Preferred Market Watch in the News
A Mortgage Update from Jay Skwierawski for the Week of August 24
Hello Everybody!
Interest rates improved ever so slightly last week. Bad news on inflation was offset by a decrease in the price of oil. Most of the other economic news came in just as the markets anticipated. The news at the end of the week that the Korea Development Bank may be interested in acquiring Lehman Brothers brought some much needed confidence into the financial sector, which caused the stock market to rally. As is so often the case, investors pulled their money out of the treasury and mortgage bond markets to buy into the stock market rally. This caused a rally that had been happening in bonds to come to an abrupt halt.
Let's take a look at the news from last week:
On Tuesday, it was reported that the Producer Price Index (a measure of inflation at the wholesale level) was up 1.2 percent in July, double what was expected, with a year over year inflation figure of a very hot 9.8 percent! It was the biggest gain in 27 years. The "core PPI" figure, which strips out food and energy costs, was up 0.7 percent in July, well above expectations of up 0.2 percent, and leaving a year over year core inflation rate of 3.5 percent, the highest since 1991. The market reaction was actually quite muted, as most of the increase seems to be oil price driven, and the price of oil has dropped significantly since July, hitting a low recently of $111 per barrel, down from highs of $147 per barrel just a few weeks ago. Lower oil prices should result in lower inflation, as long as oil prices don't continue their trek higher. This week, oil reached a high of $121 per barrel on concerns over the dispute between Georgia and Russia, and a weakening dollar. Oil finished the week back down around $114, which bodes well for future inflation. Also on Tuesday, the government reported that new home starts came in at 965,000 units, which was slightly better than expected, yet still over 100,000 less than in June. At the same time, permits for new homes came in lower than expected. This housing news also helped to offset the worse than expected inflation news. On Thursday, First Time Unemployment claims came in close to the expected number. The Index of Leading Economic Indicators came in slightly worse than expected, and the Philadelphia Fed Index came in slightly better than expected. All three of these reports were treated as nonevents. The big news on Thursday was oil. As the price of oil rose on Thursday, so did interest rates!
Next week is a busy news week as far as economic reports go. Here's what we have to look forward to:
Monday - July Existing Home Sales came in this morning slightly better than expected (This report has a MODERATE impact on rates)
Tuesday - July New Home Sales are expected to show a slight decrease over June's sales. (MODERATE)
Tuesday - Consumer Confidence should show an increase, especially with gas prices coming down. (MODERATE)
Tuesday - The minutes from the most recent Federal Reserve Meeting will be released. The markets will be looking for signs of the future direction of interest rates. (HIGH)
Wednesday - July Durable Goods Orders are expected to show a decrease from June's numbers. (MODERATE)
Thursday - First Time Jobless Claims are released (MODERATE)
Thursday - Gross Domestic Product (1st revision) - The second quarter GDP is expected to show an increase over the original estimate of +1.9 percent. There is also an inflation index tied to the GDP - the GDP Chain Deflator. The GDP itself has a moderate impact on rates, while the Chain Deflator has a HIGH impact on rates, as do most inflation gauges.
Friday - Personal Income and Personal Spending are both expected to show decreases in July. (MODERATE)
Friday - Personal Consumption Expenditures (PCE) and Core PCE, excluding food and energy - These figures are the Federal Reserve's favorite gauges of inflation. They can have a very HIGH impact on mortgage rates.
Friday - Chicago Purchasing Manager's Index (PMI) - a gauge of the economy in the Chicago area is expected to show a decrease in economic activity in July. This report has a HIGH impact on mortgage rates.
Friday - University of Michigan Consumer Sentiment Index is expected to show an increase, especially with oil and gas prices falling. (MODERATE)
As far as economic news goes, it's going to be a very busy week. And this list doesn't even take into account the other things that can affect mortgage rates, like the price of oil, the skirmish in Georgia, the market's uneasiness about FNMA and FHLMC and the number of people that will be getting back on regular sleeping schedule now that the Olympics are over!
We will keep you posted on any major developments in the mortgage industry. Have a great week!
The chart above shows the price of mortgage bonds over the past 90 days, with the most recent days on the right. The price of bonds moves opposite mortgage rates, so on this chart, up and green are good, while down and red are bad. You will notice that the market started the week flat, rallied on Wednesday, tried to continue the rally on Thursday, but then sold off and finished flat on Friday. The end result - rates finished the week just about where they started.
Jay Skwierawski
President
First Sterling Mortgage Services, LLC
737 North Michigan Avenue, #1900
Chicago, IL 60611
312.268.7601
WE CLOSE ON TIME - EVERY TIME!
A Mortgage Update from Jay Skwierawski for the Week of August 17
Hello Everybody!
Mortgage rates remained flat last week, as bad news on inflation was offset by bad news on the economy. The mortgage market started the week in "sell-off" mode as fear of an interruption in the flow of oil from and around the Georgia area, due to its skirmish with Russia, caused oil prices to increase from low levels it had experienced the week before. As this situation seemed to resolve itself with a cease-fire being announced (whether it's a real cease-fire remains to be seen,) crude oil prices continued their trek downward. Other events and economic reports of the week included:
U.S. Crude oil inventories decreased last week. This sometimes is a sign of increased demand, which could put upward pressures on crude oil prices. Retail Sales for the month of July were reported -0.1 percent, which was as expected, and bad news for an economy that relies on the consumer. Retail Sales, excluding auto sales was reported at +0.4 percent, which was slightly worse than expected. The Consumer Price Index (CPI) came in at +0.8 percent, which was double the +0.4 percent that was expected, and showed inflation rising at a 5.6 percent level, year over year - the highest level since January, 1991. The Core CPI, which excludes volatile food and energy costs, was also up higher than expected at +0.3 percent. Mortgage and treasury bond markets would normally have sold off on such high inflation figures, but didn't, probably due to the fact that these July numbers reflected a period when oil prices rose to $147 per barrel, and they have since fallen back to $113. Markets usually trade on the anticipation of what is to come, and it is starting to anticipate lower oil and gas prices. The market was also helped by a report on first time unemployment claims that showed 450,000 new claims, which was hotter than the 438,000 claims that the market was expecting. This number continues to get worse, and shows a definite weakness in the labor market. Consumer Sentiment, Industrial Production and Capacity Utilization all came in close to expectations. The New York Fed Index came in a bit stronger than expected, but as traders delved into the report, they noticed that the prices paid component of the report showed prices decreasing, which was obviously good news, and bonds rallied as a result. By the end of the week, bonds had traded up and down, and finished mostly flat on the week. Mortgage rates did the same.
This week will not have as many economic releases, but those set for release will be carefully watched for signs of inflation and weakness or strength in the underlying economy. In addition, the markets will be keeping an eye on the price of oil, the situation in Georgia and continued strength in the dollar, which has been helping to bring the cost of oil and other commodities down. News scheduled for release this week includes:
Tuesday - Producer Price Index - This report shows inflation at the wholesale level. The market is expecting a reading of +0.5 percent, after a substantial increase of 1.8 percent in June. This report has a HIGH impact on mortgage rates.
