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Fed announced its plan to purchase Mortgage Backed Securities last week, and began buying them Monday. The Fed will announce the results each Thursday (This should be an interesting rate day).  The Fed is estimating 500b will be purchased. This process will continue gradually through June and should aid in pushing rates down until then. (Read between the lines, make sure your refinance or purchase before the end of July 2009, in order to take part in History) Market Forecast Week of January 5, 2009

As you can see from the chart it has not been pretty in the MBS Market. If my Technical Analysis serves me right; if we don’t fill Friday’s gap we are in trouble!

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Oil prices have been rising steadily since January and are up roughly 30 percent year-to-date.  Because of this, Thursday and Friday’s Producer Price Index and Consumer Price Index, respectively, will be closely watched. Both are a sort of “Cost of Living” measurement and are, therefore, susceptible to spiraling energy costs.

If either reading comes in higher-than-expected, look for inflation fears to ignite on Wall Street and mortgage rates to rise.

Similarly, if Friday’s Consumer Sentiment Index reveals a more confident American consumer, mortgage rates are likely to rise in that scenario, too.  This is because a confident consumer tends to spend more, thereby hastening the recession’s end.

And, lastly, it’s worth noting that six members of the Federal Reserve will be delivering prepared speeches this week, including Chairman Bernanke. When Fed officials speak, the markets can move quickly.

If you’re still shopping for a mortgage rate, consider locking one in soon. Rates have been trending higher and there’s little reason for them to fall.

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Although the FED announced to keep the FED Funds target unchanged, MBS gave up ground with the 30 YR FNMA 4.0% pulling back 22bp.  Mortgage Rates held their ground and closed where they ended yesterday.

The Federal Open Market Committee voted to leave the Fed Funds Rate unchanged today within its target range of 0.000-0.250 percent.  The Fed also reiterated its plan to support the mortgage market to the tune of $1.5 trillion.

In its press release, the FOMC noted that the economy may still be contracting, but that it’s not happening with the same speed as in prior months.  Household spending is stabilizing and financial markets are “easing”.

Nevertheless, threats to the recovery are everywhere with the following items on the Fed’s short list:

• The growing ranks of unemployed workers
• The reduction of housing wealth nationally
• Reduced inventories and investment from business

Furthermore, the FOMC fingered today’s inflation levels as too low to support economic growth.  This justifies the Fed’s plan to hold the Fed Funds Rate near zero percent “for an extended period”.

The FOMC’s next scheduled meeting is June 23-24, 2009.

Source
Parsing the Fed Statement
The Wall Street Journal Online
April 29, 2009
http://online.wsj.com/public/resources/documents/info-fedparse0904.html

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For active home buyers who have yet to find the “right home”, long-term flatness like this is terrific.  While interest rates stay even, buyer purchasing power holds flat and pre-approval letters stay valid.

For buyers under contract or homeowners looking to refinance, though, the market’s pattern is a little more rough.  Although rates are holding steady week-to-week, the day-to-day action is quite different.  Bond markets are volatile and rate swings of a quarter-percent in a day have been common.

How good of a rate you get depends on day on which you shop. This complicates the process of “locking a rate” and makes it very hard for people trying to time a market bottom.

This week, though, the market may finally make a run and break its range.

Aside from it being an unusually data-heavy week, the Federal Reserve meets Tuesday and Wednesday to discuss monetary policy.  The data combined with the Fedspeak may push the markets one way or the other towards economic optimism or pessimism for the latter half of 2009.

Lately, it’s been a combination of the two — a “cautious optimism” — and that’s a big reason why mortgage rates have held in a tight range for so long.

Understand, though, that when mortgage rates finally do move, they’re going to move in a big way.  So, if you’re among the crowd looking for lower rates, the best possible outcomes you can hope for this week are:

• Weak consumer confidence data (Tuesday, Friday)
• Weak consumer spending data (Thursday)
• Falling “cost of living” calculations (Thursday)
• Fed concerns about deflation and/or recession (Wednesday)

Any of these four events would likely temper hope for a quick economic revival, sending mortgage rates lower.  On the other hand, if confidence or spending is strong, or the Fed has no regard for deflation or recession, expect mortgage rates to rise.

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mortgage-rates-april-24-09

home sitting on the market.  One would hope the Monetary and Fiscal policy will eventually lead us to equilibrium and a stable economy and housing market.

Friday’s better than expected New Home Sales number (337K estimated 356K actual). The positive number could be the first chute to sprout for this spring recovery.

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Mortgage rates ended last week exactly where they started.  However, if you locked your mortgage rate Tuesday, you got a rate decidedly lower than someone who waited until Friday.

Last week, one of the biggest mortgage rate drivers was a series of surprisingly strong corporate earning reports, including those from financial firms Goldman Sachs and Citigroup.

The positive reports pushed the Dow Jones Industrial Average to its 6th consecutive weekly gain.  This is the market’s longest winning streak in two years and its best 6-week rally since 1938, in percentage terms.

In part, the rally is boosting Consumer Sentiment, too.  According to a survey, Americans are feeling better about the economy than at any time since last September’s meltdown.

