Kevin Martini's Blog

ARM & FIXED RATE GAP

Kevin Martini (SunTrust Mortgage) — Sat, 22 Mar 2008 18:30:23 -0700

Over the past recent weeks, I have received some calls and emails from client's and Realtor's regarding the relationship between hybrid ARM and fixed rate mortgages here in the Raleigh market. The specific question is why is the relationship between the two seems to be changing so dramatically. The answer is very simple. In the past several weeks, some very large real estate investment trusts (REITs) - (I prefer not to name them but they were big) they received margin calls from their creditors and to meet those margin calls, assets must be $old. What sort of assets do these REITs hold that they must sell? Hybrid ARMs. Tens of BILLIONS of dollars worth of hybrid ARM either have come to market in the past week or are about to and this supply wave is crashing down on a market, hence one reason for the gap.

This is an unusual time and unusual things happen during unusual times...Folks, yes, hybrids ARMs are slightly higher as compared to 30 year fixed. So? This does not change the fact that now is a great time to re-fi, move-up or buy your first home. The 30 year fixed, historically-speaking, is at a great rate. There are some great deals in Raleigh and the 30 year is below 6%. Use these unusual times...it is a great time to buy!

Cary Mortgage Information - Kevin Martini - (9-23-2007)

Kevin Martini (SunTrust Mortgage) — Sun, 23 Sep 2007 04:55:38 -0700

LAST WEEK - Fed Chairman Ben Bernanke and his Federal Open Market Committee cut to the Fed Funds Rate 0.50%. Here's what the Fed had to say as they announced the cut: "Economic growth was moderate during the first half of the year, but the tightening of credit conditions has the potential to intensify the housing correction and to restrain economic growth more generally. Today's action is intended to help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and to promote moderate growth over time." It is pretty clear that they will take whatever steps are necessary in terms of rate cuts to try and prevent a possible recession, as long as the beast (a.k.a. inflation) remains in check.

At first, both Stocks and Bonds rallied on the warm words from the Fed - but as Bond Traders analyzed the potential future impact of the Fed cut over the following days, they started selling off Bonds with both hands, causing fixed home loan rates in Raleigh ans Cary to rise by .125 to .25%, actually higher than where they stood before the Fed Rate Cut. So what happened?

The reduction of the Fed Funds Rate may encourage increased spending by consumers and businesses, borrowing costs will now be cheaper for Home Equity Lines of Credit, consumer loans like car loans and credit cards, and even business loans as well. Now if there is increased spending this will translate into inflation in the long run - inflation is the enemy for Bonds. Bonds deliver a fixed rate of return, and the value of that return is eroded by inflation. So Bond Traders sold, the price of Bonds moved lower, and home loan rates moved higher as a result. This is counterintuitive to many...but its reality!

THIS WEEK - Fastener your seat belt...we have an action packed economic calendar this week. (Consumer Confidence and Sentiment, New and Existing Home Sales, GDP, Manufacturing) Simply name the report and this week will have it. On Friday we will have the Big Dog" of reports that will lmake all other look small: the highly anticipated Personal Consumption Expenditure (PCE) Index. Why is it so important? This is what the Fed watches most carefully to gauge consumer inflation.

We all know that the Fed feels inflation is presently under control, if not they would have never cut to the Fed Funds Rate. So will this important report show a tame read on inflation, and confirm the Fed's move to cut? Fed Chairman Bernanke and his fellow inflation-fighters at the Fed certainly hope so. Inflation-hating Bonds would also appreciate news of soft inflation, and home loan rates her in the Triangle could improve as well. But what if the report shows stronger than expected consumer inflation? If it does, inflation-hating Bonds will react negatively, and home loan rates Raleigh and Cary will move higher in response.

Cary Mortgage Information – Kevin Martini - (9/10/07)

Kevin Martini (SunTrust Mortgage) — Sun, 09 Sep 2007 10:45:43 -0700

Last week - I was reminded of that Bob Seger song..."BREAKDOWN, TAKEDOWN...YOU'RE BUSTED!" That song describes the market last week, as the Stock market suffered a breakdown, analysts got a takedown, and many investors felt (including me) they were busted as Stocks sold off hard on Friday. What happened? Simply the result of a super lousy Jobs Report number on Friday morning. US job growth in August was actually negative for the first time in four years, with a loss of 4,000 jobs. And the shocker was that analysts had expected somewhere close to 110,000 new jobs to be created!

But while Stocks suffered on the news, Bonds benefited, meaning that Cary, NC home loan rates on conforming loans improved in by .125% to .25%. Additionally, the gloomy Report also means the Fed is almost guaranteed to make a cut to the Fed Funds Rate at their upcoming meeting on September 18th to help stimulate a sagging economy. And in fact, their cut now may be a .50% cut, rather than the .25% that has been speculated.

This action would help stimulate business at large, with less expensive costs to borrow - and also help consumers as well. The Fed Funds Rate impacts many other borrowing rates, such as Home Equity Lines, credit cards, car loans and the like.

This week - I wonder if all the back to school buying that happened last month will help boost this week's read on August Retail Sales? It's the biggest economic report coming this week, due to be delivered on Friday morning. It will be interesting to see if the turmoil in the financial markets during August had an impact on consumer spending. A strong Retail Sales Report would be good news for Stocks, but could pull money away from Bonds, causing home loan rates to worsen. A weak report would have the opposite effect, dragging Stocks lower, but helping Bonds and home loan rates improve.

