Posts Tagged ‘#SFRE’

WeeklyBasis 12/24: Better Housing News & The Fine Print

December 27th, 2011 by Julian Hebron
 

Rates were up .125% last week, retreating slightly from record lows: 30yr single family home loans to $417k closed at 3.875%.

Below I recap last week’s good (and not so good) economic data, and preview the rate and stock week ahead. Scroll to ‘Bottom Line’ if you’re in a holiday rush. And I hope you get some time to sit back and relax this long Christmas weekend.

RECAP DECEMBER 19-23 MARKET WEEK

Homebuilder Confidence Best Since 2006: The index of homebuilder confidence rose for the third straight month in December to 21. Still a long shot from 50+ mark that signals a healthy market, but it’s the best since April 2006. Here’s how it looks 1985-Present.

Home Construction Jumps: Construction was up 9.3% in November to 685k (seasonally adjusted, annualized). Still below 1.5m needed to keep in line with population growth and scrappage, but highest since April 2010 when homebuyer tax credit boosted production. Excluding that one-time event, construction is highest since October 2008. Here’s the single family vs. multifamily breakdown. Building permits were up 5.7% to 681k, best since March 2010.

Existing Home Sales-Watch This Closely: November’s existing home sales were 4.42m annualized, up 4% in November and up 12.2% since November 2010. This is the highest mark in 10 months and 34% above mid-2010 low point. But NAR also revised 2007-2011 sales down 14%, tarnishing credibility of current numbers. And cancelled deals spiked again: 33% of Realtors reported at least one cancelled contract in November. Same for October, which was up sharply from 18% in September and August, and up from 9% in September 2010. I’ll be watching this EHS dataset, very interesting on many fronts.

Worst New Home Sales Ever?: November’s new home sales were 315k (annualized), 1.6% better than October, 9.8% better than year ago. This is the best since April, but well below the 700k needed for a healthy market, and 2011 looks to be the worst year ever for new home sales. Average November new home sale price: $242,900.

GDP Cut Again: The third of three GDP readings for 3Q20111 was revised down to 1.8%. Second reading was 2%, first reading was 2.5%. Like existing some sales, revisions are moving in the wrong direction.

Good News On Jobs Outlook: Claims for unemployment insurance were 364,000 for week ended December 17, down 4,000 from previous week and the lowest post financial crisis reading so far. Below 400k signals improving jobs picture and the average since 2000 is 390,000. So 1-week and 4-week numbers are trending below this long-term average: good news. More in next week’s preview below.

Inflation Flat, Again: The Fed’s favorited measure of inflation, the personal consumption expenditures index (PCE), is flat. November’s annual figures were 2.5% total and 1.7% excluding food and energy. Same story with flat monthly and annual PPI and CPI the week before last. November’s annual PPI was 5.7% total and 2.9% excluding food and energy. Annual CPI was 3.4% total and 2.2% excluding food and energy.

PREVIEW DECEMBER 26-30 MARKET WEEK

Next week’s economic calendar is light, but below are noteworthy highlights with rate impacts.

Home Prices Down Again?: Last month, Case Shiller’s September report showed home prices across 20 major U.S. metro areas were down 0.6% since August and down 3.6% since September 2010, breaking a (rather weak) five-month ’20-City’ gain streak. Tuesday’s October report will determine if the monthly figure can reclaim positive territory or not. Either way, rates won’t move much on this data.

Jobless Claims Trend: Rates didn’t rise last week despite declining jobless claims (recap above). Markets will wait for December jobs report January 6, and to see more jobless claims declines–next read this Thursday.

Pending Home Sales: Existing home purchase contracts entered into were up 10.4% in October and up 9.2% since October 2010. November figures are Thursday. This is a leading indicator of existing home sales expected to close in 60 days. But remember stat from above: 33% of Realtors are reporting cancelled existing home sales contracts. Rates don’t typically move on this report.

