Home starts down 5%; Corporate results disappoint - Daily Mortgage Rate Update for July 20th, 2010

We learned yesterday that builders of new homes and condominiums are not happy with the state of the makret for new home construction. Today, we saw exactly why, as new home consruction was reported to have declined further in June, 2010.

Corporate profits (or lack thereof) continue to dominate the direction of mortgage pricing, an today, two giants of the corporate world disappointed investors. Both Goldman Sachs and IBM failed to bring in enough revenue to meet market expectations, and as a result, stocks are down and pricing of fixed-income securities like mortgages and Treasuries is better today.

For the complete recap of today's economic news and commentary on upcoming FHA changes, Jumbo rates, and more, please see the complete Dan Hartman Daily Mortgage Rate Update.

For a recap of last week's market activity, check out my review on lenderama.com.

Dan Hartman is a Senior Mortgage Advisor with Province Mortgage Associates, and serves as an Adjunct Professor of Finance and Economics at Roger Williams University and the University of New Haven. He has been helping homeowners and homebuyers with their mortgage questions for over 10 years.

Inflation stays low; bank profits up, but revenues down; Financial reform coming - Daily Mortgage Rate Update for July 16th, 2010

Please visit http://provincemai.com for the full text of today's update.

Mortgage rates are better today after reports have indicated that inflation is very low. The core Consumer Price Index, or CPI, came in at a scant rise of 0.2%, meaning that prices of goods consumers use are holding very stable in the US. Inflation is the archenemy of low interest rates, as investors want their investments to gain value faster than inflation takes it away. Meanwhile, consumer sentiment, according to the University of Michigan, dropped sharply this week, probably due to the less-than-encouraging employment situation.

Banks had higher net income this quarter, but did so on less revenue, principally due to the downturn in stock prices on Wall Street. Banks simply make more money on brokerage than they used to. Remember the good old days when banks made money by taking in deposits and using the money to make loans?

Financial reform is on its way to the President's desk, and will have significant impact on the mortgage industry. As it stands now, subject to interpretation, it may take away some of the options consumers have in chosing a mortgage rate. For example, today, a consumer can select 4.25%, 4.375%, 4.5%, 4.625%, 4.75%, etc. on a 30-year fixed mortgage, depending on the closing costs the consumer wants to pay, and the monthly payment target that needs to be hit. In the future, financial reform may reduce that same consumers options to 4.25% and 4.75%, depending on qualifications and where the mortgage is obtained. Obviously, we have a lot more to learn about this legislation.

For today's mortgage rate lock recommendations, please see my full article on http://provincemai.com.

If you have questions regarding Rhode Island Refinance Rates, or whether or not to lock your loan, please don’t hesitate to contact me by cell at (401) 263-8655, or by commenting on this post. Have a great weekend!

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July 15th, 2010 Update

Dan Hartman is a Senior Mortgage Advisor with Province Mortgage Associates, and serves as an Adjunct Professor of Finance and Economics at Roger Williams University and the University of New Haven. He has been helping homeowners and homebuyers with their mortgage questions for over 10 years.

Core inflation a mere 0.1%; Manufacturing growth slows in Philly, Empire Fed indexes; 30-year fixed rates hold at 4.57% - Daily Mortgage Rate Update for July 15th, 2010

In a week filled with important economic data, no day brings more of that data than today. Inflation, 3 different manufacturing surveys, and the Freddie Mac mortgage rate survey all report today. The information revealed suggests that the economic recovery may be sputtering.

All three manufacturing surveys showed a decrease in the growth rate for manufacturing, which had been one of the few bright spots for this economy lately. The services sector isn't growing nearly as quickly, and much of the recent increases in hiring have come from factories. One particularly intersting phenomenon that has occurred recently is that some companies have on-shored their manufacturing, bringing production back into the United States that had previously been sent abroad.

For all the details on today's market condition, please check out my complete Mortgage Rate Update for July 15th on the all new http://provincemai.com. If you have questions regarding Rhode Island Refinance Rates, or whether or not to lock your loan, please don’t hesitate to contact me by cell at (401) 263-8655, or by commenting on this post. Have a great day!

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July 14th, 2010 Update

Dan Hartman is a Senior Mortgage Advisor with Province Mortgage Associates, and serves as an Adjunct Professor of Finance and Economics at Roger Williams University and the University of New Haven. He has been helping homeowners and homebuyers with their mortgage questions for over 10 years.