But while stock market rallies and rising consumer sentiment can be good for our investment portfolios, they’re not always welcome when we’re shopping for mortgage rates.  This is because the bond market is considered a “safe place” for money, an alternative for when stock markets are risky.

When market risk is reduced like, say, following 6 consecutive weeks of gains, the safe haven of bonds loses some of its importance to investors.

As a result, bonds start to sell-off so more cash is available to invest in equities.  Bond prices suffer when this happens and, because mortgage rates are based on the price of mortgage bonds, mortgage rates suffer, too.

This week, there are a number of large corporations reporting first quarter earnings including banking behemoths Bank of America and US Bank, plus companies like IBM, AT&T and McDonald’s.  Strong earnings may — again — lead mortgage rates higher.

If you’re among the thousands of Americans still waiting for mortgage rates to “bottom out”, consider that the bottom may have already been touched.

It’s tough to follow mortgage rates in real-time so, at least in the short-term, you can find some clues in the stock market.  If stock markets are starts rising this week, it’s likely mortgage rates are, too.

Image: http://www.flickr.com/photos/wwworks/2959833537/

[where: 98109] [where: 85012]

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Overall rates remain low for the time being, thanks to the FEDs Subsidy Suppression program.  The FED continued its weekly protocol purchase of Agency Mortgage-Backed Securities Purchase Program.

Gross purchases from April 9 through April 15: $30,400 million
Net purchases from April 9 through April 15: $21,750 million

With respect to housing data, news is rarely positive or negative on a universal level. There’s always two perspectives to consider, after all.

1. The home buyer’s perspective
2. The home seller’s perspective

Usually, when data is beneficial to one group, it’s less beneficial to the other.  This is true for rising home prices, average days on market and so forth.

Today, the group that gets the most benefit from data is the home seller group.

Published Thursday, a government report showed that Housing Starts fell 11 percent nationwide in March and also fell short of analyst expectations.  A “Housing Start” is a new housing unit on which construction has started.

The press is calling this a stumbling block for the economy, but that’s not exactly true.

Fewer Housing Starts last month means that fewer new homes will come on the market later this year.  This is not necessarily bad news.  Especially if you’re planning to sell your home in the latter half of the year.  With fewer homes for sale, the supply-and-demand curve should shift in favor of home sellers.  This helps stabilize home prices at a time when they might otherwise be prone to fall.

If it’s true that stable housing markets are key in an economic recovery, then fewer Housing Starts is actually a push in the right direction.

But there’s more to the story (as always).

As footnoted in the Commerce Department’s report, a statistical disclaimer states that the Housing Starts data’s Margin of Error was so high that the report’s conclusion is just a guess.  Technically, the entire report is invalid anyway

So, the government won’t issue its final March 2009 Housing Starts data for months, but if the initial figures stick, home sellers may be in position to command higher sale prices later this year to the detriment of home buyers.  It’s basic economics.

And from a home seller’s perspective, that news is good.

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Both Building Permits and Housing Starts were released today.  Building Permits were down over 61k from last month and Housing Starts down 62k..All though they are down this is a positive sign in the sense the supply is not increasing; it will take a tighter supply in order to clear the current inventory on the market.  Given the Foreclosure Moratoriums have come to an end, the housing number are welcomed, as we will start to witness an increases in foreclosures given the temporary delay in now gone.

I have one REO Agent friend who informed me that just last week he received 48 BPO request from banks, if only half hit the market that is HUGE.

The finger has been removed from the dike!

In a recent post by my idol; Tyler Durden he points out that we can’t hide from the massive wave of California Foreclosures that is ominously approaching.  While pointing out the fact he does not point to the reasoning.

Many borrowers in CA decided to take advantage of what we in the biz called the POA (Option ARM). Now that these ARM are set to adjust, the borrowers will need to refinance into a fixed.  Given the deterioration in housing values they will not have the luxury.  One item that is aiding in taming the massive amount of defaults is the fact that although the ARMS have adjusted the Index to which they are tied to has come down to the point they are paying less on their IO (interest only) payment then they would in a current fixed.  This temporary lull will only be brief. Once inflation kicks in and rates shoot up, the defaults will recommence as the homeowners walk!

[where: 98109] [where: 85012]

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It was Tax Day today and who among us doesn’t love a legitimate tax deduction?

The IRS expects to process 138 million tax returns this year and accompanying those returns will be a melange of tax deduction requests.

Most will be run-of-the-mill including such staples as mortgage interest, vehicle mileage, and child care deductions. Others, however, will be less ordinary.

On its website, TurboTax pays homage to some of the most off-the-wall, offbeat tax deductions through the years permitted by the IRS.

Among the “weirdest deductions allowed“:

• A bodybuilder’s body oil so his muscles would glisten in competition
• A private airplane for owners of investment properties
• Landscaping for a sole proprietor that meets clients at home
• A swimming pool for a man with emphysema

Tax deductions are prized by U.S. taxpayers. Hopefully, your 2008 tax returns included some good ones, too.

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