Tuesday - Core PPI, excluding food and energy costs - This report shows inflation without volatile food and energy costs. It is expected to show an increase of +0.2 percent for July, same as in June. (HIGH impact on rates)
Tuesday - Building Permits and New Housing Starts are both expected to show decreases in July from June. Better than expected numbers could be a positive sign for the housing market. (Moderate impact on rates)
Thursday - Index of Leading Economic Indicators - This report is a "predictor" of the economy in the future. It is expected to show a reading of -0.1 percent for July, same as in June. (Low impact on rates)
Thursday - First Time Unemployment Claims - This report shows the number of people that are applying for unemployment for the first time. It has remained at a high level for the past several weeks. (Moderate impact on rates)
Thursday - Philadelphia Fed Index - Shows economic activity in the PA tri-state area. It is expected to show an economy that was slow in July, but not as slow as in June! (HIGH impact on rates)
Friday - U.S. Crude Inventories - This report shows the amount of oil "on hand" in the U.S. If this number increases, that sometimes means that there is less demand, and the price of oil goes down. If the number decreases, then this could mean that there is more demand, and the price of oil goes up.
We will be keeping an eye on all of these economic reports, and if any news comes out that causes mortgage rates to swing wildly one way or the other, we will let you know.
In the meantime, have a great week!
The chart above shows the price of mortgage bonds over the past 90 days, with the most recent days being on the right side. Keep in mind that the price of bonds moves opposite mortgage rates, so up and green are good, while red and down are bad!
Jay Skwierawski
President
First Sterling Mortgage Services, LLC
737 North Michigan Avenue, #1900
Chicago, IL 60611
312.268.7601
WE CLOSE ON TIME - EVERY TIME!
A Mortgage Update from Jay Skwierawski for the Week of August 10
Hello Everybody!
I hope you were able to catch the Olympic opening ceremonies on Friday night. What a spectacular show!
Interest rates rose slightly last week, but it could have been a lot worse! Good economic news released early in the week was offset by negative news at the end of the week. This coupled with a large decline in the price of oil caused mortgage rates to end the week very close to where they began.
First, a recap on the news that was: On Monday, Personal Income for July were reported at +.1%, which was higher than expected, but much lower than the +1.8% that was reported for June. The difference from month to month was a reflection of most of the stimulus package checks going out in June. At the same time, Personal Spending for July came in at +.6%, slightly better than the market was expecting. Also included in this report was the Federal Reserve's favorite inflation gauge - the Personal Consumption Expenditure (PCE) index, and the PCE core index (excluding food and energy). Both of these numbers came in at the high end of expectations, and showing a yearly rate of inflation that is higher than the Fed likes to see. These reports got the mortgage bond market off to a bad start for the week. Tuesday brought the Industrial Supply Manager's Services index, which came in much stronger than expected and much stronger than the month before. The Fed announce in the afternoon that they were leaving short term interest rates unchanged, signalling that the danger of a slowing economy was worse than the obvious increase in inflation. They also announced that they expected inflation to abate towards the end of the year. The recent 20%+ decrease in oil prices may help this prediction to come true, barring a turnaround. The market took this as a hint that the Fed will not raise interest rates anytime soon. The stock market rallied on this news, closing up over 300 points. The fear that the Fed will not be vigilant against inflation and the rally in stocks caused a sell-off in mortgage bonds, and rates jumped. On Wednesday, the only economic news reported was an increase in U.S. Crude oil inventories. The mortgage bond market continued it's sell-off, but then reversed course during the day and rallied into the close, probably on oversold conditions. Thursday brought word that first time unemployment claims, which had spiked the week before, continued their increase and jumped to 455,000 claims. This caused the four week moving average of this number to spike to its highest level since July, 2003. The labor market is still experiencing some pain. Mortgage bonds continued the rally they started on Wednesday on this news. Finally on Friday, it was reported that productivity in the U.S. rose at a 2.2% annual rate, slightly lower than anticipated. Although it was lower than expected, it was still a good number for an economy that has given up 165,000 jobs in the last quarter. It shows that productivity is up even though the number of workers is down. This was good news for the economy and on the inflation front.
In the week ahead, some important news will be released that will give us an idea whether the recent rise in inflation is starting to slow down or reverse course. This could be a volatile week for mortgage rates, depending on where the numbers come in. Here's what to expect:
Wednesday - Retail Sales are expected to have increased by .5% in July, up from +.1% in June. (HIGH impact report)
Wednesday - Retail Sales, excluding auto sales, are expected to have increased by .6%, down from +.8% in June. (HIGH impact report)
Wednesday - Crude Oil inventories are to be release (typically a moderate impact on rates, but an increase in inventories would be very positive)
Thursday - First time unemployment claims will be released (typically a moderate impact, but last week this negative number sparked a rally in bonds)
Thursday - The Consumer Price Index (CPI) is expected to show a +.2% increase, vs. a +.3% increase in June. (HIGH impact report)
Thursday - Core CPI (excluding volatile food and energy costs) is expected at +.4%, down from a whopping +1.1% in June (HIGH impact report)
Friday - Empire State Index (NY area economy) is expected to show a decrease from its June number (Moderate impact report)
Friday - Capacity Utilization and Industrial Production will be reported (Moderate impact reports)
Friday - University of Michigan Consumer Sentiment Index is expected to show a slight increase over its last report (Moderate impact report)
Although I indicate "moderate" or "high" impact report, any number that comes in a lot different than expected can have a "high" impact on mortgage rates. Also, any events, whether they are political or economic reports, that have a big impact on the stock market can have a big impact on mortgage bonds. For instance, the war that erupted over the weekend between Russia and Georgia (no, not that Georgia, the Republic of Georgia) could cause havoc with worldwide markets until it is resolved.
We will keep an eye on the economic reports and any other major developments, and report anything that may have a "high impact" on your business!
Watch for my "Mortgage Minute (or two)" this week on "Mortgage Financing in 2008." It's a follow-up to the report we came out with at the end of 2007, as the mortgage market was just entering the subprime crisis, which quickly spread throughout the mortgage industry. You won't want to miss it!
Have a great week. The chart above shows the price of mortgage bonds for the past 90 days. Keep in mind that the most recent days are on the right side. An increase in the cost of a bond means a decrease in the rate. Green and up are good, while red and down are bad. You'll notice a nice V shape over the past 5 trading sessions. The market sold off, as rates rose. On Wednesday, mortgage bonds hit a level of support (dark blue line) that seems to be very strong and the market rallied. Let's hope this continues!
Jay Skwierawski
President
First Sterling Mortgage Services, LLC
737 North Michigan Avenue, #1900
Chicago, IL 60611
312.268.7601
WE CLOSE ON TIME - EVERY TIME!
A Mortgage Update from Jay Skwierawski for the week of August 3
Good Morning Everybody!
Mortgage rates finished their second straight week with a slight improvement in rates.
The biggest newsmaker of the week was President Bush signing into law HR 3221 - "the Housing and Economic Recovery Act of 2008," which is a sweeping $300 Billion plan to help struggling homeowners avoid foreclosure and to boost confidence in the sluggish housing market. The bill is several hundred pages long, and there have already been hundreds, if not thousands, of articles, summaries and analyses of the bill from the media and other mortgage "experts," many with inconsistent and conflicting data. I put out a brief "mortgage minute or two" last week on some of the key parts of the law. Be sure to watch for another "mortgage minute or two" later today regarding down payment assistance programs!
In addition to the housing bill being signed last week, there was a slew of economic reports that had an impact on mortgage rates. Remembering that negative news on the economy is typically good for mortgage rates, several of the reports last week helped progress mortgage rates towards better levels. Some bad economic data out of Europe, negative comments by one of the Federal Reserve Presidents and a weaker than expected Gross Domestic Product number helped to offset some good news last week on lower oil prices, some higher than expected consumer confidence numbers and a lower than anticipated loss of jobs for the U.S. economy. Here's a recap of what we saw last week:
Consumer Confidence unexpectedly rose last week to 51.9 from a reading of 51.0 last week. A drop to 50 was expected.