Stock & Bond Technicals: Looking at stocks, the S&P 500 closed at at 1265, up 3.69% on the week, ending above its 200-day moving average of 1259. Huge change from last week when it closed below 50- and 200-day moving averages, signaling a rally could continue next week. But analyst Robert Sinn warns that last week’s rally was on anemic volume and fails to meet key technical qualifiers for a run higher. As for mortgage bonds (MBS), the 3.5% Fannie Mae coupon—a key benchmark lenders use to price consumer rates—dropped 66 basis points on the week to close at 101.98. This is why rates rose .125%, and this kind of MBS drop would normally mean rates rise more but lenders held the line since MBS moves were (like stocks) on very low volume. MBS are now just 18 basis points above their 50-day moving average, a line that’s been a concrete floor of support even when stocks rally. But downside risk (pushing rates up) exists because MBS dropped below their 25-day moving average to close last week.

Bottom Line: Last week, I said “rates should be even to up .125% as MBS drop a bit and stocks rise a bit” which happened. That makes a two month roll of nailing weekly rate predictions. Now that I’ve said that, I’m sure the streak will be broken! Anyway, next week has little MBS-moving data so stock activity will drive bonds. Sentiment seems to favor a Santa rally for stocks, suggesting rates should be even to up slightly as the 25-day average on MBS is tested.

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Posted in 1st Time Home Buyers, by Julian Hebron, For Home Buyers, For Owners & Sellers, Mortgage Market, National Housing News, New Construction | No Comments »

Which SF Neighborhoods Have the Most Sales?

November 15th, 2011 by Katy Dinner

Which San Francisco neighborhoods have the most sales? To determine where the most turnover was and how the market has changed since the peak, we took a look at the sales of single unit properties (single family homes and individual condominiums) in select San Francisco real estate districts, including Districts 4,5,7,8,9 (see this map for reference:  http://www.sfrealtors.com/dw_sfarmls_map.html)

  • District 4:  Twin Peaks West (St. Francis Wood & surroundings, including Miraloma Park & Forest Hill)
  • District 5:  Central (Noe Valley, Castro, Inner Mission)
  • District 7:  North (Pacific Heights, Cow Hollow, Marina)
  • District 8:  North East (Russian Hill)
  • District 9:  Central East (SOMA including Potrero Hill, Bernal Heights, & South Beach)

Please contact us at our email address below to discuss your interest in in other parts of San Francisco.

As shown by the above graph, we can see that the number of properties sold overall bottomed out in 2009, and recovered a little in 2010.  If the 2011 year-to-date figures hold steady, volume will remain flat.  Overall, we can estimate that the volume of transactions will remain 18% lower than five years ago.  What can we learn from this?

San Francisco is more fortunate than Southern California and the rest of the country in that there are far fewer distressed properties for sale.  How are people holding out?  It seems that we are in a cash- and equity-rich environment, especially given the challenges in the mortgage financing arena.  Also, many current owners are choosing to remodel and/or simply hold instead of trading up their property.  We can tell this by looking at the number of withdrawn & expired listings for the same neighborhoods over the same time period, which has overall remained steady over the past three years.  We can infer that the most desirable properties are being snapped up by cash buyers, but the rest are not receiving offers which current owners are willing to accept.  Given how much prices rose, those owners in the middle of the market are choosing the hold and/or remodeling path instead rather than take a loss.

Most of the sales activity has taken place in District 5 and District 9.  They are no longer alternative to neighborhoods to the north of market San Francisco.  They are destinations demanding often demanding a higher price per square foot.  District 5 appears to be more transitional in that the demographics are changing as people move out to follow jobs and schools.  District 9 has become the focus of many first time buyers, second homes and also a great location for “empy-nesters” coming back to the city.

To learn more about trends in the SF real estate market, email us at Team@KatyDinner.com, or call our office at 415.863.5289.

