Archive for March, 2008
Looking Back And Looking Ahead : March 31, 2008
Posted by: | CommentsMortgage rates were up last week on weak housing data and a growing nervousness about mortgage bond quality.
Rates would have been up more if not for a tame inflation reading Friday.
The Personal Consumption Expenditures report fell Friday to 2.0% year-over-year, putting it back within the Federal Reserve’s comfort zone of 1-2 percent.
PCE is the Fed’s preferred inflation gauge and with inflation in check, Ben Bernanke & Co. can focus on other elements of the economy such as housing and employment.
Mortgage rates figure to be volatile (again) this week.
The first major event to strike markets is today’s release of a 200-page, government-written plan outlining sweeping reforms for the financial industry.
If markets interpret the government’s plan to be bad for bond markets, expect mortgage rates to rise as demand for bonds falls. Conversely, if the reforms are expected to benefit bonds, mortgage rates should fall.
Then, Wednesday, Fed Chairman Ben Bernanke testifies to Congress about the U.S. economy.
Expect the Fed Chief to stay on message, but mortgage rates will respond to his word choice and tone — especially in remarks about large banks and their ability to survive the current market. Traders are already on edge and will take Bernanke’s testimony very seriously.
And lastly, also moving markets this week is the March jobs report, due Friday.
Remember that job growth was negative in January and February so with a third negative month in March, the calls of recession will grow louder; the expectation is the economy shed 40,000 jobs last month. Whether a negative number will be good or bad for mortgage rates, though, will depend on the bond traders’ mood come Friday morning.
Either way, though, if the actual jobs number deviates from the expected jobs number of 40,000, mortgage rates will swing wildly starting at market open Friday and continuing into the weekend.
In 2008, Home Loans Are One Day Cheap And The Next Day Expensive
Posted by: | CommentsWhen mortgage rates change rapidly, it’s a fiscal challenge to shop for a home and/or home loan.
Lately, mortgage rates have been especially volatile, mirroring the wild moves of the stock market.
Here’s how up-and-down stock markets have been in 2008: Through last week, the S&P 500 Index changed more than 1 percent per day on 28 separate days.
This represents 52 percent of all trading days and is the most volatile measurement since 1938.
Mortgage financing is impacted by stock market changes because when money flows into stocks, it tends to come from bond markets. And, when money leaves stocks, it tends to “gets parked” in bond markets.
Because mortgage bonds set mortgage rates, you can understand how stock market volatility can make it difficult to predict what home loan payments might look like.
Volatility is expected to continue for the next several quarters so if you see a mortgage rate you like today, consider locking it right away — it probably won’t last long.
Source
U.S. Stock Volatility Climbs to Highest in 70 Years, S&P Says
Jeff Kearns
Bloomberg, March 20, 2008
http://www.bloomberg.com/apps/news?pid=20601213&sid=av840GLwE4UA&refer=home
Why “Median Sales Price” Reports Aren’t Helpful For Housing Markets
Posted by: | CommentsEach month, the Commerce Department and the National Association of REALTORS release national housing data.
The former’s release is called the New Residential Sales report and the latter’s is called the Existing Home Sales report.
Both reports highlight the “median sales price”, the point at which half of the homes in the U.S. sold for more, and half sold for less.
Last month, the median sales prices were as follows:
- Existing homes: Down 8.2 percent
- New homes: Down 2.7 percent
The very definition of “median”, however, makes this data point useless for national housing statistics.
If a large amount of homes are sold in regions where home prices are traditionally high, the median sales price will trend higher.
If a large amount of homes are sold in regions where home prices are traditionally low, the median sales price will trend lower.
Again, all that the median sales price tells us is the price point at which half the homes in the country sold for more, and half sold for less.
Real estate is a local phenomenon and so grouping the entire country’s supply of homes together makes little sense. A home in San Francisco has little to do with a home in Omaha.
To get a true gauge of your local market, talk to a real estate agent that knows the local market well. You’ll not only get meaningful statistics about a neighborhood, but you’ll get good insights, too.
The Small Statistic Within Consumer Confidence That Didn’t Show Up On The News
Posted by: | CommentsConsumer Confidence fell to its lowest point in three years and anybody who watches the evening news can understand why.
Each day, news programs barrage Americans with tales of economic woe and American Opinion is largely shaped by the media.
After enough time, the reporting becomes a self-fulfilling prophecy.
But, in the Consumer Confidence report, there was a choice piece of data that isn’t getting reported by the news programs and it’s a rather important piece.
Although fewer consumers expect to buy automobiles and appliances over the next six months, those with plans to buy homes is actually higher by 14 percent.
In other words, despite weakening confidence in the economy, an increasing number of Americans are planning to buy homes this season and next.
Consumers may be motivated to buy this year by a number of factors:
- Lower home prices nationwide
- Affordable mortgage rates
- Fear that mortgage products will require larger downpayment
Regardless, the media is choosing to ignore this part of the story. Instead, the news programs are focusing on the negatives – just look at the headlines.
It’s no wonder that confidence is down — bad news is all the American Public tends to hear.
How Seasonal Factors Change Homeowner Vacancy Rates
Posted by: | CommentsEach quarter, the Census Bureau releases the Homeowner Vacancy Rate, a housing statistic the measures the percentage of homes for sale that are vacant.
A home listed for sale may be vacant for several reasons including:
- The home has been foreclosed and the owner has moved out
- The home seller moved into a new home and not sold his former home
- The home was a rental property and is being sold without a tenant
In Q4 2007, the Homeowner Vacancy Rate matched its all-time high of 2.8 percent.
The statistic can be misleading, however, because Homeowner Vacancy Rates appear to be seasonal and the fourth quarter is more prone to high figures.
As evidence: In 6 of the last 7 years, Q4 posted higher vacancy rates than for the preceding three quarters.
Vacancy rates may increase in the fall because homesellers without a “need” to sell tend to take their properties off the market during the Holiday Season. That leaves an over-weighting of empty homes for sale — precisely what the Homeowner Vacancy Rate measures.
For an interactive version of the chart above, visit the Wall Street Journal Online.
Source
Housing Markets: A Vacant Look
The Wall Street Journal Online
March 21, 2008
http://online.wsj.com/public/resources/documents/retro-VACANCY08.html