Archives for April 2012

Real Estate Week In Review

In This Issue

Last Week in Review: The Fed met, but was there mention of more Bond buying?

Forecast for the Week: A full slate of economic reports is ahead, with news on inflation, manufacturing, and the job market.

View: Cinco de Mayo is right around the corner.

Last Week in Review
“I’m still standing – yeah, yeah, yeah.” Elton John. And after last week’s Fed meeting, Bonds and home loan rates are still standing near record best levels. Read on for details.

 After last week’s regularly scheduled meeting of the Federal Open Market Committee (FOMC), Fed Chairman Ben Bernanke acknowledged that conditions in our economy are improving modestly, but he noted that the housing market remains depressed. One example of this is New Home Sales, which fell 7.1% in March to 328K units on an annual rate.

Bernanke also noted that inflation is higher in the short-run due to higher energy costs, but that the Fed expects prices to moderate and remain in check longer-term. Remember, inflation hurts the value of fixed investments like Bonds (including Mortgage Bonds, to which home loan rates are tied)…so inflation staying in check is crucial when it comes to home loan rates remaining near record best levels.

One important subject the Fed didn’t mention in their Policy Statement was another round of Bond buying to stimulate our economy (known as Quantitative Easing or QE3). This wasn’t much of a surprise because — after several moves to prop up the economy — the Fed must see where upcoming economic reports go before venturing to underwrite the economy further. If the housing market remains depressed and the economy doesn’t pick up steam, QE3 could be a very real possibility.

And there was a bit of a sluggish read on our economy last Friday, after the Fed’s mid-week meeting. The advanced (first of three readings) of Gross Domestic Product (GDP) for the 1st Quarter of 2012 came in at 2.2%, well below expectations. This was also well below the 3% final 4th Quarter 2011 GDP reading. Within the report it showed that the personal consumption expenditure inflation reading rose at the fastest pace since the 2nd Quarter of 2011. This is definitely something the Fed is watching closely.

As 2012 continues to unfold, inflation, the housing market, our sluggish economy, and our ever-growing debt are important issues that the Fed and our government need to address. Seeing the debt crisis in Europe escalate must put a sense of urgency on our government to reign in our annual budget deficit and overall debt. This mix of factors will continue to impact the direction in which Bonds and home loan rates move in the weeks ahead.

The good news is that now continues to be  a great time to purchase or refinance a home, as  home loan rates remain near historic lows. Let me know if I can answer any questions at all for you or your clients.

 

Forecast for the Week

A slew of economic reports are set for release this week, and investors and traders will be watching the data closely for any signs of an economic slowdown:

  • Right off the bat on Monday the Personal Income and Spending data will be released along with the closely watched Core Personal Consumption Expenditure (PCE) report. The Core PCE is the Fed’s favorite gauge of inflation and comes after Fed Chairman Ben Bernanke said last week that inflation in the short-term has been pressured higher by rising energy costs.    
  • In the manufacturing sector, the Chicago PMI will be released on Monday with the national ISM Index delivered on Tuesday.
  • On Wednesday, the ADP Employment Report will be released ahead of the government’s monthly Non-farm Payrolls and the Unemployment Rate on Friday.
  • Initial Weekly Jobless Claims will be released on Thursday. The recent couple weeks of elevated Jobless Claims is disturbing…and if it continues, rest assured QE3 chatter will re-emerge.

Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result. The chart below shows Mortgage Backed Securities (MBS), which are the type of Bond that home loan rates are based on.

  When you see these Bond prices moving higher, it means home loan rates are improving — and when they are moving lower, home loan rates are getting worse.

To go one step further — a red “candle” means that MBS worsened during the day, while a green “candle” means MBS improved during the day. Depending on how dramatic the changes were on any given day, this can cause rate changes throughout the day, as well as on the rate sheets we start with each morning.

As you can see in the chart below, Bonds and home loan rates continue to hover near record best levels. I’ll stay on top of this week’s news to monitor how Bonds and home loan rates are impacted.

