Stan Nelson

Last week's Jobs Report showed that there were 190,000 jobs lost in October, higher than the 175,000 job losses that were expected. Also, the Unemployment Rate rose to 10.2%, quite a bit higher than the 9.9% expected, and the highest Unemployment level since 1983!

While this number is shocking, what is even more concerning is the "real" unemployment rate being closer to 17.5%. This includes those who have not searched for a job for at least four weeks, known as "discouraged or detached" workers, as well as those desiring full time work but having to settle for part time, the "underemployed". There was a tiny bit of good news; there was an upward revision for August and September, showing 91,000 fewer jobs lost than previously reported.
However, in order to just keep up with population growth - or to keep the ranks of the unemployed from rising - there must be 125,000 jobs created each month. So the latest report of 190,000 jobs lost, really means we have fallen behind by 315,000 jobs, just last month!

Thursday brings another Initial Jobless Claims Report, and now that the bill to extend unemployment benefits has been signed into law, the number of Continuing Jobless Claims is likely to rise significantly. This number had been moving lower, which the media and other "experts" have been rejoicing over, not understanding that it is moving lower because so many people have been on unemployment for so long, their unemployment benefits have actually expired before they were able to find work. It's more important than ever to keep an eye on this information, since the labor market is a key factor in our overall economic recovery.

The dollar is getting hit hard again this morning; stocks rallying, crude oil higher and gold up----all a function of the dollar's decline. So far a good thing for the markets, equities and rate markets. America is for sale and there are buyers out there willing to step up. Eventually however, there will be a huge price to pay for the collapse; inflation. No one in Washington from the President to Congress to the Fed and to Treasury has uttered a peep about it. This is the first administration in over a decade that hasn't jaw boned and do the required thing, saying the US wants a strong dollar. No matter those comments are meaningless. This administration and the Fed don't want to create the least ripple, in fear that markets might take them seriously. While the Fed continues to talk the talk and walk the walk keeping interest rates low for that "extended" period, I hope the Fed is watching closely. While there are no immediate concerns as long as unemployment is increasing, but when the rate turns so too will the Fed and more importantly investors will sell US bonds and stocks in fire sale moves? I certainly hope not for all our sakes.

Wow! what a long strange trip ( thanks Greatful Dead). As we appoach the end of the 1st time Homebuyers Tax credit program the Fed appears to be buying alot more mortgage backed securities (MBS). This is supporting and even driving rates down. We are seeing rates that we have not had since early in July of this year. This is making refinancing attractive again; that is, as long as there is equity in the property.

Bottom line. If you are remotely considering buying a home you should be moving QUICKLY! These rates and programs won't last forever and when they are gone, you won't want to say "I wish I had".

Interest rates will rise.

There, I said it. Rates will be going up. Depending upon your time line for refinancing or buying, rates could be going up very soon. With all the money the government is putting into the system, rates will have to increase and increase sharply to stave off inflation.

If you are AT ALL considering buying or refinancing you need to act now. I recently commented on how you can 'bend over to pick up nickles while dollars fly over your head'; and fortunately for most of my clients thay have acted instead of remaining on the fence. I heard a recent forecast that said mortgage rates will be at 7% or HIGHER in the next 18-24 months. If that is true, most of those 1st time fence sitters will again be priced out of the market.

And according to the local Realtor association not only are we in the most affordable local housing market in over 5 years, sales have JUMPED 48% in March compared to February (-8% to March 08). One of the biggest Feb. to March increases ever.

Bottom line: If not now, when? Call me for your lending needs, Local underwriting and funding, lending done the old fashioned way.

We have all heard it, Rates are down! Rates will be in the 4.5% range soon! Well, rates are down, way down in fact but I would advise everyone not to get their heart set on obtaining 4.5% 30yr fixed rate loans.

Yesterday the Fed announced they are leaving the Fed Funds rate unchanged at 0-.25%. They then went on to say ""economic conditions are likely to warrant exceptionally low levels of the Federal Funds Rate for some time" and that "inflation pressures will remain subdued in coming quarters". The Fed then continued, indicating that the will continue to purchase MBS (mortgage backed secuirites) to support mortgage rates and the housing market. Our big concern; the media gets ahold of these quotes and spins it to mean that mortgage rates will continue to drop and will remain low though the summer. We believe this will only put more people on the fence as this 'wait and see' attitude has already cost many borrowers the chance at lower rates.

Here's one reason we may not get there. Yes, the Fed has been buying Mortgage Bonds, but if you look at what they are buying it is a lot of FNMA 30-yr 5.5% and 5.0% Bonds, which won't have much of a positive effect on curent rates. Why is the Fed buying these Bonds? First,it's very smart of the Fed. Second (and maybe even a little sneaky) because 5.5% Bonds actually represent outstanding mortgages with rates of 6 - 6.50%, which are precisely the loans being refinanced today!! Many of the mortgages in the FNMA 5.5% pools will be refinanced and paid, there by allowing the Fed to quickly recoup on some of their investment. And this is likely a big reason why the Fed said they could continue this purchasing program beyond June, if necessary. So the Fed buying higher rate coupons will not necessarily get rates to 4.5%, but it should put a ceiling on how high rates can go during the near term.

And that brings us to another objection, customer greed. This isn't the 1980's and Gordon Geco is no where in sight, yet greed is still a huge problem in this market. Even if it makes sense to refinance right now, and save $250 @ month for example, the greed factor kicks in as clients fall in love with the idea that "rates are going lower". So they risk saving that $250@month in the hopes of saving another $30 per month. Usually though, things change and this window of opportunity closes. Even if they are lucky and do get that lower rate and save another $30/month - remember that they are losing the current savings - ($250 in the current example) - for every single month they wait.