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

Analysis: Markets liked Ben Bernanke’s testimony yesterday.  He’s forecasting more unemployment, and the economy hitting a bottom here and starting to climb late this year or early next.  But he’s also telling us that he sees a slow climb, with no huge bounce, especially in real estate.  This is what is called an “L” recession, where things fall and then plateau at the new, lower level.  I think that’s a good analysis.  I expect the same, for a good while, until US households shed more debt and build more cash.  Right now it is the cash dearth that is starving the economy.  That dearth has been created by huge appetites for debt.  Eventually, all debt payments come a’cropper, and that’s what is happening now.  It will pass, if we’re smart, and if the government doesn’t insist on a recovery according to some electoral timetable.

Which is why I’d get my own house in order as fast as possible.  We’re not all that smart, and the government always acts according to electoral timetables.  The basics still work, though, people.  Save some, pay off your debt, find someone to help and help them.  That’s the way through.

Cj

On the other hand, since according to Mortgage Strategy only 19% of the real-estate industry is even kind of using social media (this from a tweet this morning), and from experience I can testify that 90% of that 19% is using it badly and doing harm to itself, I thought I might at least give my opinions about how social media might be used well in a real-estate context.  I am certainly using these tools better than most in my industry, and that has translated into gigs at Zillow and the Daily Herald Newspaper, so apparently my ideas do not entirely suck.  Take them for what they are worth.

Here’s how I got to writing this:

From Seth Jenson, a really good Realtor in Colorado: “Chris, what do you think about Twitter vs. Facebook? Do you think I need to be on both?”

Seth-

Whoo.  What a question.

Facebook is a terrific way for people to connect.  I’m no huge FB-er; I have about 400 friends, which is not a big number by any stretch of the imagination.  I don’t spend a lot of time trying to find friends on FB, or I likely could have a couple hundred more.  And maybe I ought to do that.  Probably I ought to do that.  But it depends on what I’m using Facebook for.

If I’m using Facebook to keep tabs on people I know – my family, my close friends here in town, a few of the guys I went to HS with – then I’m doing it the right way.  You can’t possibly keep track of the doings of 1000 people every day.  Impossible.  However, if one of the reasons for you to be on Facebook is that you want people to remember YOU, well, then you might want a few more friends.  You’d want to update your status at least once a day, and probably more than once.  These wouldn’t all be real-estate updates.  In fact, most of them would be about anything except real estate, and would be only for the purpose of strengthening relationships.  It is those relationships that bring the referrals that make you successful, and coincidentally, it is those relationships that make your life richer and more rewarding, so that’s a happy thing.  Facebook makes strengthening those relationships easier than ever, so I would definitely be on Facebook.

Twitter is very different.  I love Twitter, myself.  I like Twitter better than Facebook.  Where I post or comment about 5x a day on Facebook, I do that twice as much – or more – on Twitter.  Twitter is a research tool as much as it is a communications network.  I get a lot of my news from Twitter, most of my reading material, and have most of my online conversations there, even more than email.  Now, again, it depends on what you’re using the tool for.  Twitter can be a huge and pointless waste of your time.  It can also do you harm, I think.  But if you use it with respect, I think it has the potential to be incredibly valuable.

Here are some examples.  I am not a big noise on Twitter.  I have fewer than 200 followers.  I’m following only about 100 people.  I determined when I got involved that I wouldn’t try to amass a gigantic following until I had some idea what I was doing it for.  I didn’t know enough about Twitter to know what I was doing, so I figured I’d start by following some people that DID know, namely, those that have good blogs about social media.  So I followed Amber Naslund, Olivier Blanchard, Beth Harte, and some others, and learned about what Twitter could do, and more importantly, what I should NOT do on Twitter.

Then I started using the search functions of TweetDeck – TweetDeck is an indispensable tool for using Twitter – to follow mortgage news.  There were some interesting conversations that came out of that, which resulted in my following Tyler Osby, Dan Green, and Agentopolis and a few others.  They are doing most of the blogging and commenting about what’s going on in the mortgage industry.  There were two or three other topics that I thought would be good (hobbies, etc.) so I started running searches on those as well.  I’ve acquired my 160 or so followers through conversations, not spam.  In fact, most of those that are following me would unfollow if I used Twitter to promote myself ad-style.  But because I blog, many of them are reading what I write, and following them allows me to read what they write, get smarter, and engage them in conversation.  Again, for me it is about the relationships.  It’s made me better at mortgages, even though I haven’t spent a great deal of time on Twitter talking about mortgages per se.

Bottom line?  Yes, you should be on Facebook and on Twitter.  Figure out what you want these tools to do for you, and design a strategy to get them to do that.  Expect it to take time.  If you do it right, it will take a lot of it, and a fair amount of work as well.  Farming does.

