Archive for the ‘Guest Bloggers’ Category

LED: The Tiniest Giants by Alfredo Zaparolli @ Techlinea

By Alfredo Zaparolli @ Techlinea

tiniest-giantIf you’re remodeling or building a home, you know that California has some of the toughest energy codes in the nation, and getting tougher every couple of years.  From a lighting perspective that means that lighting must be highly energy efficient.

Luckily, we have a tiny new player in the world of lighting: Solid State Lighting (SSL) better known as LED lighting. SSL has taken the lighting industry by storm and will soon knock out inefficient contenders such as incandescent, halogen and many fluorescent lamps by providing warm, dimmable, long lasting energy efficient light.

SSL is the best lighting innovation to come along since the Edison lamp, in fact, there is nothing on the horizon that can compete with this light source for the next 20 years, and SSL is projected to get better and better in 6 month cycles.

Why? Because SSL produce light via an extremely energy efficient  process called electroluminescence thereby eliminating the need to heat a filament in a gas filled vacuum tube like incandescents, or exciting gases in an arc chamber as in florescent lighting, both of which are inefficient ways to produce light.  

Instead, SSL only have to move electrons over a tiny distance to produce light. The LED chip itself is extremely small and requires very little energy to produce huge amounts of light.  Currently, a 1 watt LED is only about 1/8” square and can produce over 150 lumens per watt (LPW) of usable light.  By contrast, a 100W incandescent lamp only produces approximately 17 LPW, and fluorescents generate between 50-100 LPW – energy efficient, but still not as efficient as SSL.

This light source which until recently was considered too blue and too expensive for residential applications, now easily produces excellent color temperatures rivaling the purest white light from halogen lamps, outclasses any fluorescent light source, and is falling closer and closer to an acceptable price point.

When considering the cost of SSL, one must accept a paradigm shift in how you calculate lighting costs and its associated value. Historically, lighting cost was determined purely by the cost of the fixtures, and lamps were considered a disposable commodity.  With SSL lighting there are more criteria to consider: fixture cost, energy consumption, lamp efficacy, demand on cooling systems and lamp life. These parameters were given only marginal considerations by homeowners in the past, but going forward they will be given a bigger consideration especially since lighting is one of the highest energy consumers in the home.

SSL is not a disposal commodity; you can expect to use a typical SSL source for over 15 years. That’s longer than most people keep a car, or most appliances, so this product should be given the same consideration that one gives to choosing big ticket items such as flooring, appliances and surfaces.

From a green perspective, SSL are considered very environmentally friendly; in fact, they are environmentally friendly from production, through usable life, to disposal. 

http://greenarchitecturenotes.com/

Alfredo Zaparolli has over twenty five years experience in high-end residential construction, design and engineering. Alfredo established Techlinea Inc. in 1985 to provide quality lighting design services to discerning clients throughout the US and abroad. Prior to the founding of Techlinea, Alfredo was principal and partner of Electric Connection Inc., and was responsible for designing and installing electrical and lighting systems for many notable residences throughout the San Francisco Bay Area. He combines a deep understanding of lighting technology and design with a unique blend of creative vision, hands-on technical expertise, and collaborative style to make Techlinea sought out for projects worldwide.

WeeklyBasis: Rates Can’t Possibly Go Lower, Right?

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RATE SNAPSHOT

Rates have dropped steadily since May 6 and hit two new record lows in each of the last two weeks. Rates for Conforming loans up to $417k, Super Conforming loans $417k-729k by county, FHA loans, and jumbo loans above $729k are below. Also below is a chart showing Conventional (non FHA) 30yr Fixed mortgage rates from 1971 to Present. The all-time record low of 4.58% with .7% in points was set the week ending July 1. The fine print on rates used in the chart is here: 

WHY RATES ARE SO LOW

In an unprecedented rate stimulus exercise from January 2009 through March 31, the Federal Reserve bought $1.25 trillion in mortgage bonds. Rates are tied directly to mortgage bonds, so when those bond prices rise on buying rallies, yields (or rates) drop. Rates were already near all-time lows as of March 31 when the Fed ended its program.

Then a week later on May 6, Greek parliament voted on austerity measures to increase taxes and cut spending (including wage cuts for about 20% of their workforce), and rioting ensued. That caused a brief 1000 point drop in the U.S.’s Dow stock index, and despite recovering from lows that day, stocks (again using the Dow as a benchmark) have lost 1240 points, or 11.35%. European bonds have taken big losses as the debt crisis spread beyond Greece. And here in the U.S., weaker new and existing homes data in the past 2 months, and June’s weak employment report has also caused market participants to question the strength of the economic recovery. 