Alcoa, CSX beat expectations; Trade deficit up; treasury auctions later - Daliy Rate Update for July 13th, 2010

When two companies that are a backbone to other corporate activity both report better-than-expected profits and revenues, you can bet that the rest of corporate America is probably doing pretty well, too. Well Alcoa, a manufacturer of aluminum, and CSX, a transporter of just about everything, both beat expectations, and this suggests that they may not be alone.

The trade deficit is worse than expected, and we'll find out exactly how traders feel about the situation at 1:00 this afternoon when the results of the 10-year treasury auction are announced. To see my full commentary for the day, please visit the economic updates section of the all new http://provincemai.com.

Dan Hartman is a Senior Mortgage Advisor with Province Mortgage Associates, and serves as an Adjunct Professor of Finance and Economics at Roger Williams University and the University of New Haven. He has been helping homeowners and homebuyers with their mortgage questions for over 10 years.

Corporate earnings, inflation, Treasury borrowing, will dominate week; Mortgage rates the lowest they’ve ever been – Daily Mortgage Rate Update for July 12, 2010

There's plenty of news coming later this week, after a very quiet, Independance-day-shortened week. Between Treasury borrowing, corporate earnings, manufacturing, inflation, and consumer sentiment, there are a number of rate-sheet influential news releases coming. While there is little indication that the news will lead to lower or higher rates, current pricing levels are so favorable as to suggest that it may make sense to get loans locked in sooner rather than later. 

For a full review of the week to come and the Rhode Island Refinance rate situation, please check out the all new Province Mortgage Associates site.

Dan Hartman is a Senior Mortgage Advisor with Province Mortgage Associates, and serves as an Adjunct Professor of Finance and Economics at Roger Williams University and the University of New Haven. He has been helping homeowners and homebuyers with their mortgage questions for over 10 years.

Wholesale inventories nominal; Investors seek to hedge positions going into busy week; Next week's preview; New Feature: The Rumor Mill - Rate Lock Report for Friday, July 9th, 2010

In spite of the relative lack of data this week, mortgage pricing has still been a little more volatile that might have been expected, but most of that was caused by the stock lever from several straight days of higher than usual stock market gains. More than anything else, those stock market gains were driven by bargain hunting. Next week is a different animal altogether though, as we'll review below.

Today, the Commerce Department reported that wholesale inventories rose by 0.5% in May, while sales that month fell 0.3%. Businesses have drawn down their inventories over the past two years in anticipation of lower demand, and economists hope that they will turn up their purchasing, as that will indicate more economic activity to come. Unfortunately that required demand just hasn't turned up.

Next week is about as busy as they come with a number of mortgage-rate-influential events and announcements. The most important events will be announcements about wholesale and retail inflation through the Producer and Consumer Price Indexes, PPI and CPI. Inflation is highly relevant to mortgage pricing because the Federal Reserve's interest rate policy is limited by inflation; if inflation rises too much, the Fed will be forced to raise interest rates. Fortunately, inflation has been very tame lately. There are also significant reports about industrial production and retail sales next week, as well as $69 billion in Treasury security auctions.

There will also be some influence from the stock market next week. Aluminum giant Alcoa starts the quarterly earnings season, a 6-week or so period during which companies make required reports on their quarterly results. As always, Wall St. is viewing this upcoming release with some apprehension, and this is reflected in today's trading. So far, stock prices, and prices for other assets like mortgages and treasuries, have wobbled around unchanged from yesterday.

I'd like to bring up my pet research project, the Friday Affect. I have a hypothesis that we can expect better mortgage pricing towards the end of the day on Fridays, as investors seek to take more defensive positions going into the weekend. In a market that can change based on global events, there is some fear that Saturday's or Sunday's news may ruin the fun on Monday morning when the US markets open, and, because of this, I believe that traders will tend to favor more secure assets, like mortgage-backed securities and US Treasuries going into the weekend. I hope to gather enough data about this over the summer to present some more detailed data in September or October.

Volatility is still somewhat high in mortgage pricing, and prices are still very close to all-time highs. I suggest a slight bias for originators to consider locking deals that are in process. I believe that next week's data will continue to support current pricing levels, however, it won't take much to break through lower, as mortgages have benefited from very strong demand recently. If the stock market continues to run, it will pull up interest rates from all-time lows around 4.57%.

I'm incorporating a new feature into today's report, the Rumor Mill. Here I'll discuss one or more of the more off-the-wall ideas I've seen this week in the mortgage world. Today, I want to highlight an idea that Brian and Frank of the TBWS Daily found yesterday: FHA loans for mobile homes. Mobile home financing has always been challenging because of the possibility that the owner could very easily pick up the home and move it elsewhere, making the collateral tough to track. Most lenders don't have any provision to lend on these properties, however, Brian and Frank point out that around 25% of homes under $200,000 are mobile homes. They point to a New York Times article as their basis. What do you think? Would and FHA loan make a mobile home more attractive to you as a home buyer? As a loan originator or real estate agent, would you be able to do more business with this option? Leave your comments below.

