The Mortgage Man

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Mortgage Bonds Trading At Historic Highs

Today the jobless claims report came out for December with a total of 524,000 jobs lost.  This was worse than projections of 500,000, but far better than rumors of nearly 700,000.  So far this morning, bond traders are reacting to the rumor and not the projection by selling mortgage bonds.

As mortgage rates continue to be unbelieveably low, the stock market is struggling.  Wal-Mart reported that due to one of the worst holiday shopping seasons on record, they will not meet expectations for the 4th quarter.  This continues to fuel uncertainty in the greater economy, and economic uncertainty drives investors to sell stocks and buy bonds.  Long term, this is good for mortgage rates and the real estate market.

Also, the FED announced yesterday that through the first 3 days of this week, they bought $10.2 billion in Fannie Mae, Freddie Mac and Ginne Mae mortgage backed securities, part of their overall plan to buy up over $500 billion in MBS’s between now and June.

Friday November 14, 2008

This weeks financial news wrap up.

It is interesting the times that we live in right now.  The 500 point intraday swings in the stock market have become so commonplace that no one even gets excited about it anymore.  Even yesterday, there was an intraday low of -331 only to rally in the afternoon to +552, a nearly 900 point intraday swing.  What is even more curious is a buying rally after incredibly bad economic reports.

All of this leads to the conclusion that the markets are trading almost entirely on emotion.  Fundamentals appear to have no affect, and that uncertainty bleeds over to the bond market as well.

Mortgage bonds started the week on a downward slide, then recovered Wednesday and Thursday morning with a nice rally.  That rally began losing steam yesterday afternoon and continues to show weakness this morning.  Daily volatility aside, mortgage rates long term are better than they have been in about a month and continue to trade in a near sideways channel.

Conventional wisdom would lead us to believe that as poor economic data comes out, investors would pull money out of stocks, invest in bonds, driving up the yield and driving down mortgage rates.  But, as previously discuss, conventional wisdom does not appear to have a place in this market.

All in all, if you have a mortgage loan in process that you have not yet locked, my bias would be towards locking to protect against uncertainty.

For today’s mortgage rates, or to apply for a mortgage loan, go to SteveRussellOnline.com.  Or call 888-257-8383 for a free consultation.

Worst Week Followed By Best Day Ever

After the stock market’s worst week in history, it closed yesterday with the highest gain in history.

What a roller coaster ride for investors.  After a record for the largest 1 week decline ever last week, investors came back with a vengence yesterday to close the DOW up 936 points.  That makes yesterday the largest single day point gain in history, and the 5th largest perecntage gain ever.  Activity like this begs the question of whether we have found the bottom in the equity markets or not.

No one will know where the bottom is until we have already passed it, but the level of volatility and panic in the sell offs last week suggest that we are either there now, or at least we are close.  Since this blog focuses primarily on real estate and mortgages, how will this affect housing?

There is no direct connection between the stock market in general and the real estate market.  But, they are all slices of the same economic pie.  The typical bear market lasts 13 months with a resulting decline of 30% to 40% in the stock market.  Right now we are in the middle of the 12th month of market decline from its highs in October 2007, and the total point decline is around 41%.  Based on this information alone (and there are many more factors at play), it would signal that we are at the bottom, or at least close to it.

The bigger problem in the real estate market is inventory vs. willing buyers.  Because foreclosures are still coming on the market in record numbers, we will have to remove some inventory before sellers can really make up any ground.  But, for buyers, this is the best buying opportunity that has existed in decades.  Locally (in North Florida), home prices are back to 2003 levels, and the deals available to buyers are jaw dropping now.  Nationaly, the numbers vary by area, but there are tremendous buying opportunities across the country.

Lending standards have tightened, but there is still mortgage financing available (contrary to the inpression that you might get from the news).  For more information on the financing options available to you, go to www.SteveRussellOnline.com, or call me at 888-257-8383.

Monday October 6, 2008

Mortgage rates are down and so is the stock market.

Stocks are down today amidst continued concerns for global economic slow downs.  As of 9:24 A.M. (Central Time), the Dow has dipped below 10,000 for the first time since October 2004.  According to traders, this is due, in large part, to the increased uncertainty of the global economy and corporate earnings as we begin the 3rd quarter corporate earnings season.