The end result is heavy buying of Treasury bonds and mortgage bonds since they’re both considered the safest investments relative to other options globally. Mortgage bonds have steadily risen from Fed-induced March 31 highs to staggering new heights, which is why rates are down.

RATE LOCK BIAS CONTINUES

This report has maintained a rate lock bias since mid-May for current homebuyers and for homeowners who have borrower AND property profiles that qualify for refinancing. It seems improbable that current levels of mortgage bonds can hold, and if they break lower, rates will rise. There are no economic reports of particular note for the holiday shortened week beginning Tuesday, July 6. 

DAILY CONSUMER-FRIENDLY COMMENTARY

In addition to this WeeklyBasis report, you can get daily updates in simple terms by visiting

http://bit.ly/9jL8nI. The fine print on the rates in this WeeklyBasis report is at the bottom of the report. www.TheBasisPoint.com. You can follow using Twitter feed at www.twitter.com/thebasispoint and/or you can ‘Like’ www.facebook.com/thebasispoint and headlines will flow into your Facebook stream.

WeeklyBasis: Primer On Fed Rate Strategy Before June 23 FOMC Meeting

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RATE SNAPSHOT
It’s quite surprising that rate volatility has been minimal for three weeks. As such, zero-point rates on 30yr fixed Conforming loans (up to $729k) held last week near record lows for a third straight week, and one-point rates on Jumbo loans (above $729k) remain steady in the low- to mid-5% range. Rates for each category below.

RATE FACTORS WEEK OF JUNE 21
Volatility could return with a full economic slate next week. Here’s the market moving data for the week, each noted with what impact it could have on rates:

We start with May Existing Home Sales Tuesday (rates neutral), a two-day Federal Open Market Committee meeting ending with a rate policy announcement Wednesday (rates neutral to higher), the third of three 1Q2010 GDP readings Friday (rates neutral to higher), $108b in 2yr, 5yr, and 7yr Treasury Note auctions Tuesday-Thursday (rates higher), and the House/Senate reconciliation of a massive finance reform bill will reach a critical stage as lawmakers look to finalize the bill for President Obama (rates neutral).

WHAT THE FED WILL SAY WEDNESDAY, JUNE 23
The Fed’s FOMC meeting announcement Wednesday will likely reveal the Fed’s intent to keep overnight bank-to-bank Fed Funds Rates at .25% and overnight Fed-to-bank Discount Rates at .75%. They may also confirm whether they’ll raise these overnight rates before they’d start selling the $1.25b in mortgage bonds they bought from January 1, 2009 to March 31, 2010.

And finally, we’ll see if any FOMC members come around to Kansas City Fed President Thomas Hoenig’s way of thinking. At every FOMC meeting this year, he’s voted to start gradually hiking rates to avoid more violent rate hikes later (more on this in next section).

The Fed selling mortgage bonds would directly and immediately cause mortgage rates to rise, while the Fed hiking overnight rates would have an indirect and slower hiking impact on mortgage rates. So when they decide the economy can handle higher rates they will hike overnight rates first. Then as the recovery strengthens, they’d start selling mortgage bonds. When those bond prices drop in a selloff, mortgage rates rise commensurately.

ARE FED RATES TOO LOW FOR TOO LONG?
The debate today is whether Bernanke’s Fed is keeping rates too low for too long. Greenspan’s Fed did the same thing with the Fed Funds Rate from January 201 (6.5%) to June 2004 (1%), and when they did start hiking off the 1% mark, it was gradual until Fed Funds reached 5.25% June 2006. It stayed there until the financial crisis picked up steam, then the Fed cut from 5.25% in September 2007 to .25% December 2008, and it’s been at .25% since then.

Greenspan took lots of heat for leaving rates too low for too long. Bernanke is perhaps better justified since this financial crisis and resulting global economic instability is much deeper than anything Greenspan faced. But we’ve also increased the money supply drastically to combat the crisis, so if the economy does show continued signs of improvement, inflation can spike quickly. Fed rate hikes and mortgage bond selloffs would follow, both causing mortgage and all other rates to spike.

