Thursday, February 26, 2015

Housing Indicator Continues to Stabilize; Energy States at Risk

Freddie Mac said on Wednesday that its Multi-Indicator Market Index (MiMi) still shows that, at the national level,housing is continuing to stabilize.  Thirty-eight of the 50 states plus the District of Columbia are now showing an improving three-month trend as are 40 of the 50 largest metro areas. However, at the same time last year, 47 states plus the District of Columbia, and 47 of the top 50 metro areas were showing an improving three month trend.

MiMi monitors and measures the 50 state and 50 metro areas by looking at home purchase applications, payment-to-income ratios (changes in home purchasing power based on house prices, mortgage rates and household income), proportion of on-time mortgage payments in each market, and the local employment picture. From this the company creates a composite MiMi value for each market to show, at a glance, where each stands relative to its own stable range of housing activity and whether it is moving closer to, or further away from, its stable range. A market can fall outside its stable range by being too weak to generate enough demand for a well-balanced housing market or by overheating to an unsustainable level of activity.

The national MiMi increased by 0.37 percent from November to December to stand at 74.9 percent.  There is a positive 3-month trend of 1.09 percent and the national market has improved by 4.41 percent on a year-over-year basis. 
The nation's all-time MiMi high of 121.7 was April 2006; its low was 57.2 in October 2010, when the housing market was at its weakest. Since that time, the housing market has made a 31 percent rebound.

Sixteen states and the District of Columbia are now in a stable range led by the District (97.6), North Dakota (97.2), Montana (91.1), Hawaii (89.9) and Wyoming (89.1).  Three new metropolitan areas, Buffalo, Boston, and Nashville entered their stable ranges, bringing that total to 11 led by Los Angeles (86.4), Austin (86.3), San Jose (83.9), Houston (83.3), and Pittsburgh (83.3).

Nevada improved its standing by nearly 20 percent year-over-year followed by Colorado, Rhode Island, Illinois, and Ohio all of which improved by between 9 to 12 percent.  The most improved metro areas on an annual basis were Las Vegas which nearly matched its state's performance, Denver, Chicago, and Providence, all improving by low double digits.
Freddie Mac noted that it is continuing to keep an eye on markets with deep ties in energy and have seen some deterioration from the previous month in some of those markets.  Louisiana, for example, as seen employment worsen over the last several months which has caused the states MiMi score to move from 86.7 in April 2014 to a current 80.2

Freddie Mac Deputy Chief Economist Len Kiefer said, "Housing markets are getting back on track. The national MiMi improved for the fourth consecutive month. Nearly 80 percent of the state and metro housing markets MiMi tracks are improving or in their stable range of activity. We've even seen the MiMi purchase application indicator increase 0.07 percent on a year-over-year basis. Low mortgage rates and moderating house price growth are helping to keep payment-to-income ratios favorable for the typical family in most of the country. In fact, Los Angeles is the only metro market with an elevated MiMi payment-to-income indicator whereas most other markets remain quite affordable. And of course, labor markets are generally improving.

Friday, February 20, 2015

As Expected

As expected, with minimal market data reports coming out this week, the stock market has been relatively flat for the first 3 days of trading. (Monday the markets were closed)  Continuing to hover just over the 18,000 mark investors seem quite content to remain where they are.

Mortgage rates have been rising since last week as optimism for the U.S. economy grows.  Additionally, add in the fact that Greece has created a plan to stabilize their economy which is taming fears of returning to another global recession.  As mentioned in the past, when any major economy in the world has significant financial challenges, it has the potential to impact the economies of other countries.

With the rise in interest rates, as expected, the Mortgage Bankers Association reported significant drops in loan applications for both purchases and refinancing.  According to the MBA applications for purchases declined last week by 7.0 percent.  Refinance apps plummeted 16.0 percent which is normal when rates rise as refinances are far more sensitive to movements in mortgage rates.

After a long deep run of pessimism from builders that bottomed in 2010 and 2011, builders have been steadily growing in confidence.  Although buyer traffic has declined in January builder optimism remains high.  Weather, especially in the Northeast and Mid-Atlantic states has certainly played a role in reducing buyer traffic.

