Market Update (12/29/2009)

The value of mortgage backed securities has been in a steady decline since the beginning of December and has fallen off of a cliff starting on December 18th. This fact has caused interest rates to go from the high 4s to the mid 5s. Where this will stop is all speculation.

What is not speculation is that the Fed's program to purchase mortgage backed securities is going to come to an end in three months. I read something last week that indicated that the Federal Reserve is now as much as 25% of the market for Fannie Mae, Freddie Mac, and Ginnie Mae mortgage backed securities. To put this in persepctive, one year ago the Federal Reserve was 1% of that market. WOW! This is a very big deal and is important for potential homebuyers and individuals that currently have a mortgage and have not yet taken advantage of the interest rates that we have seen this year. As I have said over and over again, now is the time.

Market Update (12/22/2009)

The Grinch is back as mortgage bonds have taken a beating the last couple of days sending mortgage interest rates higher. A lot of factors are contributing to this current uptick for interest rates. The big ones being inflation fears, a rising stock market, and the looming end of the Fed’s program to purchase mortgage backed securities. Rates are still phenomenal from a historical perspective, but have risen consistently since the record lows that we saw at the beginning of this month.

I do feel bad delivering all of this negativity during the holiday season. To make up for it, I included a link to a Christmas song that you might enjoy.

http://www.youtube.com/watch?v=aAGq1u5R9mw

Why now is the time to buy.

The record low rates that we have experienced this year are thanks to the Fed’s program to purchase mortgage backed securities. This program, which began back in January, is set to expire at the end of March. The latest data shows that the Fed has about $163 BILLION left for this program. Simple math tells us that that averages out to $11.5 BILLION dollars per week from now until March 31. The reason that I highlight this today is because the Fed has been spending over $18 BILLION per week over the most recent 3 months. Common sense tells us that the Fed will start purchasing fewer mortgage backed securities over the next 3 months. The result will be higher mortgage interest rates. Please make sure that your buyers are aware of these facts.

Just to keep in the “Grinch” spirit, I also want to make you aware of some rumblings going around concerning FHA loans. These “rumblings” started because HUD—the department that controls FHA loans—is seeing its reserves dwindle as a result of foreclosures and increased demand for FHA loans. Changes that could be coming to FHA loans are the following:

Raising the minimum down payment to 5%
Raising the up-front mortgage insurance premium
Raising the minimum FICO requirements

Will this happen? I do not know. What I do know is that buyers should not wait and see. Now is the time.

Sorry for all of the negativity this morning, but the good news is that interest rates are still very, very low.

Market Update (12/16/2009)

Mortgage interest rates are steady this morning ahead of this afternoon’s Fed meeting. Also this morning, the Consumer Price Index (CPI) was released. For those of you that do not know, the CPI is an inflation indicator that measures the price paid by consumers for a fixed basket of goods. This number came in at expectations. This has added to the steadiness in the bond market.

This afternoon’s Fed meeting should not bring a whole lot of news to the forefront. The Fed Funds Rate and the Discount Rate, two rates that the Fed uses to control monetary policy, will not change as a result of this meeting. What we will be watching for is the Fed’s concern or lack of concern about future inflation. We will update you tomorrow.

Market Update (12/14/2009)

After a slight uptick last week for interest rates that followed the record low mortgage interest rates that we saw in the first week of December, rates are once again settling into the low 5% range. Not much economic news is set to be released today, but the rest of the week is full of market movers. On Wednesday, the Fed will get together for the 8^th and final time to discuss their short-term monetary policy. As you know, the news that comes out of this meeting could always be market moving. Also on Wednesday, there are several very important inflation reports set for release. Any sign of inflation will cause a sell off in the bond market and higher interest rates.

In the meantime, please enjoy the current mortgage interest rate market as we head into the final stretch of the year.

Have a great day and a great week!

Market Update (12/10/2009)

This week has been a little bit of a roller coaster with interest rates rising on Monday, falling on Tuesday, and going back up again today. Today’s move is particularly concerning because some economic news that would typically trigger a good day for the bond market was released this morning. I am referring to the weekly initial jobless claims coming in higher than expected. This negative economic information would usually mean good news for mortgage bonds and mortgage interest rates.

The issue with the bond market this week is that results of the Treasury Department auctions that we discussed on Monday have been less-than stellar. The weak appetite for treasury bonds spills over into mortgage bonds and mortgage interest rates are up as a result. Will this trend continue? The long-term answer is “YES.” The short-term answer is “I don’t know.”

Market Update (12/8/2009)

Last week’s rising mortgage interest rate market was very short lived. Comments by the Federal Reserve Chairman and some less-than-stellar economic news from a couple of very large US companies has sent the stock market lower and the bond market soaring once again.

Ben Bernanke made some news yesterday by indicating that inflation is currently in line and could possibly go down in the future. As you know, low inflation is the key to low mortgage interest rates. Couple that with McDonald’s and 3M indicating that the economy might not yet be ready to take off and you get money to flow out of the stock market and away from the gold market and back into the bond market. This has once again sent mortgage interest rates below 5%. Enjoy this time.

Have a great day!

Market Update (12/7/2009)

Mortgage interest rates have held steady through the weekend.

Once again this week, the Treasury Department will be auctioning off a very large amount of notes and bonds that could affect the value of mortgage bonds. As always, the real effect on mortgage bonds and mortgage interest rates will not be known until we see how much of an appetite there still is for bonds. We will be watching.

I am sure that all of you know that December 7^th, 1941 is “a date which will live in infamy.” However, have you heard the actual speech given by President Roosevelt where he uttered those famous words? If not, click on this YouTube link to listen to this very famous speech.

Market Update (12/4/2009)

I hate to say that I told you so, but I TOLD YOU SO!

In my market updates last week, I indicated that mortgage interest rates were not going to go any lower and would probably go higher. Well, guess what? Mortgage interest rates have gone up every day this week. This is especially true today following the much-better-than-expected Jobs Report which showed that our economy only lost 11,000 jobs last month. (I say “only” because the expectation was that the loss would be about 125,000)

By the way, I do know that I have hinted at rates going up for the past couple of months. Since I was wrong for those two months, I just wanted to make sure that I pointed out my first correct prediction since Columbus Day.