But before we even see the biggest report next week, Retail Sales Report, Bonds will be fighting a very tough technical battle. Previous ceilings of overhead resistance can prevent the Bond from moving higher and helping home loan rates improve - and there is a tough ceiling lying in wait right now for Bonds.

In the absence of any scheduled economic releases until Friday's Retail Sales Report, Bonds may find it tough to power through the ceiling and bring improvement to home loan rates...unless Stocks continue to falter. If the Stock market continues the plunge it saw last Friday, money being pulled away from Stocks could flow over into Bonds, which would help home loan rates improve.

Kevin

Cary Mortgage Information – Kevin Martini - Last Week...This Week (For the week of August 27, 2007)

Kevin Martini (SunTrust Mortgage) — Mon, 27 Aug 2007 06:21:16 -0700

Last week - Bernanke and the Fed have helped to stabilize the financial markets, and calmed some of the "credit crunch blues". Just over a week ago, the Fed made a decision to lower the rate at their "Discount Window", allowing banking institutions another method of providing assurance of liquidity to their clients, and also helping many institutions continue to fund home loans. Because of the Fed's action, the past week was somewhat calm in the financial world...at least calmer than has been seen in awhile. Both the Stock market and the Bond markets moved higher, and conforming home loan rates remained stable to VERY slightly improved.

Now some good news arrived on the housing front via the New Home Sales report, showing a 2.8% increase in sales for July, and an upward revision to June's numbers as well. Now unsold new home inventory continued to decline for the fourth consecutive month, falling by 1.0% to 533,000 homes. This inventory represents a 7.5 month supply, down from the 7.7 month supply in June. The median new home sales price went up to over $239K.

This week - it appears that Bonds will have double challenge of "fundamentals" and "technical's" to overcome if home loan rates are to see much improvement in the coming week.

"Fundamentals" are the news items and reports which can influence Bonds and home loan rates. In general, hot or positive economic news tends to help Stock prices get better, but causes Bonds and home loan rates to worsen - and vice versa. This week, there will be a slew of potentially high impact reports in store, ending with a very important read on inflation by way of the Core Personal Consumption Expenditure Price Index (PCE).

Don't forget we also have the "technical" factors to contend with too. One part of technical analysis means looking at where Bonds are trading now, versus where they have in the past, and thinking about what patterns are likely to repeat themselves. Remember that when Bond prices move higher, home loan rates move lower.

Today we are at the 200-day Moving average. Historically speaking, the 200-day moving average has proven to be a very tough ceiling to break, when Bonds are beneath it and attempting to move higher. In my opinion, it has also been a strong floor of support, when Bonds are trading above this level, helping to prevent home loan rates from worsening. Today Bonds are below this level, a break out higher would mean that home loan rates would improve - but it has been a tough level to beat in the past, and this ceiling may slow down or cap any improvements or advances that come via economic news.

Kevin

I am back!!!

Kevin Martini (SunTrust Mortgage) — Thu, 23 Aug 2007 18:43:09 -0700

Hello Blog Friends,

Please excuse the personal nature of this blog but with the recent wealth of "offline" thoughts, I wanted to share my current position. The last weeks reminds me of the song, "What A Long Strange Trip It Has Been". Two weeks ago Monday night I went to bed as a HomeBanc Associate. This week I will be going to sleep as a Countrywide Associate. It is official and I am pleased to announce I am now a Countrywide Associate.

I know there has been much speculation over the past weeks that has been circulated by the media, competitors and others. Some of it is true, some of it is exaggerated, all of it is interesting. Let this e-mail crystallize that I am not only alive and well, but excited about the opportunity to combine my mortgage expertise and professionalism with the Countrywide brand and platform to serve your present and future clients.

Trust me when I tell you...I am OPEN FOR BUSINESS...not out of business.

I have built a great business relationship over the past with my Realtor partners and look forward to continuing it. In additon, I hope that you have found my blogs informative about the economic landscape.

On a personal note, I would like to thank you all for your inquiries and concerns over the past week. It was touching to have so many of you contact me to simply say " I heard the recent news and I am here for you". The kind words were reassuring encouragement during the change from the past (HomeBanc) to the future (Countrywide).

Being recognized as the #44th Top Orginator in the country by Mortgage Orignator Magazine, I had several offers to weigh. I wanted to share with all my blog friends, why I selected Countrywide to be my new home. As you all know, the current market is is extremely volatile.

Countrywide is operating a massive business - they are the number one mortgage lending company in the nation. Let me share they dominate the business and can weather the current enviorment: Countrywide Financial Corporation remains the nation's largest mortgage lender with close to $14 billion of net worth, significant excess capital and strong investment grade credit ratings. I cannot control what people say, I can, however, focus on the facts that supported my decisionto join thier team.

