Archive for January, 2010

Eve Robin Jarrett

Monday, January 25th, 2010
The Manhattan Mortgage Company Mortgage Weekly Update
Eve Robin Jarrett
MANAGING DIRECTOR
Senior Mortgage Consultant
Manhattan Mortgage
Office: 631-324-1555 x 25
Blackberry:
e-Fax:
Email: EJarrett@manhattanmortgage.com
631-514-3654
631-697-3366
Eve Robin Jarrett

For the week of Jan 25, 2010 // Vol. 8, Issue 4
 

  Last Week in Review  


     
 

"If you are losing a tug-of-war with a tiger, give him the rope before he gets to your arm. You can always buy a new rope." Max Gunther. Such a sweet sentiment…but definitely not one that the markets adopted this week, as both Stocks and Bonds battled back and forth near key technical levels.

The markets were closed on Monday in honor of the Martin Luther King, Jr. holiday, but then the Bulls and the Bears in the Bond market spent the first part of the week pushing and pulling Bond prices above and below their 200-Day Moving Average. This level is important because it can often set the stage for price direction for an extended period of time. Bonds were finally able to break above this important level, which was good news for home loan rates.

And the war wasn’t just being waged in Bonds…the Stock market was fighting some technical battles of its own. The Dow and the S&P both tumbled lower, falling beneath their own 50-day Moving Averages. This is very significant, as neither index has closed beneath their 50-day Moving Average since July of 2009. If Stocks are unable to regain their footing and move above this important Moving Average, we may see a continued slide lower in Stocks, which could benefit Bonds and home loan rates.

———————–
Chart: Technical Look at the Dow

However, a possible uptick in inflation later this year and an end to the Fed’s Mortgage Backed Security purchase program in March are two important factors that will likely cause home loan rates to worsen in the months ahead. While this week’s Producer Price Index Report (which measures inflation at the wholesale level) was relatively tame, higher than expected inflation was reported in both the UK and India. Reports out of both countries say that they expect levels of inflation to continue higher, but not just in their own countries…they see it around the world as well. Remember, Bonds and inflation are mortal enemies. If Bonds were Superman…inflation would be Kryptonite. And when inflation does begin to tick higher here, it will send home loan rates higher as well.

It’s also important to note that the Fed bought $12B in MBS in the latest week, bringing their purchase total to $1.149T, leaving $101B left to purchase before the end of March. If we have not talked yet about your own home loan situation, let’s be sure to connect very soon as the current low home loan rate environment may soon be a thing of the past.

There was also housing news to note last week, as Housing Starts fell in December, due in part to bad weather throughout the country. However, a look down the road appears more positive, as Building Permits rose significantly in December, to the best level since October 2008.

After all the tug of war this week among traders, home loan rates were able to end the week slightly better than where they began.

IMPORTANT CHANGES ARE COMING TO A VERY POPULAR HOME LOAN PROGRAM…AND THEY COULD IMPACT YOU OR SOMEONE YOU KNOW. CHECK OUT THIS WEEK’S MORTGAGE MARKET GUIDE VIEW FOR THE DETAILS.

 
 

  Forecast for the Week  


     
 

Looking ahead, there will be plenty of news and reports this week that could lead to more tug of war in the markets. There will be big news on Wednesday as the Fed releases its policy statement after its regularly scheduled meeting of the Federal Open Market Committee. What to listen for in particular is if the Fed once again comments on their Mortgage Backed Security purchase program, which is slated to end on March 31st. The Fed has previously stated they will not extend the program, despite recent speculation otherwise. I’ll be listening closely to see what the Fed has to say.

There will be a double dose of housing news this week, with Monday’s Existing Home Sales Report and Wednesday’s New Home Sales Report. There will also be several important reads on our economy, with Tuesday’s Consumer Confidence Report, Thursday’s Durable Goods Report – which is a look at consumer and business buying behavior on big ticket items that last for an extended period of time – and Friday’s Gross Domestic Product Report, which is the broadest measure of economic activity.

It will also be important to keep an eye on Thursday’s Initial Jobless Claims Report. Last week’s Initial Jobless Claims came in at 482,000, which was significantly worse than expected and reversed the trend of lower numbers we’ve seen. We need to see Initial Claims below 400,000 per week to see stabilization in the Unemployment Rate.

Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result. As you can see in the chart below, Bonds were able to end the week above the 200-day Moving Average. I’ll be watching closely to see if this trend continues.

Chart: Fannie Mae 4.5%% Mortgage Bond (Friday Jan 22, 2010)

Japanese Candlestick Chart
 
 

  The Mortgage Market View…  


     
 

New Lending Policies Announced by FHA

If you were listening to the housing news last week, you probably heard a number of reports about lending changes that were announced by the Federal Housing Administration (FHA). While many of the news reports were confusing, the truth is pretty clear, and isn’t as bad as some people may have heard.

Overall the measures are intended to help the FHA better manage its risks and strengthen its capital reserves, while still providing home loans to the nation. The good news, as FHA Commissioner David Stevens stated recently, is that "by continuing to provide affordable, responsible mortgage products, FHA will support the housing market’s recovery" and "remain the largest source of home purchase financing for underserved communities."

What’s Changing?

If you or someone you know is considering an FHA loan, some of these changes may affect you. Here’s a clear, concise rundown of the major changes and what they mean:

1. Increased mortgage insurance. The mortgage insurance premium (referred to as private mortgage insurance by many people) will be increased from 1.75% to 2.25%. This change will add some cost to purchasing a home, but will not overburden consumers since the mortgage insurance is paid over the life of the loan, rather than upfront at closing.

2. New down payment and credit score requirements. According to the new policy, homebuyers who have a credit score of at least 580 may still be able to purchase a home with 3.5% down, but those with credit scores of less than 580 will be required to put down at least 10%. This change is designed to help the FHA balance its risk, while still providing affordable down payments for consumers with a history of good credit and responsibility.

3. Reduced seller concession. Basically, this change means that the person selling the home will now only be able to offer the homebuyer 3% to help defray closing costs, as opposed to 6% under the previous policy.

In addition to these changes, the new policies contain a series of new measures aimed at increasing lender enforcement.

These changes will become effective on April 5, 2010. The bottom line is that the changes will impact some homebuyers more than others. But in the end, the FHA is still committed to providing affordable home loans.

If you’re concerned about your credit score or are worried about what these changes may mean to your specific situation, please call or email to schedule an appointment. There are many different programs available for homebuyers, so finding the right plan for you just requires a short discussion about your goals and financial picture.

 
 

  The Week’s Economic Indicator Calendar  

     
 
Remember, as a general rule, weaker than expected economic data is good for rates, while positive data causes rates to rise.

Economic Calendar for the Week of January 25 – January 29

Date
ET
Economic Report
For
Estimate
Actual
Prior
Impact
Mon. January 25
10:00
Existing Home Sales
Dec
6.00M
 
6.54M
Moderate
Tue. January 26
10:00
Consumer Confidence
Jan
52.9
 
53.3
Moderate
Wed. January 27
02:15
FOMC Meeting
1/27
.25%
 
.25%
HIGH
Wed. January 27
10:30
Crude Inventories
1/22
NA
 
-0.471M
Moderate
Wed. January 27
10:00
New Home Sales
Dec
370K
 
355K
Moderate
Thu. January 28
08:30
Jobless Claims (Initial)
1/23
NA
 
482K
Moderate
Thu. January 28
08:30
Durable Goods Orders
Dec
2.0%
 
0.2%
Moderate
Fri. January 29
08:30
Chain Deflator
Q4
1.3%
 
0.4%
HIGH
Fri. January 29
08:30
Employment Cost Index (ECI)
Q4
0.4%
 
0.4%
HIGH
Fri. January 29
09:45
Chicago PMI
Jan
56.0
 
58.7
HIGH
Fri. January 29
10:00
Consumer Sentiment Index (UoM)
Jan
73.0
 
72.8
Moderate
Fri. January 29
08:30
Gross Domestic Product (GDP)
Q4
4.5%
 
2.2%
Moderate
 
 

 
 

Eve Robin Jarrett
Manhattan Mortgage
75 Main Street, 2nd Floor
East Hampton, NY 11937

 
 
 

WALL STREET BONUSES & HIGH END REAL ESTATE

Tuesday, January 12th, 2010

Weekly Mortgage Update

Monday, January 11th, 2010
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The Manhattan Mortgage Company Mortgage Weekly Update
Eve Robin Jarrett
MANAGING DIRECTOR
Senior Mortgage Consultant
Manhattan Mortgage
Office: 631-324-1555 x 25
Blackberry:
e-Fax:
Email: EJarrett@manhattanmortgage.com
631-514-3654
631-697-3366
Eve Robin Jarrett

