MORTGAGE LOAN NEWS FROM CINDY TOMLINSON: stock market

Friday, September 14, 2012

Market News Update - A New Stimulus Launched

Well the news everyone has been waiting for happened…The Fed announced the launch of QE3. This announcement on Thursday morning spawned a rally in the stock market driving it up over 200 points. Investors have been sitting patiently on the sidelines waiting for this news as the Fed’s intervention was not unexpected. The recent poor employment reports along with increasing jobless claims has the government very concerned about the job market not improving.

The goal of the Fed’s 3^rd round of stimulus is to keep interest rates artificially low. However, this is a delicate balance, because when investors believe that the stock market is going to do well, they take their money out of government bonds and purchase stocks. This ultimately will have the opposite result that the Fed wants to accomplish. When investors sell bonds to buy stocks, bond yields rise which indirectly causes mortgage rates to rise. If mortgage rates rise, then the cost to finance a house rises. If the cost of financing a home rises then….(Well you get the idea)

Immediate reaction to the Fed’s announcement was for the stock market to rally and, exactly as I said, bonds got hammered and rates actually went up.

I truly understand what the Fed is trying to accomplish. They believe that keeping rates super low will get the housing market really going. Here is the challenge however. We have seen mortgage rates down to the low 3% range, yet this did little to spur housing demand. The latest round of stimulus is not expected to even bring rates down as low as they were before.

To make matters worse, the two sides of government don’t even talk to each other anymore. The expiration of tax cuts, as well as the automatic trigger of huge spending cuts scheduled for the end of the year, has many people concerned about what is called the “Fiscal Cliff”. If this is allowed to occur and Congress does not do anything to stop it, it is widely believed that the economy will fall back into recession. The Fed can only do so much; however, until our elected officials decide to go back to work, nothing will change.

First Time Jobless Claims took an unanticipated jump all the way up to 382,000. The Labor Department blames the jump on the effects of Hurricane Isaac on many states. It is in those impacted areas that the biggest jump in layoffs had occurred.

Inflation on the wholesale level continues to remain under control when you don’t factor in the volatile food and energy prices. The Producer Price Index rose a modest .2% which is in line with expectations. What is interesting to note is that on Thursday when the Fed announced the new round of economic stimulus, the price of oil shot up to just under $99.00 a barrel. It is likely that $100 a barrel is just around the corner.

Next week’s economic reports are:

Tuesday September 18^th – Housing Market Index
Wednesday September 19^th – MBA Applications, Housing Starts and Existing Home Sales
Thursday September 20^th – First Time Jobless Claims

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

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Friday, June 15, 2012

Market News Update - Mortgage Applications on the Rise!

At long last it seems that homeowners and homebuyers alike are listening to the news and realizing that they need to take advantage of the record low mortgage rates. In the last two weeks almost every day you would hear that mortgage rates have hit new lows. Well…the people are responding. Mortgage applications for refinancing and purchases had the largest increase in a single week than we have seen in over a year.

Purchase applications jumped 13% and refinances went up by 19%. The purchase increase, which for me is the most telling, indicates that home buyers are realizing that the time may never be better to purchase. When you combine the interest rates with low home prices, home affordability is once again at record levels. The refinance jump is hard to read because a good portion of the applications now coming in are for borrowers that may have refinanced within the last few years. Because rates are so ridiculously low, they are opting to do it again.

Next week starts what I call Housing Week. There will be 3 different reports on the housing market which will give us an indicator on the health and recovery of the market. The reports scheduled to be released are Housing Starts, Existing Home Sales, and the FHFA House Price Index. Although these are not all of the housing reports, these are major ones which will certainly make headlines and can have an impact on the stock market. It is important to remember that these reports are for the prior month. Housing can change week by week and what is the latest report may not necessarily reflect what is happening today.

Mortgage rates, although they have risen off of their record lows, continue to remain far below where anyone ever expected them to be. The likely hood of them remaining low is high for now because demand for government securities remains strong. The government’s 10YR Treasury Auction this week drew more demand than was expected. This demand demonstrates that investors are still very weary of what is happening in Europe and continue to remain on the sidelines of the U.S. stock market. Although mortgage rates do not tie in directly to the government treasury prices, they certainly are an indicator on the movement of mortgage rates.

The rumor mill and speculation was in full swing on Thursday in the stock market. With yet another poor unemployment report, someone started the talk that the government is more likely to act on providing more stimulus to help move the economy towards recovery. I don’t know who started the rumor, but I do know it was NOT Fed Chairman Ben Bernake.

The irony of the speculation is that it was only based upon the First Time Jobless Claims that rose again by 6,000. The claims for the prior week were 387,000 which is moving closer to the artificial crisis benchmark of 400,000 that we saw during the recession.

Please keep in mind, that last week Bernake gave no indication that another round of stimulus was coming any time soon. Yesterday nothing was said, either, despite the poor employment report. However investors have taken it upon themselves to guess what the Fed may do, and that is driving the stock market.

Inflation continues to remain well under control. The Producer Price Index declined .1% which was a larger decline than was expected by analysts. The Consumer Price Index also dropped due to the dropping energy prices. When you remove energy from the equation, the CPI actually increased by .2%, which is considered a moderate increase but well under control.