Chart: Fannie Mae 3.5% Mortgage Bond (Friday Apr 27, 2012)
Japanese Candlestick Chart
The Mortgage Market Guide View…
Cinco de Mayo: The Story You May Not Know

In a few days, we’ll mark the celebration known as Cinco de Mayo. Although many people have heard of this celebration, most people don’t realize that the event being commemorated may have actually played an important role in shaping the United States that we know today.

Feel free to share the interesting facts below with clients and friends in the coming days! You may surprise them with what you’re about to read.

What Does Cinco de Mayo Commemorate?

Many people believe that Cinco de Mayo is the day that recognizes Mexico’s independence from Spain. To set the record straight, that conquest happened on September 15th, 1810. Cinco de Mayo, on the other hand, celebrates an event that took place over 50 years later.

On May 5, 1862, the Mexican cavalry, under the command of Texas-born General Zaragosa, defeated the French at the battle at Puebla, a city 100 miles east of Mexico City.

The French army, having not suffered a defeat in nearly 50 years, landed in the port of Vera Cruz and headed toward the capital city with a specific mission. Fearless of any opponent, the French sought to overthrow the capitol and gain control of Mexico, even bringing along a Hapsburg prince to oversee the would-be empire.

Cinco de Mayo’s Connection to the United States

The goal of France’s leader, Emperor Napoleon III, was to gain proximity to the US in hopes of supplying the Confederate Army in their fight against the North. He had a vested interest in sustaining the division within America.

To America’s benefit, the undersized Mexican cavalry used their knowledge of the terrain to defeat the powerful French army. This victory enabled the northern states to build the greatest army in the world at that time.

Fourteen months later, the North soundly defeated the Confederate Army in the battle at Gettysburg, thus ending the civil war. Union troops were subsequently rushed to the Texas/Mexican border to help expel the French from Mexico.

 For this reason, Cinco de Mayo is celebrated in both countries. More importantly, it’s a great occasion to honor freedom and liberty.

Economic Calendar for the Week of April 30 – May 04

Date ET Economic Report For Estimate Actual Prior Impact
Mon. April 30 08:30 Personal Income Mar NA 0.2% Moderate
Mon. April 30 08:30 Personal Spending Mar NA 0.8% Moderate
Mon. April 30 08:30 Personal Consumption Expenditures and Core PCE Mar NA 0.1% HIGH
Mon. April 30 08:30 Personal Consumption Expenditures and Core PCE Mar NA 1.9% HIGH
Mon. April 30 09:45 Chicago PMI Apr NA 62.2 HIGH
Tue. May 01 10:00 ISM Index Apr NA 53.4 HIGH
Wed. May 02 08:15 ADP National Employment Report Apr NA 209K HIGH
Thu. May 03 08:30 Productivity Q1 NA 0.9% Moderate
Thu. May 03 08:30 Jobless Claims (Initial) 4/28 NA 388K Moderate
Fri. May 04 10:00 ISM Services Index Apr NA 56.0 Moderate
Fri. May 04 08:30 Non-farm Payrolls Apr NA 120K HIGH
Fri. May 04 08:30 Unemployment Rate Apr NA 8.2% HIGH
Fri. May 04 08:30 Hourly Earnings Apr NA 0.2% HIGH
Fri. May 04 08:30 Average Work Week Apr NA 34.5 HIGH
The material contained in this newsletter is provided by a third party to real estate, financial services and other professionals only for their use and the use of their clients. The material provided is for informational and educational purposes only and should not be construed as investment and/or mortgage advice. Although the material is deemed to be accurate and reliable, we do not make any representations as to its accuracy or completeness and as a result, there is no guarantee it is without errors.
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Today’s Links

Kurt Galitski’s Life In Costa Mesa

  • Weichman Realtors Open House List for 4-27, 4/28 and 4/29
    Weichman Realtors Open House List for 4-27, 4/28 and 4/29 Friday-April 27th, 2012 3144 Coolidge Avenue, Costa Mesa 1pm-4pm  Saturday- April 28th, 2012 Go out and enjoy the Orange County Swap Meet! Sunday- April 29th, 2012 3281 Colorado Avenue, Costa Mesa 1pm-4pm 3126 Cork Lane,…