Finally, I want to let you know that this blog will have a new home as of Monday. My main articles will appear on the all-new www.provincemai.com, the online home of Province Mortgage Associates. I will post a summary of those articles here, as well. Thank you very much for reading; I hope you will join me at my new home. If you have questions regarding Rhode Island Refinance Rates, or whether or not to lock your loan, please don't hesitate to contact me by cell at (401) 263-8655, or by commenting on this post. Have a great day!

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July 8th, 2010 Update

Dan Hartman is a Senior Mortgage Advisor with Province Mortgage Associates, and serves as an Adjunct Professor of Finance and Economics at Roger Williams University and the University of New Haven. He has been helping homeowners and homebuyers with their mortgage questions for over 10 years.

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Traders gobble up data suggesting worldwide growth may be stronger than expected this year; Unemployment claims fall more than expected; Mortgage rates at new lows - Rate Lock Report for Thursday, July 8th, 2010

Stocks got a nice bump yesterday as bargain-hunting traders swooped into financial sector companies, among others. After Tuesday's near-panic over a possible double-dip recession, stock prices presented a nice opportunity, enough to push the Dow Jones Industrial Average over 10,000 again. Unfortunately for mortgage pricing, much of the money needed for this came from sales of other assets, like mortgage-backed securities, causing pricing to worsen by as much as 3/8 of a point yesterday. 

Pricing this morning is slightly worse again, as better-than-expected unemployment claims hit markets. Only 454,000 filed first-time claims last week, compared to expectations of 465,000 and last week's total of 472,000 new claims. While this does represent an improvement, it is still at a level higher than what would be suggestive of real employment growth. Continuing claims declined, and are expected to continue declining as more long-term unemployed run out of benefits.

The International Monetary Fund reported today it expects worldwide economic growth to come in higher than originally expected, reaching 4.6% in 2010. This has helped to support yesterday's stock market rally, although it isn't strong enough news to push stocks higher. The IMF suggested it expects US growth to hit 3.3% for the year; the principal driver of its bigger growth expectation is Asian economies. Worldwide growth gives us insight into possible future interest rate increases. We will get the first look at 2nd quarter 2010 US economic growth later this month through the Advance GDP report.

Mortgage rates hit another new low today at an average of 4.57% for a 30 year fixed, according to this week's Freddie Mac Survey. Freddie Mac has surveyed mortgage lenders each week since 1970 to establish weekly average interest rates and fees. Current fees average 0.7 points, according to the survey.

We appear to be entering a period where there could be a bit more volatility in mortgage pricing. With the stock market finally catching a bit of a break yesterday, and having nearly cleared a week almost devoid of economic data, I am concerned that there could be another move in mortgage rates coming. Next week brings some more meaningful data, and it also brings a substantial supply of new Treasury paper, which serves as a barometer for the direction of mortgage rates. I maintain my recommendation from yesterday that the market demands a bit more caution now, and that you should consider locking deals more proactively now. There are certainly situations that still justify floating, but I would want to have more of my pipeline locked at this time.

Tomorrow brings us another test of the "Friday Effect". Will it kick in again? Stay tuned to find out. If you have questions regarding Rhode Island Refinance Rates, or whether or not to lock your loan, please don't hesitate to contact me by cell at (401) 263-8655, or by commenting on this post. Have a great day!

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July 7th, 2010 Update

Dan Hartman is a Senior Mortgage Advisor with Province Mortgage Associates, and serves as an Adjunct Professor of Finance and Economics at Roger Williams University and the University of New Haven. He has been helping homeowners and homebuyers with their mortgage questions for over 10 years.

Yesterday's market dominated by "double dip" recession fears; Today's data suggests things MAY not be that bad - Rate Lock Report for July 7th, 2010

If you're unhappy with the pricing improvements we received yesterday, please raise your hand. Anyone? I didn't think so. Would you like to know why it happened?

Yesterday, markets were gripped with panic over the possibility of a "double dip" recession, that is, a second, possibly worse, recession following the first. Needless to say, this is a pretty scary possibility, and one that the talking heads on CNBC apparently couldn't say enough yesterday. (I didn't actually watch, as the best thing CNBC usually has going is the ticker on the bottom, but that's what I heard.)

Now, obviously, a double dip recession would be a very bad thing right now, because our government has already spent its way into a big hole trying to dig out of this recession. Do we really expect them to repeat all of that spending to dig out of another recession? Are they even capable of that? A lot of very smart people are worried about this very possibility.