Good luck.  Follow me at @chrisjoneslehi, and I’ll follow back.  You can friend me at www.facebook.com/chrisjoneslehi.

Cj

P.S. I’m thinking of changing my legal name to “Chris Jones Lehi”.  It’s just so dang much easier for people to find me that way.

Just kidding, Dad.

P.P.S. I’ll have Volume 2 of this post next week, with examples of what to do and what not to do on Facebook and Twitter, and how I think Realtors and mortgage agents can use those tools most successfully.  Stay tuned.  And for Heaven’s sake, get the opinions of some of those above that really know what they’re talking about.

Analysis: A manufacturing reading of 0 means that the industry is stable, so today’s reading of -.55 is not good news except in the context of last month’s reading, which was -.9.45.  So things are looking up.  Sort of.  The inflation number continued to be higher, boosted by a spike in oil prices, but stripping that out the core CPI was still higher than expected, the second such inflation reading to the high side this week.  Mortgage-backed securities have dropped about 100 bps this week so far, a now three-day negative run.  We’ve given back most of what we got last week.

The economy is still in a shambles, but just as nothing goes up in a straight line, nothing comes down in a straight line, either.  There are inevitable plateaus, and every plateau looks like a potential bottom, especially to a population starved for good economic news.  In the macro sense, I hate to say this, but in the mortgage rate sense, I’m happy to report, that the economy is still moving the wrong way and doing so with some rapidity.  We are not at the bottom yet.  Repeat.  NOT at the bottom yet.

Look for rates to make a small rise here, then drift back to where we were last Thursday, or even a skoshe lower.

Cj

Analysis: Folks, the economy is in the soup.  The things that got us here didn’t happen in four months, and they’re not going away in four months, either. This morning @agentopolis (I love Twitter) put me on to this article about unemployment, predicting that we’ll see it hit roughly 14% in the coming months.  I heard a very convincing analysis last night that put the CURRENT unemployment rate at 20% right now, if you count everyone, which the government numbers do not.

Do not worry about this.  You cannot stop any of it.  Work hard.  Do your job.  If you lose your job, it happens.  Call me and tell me.  I know people.  We’re doing things.  We’ll help you if we can.

Find someone worse off than yourself – this will not be hard – and help them.  There’s no better cure for recession than a lot of people working hard to help each other.  No, let me amend that.  There is no OTHER cure for recession than a lot of people working hard to help each other.  Be part of the solution where you are, and let the markets do what they will.

Have a good weekend.

Cj

Analysis: This is really quite interesting.  The government auctioned off $8 billion in 10-year notes this morning and the demand was very solid, both domestically and internationally.  There was more money out there in that auction than there has been in years.  That’s a much different result than the auction of two weeks ago, let alone the one a month ago, which was disastrous.  What it means is that there is a good deal of pressure in the market forcing bonds higher, and if you’ve been paying attention, and of course you have, you know that bonds moving up means rates moving down.

But it’s more than that.  Just the bond level is not entirely indicative of where rates are going to be.  There’s also the question of risk and liquidity on the bank side.  The more liquid bank assets are, the lower they can set rates without exposing themselves to rate risk.  As the credit markets froze up last year, banks had to raise rates to protect themselves, and had to chop programs until essentially only a-credit borrowers could qualify.  It’s too early to say that we’ve started the pendulum swinging back again, but today’s auction was a thing that makes you go hmmmmmm.

We’ll be keeping a close eye on the auctions later this week.

Analysis: Oil spiked a couple weeks ago because it looked like the recession was bottoming out. Whoops. Demand continues to be bad. Oil is now falling. GDP numbers today showed the economy shrinking by 5.5%, and unemployment numbers were bad again, and now earnings are bad as well, so what we learn from this is that we still have a long way to go. This argues for a flat rate environment.

In fact, we’d be trending strongly downward except that every time the government holds a press conference it talks about changing the face of the financial landscape to such a degree that lenders and banks are forced to hedge their bets. Think of it this way: you’re in Vegas. You want to play a little blackjack. You go to the table and the dealer deals you some cards. Then when you look at them, he takes one back. Apparently you can’t look at both of them. This hand, the dealer says, 23 will be the winning score. Next hand it’s back to 21, except you can’t win if you have clubs. How much would you bet on a game like that?

But that’s precisely what’s happening with the US government. Between President Obama, Ben Bernanke, Secretary Geithner, FHA, FHFA, OFHEO, HUD, and a partridge in a pear tree, every single day (and sometimes twice) the rules for lending, how much you can lend, to whom, under what conditions, are changing. If you were a bank, how much would you bet on a game like that?

If it weren’t so catastrophic to so many people, it would be actually kind of fun, like trying to do a puzzle using a funhouse mirror. At least I can say my job isn’t dull.

Cj

Chris Jones
City 1st Mortgage Services, Utah’s Mortgage Lender of Choice (and nearly everywhere else)
801-310-3407