May 7, 2009
May 7, 2009 by admin
The stock market turned south in trading on Thursday, moving down following a strong opening fueled by positive numbers from the jobless claims report. The market has been anxiously awaiting the results of the government’s stress tests this week and has tried to get past the 8500 point level.
Financial stocks have jumped again this week as more investors have renewed confidence following government regulators examining on and off balance sheet assets of the nations largest banks and financial institutions. Companies such as JP Morgan Chase have indicated for some time that they would not have to raise additional capital and could pay back the money they received through the TARP program at any time, and government regulators have now come out and confirmed this to be true. Citigroup, Wells Fargo and Bank of America were three of the larger banks that are expected to require additional capital infusions over the next six months as the government raised concerns over their balance sheets. Wells Fargo, through their acquisition of Wachovia and Bank of America, through their acquisition of Countrywide are the two largest holders of pay option adjustable rate mortgages. These mortgage loans were designed to give borrowers the opportunity to pay less than the interest required on their mortgage and potentially defer interest, allowing their principal balance to grow in the future. These loans are amongst the most toxic mortgages assets in the market due to their high probability of default, fueled by the rapid drop in home values.
The market received surprising results today from the retail industry which reported positive sales for the month of March. The retail sales report showed an uptick in sales, where many economists predicted that the decline in sales would continue. This is another indication that the confidence in the market is beginning to return for consumers. This report is the third major economic report this month which has been better that anticipated, but Friday’s non farm payroll report and unemployment rate report will be critically examined by both economists and investors to see if the market has truly bottomed out and whether brighter days are in the future.
The mortgage industry has not been immune to the recent rally from stocks. The yield on the ten year bond is now at 3.28%, up sharply over the past three weeks. The average rate for a thirty year fixed rate mortgage loan is now above five percent. Investors have diverted more money into the equity markets, forcing the yields up on bonds and driving up fixed rates.
May 4, 2009
May 4, 2009 by admin
The housing market received some great news early this morning as reported by the National Association of Realtors. For the month of March the group is reporting an increase of over three percent is pending sales. This improved figure providing a much needed jolt to the stock market which is now challenging moving above the 8400 point level. The stock market took the great news from the housing industry as well as positive remarks from Warren Buffet over the weekend and investors are again moving back into equity positions.
The strong numbers from the housing market, could be a clear signal that all of the governments efforts to stabalize home prices and housing are beginning to work. The governments $8,000 tax credit, combined with historically low fixed rate mortgages and great housing inventory, may begin to lure home buyers who have been on the fence back into the marketplace. The increase in pending sales could provide further hope that the market could gain momentum heading into the seasonally stronger summer months.
The good news on housing and the recent move up in the stock market has begun to pressure fixed rate loans to move higher. Rates on both thirty and fifteen year home loans have moved up about .25% over the past two weeks. The yield on the ten year bond, is now well above 3% and was at 3.16% on Monday. The recent move with interest rates, is only a slight move up from historically low rates. Most lenders are still offering thirty year fixed rate loans at or near five percent, and fifteen year fixed loans are well under the five percent level, even with the recent jump in the stock market. This week will be a critical test for the markets, as the April jobs report is scheduled to be released. This is a market moving report, and if job losses are above or below the expected range, there could be a large rally or sell off in stocks, resulting in a shift with interest rates. If you are on the fence regarding a home refinance or purchase mortgage, you may want to consider locking in your interest rate, especially if your lender offers a float down rate option.
Housing market set to rebound – Warren Buffet
May 2, 2009 by admin
The housing market could be turning a critical corner according to famed investment guru Warren Buffet. The nationally acclaimed financial & investment icon is participating in the annual Berkshire Hathaway shareholder meeting in Omaha this weekend. The annual meeting draws over 30,000 shareholders, investors and media members who are eager to listen to Warren Buffet review the current state of the economy, review the companies investment opportunities and talk about financial markets.
Berkshire Hathaway is one of the world’s largest investment conglomerates. The company has holdings in hundreds of companies, in all types of industries. They are majority shareholders in insurance companies (Geico), banking (Wells Fargo), consumer products (Pepsi Cola) and real estate (Home Services). There vast holdings in many different industries put them in a unique perspective to speak on the state of the current economy.
Their close ties into the U.S. real estate industry make them one of the best sources for predicting the state of the current market and prospects for future growth. They have seen their investment in Wells Fargo recover as Wells has benefitted from a surge in their mortgage division. The company has now indicated they are the nation’s largest mortgage company with over 100 billion in production during the first quarter of 2009. The company’s mortgage operation has benefitted from the spike in home refinance loans, thanks to the lowest mortgage rates of the past fifty years. Wells Fargo has been the leader in the reverse mortgage market for the past ten years, and have now moved into leading position for the entire residential mortgage industry.
They also own one of the largest real estate brokerage companies in the country through their home services holdings. This entity owns some of the largest regional real estate brokerages and provides unique insight into the housing market. The housing industry, will always be a market that is regional and localized, and we are certain to see different levels of improvement from different areas for the balance of the year. Hard hit areas such as California and Arizona are starting to see a stabilization with sales, but have been hard hit with sharp value declines. The Midwest markets, will likely take longer to bottom out as they are still facing challenges from manufacturing job losses and a migration of residents to states with better job prospects. The real estate and housing market follow very simple economic principles of supply and demand. The excess supply will need to be eliminated from the market before a realistic pricing bottom is in place and will eventually lead to a stronger demand than supply which will help to move home prices upward. The question lingers, will this be in 2009 or beyond, certain markets could have already reached bottom, but the national housing pictures still provides more questions than answers.
May 1, 2009
May 1, 2009 by admin
The month of May brings renewed optimism that the economic recession is edging closer to being over. The stock market has enjoyed two straight months of increases and starts the month of May above the 8,000 point level. This month investors will continue to digest key reports such as the jobs report due out next week and follow progress in the housing markets.
The stock market appears to be taking the news of the Daimler Chrysler bankruptcy in stride. The overall effects of the bankruptcy on the economy are difficult to gauge, but government has pledged to perform the process with speed and efficiency. The major news of the day was the government’s announcement that they would be releasing results of their stress tests next week. Rumors circulated earlier this week that two of the nations largest banks (Citigroup & Bank of America) would be required to raise additional capital. These two banks have some of the most toxic assets on their balance sheets and have been heavily criticized for their lending practices. Citigroup, today moved to try and address their balance sheet with the sale of a Japanese banking unit.
The ten year bond has moved above 3%, from it low point of 2.26% earlier this year. The ten year bond is often viewed as a leading indicator for following movement with fixed mortgage rates. Fixed mortgage rates have edged up this week and are now above 5% with most major national lenders for thirty year loan terms. You can generally secure a lower rate (below 5%) if you are looking to refinance into a 15 year term or are willing to pay points to buy down the mortgage rate. The move up with mortgage rates, follows a strong run by the stock market over the past two months, however during this period mortgage rates have not moved as much as would have been anticipated, considering the large move in the mortgage sector. Fixed mortgage rates are likely to remain at lower levels, thanks to the commitment from the Federal Reserve to continue purchasing mortgage backed loan securities and keep credit flowing to banks and consumers.