Daily Updates

What's moving rates for the week of July 13, 2009

chrisrichter@chrisrichter.com (Chris Richter) — Mon, 13 Jul 2009 09:00:00 +0000

Mortgage rates improved for the third consecutive week as the economy is offering up totally inconclusive signals. With uncertainty in the mix and earnings season upon us, traders parked money in bonds and mortgage rates were the big winners.

This week, rates should be in flux with traders watching 3 things.

The first is the aforementioned Earnings Season reports. Big Banks JP Morgan Chase, Bank of America and Citigroup report quarterly earnings this week. If balance sheets look healthy and markets are encouraged by the results, it could spark a stock market surge, similar to last quarter. This would be bad for mortgage rates.

The second item markets will be watching is economic data. In addition to inflation-related data like the Consumer Price Index, markets are watching for Tuesday's Retail Sales report. Retail sales are a key economic indicator because consumer spending accounts for two-thirds of the economy. If the data is weak, mortgage rates should benefit.

And, lastly, markets are awaiting the Wednesday release of last month's Federal Open Market Committee meeting minutes. The minutes will give a behind-the-scenes look at the conversation and debate surrounding the Fed's decision to hold the Fed Funds Rate near 0.000 percent and not purchase additional treasury securities on the open market.

Mortgage rates remain volatile. Therefore, if you're actively shopping for a mortgage rate, consider that mortgage rates have been falling for the past 3 weeks and may be due for a reversal. All it would take for that to happen is for this week's economic data to show just a little bit of strength.

We could expect traders to pile back into stocks and mortgage rates to suffer.

Getting a Better Mortgage Rate: Change the Closing Date

chrisrichter@chrisrichter.com (Chris Richter) — Fri, 10 Jul 2009 09:00:00 +0000

Sometimes, saving money on your mortgage is as simple as picking a better closing date.

For years we've been watching some clients get the best purchase price by offering an edgy Seller a quick closing. In a market where strong buyers get great prices, offering a quick closing is music to the ears of most Seller's.

The number crunchers in the back office of banks like it too. A Rate Lock Commitment is a promise for a bank to honor that mortgage rate over a period of time.

The longer the rate lock commitment, the higher the rate. "Time Risk" is directly passed onto the buyers. Here are some examples. Rate locks typically come in 15-day increments with the 30-day lock serving as the basis for all other pricing:

15-day rate lock : 1/8 percent lower than the 30-day rate lock
30-day rate lock : The basis for all other pricing
45-day rate lock : 1/8 percent higher than the 30-day rate lock
60-day rate lock : 1/4 percent higher than the 30-day rate lock

These aren't exact figures, of course. Spreads between rates can (and do) vary from lender-to-lender. Spreads also vary based on volatility. When things were crazy earlier this year, the total spread from 15 to 60 days was often over .5%. That is why we suggested that refinances get approved before locking at that time.

This is why choosing a closing date is so important to your mortgage rate. A 45-day closing may reduce your rate 0.125% versus a 46-day close or .25% for a 29-day close.

Assuming a $300,000 home loan near today's rates, that's an annual difference of $375-750. So, when negotiating a contract on a home, keep in mind how rate locks work to make sure you get the best rate possible. The shorter the length of your rate lock commitment, the more money you might save long-term.

5 Purchases To Make In A Down Economy

chrisrichter@chrisrichter.com (Chris Richter) — Thu, 09 Jul 2009 09:00:00 +0000

Visit msnbc.com for Breaking News, World News, and News about the Economy

Down economies reduce consumer spending, creating a bind for retailers. As excess inventory collects dust, companies have little choice but to drop prices in hopes of selling more product.

For the bargain shopper with extra cash right now, there are some terrific deals to be had out there. This 4-minute piece from NBC"s The Today Show highlights a few of them.

Wines over $25 per bottle reduced up to 50%
High-quality diamonds reduced up to 30%
Summer rental homes reduced up to 50%

Furniture is another discounted item.

Now, these aren"t everyday-type purchases, but when the economy turns around for good, the bargain-priced items highlighted in the video are expected to return to their former price levels.

If you have the means, therefore, consider taking advantage while costs are down.

Fannie Mae Restricts 2-Unit Borrowing

chrisrichter@chrisrichter.com (Chris Richter) — Wed, 08 Jul 2009 09:00:00 +0000

For the first time in nearly six months, Fannie Mae is imposing strict, new guidelines on American homeowners.

This time, the hardest hit demographic is owners of 2-unit homes.

