Market Commentary for Dec. 16th 2009

Wednesday’s bond market has opened in positive territory after this morning’s inflation data did not cause concern like yesterday’s PPI release did. The stock markets are also showing gains with the Dow up 40 points and the Nasdaq up 15 points. The bond market is currently up 10/32, which should improve this morning’s mortgage rates by approximately .125 - .250 of a discount point.

This morning’s major news came from the Labor Department who reported that November’s Consumer Price Index (CPI) rose 0.4% and that the more important core data reading was unchanged from October’s level. The overall reading matched forecasts but the core data fell short of the 0.2% that was expected. This means that inflation at the consumer level of the economy was not nearly as strong as feared after yesterday’s Producer Price Index was posted. This is good news for the bond market and mortgage rates.

Today’s second release was November's Housing Starts that gave us an indication of housing sector strength. It matched forecasts of an 8.9% rise in construction starts of new homes, but this data is the least important this week’s reports. Its impact on this morning’s bond trading and mortgage rates has been minimal.

Later today, the two-day FOMC meeting with adjourn. There is not much debate about what the Fed will do at this meeting with little chance of them raising key short-term interest rates. Therefore, the post meeting statement will likely be the sole source of a market reaction. This statement has the potential to have a significant influence on the markets and mortgage rates as investors look for any indication of what and when the Fed may do next. Generally speaking, the bond market would like to hear something that indicates the Fed will not be raising rates anytime soon.

Look for an update to this report shortly after the markets have had an opportunity to react to the meeting’s results.

Tomorrow morning does bring us the release of a moderately important when November’s Leading Economic Indicators (LEI). This 10:00 AM release attempts to measure or predict economic activity over the next three to six months. It is expected to show a sizable increase in activity, meaning that it predicts any expanding economy over the next several months. This probably will not have much of an impact on bond prices or affect mortgage rates unless it exceeds current forecasts of a 0.7% increase from October’s reading. The lower the reading, the better the news for bonds. If it shows a smaller increase, the bond market may move slightly higher, improving mortgage rates slightly.

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Float if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now...

This is a REALLY cool video on what happened to the Real Estate/Mortgage/ Credit Industry

Give this a few minutes of your time, it's VERY well put together and will help you to understand, in laymen's terms, why big banks are hesitant to give loans to certain people these days. 


The Crisis of Credit Visualized from Jonathan Jarvis on Vimeo.

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Economic Outlook for Dec 9th, 2009

Wednesday’s bond market has opened relatively flat following an uneventful opening in stocks. The stock markets are mixed with the Dow up a couple of points and the Nasdaq down nearly the same. The bond market is practically unchanged from yesterday’s closing level, so I am expecting little change in this morning’s mortgage rates.



There is no relevant economic news being posted today, but we do have the first of this week’s two important Treasury auctions. The 10-year Note sale is being held today while 30-year Bonds will be sold tomorrow. Today’s sale is more important to mortgage rates than tomorrow’s is. If there was a strong demand from investors, we should see bond prices move higher after results are posted at 1:00 PM ET. This could lead to downward revisions to mortgage rates this afternoon. However, if the sale was met with a lackluster interest, there is a pretty decent possibility of seeing higher mortgage pricing later today.



October’s Goods and Services Trade Balance report will be posted early tomorrow morning. This report gives us the size of the U.S. trade deficit, but it is the week’s least important release. It is expected to show a $37.0 billion trade deficit. Unless it varies greatly from forecasts, I don’t expect it to affect mortgage pricing.



The Labor Department will post last week’s unemployment figures. They are expected to announce that 465,000 new claims for benefits were filed last week, up from the previous week. That would be considered favorable news for the bond market and mortgage rates, but the truth is that this data is not considered to be highly important because it tracks only a week’s worth of new claims. It usually takes a wide variance between the announced total of new claims and forecasts for them to have much of an impact on mortgage rates.



We do get some important economic data Friday morning when November’s Retail Sales report is released. This is one of the more important reports released each month since it tracks consumer spending. Consumer spending makes up two-thirds of the U.S. economy, so any related data is watched closely. It is expected to show a 0.7% increase in sales at retail level establishments, meaning consumer spending was stronger in November than in October. Since the market is expecting an increase, it will likely take a larger than expected jump in sales for the bond market to react negatively and mortgage rates to rise. A smaller than expected increase should lead to lower mortgage rates Friday.



If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Float if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

REO and Foreclosed Homes, short sales really a good deal?

 

It really all depends.

 

Here is a GREAT article that lines it out.

 

http://www.inman.com/buyers-sellers/columnists/berniceross/reos-short-sales-arent-always-bargains?page=0%2C1

Gift Fund Requirements For Conventional Conforming Loans

Gift Funds

Gift Funds
Type	Owner-Occupied	Second Home	Investment
Source	• Relatives   • Domestic partner   • Fiancé Fiancée   • Church   • Municipality   • Non-profit organizations	Relatives only	Not Allowed.
Percentage of Borrower's Funds	Minimum 5% down payment must be from the borrower's own funds. Note: If the LTV/CLTV is less than or equal to 80%, the entire down payment may be a gift.	Minimum 5% down payment must be from the borrower's own funds. Note: If the LTV/CLTV is less than or equal to 80%, the entire down payment may be a gift.	N/A

 

Gift Fund Requirements:

Gift funds must be documented by a letter signed by the donor and include the following information:

 

Gift Funds from a Relative:

 

• The dollar amount of the gift and the date funds were transferred.

 

• The donor's name, address, telephone number & relationship to the borrowers.

 

• State that no repayment is expected or required.

 

• Identify the subject property being purchased.

 

Gift Funds from a Municipality or Non-profit Community Organization:

 

• That the funds were provided by a municipality or non-profit community organization.

 

• The donor's mailing address.

 

• A statement that no repayment is required.

 

• Funds were received by the borrower or the property seller on the borrower's behalf.

 

Requirements for Grants

Grants provided by a church, municipality or non-profit organization must be documented by:

 

• A copy of the letter awarding the grant.

 

• A copy of the legal agreement establishing the terms and conditions under which the funds are grated, OR

 

• Evidence of the transfer of funds.

 

• The documentation must specify the amount of the grant, how the funds will be transferred and that no repayment is expected.