FACT: Countrywide has an "A" rating and stable outlook has been reaffirmed by two of the most important credit ratings agencies, Moody's and S&P.
FACT: Countrywide has delivered over $900 million in net earnings in the first half of 2007.
FACT: Countrywide is ranked #91 on the Fortune 500 rankings, and 70th most profitable company in the United States in the same rankings.
FACT: Countrywide remains very profitable and in fact has been profitable for over 100 consecutive quarters.
FACT: Countrywide has acquired valuable assets from other companies this year, while numerous other lenders have shut their doors entirely.

Please know that I am confident that myself and Countrywide will allow us all to help individuals and families achieve and preserve the dream of home ownership.

Thank you again for all your your support, it was and still is truly appreciated!

Kevin

Liquidity Crisis...Margin Calls...WHAT IS GOING ON????

Kevin Martini (SunTrust Mortgage) — Mon, 06 Aug 2007 05:38:57 -0700

Mortgage Financing...What's Going On?

Anyone watching or reading the financial news this weekend, over the last few days and weeks has seen a lot of anguish and dismay over the state of the mortgage industry. In fact, one of the larger lenders in the US, American Home Mortgage, was forced to shut down operations last week. But why? What is happening, and most importantly, what does all this mean to you if you are in the industry or thinking of buying or refinancing a home in the Raleigh, Cary of the Triangle? Let me try to share my opinion so that you understand the truth behind the headlines.

Over the past several years, many loans were made to homeowners with somewhat non-traditional or "non-conforming" situations, be it a poor credit history, inability to document income, or any number of factors that do not fit within the traditional "box" for home loans. These loans are often called "Sub-Prime", or "Alt-A", meaning that they were somewhat riskier in nature than A credit, prime, or traditional loans. Another type of "non-conforming" home loan is one where the credit and income might be perfectly fine, but the loan amount is higher than $417,000 (which is the current maximum loan that can be done using pools of money from mortgage giants Fannie Mae and Freddie Mac). If the loan amount is higher, it can certainly be done - it's called a "jumbo loan" - but the end money does not come from Fannie Mae or Freddie Mac...it comes from private institutions that are not government sponsored like Fannie Mae and Freddie Mac.

In Raleigh non-conforming loan product rates popped significantly higher in the last week. Here's the scoop.

The end investor for "Sub-Prime" or "Alt-A" loans will charge a premium for taking on a pool of these loans, because they know that traditionally, they might have a higher rate of default and delinquent payments within that risky pool. But lately, default and foreclosure has been on the rise - partly due to the fact that with credit tightening and a shifting national real estate market (FYI - Forbes recently cited Raleigh as the best place to sell a house), many troubled homeowners nationally are unable to refinance or sell in order to get out of trouble. So now, these end institutions are demanding a much higher "risk premium" for taking on these pools of loans, as they see the rates of default are climbing higher.

But since these institutions are purchasing these pools of loans sometimes months after the borrower has actually closed at a given rate, this increase to the risk premium means that instead of paying $101K for a $100K loan that will bear interest, they may only be willing to pay $95K for that $100K mortgage to account for the risk. Now multiply that times thousands upon thousands of loans...and you have millions upon millions of dollars in loss for the company trying to sell the pool at a much lower price than they were expecting. This is called a "liquidity crisis", and is exactly what happened to American Home Mortgage - there was no mismanagement, but they simply got caught holding too many "hot potato" loans, forced to sell them at massive losses...and eventually they had to make the decision to close the doors and stop the bleeding.

Further, even when a lender is able to take some losses, they may be subject to a "margin call". This means that as their losses and risk premiums increase, the value of their loan portfolio decreases. As the value decreases, the credit lines that are secured by those portfolios begin to issue margin calls as the value of the asset that they are secured on is now diminished. This is exactly like margin calls in the Stock market. If you have a loan against a Stock that is losing value, you will get a "margin call" and need to pay down the loan, as the underlying Stock is losing too much value to be considered adequate collateral any longer. So for the big lenders, as their portfolio is losing value due to increased risk premiums and losses...the margin calls start coming in, and they are required to pay down their balances. In turn, this means that they have less availability to fund their new loans, which then exacerbates the problem.

In response to seeing this situation play out in the demise of American Home Mortgage, lenders of other non-conforming loan products increased their interest rates dramatically almost overnight to be better prepared - and likely over-prepared - for increased risk premiums down the road. Even though loans above $417,000 are not presently suffering from increased delinquencies like the "Sub-Prime" and "Alt-A" loans are, these rates popped higher as well, because they are being purchased by smaller private entities that can't afford to take on any margin of risk.

What happens next, and what should you do now?

The present situation will likely settle out over the coming year, and the rates on products that have moved so significantly higher now should trend lower down the road as delinquency rates stabilize. But here are a few important things to do right now.

First, even if you are not presently in the market for a home loan of any type, call me or visit my site at www.FreeRaleighMortgageInfo.com to make sure that your credit standing is as solid as possible. Many people I talk to about home loans didn't expect they would have a need, and didn't plan in advance to ensure their credit would qualify them for the best possible financing. With no immediate need for a home loan, time will be on your side...why don't we take a few minutes together and just make sure you are prepared, should a need arise down the road?

Next, if you are in the market for a home loan, or know someone who is - know that now is time to be working with a real qualified professional who can keep you informed of changes in the market and get your loan funded quickly. Now is NOT the time to be playing the risky game of trying to scour the entire nation to find someone who promises to save you a measly amount on costs, or deliver a rate that seems too good to be true. Your home and your financing are just too important, and times have changed. I am here to help and advise during these volatile times - and would welcome calls from you, your friends, family, neighbors or coworkers.

