Stock Market On a Rapid Rise as Interest Rates Kept Artificially Low

The story this week has been stock market records and rising interest rates.  The stock market has been on a rapid rise, hitting new all-time highs almost daily.  Monday, the Federal Reserve officials suggested that the central bank will continue to support the economy even as it continues to improve.  This simply means that they plan on keeping interest rates artificially low allowing businesses and consumers to continue to borrow money at very low interest rates.

Tuesday, the market hit another record high during the day as investors continued to believe that the global economy will continue to improve because governments around the world are all doing what is necessary to support economic stability and growth. 

Wednesday, the market closed at yet another new record based upon the optimistic ADP employment report indicating that the economy added 198,000 jobs.  Additionally, the prior months report was revised upward by 23,000 up to 215,000.  Although payrolls did not increase as much as the prior month, the employment sector continues to show modest improvement.

Finally, on Thursday the market once again topped the previous close. Manufacturing was up and first time jobless claims were less than expected.  Friday we will hear from the Department of Labor on national unemployment, however that report will be released after the writing of this article.

Mortgage rates have been rising all week long in response to the strong gains in the markets.  The positive movement in the stock markets and expectations of the continued economic improvement has investors putting more money into the stock market while selling off their bond investments.  The selling of bonds and mortgage backed securities drives the yield on securities higher causing interest rates to rise.

The forecast from Case-Shiller predicts that home prices will increase by an average of 3.3% annually from now through September 2017.  This would be a completely different picture than what we have experienced since 1997 where house prices rose and fell sharply.  Between 1998 and 2006, price increases averaged at 5% or more per year; however, once the real estate bubble burst, home prices fell 30.5% from 2006 to September 2012.

Lastly, the government spending cuts that went into effect on March 1^st have not seemed to dampen the mood of consumers and business owners.  The public seems to have gotten used to the craziness coming from the government and since many of the cuts do not impact the bulk of the population, most people are just going about their daily business.

Next week’s market moving reports are few and far between:

 

• Wednesday March 13^th - MBA Applications and Retail Sales
• Thursday March 14^th - First Time Jobless Claims and Producer Price Index
• Friday March 8^th – Consumer Price Index and Industrial Production

I appreciate your business and look forward to talking to you soon! Have a great day!!!
 

Sincerely,

Cindy Tomlinson
Loan Officer

USLending Company

DRE Lic # 01520422
NMLS # 214851   

 

PS… FOLLOW ME on Facebook for the latest Mortgage updates

Gridlock in Congress But Home Sales Steadily Rising

There was a time in our recent memory that the threat of $85,000,000,000 (That is Billion with a “B”) would have a major negative impact on the markets, interest rates, and even consumer confidence.  Yet, even though our elected officials have once again proven that they cannot work together, the markets do not seem to be paying much attention to Washington’s gridlock.  It is clear that almost everyone believes that Congress will somehow come up with some type of temporary stop-gap piece of legislation that will prevent what is supposed to happen, from happening. 

Well…it is Friday morning and Congress has worked through the night and still there is no resolution or solution.  The stock market futures as of this moment are only down slightly and interest rates are virtually unchanged, so I guess most people simply are not paying attention, or they are just numb to it.

In the end, we know that our elected officials will come up with something that will not solve any of our financial woes in this country.  We continue to increase our debt, and despite all the shouting from the mountain top that this needs to stop, I guarantee that once again our elected officials will “kick the can down the road” and not do anything to curtail spending.

Housing was the big news maker this week as there were 4 key housing reports released.  Here is the recap:

• FHFA House Price Index - Home prices continue to increase gradually.  The FHFA price index for December increased 0.6 percent which follows November’s rise of 0.4 percent.

• Case-Shiller Home Price Index - Home prices continue to rise by a very strong 0.9 percent for December's 20-city adjusted Case-Shiller index. This pace of increase is the best since last year's second quarter when monthly gains averaged 1.0 percent. From the same time last year the index is up 6.9 percent which is the highest since the giant housing bubble back in 2006.

• Pending Home Sales Index – The pending home sales report points to strong improvement for February. The number of contracts signed to purchase an existing home rose 4.5 percent from the prior month.  One of the biggest challenges to home sales is that properties for sale on the market are scarce and the pace of increasing sales is draining what inventory there is.  The market, believe it or not, is starting to return to the seller’s advantage.

• New home sales in January surged a monthly 15.6 percent to an annualized 437,000 from an upwardly revised 378,000 for December. The latest number well topped market expectations.

Next week’s market moving reports are few and far between:

 

• Wednesday March 6^th - MBA Applications, ADP Employment Report and Factory Orders
• Thursday March 7^th - First Time Jobless Claims
• Friday March 8^th – National Unemployment

I appreciate your business and look forward to talking to you soon! Have a great day!!!
 