U.S. Crude Oil Inventories dropped, which was also unexpected. Remember rising inventories have been helping to bring down the cost of oil.
The Gross Domestic Product for the 2nd Quarter of 2007 rose less than expected to up 1.9%. The market was expecting the economy to have grown by 2.3%. Other parts of this report showed employment costs coming in-line with expectations for the quarter, while the GDP inflation gauge actually was a little tamer than the market anticipated.
First Time Unemployment claims surged to 448,000, although the government blamed part of the increase on a statistical anomaly!
Friday's employment report brought some surprises as well, as the unemployment rate increased to 5.7% from 5.5% the previous month. The economy lost only 51,000 jobs in June, less than expected, but still a lot of job losses. The average work week was a little shorter than expected, while average hourly earnings came in as targeted.
The Chicago Purchasing Manager's Index (PMI) and the Industrial Supply Manager's Index both came in higher than expected, with numbers that showed the economy either expanding, or at least not contracting.
All in all, the good news in the employment report (less jobs lost than expected) was offset by bad news in the other reports, and we saw rates decrease slightly over the week.
This week brings another round of economic reports that may prove to be market moving, including:
Monday - Personal Income and Personal Spending (Moderate Impact on mortgage rates) (Note - these numbers have been announced already this morning. Personal Income and Spending both came in slightly higher than expected, reflecting the balance of stimulus checks being received.)
Monday - Personal Consumption Expenditures (PCE) and core PCE (less food and energy) - HIGH (This is the Fed's favorite inflation gauge) (Note, these numbers have also been released, and the numbers came in pretty much in line with expectations, albeit higher than the Fed's target rates. These numbers have caused a small sell off in mortgage rates, which could cause rates to go up today.)
Tuesday - Industrial Supply Managers' (ISM) Service Index (Moderate)
Tuesday - 1:15pm C.D.T - The Federal Reserve will announce their latest decision on interest rates (HIGH). The market is not anticipating a change.
Wednesday - U.S. Crude Oil Inventories (Moderate)
Thursday - First time Unemployment Claims (Moderate)
Also this week, Brett Favre has been reinstated to the NFL and is expected to rejoin the Green Bay Packers today. It is unknown if this will have any impact on mortgage rates. It certainly will have an impact on ESPN, as they will have to find something else to talk about. If he stays in Green Bay and regains his starter status, it is expected to have a dramatic impact on the economy of Green Bay!
The chart above shows the change in prices of mortgage bonds over the past quarter, with the most recent dates being on the right. You will notice that there was a nice march upward in the past several sessions. Keep in mind when looking at the chart that the price of mortgage bonds moves opposite of mortgage rates. So, on the chart, up and green are good, down and red are bad!
Have a great week!
Jay Skwierawski
President
First Sterling Mortgage Services, LLC
737 North Michigan Avenue, #1900
Chicago, IL 60611
312.268.7601
WE CLOSE ON TIME - EVERY TIME!
A Special Mortgage Industry Update from Jay Skwierawski
Hello!
Over the weekend, the U.S. Senate passed a landmark housing bill that is now waiting for the President to sign into law.
The key elements of the bill are:
- A temporary first time home buyer tax credit. This credit, in the amount of 10 percent of the purchase price of a new or existing home, with a limit of $7,500 is expected to stimulate home buying, reducing excess supply in housing markets and, hopefully, shore up home prices. The refundable credit, which is actually a 15 year interest-free loan, is a credit against any Federal income taxes owed. If, for instance, someone owes $5,000 in Federal taxes, they would pay nothing, AND receive a refund check at tax time for $2,500. If they were getting a refund of $1,000, they would receive a refund check for $8,500 (the $1,000 plus the $7,500 refundable tax credit). What's the catch? The refundable tax credit has to be repaid to the government over a 15 year period, at $500 per year. If the homeowner sells the home during the 15 year period, the remainder would be due from the profit of the home sale. If there is insufficient profit, then the remaining payback would be forgiven. The tax credit can be taken on the 2008 or 2009 Federal Tax Return. There are income limits. A first time homebuyer is defined as a buyer who has not owned a principal residence during the three year period prior to the purchase. The home purchase must take place between April 9, 2008 (retroactive) and July 1, 2009. This should help us now and well into the spring market of 2009!
- Modernizes the FHA loan program. There are several key provisions in the bill which will affect FHA financing:
1. Permanently increases the maximum FHA loan amount to 115 percent of an area's median home price, up to $625,000. How this will affect us in our area is yet to be determined.
2. Enables FHA to simplify requirements for condominium loans, which have been burdensome and significantly different than requirements for single family detached properties
3. Expands the FHA reverse mortgage loan program to allow more seniors to tap into their equity. Increases the maximum reverse mortgage loan amount to $625,000 nationwide, while reducing and capping the maximum amount of fees that lenders can charge to originate these types of loans.
4. Permits 40 year FHA amortizations to reduce monthly payments, while still assuring that the loan balance is being reduced, even slightly.
5. Allows FHA to charge higher risk-based mortgage insurance premiums, but places a one year moratorium on implementation of them.
6. Increases the minimum downpayment amount on an FHA loan to 3-1/2 percent from 3 percent. (they're going the wrong way!)
7. Bans the use of down payment assistance programs (Nehemiah, Ameridream, etc.) effective 10/01/2008.
- Allows FHA to provide relief to homeowners facing foreclosure. FHA will guarantee up to $300 billion in mortgages for borrowers that are in danger of losing their homes. With assistance from their current lender in the form of a partial loan reduction, struggling homeowners will be able to refinance into lower cost government-insured loans that they can repay.
- GSE (government-sponsored enterprise) reform. The law changes the way that FNMA and FHLMC are regulated and permanently increases the conforming loan limit to help buyers in high-cost markets. To further reassure financial and global markets of the soundness of FNMA and FHLMC, the government will temporarily expand its line of credit to them and permit the U.S. Treasury to purchase an equity stake in the company through the end of 2009.
- Mortgage Bond Revenue Program. This gives states the authority to issue up to $11 billion in mortgage revenue bonds designed to help strapped homeowners seeking to refinance their home loans.
Other provisions of the bill include:
1. $3.9 billion in Community Development Block Grant funding to allow cities to purchase, rehab and redevelop foreclosed properties
2. A $500 additional standard deduction ($1,000 for married couples) in tax year 2008 for taxpayers who do not itemize their deductions but pay property taxes.
3. Increase the maximum loan amount for VA loans in high cost areas to increase homeownership opportunities for qualified veterans.
4. Increase the amount of time a lender must wait to foreclose upon returning soldier from 90 days to 9 months.
5. Encourage states to establish mortgage licensing and registry systems and directs HUD to step in if the states fail to do so.
That's the Housing Bill in a nutshell. Almost 700 pages condensed into a two minute read! Hopefully it's passage will give the housing market a boost! Now is the time to call your first time homebuyers and let them know about the $7,500 "gift" the government is giving them if they purchase a new home.
Jay Skwierawski
President
First Sterling Mortgage Services, LLC
737 North Michigan Avenue, #1900
Chicago, IL 60611
312.268.7601
WE CLOSE ON TIME - EVERY TIME!
A Mortgage Update from Jay Skwierawski for the week of July 27
Hello Everybody!
Mortgage rates improved slightly last week, with bad news on the economy helping the mortgage bond market more than good news hurt it!