For the week of Jan 11, 2010 // Vol. 8, Issue 2
 

  Last Week in Review  


     
 

"THERE ARE NO SECRETS IN LIFE, JUST HIDDEN TRUTHS THAT LIE BENEATH THE SURFACE." From the Showtime TV hit, "Dexter". The highly anticipated Jobs Report arrived last Friday morning, showing 85,000 jobs lost during December…and while this was a bit worse than expected, the report also carried some good news, in that the prior month’s revisions showed that November actually had a final tabulation of job gains for the month, for the first time since December 2007. Additionally, the Unemployment Rate remained stable at 10%. While this all seems to indicate some level of improvement in the labor market – you do have to look beneath the surface to clearly understand the present realities for the labor market.

Let’s start with the headline number of 85,000 jobs lost. This comes from what is called the "business survey", which uses many estimation tools, including the birth-death ratio of businesses, i.e. how many businesses were created or closed. The mechanics in coming up with the business survey allow the information to be gathered rapidly, but it also makes the information far less than accurate. On the other hand, there is also a "household survey", where a sampling of households receive actual phone calls. Although the household number is not used by the Labor Department for their headline numbers of job losses or creations, some deem it to be a bit more accurate. The household survey paints a bit of a darker – but perhaps more realistic – picture, showing a whopping 589,000 jobs lost. But let’s dig deeper still.

The Labor Department does use the household survey to calculate the Unemployment Rate – and remember, it stayed stable at 10% – but the calculation is determined by how many people are presently in the workforce. And the household survey indicated that last month, 661,000 people left the workforce.

Whoa – what does "leaving the workforce" mean? And where exactly are they going? Let’s take a closer look to understand.

The Labor Department’s definition of this is a "discouraged worker", who has not looked for a job during the past four weeks. Based on this definition, there are a few contributing factors that would help us understand why this would indicate such a large number of people "exiting the workforce." And remember, more people exiting the workforce means less people counted as unemployed, and this number alone last month would have contributed to almost a half percent increase in the rate of unemployment from 10% to almost 10.5%.

So let’s talk about these contributing factors. First, frigid temperatures and piles of snow during December played a role in keeping job seekers home. Add to that the holiday season, as well as travel for family gatherings and vacations during this time, also contributing to pushing off the job search. And perhaps most importantly playing a role are the extended unemployment benefits – up to 99 weeks worth – which could also play into the decision to not seek work. Put this all together, and it might clarify the large so-called exodus from the workforce, which masks the true Unemployment Rate.

Overall – the job picture is still weak, at best. Census hiring in the next few months – although temporary – should boost job creations, which in turn may lead to upside Job Report surprises. This could lead to some tough days ahead for Bonds and home loan rates – count on me to be watching closely, and standing by to advise.

———————–
Chart: 2009 Job Gains or Losses (In the Thousands)

IT’S NO SECRET THAT MANY AMERICANS MAKE NEW YEARS RESOLUTIONS RELATED TO THEIR HEALTH AND FITNESS – AND THE GOOD NEWS IS THAT IT CAN BE SIMPLE. READ ON FOR A MORTGAGE MARKET GUIDE VIEW ARTICLE DESCRIBING A FEW SIMPLE TRIED AND TRUE EXERCISES THAT ARE EASY…AND WORK.

 
 

  Forecast for the Week  


     
 

The major reports for this week start in earnest on Thursday when the Retail Sales Report arrives, being the most-timely indicator of broad consumer spending patterns. Initial Jobless Claims will also be released on Thursday, and will likely be a hot topic after last week’s weaker-than-expected Jobs Report. Friday will bring another healthy round of economic news when we get a look at the Consumer Price Index, Industrial Production, and the Consumer Sentiment Index.

We may also see some volatility depending on how the markets receive more supply…via the Treasury Department auctions of $10 Billion in 10-yr Treasury Inflation-Protected Securities on Monday, $40 Billion in 3-year Notes on Tuesday, $21 Billion in 10-year Notes on Wednesday, and $13 Billion in 30-year Notes on Thursday.

Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result.

As you can see in the chart below, Mortgage Bonds rallied early last week but were halted by a technical ceiling of resistance at the 200-Day Moving Average and were subsequently pushed lower, meaning home loan rates worsened.