As usual, when there is a selloff in stocks, people tend to move their money over to bonds, and today is no exception.  Mortgage bonds are up over 70 basis points leading to stronger monrtgage rates this morning.  If you were waiting to lock your loan, today would be a good day for it considering the major move of the index over levels of resistance.

You can see where today’s rates are currently at SteveRussellOnline.com.

Thursday September 18, 2008

Today’s bond market and its affect on mortgage rates.

At present, the bond market is moving in a sideways channel between resistance and support.  The cash infusion by The Fed has had some positive affects on the stock market today which is creating pressure on bonds.  There is no clear up or down swing predicted to happen today in mortgage rates and mortgage bonds, but due to unexpected volitility in the markets that could happen at any time, it would be prudent to go ahead and lock your rate if you have a mortgage loan in process.

Enjoy your day, and try to think about something other than the stock market.

Where Do You Keep Your Money Safe?

In these historical times in the financial markets, how do you know that your money is protected?

Everyday there is a new headline about some other “sky is falling” scenario.  It was only a week ago that history was made when the government stepped in and took over operations of Fannie Mae and Freddie Mac, but that is old news now.  This week it was the nations largest insurer AIG being given an $85 Billion loan from your tax dollars to help keep them out of bankruptcy.  But hidden in all of the negativity are shining pockets of positive news.

If you ever watch CNBC, you may know that Jim Cramer likes to say “there is always a bull market somewhere”, and he is right.  In the constant yin and yang of the financial markets, where there is a loser, there is also a winner somewhere, you just have to know what to look for and where to find it.  For instance, if you bought into gold earlier this week, you are no doubt celebrating as the gold market had the largest dollar gain in history this week.  Equally, as confidence fades in the stock market, investors must forge ahead and put their money somewhere, and guess what just started looking really good…..real estate.  Thats right, real estate.  The dirty word that people have been scouling at for months just became one of the best places to put your money.

Think about it, if you have $1 million in the stock market and you don’t know if you will wake up one day to find that your top holdings are out of business, your money may be better served in a tangible asset that you can see, touch, get a tax break, and live in (or rent out).  At a time when real estate is at historically low prices, you could be getting in at the very beginning of a new bull market.

I find it interesting what an affect the media has on the markets.  They seem to give you just enough information to instill a panic without regard to how people will react.  I know that the AIG issue is big news, but did you know that there are 1000’s of people without homes or jobs in Galveston, TX after Hurricane Ike virtually wiped the town off the map.  Chances are pretty good that you didn’t because no one in the news is saying a word about it.

So back to the topic at hand, is your money safe in the bank?  Yes, if it is less than $100,000 per depositor per institution.  Is it safe in stocks?  I guess it depends on the stock and your level of exposure.

Even if you take away my obvious bias towards real estate (because I am an active mortgage banker), do your own home work in your local market to see if I am right.  If you haven’t looked lately, you might be shocked at the deals available now.  I my area of the Florida Panhandle, there are gulf front condos that can be stolen for prices that compare to 4+ years ago.

Good luck to you, and tell me how things are in your local real estate market.

Inflation Puts Pressure On Financial Markets

Stocks and bonds are both down today on worse than expected inflationary news.

Mortgage bonds are being hit today by worse than expected inflation reported in the Personal Consumption Expenditure (PCE) report.  Even though bonds are off of their lowest levels of the day, the figures show that inflation for the month of June was up 0.8% – the highest single month increase in 27 years.

As we have discussed before, what is bad for bonds is usually good for stocks, but not inflation.  Traders on both sides of the isle hate inflation, so the trend is likely to be down in both markets today.

The FED is meeting today and will be anouncing the results of its meeting at 2:15 PM EST tomorrow.  The markets are currently predicting a 93% chance that short term lending rates will not change due to current market conditions.

Based on the current state of the markets, it looks like floating your rate in the short term is the best course of action to see how the markets continue to react to today’s economic news.  If you will be closing soon, I recommend locking to avoid possible negative impacts.