Kevin Martini

http://www.freeraleighmortgageinfo.com/

Raleigh Mortgage Information – Kevin Martini - Last Week...This Week (For the week of August 6, 2007)

Kevin Martini (SunTrust Mortgage) — Sun, 05 Aug 2007 18:53:07 -0700

Last week

GOOD, BAD OR UGLY? I truly believe all off the above, if we're looking at last week and home loan rates in Raleigh, Cary and the entire Triangle. Good news came in the form of the very friendly inflation and employment news, which helped rates on conforming home loans improve by about .125% over the course of the week. "Conforming" home loans are those under $417,000, and subject to very standard credit, income and asset qualifying, nothing exotic or designer, outside the box or fancy - and there's a reason those are being singled out here as having improved.

A little bad news came by way of the Bureau of Economic Analysis, revising previous personal savings rate estimates higher, but showing that Americans still save less than 1% of their income. If you're not sure that you are preparing effectively for your future plans, like retirement or sending your kids to college, please get in touch with me, and let's review your situation to see if I have an idea or referral that might help.

The ugly last week - well, it was REALLY ugly. The media screamed all week about issues in the mortgage industry, particularly impacting what are called "non-conforming" home loans; those that are dollar amounts higher than $417,000, or with credit, income or assets not falling under traditional guidelines. Many of those rates got excessively ugly, in many cases, overnight. Why? It's an interesting story, and not one that even the media seems to understand very well. I will share my opinion in a future post.

This week

Whew!!!!...after a busy week of expected and unexpected news last week, the economic report calendar becomes very tame this coming week, only populated with a handful of low-level reports. In fact, the week's only MAJOR event takes place on Tuesday with the release of the Fed's latest interest rate decision and monetary Policy Statement. The Fed is expected once more to keep their Fed Funds interest rate "on hold" at 5.25%.

I am most interested in the tone and wording of the Fed's Policy Statement. Are they feeling more comfortable about inflation, given the inflation friendly news of last week? If this sentiment leaks into the verbiage of the Policy Statement, Bonds may get a ride higher upon the release, and home loan rates would improve. However, if Fed Chair Ben Bernanke and his fellow inflation fighters at the Fed still sound concerned about inflation, Bonds and home loan rates could worsen.

Kevin Martini

www.FreeRaleighMortgageInfo.com

Raleigh Mortgage Info – Kevin Martini - Last Week...This Week (For the week of July 30, 2007)

Kevin Martini (SunTrust Mortgage) — Mon, 30 Jul 2007 07:10:51 -0700

Last Week...

Although the heat is on weather-wise in the Triangle, our recently overheated Stock market suddenly took an icy plunge lower this past week. Just as quickly as the Dow had cracked the record level of 14,000, Stocks reversed course and lost 586 points for the week overall. The big cool down was triggered by a few different factors, including several weak Stock earnings reports and continuing concerns about the backlash from the subprime mortgage situation and tightening mortgage credit. And when the mood in the Stock market went sour, it happened fast - Traders and investors unloaded Stocks hand over fist.

But when they sell off Stocks, that money has to get parked somewhere, right? The glad beneficiary of the selling was the Bond market. As money flowed out of Stocks and into Bonds, the Bond market overall enjoyed a move higher with the influx of money, helping home loan rates stabilize and even improve very slightly in Raleigh and Cary, NC.

This Week...

It is my opinion the heat is on - and will stay on for the week ahead! The volatile Stock earnings season continues, and as if that weren't enough, the economic calendar also holds several big potential market movers.

Lots of economic reports are due for delivery this week, including Tuesday's look at the Fed's favorite measure of inflation, the Personal Consumption Expenditure index, and wrapping up with a bang on Friday with the monthly Jobs Report. If the week's inflation numbers meet or are lower than expectations while the data for the economy is worse than expected, Bond prices should continue their recent upward trend and home loan rates will improve. However, if the reports reek of inflation or an overheated economy, Bond prices could quickly lose their recent gains, and home loan rates will worsen.

Martini

www.FreeRaleighMortgageInfo.com

Raleigh Mortgage Info - The Martini Factor - Last Week...This Week (For the week of July 23, 2007)

Kevin Martini (SunTrust Mortgage) — Sun, 22 Jul 2007 18:22:20 -0700

Last week: Stocks surged to cross the 14,000 mark on the Dow for the first time ever. The party was short, just as the excitement started so did a disappointing earnings report from Wall Street and my own darling Google. Suddenly, the Stock that could do no wrong was showing chinks in the armor, and led to fears that other Stocks might follow suit, which caused an across the board sell-off. But every cloud has a silver lining - the money coming out of Stocks was parked over into Bonds. This is fantastic for the interest rate market. Hence, this helped home loan rates improve from levels hit earlier in the week, and end up about .125% better for the week overall.

If Dow 14K was not enough excitement, Fed Chairman Ben Bernanke took center stage last week, speaking to Congress about inflation, housing, and the economic outlook. He stated that although the recent inflation numbers have been moderating, the Fed remains very concerned about inflation. He underscored that they are staying very alert to economic changes and indicators, but based on their continuing concerns over inflation, it is my opinion that there will not be a cut to the Fed Funds Rate in the near future.