Sincerely,

Cindy Tomlinson
Loan Officer

USLending Company

DRE Lic # 01520422
NMLS # 214851   

PS… FOLLOW ME on Facebook for the latest Mortgage updates

Fiscal Cliff and More Fiscal Cliff

The whole world is watching and our elected officials are not looking very good.  The Fiscal Cliff is a real threat not only to the U.S. economy, but the world economy as well.  Markets around the world are moving up and down on every little whisper that comes out of Washington D.C. regarding the negotiations between Democrats and Republicans.  The bottom line is that real fear is beginning to take hold as it becomes more and more likely that a budget deal will not be reached by year’s end.

I understand the different ideologies and I am not going to make any type of political statement here.  What does amaze me is that with so much at stake there appears to be very little movement on both sides.  Our elected officials are playing “chicken” with each other, but the vehicle they are driving is the world financial markets.  It’s disturbing how our government has reached a point that it just does not function.

The Federal Open Market Committee met this week and released not only their opinions, but also their forecast for the economic future.  Here are the highlights:

• The Fed has indicated that they will keep rates low well into 2015 (it used to be 2014)
• Rates will not be raised until unemployment drops to 6.5% or inflation increases to more than 2%.
• The Fed will continue to purchase long term interest rates and mortgage backed securities to keep mortgage rates artificially low.  (What is interesting is that as soon as the Fed announced this news, mortgage rates rose and have risen more than expected just this week)

By the way, if you weren’t sure what it means that the Fed is going to continue to buy MBS’s and long term debt, it simply means our country is going further and further into debt.  (Just thought you should know)

Inflation is down and retail sales are up.  The producer price index showed that inflation is very much in check on the wholesale level with a reading of.1% which is actually indicating that wholesale prices are declining.  Retail sales jumped back this past month with an increase of .3% after last month’s decline of the same amount. Despite uncertainty about the fiscal cliff, it appears that retailers at this point are very optimistic about a very “green” Christmas as consumers appear to be purchasing more gifts than last year.

Next week’s market moving reports:

• Wednesday December 19^th - MBA Applications and Housing Starts
• Thursday December 20^th –First Time Jobless Claims, GDP and Existing Home Sales
• Friday December 21^st – Consumer Sentiment

I appreciate your business and look forward to talking to you soon! Have a great day!!!
 

Sincerely,

Cindy Tomlinson
Loan Officer

USLending Company

DRE Lic # 01520422
NMLS # 214851   

 

PS… FOLLOW ME on Facebook for the latest Mortgage updates

Market News Update - The Housing Recovery

Over the last few weeks I have been excited to write good news about the housing market.  To be honest, as much my fingers were doing the typing about the good news, my heart was wondering if it was really going to last.  I am finally ready to say the housing recovery has arrived.

I am not suggesting that there are not any issues or concerns that remain regarding housing, it is just that it has become very clear that housing is improving and with each passing month the data appears to support the notion of a recovery.

Despite the fact that interest rates have come off their new record lows, buyers are growing in numbers in the new home market.  The number of serious buyers exploring properties with the nation's home builders continues to rise with the housing market index moving up by one point in October.

Trends in current sales, and especially in expectations of future sales, have been sloping steeply higher this year.  The big surprise has been the significant increase in buyer traffic, as it’s at its highest level since the boom days of 2006.

Further evidence of housing improvement is in the recent release of stronger-than-expected growth of both housing starts and permits in the latest report. The September housing starts report is up 34.8% from a year ago.

Imagine all of this is happening while many of the other economic reports are headed in the wrong direction.  This week First Time Jobless claims jumped back up to 388,000 which is higher than we have seen in recent weeks.  Before we begin to panic we must recognize that this weekly report has had large movements over the last few months and a consistent rise in claims has not been seen.  The reports seem to vary significantly week to week.

Mortgage rates have been climbing for the last 2 weeks and the impact is being seen in the number of people refinancing.  Last week the MBA reported that refinance applications declined by 5%.  Purchase applications increased slightly, which continues to validate the improving housing picture.

I don’t know about you, but the election and the debates have been giving me big headaches.  Neither candidate talks about what they will do to help the economy in any sort of detail.  I can’t wait until the elections are over and we can move forward.

Next week’s economic reports are:

• Wednesday October 24^th - MBA Applications, FOMC Announcement and New Home Sales
• Thursday October 18^th – First Time Jobless Claims and Durable Goods Orders
• Friday October 19^th – GDP

I appreciate your business and look forward to talking to you soon! Have a great day!!!
 
Sincerely,

Cindy Tomlinson
Loan Officer

USLending Company

DRE Lic # 01520422
NMLS # 214851   

PS… FOLLOW ME on Facebook for the latest Mortgage updates.