Here's a brief recap of economic releases from last week:
Crude Oil Inventories were reported lower than expected, although this was offset by a decrease in the cost of oil and a decrease at the pump. Existing Home Sales came in lower than expected, but then New Home Sales came in a bit stronger than expected. First Time Unemployment Claims jumped back over the "recessionary" 400,000 level, which was much worse than the markets were anticipating. Consumer Sentiment figures were much better than expected, which was a very positive sign. Finally, Durable Goods Orders for June were reported much better than expected.
So, with some news coming in good, and some news coming in bad, mortgage bonds took their cue from stocks, oil prices and the latest Fedspeak, and finished slightly better on the week. The cost of oil dropped to around $123 per barrel, and a dip in the price of gasoline is expected to follow. The markets seemed to ignore warnings on inflation by a couple of Federal Reserve Bank Presidents. The Fed's way of combatting inflation is to raise short term interest rates. While they are unlikely to do so at their next meeting on Tuesday, August 5th, they may have to in subsequent meetings. The problem that they face is that if the economy is not showing enough signs of strength, an increase in short term interest rates may stifle any growth.
Here's what's due to be released this week (shown with its typical impact on mortgage rates):
Tuesday - Consumer Confidence (Moderate)
Wednesday - Crude Oil Inventories (Moderate)
Thursday - Gross Domestic Product (GDP) for 2nd Quarter of 2008 - (Moderate)
Thursday - GDP Chain Deflator, a measure of inflation (HIGH)
Thursday - First Time Jobless Claims (Moderate)
Thursday - Chicago PMI (HIGH)
Friday - The "big" report of each month - the monthly employment report, including Jobs Created or Lost (HIGH), Average Work Week (HIGH), Unemployment Rate (HIGH), Hourly Earnings (HIGH).
Friday - Industrial Supply Manager's Index (HIGH)
Hopefully mortgage bonds will be able to continue the rally that they started last week, and we can see some further improvement in mortgage rates. We will keep you posted on any major developments or movements in rates.
Above is a chart showing the movement in the price of mortgage bonds over the past week. Keep in mind that the most recent days are on the right. Mortgage bond prices move opposite of mortgage rates, so in this chart, UP AND GREEN are good, DOWN AND RED are bad. You will notice that the markets were flat for the first three days of the week, and then rallied on Thursday. Although they pulled back a little on Friday, they ended the week better than where they started!
Have a great week!
Thank you for your continued support!
Jay Skwierawski
President
First Sterling Mortgage Services, LLC
737 North Michigan Avenue, #1900
Chicago, IL 60611
312.268.7601
WE CLOSE ON TIME - EVERY TIME!
A Mortgage Update from Jay Skwierawski for the week of July 20
Hello Everybody!
Last week started out with such promise. Over the previous weekend, the government announced that they would stand behind Fannie Mae and Freddie Mac and, basically, do whatever it takes to make sure that they don't fail. This would have been disastrous for a housing market that is trying to pull itself out of the doldrums. Yet, interest rates jumped this week to their highest level this.
Bad news on inflation and some favorable news on the economy were the main culprits this week, along with more news of mortgage related losses by big banks and investments companies, the failure of IndyMac Bank and a huge decrease in the price of oil.
First the news that was released: The Producer Price Index (PPI), the measure of inflation at the wholesale level, was reported at up 1.8%, considerably higher than the high "up 1.3%" that the market was anticipating, and at a level we haven't seen since 1981. In addition, the core PPI (excluding the cost of volatile food and energy) was reported up .2%, which was actually better than the increase of .3% that was expected. Retail Sales were reported up only .1%, compared to the up .4% that was expected. This was bad news, especially considering this should have included the checks that were sent out for the President's fiscal stimulus plan. Excluding auto sales, Retail Sales also came in worse than expected. The Empire State Index, which is a measure of the economy in the New York area came in better than expected, but still at a recessionary level. As has been the case lately, the markets have been selling off, with rates rising, on news that, even though it's bad news is better than expected. Industrial Production unexpectedly rose by .5%. The markets were expecting a flat number. Capacity Utilization, the measure of how much output factories have versus what they are capable of, also came in higher than expected. The measure of inflation at the consumer level - the Consumer Price Index (CPI) came in much higher than expected, as businesses started to pass on the higher cost of fuel, and the core CPI, excluding the cost of food and energy, also came in slightly higher than expected. Good news was reported on the "home" front, as new housing starts were reported to be 100,000 units higher than expected, and permits for new units rose to a level 130,000 more than expected! Crude oil inventories jumped, which helped bring the cost of oil down at a record breaking pace last week. Finally, first time unemployment claims came in lower than expected and the Philadelphia Fed Index came in much lower than anticipated, at a very recessionary number.
In the banking news front, we had J.P. Morgan Chase and Wells Fargo report good earnings, while Freddie Mac was trying to increase capital to reduce the need for any government intervention. Some other large institutions (National City, Wachovia, Lehman Bros, MGIC and M&I) either reported large losses, or warned that they were going to, as the bad news on the mortgage sector continued. We also had Ben Bernanke, the Chairman of the Federal Reserve, testify for two days before Congress. In his testimony, he said that the Fed worries about inflation and a slowing economy, and will continue to do what it can to resolve both. He said that he could see the economy and housing both improving as we approach the end of the year.
The best news out of the week is that the price of oil plunged over Wednesday, Thursday and Friday. Hopefully this bodes well for the future prices we're going to be paying at the pump. The reason for the drop in the price of oil has partly to do with the rise in our crude oil inventories, the announcement by the president that he is pushing for increased drilling here at home, and a strengthening in the dollar due to some of the positive news out this week.
Although the news out on the economy was mixed, we should focus on the positive news on the housing sector. Have we finally rounded the corner, and are we in the homestretch? We may find out next week when some more housing news is released:
Monday - The Index of Leading Economic Indicators is released. This shows the expected direction of the economy over the next 6 to 9 months, and has a LOW impact on mortgage rates.
Wednesday - Crude Oil Inventories are released. Although this report typically has a moderate impact on rates, lately it has had a HIGH impact on rates, as increasing inventories here at home show that we are fed up with high gas prices, and we're starting to cut back.
Wednesday - The Fed's Beige Book is released, showing how the economy is doing at the various areas covered by the different Federal Reserve Banks. This report typically has a MODERATE impact on mortgage rates.
Thursday - Initial Jobless Claims reports how many people joined the unemployed rolls for the first time. This has a MODERATE impact on rates.
Thursday - Existing Home Sales will be reported. Are there buyers out there that are looking to buy and close before school starts? MODERATE
Friday - Durable Goods Orders - Are people buying those items that are expected to last more than three years? MODERATE
Friday - New Home Sales - Another report showing whether buyers are buying new construction. MODERATE
Friday - Consumer Sentiment (University of Michigan) - How are consumers feeling about the way the economy is doing right now? Is the fact that we're paying almost $4.50 per gallon for gas starting to take its toll?
Of course we'll also be watching the price of oil and for signs of any more unrest in the mortgage industry. As your advisor, I will keep you updated on any major developments along the way!
WHAT'S YOUR MOTHER'S MAIDEN NAME?
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The tips below can help you avoid the most common password pitfalls and even implement a few new ideas that will make your passwords easy to remember...and hard to break!
Strength Training
A well-protected password is not only unique, but also hard to guess. How do you do that? It's pretty simple really. Just follow this advice:
Use a random string of characters. That means no sequential letters or numbers. None.
Make it long. The longer the better--even up to as many as 10 to 14 characters.
Switch things up. Use a combination of upper and lower case letters, along with a few numbers mixed in the middle or end.
Don't use substitutes. Using "@" for "a" or "1" for "I" may look good to you, but most hackers are smart enough to break those substitutes rather quickly.