This week: So what's coming around the bend for Bonds and home loan rates this week? The economic calendar will be slimmer than last week's, but will include a look at the housing market with Existing and New Home Sales being reported on Wednesday and Thursday. Stocks may also continue to drive the action in Bonds, as investors will again be closely watching Stock earnings reports this week, and making decisions on where their dollars are best invested - in Stocks or in Bonds.

In closing, I want to take a moment to introduce my new website located at www.FreeRaleighMortgageInfo.com. It is my goal to make this site a great resource for people interesting in buying, selling or refinancing property in the Triangle.

Have a great week!

Kevin Martini

Raleigh Mortgage Info - The Martini Factor - Last Week...This Week (For the week of March 19, 2007)

Kevin Martini (SunTrust Mortgage) — Mon, 19 Mar 2007 02:14:25 -0700

This Week

Last week, you couldn't watch the financial news for longer than a few minutes without hearing about the "subprime meltdown", talking about a certain type of home loan experiencing heavy rates of default and foreclosure, and what the potential consequences might be on the US economy. Please know that subprime lending only represents a very small portion of home loans overall...I truly believe the media loves to share "doom-and-gloom".

Perhaps the "subprime meltdown" while it has been overblown, there certainly will be some ramifications. Overall, the news and hype did worry investors, and both Stocks and Bonds experienced an increase in volatility...but home loan rates in Raleigh ended up very close to where they started for the week.

In other news, Retail Sales came in a bit weaker than anticipated last week - but with a freezing cold February across most of the US, it wasn't exactly the best month to go hit the malls. The Producer Price Index (which measures wholesale inflation) and the Consumer Price Index (which measures retail inflation) both came in a bit hotter than had been expected, indicating that inflation has been stubbornly persistent in the economy. What must the Fed think of all this - and what will they do at their upcoming meeting?

This week

Friends, the week ahead holds a few real headliner news items, including a new round of housing data to sift through, including Housing Starts and Building Permits on Tuesday, and Existing Home Sales next Friday. But, the financial highlight of the week will be the Fed Meeting and resulting Policy Statement.

There has been rumors of a Fed Funds Rate cut to help the housing market or to smooth out the subprime home loan problem...I truly do not believe this will happen. The Fed's main charge is to control inflation, period. And they will only consider cutting rates if the core rate of inflation, as measured by the Personal Consumption Expenditure (PCE) Index, falls below 2% for a few consecutive months. The latest Core PCE was 2.3%, so don't look for Home Equity Lines of Credit or other adjustable home loan rates that are tied to the Fed's movements to be dropping anytime soon.

Kevin

Raleigh Mortgage Info - The Martini Factor - Last Week...This Week (For the week of March 5, 2007)

Kevin Martini (SunTrust Mortgage) — Mon, 05 Mar 2007 04:58:50 -0800

This Week

Last week's volatility in the markets stabbed at both the Stock and Bond markets, with Raleigh home loan rates swinging higher and lower throughout the course of the week. Economic news releases took a backseat to the massive movements in Stocks.

What happened? First, remember that the Stock and Bond markets compete for the same investment dollar. This means that when Stocks are worsening and investors are selling off their holdings, some of that money gets moved over into the Bond market, which helps home loan rates improve. And vice versa, when Stocks move higher and investors are buying into the Stock market, some of that money comes back out of Bonds, which causes home loan rates to worsen.

This week

So what's about this week? What will the story be? The increase in volatility, and even the recent decline, is actually perfectly normal. We have had a steady 7 month climb we have seen in Stocks was unusual, and the current 1000-day streak without a 10% decline is the second longest in history. So looking ahead, it would not be a surprise to see Stocks find their way even lower over the near term, before regrouping and making another run at new highs. The fact that outflows from Stocks are being "parked" into Bonds is a long term plus for Stocks, due to the temporary nature of this trade. This also tells us that Bonds and home loan rates will be a short term beneficiary, but will be adversely affected once Stocks start to rebound.

This week holds only one potentially major market-moving economic release, the February Jobs Report. Initial estimates are calling for the creation of 100,000 new non-farm jobs, down from January's report of 111,000 new jobs.

Kevin

Raleigh Mortgage Info - The Martini Factor - Last Week...This Week (For the week of February 26, 2007)

Kevin Martini (SunTrust Mortgage) — Mon, 26 Feb 2007 04:59:32 -0800

This Week

Not much to report from last week. It was a short week and as expected, the economic news and was super thin. As discussed in previous postings, when there is an absence of data the Wall Street Warriors scrounge around looking for information to trade on, and often find extra significance in financial events that might ordinarily be overlooked. Raleigh mortgage rates bumped around a bit midweek, but ended up almost exactly where they started.

I have one true concern form last week. The US Treasury auctioned off $13 Billion in 5-year notes, and the level of foreign buying of these notes was much lower than expected. Strong foreign demand for our Bonds has helped keep our US Bond prices high and interest rates low - so the auctions are important to watch.