Volatility is the byproduct of markets trading on every little sign that we’re finally ready to move out of an artificially low rate era. And that’s precisely why this WeeklyBasis opened by saying “it’s quite surprising” to see less volatility in recent weeks.

It’s also why consumers waiting for lower rates will be disappointed if they wait much longer.

DAILY CONSUMER-FRIENDLY COMMENTARY
In addition to this WeeklyBasis report, you can get daily updates in simple terms by visiting www.TheBasisPoint.com. You can follow using Twitter feed at www.twitter.com/thebasispoint and/or you can ‘Like’ www.facebook.com/thebasispoint and headlines will flow into your Facebook stream.

WeeklyBasis: Three New Deal Killers Homebuyers Need To Be Aware Of

Zero-point rates on 30yr fixed Conforming loans (up to $729k) held last week near record lows for a second straight week, and one-point rates on Jumbo loans (above $729k) are steady in the low- to mid-5% range.

RATE LOCK ADVISORY WEEK OF JUNE 14
WeeklyBasis continues its rate lock bias going into next week because European debt problems that caused U.S. rates to drop during May and early-June are easing, and rates could reverse as a result.

This coming market week of June 14-18 is likely neutral for rates. We’ve got business and consumer inflation reports Wednesday and Thursday, and housing starts and building permits Wednesday. The X-factors for rate markets are ongoing global debt fears, and continued Senate and House debate to reconcile their two versions of financial reform bills. Mortgage bonds remain in a slightly overbought state, and if these bonds sell off, rates would rise.

THREE DEAL KILLERS TO BE AWARE OF
Borrowers and their Realtors should be aware of three key topics of recent weeks that can delay or kill deals. In all three cases, you should ask for clear answers from your lender on whether they can fund loans with these characteristics BEFORE going forward on a loan and before writing an offer to buy a home.

(1) TWO CREDIT REPORTS DURING LOAN PROCESS:
As of June 1, Fannie Mae is requiring that lenders who sell loans to them (most lenders do this) run a second credit report on the borrower before the loan funds to make sure the borrower still qualifies for the loan. This means borrowers should severely limit all credit-related spending activity and check with their lender before engaging in any activity. If a pre-funding credit report is different from the credit report run at time of application, loan funding could be delayed or ineligible. Click here for more on this rule and what it means for credit scores: http://bit.ly/bx1pBy.

(2) RESCRICTIONS ON PROPERTY FLIPS:
If any currently listed property was bought in the past three months, most lenders have restrictions on loans made to someone buying that property. Since many properties listed now were bought in recent months at deep discounts by investors with the intent to quickly fix and sell (or “flip”), lenders often question the value of these properties when they come back onto market. Some lenders won’t even lend on a property that’s a flip. And the lenders who do usually require two appraisals to verify the value and quality of the home. Often, loan agents issue loan pre-approval letters to borrowers without pre-approving the borrower’s target property, so make sure your lender checks out your target properties before you write any offers—loans are funded based on approving borrowers AND properties.

(3) FUNDING DELAYS ON FLOOD ZONE PROPERTIES:
If you’re seeking a loan on a property in a FEMA-designated flood zone, FEMA is currently not allowing new flood insurance policies (for homebuyers) or extensions of existing flood insurance policies (for refinancers) until Congress reauthorizes the flood insurance program that expired May 28. Lenders won’t fund a loan on a flood zone property without insurance (and it should also be noted that they won’t fund a loan on any property without basic, non-flood insurance). FEMA has said a Congressional vote to reinstate flood insurance won’t occur until Tuesday, June 15 “at the earliest.” FEMA posts latest on this topic here: http://www.fema.gov/business/nfip/nfip-reauth.shtm. Borrowers with applicable properties need to have this conversation with their lender to determine loan eligibility before entering into a purchase or refinance loan transaction.

DAILY CONSUMER-FRIENDLY COMMENTARY
In addition to this WeeklyBasis report, you can get daily updates in simple terms by visiting www.TheBasisPoint.com. You can follow using Twitter feed at www.twitter.com/thebasispoint and/or you can ‘Like’ www.facebook.com/thebasispoint and headlines will flow into your Facebook stream.

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WeeklyBasis: How Long Record Low Rates Will Last? (CHART)

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Zero-point rates on 30yr fixed Conforming loans (up to $729k) begin the week back at record lows, and one-point rates on Jumbo loans (above $729k) are steady in the low- to mid-5% range. The European debt crisis flared up again last week and Friday’s jobs report was drastically lower than expected. The result was that global investors continued to be net buyers of Treasury and mortgage bonds as a safe haven, and when mortgage bond prices rise on these buying rallies, rates drop.