Housing starts which had been increasing seems to have leveled off for the time being.  Although the latest report shows housing starts dropped 2.0 percent in January, concern does not seem to be extraordinarily high over the decline.  It is not uncommon for January and February to see a drop considering weather can play a significant role in builders breaking ground on new construction.  Despite the small decline, housing starts remain significantly higher than the same time last year by 18.7 percent. 
Single-family permits dropped by 6.7 percent after a 7.9 jump in December. As stated before, the weather will certainly play a factor in many aspects of new construction.

The release of the Fed minutes on Wednesday from January’s FOMC meeting indicated that the Fed has increased their debate for when the first policy rate increase will occur. While some members are concerned about raising rates too late, most FOMC board members believe that rates need to remain low and likely nothing will happen before June.  As long as the risk of inflation remains low, the pressure for the Fed to start raising interest rates remains muted.  The last thing the Fed wants to do is take an action that could potentially throw the U.S. back into recession.

Next week’s potential market moving reports:

·        Monday February 23rd  - Existing Home Sales
·        Tuesday February 24th – S&P Case-Shiller Home Value Index
·        Wednesday February 25th - MBA Applications & New Home Sales
·        Thursday February 26th - First Time Jobless Claims, FHFA Home Price Index & CPI
·        Friday February 27th - GDP

As your mortgage professional, I am happy to assist you with any information you may need regarding mortgage or real estate trends.  I welcome the opportunity to serve you in any way I possibly can.  Please feel free to reach me at (707) 455-7070.

Saturday, February 14, 2015

Continuing The Climb

With very limited data to move the markets this week, the Dow Jones Industrial Average continued its climb towards 18,000.  Although not quite record high territory yet, it appear that unless it gets derailed, we will see a new record high for the DOW within a few days.

With that said, we need to pay attention to the economic reports for next week as there are a ton of them that cam impact trading and the markets.  If there was ever a week that could take the stock market on a wild ride, next week could be the week.  Housing data will be in strong focus next week.

Meanwhile this week, the few market reports posted did little to make investors worry.  Corporate profit reports for the 4th quarter mostly came in as expected or slightly better which kept investors calm.  In fact so much so, investors have been pulling their money out of the bond market and back into stocks.  This caused mortgage rates to rise.

Without fail, when bond yields and mortgage rates rise, the immediate impact will be felt in housing.  The Mortgage Bankers Association reported that in correlation with the rising rates applications for purchase loans declined 7.0 percent for the week ending February 6th.  Refinances, which are even more sensitive to rate fluctuations dropped 10.0 percent.

Real estate professionals across the country continue to be very optimistic as they see buyer activity increasing steadily.  This is fairly common for this time of year.  The most important factor is that when you compare housing activity at present to the same time last year, it is enough to give real estate and mortgage professional’s reason to celebrate.  Overall purchase activity is significantly higher than it was in February 2014.

Improved housing activity is being driven by three things.  First rates are very low and that can bring buyers into the market.  Second, the labor market is stable and overall consumer sentiment appears to be strong.  Lastly, compared to last year, the weather is significantly better, especially in the Northeast. 

Although the New England area has been blanketed with incredible amounts of snow in the last two weeks, by comparison to last year which featured storm, after storm, after storm, the winter has been far more palatable this year.  Punxsutawney Phil predicted six more weeks of winter on Groundhog Day.  Despite this, overall optimism in the economy and the real estate market seems to have consumers going about their business versus last year when people were hibernating in their homes to get away from the cold and snow.

Next week’s potential market moving reports:

·        Monday February 16th – Presidents Day – All Market Closed
·        Tuesday February 17th – Housing Market Index
·        Wednesday February 18th - MBA Applications, Housing Starts, Producer Price Index,
         Industrial Production, and FOMC Minutes
·        Thursday February 19th - First Time Jobless Claims

As your mortgage professional, I am happy to assist you with any information you may need regarding mortgage or real estate trends.  I welcome the opportunity to serve you in any way I possibly can.  Please feel free to reach me at (707) 455-7070.

Wednesday, February 11, 2015

Sunday, February 8, 2015

What Is Fueling The Stock Market

What is fueling the stock market this week that has it rallying 710 points over the last 4 days?