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Posted in 1st Time Home Buyers, About San Francisco, Castro, For Home Buyers, For Owners & Sellers, Neighborhood Focus, Noe Valley, Pacific Heights, Potrero Hill, Russian Hill, SOMA, South Beach | No Comments »

WeeklyBasis 11/5: Rates Holding Near Record Lows

November 7th, 2011 by Julian Hebron

 

Rates were down .125% last week, ending .125% above record lows last hit October 3. But we did touch those record lows of 3.875% zero points (on single family home loans to $417k) briefly during Tuesday’s trading.

Below I recap last week, preview what’s coming next week, and remind consumers how to lock record rate lows that come and go in minutes. NOTE: Bond/rate markets closed Friday, November 11 for Veteran’s Day.

RECAP OCTOBER 31 – NOVEMBER 4 MARKET WEEK
Manufacturing: The Institute for Supply Management October manufacturing index was 50.8, with 50 as dividing line between expansion and contraction. September was 51.6. Good news: 27 months of growth. Bad news: barely growing.

Fed AND European Central Bank Meetings: No surprises from the Fed: overnight bank-to-bank rates near zero and they’ll continue reinvesting proceeds from mortgage holdings into new mortgage bonds to keep longer-term rates low. Europe’s Fed equivalent, now led by Mario Draghi, cut their one-week bank-to-bank rates from 1.5% to 1.25% to provide extra liquidity amidst debt crisis.

Jobs Report: 80k non-farm jobs were created in October. Weak report even with September revised from 103,000 to 158,000 and August revised from 57,000 to 104,000. About 2.3m jobs were created since an employment trough in February 2010, but there are still 6.47m fewer jobs than the beginning of the recession in December 2007. Over the past 12m, about 125,000 new jobs were created per month: not enough to keep pace with population growth.

PREVIEW NOVEMBER 7-11 MARKET WEEK
Here are next week’s economic calendar highlights with rate impacts:

Greece/Europe: Rates and stocks rose after the Oct 27 EU deal saying private Greek bond investors must take 50% writedowns. This was one condition of the next EU/IMF bailout payment Greece needs within 30 days to stay afloat. Another condition is ongoing austerity: pay cuts and tax hikes. So last week Greek prime minister George Papandreou said he wanted to let his people vote on austerity measures—as though they have a choice. The result: rates dropped again as U.S. mortgage bonds rallied and stocks sold. This up-down rate (and stock) trend will continue as the Greek charade continues.

Treasury Auctions: $72 billion in new Treasury debt will be auctioned into markets as follows: $32b 3yr Notes Tuesday, $24b 10yr Notes Wednesday, $16b 30yr bonds Thursday. Demand for these auctions, especially the 10yr and 30yr maturities, can dictate the mood in mortgage bond trading, but rates should remain even on auctions as U.S. debt remains a safe haven.

Consumer/Real Estate Themed Earnings: Another big earnings week with lots reports that will give a reading on consumers and real estate, including: Priceline.com, Sotheby’s, Dish Networks, Toyota, Vodafone, Anheuser Busch InBev, General Motors, HSBC, Macy’s, General Growth Properties, Ralph Lauren, Wendy’s, Cisco, Lionsgate Entertainment, Viacom, Disney, Kohl’s, Nordstrom, DR Horton.

Jobless Claims: This is a weekly report Thursdays. Claims for unemployment insurance were 397k last week, below the 400k threshold considered to signal an improving jobs picture. Still the 4-week average is 406k, so next week would have to continue the trend. Unless Thursday’s number is meaningfully below last week’s mark, rates will be even.

Technical Trading Factors: Looking at stocks, the S&P 500 closed last week at 1253, below the 200 day moving average they topped the week before. Charts suggest a trading range of 1215 to 1285 near term. It’s a broad range but volatility this year warrants it. The theme is similar for mortgage bonds—namely the 3.5% Fannie Mae coupon most lenders use to price consumer rate sheets. They closed the week well above their 50 day moving average, suggesting rates could move a bit lower. But the stock/bond reverse correlation is critical here. The volatility on both sides will continue as investors shift back and forth.

