Saturday, January 30, 2016

Struggling Stock Market

The stock market is struggling while the housing market continues to improve.  Home prices reported by the Federal Housing Finance Agency are up a solid 0.5 percent for November.  Additionally, prices are 5.9 percent higher than the same time last year.  The Mountain states led the way with price appreciation of 10.0 percent.  The Pacific region followed with a strong 8.6 percent.  The weakest growth sector of the nine regions that are measured was the Middle Atlantic states which were up only 2.6 percent.

On the heels of the FHFA report comes the Case-Shiller Home Price Index, which was also released on Tuesday morning.  Case-Shiller numbers are relatively tracking along with the FHFA data in that their report shows an increase in the 20 major city index of 0.9 percent from October to November.  Year over year prices were up 5.8 percent virtually matching the FHFA report.  What is very strong with the Case-Shiller report is that this is the 3rd consecutive month in which all 20 major cities were up in price.

The 3rd housing report of the week in which sales of new homes was reported showed a higher than expected boost for the month of December.  New home sales jumped 10.8 percent to an annualized rate of 544,000.  The increase was 44,000 over the high end of analyst’s predictions.  It is possible that the gain was driven in part by some discounts builders have offered.  The median price of new home sales dipped 2.7 percent.  Despite the drop in price, demand for homes remains strong.  With builders continuing to move cautiously in starting new homes, home supply declined from 5.6 months down to 5.2 months.  An inventory supply of 6 months is considered an ideal balance between construction and sales.

To continue on with the theme of the improving housing market, the Pending Home Sales Index rose 0.1 percent.  Although not a significant jump, it is a positive move and it is also a reversal in trend after November’s report was revised to show a 1.1 percent decline.  Additionally, it is believed that the new TRID regulations that went into effect last November, are playing a significant role in the delay of closings.  Mortgage companies are improving their work flow related to the new regulations so it is likely that we will see even more market data improvement when January’s report is released next month.

As is typical, with the stock market taking it on the chin in recent weeks, investors have moving their money into the bond markets.  The bond rally means yields are declining which in turn moves mortgage rates lower.  The Mortgage Bankers Association report on purchase and refinance applications for the week of January 22nd shows that when rates drop, there are plenty of borrowers ready to take action.  Purchase applications increased 5.0 percent and refinances leaped 11.0 percent.

The major potential market moving reports are:

·        Monday February 1st – ISM Manufacturing Report
·        Tuesday February 2nd – Motor Vehicle Sale
·        Wednesday February 3rd - MBA Applications & ADP Employment Report
·        Thursday February 4th - First Time Jobless Claims
·        Friday February 5th – National Employment Situation

As your mortgage and real estate 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, January 27, 2016

Sunday, January 24, 2016

Oil Prices And The Economy

Many on Wall Street are hopeful that the slide in oil prices has stopped.  As you probably already know, the stock market has lost over 1500 points since the start of the year.  This is the worst start in history for the market. 

The Dow, after being down all week was up Thursday and has been rallying as of Friday morning.  It seems that stability in oil prices has returned, at least temporarily.  After oil prices dropped as low as $26 a barrel earlier in the week, as of Friday morning oil is trading at over $31.00 a barrel.

Many people seem to be confused as to why lower oil prices is scaring investors.  As a consumer we are cheering the fact that we can fill our vehicles for so much less than a year ago…in fact, so much less than just a few months ago.  Traditional thinking would have you believe that consumers will take their savings at the gas pump and put it into the economy elsewhere.  Unfortunately, that is not what is happening.  Consumers seem to be saving their money.

The bigger problem with low oil prices is that many energy companies are not able to make money with oil at such a low price.  It is costing them more to get the oil out of the ground than they can sell it for.  Already massive layoffs and over 85 energy company bankruptcy filings have taken place.  Although we might like to say that “it is just too bad for them”, the decline in oil prices is very serious.