Fortunately, we got some better news from less commonly cited sources today, suggesting that things might not be all that bad. The first piece of data needs to be taken with a grain of salt. The American Bankers Association reported that credit card delinquencies, that is, 30-day late payments on credit cards, fell to their lowest level in 8 years this month, with fewer than 4% of credit card holders 30 days or more past due. This is good news for the banks, yes, but keep in mind what has happened in the last two or three years - banks have been taking credit cards away from consumers it perceived as riskier left and right. I know very few people who haven't had a credit card shut off or a credit line reduced, and it may be that this is a bigger cause of the reduced delinquencies. It also bears mentioning that this report covers only the 1st quarter of 2010, a period during which we already know the US economy was in better shape.

The second piece of information to arrive today was a report from the OECD raising the possibility that unemployment may have peaked for developed economies. The Organization for Economic Co-operation and Development is a non-governmental organization based in Paris that seeks to foster sharing of knowledge and solutions to common economic problems throughout its membership, which includes most of North America, Europe, and a few other scattered countries. In its report, the OECD states that 17 million jobs have been lost among its member countries during the recent crisis, 10 million of those in the US alone, and it suggests that governments striving to trim budget deficits must be careful to avoid making unemployment worse through their cuts. It does state that it feels that the level of unemployment may have leveled off, and could move lower if governments foster the right environment.

Markets have opened higher on the day, and appear to be holding that level at present. Still, mortgage pricing moved significantly yesterday to the point where there is little chance of further improvement in the immediate future. At this time, you may want to consider locking especially on loans closing in the next 2-3 weeks. It is more likely at this point that we will see a reversal in that time, rather than continued improvement.

There is little more economic news due this week, so the stock market will be a major driver of mortgage pricing. Tomorrow's unemployment claims report is the last piece of significant data for the week. If you have questions regarding Rhode Island Refinance Rates, or whether or not to lock your loan, please don't hesitate to contact me by cell at (401) 263-8655, or by commenting on this post. Have a great day!

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July 6th, 2010 Update

Dan Hartman is a Senior Mortgage Advisor with Province Mortgage Associates, and serves as an Adjunct Professor of Finance and Economics at Roger Williams University and the University of New Haven. He has been helping homeowners and homebuyers with their mortgage questions for over 10 years.

Service Sector Growth Misses Expectations; Accounts for 80% of all US Jobs - Rate Lock Report for July 6, 2010

Today marks the start of a short, quiet week, from the perspective of economic data. We will receive exactly two pieces of interest-rate-influential data this week; one the Institute for Supply Management's Services Sector Index this morning, the second the weekly unemployment claims on Friday. For the rest of this week, I anticipate mortgage rates will be driven more by activity in stock markets.

The ISM Services Sector Index measures the pace of expansion or contraction in the services sector, which comprises as much as 80% of the US economy, and includes businesses like hair salons, landscapers, accounting, bookkeeping, payroll, even mortgage and legal services. The index measures activity on a scale based around 50. A level of 50 indicates neither growth nor contraction.

In today's report, the main index slipped to 53.8 from 55.4 in May. Economists had been expecting a decline in the index to 55.0. The index also features an employment component, designed to guage the likelihood of service businesses hiring new workers. This component declined to 49.7 from 50.4, suggesting further weakness in business hiring.

The markets have brushed off this data, for the most part, as all sectors of the financial markets are rallying significantly on other news. While there are concerns that the upcoming European bank stress test may be inadequate to truly identify all problems that may exist. Meanwhile, the central bank of Australia had some upbeat comments regarding that country's economy, suggesting growth there is expected to continue. Australia has been one of the world's few bright spots, and has been strong enough for its central bank to raise interest rates 6 times in the past year. Analysts principally cite growth in China and that country's demand for iron ore and energy.

Mortgage rates are at the lowest point ever, with last year's average 30-year fixed rate at 4.58%. I've seen many banks offering rates as low as 4.25% with 1-2 points. Still, refinancing is difficult for many homeowners who have seen the housing market rob their homes of value.

Mortgage pricing has opened better this morning, and has showed some continued improvement as the day has progressed. Based on the current pricing level, and the negligible amount of data this week, I feel it is Safe to Float at all lock periods. I suspect that markets will allow mortgage pricing to continue to hold its best ever level currently held, because of the growing doubts about the health of the economic recovery. The largest concern I see with this recommendation is an advancing stock market. The DJIA and other indices are all around 1.5% higher today; this is fine for now, but if it continues throughout the week, mortgage pricing could retreat somewhat.