RECORD LOW RATES TO START WEEK
As of market close Friday mortgage rates were again at their lowest levels since 1971. Attached is a chart showing this.

The WeeklyBasis rate lock bias continues this week—mortgage bond levels make it unlikely rates can drop further, and this is the time for borrowers to lock record low rates.

The latest EU country to buckle under the weight of its own debt is Hungary, as their prime minister issued a statement Friday saying their “economy is in a grave situation” and market speculation about Hungary defaulting on their debt “isn’t an exaggeration.”

Markets indeed speculated by selling (or shorting) the country’s debt securities, and once again investors shifted assets into U.S. Treasury and mortgage bonds—which helps rates.

The other big factor in rates dropping last week was Friday’s poor jobs report. It showed 431k jobs were added to economy versus 500k expected. Far worse was that 411k jobs were temporary workers hired to conduct the U.S. Census, and only 41k private sector jobs were created.

ECONOMIC WEEK AHEAD
This week is light on economic news. The biggest market mover is $70b in Treasury auctions as follows: $36b 3yr Notes Tuesday, $21b 10yr Notes Wednesday, $13b 30yr Bonds Friday.

New Treasury supply, especially the longer dated 10yr and 30yr issues, competes with mortgage bonds for buyers and can also spook bond investors. So these auctions can cause mortgage bonds to sell off and rates to rise if they don’t go well.

There are also 7 senior Fed officials giving speeches on the economy throughout the week, and we have Retail Sales on Friday, a key measure of consumer strength.

Also BP seems to be making progress on the Gulf oil leak and Apple may release a new iPhone this week, both of which could push stocks higher and rates would also move higher if this was the case.

DAILY CONSUMER-FRIENDLY COMMENTARY
In addition to this WeeklyBasis report, you can get daily updates in simple terms by visiting www.TheBasisPoint.com. You can follow using Twitter feed at www.twitter.com/thebasispoint and/or you can ‘Like’ www.facebook.com/thebasispoint and headlines will flow into your Facebook stream.

WeeklyBasis: Rationale For Rate Lock Advisory

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Zero-point rates on 30yr fixed Conforming loans (up to $729k) begin this week up about .125% after touching record low levels the week of May 17, and rates on Jumbo loans (above $729k) are steady. Rates are holding just above record lows because global investors continue to be net buyers of Treasury and mortgage bonds as a safe haven from European debt problems and stock weakness. When mortgage bond prices rise on these buying rallies, rates drop.

EUROZONE PROBLEMS LOWER U.S. RATES

Debt concerns in Eurozone countries continue as we enter June, with ratings agency Fitch downgrading Spain from AAA to AA+ on Friday, and France acknowledging that their ratings are justifiably at risk. As for stocks, the Dow and S&P lost 7.9% and 8.2% respectively in May, the worst losses in five quarters.

To calm markets last week, China stated they weren’t shifting away from European bonds, and it worked for a couple days. Stocks rallied and U.S. mortgage and Treasury bonds sold off, pushing rates higher.

But to begin this week, the data is proving that most institutional investors and central banks are net sellers of Eurozone debt (http://bit.ly/c5MKpf).

This will help keep rates low short-term, but it’s unreasonable to expect that rates can go lower.

Before the week of May 17, we only touched on record low rates (which are .125% lower than today’s average rates shown below) two other times since Freddie Mac started keeping the official records in 1971: April 2009 and November 2009. And in both cases, rates rose just as quickly.

The reason is that there are too many factors preventing mortgage bonds (that rates are tied to) from rallying past current price levels—not the least of which is the Fed’s $1.25t mortgage bond portfolio they will look to start selling in the next 12-24 months.

RATE LOCK ADVISORY FOR WEEK OF JUNE 1

Besides these global economic topics influencing markets this week, the high points of the economic calendar are as follows. The WeeklyBasis rate lock bias continues for the second week—this is the right time for borrowers to lock rates at the lowest possible levels.

NAR’s April Pending Home Sales Tuesday, which will show us how many homes went into contract and these numbers will still be skewed by the April 30 expiration of the Federal homebuyer tax credit.