Remember our banking system that had so many issues back in 2008 related to all the money lent out on mortgages that were not being repaid?  Well, many banks are heavily leveraged with loans to energy companies which now may not be able to be repaid.  I am not suggesting that we are headed for another Great Recession.  This is just an explanation as to why investors are skittish about the stock market and that there is a risk of a large market correction to occur if oil prices don’t stabilize.

The good news from all this turmoil in the stock market is that money has been flooding into the bond market.  This is driving down mortgage rates.  Just when everyone seemed to think that the opportunity to refinance was fading away, the decline in rates has rekindled a mini refinance craze.  The Mortgage Bankers Association reported that refinance applications jumped last week by 19.0 percent.

The Housing Market Index, which is provided by the National Association of Home Builders, continues to remain optimistic about the future of housing.  The index, although not quite as strong as it has been in recent months, continues to remain well into the area of positive sentiment and optimism for future construction and sales.

The major potential market moving reports are:

·        Monday January 18th – All Markets Closed for Martin Luther King Jr. Holiday
·        Tuesday January 19th – Housing Market Index
·        Wednesday January 20th - MBA Applications, Consumer Price Index & Housing Starts
·        Thursday January 21st - First Time Jobless Claims
·        Friday January 22nd – Existing Home Sales

As your mortgage and real estate 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.

Thursday, January 21, 2016

Must Do Home Improvements Before Selling Your Home

Even with the improved housing market, selling your home is no simple task. There is a lot of competition and buyers have a wide range of houses to choose from. By improving your home to the max, you can make selling it much easier, and, you will get more money for it when it's time to close.

1. Remodel Your Kitchen

The kitchen is one of the biggest selling points in any home. It is often called the heart of the home and many potential buyers will put a lot of weight into how your kitchen looks. Remember, buyers envision themselves in your kitchen, so it is a good idea to make it as nice as possible.

If you have it in the budget to do a full remodel, then go for it. Adding new hard stone counter tops, new flooring and new cabinets is almost guaranteed to increase the value of your house.

If you are on a smaller budget, simply painting the walls into neutral colors, cleaning up and organizing and adding small upgrades like new faucets, light fixtures, etc. can have a big impact on selling your home.

Avoid: putting in or keeping carpet in your kitchen. Carpets do not do well in wet, damp environments like your kitchen. It is easy for water to get onto the floor and cause mold and mildew growth.

2. Waterproof or Finish Your Basement

The basement is an oft forgotten part of your home that can have a huge impact on both selling price and ease of selling your house.


Because your basement represents a huge amount of storage and living space. If it is wet, damp, floods when it rains or has mold, your new buyer can not use it, reducing the overall size of your home drastically.

And, most realtors and home owners know that making foundation repairs or fixing a wet basement could be expensive. if you take care of it before you sell, you can increase your home's asking price by up to 25%

3. Bathroom Remodeling

Like the kitchen, the bathroom is highly prized by buyers. IF you can do a full remodel, do so. Much like the kitchen, if you add granite or other stone counter tops, you'll increase the value of your house. New bath tubs, shower doors, faucets, fixtures and paint color can have a big impact. SImply painting a neutral color can be helpful because potential buyers often envision their furniture, towels, etc. in your rooms, so making them as neutral as possible helps.

Article Source:

Sunday, January 17, 2016

A Roller Coaster Ride

I imagine if you are reading this newsletter this morning, just like me, you did NOT with the 1.5 Billion Dollar Powerball Jackpot and have to go to work like the rest of the millions that did not win.

This morning I looked at a chart of the stock market for the first four days of this week, and began to imagine that I was looking at a roller coaster ride.  If this ride was in an amusement park it would make almost every rider crazy with excitement.  However, looking at it as an investor, it is enough to make any one nauseous.  The good news is that the market is pretty close to where it started the week after being down as much as 499 points if measured from the trading peak to the low point.  Like we have so many times before, we get used to the market craziness until a new pattern develops.

The economic slowdown in China and the price of oil, which are going hand in hand, continue to dominate the business news.  With China’s economy appearing to be in worse shape than initially believed, their use of oil continues to remain low.  With OPEC not slowing down with production, the oil glut on the market continues to grow and prices just keep dropping.  Oil, now at a twelve year low, is selling at $30.40 a barrel.  At the pump drivers are seeing gas prices for less than $2.00 a gallon.

