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What's Ahead For Mortgage Rates This Week: March 23rd, 2009

03-23-09
David Kosmecki
David Kosmecki: Loan Officer in Maple Grove, MN
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  • Office: (763) 559-5095 x16
  • Mobile: (763) 519-1100

Mortgage rates may rise if the President inspires hope in the financial marketsMortgage markets scored big gains last week, sparked by the Federal Reserve's pledge to buy $750 billion more mortgage-backed bonds in 2009.

Conforming mortgage rates fell on the week, overall.

But Federal Reserve intervention wasn't the only good news for rate shoppers last week. New evidence showed -- for the time being, at least -- that the U.S. economy may be reversing direction:

Should the economy continue trend stronger through the summer, it will likely fuel stock market gains, drawing cash away from mortgage bonds. This would lead mortgage rates higher -- perhaps for good.

Today's levels are artificially low, after all, supported by government intervention more than economic fundamentals. After the Fed's Wednesday afternoon announcement, rates fell to all-time lows before recovering sharply into the weekend on economic optimism and fears of inflation.

This week, the trend higher may continue.

In addition to the economic data set to be released this week, the U.S. government is expected to unveil its "toxic asset" plan Monday. If the plan includes issuance of new federal debt, inflation concerns will grow and that should lead mortgage rates up once more.

Some of the week's key events include Monday's Existing Home Sales report, Wednesday's New Home Sales report and Friday's consumer spending report, as well as President Obama's Tuesday evening address to the nation.

Rates can make huge changes from day-to-day and even from hour-to-hour. If you're shopping for a new home loan and find a mortgage offer that "fits", consider locking it right away. With so much news hitting the wires this week, the rate quote is likely to expire quickly.

Dave Kosmecki - Guaranteed Rate, Inc.

website: http://www.homeloansmidwest.com/

youtube channel: http://www.youtube.com/midwesthomeloans

blog: http://www.homeloansmidwestblog.com/

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Explaining What The Federal Reserve Did In Plain English (March 18th, 2009 Edition)

03-20-09
David Kosmecki
David Kosmecki: Loan Officer in Maple Grove, MN
  • view my blog
  • Office: (763) 559-5095 x16
  • Mobile: (763) 519-1100

FOMC press release March 18 2009

The Federal Open Market Committee voted to leave the Fed Funds Rate unchanged today, within the target range of 0.000-0.250 percent.  This doesn't mean the Fed stood pat, however.

On plan to resurrect the economy using "all available tools", today, the Fed announced a new, $1.5 trillion round of fiscal support for the treasury and mortgage markets.

The stimulus will likely be Thursday morning's headline story.

In its press release, the FOMC touched upon a few of the prevailing economic issues, using these points as a legitimizing backdrop for its newest debt load:

  • Job losses and wealth loss are dragging down consumer spending.
  • Some U.S. trading partners are falling into recession.
  • Businesses are cutting back on investment and inventory.

Of interest is that the FOMC said today's inflation levels may be too low to support economic growth at all.  This condition is more commonly called deflation.  The Fed's latest actions, therefore, may be a deliberate attempt to induce inflation through unprecedented borrowing.

For home buyers and potential refinancers, this is terrific news -- at least in the short-term.  By introducing new demand for mortgage bonds, the Fed will help pressure mortgage rates lower.  Already this afternoon, mortgage rates fell and they will continue to fall until the market reaches a new equlibrium.

After the Fed's last intervention, markets reached their balance point in about a day-and-a-half.

Source
Parsing the Fed Statement
The Wall Street Journal Online
March 18, 2009
http://online.wsj.com/public/resources/documents/info-fedparse0903.html

Dave Kosmecki - Guaranteed Rate, Inc.

website: http://www.homeloansmidwest.com/

youtube channel: http://www.youtube.com/midwesthomeloans

blog: http://www.homeloansmidwestblog.com/

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4 Minutes Of Guidance For Soon-To-Be Real Estate Investors

03-16-09
David Kosmecki
David Kosmecki: Loan Officer in Maple Grove, MN
  • view my blog
  • Office: (763) 559-5095 x16
  • Mobile: (763) 519-1100

"Most of the biggest real estate fortunes were not made in good times, but in bad times like this" Barbara Corcoran reminds us in this talk with NBC.

It's important perspective for Americans wondering how to invest in foreclosed properties without losing their cash or their credit rating.