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Today’s Links

Kurt Galitski’s Life In Costa Mesa

  • Weichman Realtors Open House List for 4-21 and 4-22
    Weichman Realtors Open House List for 4-21 and 4-22  Saturday- April 21st, 2012 Come to Weichman Realtors Free Shred Day! Sunday- April 22nd, 2012 3281 Colorado Avenue, Costa Mesa 1pm-4pm   Weichman Associates Realtors is a full service real estate agency located in the heart of…

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Tomorrow’s Free Shred Day April 21st, 2012 between 9am and 11am!

Weichman Realtors and Mesa Verde Center present Free Shred Day! Mark your Calendars!

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Kurt Galitski and Weichman Realtors have teamed up again with Mesa Verde Center for the 3nd Annual Free Shred Day! Mark your calendars for April 21st, 2012 between 9am and 11am!

Weichman Associates Realtors is a full service real estate agency located in the heart of Costa Mesa offering a wide-array of custom services to meet their clients’ needs with roots in the community since 1976. It’s Weichman’s mission to provide trusted, convenient, responsive service to ensure clients enjoy their real estate experience. Weichman Associates Realtors was originally formed to offer personal, concierge-level service as an alternative to the large, nationally based real estate companies. From its small beginnings of only two employees, Weichman Realtors has grown to a full staff of 20 serving over 300 clients a year.

Weichman Realtors is not limited to serving just its clients, it is also committed to serving the community. Not only has Weichman donated hundreds of hours to many area charities, they have also received the prestige of being named one of the top real estate companies in Costa Mesa.

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Real Estate Week In Review

In This Issue

Last Week in Review: Inflation news was released…and home loan rates responded.

Forecast for the Week: Earnings season continues, plus look for reports on retail sales, manufacturing, housing and more.

View: Have you ever needed to read an important text for work while you were driving? Now there’s an app for that.

Last Week in Review
“Wild thing! You make my heart sing!” The Troggs. And that song lyric is certainly an apt description for the volatility in the markets these days, as the ups and downs have given people things to both sing and scream about. Here’s what happened last week…and how home loan rates were impacted.

 Inflation news hit the wires, with reports on both the wholesale and consumer levels. The wholesale-measuring Producer Price Index (PPI) showed that prices remained mostly unchanged during March. Remember, inflation hurts the value of fixed investments like Bonds (including Mortgage Bonds, to which home loan rates are tied)…so the lack of inflation on the wholesale side was good news for Bonds and home loan rates.

Also helping Bonds and home loan rates last week was the tame inflation data from the Consumer Price Index (CPI). The headline reading for March was right in line with estimates. When stripping out volatile food and energy, the Core CPI was also inline with estimates…but the year-over-year number was 2.3%, just slightly higher than the previous reading of 2.2%.  While this raises eyebrows a bit, the Fed is still reiterating that inflation remains subdued. That being said, if the Core CPI continues to rise…which is indicative of inflation and as you can see in the chart…Bonds and home loan rates will have a tough time improving much further, regardless of other factors.

One key factor to keep an eye on is the labor market, as Initial Jobless Claims increased 13,000 to 380,000 for the week ending April 7. This marks the highest level since January, and the second highest reading for 2012. The Fed has acknowledged that job creations are short of their goals. In fact, last week Federal Reserve Vice Chairman Janet Yellen said that weakness in housing, the European debt crisis, and government spending cuts are likely to slow the pace of recovery and expansion. She did state that the Fed has plenty of stimulus tools to use, if economic conditions warrant another round of quantitative easing.

The bottom line is that many factors will impact the direction in which Bonds and home loan rates move in the weeks ahead. The good news is that home loan rates remain near historic lows and now continues to be a great time to purchase or refinance a home.  Let me know if I can answer any questions at all for you or your clients.