Avoid easy targets like words straight out of the dictionary or things like family names and birthdays.
Multiplication Facts
Most of us cheat when it comes to passwords. We have trouble remembering our passwords, so we come up with two or three that we can remember and use them everywhere. But you should avoid the temptation. The fact is, once a password is compromised, all of your accounts are vulnerable. There's no way around it, you need to a way to create and remember multiple passwords--a different one for each account!
Sure-Fire Technique for Memorable, Unique Passwords
For all the advice above, good passwords come down to two things: they're easy for you to remember, and they're hard to break. Implementing the tips above can make your passwords hard to break, but what about remembering them--especially if you have a unique password for every account? Here's a sure-fire tip to help!
1. Think up a phrase. Instead of a common word or family member name, think up a unique phrase that only you know. For example, you may think up something off the wall such as "I Like Short Hair Too."
2. Make it an acronym. In our example, "I Like Short Hair Too" would become ILSHT.
3. Add Complexity. Remember those substitutes you're not supposed to use with dictionary words? Well, you CAN use them with your acronym. For example, "I Like Short Hair Too" can become "1 Like $hort Hair 2" which makes: 1L$H2. You can also use upper and lower letters to make it 1L$h2. The point is to be creative, but in a way that you can easily remember it.
4. Make it unique. A password is only really unique if you use it for one account and one account only. So you can't just use 1L$h2 for every account. And, in reality it's still too short. Here's the key to the whole process: Mix in additional letters and numbers that are unique to each account. For example, if you're logging into a "gmail account" you can use the "gm" and "@cct" (for acct) to make: 1L$h2gM@cct. Then, for a Netflix account, you may use: 1L$h2Nf@cct.
Of course, these are just examples. You'll want to be creative and think up your own acronym and ways to add unique characters for each account. And then keep that little secret to yourself so no one will be able to guess your account passwords.
Follow these simple steps and you'll have passwords that are tough to break, unique to every account, and easy to remember!
Have a great week!
Above is a graph showing the price of mortgage bonds for the past quarter, with the most recent days on the right. You will notice some pretty large drops from Tuesday through Friday. This reflects the increase in rates.
Jay Skwierawski
President
First Sterling Mortgage Services, LLC
737 North Michigan Avenue, #1900
Chicago, IL 60611
312.268.7601
WE CLOSE ON TIME - EVERY TIME!
Important Message from First Sterling Mortgage Services
Important Notice About New Law
On July 1, 2008 the Governor's new "Anti-Predatory Lending Database" law will take effect. This means that ANY applicant purchasing an owner occupied residential 1-4 unit home in Cook County may have to attend a 2 hour home buyer counseling course and come to the closing with a certificate proving same or THE TITLE COMPANY CANNOT ALLOW THEM TO CLOSE.
Counseling will be required for the reasons:
(A)
1) For all first time home buyers.
2) For anybody refinancing their principal residence.
and
(B) If the loan includes one or more of the following:
1) Interest only loan
2) Negative amortization (option-arms)
3) Pre-payment penalty loans
4) Adjustable rate loans up to 3 years
5) Total points and fees paid are 5% or more of loan amount
Note: If one standard from group (A) and at least one standard from group (B) are present, then the buyer MUST get counseling, prior to closing.
Although there are still some ambiguities within the law as it stands now, it will be enforced by the title companies and lenders. Furthermore, there will be a cost of $300 for this counseling. Although the cost will be borne by the mortgage broker, you can be assured that the fee will be passed on to the borrower through higher closing costs.
BUT THERE IS GOOD NEWS!
Exempt from this new law are the buyers and home owners who transact their mortgage business through federally chartered banks, such as Guaranty Bank, the parent company of First Sterling Mortgage Services, LLC. Borrowers can avoid any needless delays and added costs by applying for a mortgage with First Sterling Mortgage Services, LLC!
This law was signed early last year and it hasn't really been talked about until very recently. This indicates that there is still a lot that needs to be put into place by July 1, 2008. Therefore, one can assume that there will be much confusion, mishandling and possibly even delays in Cook County closings, as title companies try to figure out if the borrower counseling is needed for every transaction. To avoid this confusion at time of closing, First Sterling Mortgage Services will be sending exemption forms to our closings, and the counseling won't be an issue.
This law only affects Cook County closings at this time, but the state is looking at it as a pilot program that will eventually be rolled out to the whole state.
We will keep you posted of further developments or clarifications.
Jay Skwierawski
President
First Sterling Mortgage Services, LLC
737 North Michigan Avenue, #1900
Chicago, IL 60611
312.268.7601
WE CLOSE ON TIME - EVERY TIME!
A Mortgage Update from Jay Skwierawski for the week of July 12
Hello Everybody!
Interest rates declined slightly last week. The market rallied on Tuesday and Wednesday, only to sell off on Thursday and Friday. The catalyst for the early week rally was a speech by Federal Reserve Chairman Ben Bernanke, who said the Fed may continue to provide emergency loans to investment banks to help them overcome credit problems. This led to improvement in the bond market because the markets saw this as a sign that the Fed is willing to take action to maintain stability and counter any turbulence that may occur. The rally came to a quick halt when Iran test fired nine medium to long range missiles and reminded the markets of the instability in that region of the world. Then on Friday, there were questions out regarding the future of Freddie Mac and Fannie Mae, which caused a substantial drop in the price of mortgage bonds, and an increase in rates. In addition, we saw the price of oil spike up to a new record high over $147 per barrel.
There wasn't much news out on the economy last week:
Crude oil inventories increased. That bodes well for the price of oil, as it appears that our demand is waning. First time unemployment claims came in 60,000 less than expected. Consumer sentiment came in slightly higher than expected, but still at a very low number. The U.S. trade deficit decreased. None of these reports moved the markets as much as the news about Fannie Mae and Freddie Mac.
This week, we have several reports due to be released, including some market movers.
Today - The Produce Price Index was reported at +1.8% in June, the largest one month increase since November, 2007, and higher than the +1.3% that the markets were expecting. Year over year PPI for the year ending in June was +9.2%, the biggest year over year showing since June, 1981. The core rate, excluding volatile food and energy costs was up .2%, slightly less than the markets were expecting. Also, retail sales were reported at +.1%, lower than the markets were expecting. This is a sign that the boost in sales received by the tax rebate checks may already be fading. The Empire State Index rose slightly, but was still negative.
Wednesday - Consumer Price Index (CPI) and Core CPI - HIGH impact on rates
Wednesday - Industrial Production and Factory Utilization - Moderate impact on rates
Wednesday - Federal Open Market Committee minutes are released - Moderate
Wednesday - Crude Oil Inventories - Moderate, but HIGH lately
Thursday - Housing starts and new building permits - Moderate
Thursday - Initial unemployment claims - Moderate
Thursday - Philadelphia Fed Index - HIGH
In addition, the markets will continue to monitor developments on the Fannie Mae and Freddie Mac story, banks in trouble, and anything that might affect the price of oil.
Later this week, be sure to watch for my "Mortgage Minute or two" on Fannie Mae and Freddie Mac and their importance to our business and the economy as a whole.
I will keep you posted on any major developments as the week progresses. In the meantime, have a great week!
The chart above shows the price of mortgage bonds. Remember that as the price goes up, the rates go down. Green is good, red is bad. Up is good, and down is bad! The chart tracks the price of bonds going back three months. You will notice that we spent a couple of days above the 200 day moving average last week. That was a very good thing. It's only unfortunate that it didn't hold. That would have meant we would be seeing lower rates before higher rates.