In its official announcement, Fannie Mae listed the following changes to its 2-unit financing programs, separated by occupancy type.

Primary Residence

Purchase: Maximum loan-to-value drops to 80%; FICO minimums reset to 640.
Rate-and-Term Refinance: Maximum loan-to-value drops to 80%; FICO minimums reset to 640.
Cash Out Refinance: Maximum loan-to-value drops to 75%; FICO minimums reset to 680.

Investment Property

Purchase: Maximum loan-to-value drops to 75%; FICO minimums reset to 660.
Rate-and-Term Refinance: Maximum loan-to-value drops to 75%; FICO minimums reset to 660.
Cash Out Refinance: Maximum loan-to-value drops to 70%; FICO minimums reset to 680.

With Fannie Mae's new loan-to-value limits falling by as much as 15 percent, it's a certainty that fewer 2-unit homeowners will be approved in the mortgage process. This could slow both purchase and refinance activity in the coming months.

The good news, though, is that while Fannie Mae recommends that lenders institute the new policy immediately, September 1, 2009, is the "effective date".

Therefore, if you plan to buy a 2-unit home, or if you own one and know you'll need to refinance it soon, it may be a good idea to move up your timeframe.

Lenders could implement the new guidelines at any time and usually do so without warning.

How A Rising Unemployment Rate Can Help Mortgage Rates Fall

chrisrichter@chrisrichter.com (Chris Richter) — Tue, 07 Jul 2009 09:00:00 +0000

Last week's jobs report is the latest data point to drag down rates for today's home buyers and would-be refinancers.

As reported by the government, the national Unemployment Rate rose to 9.5 percent in June -- a 25-year high.

As the percentage of out-of-work Americans grows, households have less disposable income to pump back into the economy.

And so, because consumer spending accounts for two-third of the economy, the growing ranks of the unemployed are forcing markets to change expectations about when the U.S. economy will reach its full recovery.

Inflation is the enemy of mortgage rates. The perceived absence of inflation, therefore, can be its friend.

With fewer working Americans, we can expect slower economic growth plus a smaller probability for inflation over the medium-term. This is why mortgage rates are lower of late, off by as much as a half-percent from the peak.

Predicting Mortgage Rates -- expect a volatile week

chrisrichter@chrisrichter.com (Chris Richter) — Mon, 06 Jul 2009 09:00:00 +0000

Mortgage markets were relatively calm throughout last week's holiday-shortened trading sessions.

After trading within a tight range between Monday and Wednesday, a weak jobs report helped edge rates lower into the weekend.

For the second week in a row, mortgage rates ended the week lower than where they started -- if only slightly.

Meanwhile, if it's the expectation of runaway economic growth that fueled the early-June, mortgage rate run-up past 6 percent, it's the tempering of those expectations that helped rates retreat by a 1/2 percent or more since.

While the housing sector continues to post strong numbers, employment is showing that it may not rebound as quickly as previously thought and U.S. consumer confidence remains shaken.

The Unemployment Rate rose to its highest levels in 25 years last month and key confidence levels fell.

With negative job growth and falling consumer optimism, it only makes sense that mortgage rates would fall -- fewer people are working and the public feels uneasy about spending its money.

This week -- without much new data due -- market momentum could push rates even lower. In general, perceived weakness in the economy will be good for mortgage rates and strength will be bad.

However, there's a wildcard.

This week, some of the world's largest nations are expected to call on a replacement for the U.S. dollar as a global currency reserve. Depending on how serious the discussion grows, the value of the U.S. dollar could be negatively impacted and that would spell bad news for rate shoppers.

A weakening U.S. dollar is linked to higher mortgage rates.

Mortgage rates remain favorable and unpredictable. If today's rates make sense for your household budget, consider locking in. Rates won't likely end the week at the same levels at which they started.

Pending Home Sales Rise for 4th Straight Month

chrisrichter@chrisrichter.com (Chris Richter) — Thu, 02 Jul 2009 09:00:00 +0000

The number of homes under contract to sell increased in May.

It's the fourth straight month in which sales volume increased, corroborating the growing notion that housing is on the mend in most U.S. markets.

Consider these other housing-related stories from the past month:

Existing Home Sales
New home
The Case-Shiller Index

Put it all together and it looks like the housing market is about to reach its bottom (if it hasn't already).

But just because homes are going under contract to sell doesn't mean that they actually will sell. A "deal" can fall apart for all sorts of reasons including failed home inspections, buyer-seller disputes, and mortgage-related problems.

