Mike Gallagher’s Mortgage Blog

Happy Friday March 12, 2010

This week China reported year-over-year inflation rate of 2.7%, higher than expected.  Mortgage Bond traders did not like this news as inflation erodes the value of bonds, and thus mortgage rates inched up slightly this week.

This news comes 4 days before the next Fed meeting, and inflation will be the main topic of that meeting.  Most economists agree that our massive debt combined with very low interest rates is a recipe for future inflation.  While we don’t expect the Fed to move the Fed Funds rate next week, the comments from the meeting regarding inflation in the US could potentially move bonds and mortgage rates.  We are keeping a close eye.

Have an awesome weekend.  Let me know if I can help you or someone you know with any real estate financing needs.

Mike

Happy Saturday February 13, 2010

Interesting what can affect US mortgage rates.  Yesterday China announced they will be tightening lending guidelines to slow down economic growth in an effort to stave off inflation.  Stocks did not like the news of a slower growing China, and sold off, boosting bonds and therefore helping rates slightly on Friday.

Rates worsened overall during the week, but Friday’s boost helped.  We expect this to be temporary as the Fed winds down their bond purchase program in weeks ahead.  We are in a lock mode for those in position to lock rate.

Have an awesome weekend.  Let me know if I can help you or someone you know with any real estate financing need.

Mike

Happy Friday February 5, 2010

Mortgage rates enjoyed a slight improvement this week, on the back of the ailing stock market.  When stocks tank, money tends to flow into the bond market as a “safe haven” and mortgage rates benefit, if only temporarily.   With not much economic news due next week, we should enjoy at least a week at these levels.  30-year conforming hovering right at 5.000%.

Signs of new life emerging in Jumbo financing.  It’s estimated banks are sitting on $1 Trillion in reserves, so we should begin to see some new entrants competing for this business in 2^nd quarter.

Have an awesome weekend, let me know if I can help you or someone you know with any real estate financing.

Mike

Happy Friday, January 22, 2010

President Obama yesterday announced bank reform measures, but provided very little detail, and is coming under criticism as a result.  Among many today, NYC mayor Bloomberg has been vocal saying these measures are costly, and will make our banks far less competitive in global markets, we’ll keep an eye as details develop.

Also giving further jitters to stock market, Senate unexpectedly delayed today’s confirmation vote for Fed Reserve Chair Bernanke’s 2^nd term.  There are only 9 days left in his term so Senate must get busy if they are to reinstate.  Whether this is political game playing or not, the stock market does not like the uncertainty.

All this news, along with worse than expected jobless claims earlier in week have helped mortgage bonds, and rates have inched lower this week as a result.

For a quote on a purchase or refinance, call or email me your scenario.

Have an awesome weekend.

Mike

Mortgage rates worsened slightly for the 2^nd straight week, fueled primarily by better than expected Retail Sales, and much stronger than expected Consumer Sentiment (Univ of Michigan).   The Mortgage Bond market tends to sell-off, and rates worsen, in the wake of positive economic news primarily due to inflationary fears and money flowing into stocks.

In the past year, the Fed could absorb any sell-off in bonds by stepping in as buyers, thus keeping rates down.  But as we’ve said in recent weeks, this program is just about out of funding, and so little the Fed can do any longer.   We’re likely to see this pattern continue for the indefinite future, slowly putting pressure on rates to inch higher.

I see this as good news, far more important to see signs the economy is turning the corner, than to see 4.5% rates.  And with conventional conforming rates now at 5.125% or so, there is quite a bit of headroom for folks to secure near historic rates.

Have an awesome weekend, let me know if I can help you or someone you know with any financing needs.

Mike

Happy Saturday, December 05, 2009

 Mortgage Bonds had their worst week in months due to profit taking, increased supply, and the strong jobs report that was released yesterday.

 The Labor Dept announced yesterday that only 11,000 jobs were lost in Nov, far less than the 125,000 that was projected, and the unemployment rate fell to 10.0% from 10.2%.  While this is great news for the economy (if the numbers prove to be accurate), it is not good for mortgage bonds, and so rates increased Friday on the news.  However, we are still seeing 30-year conforming rates at or below 5% with most lenders, but the tied is turning.

 Keep an eye in the news regarding the US Dollar “carry trade”, this is putting pressure on the Fed to bump rates to strengthen the dollar, some are calling this as early as 1^st quarter 2010.  We’ll keep an eye on this as well.

 Have an awesome weekend, let me know if I can help you or someone you know with their real estate financing.

Mike

Happy Saturday, November 21, 2009

The big news this week was the year-over-year Core Consumer Price Index (CPI) number, which excludes food and energy, at 1.7%.   While it doesn’t look like a startling inflation number, it is up sharply from 1.4% just 2 months ago.   As you know, inflation is the arch enemy of mortgage bonds, and thus rates.

So why have rates held low in spite of this hint of inflation?  The Fed’s bond purchasing program was able to mop up any excess supply from the sell off of bonds, so rates did not move much.  However, the Fed’s bond purchasing program is coming to an end soon, so higher rates are on the horizon.  We do not expect this program to be extended, the cost is too great.   As a result we’re expecting conforming rates to begin inching up in the next 8 to 12 weeks.

Have a blessed Thanksgiving week, let me know if I can help you or someone you know with any financing needs.

Mike

Happy Friday – October 30, 2009

The Fed’s favorite gauge of inflation, Core PCE, reported this morning at 1.3% year over year.  This was right in line with expectations and shows that inflation remains in check for the moment.  This was bond friendly news, and rates are holding firm so far this morning.

It appears the temporary loan limits for Fannie, Freddie, and FHA (up to $729,750 in many CA counties) will be extended one additional year through end of 2010.   Details are just surfacing this morning, but appears to be certain.

There is momentum pushing for an extension of the $8K tax credit for first time homebuyers, but nothing definitive yet, there is a lot of opposition due to the expense, we’ll keep you posted.

Have an awesome weekend, let me know if I can help you or someone you know with a real estate financing need.

Mike

Happy Friday, September 04, 2009

 The markets were relatively quiet today, not unusual before a 3-day weekend.   Average hourly earnings up a modest 6 cents, to $18.65/hour.    In the past year average hourly earning are up 2.6%, compared to last year’s 3.6% increase, so another indicator that inflation is not an immediate issue.  This is bond friendly news, so all things equal, we might see a break in rates next week, if only slightly.

 Have an awesome Labor Day weekend.  Let me know if I can help with any of your real estate financing needs.

Mike

Happy Friday – August 28, 2009

 The Federal Reserve’s preferred inflation gauge, the Core Personal Consumption Index came in this morning at 1.4%, year-over-year, the smallest rise since September 2003.  So inflation is non-existent for the moment, but most agree inflation will rear its ugly head as the increased money supply starts working its way through the economy (velocity of money from Econ 101). 

 We’ve enjoyed historic low rates for so long, it is easy to be lulled into a sense that our current rates will last forever, but we know that’s not the case.    Once we start seeing hints of inflation, the bond market will react quickly, and rates will increase quickly as well.  Inflation is the arch enemy of bonds, and mortgage rates.  But for now we are still enjoying historically low rates.

 Housing is such an important component of turning this economy around and there couldn’t be a better time to purchase.  Let me know if I can help you, or someone you know, with any real estate financing needs.

 Have an awesome weekend.

Mike