Not So Fast….
Despite warnings from everywhere that the recovery would be full of “stops and starts,” the employment report from November and preliminary positive Holiday sales reports had the markets getting ahead of themselves before the December jobs report was released late last week. We are not only talking about the stock market. Bonds had fallen significantly in December, the dollar was rallying and oil prices were marching upward. These are all indicative of a strong recovery and many were expecting a positive employment report for December. Well, 85,000 jobs lost in December shows that we are not out of the woods yet. The Federal Reserve Board and most economists keep saying that, while things are looking better, the world will not turn rosy for some time.
The case of oil prices is one exception. We have had frigid temperatures in many parts of the nation since late December and this has given energy prices a substantive reason for increases on the upside. Not only is this a temporary factor, but higher energy prices such as $3.00 per gallon at a pump can actually slow the economy down as consumers curb spending on other purchases. It is expected that increased energy consumption by buildings will actually give a boost to economic growth in the short run, but once again that is temporary. Expect the sobering but not surprising employment report to spur more stimulus activity such as the “cash for caulkers” program as well as more support from the Fed with regard to keeping long-term rates down through purchases on Treasuries and mortgage-backed-securities on the open market. At least until the jobs picture turns positive permanently.
The Markets. Rates eased slightly in the past week. Freddie Mac announced that for the week ending January 7, 30-year fixed rates averaged 5.09%, down from 5.14% the week before. The average for 15-year fixed eased to 4.50%. Adjustables were stable with the average for one-year adjustables falling slightly to 4.31% and five-year adjustables staying at 4.44%. A year ago 30-year fixed rates were at 5.01%. “Although long-term rates rose for the fourth week in a row, they still remain affordable by historical standards,” said Frank Nothaft, Freddie Mac vice president and chief economist. “Rates eased slightly this week after rising consecutively through December,” said Frank Nothaft, Freddie Mac vice president and chief economist. “Current rates for fixed-rate loans are just about at their annual average for 2009, while ARM rates are considerably below their averages for last year. As the economy strengthens further and the Federal Reserve decides to raise its overnight target rate, ARM rates will follow suit because they are typically tied to shorter-term rates. However, the federal funds futures market does not anticipate any Fed action until the second half of 2010.” Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.
Current Indices For Adjustable Rate Mortgages
Updated January 8, 2010
| Daily Value | Monthly Value | |
| Jan 7 | December | |
| 6-month Treasury Security | 0.16% | 0.17% |
| 1-year Treasury Security | 0.40% | 0.37% |
| 3-year Treasury Security | 1.62% | 1.38% |
| 5-year Treasury Security | 2.62% | 2.34% |
| 10-year Treasury Security | 3.85% | 3.59% |
| 12-month LIBOR | 1.000% (Dec) | |
| 12-month MTA | 0.471% (Dec | |
| 11th District Cost of Funds | 2.093% (Nov) | |
| Prime Rate | 3.25% |
Selling a home in the dead of winter might seem ill-advised, particularly considering the state of the economy, but some experts think that making the decision to wait until spring to list the property could be a mistake. Government incentives will likely have a big impact in 2010, with many buyers determined to sign a contract before the April 30 tax credit deadline. “This year, we’re anticipating sales will peak earlier,” says Nicole Hall, editor in chief of Lendingtree.com, an online home loan comparison service. “The best time to get your house on the market will be February or early March, and maybe even earlier if you want to avoid competition.” Traffic on real estate Web sites begins to rise right after the New Year, says Ken Shuman, spokesman for real estate Web site Trulia.com. Source: Forbes.com
The National Association of Realtors expects existing home sales will rise 9.9% in 2010 to 5.71 million units, after falling 12.8% last year. The trade group’s updated forecast also calls for a surge in sales this spring as the newly extended and expanded homebuyer tax credit expires on April 30. Homebuyers that sign a sales contract before the end of April will have 60 days to close. NAR economists see sales surging to a seasonally adjusted rate of 6.03 million units in the second quarter before falling back to a 5.45 million rate in 3Q. Despite this optimistic outlook, a leading indicator of future home sales plunged 16% in November after rising nine consecutive months with the help of the first-time homebuyer tax credit which was due to expire Nov. 30 before it was extended. The uncertainty surrounding the tax credit legislation has been cited as a reason for first-time buyers staying on the sidelines. NAR reported that its ‘Pending Home Sales’ index fell to 96 in November from 114.3 in October. The PHS index is based on newly executed sales contracts with the closing expected to be completed in the next month or two. Source: National Mortgage News
Grubb & Ellis Co. released its annual forecast Monday, predicting that commercial real estate will decline more slowly in 2009, reaching bottom by the end of the year and starting to recover in 2011. The problem is the labor market, which is just beginning to improve and then only slightly. “Because commercial real estate lags the labor market, it still has a ways to go before reaching its own low point,” says Bob Bach, senior vice president, chief economist of Grubb & Ellis. Bach disputes the notion promulgated by some that the commercial real estate market is the next bubble to burst. Grubb & Ellis examines all segments of the commercial market and concludes that across the board the “free fall we saw in 2009 is over, and the future is more certain, giving owners and users of real estate the confidence to begin making decisions again,” Bach says. Source: Grubb and Ellis Co.