There are five public speeches this week on the economic outlook by voting members of the Fed’s rate setting committee, including Kansas City Fed president Thomas Hoenig who has voted against keeping the overnight Fed Funds Rate at .25% at all three 2010 Fed meetings—he thinks inflation is a threat and his public comments usually cause rates to rise.

The Bureau of Labor Statistics jobs report Friday is expected to show 508k jobs gained in May, which would be a monumental single-month gain since 573k jobs were added from January through April. If this the actual number is close to this, rates will rise on improving economic sentiment—even if the unemployment rate doesn’t move much from it’s 9.9% mark.

DAILY CONSUMER-FRIENDLY COMMENTARY

In addition to this WeeklyBasis report, you can get daily updates in simple terms by visiting www.TheBasisPoint.com. You can follow using Twitter feed at www.twitter.com/thebasispoint and/or you can ‘Like’ www.facebook.com/thebasispoint and headlines will flow into your Facebook stream.

WeeklyBasis: May 6 ‘Flash Crash’ Incites Two-Week Refi Boom

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Zero-point rates on 30yr fixed Conforming loans (up to $729k) ended last week at their lowest levels since official records began in 1971, and Jumbo 30yr fixed loans (above $729k) touched the low-5% range. By the time last week’s rate levels are officially announced by Freddie Mac on May 27, rates are likely to be higher. Below is a recap of how rates got here and rationale for why rates may rise next week.

WHY RATES & STOCKS HAVE DROPPED
The Dow dropped 1000 points before closing down 348 points on May 6. The press has dubbed it a “Flash Crash,” but let’s go beyond the clever label to understand what happened that day, why the Dow is down 675 points since that day, and why mortgage rates are down .25% since then.

MAY 6 STOCK CRASH
Europe’s troubles started with Greece facing default on it’s bonds due to insufficient tax revenue, so they were granted a $140b bailout package by the IMF and fellow members of the European Union. As a condition of the bailout, they were forced to cut salaries of Greek citizens and raise taxes, measures which Greek parliament voted into law May 6. The vote caused rioting and death on the streets near the Greek parliament in Athens, and it tipped off the so-called Flash Crash here in U.S. stock markets.

MAY 9 TO PRESENT
U.S. and non-U.S. stock markets continued down Friday May 7, on fears that more EU countries were in similar trouble. On Sunday May 9, the EU announced a nearly $1t bailout (similar to the U.S. TARP program) to support the debt of all member countries. But since then, investors have been unconvinced, so they’ve been heavily shorting European stocks and government bonds even if they don’t own the securities. This ‘naked shorting’ was banned by Germany last week to little effect, as the market still finds ways to punish securities it deems overvalued.

RATE IMPACT
As investors have sold out of (or shorted) stocks and European debt, they have purchased safer U.S. Treasury and mortgage bonds, driving prices on both to 2010 highs. When mortgage bond prices rally like this, yields (or rates) drop, and that’s exactly what has brought us to record lows on conforming 30yr fixed rates. We touched these same record lows once in April 2009 and again in November 2009, but these three dips are the lowest rates have gotten since official records began in 1971.

WHY RATES MAY RISE MAY 24-28
Whenever there’s talk of a “stock market crash” or “record low rates,” we can be sure volatility is the central theme. As such, those phrases can quickly change to “rally” or “rate spike.” On top of ongoing Eurozone issues and U.S. regulatory reform, there’s a full slate of economic data contributing to the volatility mix next week. The biggest market movers are highlighted below.

Tuesday is the March S&P Case Shiller existing home price report. Last month’s report showed year-over-year home prices going positive for the first time since December 2006. If this trend continues, rates would likely rise.

Thursday is the second of three Q1 GDP readings that will show us if +3.2% GDP growth holds from the first reading in April. If it does, this will solidify a third consecutive quarter of positive economic growth, fueling positive stock sentiment so bonds would sell off, pushing rates higher.

Tuesday through Friday, bond markets will get $113b in new Treasury auctions—$42b in 2yr notes, $40b in 5yr notes, $31b in 7yr notes—and this will be a big test for whether the Treasury and mortgage safe haven from Europe will continue, or new supply will spook bonds and push rates up.

Friday is the Fed’s favorite inflation measure, the Personal Consumption Expenditures Index, and also April Personal Income and Spending will show us whether consumers, who account for two-thirds of GDP, are gaining strength. Tame inflation and better spending could be a net neutral for rates.