Bottom Line For Rates: Going into last week I said the week would be key to determine whether rates rise near-term or hold this volatile .25%-above-record-low range we’d been in since October 7. Now, record lows (see paragraph 1) seem feasible to touch again given technical trading factors noted above. Next week is a slow economic week so Europe will be the main theme, which means continued extreme volatility. So as I’ve been saying for several weeks, read the post below to understand how to capture the lows.

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Posted in by Julian Hebron, For Home Buyers, For Owners & Sellers, Guest Bloggers, Mortgage Market, National Housing News | No Comments »

WeeklyBasis 10/29: Jobs, Fed, ECB Center Stage

October 31st, 2011 by Julian Hebron

 

Rates were even to end last week after +/- .25% daily swings, and are still up .25% from all-time record lows set October 3-4. Another huge week ahead: Fed and ECB rate meetings, October jobs report, lots more earnings, and Europe’s debt crisis slogs on.

Below I recap last week, then preview what’s coming. And please note: you can see if you qualify now for HARP II, the new refi plan for underwater homeowners, but loans won’t be made until November 15 at the earliest.

RECAP OCTOBER 24-28 MARKET WEEK
Home Prices: Case Shiller’s reported home prices rose 0.2% July to August, the fifth straight monthly gain but a tiny gain. Prices are down 3.8% since August 2010 and stuck at 2003 levels. So: Is owning a home smart?

GDP: The first of three 3Q2011 GDP readings showed the economy grew at 2.5%, compared to 1.3% for 2Q and 0.4% for 1Q.

Europe Debt Deal: Rates rose Thursday on news of the EU debt deal but reversed Friday as skepticism grows. Next week’s preview below.

Consumer inflation: The Fed’s preferred measure of consumer inflation, the Personal Consumption Expenditures Index (PCE), was within their 2% annual cap. They focus on ‘Core’ which excludes food and energy prices. From Sept 2010 to Sept 2011, all-inclusive PCE was 2.9% and Core was 1.6%. Inflation ok for now.

PREVIEW OCTOBER 31 – NOVEMBER 4 MARKET WEEK
Here are next week’s economic calendar highlights with rate impacts:

Manufacturing: Tuesday is the Institute for Supply Management October manufacturing report. September was 51.6 with 50 as dividing line between expansion and contraction. Good news: 26th months of growth. Bad news: barely growing. Also, manufacturing is weak as measured by two other October surveys: Philly Fed (PA) was 8.7, up from September’s -17.5, the first positive in 3 months. Empire State (NY) was -8.48, fifth straight monthly contraction. For PA/NY surveys, 0 is line between growth/contraction. ISM shouldn’t be a blowout number so rates even.

Fed AND European Central Bank Meetings: The Fed’s meets two days with a policy announcement Wednesday. Rates dropped after their September 21 meeting because they recommitted to mortgage bond buying (not QE!). The Fed is unlikely to surprise markets, but Thursday’s European Central Bank meeting is huge: the first with new ECB President Mario Draghi (bio). His stance on ECB policy and EU debt crisis is key. Rates even to down on Fed meeting. Rates are wild card for ECB meeting.

Jobs Report: Markets expect Friday’s jobs report to show 88k-100k new jobs created in October and unemployment to hold at 9.1%. The economy added 103k new jobs in September, plus August was revised from zero to 57,000 jobs created, and July was revised from 85k to 127k. I think this one will be close to consensus. If so, rates even.

Europe Debt Crisis: Besides Thursday’s ECB meeting, there’s a G20 Summit Thursday and Friday. Both may elaborate on last week’s debt deal, which helped stocks and hurt rates. Another wild card for rates.

Corporate Earnings: Another big earnings week including reports from Pfizer, Kraft, Nissan, Honda, Comcast, Clorox, Mastercard, AIG, Unilever, Credit Suisse, Anadarko, Time Warner, News Corp, Sony, LinkedIn.

