Home building reached the highest pace in 17 months during September with new projects, according to an article in the Seattle Times, which is a hopeful sign for both the economy and the market.
A large part of this was apartment construction, which bodes well for job creation and the economy but does not significantly affect the housing market.
Single family homes made up about 70% of the building projects, a small increase. The Commerce Department said on Wednesday that 658,000 homes were built in September, about half of the ideal healthy economic amount but still a 15% improvement over August.
Monday, October 31, 2011
Friday, October 28, 2011
This Week’s Market Commentary
This week brings us the release of seven economic reports and two relevant Treasury auctions for the bond market to digest. There is nothing of importance scheduled for release today, but we do have something to watch every other day.
The data ranges from low importance to extremely important so some reports will have a much bigger impact on trading than others. We also need to keep an eye on the stock markets as they have been heavily influential on bond market direction recently. In other words, there is a pretty good chance of seeing noticeable movement in mortgage rates several days this week, especially if the major stock indexes rally or post sizable losses.
October’s Consumer Confidence Index (CCI) is the first release of the week and Tuesday’s only news. This Conference Board index will be released at 10:00 AM ET. It gives us a measurement of consumer willingness to spend and is expected to show a small increase in confidence from last month’s 45.4 reading.
That would mean that consumers felt a little better about their own financial situations than last month, indicating they are slightly more likely to make large purchases in the near future. As long as the reading doesn’t exceed the forecasted 46.0, we will likely see the bond market react favorably to this report. This data is watched closely because consumer spending makes up two-thirds of the U.S. economy.
Early Wednesday morning, the Commerce Department will post Durable Goods Orders for September. This report gives us a measurement of manufacturing sector strength by tracking orders at U.S. factories for big-ticket items, or products that are expected to last three or more years. Analysts are currently calling for a decline in new orders of approximately 1.0%. If we see an unexpected increase in orders, mortgage rates will probably rise as bond prices fall. A weaker than expected reading should be good news for the bond market and mortgage rates, but this data can be quite volatile from month to month and is difficult to forecast. Therefore, a small variance from forecasts likely will have little impact on bond trading or mortgage pricing.
Also Wednesday is the release of September’s New Home Sales at 10:00 AM ET. This data covers the remaining 15% of home sales that last week’s Existing Home Sales report didn’t include and is this week’s least important data. It is expected to show an increase in sales of newly constructed homes, but regardless of its results I am not expecting it to have a significant impact on mortgage rates Wednesday.
Thursday’s only monthly or quarterly data is not only the most important report of the week, but also the most important we see regularly. The preliminary reading of the 3rd Quarter Gross Domestic Product (GDP) will be released early Thursday morning. The GDP is considered to be the benchmark measurement of economic growth because it is the sum of all goods and services produced in the U.S. and therefore is likely to have a major impact on the financial markets and mortgage pricing. There are three versions of this report, each a month apart. Thursday’s release is the first and usually has the biggest impact on the markets. Current forecasts call for an increase of approximately 2.2% in the GDP, which would mean that the economy grew at a noticeably quicker pace than the 2nd quarter’s 1.3%. If this report does show a much smaller increase, I am expecting to see the bond market rally and mortgage rates fall. However, a larger than expected rise could lead to a rally in stocks, bond selling and a sizable increase in mortgage pricing Thursday.
There are three reports scheduled for release Friday that may affect mortgage rates. The first comes at 8:30 AM ET when September’s Personal Income and Outlays report will be posted. This data gives us an indication of consumer ability to spend and current spending habits. It is important to the markets because consumer spending makes up two-thirds of the U.S. economy. Rising income generally indicates that consumers have more money to spend, making economic growth more of a possibility. This is bad news for the bond market and mortgage rates because it raises inflation concerns, making long-term securities such as mortgage related bonds less attractive to investors. Analysts are expecting to see a 0.3% increase in income and a 0.6% rise in spending. Smaller than expected increases in both readings would be good news for the bond market and mortgage pricing.
The second report of the day is the 3rd Quarter Employment Cost Index (ECI), also at 8:30 AM ET. This data tracks employer costs for salaries and benefits, giving us an indication of wage inflation pressures. Rapidly rising costs raises wage inflation concerns and may hurt bond prices. It is expected to show an increase in costs of 0.6%. A smaller than expected increase would be good news for mortgage rates.