Oil prices and quarterly earnings are big drivers for the week.  Oil prices have rebounded this week from the free fall we have been seeing in recent times.  Rapidly falling oil prices, as much as consumers love it at the pumps, is not necessarily a good thing.  Instability or what seems like out of control movements in the market or economy are never good long term for investors.  Initially, people may cheer rapid increases or declines in the market as a lot of money can be made when this occurs.  However, the longer the instability persists, the more uncertainty creeps into the minds of investors and consumer which can then lead to fear and irrational investment decisions and behavior.

Better than expected earnings reports for the week have also played a role in the market rise.  The sentiment that is growing with investors is that the economy will continue to improve and that stocks are the right place to be parking their money.  What is bizarre is that just last week the stock market was moving in the opposite direction because of economic fear.

Mortgage rates which has been dropping to lows we have not seen since 2013, have risen slightly.  The decline in mortgage rates, combined with the new reduction in the FHA Insurance premiums has been driving refinances up rapidly.  Surprising though is that the low mortgage rates have not yet been translating into a significant increase in purchase activity.

Purchase activity is certainly being tempered in the Northeast.  It seems as though winter has finally decided to show up in that area.  Two major snow storms within just over a week have homeowners and purchasers moving into hibernation similar to what occurred last year.  The latest forecast is for another twelve or more inches of snow to hit the area on Monday.

Employment may be cooling off somewhat.  Wednesdays ADP Employment Report is showing signs of slower growth for January.  ADP reported that private payrolls increased only 213,000 which is lower than December’s upward revised 253,000.  February’s employment numbers may indicate improvement as weekly first time jobless claims remain below 300,000.  Claims below this threshold is considered healthy for the labor markets.

Cybersecurity companies will continue to grow as more and more fear about data breaches occurs.  The latest breach, and what might be the largest one ever, occurred against Anthem Health.  The damage is still being assessed however Anthem has confirmed that the hackers have broken into a database that contains names, addresses, birthdates, and social security numbers.  They have not yet determined how many records have been stolen however their early estimates are tens of millions.  

Next week’s potential market moving reports:

·        Wednesday February 11th - MBA Applications
·        Thursday February 12th - First Time Jobless Claims & Retail Sales
·        Friday February 13th – Consumer Sentiment

As your mortgage professional, I am happy to assist you with any information you may need regarding mortgage or real estate trends.  I welcome the opportunity to serve you in any way I possibly can.  Please feel free to reach me at (707) 455-7070.

Wednesday, February 4, 2015

Top 5 Reasons For Buying A Home

Maybe you have seen a lot of people buying homes and it has hit you that maybe you should be doing the same. But since buying a home is a very huge commitment as well as undertaking, you will need to know what you will benefit from this action. This is one of the biggest decisions you may ever make in your whole life. The top 5 reasons for buying a home are the following:
Protection against increasing rents
Unlike a while ago when renting a house used to be a cheaper alternative to people had the aim of saving so that they can later on buy their own homes, landlords nowadays have set the rent prices so high that it is hard for some people to save. In many places, it is cheaper to buy a house compared to renting. 1500 dollars or more is a lot of money to part with every month to pay rents. It will be even better off if you buy a house that has a fixed rate mortgage because you will never have to worry about the monthly payments increasing.
Taking advantage of low mortgage rates
Mortgage rates have dropped tremendously as of now and therefore you will benefit a lot if you buy a home now since that trend may be short-lived. Therefore the best time to act is now especially if you are a bargain shopper. With the current low rates, you will never have worries about refinancing in the future and therefore you will be able to save a lot of money in closing costs on loans that you may have taken.
Taking advantage of low home prices
There are those years is one those when the cost of buying a home really goes down. But the prices may start rising and go up really fast. You will therefore need to take advantage of the situation and buy a house sooner if you want to get great deal.
Helping your credit
You may also buy a home if you want to boost your credit score. If you are able to handle a mortgage, it implies that you are responsible and therefore credit bureaus will not have a problem rewarding you for that. That will help you overcome situations that might cause you to incur a lot of interests.
Making the home your own
When you are living in a rented apartment, there is a limit to the modifications that you can make to that house, and you will also need to seek consent from the owner to be able to make any change to the house. If it is your own home, you can upgrade the kitchen to suit your own taste, paint the walls in the living room and the master bedroom using your favorite colors and also put up a garden in the backyard. You will have full control over your home so you can personalize it as you want.

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