Mike Gallagher’s Mortgage Blog

Happy Friday, June 25, 2010

Last night the Financial Reform Bill was reconciled between House and Senate.  This is a far reaching bill with changes affecting just about every sector of the financial industry, including real estate and mortgage lending, and has been the subject of a lot of debate.  The next step is vote by House and Senate, then to President for signature, we’ll keep you posted.

The Fed finished their 2-day meeting on Wed, and as expected left the Fed Funds Rate unchanged at 0.25%.  A rate increase just isn’t justified until the economy shows some definitive signs of a sustained recovery.

Today 1^st Quarter 2010  Final GDP number was revised downward to 2.7% from the initial measure of 3.0%.  This supports the Fed’s comments about the recovery, and has helped mortgage bonds and rates again today.  30-year fixed conforming have dipped and held near 4.75% for most of the week.

Have a great weekend, let me know how I can help you or someone you know with any real estate financing.

Mike

Happy Friday May 28, 2010

Mortgage rates worsened on Thursday as China announced their support of European Bonds; goes to show how just the hint of stabilizing the European financial situation leads to higher U.S. mortgage rates.  Time will tell whether China delivers.

In U.S. news the Personal Consumption Expenditure (PCE) index, the Fed’s favorite gauge of inflation, came in today at 1.2% year-over-year, within the Fed’s target of 1% to 2%.  This was bond friendly news so mortgage rates are getting back some of yesterday’s losses.  This is evidence of how volatile mortgage rates are now, with significant moves on just about any type of news.

Next week we have Pending Home Sales and Unemployment numbers released, so should be interesting.

Have an awesome Memorial Day Weekend, take a minute to remember those who have helped us keep this a free nation.

Thanks,

Mike

Happy Friday May 21, 2010

Stocks are now down about 10% from their peak.  So the debate is whether this is a healthy correction, or whether we’re headed into a legitimate bear market.  We’re kind of at that teetering point, so the next couple of weeks of trading will be a very important.

All of this uncertainty in stocks, combined with the financial fallout occurring in Europe has given US Mortgage Bonds a nice lift, and so rates have held very firm, maybe inching down just slightly.

The Senate passed the controversial Financial Regulation Bill last night.  The Bill must be reconciled with a version passed by the House, before being sent to the President.  We will be watching this closely as it gets closer to the President’s desk.

Jumbo financing is slowly coming back to life, we now have products up to $5 Million, if needed.  This is welcome relief to the upper end market.

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 May 14, 2010

The problems in Europe continue to dominate headlines.  Skepticism over the European bailout plan is again helping mortgage rates in U.S.

Here is a crude map from 30,000 feet:  lack of confidence in Europe in recent weeks has pushed the Euro lower compared to US Dollar (i.e. the US Dollar is strengthening),  a stronger Dollar can hurt U.S multi-national corporations because it makes our exports more expensive, and thus can hurt sales, and weaken the stock market if the Dollar strengthens too quickly, which we’ve seen recently.   As stocks weaken, and foreign debt instruments look less attractive, money flows into mortgage bonds as a safer investment and helps our interest rates.

Bottom line is we may be in this very beneficial interest rate environment a little longer than expected.  Don’t look for rates to stretch any lower, but we may see these current levels for another 30 to 60 days.

Also, don’t forget we can finance FNMA Homepath properties (Fannie Mae owned homes).  There are currently over 1000 listings in the greater Bay Area, over 8000 in CA.  97% financing for investors, no MI and no appraisal.

www.homepath.com to check current listings.

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

Mike

Happy Friday May 7, 2010

Wow, a wild ride yesterday, and volatility in market continues today.  While nobody seems to be making any math errors with their sell orders today, stocks are still down from the close of yesterday, helping mortgage bonds and improving rates if only marginally.

The big news this morning was the jobs report; 290,000 jobs created in April, ahead of estimates and the biggest monthly gain in 4 years.  This is very good news for the U.S. economy and consumer confidence and further strengthens the argument that we have turned the corner, albeit slowly.

The German government approved a bailout plan for Greece.  This should bring some stability to the debt markets, and so we may see rates inch up a bit next week as a result.  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.

Mike

Happy Friday April 30, 2010

The Commerce Dept reported today that the initial reading on GDP for 1^st quarter 2010 showed that the economy grew at 3.2%, this was slightly below estimates but the 3^rd straight quarter of positive GDP, so great news, we seem to have turned the corner, albeit slowly.

Inflation readings in the report remained tame, the price index for personal consumption index rose a modest 1.5%, so no worries about Fed making any sudden moves with short term rates any time soon.

The saga in Greece continues, and European officials are working quickly to approve a bailout plan before this spreads throughout Europe.  Concerns about sovereign debt has created a “flight to quality”, where investors lose confidence in European debt instruments and move holdings into US bonds, including mortgage bonds.  So our mortgage rates have benefited this week as a result.

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 April 16, 2010

Housing Starts for March rose to annual rate of 626,000, higher than expected.    Housing starts are up 20% from one year ago, making this a very strong report.  As we know builders have been wrong in the past, but considering the licking most builders have taken in the past couple of years, this is extremely encouraging for our economy to see builders this optimistic about future absorption.

In other news, the SEC is filing fraud charges against Goldman Sachs relating to subprime mortgages.  Stocks are reacting negatively on the news, giving mortgage bonds a lift and slight improvement in rates this morning as a result.   The 30 year fixed conforming inching back down near 5.0%.  We don’t expect this break to last more than a day, so we’re advising anyone in position to lock rate to advantage of the temporary improvement in rates.

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

Mike

Happy Friday April 2, 2010

Big news this morning.  The U.S. economy adds 162,000 jobs in March, single biggest increase in 3 years.  While this is certainly great and much needed news for our economy, mortgage bonds are selling off once again this morning.  The combination of alternative investments looking more attractive than bonds, and the threat of inflation in an expanding economy is what is triggering the sell off.

After 15 months of purchasing bonds to help prop up the bond market, as of Wed of this week the Fed is out of the market.  Without the Fed in there to mop up the sell off, there is not much to stop the selling, and rates are inching up already this morning as a result.   In the past week, we’ve seen about .25% worsening in mortgage rates.

Good news for California first-time homebuyers (and buyers of new construction); a new $10,000 Tax Credit bill was signed by the Governor this week.  So for the lucky buyer who gets into contract before April 30, they could possibly benefit from the $8,000 Federal credit, and the $10,000 CA credit.

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

Mike

Happy Friday March 26, 2010

Yesterday mortgage bonds suffered their worst single day in the market in roughly 6 months, and rates worsened as a result.   Most lenders increased rates yesterday by at least .25% across the board.

What is going on?  First, as we’ve been discussing for months, the Fed is in fact exiting the mortgage bond market in 3 days.  There was speculation they would continue playing “buyer” of mortgage bonds, but after $1.25 TRILLION, there is no political support to continue that program.  Nervous investors are selling in anticipation, driving yields and mortgage rates up with it.

Secondly, Fitch downgraded Portugal’s debt yesterday, so apparently Greece is not the only government in Europe with debt problems.  Bonds around the globe did not like that news and began selling.  Amazing how Portugal’s debt rating can affect mortgage rates in U.S.   Keep an eye on this news, as U.S. is on Fitch’s “watchlist”, should Fitch downgrade U.S. debt, rates would move rapidly.

Good news.  State of CA has extended their first time homebuyer tax credit through August, 2011, and has opened it up to both new construction and existing inventory.   There is no extension on the Federal program set to expire April 30.

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

Mike

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