Jay Skwierawski
President
First Sterling Mortgage Services, LLC
737 North Michigan Avenue, #1900
Chicago, IL 60611
312.268.7601
WE CLOSE ON TIME - EVERY TIME!
A Mortgage update from Jay Skwierawski for the week of July 6
Good Morning Everybody!
I hope you had a great fourth of July holiday weekend!
Interest rates rose last week, even in the face of economic reports that would normally have brought rates down. We can blame the usual suspects for pushing rates upward instead of downward - the cost of oil and the weak dollar. Although news out on jobs and the economy was for the most part weak, inflation fears within the market were to tough too overcome. Here's a recap of the news out last week:
The Industrial Supply Manager (ISM) Index unexpectedly went up from being negative to slightly positive. U.S. Crude Oil Inventories increased, as more and more people are cutting back on fuel usage. The jobs report released on Thursday showed the unemployment rate staying at 5.5%, the same as the month before, while the country lost 62,000 jobs, which was in-line with expectations. However, April and May's job losses were both revised to show an additional 52,000 jobs lost in those months. Hourly earnings and the average work week both came in as expected. First time unemployment claims for last week surged to over 400,000, and the ISM Services Index came in worse than expected, which should have offset the first ISM number released earlier in the week. All in all, these reports should have brought rates down. It is quite possible that the markets had a bit of a sell-off due to the run-up they had the previous two weeks. That happens - traders sell to rake in profits that have been realized in times when any market goes up over a certain period of time.
This week does not bring a lot of economic reports, however the markets could still be in for some volatility with regards to the price of oil and the strength (or weakness) of the dollar. Here's what is in store for this week:
Wednesday - U.S. Crude Oil Inventories (Moderate impact on rates)
Thursday - Initial Jobless Claims (Moderate)
Friday - University of Michigan Consumer Sentiment Index (Moderate)
Friday - U.S. Balance of Trade (Moderate)
Although there is not a lot in the way of reports due out this week, there is a meeting in Rusutsu, Japan this week of the G8 group of nations. Ever hear that term and wonder what the G8 is? It is an international forum of governments from Canada, France, Germany, Italy, Japan, Russia, The United Kingdom, and The United States. They hold an annual economic summit, although this year they will also deal with climate change and the global food crisis. The reason that this year's meeting may have an impact on mortgage rates, is that there appears to be a concerted effort to shore up the dollar. A stronger dollar could help take away some of the pressures on the cost of oil, which could help on the inflation front. Remember that last week's rise in mortgage rates was probably due to a weakening dollar and rising oil prices.
As always, we will keep you posted on any major developments in the mortgage industry.
Have a great week!
Jay Skwierawski
President
First Sterling Mortgage Services, LLC
737 North Michigan Avenue, #1900
Chicago, IL 60611
312.268.7601
WE CLOSE ON TIME - EVERY TIME!
A Mortgage update from Jay Skwierawski for the week of June 30
Hello Everybody!
Mortgage rates actually fell last week, partially on weak economic news, but mostly on a decline in the stock markets, which caused money to flow out of stocks and into bonds.
The "big" news events of the week were the Federal Reserve's Open Market Committee meeting, the continuing surge in the price of oil and the stock market teetering on a bear market. Last week, the Fed decided to leave interest rates alone at their two day meeting that ended on Wednesday. On the surface, this might seem like a good thing. But as far as mortgage rates are concerned, it really wasn't a good thing. You see, the Fed has quite a dilemma on its hands, with the economy performing sluggishly, at best, the housing market having its share of problems, consumer confidence continuing to drop and the cost of food and energy rising every day. The Fed decided to leave rates unchanged for now, but that could change as soon as their next meeting in August. When the Fed started to cut rates back in September, it was a great idea. The economy seemed headed into a slow period, and the Fed hoped that by lowering short terms interest rates, they could stimulate the economy and prevent a recession. With the continued string of cuts that have come since September comes a much weaker Dollar. And since oil is priced in U.S. Dollars, the decline in the Dollar has pushed oil prices through the roof, even with consumption in the U.S. decreasing. Prior to the Fed's first rate cut, oil was trading at a then staggeringly high $73 per barrel. After nine months of rate cuts, oil traded today over $143 per barrel, almost double. Since oil is involved in so much of what we purchase, prices have gone up on just about everything. What does this all have to do with mortgage rates? A stronger stance by the Fed against inflation, which would mean interest rate hikes ahead, would strengthen the Dollar, batter down high oil prices and cause Treasury Bond and mortgage rates to improve in turn, since inflation is the arch enemy of both. We'll find out what the Fed decides to do at their next meeting in August.
The price of oil continued its ascent into never before seen territory, and this morning it has traded over $143 per barrel, with many experts saying that we could see $175 per barrel before the end of summer. So, put that in your tank and burn it. Also, we saw the stock market drop so much that, barring a miraculous recovery today, the markets may experience their worst June since the depression.
Recapping the news that came out last week: We saw Consumer Confidence dip to its lowest level in decades. Durable Goods Orders stay unchanged for the month of May, New and Existing Home Sales come in slightly better than expected, Gross Domestic Product came in as expected, first time Unemployment Claims came in higher than expected, the Fed's favorite gauge of inflation - the PCE (Personal Consumption Expenditures) came in better than expected and Personal Income and Spending both came in better than expected, as the government's economic stimulus checks began to be received and spent in May.
The week ahead will be a short one for the markets, as the fourth of July holiday will cause the markets to close early on Thursday and be closed all day on Friday. But, that doesn't mean there won't be fireworks in the markets before the first fuse is lit at parks and lakefronts across the country. Here's what we can look forward to, in addition to news on the price of oil and the stock market:
Monday - The Chicago PMI has already been reported this morning, and has come in better than expected, but still showing a slowdown in the economy. (HIGH)
Tuesday - The Industrial Supply Manager's Index (HIGH)
Wednesday - U.S. Crude Oil Inventories (typically Moderate, but could be HIGH, given oil's recent rise)
Thursday - U.S. Payroll numbers, including the unemployment rate, jobs created or lost, average work week and hourly earnings (HIGH) Note: This report is usually released on the first Friday of the month, but is early this month due to the holiday.
Thursday - First time unemployment claims (Moderate)
Thursday - Industrial Supply Manager's Services Index (Moderate)
So, although it is going to be a short week, it will end with a bang, as the employment report is usually the "big event of the month" as far as the markets are concerned.
The chart above shows the price of mortgage bonds over the past three months, with the most recent activity on the right. You will notice a march higher last week after a rocky start on Monday. The trend, at least for now, seems to be for that march higher to continue. Only time will tell!
Have a great and safe Fourth of July, and I will keep you updated on any major developments over the week ahead!
Thank you!
Jay Skwierawski
President
First Sterling Mortgage Services, LLC
737 North Michigan Avenue, #1900
Chicago, IL 60611
312.268.7601
WE CLOSE ON TIME - EVERY TIME!
A Mortgage Update from Jay Skwierawski for the week of June 22
Hello Everybody!
Interest rates improved slightly last week (it's about time!).
Some soft economic news and more write downs announced by Citigroup helped to overcome oil's relentless march higher. We saw the stock market drop, and bondholders were the beneficiaries, as investors took their money out of the stock market and put it in the bond market. If the price of oil continues to rise, however, we could see these same investors pulling their money out of stocks AND bonds, which would cause mortgage rates to rise.