Technical Trading Factors: Last Thursday, the S&P 500 broke clearly above it’s 200 day moving average of 1274 for the first time since August 2, and closed at 1285 Friday. Also Thursday, mortgage bonds—namely the 3.5% Fannie Mae coupon most lenders use to price consumer rate sheets—dropped clearly below the 50 day moving average they were hugging since October 7. Mortgage bonds regained much of Thursday’s sharp post-EU news losses Friday, but they’re still below the 50 day moving average.

Bottom Line For Rates: These technical factors suggest stocks and rates could start the week stable, but volatility will remain extreme as politicians and central banks hog center stage. Also the 10yr Note yield, a key benchmark for rate markets, has risen enough (now 2.32%) to create upside rate rate risk near-term. Long-term, a rate spike isn’t warranted by weak global economic conditions. But next week is key to determine whether rates rise near-term or hold this volatile-but-steady range we’ve been in since October 7, which is .25% above record lows.
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Rate Shopper Must-Read:
How To Shop For A Mortgage

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Posted in by Julian Hebron, For Home Buyers, For Owners & Sellers, Guest Bloggers, Mortgage Market, National Housing News | No Comments »

WeeklyBasis 9/18: How Europe Keeps U.S. Rates Low

September 19th, 2011 by Julian Hebron

Rates were up .125% last week, rising off record lows touched briefly the week before. Is this the start of a rising trend? Unlikely given weak U.S. economic fundamentals, but volatility will continue as markets reconcile U.S. data with Europe’s debt crisis.

Below I cover how Europe affects U.S. rates, recap rates last week and preview next week.

So far this statement from my September Rate Outlook a few weeks ago is holding true:

Given all these fundamental and technical factors, we’ll likely be in a trading range until the September 21-22 Fed meeting, with rates +/- .25% from current levels until markets can get a clear signal from the Fed and forthcoming economic data.

Rates were up last week for a few reasons:

(1) Rates rise when mortgage bonds sell, and they sold Thursday because consumer inflation was higher. Inflation makes the future income a bond pays to an investor worth less, so bonds usually sell on inflationary threats.

(2) Despite weak manufacturing activity readings, Empire State and Philly Fed surveys last week both showed inflation creeping up. Same inflation-fear theme as noted in #1 above applies.

(3) News of central banks in Europe, U.S., Japan, England and Switzerland providing liquidity for Eurozone banks was perceived as good news causing stocks to rally, bonds to sell, and rates to rise. But this isn’t good news. It’s an acknowledgement that Eurozone defaults are imminent. The move won’t stop defaults, it’ll just help manage liquidity problems when defaults come.

But rates shouldn’t spike from here because U.S. economic fundamentals don’t support it.

Jobless claims are running at a 419,500 four-week average, and have been in this range or higher for 3 years. Home sales are driven by cash buying bargain hunters and not the broader population. And last week we learned that the consumer mood about the future is the worst since 1980, which doesn’t bode well for spending.

As for Europe’s bank liquidity, money manager Comstock Partners agreed that the stock rally and bond selloff on this news was short-sighted, and reiterated key points about sustained U.S. weakness.

Net result in near- to medium-term: flight to quality will continue with U.S. Treasuries and mortgages benefitting, keeping U.S. rates low.

Next week, we’ve got August housing starts (a measure of new homes construction which has also been dismal), August existing home sales, and the Fed’s policy announcement Wednesday following their two-day FOMC meeting.

Operation Twist is a likely outcome of that meeting, which is when the Fed shifts its debt holdings to longer durations buy selling shorter-term debt and buying longer-term debt.

This could also support lower rates in the near term, as long debt prices rise and yields (or rates) drop.

But volatility will reign supreme: investors have already been buying long Treasury debt in anticipation of Operation Twist and may sell on this announcement. And from a technical perspective, mortgage bonds are clinging to the 25-day moving average with a big gap to drop to the next support level—this could bring some upward rate risk until debt markets are spooked again by the dire Eurozone situation.