In the 4-minute interview, Corcoran quips on the basics and the essentials of foreclosure investing,

  • "Everyone who loses their shirt loses it somewhere else."
  • "Every big shark started small."
  • "The house on the corner sets the tone for the block."

She also lends some personal perspective to rent rolls, the cost of losing a tenant, and finding a good business partner. Banks are anxious to sell their foreclosed homes and that makes this an ideal time for shrewd real estate investors.  If you're new to the game, watch the video and take good notes.

Dave Kosmecki - Guaranteed Rate, Inc.

website: http://www.homeloansmidwest.com/

youtube channel: http://www.youtube.com/midwesthomeloans

blog: http://www.homeloansmidwestblog.com/

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Market-to-Market: Corporate Accounting Might Impact Your Rate.

03-16-09
David Kosmecki
David Kosmecki: Loan Officer in Maple Grove, MN
  • view my blog
  • Office: (763) 559-5095 x16
  • Mobile: (763) 519-1100

Mark to market accountingYou know you're in the middle of an economic crisis when an accounting issue become Front Page News, and that's exactly where we're at today.

Mark-to-market accounting is having its day in the sun and people in need of mortgage sometime soon would do well to pay attention. 

If you've never heard of mark-to-market accounting, don't worry. Not many people have.  Mark-to-market is a method of valuing an asset based on its what-if-it-was-sold-today value.  Mark-to-market is officially known as FASB Statement 157.

Mark-to-market is one reason why bank balance sheets look so awful right now.  Banks have to assign firesale-like values to their mortgage-backed assets even if those loans are performing, and even if there's no plans to sell them.  Assigning low values to assets, then, in turn, forces the banks to seek TARP funds and take other measures to solidify their mandated capital requirments. 

Wall Street and Washington are taking notice of mark-to-market's impact on banking and, by extension, the economy.  Even Fed Chairman Ben Bernanke has expressed an interest in opening a dialogue about the matter.

So, today, starting at 10:00 AM ET, the House Committee on Financial Services meets with key members of the Securities and Exchange Commission, the Treasury, and the Financial Accounting and Standards Board to talk about mark-to-market accounting and whether it should be modified.

It's unlikely that change will come immediately, but if enough evidence shows that mark-to-market is unduly damaging to the economy, expect changes to the way we value banks to happen soon. 

For homeowners and home buyer, a reversal in mark-to-market rules would be a bad thing.  Almost overnight, bank balance sheets would recapitalize and the economy would spring forward.  This would reverse most of the pressures that have held mortgage rates low for so many months.

A healthy economy, in other words, may be bad for mortgage rates.

Dave Kosmecki - Guaranteed Rate, Inc.

website: http://www.homeloansmidwest.com/

youtube channel: http://www.youtube.com/midwesthomeloans

blog: http://www.homeloansmidwestblog.com/

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Homes Listed For Sale Plummet Across 96% Of Major US Markets.

03-13-09
David Kosmecki
David Kosmecki: Loan Officer in Maple Grove, MN
  • view my blog
  • Office: (763) 559-5095 x16
  • Mobile: (763) 519-1100

The number of homes listed for sale is falling in a lot of citiesIf you asked an economist why home prices have broadly fallen over the past 2 years, you'd get a short lesson in Supply and Demand.

Too many homes for sale and not enough people to buy them pushed values lower until a balance point can be reached. Looking at the chart at right, that balance point may be fast approaching.

According to data compiled by ZipRealty, the total number of homes listed for sale fell in February 2009 in 23 of 24 major housing markets. 

This is an especially important data point because home inventories typically rise in February, ahead of the Spring Home-Shopping Season. 

Since 1982, February home inventory has been up 3 percent on average. Last month, it fell.

So, in support of the Supply and Demand Theory, we shouldn't be surprised that the rate of price decline as shown by the Case-Shiller Home Price Index is easing in a lot of markets, too.

We may not have reached the housing market bottom yet, but if we haven't, the data shows us we're likely very close.

Source
Home Listings for February Stayed Steady
James Hagerty
The Wall Street Journal, March 5, 2009
http://online.wsj.com/article/SB123620588396833321.html

Dave Kosmecki - Guaranteed Rate, Inc.

website: http://www.homeloansmidwest.com/

youtube channel: http://www.youtube.com/midwesthomeloans

blog: http://www.homeloansmidwestblog.com/

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