First, a look at the week that was:
The Empire State Index, which is a measure of the economy in New York came in much lower than expected. Industrial Production and Factory Capacity Utilization both came in lower than expected, showing that factories are producing less, and using less of their potential. The Producer Price Index came in at a whopping +1.4% (compared to an almost equally whopping +1.0% that was expected), however the Core PPI, which strips out the cost of food and energy, came in as expected at +0.2%. Housing Starts came in lower than expected, while new Housing Permits came in slightly higher than anticipated. U.S. Crude Oil Inventories came in a lot less than the market was looking for, proving that there is still a huge demand for oil, even at these loftier price levels. The Philadelphia Fed Index, which shows how the economy is doing on the east coast, came in worse than anticipated, and first time Unemployment Claims came in higher than expected. Finally, the Index of Leading Economic Indicators (a possible gauge of future economic growth) came in slightly higher than expected.
All in all, the week's reports were negative on the economy, while at the same time being inflationary. As you will notice on the chart below, the market started out positively on Monday, but then finished lower. Tuesday and Wednesday, the market rallied and we saw rates fall. Then on Thursday and Friday the market was a bit volatile, but ended both days fairly even. Sometimes even is not so bad!
This week, we will see a lot of news out on the economy AND we have a Federal Reserve meeting. First the news:
Tuesday - Consumer Confidence - Will we see any improvement of how John and Jane Q. Public feel about the state of the economy? With gas approaching $4.25 per gallon, this number will probably be steady to lower. (Moderate impact on mortgage rates)
Tuesday - The Federal Reserve begins the first day of its two day meeting on determining the direction of short term interest rates
Wednesday - Durable Goods Orders - The purchase of big ticket items, meant to last at least 3 years (Moderate)
Wednesday - New Home Sales - Are people purchasing the homes that those builders are starting? (Moderate)
Wednesday - Crude Oil Inventories - At what level will consumers be turned off by the price of a gallon of gas? (Moderate)
Wednesday - 1:15pm, CST - The Fed will announce their decision on interest rates. Most market players are not expecting any movement at this time, but are anticipating that the Feds next move will be up instead of down. Everyone will be paying close attention to what the Fed says in the statement that it releases with its decision. (HIGH)
Thursday - First time Unemployment claims (Moderate)
Thursday - Existing Home Sales (Moderate)
Thursday - 1st Quarter Gross Domestic Product (GDP) - Final revision of this number that showed the economy growing at an anemic 0.6% pace (Moderate)
Thursday - Chain Deflator - Inflation gauge released with the GDP number (Moderate)
Friday - Personal Income and Spending (Moderate)
Friday - Personal Consumption Expenditures (PCE) and Core PCE, excluding food and energy - This is the Fed's favorite gauge of inflation, and the markets watch it closely, and will definitely watch it closely this month to see if the Fed "got it right" on Wednesday (HIGH)
It could prove to be a very volatile week for mortgage rates and the stock market. In addition to the reports that are due out, the markets will be watching the price of crude oil and further developments with large banks and mortgage lenders.
If we see any larger movements either way, we will make you aware of them.
The chart above represents the price of certain mortgage bonds. Keep in mind that the price moves opposite rates, so on the chart up and green are good, while down and red are bad. You will notice that the market is stuck under a pretty strong level of resistance. It will take some very bond friendly news to make the bond break through this barrier.
Have a great week!
Jay Skwierawski
President
First Sterling Mortgage Services, LLC
737 North Michigan Avenue, #1900
Chicago, IL 60611
312.268.7601
WE CLOSE ON TIME - EVERY TIME!
A Mortgage Update from Jay Skwierawski for the week of June 15
Hello Everybody!
First of all, to all of you that it applies, I wish you a Happy Father's Day!
Interest rates rose this past week on inflation fears and some positive news out on the economy.
We can blame the Federal Reserve Governors for the inflation scare. In several speeches this week, the Fed seemed to be preparing the markets for an increase in short term interest rates. While the economy isn't exactly going gangbusters, it seems to be holding steady, albeit a "very weak steady," while at the same time we are seeing definite signs of inflation at every turn. I paid $4.35 per gallon for gas this morning. Worse yet, the gas pump stops at $100, because that's the limit, so I actually had to put my credit card back in and pump the remaining $15. Fun stuff! The high cost of gas doesn't seem like it's going away anytime soon. Earlier this week, after it appeared that oil had topped out, we had the largest one day increase in the cost of a barrel of oil. Ouch!
Most of the news out on the economy this week was so-so, but the market seemed to focus on Retail Sales and the price of oil. This week's news:
Tuesday - the balance of trade came in worse than expected, meaning we are importing more than we are exporting. This makes sense with the price of oil increasing as it has, considering our great thirst for oil.
Wednesday - Crude oil inventories came in less than expected. The markets were anticipating that inventories would rise, as we Americans started using less gas, especially with gas priced at over $4.00 a gallon. If inventories go up, which means demand is going down, then the price would go down. Also on Wednesday, the Fed's Beige Book was released. The Beige Book is used as a barometer of how the economy is doing in the different Fed areas. There were no surprises in the release. The economy has softened, and there are upward pressures on prices.
Thursday - The big news of the week was that Retail Sales came in twice as much as expected in May, and Retail Sales, excluding automobiles, came in much better than expected as well. Market players were waiting for these numbers to see how much affect the President's economic stimulus checks had on the economy during their first month of release. Turns out people were spending those checks instead of saving them, and they weren't just spending them at BP Amoco and Shell. Also on Thursday, the government reported that first time Unemployment claims jumped twice as much as expected. Maybe people should be holding on to those stimulus checks after all.
Friday - The Consumer Price Index (CPI) rose 0.6% in May, a touch hotter than the 0.5% expected by the market. This represents the fastest pace in 6 months. The Core CPI, which excludes food and energy prices, rose 0.2%, right in line with expectations. Overall, the CPI has risen 4.2% on a year over year basis, and has risen at a 4.9% annual pace over the past three months. This is definitely a result of higher oil prices. While the main CPI number is uncomfortably high, the core CPI is up only 2.3% in the past year, which is only slightly higher than the Fed's target rate, and it has risen at a modest 1.8% pace over the past three months, which is in line with the Fed's target rate. Also on Friday, the University of Michigan Consumer Sentiment number came in at 56.7, well below expectations of 59.5. This is not a big surprise that consumers are down a bit on the current economic climate.
Next week is one of those busy weeks for economic updates, which could bring more volatility to mortgage rates. Scheduled for release:
Monday - The Empire State Index, an indicator of the economic climate in the New York region (Moderate)
Tuesday - The Producer Price Index (PPI) and Core PPI - Inflation at the wholesale level (Moderate)
Tuesday - Housing Starts and Builder Permits (Moderate)
Tuesday - Industrial Production and Capacity Utilization (Moderate)
Wednesday - Crude Oil Inventories (Moderate)
Thursday - Philadelphia Fed Index (HIGH)
Thursday - First Time Unemployment Claims (Moderate)
Thursday - Index of Leading Economic Indicators (Moderate)
In addition to these reports, the markets will be watching the price of crude oil and listening to Fedspeak for any hints on the future direction for interest rates. Mortgage rates rose to their highest level in 4 months this week. As you will see by the chart above, the movement in rates was not pretty. The chart shows the price of mortgage bonds, which move opposite the rates on those bonds. The most recent day (Friday) is on the far right. Rates were steady on Monday, jumped on Tuesday, were steady again on Wednesday, and then jumped on Thursday and Friday. We are now well below the 200 day moving average, which is a good indication of rising interest rates.
We will keep you posted on any major changes in the mortgage market.
Have a great week!