In general, though, as the number of pending contracts increase, we find that Existing Home Sales rise, too, some 45-60 days into the future. And so long as buyers' demand for homes remains strong, we would expect that home prices edge higher.

It's too soon to say that housing has turned the corner for certain, but there's an awful lot of data lately that suggests that it has.

19 of 20 Case-Shiller Markets Are Improving

chrisrichter@chrisrichter.com (Chris Richter) — Wed, 01 Jul 2009 15:00:00 +0000

Tuesday -- for the first time in a long while -- members of the press met the monthly Case-Shiller Index data with enthusiasm. And why shouldn't they? showed a slowing pace of home price decline in April.

Here are some of the headlines about the story:

(Business Week)
(Seeking Alpha)
(Bloomberg)

Now, the headlines feel negative, but they're actually highlighting some key strengths in April's figures. For example, nearly half of the Case-Shiller markets posted gains in April and all but one showed month-over-month improvement.

It's a step in the right direction but doesn't mean that housing has turned around for good.

We have to be careful about how we interpret the Case-Shiller Index because it's an imperfect housing gauge. The most obvious Case-Shiller flaw is that it only measures home values in 20 cities nationwide and they're not even the 20 biggest cities.

Houston, Philadelphia, San Antonio and San Jose are excluded from the report and each ranks among the .

That said, the report is still important because the Case-Shiller Index identifies broader housing trends and that helps to shape economic policy.

Not only versus last month but also versus last year, the pace at which home values are falling appears to be getting slower. This is the third straight month Case-Shiller has reported as such.

Now, three months makes a trend, but the data has to stay strong through the summer months to mark a bona fide turnaround. If the Case-Shiller Index shows strength for May and June, it could be the signal for which the markets have been waiting.

How Accurately Did Economists Predict 2009

chrisrichter@chrisrichter.com (Chris Richter) — Tue, 30 Jun 2009 09:41:41 +0000

At the start of the year, the "experts" made a lot of predictions about the U.S. economy and what to expect in 2009.

And nobody predicted just how big the government"s stimulus package would be.

Now, on June 30, with the year officially half-over, it"s as good a time as any to remember that people are much better at interpreting the past than predicting the future. Economists can make educated guesses about the future, but they"re guesses nonetheless.

It's like watching the Weather Channel. A meterologist can look at the data and say it's going to rain next week, but the forecast is never 100%.

So far this year, mortgage rates have been up and down, credit availability has been higher and lower, and home prices have varied immensely from neighborhood to neighborhood. These are not the types of predictions we get from the pundits.

There's another 6 months until 2010 and there's no reason to expect the current trends to change.

The world is unpredictable and so is the U.S. economy. Therefore, consider making your personal finance decisions based on the information at hand today instead of on an educated guess about the future.

After all, the weatherman's been wrong before.

What's driving mortgage rates : June 29, 2009

chrisrichter@chrisrichter.com (Chris Richter) — Mon, 29 Jun 2009 09:00:00 +0000

Mortgage markets improved last week on the heels of benign economic data and a non-inspired press release from the Federal Reserve.

Aside from trader momentum, 3 market-moving events helped set the pace last week:

Housing data hinted at strength
Jobless data
The Fed said

The combination of the three created volatility that -- for just the second time in the last 8 weeks -- worked in favor of rate shoppers.

Mortgage rates changed a lot last week, but they trended lower overall.

Already, however, markets are looking ahead to this week's holiday-shortened trading sessions. There is a ton of data to be released and as the week progresses, the ever-falling market volume could create some wide swings in mortgage rates.

The mystery is whether rates will be getting better or worse.

On Tuesday, markets will get Consumer Confidence and Case-Shiller Index data at 9:00 AM ET. The Case-Shiller Index is and it always gets a lot of press. Strength in either number should lead mortgage rates higher. Weakness should help rates ease.

Then, on Wednesday, Crude Inventories should take the spotlight. Normally, we don't watch this data point too closely but with gas prices easing last week, rising oil supplies could mean even lower gas prices ahead. This is anti-inflation and a good sign for mortgage rates.

And lastly, on Thursday, the government releases June's jobs report. This report is always a market-mover -- good or bad. And with trading volume low by Thursday, mortgage rates should move more than 'normal'.

Be ready to lock at a moment's notice this week. Mortgage rates continue to be volatile and the holiday-shortened week won't do anything to counter that. If you're the nervous type, when you see a rate that fits your budget, consider locking it in.