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

Analysis: As usual analysis is complicated.  This morning’s data (ISM and pending home sales) were better than expected, which for months now has meant that mbs would retreat and stock would rise.  But for the past two weeks, that has not been so.  It’s not the Fed, this time – the Fed is buying mbs, of course, but buying them in ever-smaller quantities, and buying mostly the 5% and 5.5% coupons, meaning that they are providing no pressure for rates to go below 5%.  That pressure, what of it exists, is coming from the broader market.  And frankly, people, it makes no sense.

There’s no big move to the upside.  There is no immediate prospect of rates dropping back into the 4.5% range.  But still, there is this persistent pressure on mbs pricing that is holding things right where they are, instead of losing ground, as analysts expected (myself among them).  I wrote last week that the only thing I could point to was back-bench sentiment that the economy really wasn’t bottoming out and that there were worse things to come, but as time goes on that argument is less and less persuasive to me.  So I don’t know what it is.  Ideas?  What do you think?

Cj

This is a warning for those of you that do business in Utah County.  Expect your values to be low.  We have not noted this problem in Salt Lake County, so at the moment we think it’s a phenomenon restricted to Utah County and southern environs.

Here’s our take on why this is: everyone knows that the $8000 first-time homebuyer credit is expiring in 90 days.  In Utah County, with its two large universities spewing forth about 10,000 graduates a year, there is an abnormally large population of first-time homebuyers.  That means that for the next little bit, that cohort, being especially active, is going to have disproportionate impact on home values.  When shopping for the thousands of properties out there, which is going to be most attractive to you: $198,000 or $204,000?  It’s human nature.  If the houses are even reasonably similar, the lower price is going to win, but here you also have the famous $1.99 effect working against you.

One of our most recent appraisals reaffirms this rather directly.  The house appraised for $203,000.  There were two comps in the low $200k range, each had been on the market for 300 days or longer.  There were 2 comps in the high $190k range, and their time on market was 42 days and SEVEN days.  The stuff that’s selling, people, is the stuff right under the K, at $295k and $195k, so if your house wants to appraise at $310k or at $210k, you might find that you’re in trouble.

Just a word to the wise.

Analysis: This is a tough market to read.  We are sitting right on the 100-day moving average (and the 200-day moving average).  For weeks, every time we touched that line, we retreated strongly.  Any news, even bad news, was interpreted in the most positive possible light, and bonds sold off.  The stock market is strongly up since March, and though bonds have not fallen by the same amount, the general consensus (here, too) has been that rates were trying to rise and that it was only a matter of time before we saw 6% and higher again.

Well, now I’m not so sure.  This is very odd behavior for the market.  The last couple days there has been some decent economic news, home sales higher, Case-Schiller index higher in 95% of the measured markets, consumer confidence much higher than expected, durable goods orders higher (but with embedded weakness), and ordinarily this would mean a selloff in bonds, especially as we’re right at the top of a trading range.  And yet, and yet.  We even had a huge 5-year treasury auction yesterday, but the bond market actually ROSE following that auction.

So here’s my interpretation at the moment: I think there is a nagging suspicion in the market that there is some really, really negative news coming.  I think there’s a fear that this summer was irrationally exuberant in terms of calling an end to the recession.  I think that means that we’re going to hang out right here on interest rates until at least the $8000 first-time homebuyer credit goes away (loans must be CLOSED by November 30).

That’s my read.  I could be wrong.  I’m holding out at least a 25% chance that there could be a big move down in rates before the end of the year.  I also wouldn’t be surprised to see a large move upward.  But if I were betting, and hey, that’s kind of what I do here every day, I’d bet on holding right here.

Cj

P.S. For you duplex buyer mortgage shoppers, just wanted to say that you’ll need to be in underwriting (for conventional financing) by Monday unless you want to put 20% down.  80% becomes the loan limit on all duplexes as of Tuesday Sept 1.  Just a word to the wise.

Analysis: What happened was the job loss wasn’t nearly as bad as it was expected to be.  This is further evidence that the economy is pulling out of the dive, and while a large rise in GDP doesn’t seem to be in the cards, it is possible that we are momentarily hitting the bottom.  Expect to bounce here for a while, but Americans being who they are, they’ll be buying stocks whenever things are not manifestly awful, meaning they’ll be selling bonds, meaning interest rates will rise.

Although, you know, rising interest rates puts downward pressure on home prices which is BAD news for the market which will hurt stocks and help bonds, which will drive interest rates down which will help ome prices rise which will be good news which will be a buy signal for stocks which will hurt bonds which drives interest rates up, and around and around the mulberry bush we go.

We’re still locking everything in sight.

Cj

Analysis: Economic news has been less bad than expected for most of the week.  The gummint is auctioning off $75 billion in treasuries next week. Traders are still vacationing coming into the fall session, and Congress is about to go on recess.  Combine all this, and the markets are less jittery than they were, which pulls money from bonds and puts it into stocks, making interest rates rise.  That’s the explanation.

The real question is: is the recession over?  Newsweek says so, for what that’s worth, and there are some signs that we may have reached the bottom of the trough.  Personally, I’m not so sure.  If by “the end” you mean that things are not going to go on getting worse forever, and that we are seeing a slowdown – even a stop – in the decline, then perhaps this could be the end.  If by “the end” you mean that the economy is going back on the offensive and a recovery has begun, then no, I think you’re out to lunch.  Most people think of the end of something as the point where that something stops and something new starts up.  By that definition, not only is the recession not over, it hasn’t really gotten started yet.

