t).  The benchmark 4.5% FNMA bond today is up 25bps (bps are “basis points”; 100 basis points = 1%) because existing home sales data was worse than expected.  As bond rates rise, mortgage rates fall.  A move of 25bps on the bond translates to less than .125% move in mortgages, but it’s something.

Analysis: strong economic growth is supposed to mean bad things for bonds, because investors take money from fixed-return investments – bonds being chief among them – and put it in stocks.  As bond rates fall, mortgage rates rise, all else being equal.  There are other factors, of course, like inflation, but in the main, good economic news is generally considered bad for mortgage interest rates.  So with rates sitting in the low 5% range on fixed 30-year mortgages and in the low 4% range on 5/1 ARMs and the like, why is the end of the recession not causing a move higher?

Answer: we don’t know.  But the suspicion is that the recession’s end might be oversold just a tad.  Remember, in the last giant downturn, we had a fool’s rally in 1930 that almost got us back to the level before the 1929 crash.  Then the bottom fell out, and we didn’t see those highs again for 20 years.  Not saying here that history is repeating itself, by any means.  But the possibility that history will repeat itself is in the back of every trader’s mind, I assure you.  Caution is warranted.  Therefore I fairly confidently predict that the thing you should worry about, if you’re buying a house, is getting it done before the $8000 federal tax credit vanishes on December 1, rather than the interest rate you’ll get.

My recommendation is that you have your house under contract by Hallowe’en, if you want to have a chance to be closed by Thanksgiving.  And not every mortgage guy can get you done that fast.  Please understand and remember this.

Cj