Forecast for the Week

The calendar heats up this week with reports on sales, housing, jobless claims and manufacturing:

  • Right off the bat, Retail Sales will be reported on Monday – and investors will be able to gauge how consumer spending is holding up.
  • In manufacturing news, the Empire State Index out of New York and the Philadelphia Fed Index will be released on Monday and Thursday, respectively.
  • Housing will be in the news this week with Housing Starts and Building Permits for March being reported on Tuesday. Those reports will be followed by the Existing Home Sales report for March, which will be released on Thursday.
  • The weekly Initial Jobless Claims report will be released on Thursday. The report released last week showed that jobless claims rose to their highest level since the week ending January 28. So the markets will be watching this week’s release!

In addition to those reports, Corporate Earnings reports may influence the Stock markets – and as we know, the Bond markets usually move in the opposite direction.

Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result. The chart below shows Mortgage Backed Securities (MBS), which are the type of Bond that home loan rates are based on.

  When you see these Bond prices moving higher, it means home loan rates are improving – and when they are moving lower, home loan rates are getting worse.

To go one step further – a red “candle” means that MBS worsened during the day, while a green “candle” means MBS improved during the day. Depending on how dramatic the changes were on any given day, this can cause rate changes throughout the day, as well as on the rate sheets we start with each morning.

As you can see in the chart below, it’s been a wild, volatile few weeks in the markets. I’ll be monitoring all the news closely to see how the markets and home loan rates respond next.

Chart: Fannie Mae 3.5% Mortgage Bond (Friday Apr 13, 2012)
Japanese Candlestick Chart
The Mortgage Market Guide View…
No More Texting and Driving…There’s an App for That!

A study by the National Highway Traffic Safety Administration found that distracted driving was the leading cause in nearly 450,000 accidents and more than 5,000 highway deaths.

Unfortunately, one of the most distracting elements for drivers today is text-messaging technology. The good news is that technology can also help solve this problem. Services – like DriveSafe.ly – have sprung up that eliminate the need to read text messages AND eliminate the need to respond. That’s good news regardless of whether you’re receiving personal or business text messages.

Here’s how it works…You download an application to your phone. Then, before you get in your car to drive, you simply turn the application on. When you receive a text message, the application actually reads it to you…automatically…and out loud. So there’s no need to take your eyes off the road.

  Better still… the application automatically sends a reply message stating that you are driving and will respond as soon as you reach a destination that allows you to safely reply.

The application can be used on a variety of phones and there are even different plans – including a free version of DriveSafe.ly as well as family and business plans.

If you receive a lot of text messages while driving, this could be one of the most important safety steps you do this year. Take a few minutes to check it out.

After all, this simple application could save your life or the life of someone you know.

Economic Calendar for the Week of April 16 – April 20

Date ET Economic Report For Estimate Actual Prior Impact
Mon. April 16 08:30 Retail Sales Mar NA 1.1% HIGH
Mon. April 16 08:30 Retail Sales ex-auto Mar NA 0.9% HIGH
Mon. April 16 08:30 Empire State Index Apr NA 20.2 Moderate
Tue. April 17 10:15 Capacity Utilization Mar NA 78.4% Moderate
Tue. April 17 09:15 Industrial Production Mar NA 0.0% Moderate
Tue. April 17 08:30 Building Permits Mar NA 717K Moderate
Tue. April 17 08:30 Housing Starts Mar NA 698K Moderate
Thu. April 19 08:30 Jobless Claims (Initial) 4/14 375K 380K Moderate
Thu. April 19 10:00 Existing Home Sales Mar 4.62M 4.59M Moderate
Thu. April 19 10:00 Philadelphia Fed Index Apr 10.3 12.5 HIGH
The material contained in this newsletter is provided by a third party to real estate, financial services and other professionals only for their use and the use of their clients. The material provided is for informational and educational purposes only and should not be construed as investment and/or mortgage advice. Although the material is deemed to be accurate and reliable, we do not make any representations as to its accuracy or completeness and as a result, there is no guarantee it is without errors.
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