Stay tuned daily on Twitter and Facebook.

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Posted in by Julian Hebron, Mortgage Market, National Housing News | No Comments »

WeeklyBasis 9/3: September Rate Outlook

September 6th, 2011 by Julian Hebron

Rates dropped .125% last week. This after dropping three straight weeks beginning July 25 then staying flat two weeks. The downtrend began with awful Q2 (and Q1 revised) GDP, then a mediocre-at-best July jobs report, then S&P’s U.S. downgrade. Then rates held steady despite worse manufacturing and housing data, and resumed their drop after Friday’s grim August jobs report.

Below are details on what’s driving rates down, plus September’s rate outlook.

RECORD LOW FOR 10YR NOTE
The 10yr Note yield, a key benchmark for long rates in the economy, closed below 2% for the first time ever Friday.

A yield is a rate, and rates drop when bond prices rise on buying rallies. The 10yr Note and mortgage bonds have rallied as safe haven investments during questionable economic recovery.

The 10yr hit record levels after Friday’s jobs report showed zero August jobs created. Mortgage bonds also rallied, which is why rates fell again.

Markets interpret weak jobs data to mean low company confidence now and even lower consumer confidence going forward.

Consumer confidence and spending was picking up but got a lot worse after the debt ceiling circus in July.

And while we got a decent August ISM manufacturing report—a national reading—two important regional manufacturing reports (1, 2) have been on a three-month weakening trend.

Also last week home price data showed signs of stabilizing, with Case Shiller June home prices up 1.1% since May, the third month of gains after seven months of decline.

So there’s a hint of home price optimism, but weak new and existing home sales still weigh on housing.

This sentiment is driving double-dip recession fears, pushing investors into mortgage bonds and Treasuries, which lowers rates.

HOW LOW CAN RATES GO?
Economic data—or fundamentals—is one factor that drives trading in mortgages and Treasuries. Trading patterns—or technicals—are another.

Weak fundamentals support current high levels for mortgages and long-dated Treasuries, but technicals have been capping runs higher. For now.

Mortgage bonds (FNMA 30yr 4% coupon) first hit an all-time high November 2, 2010, one day before the Fed’s QE2 announcement, then sold off when the Fed confirmed QE2 was Treasury buying rather than more mortgage bond buying—which was the focus of QE1.

That selloff caused rates to spike: they rose .875% in six weeks.

During the run up to that—on October 8-9, 2010—30yr fixed rates (for single family home loans to $417k) were 4% at zero points.

Those were the true record lows. Despite headlines in recent weeks, rates haven’t closed a 2011 trading day at 4% zero points.

But it’s close: mortgage bonds have broken through those November 2, 2010 highs four times in the past six weeks—including last week—before retreating.

FED’S ‘OPERATION TWIST’
The Fed’s August 9 statement was open ended about future quantitative easing, which is printing money to buy bonds and lower rates. That’s contributed to this current bond rally even though Operation Twist, a different Fed strategy is likely to come before any more QE.

Speculation about Operation Twist, a Fed tactic of selling short-term securities and buying long-term securities, has also contributed to the 10yr Note rally because investors like to get in before the Fed.

They also like to get out before the Fed so investors could just as easily sell if/when Operation Twist begins, pushing yields higher.

The end result is more rate volatility.

The good news about Operation Twist is that it doesn’t require printing money like QE does. It’s about shifting U.S. debt to longer durations, much like a homeowner might switch from a 5yr ARM to a 30yr fixed while rates are this low.

It remains to be seen whether we’d get more QE, and in what form.

More Treasury-focued QE would likely cause rates to spike like they did in late-2010 because it would push money into stocks. And there’s been no indications about mortgage-bond-focused QE.

SEPTEMBER RATE OUTLOOK
Given all these fundamental and technical factors, we’ll likely be in a trading range until the September 21-22 Fed meeting, with rates +/- .25% from current levels until markets can get a clear signal from the Fed and forthcoming economic data.