The week’s last report comes just before 10:00 AM ET Friday when the University of Michigan updates their Index of Consumer Sentiment for this month. Current forecasts show this index remaining nearly unchanged from the preliminary reading of 57.5. This report is moderately important because it helps us measure consumer confidence, which is believed to indicate consumers’ willingness to spend. As with Tuesday’s CCI release, the lower the reading, the better the news for mortgage shoppers.
This week also has Treasury auctions scheduled each day except Friday. The only two that are likely to influence mortgage rates are Wednesday’s 5-year and Thursday’s 7-year Note sales. If those sales are met with a strong demand, particularly Thursday’s auction, bond prices may rise during afternoon trading. This could lead to improvements to mortgage rates shortly after the results of the sales are posted at 1:00 PM ET each day. But a lackluster investor interest may create selling in the broader bond market and lead to upward revisions to mortgage rates.
Overall, it will likely be an active week for the markets and mortgage rates. I believe that the single most important day will probably end up being Thursday with the extremely important GDP release in the morning and the 7-year Treasury Note auction in the afternoon, but Friday has three reports scheduled so it is expected to be active also. Today is likely to be the least important day, but we still could see some movement in rates as the markets prepare for the upcoming week. Accordingly, I strongly recommend maintaining contact with your mortgage professional this week, especially if still floating an interest rate.
The data ranges from low importance to extremely important so some reports will have a much bigger impact on trading than others. We also need to keep an eye on the stock markets as they have been heavily influential on bond market direction recently. In other words, there is a pretty good chance of seeing noticeable movement in mortgage rates several days this week, especially if the major stock indexes rally or post sizable losses.
October’s Consumer Confidence Index (CCI) is the first release of the week and Tuesday’s only news. This Conference Board index will be released at 10:00 AM ET. It gives us a measurement of consumer willingness to spend and is expected to show a small increase in confidence from last month’s 45.4 reading.
That would mean that consumers felt a little better about their own financial situations than last month, indicating they are slightly more likely to make large purchases in the near future. As long as the reading doesn’t exceed the forecasted 46.0, we will likely see the bond market react favorably to this report. This data is watched closely because consumer spending makes up two-thirds of the U.S. economy.
Early Wednesday morning, the Commerce Department will post Durable Goods Orders for September. This report gives us a measurement of manufacturing sector strength by tracking orders at U.S. factories for big-ticket items, or products that are expected to last three or more years. Analysts are currently calling for a decline in new orders of approximately 1.0%. If we see an unexpected increase in orders, mortgage rates will probably rise as bond prices fall. A weaker than expected reading should be good news for the bond market and mortgage rates, but this data can be quite volatile from month to month and is difficult to forecast. Therefore, a small variance from forecasts likely will have little impact on bond trading or mortgage pricing.
Also Wednesday is the release of September’s New Home Sales at 10:00 AM ET. This data covers the remaining 15% of home sales that last week’s Existing Home Sales report didn’t include and is this week’s least important data. It is expected to show an increase in sales of newly constructed homes, but regardless of its results I am not expecting it to have a significant impact on mortgage rates Wednesday.
Thursday’s only monthly or quarterly data is not only the most important report of the week, but also the most important we see regularly. The preliminary reading of the 3rd Quarter Gross Domestic Product (GDP) will be released early Thursday morning. The GDP is considered to be the benchmark measurement of economic growth because it is the sum of all goods and services produced in the U.S. and therefore is likely to have a major impact on the financial markets and mortgage pricing. There are three versions of this report, each a month apart. Thursday’s release is the first and usually has the biggest impact on the markets. Current forecasts call for an increase of approximately 2.2% in the GDP, which would mean that the economy grew at a noticeably quicker pace than the 2nd quarter’s 1.3%. If this report does show a much smaller increase, I am expecting to see the bond market rally and mortgage rates fall. However, a larger than expected rise could lead to a rally in stocks, bond selling and a sizable increase in mortgage pricing Thursday.
There are three reports scheduled for release Friday that may affect mortgage rates. The first comes at 8:30 AM ET when September’s Personal Income and Outlays report will be posted. This data gives us an indication of consumer ability to spend and current spending habits. It is important to the markets because consumer spending makes up two-thirds of the U.S. economy. Rising income generally indicates that consumers have more money to spend, making economic growth more of a possibility. This is bad news for the bond market and mortgage rates because it raises inflation concerns, making long-term securities such as mortgage related bonds less attractive to investors. Analysts are expecting to see a 0.3% increase in income and a 0.6% rise in spending. Smaller than expected increases in both readings would be good news for the bond market and mortgage pricing.