There are a few other issues out there that could affect mortgage and other fixed-income pricing. The Federal Reserve still holds somewhat more than $1 trillion in mortgage-backed securities, which it must begin liquidating at some point. Finally, systemic risk is still present in the myriad problems we hear about daily in other countries' economies.

If you have questions regarding Rhode Island Refinance Rates, or whether or not to lock your loan, please don't hesitate to contact me by cell at (401) 263-8655, or by commenting on this post. Have a great day!

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July 2nd, 2010 Update

Dan Hartman is a Senior Mortgage Advisor with Province Mortgage Associates, and serves as an Adjunct Professor of Finance and Economics at Roger Williams University and the University of New Haven. He has been helping homeowners and homebuyers with their mortgage questions for over 10 years.

Overall, 125,000 jobs lost; unemployment rate falls to 9.5% on discouraged workers; Only 83,000 private-sector jobs added - Rate Lock Report for Friday, July 2nd, 2010

As I predicted yesterday, the highlights of today's monthly jobs report were too few private-sector jobs added, and too many discouraged workers giving up. Results weren't drastically different than expected, though, so mortgage rates have opened the day slightly worse than they closed yesterday.

Each month, the Bureau of Labor Statistics brings us its Current Employment Statistics report, often referred to as the Non-Farms Payrolls report, a survey of 160,000 business and government entities that is intended to measure the total number of non-agricultural jobs existent in the economy. Simultaneously, the BLS also reports the results of its Current Population Survey, or Household Survey, a telephone survey of 60,000 households in the US in efforts to measure the rate of unemployment.

There are some flaws to the methodology of this survey, especially in relation to the unemployment rate. For purposes of the survey, an unemployed worker is defined as someone who does not hold any job, full or part time, nor has worked without pay at a family-owned business in the past month, who has searched for a job within the past 4 weeks. This leads to problems like the one we see in this week's report: 652,000 former workers didn't look for a job last month, and because of that the unemployment rate dropped from 9.7% in May to 9.5% in June.

Of those 652,000 discouraged workers, I expect most will eventually start looking for a job again, so if job creation does ramp up, bear in mind that we have a number of discouraged workers that will return to their searches, and that will push up the unemployment rate again.

Private employers did ramp up their hiring from May, adding 83,000 jobs in June, compared to the revised 33,000 jobs added in the earlier month. Long-term employment growth is dependent upon private employers to add jobs, as government can only borrow so much money to put people to work. The labor force grows by about 100,000 people per month, as that many more children turn 15, the age at which they are first counted in the labor force, than retirees leave the work force. Therefore, 100,000 new private sector jobs are needed to keep pace. Another concern in the private sector component of this report is the balance of job creation; at present more of these jobs are coming from manufacturing companies bringing back laid off workers than from new job creation at the small business level, which has been a historically more important source of long-term job growth.

Mortgage pricing opened slightly worse on this information, but has since broken even with yesterday's close. Mortgages are affected in two ways by the employment data: first, when the data indicates the economy is weaker than expected, all fixed income securities, like mortgages and Treasuries, see lower rates; second, employment specifically impacts mortgages because homeowners need jobs to pay their mortgages; high unemployment increases mortgage risk.

The final factor that will affect mortgage pricing today is the "Friday Effect". In times of weak economic data, investors generally want to enter the weekend holding the safest portfolio of investments they can, and this often means they will sell stocks and buy fixed income, like mortgages and Treasuries. This phenomenon tends to present itself most clearly after 1:00 PM on Fridays. I expect that we will see an uptick in demand for mortgages after that time.

My recommendation for today is that it is Safe to Float rates on most rate lock periods, with the possible exception of the shortest period before closing. Pricing is already as good today as it was at the close of business yesterday, and the Friday Affect should improve it later in the day. Because pricing started a little worse this morning, I expect that many lenders will send out pricing improvements later in the day.

I hope that all of you have a fantastic Independence Day weekend. If you're looking for Fireworks in Rhode Island, check out this great resource from the Central Rhode Island Chamber of Commerce. I was pleased to find that there will be a show in Providence on Monday, as I wasn't expecting one. If you have questions regarding Rhode Island Refinance Rates, or whether or not to lock your loan, please don't hesitate to contact me by cell at (401) 263-8655, or by commenting on this post. Have a great day!

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July 1st, 2010 Update

The Friday Effect (3rd paragraph)

Dan Hartman is a Senior Mortgage Advisor with Province Mortgage Associates, and serves as an Adjunct Professor of Finance and Economics at Roger Williams University and the University of New Haven. He has been helping homeowners and homebuyers with their mortgage questions for over 10 years.