Lessons should be learned from the Great Depression, which this recession mimics in many ways.  The decline was steep and sudden, but that’s what we usually call a “crash”.  The thing that put the “Great” in “Depression” was the length of time before things came back to where normal would have been.  That’s what makes me more cautious here.  I think it likely that we could be in this trough a very long time.  It takes some years to undo the calamity we spent 30 years getting into.

Keep saving, keep paying off your debts, keep working even if you don’t have anyone paying you.  That’s the way out, no matter what the broader economy is doing.

Cj

P.S. Apropos of this, I’ve finally posted something that’s been percolating for a few months.  It’s called The Most Important Post of My Life, and I’d be grateful if you’ll take a second to read it.

Regulations that go into effect August 1 make quick closings impossible and will do nothing whatever to stop future foreclosures.  They involve waiting 3 days from the initial disclosure to order the appraisal, followed by a mandatory 3 day waiting period from final disclosure to the close.  This adds at least 6 business days to the loan process and will make only one thing happen: more fraud.  That’s it.  It won’t help the borrowers, and it won’t help the sellers, and it won’t help any of the other people involved, myself least of all.  This raft of foreclosures is supposed to make it so people understand better what they’re doing at the closing table, so they don’t default on their loans as often.

Cue maniacal laughter here.

I’m telling you that less than 1% of foreclosures are because the people getting the loans didn’t know what they were doing.  Effectively all the foreclosures in the US are because of the following, in descending order of virulence:

1. The house is upside down and it makes financial sense for the borrower to walk
2. The borrower lost his job
3. The borrower got overleveraged in multiple properties, which he now cannot sell
4. The loan adjusted and the new payment is out of reach

Those are the reasons people are being foreclosed on.  The only possible group that might have been unaware of what they were doing is the last one, and I can tell you from front-line experience, these people DID know what they were doing, they just miscalculated the risks and got bit.  There’s not one thing – not ONE – in this entire piece of legislation (HERA, for those interested, named for the Greek goddess of jealousy and micromanagement) that makes consumers safer or better off.

Let me emphasize something here: I already did all the stuff that HERA tells me to do.  My clients are all told the first time we sign disclosures that if we have agreed on a deal, whatever we agreed to at the beginning will be what we get at the end.  I urge all my clients to bring their original Good Faith Estimates to the table when they close, and if they don’t, I do.  I go through the whole thing line by line.  None of this new legislation makes me a better loan officer, it just makes me slower at it.

Sigh.

Analysis: Employment numbers came in right in line this morning, followed by home sales numbers that are so anemic they’d be confined to bed in any other market.  The stock market euphorically rose to over 9000 on this news.  Whatever.  Who can analyze this stuff?

But I know how to control it.  This has been tested so many times now that it’s as good as proved.  We know here at the office that when we lock a loan, we reverse the market (this only works when the market is tanking).  In the last two weeks we’ve done it several times.  The market starts to fall, so we call up one of our loans and lock it.  The second we do, the rally begins.  Happens 100% of the time.

Why didn’t we do something about the terrible crash of Black Wednesday two months ago?  Funny you should ask.  We TRIED.  Lenders stopped accepting locks, so we couldn’t get one down.  We sent in the request, and it was eventually honored – at the open of the market the next day, which sparked the largest up day for bonds in several years.  I’m telling you, it’s a curse having this much responsibility.

But I promise you I will use it with discretion and wisdom.  I also promise that your personal loan will not be the one we sacrifice on the altar of the gods of mortgage rates.  We’ll get someone else.

Cj

P.S. Thought I’d again thank all of you for following me, and let you know that it matters a great deal to me.  Today I picked up a gig writing for the Scotsman Guide, somewhat because of RateWatch.  You are all very important to me, and you do get service that’s not available to just anyone.  Thank you again, and welcome to our new signups.  Hope you like it here.

While I didn’t find quite as many deals this week as I would have liked to, a few of these deals are some of the best that I have seen all summer.  Homes are selling and buyers are walking into unbelievable deals.  Call me or email me back if you want to know the value of your home in this market or if you would like to see the weekly # of homes that are selling in your county, city, and area. Thanks!

TOP 10 DEALS OF THE WEEK!!!

1. Draper- 2027 sq ft- $137,500- needs some but minimal work

2. Cottonwood Heights- 4,322 sq ft- $274,900- Bank Owned

3. Lehi- 3,866 sq ft- $234,800- bank owned

4. Herriman- 2,468 sq ft- $201,000- bank owned (One of my clients is already offering on this one, sorry)

5. Draper- 6,516 sq ft, 1/2 acre – $459,000- Trying to avoid foreclosure, needs an offer quick

6. Provo- Triplex on Center St., rents for over $1700/mo. – $234,000

7. West Valley- 2707 sq ft- $105,000- Bank owned, needs some work

8. Draper- 3,050 sq ft- $219,900- built in 2006, priced well below any comps (Not a bank sale)

– Please pass this along to anyone you know that might be interested in buying or selling a home in the next 30 days.  I would love to show them any of these or any other homes that they may be looking for.

Jimmy Rex

Realtor/Keller Williams Realty

cell: 801-979-4506

fax: 801-405-6737