Watch the stocks! News from other US financial markets showed stocks might be ripe for a move lower. In fact, the S&P 500 has gone almost 1000 trading days without suffering a 10% decline, this is the second longest stretch in history. So something to watch - if Stocks do a back up, Bond prices and home loan rates may benefit, as money flows out of Stocks and into Bonds.

This week

Get READY! Traders will have to be at the top of their game, and be ready to deal with some fast and furious economic calendar action. In the manufacturing sector, we'll have the Durable Goods Orders report on Tuesday, the Chicago Purchase Manager's Index on Wednesday, and the national ISM Index on Thursday. In Housing, we will see Existing Home Sales on Tuesday, New Home Sales on Wednesday, and Construction Spending on Thursday. Other important economic news will include Consumer Confidence on Tuesday, Preliminary 4th Quarter GDP on Wednesday, and the Personal Income and Spending report...and if that weren't enough, the critically significant Personal Consumption Expenditure inflation data on Thursday.

If the news of the week comes in looking like the economy is hot, with higher inflation to match, expect to see Bond prices worsen and home loan rates increase. If the news shows some economic weakness and reduced inflation, Bond prices and home loan rates will improve.

Kevin

Raleigh Mortgages - The Martini Factor - Last Week...This Week (For the week of February 12, 2007)

Kevin Martini (SunTrust Mortgage) — Sun, 11 Feb 2007 07:42:47 -0800

This Week

If you were in the market to buy new Bonds; then last week was your week. Over $35 Billion in new Bond were offered by the US Treasury. The auctions were well received throughout the week. It is my opinion that how well this auction is received because it a gauge for investor appetite. With dull buying means that buyers feel that rates will be higher down the road. But as I mentioned, last week's offering was well received by both US and foreign investors, which means that they feel that the rate market will remain somewhat stable ahead. Bond buyers who seek a safe, high rate of return on their money love our US Bonds - and their continued investment in our Bond market has helped keep Bond prices high, and therefore, home loan interest rates low. Based on the good result of the auctions, Bond prices and home loan rates improved throughout the week, but then lost some ground on Friday to end the week right back where they started.

So what happened? First, it is what I call technicals......traders saw prices as topping out, and decided to sell and take their profits. Additionally, there were several Fed officials on tour, including St. Louis Fed President William Poole. Poole mentioned increased defaults in home loans to risky borrowers, and said that rates may rise as a result. A Fed official simply whispering "rising home loan rates" was enough to spook Traders on Friday.

This week

Everyone please remember that this week cupid will be on the prowl. The week has a host of potentially market-moving reports...and at the heart of it will be Retail Sales coming out on Valentines Day. Isn't that special!!! This report may come in a little stronger than normal due to all of the gift card purchases made during the holiday season. You see, Retailers do not count gift cards as sales - until they are redeemed. So since gift cards were such a hot holiday item this year, many recipients may have gone on spending sprees in January, thereby leading to a potentially hot Retail Sales number this week, which would pressure home loan rates higher.

After a couple of weeks of improvement, Bond prices hit a tough ceiling and have retreated lower. Unless there is some Bond-friendly economic news in store, Bond prices will likely follow this trend, causing people looking for a Raleigh mortgage to see thier rates to worsen slightly this week.

As always, your feedback and thoughts are welcome.

Kevin

Raleigh Mortgages - The Martini Factor - Last Week...This Week (For the week of February 5, 2007)

Kevin Martini (SunTrust Mortgage) — Mon, 05 Feb 2007 03:08:10 -0800

This Week

I told you all last week to have your seat belts on...what a wild week of twists and turns due to the full economic calendar...the great news is the Bonds gained back some speed . Last Friday brought the monthly Jobs Report. The highly anticipated Jobs Report showed 111,000 new jobs were formed in January - and while this was below expectations of 150,000 but, there was revisions to the prior months which added 80,000 jobs to previously reported numbers! So if you take the average...we have a gain of 40,000 jobs per month and add it to January...hence the number right in line with expectations,.

Last Wednesday, it was no surprise to me when the Fed decided to keep the Fed Funds Rate unchanged at 5.25% - they indicated there willingness to keep a vigilant eye on inflation, and promise to raise rates further if inflation picks up any steam. The Fed has a favorite. And their favorite is the Personal Consumption Expenditure Index, which indicated that inflation looks to be moderating. I truly believe that the Fed likely made the right move

The personal savings rate remains negative for the US, showing that Americans actually spend more than they make across the board. In 2006, the savings rate was a negative 1.0%. This is the lowest savings rate since The Great Depression in 1933! If you feel your own savings plan may need some beefing up - please feel free to contact me.

This week

After last week's line up of high impact news and reports, this weeks economic calendar only has a few minor releases. Technical signals, in my opinion play a bigger role in the direction of home loan rates ahead. It is my thesis this week that upward momentum of Bond prices will continue (assuming no major surprises) and this will help home loan rates. Please remember when the Bond goes up, home rates go down.

As always your feedback is welcome.

Kevin

Kevin Martini - Mortgage Banker - kmartini@HomeBanc.com

Raleigh Mortgages - The Martini Factor - Last Week...This Week (For the week of January 29, 2007)

Kevin Martini (SunTrust Mortgage) — Sun, 28 Jan 2007 05:02:26 -0800

This Week

What a week! Many reports indicated stronger than expected data and signs of a strong economy. This was bad news for Bonds and home loan rates, as with of good news, investors tend to pull money from safe-haven Bonds and inject them into Stocks, which have a better chance of profiting from a strong US economy. Overall, home loan rates worsened by about .125%.

