The Mortgage Man
Get more out of your mortgage experience!Archive for June, 2008
Monday June 30, 2008
European inflation could create problems for us here at home with Mortgages and Real Estate.
It is the last day of June and the first day of the week with news from our friends across the pond creating problems here at home. Inflation in Europe reported for June is around 4% which is much worse than the expected forecast between 1% and 2%. As we struggle with our own problems here with the neverending run up on oil prices and a lagging economy, investors are likely to move more money into the Euro and away from the Dollar.
What does this mean for you? Well, first of all, the price of oil is tied to the US Dollar. And as we have discussed in previous posts, as the dollar lags behind in the global currency markets, the weakness in the dollar continues to be a contributing factor in the price of oil. In addition, inflationary pressures keep the FED on the hot seat about raising rates to strengthen the dollar. While this action would be a short term problem in the real estate and mortgage industry, it would likely be a long term stimulus by strengthening the dollar, lowering the price of oil, and thereby relieving the pressure on consumers and discretionary spending.
The affect this is having on mortgage bond trading today is surprisingly positive. Not a rally by any means, but not negative either. My crystal ball is in the shop, so I can’t give you an intelligent answer as to why bonds are moving into positive territory based on this news. What I can tell you is that if you are working on a mortgage loan currently, you might want to float the rate to wait and see if this market moves above current levels of resistance.
In summary, the economy is very complicated and many factors are contributing to the current uncertainty. If you are on the fence about buying real estate until it “hits the bottom”, be aware you may lose more than you gain by waiting. Ultimately, if we are to move forward, we will need to experience a little short term pain to feel any long term gain. You can’t make an omelette without breaking a few eggs.
Supreme Court Strikes Down Gun Ban
This has nothing to do with mortgages or the economy, but I thought it was important enough to bring up.
Today in a 5-4 split decision, the supreme court ruled that the 32 year old law in the District of Columbia banning the ownership of handguns is unconstitutional. A law that was placed on the books 32 years ago was recently challenged by residents who were fed up with being victimized by crime in the city, and made it all the way to the highest court in the land.
A quote from the proceedings read, “Undoubtedly some think that the Second Amendment is outmoded in a society where our standing army is the pride of our nation, where well-trained police forces provide personal security and where gun violence is a serious problem,” Scalia wrote. “That is perhaps debatable, but what is not debatable is that it is not the role of this court to pronounce the Second Amendment extinct.”
I am by no means a gun fanatic or a card carrying member of the NRA. But I am a proud citizen of this country, and I grow a little tired of the complaints of a few trampling on the rights of many on practically a daily basis. Kudos to the Supreme Court for doing the right thing.
Thursday June 26, 2008
Mortgage Bonds have likely hit the ceiling today.
The FED came out with the results of their meeting yesterday, and as expected they did not move rates from their existing level of 2%. This comes on the heels of 7 straight rate reductions in as many meetings. There is increasing opinion that the next meeting will likely bring a rate hike with it to help strengthen the dollar and thwart off the rise in oil prices.
Mortgage bonds are trading slightly higher today, but they are up against a top side resistance level. With the state of the stock market, and an upward correction looming, it is unlikely that mortgage bonds will break through that level of resistance. In addition, since we already know that typically what is good for stocks is bad for bonds, if there is a rally in stocks in the coming days, you can place your bets on the fact that bonds will go through a sell off. This means that mortgage rates will rise and it would be a good idea to lock in soon (or at least be prepared to lock in) to protect yourself from upward movement.
Existing Home Sales for May cam in at 4.9 million, in line with estimates. This is a good sign for real estate because it shows some stability even though the market in general is slower than in recent past. It is also an affirmation that regardless of the doom and gloom you may hear in the media, people are still buying houses.
Here in Pensacola Florida, even though we are statistically the poorest county in the state, we had the highest increase in average sales for the first quarter of 2008 out of 19 metropolitan areas surveyed. We are also holding steady at 350 to 400 sales per month. Not where we would like it to be, but not too shabby either.
The Mortgage Man 
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