Chart: Fannie Mae 4.5%% Mortgage Bond (Friday Jan 08, 2010)

Japanese Candlestick Chart
 
 

  The Mortgage Market View…  


     
 

Exercises That Don’t Cost a Dime

Getting back in shape after the holidays is often tops on people’s New Year’s Resolution list. Here are some exercises you can do at home…and for free…to help kick start the new year.

Push-Ups
Tried and true, push-ups are perfect for toning the chest, triceps and shoulders. If you’re not ready for the standard military push-up, try doing them from your knees, making sure to keep your ankles crossed.

Sit-Ups
Start by lying on your back with your knees bent and feet placed flat on the floor. Feel free to wedge your toes underneath a couch or bed frame in order to keep your feet planted. With your hands behind your head, begin your sit-up. But, instead of going all the way up to your knees, stop halfway and pause before returning to the ground. Doing so alleviates tension in the lower back, while isolating the middle and upper abdominals.

Leg Lifts
Lie flat on your back with your feet together and the palms of your hands on the ground next to you. Keeping your legs straight, raise them until they are perpendicular to the ground and your toes are pointing straight in the air. This is a great exercise for strengthening and toning the lower abdominals.

Lunges
Stand with your feet spread shoulder width apart. With your hands on your hips, step forward with your right leg and take your left knee to the ground. Return to the initial standing position and step forward with your left foot, taking your right knee to the ground. Return to standing and repeat this series of moves. Increase the difficulty by holding dumbbells during the exercise. If you don’t have dumbbells, try using jugs of water or something similar from your pantry.

Dips
This is a great exercise for both your triceps and shoulders. Utilizing a sturdy chair or bench, sit at the edge of the seat with your legs straightforward, heals to the ground and toes pointing up. Your hands should firmly grasp the edge of the seat, shoulder width apart. Supporting yourself with your arms, slide your butt off the edge of the seat. Use your arms to lower yourself until your triceps are parallel to the ground. Then push yourself back up. Keep repeating this motion.

Calve Raises
On your toes, balance yourself on the edge of a bottom step. The soles of your feet, as well as your heels, should be hanging off the edge. Grab on to a banister or door jam for support and lower your heals toward the ground, as far as they’ll go. Now, raise yourself up so that you are standing on your toes. Repeat this motion. This exercise works wonders for toning calve muscles.

For all of these exercises, start with one or two sets of 10 to 20 repetitions. As you get stronger, increase the number of sets and repetitions, as well as decrease the amount of time spent resting between sets.

You’ll feel great and look great in plenty of time for summer!

 
 

  The Week’s Economic Indicator Calendar  

     
 
Remember, as a general rule, weaker than expected economic data is good for rates, while positive data causes rates to rise.

Economic Calendar for the Week of January 11 – January 15

Date
ET
Economic Report
For
Estimate
Actual
Prior
Impact
Tue. January 12
08:30
Balance of Trade
Nov
-$34.8B
 
-$32.9B
Moderate
Wed. January 13
10:30
Crude Inventories
1/8
NA
 
1.33M
Moderate
Wed. January 13
02:00
Beige Book
 
 
 
 
Moderate
Thu. January 14
08:30
Jobless Claims (Initial)
1/09
433K
 
434K
Moderate
Thu. January 14
08:30
Retail Sales
Dec
0.4%
 
1.3%
HIGH
Thu. January 14
08:30
Retail Sales ex-auto
Dec
0.3%
 
1.2%
HIGH
Fri. January 15
08:30
Core Consumer Price Index (CPI)
Dec
0.1%
 
0.0%
HIGH
Fri. January 15
08:30
Consumer Price Index (CPI)
Dec
0.2%
 
0.4%
HIGH
Fri. January 15
08:30
Empire State Index
Jan
11.25
 
2.55
Moderate
Fri. January 15
09:15
Capacity Utilization
Dec
71.8%
 
71.3%
Moderate
Fri. January 15
09:15
Industrial Production
Dec
0.6%
 
0.8%
Moderate
Fri. January 15
10:00
Consumer Sentiment Index (UoM)
Jan
73.8
 
72.5
Moderate
 
 

 
 

Eve Robin Jarrett
Manhattan Mortgage
75 Main Street, 2nd Floor
East Hampton, NY 11937