DAILY CONSUMER-FRIENDLY COMMENTARY
In addition to this WeeklyBasis report, you can get daily updates in simple terms by visiting www.TheBasisPoint.com. You can follow using Twitter feed at www.twitter.com/thebasispoint and/or you can ‘Like’ www.facebook.com/thebasispoint and headlines will flow into your Facebook stream.

WeeklyBasis: How Lenders Create Rate Sheets, European Debt To Drive Markets Next Week

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HOW LENDERS CREATE RATE SHEETS
Zero-point rates on loans up to $729k held at record lows for the second week last week even though mortgage bond levels might suggest rates would have dropped further. Jumbos also held steady at very attractive levels. Mortgage bonds benefitted as the EU/IMF’s $140b Greece bailout caused investors to sell European debt and buy more conservative U.S. mortgage and Treasury bonds. When bond prices rise on these buying rallies, rates drop.

 

But it’s not actual mortgage rates that drop when mortgage bond prices rally, it’s mortgage bond yields (the rate of return on those bonds) that drop. Then lenders re-price mortgage rate sheets based on those lower yields. This lowering of mortgage rates didn’t happen to quite the extent that lower mortgage bond yields might suggest because last week was wildly volatile. Mortgage bond prices swung more than 100 basis points Thursday and Friday—in the bond world, this is similar to the massive swings we saw in the Dow Thursday (when it was down 1000 at one point).

 

And when lenders see this kind of volatility, they sometimes hold the line on rate sheet re-pricing. This is what lenders did Thursday and Friday so they can wait to see if the mortgage bond rally can sustain itself or if it washes out. Nevertheless, current low rates still speak for themselves.

EUROPEAN DEBT ISSUES TO DRIVE MARKETS MAY 10-14

Market movement next week will continue to be dominated by the European debt situation. To keep the Greece debt crisis from spreading throughout the 16-country Euro zone, the EU announced today that they will “defend the Euro, whatever it takes” by creating a fund. By Sunday, before Asian markets open, the EU will roll out further details of their plan.

And since government debt issues are front and center, next week’s Treasury auctions will strongly influence the direction of trading—and rate levels. Treasury will auction $78b in new debt as follows: $38b 3yr notes Tuesday, $24b 10yr notes Wednesday, $16b 30yr bonds Thursday. Logic would suggest strong uptake on these auctions since this debt is a better credit risk than other government debt options, but as we saw Thursday and Friday, logic can be fleeting.WHERE TO GET

DAILY CONSUMER-FRIENDLY MARKET UPDATES

In addition to this WeeklyBasis report, you can get daily updates on this fluid situation (written in terms consumers can understand) by visiting www.TheBasisPoint.com. You can follow using Twitter feed at www.twitter.com/thebasispoint and/or you can ‘Like’ www.facebook.com/thebasispoint and headlines will be added to your Facebook stream. Next week is light on economic data with Trade Balance Wednesday, Retail Sales Friday, and Consumer Sentiment Friday being the three biggest reports. We also have 7 public speeches by senior Fed officials throughout the week. Zero-point rates on loans up to $729k held at record lows for the second week last week even though mortgage bond levels might suggest rates would have dropped further. Jumbos also held steady at very attractive levels. Mortgage bonds benefitted as the EU/IMF’s $140b Greece bailout caused investors to sell European debt and buy more conservative U.S. mortgage and Treasury bonds. When bond prices rise on these buying rallies, rates drop.

WeeklyBasis 4/23/10: Rate Lock Bias Next Week, Federal Homebuyer Tax Credit Expires Friday

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Despite a volatile week, rates were net down .125%, bringing conventional conforming rates (on loans up to $417,000) within .1% of all-time record lows. Below is a recap of last week and rationale for a rate lock bias going into next week. And don’t forget that Friday is the last day homebuyers can be in contract to be eligible for the Federal homebuyer tax credit—those in California have a new state credit with different deadlines. More on both tax credits here:

RATE FACTORS WEEK OF 4/19/10

Three factors pushing rates up mid to late last week were: (1) business inflation measured by the Producer Price Index came in at 6% year-over-year through March, and despite the much tamer 0.9% ‘Core’ number which excludes oil and food costs, bond markets saw it as cause for concern, (2) Treasury announced $129b in new bond supply being auctioned next week and supply concerns caused mortgage bonds to sell off, pushing rates up, and (3) New Home Sales surged 27% in March, positive economic news which was also a sell off signal for bond markets.

