While basic understanding of the "book smarts" within the mortgage industry will help you understand specific terminology, loan programs, and features, there is so much more you will need to know in order to make an informed financial decision.
My approach to providing education strives to further your understanding beyond the "book smarts" of the mortgage industry, and learn the valuable "street smarts" that will help you achieve the best possible results, while avoiding the most common pitfalls that non-informed Borrowers and Real Estate Professionals have experienced.
The Mortgage Street Smarts of where mortgage interest rates are going (and why):
The following information is current as of Monday 12-27-10. If you are a Buyer/Borrower who is still on the fence (or if you are a Real Estate Agent attempting to educate your "on the fence" Buyer), please review these trends and secure an historically low interest rate before it is too late.
The following chart shows the market activity thus far today (hint: upward activity is good, downward activity is bad):
The following chart shows market activity over the past 10 days (hint: green is good, red is bad):
The following chart shows market activity over the past 1 month:
Daily Interest Rate Snapshot
Market Analysis & Commentary
Analyst #1 (Neil Trenerry)
FNMA 30-YR 4.0%
Previous close 98.569
Opened Down 0.10bp @ 98.469
Key Economic Data:
EUR / USD 1.3145 Up 0.0023
USD / JPY 82.8358 Down 0.0477
GBP / USD 1.5407 Down 0.0037
OIL 91.07 Down 0.44
Gold 1,383.50 Up 2.90
Key Economic News:
Just the Dallas Fed's Texas manufacturing index this morning...
10:30: Dallas Fed manufacturing index for Dec...will it show continued growth? This index pulled back into positive territory in October after three months in seriously negative territory, and it rose significantly further in November. If the New York and Philadelphia Fed indexes are any indication, it will consolidate those gains in this report.
Median forecast (of 6): +17, ranging from +12 to +18; last +16.2.
Advice:
If the Dallas report comes in as expected we will probably see the market continue to sell off.
Short term lock, long term float
Analyst #2 (Bill Fisher)
Flirting with Uncertainties
As is so often the case these days, the economic indicators for housing are a good-news/bad-news story, and it seems that we get to guess whether the good is outpacing the bad. It still isn't obvious, though the economy does seem to be growing on the whole. Slowly.
We can find samples of good news in the November data on existing home sales, released last week. Sales increased by a sturdy 5.6% from October to November. Among existing single-family homes, sales were up 6.7%.
The Grinches will point out that sales are down by a whopping 27.9% from November 2009, but we need to remember that the 2009 sales were hugely inflated by the end of the federal homeowner tax credit program.
There is, though, a matter of some confusion. The good sales data for November were forecast by the latest Pending Home Sales Index, which suggested that completed sales in November and December would trend upward. However, the MBA Mortgage Applications index, measuring the growth or decline in the number of new mortgages being applied for, has fallen the past two weeks, with purchase money mortgage applications down 2.5% in the week ending December 17. Perhaps there is an explanation for the fact that these two real estate indicators are out of synch, but it isn't obvious.
Another cluster of important data provides precious little certainty about where we're headed. Personal incomes rose by a decent 0.3% in November, but wage growth was only 0.1%. This was in stark contrast with the strong 0.5% wage growth in October. Nonetheless, personal expenditures continued to rise at 0.4%, raising the question: Where did the money come from for increased spending if wages remained relatively constant?
Again, there is no clear answer. And the savings rate for the month declined once again, from about 5.7% to 5.3%. This is mildly worrisome.
Meanwhile the stock markets rose last week as if the economy were obviously improving steadily. The only thing here that is obvious is that stock market investors have their eyes on other indicators and economic news than what we've just reviewed.
Last Thursday, the Dow Jones Industrial Average rose 0.12% to 11573.49. That's its highest level since August 2008. We're approaching the levels enjoyed just before the Lehman Bros. fiasco almost brought the markets down.
The DJIA was up 0.71% on the week, and other indices improved similarly. But let's step back for a moment. As we've noted several times, the movements in the markets tend to be skewed by end-of-year tax trading and a general lack of certainty about where we'll be headed (assuming it's at all apparent) as the new year begins. It seems to have been a good time for investors to do very little except some holiday shopping. Though the DJIA rose gently, participation in the stock markets was thin; fewer than 3 billion shares traded on the day before Christmas, and that in a month when the average was 4.8 billion shares a day.
The takeaway, if there is one, may just be that there isn't a takeaway just now. The stock market continues to edge up and, because so many investors pull money out of bonds in order to buy shares of stock, rising stock share prices tend to be accompanied by lower bond values (which means somewhat higher yields). The HSH average 30-year fixed rate, which includes jumbo rates, was up to 5.15% this past week. The Freddie Mac average is moving toward 5%. The below-5% mortgage may well be on its way out. At least, many economists argue that it is.
It's a great time, therefore, to lock in today's rate, though it's higher than it was several weeks ago. It will probably continue to rise, and 4.9% will soon look very good, indeed.
For more information on topics like this, please feel free to visit www.MortgageStreetSmarts.com (an educational resource for Borrowers, Real Estate Agents, and Financial Professionals)
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