PREVIEW FOR SEPTEMBER 6-9
Next week’s economic calendar is slow with August ISM non-manufacturing Tuesday and weekly jobless claims Wednesday as the highlights.

We’ll also get more uncertainty out of Washington as Congress and the White House politicize jobs up to and after Obama’s jobs speech Thursday.

Stay tuned daily on Twitter and Facebook.

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Posted in by Julian Hebron, Mortgage Market, National Housing News | No Comments »

WeeklyBasis: Preview Of August 29 Rate Week

August 29th, 2011 by Julian Hebron

Week-over-week, rates are even. But they’re slightly higher this morning than Friday as stocks extend Friday’s gains. Below is this week’s economic snapshot, click image for details. So far today we’ve had consumer spending and inflation as well as pending home sales. Spending was rebounding early summer but has backed off in past two weeks, and pending home sales (homes for sale that went under contract) were down in July.

Highlights for the week include tomorrow’s Case Shiller June home prices, Thursday’s August ISM manufacturing index, and Friday’s August jobs report. May posted a second straight monthly home price gain after seven months of decline, so stocks and rates would likely rise if the winning streak continues. Manufacturing has weakened significantly in recent months measured by regional Fed surveys, so ISM will confirm if that trend continues—rates would hold lows on continued weakness. July showed 117k new payrolls created and estimates call for 75k on Friday. If it’s more than 75k, rates would rise as bonds sell on broader market optimism. Overall, it’s going to be another volatile week.

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WeeklyBasis 8/20: Headline Rates vs. Reality

August 22nd, 2011 by Julian Hebron

 

Rates ended even last week, capping off a three week down trend. Below I discuss the direction of rates from these record low levels. But first, a word on rate headlines vs. reality.

Nearly all ‘record low’ rate headlines hit Thursdays. That’s the day Freddie Mac releases its weekly rate survey covering the previous week. The survey is source material for nearly all media, but the rates aren’t relevant for all homes nor borrowers.

Rate Headlines vs. Reality
Headline rates are expired by the time you’re reading about them, and here’s some other fine print most media stories don’t catch: those rates are only for loans to $417k, single family homes only, owner-occupied only, and those loans have .7% to .8% in points (aka extra fees) on top of a full set of closing costs.

So if you bought a condo with 20% down earlier this year and you’re looking for a zero-cost refinance of your $475k loan, your rate quote as of Friday was about .48% higher than the headlines you were reading. Here’s the fine print.

Rates change throughout each day as mortgage bonds trade, and a rate quote is based on your profile and your property profile, so it must come from a lender to be specific.

Double-Dip Fears Fuel Low Rates
Last week’s U.S. economic data fueled double-dip recession worries. Fed manufacturing reports (1, 2) confirmed a three-month slowing trend, existing home sales posted an eight month low, and jobless claims again broke above 400k after just one week of improvement.

Business and consumer inflation (PPI and CPI) were both a bit hotter, but not enough for alarm bells, especially when lower inflation readings from the manufacturing surveys suggest PPI will moderate.

Rate Preview August 22-26
Weak data suggest rates shouldn’t spike next week, but the “here and gone” rate lows will continue as mortgage bonds battle tough price ceilings. Rates drop when bond prices rise, and every time mortgage bond prices touch highs in the past two weeks, they quickly retreat, sending rates higher.

To manage this volatility, you need to set a rate target you can’t or won’t go below, then watch the market to see if it goes lower. BUT you should give your lender a standing order to lock that rate if it’s ticking up—which happens in minutes, not days.

Here’s a case for why rates might go even lower next week, but this is rooted primarily in Treasury trading, not mortgages. So the safe bet is the standing lock order recommendation above.

Economic calendar highlights next week include July New Home Sales Tuesday, FHFA home prices Wednesday, jobless claims Thursday, and the second of three 2Q2011 GDP readings Friday. The first reading was an anemic 1.3%.