In my opinion very decent news on the housing front, as New Home Sales came in better than expectations, and while Existing Home Sales were slightly less than expected, both enjoyed improved paces of inventory.

Last week allowed us to look at last year. Did you know that, 2006 represented the 3rd best existing home sale market on record. I am to the opinion that sometimes the media has to always spin good news. Here is their spin...steep drop from 2005 to 2006, and the fact that sales haven't fallen off this much year-over-year since the early 80's.

Just the facts please:

2006 is coming off a record year in 2005, so to see a drop off in record levels is not unexpected.
The media is comparing the drop in year-over-year sales to the early 80's - but in 1982 the national unemployment rate was 9.7% (that is more than double unemployment rate today)

As I have stated in previous posts, my thesis is that August 2006 was the bottom of the housing market. This will be great for Raleigh Home-Buyers, Raleigh Realtors and Raleigh Mortgages.

This week

PUT YOU SEAT BELTS ON...this week highlights a very juicy and potentially market moving economic calendar. We get to see the Fed's favorite measure of inflation, Personal Consumption Expenditures (PCE); the always intriguing monthly Jobs Report; and yes there is more...the next interest rate decision and policy statement from the Fed.

The most recent reports seem to indicate that inflation is cooling, and responding to the Fed's long string of rate hikes during 2005 and 2006. If the reports of the week show inflation moving higher, or if Friday brings a hot jobs number - Bonds could move lower and cause home loan rates to move higher.

(on a technical note...Bonds and home loan rates holding their ground is a nice floor of support. Yes Bond pricing and home loan rates have worsened slightly since the beginning of the year, this level might just help stop the bleeding if the upcoming news does indeed come in hot.)

As always your feedback is welcome.

Kevin

Kevin Martini - Mortgage Banker - kmartini@HomeBanc.com

Raleigh Mortgages - The Martini Factor – Last Week…This Week (For the week of Jan 22, 2007)

Kevin Martini (SunTrust Mortgage) — Sun, 21 Jan 2007 06:05:26 -0800

Last Week

Last week's economic news should have been enough to make bonds and in turn home loan rates make a move, but they didn't. A "flurry" (or if you prefer a wintery mix) of stronger than expected economic reports hit the streets, indicating a resilient economy. Strong economic news usually indicates good things for US businesses - which tends to push money out of Bonds and into the Stock market. We also know that strong economic data can point to higher inflation, which is the nemesis of bonds. So when money flows out of the Bond market, the value of Bonds fall - and since home loan rates are tied to Bonds, this in turn causes home loan rates to rise.

Here were some headlines from last week...the inflation measuring Consumer and Producer Price Indexes (CPI and PPI) both were hotter than expected, showing some lingering inflation in the economy; Housing Starts and Building Permits were both reported as better than anticipated; Initial Jobless Claims were lower than expected, indicating a strong labor market; the Philadelphia Fed Manufacturing Index was higher than estimated; and to top off the week, the Consumer Sentiment Index came in very strong - a three year high! But a closer look at the inflation numbers showed that prices are only increasing at a slightly higher pace than desired by the Fed, which keeps inflation as a concern, but in my opinion not a reason to panic.

Bonds and home loan rates ended up the week only slightly worse than where they started.

This week

This week will be a slow news week (as it relates to economic reports). PLEASE NOTE: anytime the planned economic news calendar is thin, Traders will pay more attention to other types of news and headlines, trends from other markets, and technical factors often step up to play a larger role as well.

Bond prices moved slightly lower, but enough to fall through a "floor of support" last week - and if the trend continues this week, it could cause home loan rates to rise.

It is my opinion , the item of most interest this week will be New and Existing Home Sales data. I truly believe the housing market nationally is stabilizing, so the numbers on average sale prices, inventory and volume of sales will be closely analyzed by the Traders. It is my thesis that the housing market hit bottom in August 2006...and home loan rates remain very low - so if you or someone you know has been considering the purchase of a home, now may be an excellent time to make a move forward.

Kevin Martini - Mortgage Banker - kmartini@HomeBanc.com

The Martini Factor – Last Week…This Week (For the week of Jan 15, 2007)

Kevin Martini (SunTrust Mortgage) — Sat, 13 Jan 2007 19:02:37 -0800

Thank you all for the wonderful posted comments and personal e-mails. Please know I am planning to post "The Martini Factor - Last Week...This Week" weekly. Best case it will be posted late Saturday evening and worst by mid Monday mornings.

Last Week

Martini Factor 101... good economic news tends to be poor for bonds and poor home loan rates. Know that stocks and bonds compete for the same investor. Hence good news on the economy generally causes investors to retreat from Bonds and into Stocks. Good news for the US economy most of the time means that inflation is going to rear it ugly head. Inflation is the nemesis of Bond prices and home loan rates.