The second report of the day is the 3rd Quarter Employment Cost Index (ECI), also at 8:30 AM ET. This data tracks employer costs for salaries and benefits, giving us an indication of wage inflation pressures. Rapidly rising costs raises wage inflation concerns and may hurt bond prices. It is expected to show an increase in costs of 0.6%. A smaller than expected increase would be good news for mortgage rates.
The week’s last report comes just before 10:00 AM ET Friday when the University of Michigan updates their Index of Consumer Sentiment for this month. Current forecasts show this index remaining nearly unchanged from the preliminary reading of 57.5. This report is moderately important because it helps us measure consumer confidence, which is believed to indicate consumers’ willingness to spend. As with Tuesday’s CCI release, the lower the reading, the better the news for mortgage shoppers.
This week also has Treasury auctions scheduled each day except Friday. The only two that are likely to influence mortgage rates are Wednesday’s 5-year and Thursday’s 7-year Note sales. If those sales are met with a strong demand, particularly Thursday’s auction, bond prices may rise during afternoon trading. This could lead to improvements to mortgage rates shortly after the results of the sales are posted at 1:00 PM ET each day. But a lackluster investor interest may create selling in the broader bond market and lead to upward revisions to mortgage rates.
Overall, it will likely be an active week for the markets and mortgage rates. I believe that the single most important day will probably end up being Thursday with the extremely important GDP release in the morning and the 7-year Treasury Note auction in the afternoon, but Friday has three reports scheduled so it is expected to be active also. Today is likely to be the least important day, but we still could see some movement in rates as the markets prepare for the upcoming week. Accordingly, I strongly recommend maintaining contact with your mortgage professional this week, especially if still floating an interest rate.
Thursday, October 27, 2011
Wednesday, October 19, 2011
Foreclosures Slow Down in Bay Area
Bay Area foreclosures slowed in September, down 7% from August and 10% from this time last year, according to an article in the Contra Costa Times. A report released Thursday by RealtyTrac revealed these numbers, though how long the decline will last is uncertain.
2,594 homeowners in the Bay Area were given a notice of default in September, the first step in the foreclosure process.
RealtyTrac does not include Santa Clara County in its definition of the Bay Area, however, and there was a slight increase in foreclosures in that county, as well as in San Mateo County, though that is included in the Bay Area defined by the company.
RealtyTrac CEO Daren Blomquist said that “in the next six months, it’s likely that default notices will be on a consistent upward rise in the Bay Area, once banks catch up with their backlog of current foreclosures and more people fall behind on their mortgages.”
Tuesday, October 4, 2011
Biggest First-Time Homebuyer Mistakes to Avoid
Looking for your first home can be an exciting experience, but it can easily get overwhelming. There are some mistakes that are pretty easy to make if you aren’t familiar with real estate.
Looking Without Knowing Your Price Range
This is a waste of time for you and your real estate agent. It can give you the wrong idea of a realistic fit for your financial situation. The first thing you should do is sit down and figure out what you can afford. Once you’ve done that, your Realtor can show you houses that fit your price range.
Discounting a Great Home Because of Decor
Just because you can’t afford to replace the hideous wallpaper right now doesn’t mean you won’t be able to soon. Getting too picky over small details that can be changed could keep you from ending up in your dream home. Use your imagination and visualize what the house could be like after you’ve put your touch on it.
Shopping Without A Mortgage Pre-Approval
What you have determined you can afford and what banks are willing to lend might not be the same thing. If you go into contract on a home and can’t get the loan you need, you will have wasted a lot of people’s time and gotten your hopes up. Contact a mortgage professional in order to get qualified for a loan before you do any serious house-hunting.
Looking Without Knowing Your Price Range
This is a waste of time for you and your real estate agent. It can give you the wrong idea of a realistic fit for your financial situation. The first thing you should do is sit down and figure out what you can afford. Once you’ve done that, your Realtor can show you houses that fit your price range.
Discounting a Great Home Because of Decor
Just because you can’t afford to replace the hideous wallpaper right now doesn’t mean you won’t be able to soon. Getting too picky over small details that can be changed could keep you from ending up in your dream home. Use your imagination and visualize what the house could be like after you’ve put your touch on it.
Shopping Without A Mortgage Pre-Approval
What you have determined you can afford and what banks are willing to lend might not be the same thing. If you go into contract on a home and can’t get the loan you need, you will have wasted a lot of people’s time and gotten your hopes up. Contact a mortgage professional in order to get qualified for a loan before you do any serious house-hunting.
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