With the stock market making investors queasy, many are turning back to bond investing which is driving bond yields lower again.  With the decline of mortgage rates as more money flows into bonds, combined with the continuing improvement in the labor market, loan applications are taking off according to the Mortgage Bankers Association of America.  For the week ending January 13th, purchase applications jumped 18.0 percent and refinance apps soared 24.0 percent.

Across the country there seems to be a lot of optimism about the housing market for 2016.  Many analysts are expecting a strong purchase market to take hold.  There seems to be a number of factors playing into this belief.

It is expected that home prices, which have been rising rapidly due to a shortage of inventory in many markets, will begin to slow down.  It is anticipated that more homeowners will be placing their homes for sale in 2016 on account of the increase in equity they have gained in the last couple of years.  Additionally, more and more previously underwater homeowners are now in positive equity positions.

Mortgage rates remain low keeping housing affordability still quite attractive.  On the flip side rents continue to remain high.  The country for the most part continue to see rental demand rising which is keeping upward pressure on rents making purchasing a home more affordable.

The major potential market moving reports are:

·        Monday January 18th – All Markets Closed for Martin Luther King Jr. Holiday
·        Tuesday January 19th – Housing Market Index
·        Wednesday January 20th - MBA Applications, Consumer Price Index & Housing Starts
·        Thursday January 21st - First Time Jobless Claims
·        Friday January 22nd – Existing Home Sales

As your mortgage and real estate 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.

Monday, January 11, 2016

An Ugly Week

It has been an ugly week for the stock market.  As of Thursday the market was just a few points above the threshold of being called a “correction”.  When the stock market declines 10% it is officially classified as a market correction.

A simple explanation of the turmoil in the market is what is happening in China.  The country which is the biggest consuming country in the world, appears to be having a far more significant economic slowdown than initially anticipated.  The Chinese government has often been accused of not being transparent in their reporting on the stability of the Chinese economy.  Currently more and more evidence is emerging that the country’s economy may be slower than reported.

With a slowing Chinese economy, the #1 consuming country for oil, the lack of productivity means that China will need even less oil.  The world already has a glut of oil which has reduced prices significantly.  Now that China is using even less, the oversupply of oil continues to grow putting further downward pressure on oil prices.  Although this is great for U.S. consumers, oil company profits are getting hammered.

Additional challenges to the stock market is that the U.S. Dollar has been becoming stronger against foreign currencies.  This makes the cost of U.S. goods in other countries higher.  This can lead to a reduction in foreign purchases which would significantly impact virtually every United States based company that operates internationally.  Less purchases of goods and services around the globe will hurt corporate profits which is what drives the stock market and investing decisions.

Adding to national economic concern is that industrial production is the weakest it has been since July of 2009.  December’s report came in worse than expected and below the “50” level which indicates the start of contraction.

Despite the grim economic news happening, the labor market continues to remain very strong.  First time jobless claims once again declined to 277K which is well below the critical 300K mark.

The labor department report on Friday for the month for the month of December was far better than expectations.  November jobs were revised upward from 211,000 all the way to 252,000.  The December numbers blew away all expectations of job growth.  Analysts were expecting job growth to range between 170,000 to 249,000.  The Labor Department announced an increase of 292,000.  It is possible that Friday the stock market may recover some losses with the great employment report.  Pre-market futures, which give an indication of the direction of the market at opening, were up 200 points.

All of next week’s potential market moving reports are:

·        Tuesday January 12th – JOLTS Report
·        Wednesday January 13th - MBA Applications
·        Thursday January 14th – First Time Jobless Claims
·        Friday January 15th – PPI, Retail Sales, Industrial Production, Consumer Sentiment

As your mortgage and real estate 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.

Michael O’Rourke
Branch Manager/Mortgage Banker
Big Valley Mortgage/A Direct Lender

Saturday, January 2, 2016