Last week we had great news for housing...Mortgage Applications showed the largest percentage increase since mid 2005. (this includes re-fi & purchase). This was poor for rates? Simply put this shows potential inflationary pressure. I read this as great for our industry...rates are favorable...markets are stabilizing...I truly believe if anyone is thinking of purchasing or refinancing, NOW may be the time. Retail sales also had great numbers...the best in over a year. Then from across the pond this week, the Bank of England (England Fed) shocked everyone by raising their rate 0.25% (this is like tour Fed raising the rate).

This Week

Markets will be closed on Monday in observance of Dr. King.

This coming week will certainly provide some "fuel" to trade on, and likely cause some motion - but the direction of that movement will fully depend on the news.

We have some big inflation news is in store with the Producer Price Index (PPI) on Wednesday and the Consumer Price Index (CPI) on Thursday. There will also be news from the Manufacturing sector sprinkled throughout the week, and Housing will take some of the spot light on Thursday with the latest Housing Starts and Building Permits data. If the data comes in suggesting a slower economy and lower inflation, Bonds will likely regain their legs and help home loan rates improve. {WHEN BONDS GO UP...YIELD GOES DOWN...WHEN YIELD GOES DOWN...HOME LOAN RATES GO DOWN} But if the data has that familiar smell of inflation...Bond prices will head lower and home loan rates will worsen. {WHEN BONDS GO DOWN...YIELD GOES UP...WHEN YIELD GOES UP...HOME LOAN RATES GO UP}

Martini

Kevin Martini

KMartini@HomeBanc.com

What happened last week & What will happen this week???

Kevin Martini (SunTrust Mortgage) — Mon, 08 Jan 2007 04:41:42 -0800

LAST WEEK (1-1 to 1-5-2007)

Fascinating things were going on behind the scenes on Thursday afternoon...here's what happened.

Late last week, analysts reduced their estimate for Friday's Jobs Report number from 115,000 to 100,000...this clearly indicating much lowered expectations in new job growth. Their predication was based on ADP reported job loss for the previous month and the FED sharing it thought the employment market would be cooling. That means ...when Bond traders saw the late change in analysts formal expectations, they gobbled up even more Bonds ahead of the Jobs Report - figuring that the number would likely come in low, Bond prices would rally, and home loan rates would improve. {WHEN BONDS GO UP...YIELD GOES DOWN...WHEN YIELD GOES DOWN...HOME LOAN RATES GO DOWN}

But this was not to be. When the numbers from the Jobs Report were posted, Traders were stunned to see an unexpectedly high December Jobs number of 167,000, with the Unemployment Rate holding steady at a very low 4.5%. Additionally, the Average Hourly Earnings in December shot 8 cents higher or 0.5%, far ahead of the 0.3% rise expected. This brings the average US hourly rate of pay to just over $17. Bond Traders quickly realized they were positioned on the wrong side of the market and began to sell, sparking a move lower in Bond pricing, and giving back some of the gains made previously in the week. {WHEN BONDS GO DOWN...YIELD GOES UP...WHEN YIELD GOES UP...HOME LOAN RATES GO UP}

THIS WEEK (1-8 to 1-12-07)

So...what will happen this week? In terms of economic news, the week ahead will be fairly slow, until Friday's potentially high impact Retail Sales Report. And whenever the market lacks economic reports and data to trade on, technical indicators like historic highs, lows and trendlines will generally take center stage. The great news is the technicals are on our side.

There will be 5 reports this week that may effect rates. The 3 big ones are Inital Jobless Claims (1/11/2007)...Retails Sales & Retail Sales ex-auto (1/12/2007). It is my opinion that Fridays reprts will have the highest impact.

Kevin

Forecast for the year ahead

Kevin Martini (SunTrust Mortgage) — Sun, 07 Jan 2007 16:25:12 -0800

It's that time of year again...I am ready to lay out our thoughts and forecast for the year ahead. They say "hindsight is 20/20", and looking back, I an quite proud of how my past predictions have held up, especially in terms of interest rates. So crystal ball, Ouija board, and Tarot cards aside, I will do my best to see into the future, and how 2007 might look on some specifics that could impact those looking to to purchase properties or refiannce properties.

The big picture

Let me tart out by looking at the US economy at large. Things began to slow down in 2006, which was not only needed after its former torrid pace, but also exactly what the Fed wanted to see happen. A "soft landing" for an overheated economy is something you often hear the Fed wants, but rarely can achieve...yet so far, the cooling has indeed been gradual and orderly. We expect more of the same in 2007 - a gradual cooling, without the economy crashing.

Job growth will likely stabilize, and unemployment rates may click just very slightly higher as the economy cools. Overall, the labor market in the US remains quite strong. And this is good news for the housing market, since healthy job markets often help housing markets remain stable. The more susceptible areas for increasing unemployment and flat or declining job growth are where manufacturing plays a key role in the local job scene, since the manufacturing sector never fully recovered as strongly as other parts of the US economy.

Drum roll please...

And of perhaps the most interest - no pun intended - where do I see mortgage interest rates in 2007? Last years forecast was incredibly accurate, which called for rates to be above 6% and below 7%, with an average between 6.25% and 6.625%...which is exactly how the year played out. For 2007, I actually see interest rates slightly lower, within a range of 5.75% and 6.75%, with a sweet spot between 6.00% and 6.375%.

Martini

Kevin Martini - 919-274-3700 kmartini@homebanc.com