We also have $99b in Treasury auctions as follows: $35b 2yr Notes Tuesday, $35b 5yr Notes Wednesday, $29b 7yr Notes Thursday.

Stay tuned daily on Twitter and Facebook.

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Posted in by Julian Hebron, Mortgage Market, National Housing News | No Comments »

WeeklyBasis 8/13: Stunning Week, Record Rates

August 17th, 2011 by Julian Hebron

Rates dropped .125% last week continuing an unpredictable three-week down trend. The first catalyst was awful GDP data two Fridays ago, then last Friday began with a questionable jobs report and ended with S&P downgrading the U.S.

This picture I took best describes last week’s stunning volatility. Net result: mortgage bonds up, rates down. But not without wild swings that make advising clients an extreme sport. And it makes headlines of record rates deceiving. They’re here, then they’re gone. Below is last week’s recap, next week’s preview, and rate locking tips.

Why Rates Are Down
Rates drop when mortgage bonds rise on rallies, and that trend began after the July 29 2Q2011 GDP report showed weak 1.3% growth and 1Q was cut from 1.9% to 0.4%.

The week of August 1 showed manufacturing slowing, weakness in the jobs report fine print, Europe’s debt crisis spreading to France and Italy, and Washington’s long-awaited budget deal did nothing to support growth or address long-term issues.

So S&P downgraded the U.S. Friday, August 5 as an indictment of paralysis in Washington, and stocks best tell how that played out from August 8-12:

The Dow closed down 634, up 429, down 519, up 423, up 126.

Mortgage bond markets swung similarly, and just like stocks were net down, bonds were net up. Bond yields (or rates) move inversely to price, and this is why rates ended down.

The week of August 8 brought mildly encouraging data: jobless claims below 400k (at 395k) first time April, retail sales up most in four months. But this was overshadowed by Europe’s debt crisis and a Fed policy announcement explicitly stating they’d keep overnight rates near zero “at least through mid-2013″ and remain open to more quantitative easing—bond buying to lower rates.

That’s why cautious bets on bonds won the week and kept rates low.

Rate Outlook August 15-19
Next week brings critical manufacturing, housing and inflation data that all impact rates.

The Fed’s August New York and Philadelphia area manufacturing surveys are Monday and Thursday. New York manufacturing contracted last two months, and Philadelphia manufacturing rebounded in July (+3.2) from a big contraction (-7.7) in June. Rates will stay low if these numbers are weak.

Housing starts and building permits for July are Tuesday and existing home sales for July are Thursday. June housing starts were highest since January, but they’re still drastically off long term trend. June existing home sales were at at 7-month low. Again rates will stay low if these trends continue.

July producer and consumer inflation are Wednesday and Thursday. These figures are all within the 1-2% no-inflation-threat range, and there is no reason to expect surprises. Rates will most likely be neutral on this data.

We may see some unwinding of the post-Fed, post-downgrade bond rally that could push rates up slightly. But it will come down to these reports and developments in Europe.

Volatility & Rate Locks
As we enter further into uncharted economic territory, market volatility will continue and so will wild daily/weekly swings in mortgage rates.

When locking rates in this environment, remember that rate locking strategy isn’t like investing strategy. With investing, you stick with a plan and adjust slightly through short-term bumps. With rate locking, it’s a trading exercise.

You have to pick a high-end target that you can’t or won’t go above, and be ready to act whenever it’s there.

Since rates change throughout each trading day, make sure your mortgage advisor knows your target so they can lock your rate at a moment’s notice as markets dictate.

Keep your seatbelt on, and stay tuned:

Julian D. Hebron
Vice President, Mortgage Consultant
RPM Mortgage
1400 Van Ness Avenue
San Francisco, CA 94109
office: 415.701.2638
cell: 415.250.1050
eFax: 415.701.2688
About: www.rpm-mtg.com/julian
Blog: www.TheBasisPoint.com
DRE #01376428, NMLS #313803

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