5 REASONS FOR RATE LOCK BIAS WEEK OF 4/26

(1) The Greece situation is playing out this weekend as the country explores aid options with the IMF, European Central Bank, Russia, Brazil, and China. The latest Bloomberg report says Greece needs about $60b to help cover maturing debt over the next three years. If any aid package is looking likely next week, that may hurt rates as investors move out of mortgage bonds.

(2) The Fed’s third rate policy meeting of 2010 is Tuesday-Wednesday with an announcement to follow. If rate policy announcement says anything even slightly different than their long-standing “inflation is likely to be subdued for some time” statement, rates could rise.

(3) The February 2010 Case Shiller existing home price report comes out Tuesday, and if it’s similar to January’s report showing year-over-year price declines of just -0.7% across 20 major U.S. metro areas, or if it tips over to become positive for the first time since January 2007, rates could rise.

(4) Treasury will auction $129b of new supply during the week as follows: $11b in 5yr TIPS Monday, $44b in 2yr notes Tuesday, $42b in 5yr notes Wednesday, $32b in 7yr notes Thursday. The direction of rates will depend on the reception of these auctions, but excessive supply hurts rates.

(5) Friday will be the first 1Q2010 GDP reading which will tell us whether the positive economic growth of the last two quarters will sustain itself, and to what extent. This estimate calls for +3.3%, and unless it’s significantly disappointing, markets will acknowledge this as a positive sign, and bonds would sell off, pushing rates higher.

Rate volatility will continue next week, and market outlook suggests rates could rise, so borrowers should be ready to lock rates at a moment’s notice. Below are the top 5 reasons for a rate lock bias. The largest factor pushing rates down early and late last week was the ongoing debt crisis in Greece. As bond market investors have grown more skeptical about Greece’s ability to fund their debt obligations, they have sold out of Greece and other European bonds to buy mortgage and Treasury bonds. When mortgage bond prices rise on this buying, rates drop. http://bit.ly/cgZJYE.

WeeklyBasis: Rates Improve. Economics 101: What Is A Minsky Moment?

logo_greenRRates were net down .125% for the week ended April 9 mostly on positive overall Treasury auctions. This regains half of the .25% rise we had as the Fed ended it’s 15-month mortgage rate stimulus program on March 31. Conventional conforming rates are now back within .25% of all-record lows.

INFLATION & FED OUTLOOK DOMINATE WEEK
The WeeklyBasis rate lock bias going into the past three weeks is now shifting to a floating bias going into Monday, with more rate lock caution as the week goes on. Here’s why…

There’s no economic data Monday, and Trade Balance data Tuesday that’s usually not a big rate mover. Wednesday we have Consumer Inflation and Retail Sales data. Inflation should still remain subdued but if it moves up at all, rates would follow. Retail Sales also may not move a lot, but even a bit of up movement will cause rates to rise on perception that the worst is over—and retail sales are the most obvious indicator that consumers are ready to spend again.

Also Wednesday, Fed chairman Ben Bernanke testifies before congressional Joint Economic Committee on the economic outlook. His speech will contain much of the recent ‘subdued inflation for some time’ message, but the Q&A helps pinpoint timing on the Fed’s eventual exit from ultra low rates.

ECONOMICS 101: WHAT IS A MINSKY MOMENT?
From Wednesday to Friday, market mood will be influenced by several speeches from prominent Fed officials, financial leaders, lawmakers, and journalists at the 19th Annual Hyman P. Minsky Conference On The State of the U.S. and World Economies. Speakers will explore where markets and financial reform goes from here.

Minsky (1919-1996) was an American economist who’s best known for his study of financial crises. The New Yorker’s John Cassidy, a speaker at this year’s conference, summed up Minksy’s work like this: “There are basically five stages in Minsky’s model of the credit cycle: displacement, boom, euphoria, profit taking, and panic.”

Minsky’s work has grown in influence as world economies more quickly go from booms (based on incurring massive debt to invest in higher yielding assets) to busts (based on the mass selling of those assets when the debt comes due). A ‘Minsky Moment’ is when the panic selling sets in…buyers are scarce because asset values plummet, and the debt used to finance asset purchases can’t be serviced.

In other words: credit and liquidity both freeze. Just like they did when the crisis began in Fall 2007.

So the topics covered at this week’s conference will be closely watched by market participants.