Jay Skwierawski
President
First Sterling Mortgage Services, LLC
737 North Michigan Avenue, #1900
Chicago, IL 60611
312.268.7601
WE CLOSE ON TIME - EVERY TIME!
State-of-the-Market
Prudential Preferred Properties
State-of-the-Market
In a challenging market such as what we are now experiencing, it is vital to implement a strategic sales plan when buying or selling real estate. The information below may be helpful to you.
Market Overview
National issues such as the war in Iraq and the weakening dollar shape consumers' attitudes and influence the economy. Additionally, this year's national election will impact the economic outlook for the foreseeable future. In September and December, the Federal Reserve stepped in to balance uncertainty by issuing rate cuts, bringing interest rates to new lows. A few bright spots - strong US exports and 5.4 million new jobs since August 2005 - also offer some promise in an otherwise challenging economy.
Though national issues are important to consider, we must also remember that real estate is local. The midwest real estate market is relatively stable compared to the constantly fluctuating business that the coasts experience. In October, the IAR reported that the Chicago Primary Metropolitan Statistical Area (PMSA) median home sale price was up 3.1 percent from October 2006.
Turn Obstacles into Opportunities
We can turn obstacles into opportunities by taking the time to refocus our goals.
Work with an Agent Who Follows a Business Plan:
- Set goals for the year with specific plans for their achievement
- Your PPP agent has some of the best online tools to help you buy or sell in this challenging market
- Prudential Real Estate has THE exclusive relationship with Yahoo! This means that your listing will appear toward the top of searches on Yahoo! Real Estate
- All listings are on 100+ websites, including ChicagoTribune.com enhanced and Realtor.com enhanced, giving you a competitive advantage in the market.
- Know that proper pricing is the key to success.
- Regularly review progress with your agent. Ask for updates on your area.
Keep in Mind:
- Homes priced right will sell
- Your agent can help you find ways to make your home stand out among every other home in its price range
- Your agent can review PPP Market Research reports with you.
With your Prudential Preferred Properties agent and strategic planning, you will be well-equipped to buy or sell in today's real estate market.
Sincerely,
Chris Eigel and Michael Pierson
January, 2008
A Mortgage Update from Jay Skwierawski for the week of June 8
Hello Everybody!
Interest rates rose slightly this week, but it could have been a lot worse.
Most of the economic news out this week was positive, or at least better than anticipated. However, the indicator that moved the market the most was the unemployment rate reported on Friday.
Here's a recap of the news that came out:
On Monday and Tuesday, the mortgage bond market improved as the stock market sold off, and investors moved their money from stocks into bonds. On Wednesday, the ADP National Employment Report was released showing an increase in jobs in the month of May. This report, while often times incorrect, comes out a few days before the government releases the official employment numbers. The markets jumped all over the number this time around, because a loss of jobs was anticipated. Every once in a while the ADP people get it right, so investors started to second guess what Friday's report would show. Also on Wednesday, Productivity at the nation's factories came in higher than expected as did the ISM Services Index. The positive news on the economy was good for stocks, and bonds suffered as investors pulled their money out of bonds and put it back in the stock market. On Thursday, bonds took it on the chin again as first time unemployment claims came in much lower than expected. Now market players were really starting to second guess how Friday's employment report would look. But as is often the case, when the big enchilada came on Friday, it had some surprises, but not the surprises the market was starting to anticipate. The economy lost 49,000 jobs, which was less than expected. The big news of the day was that the unemployment rate unexpectedly jumped from 5% to 5.5%. This was the largest monthly increase in over two decades. This was much worse than the market expected and remembering that bad economic news tends to be bad news for the stock market, but good news in turn for the bond market,, the news was indeed good for the bond market, and the mortgage bond market recouped much of what it had lost throughout the week.
The week ahead brings numbers on inflation and retail sales, which could have an impact on mortgage rates:
Tuesday - Balance of Trade (Moderate)
Wednesday - Crude oil inventories (Moderate)
Wednesday - Beige Book is releases showing how the economy is fairing in the different Federal Reserve Bank areas (Moderate)
Thursday - First time unemployment claims (Moderate)
Thursday - Retail Sales and Retail Sales excluding automobiles (HIGH)
Friday - Consumer Price Index (CPI) and Core (excluding food and energy) CPI (HIGH)
Friday - Consumer Sentiment
Although there isn't a lot of news coming out this week, the markets will definitely be watching the retail sales figures to see if the economic stimulus checks are being spent, and the inflation numbers out on Friday to see if the increase in fuel costs is being passed on to consumers. As I am typing this, the news is on and they are reporting that the nationwide average cost of a gallon of gas just went above $4.00 for the first time. And with the cost of oil increasing by over $10 a barrel on Friday alone, $5.00 a gallon might not be that far off. OUCH!
The chart above shows the price of mortgage bonds over the past 90 days, with the most recent on the right. Remember that green and up are good, red and down are bad. You'll notice that on Monday and Tuesday, the bond got back over the 200 day moving average, which was good for rates. Then the sell off on Wednesday pushed them back below the 200 day moving average. Thursday and Friday they traded firmly below it. Traders will be watching this week to see if they can work their way back above the blue line. If they do, that would bode well for mortgage rates. If they don't, then look out!
We'll keep you posted on any major developments in the mortgage market. In the mean time, have a great week!
Thank you!
Jay Skwierawski
President
First Sterling Mortgage Services, LLC
737 North Michigan Avenue, #1900
Chicago, IL 60611
312.268.7601
WE CLOSE ON TIME - EVERY TIME!
A Mortgage Update from Jay Skwierawski for the week of June 1
Good Morning Everybody!
Mortgage rates rose last week by about 1/4%, to their highest level in about 3 months. The increase in rates was caused by some positive news on the economy.
Last week, the following news was reported:
Tuesday - Consumer confidence came in much lower than expected, with inflation being the number one concern for the consumer. New Home Sales actually rose 3.3% in April, the first increase in six months.
Wednesday - Durable Goods Orders declined a smaller than expected .5%, and stripping out transportation orders, there was actually a larger than expected increase of 2.5%.
Thursday - The Gross Domestic Product (GDP) was revised to show the economy grew at a .9% pace in the first quarter of the year, instead of the .6% originally reported. Although it was revised upwards, .9% isn't all that great. Crude Oil Inventories unexpectedly dropped, which caused oil to temporarily spike upward, increasing inflation fears.
Initial Unemployment Claims increased more than expected
Friday - The Chicago Purchasing Managers (PMI) report came in higher than expected, but still showing the economy contracting. The Personal Consumption Expenditures and Core PCE (the Fed's favorite inflation gauge) came in as expected, with inflation at or below the level the Fed likes to see. Personal Income and Personal Spending both came in as expected. The University of Michigan Consumer Sentiment survey came in lower than expected.
All in all, the reports showed that perhaps the economy was doing SLIGHTLY better than expected, but no more. Mortgage bonds seemed to take their cue this week from the stock market and inflation worries in the marketplace. As you will see by the mortgage bond price chart below, mortgage bonds sold off big-time on Tuesday, Wednesday and Thursday, and then recovered a little bit on Friday with the positive PCE news. However, in selling off, the bonds breached a key level of support at the 200 day moving average. It is struggling this morning to try to get back above that level. If it is unable to in the days ahead, it could mean that we will see higher mortgage rates. The mortgage bond has only fallen below the 200 day moving average 3 times in the last three years. Each time it does, it brings higher mortgage rates until it can work it's way back above it.
This week, we have the following news to look forward to:
Monday - The ISM (Industrial Supply Managers) manufacturing index already came in a little bit better than expected. (HIGH)
Wednesday - The ISM services index (MODERATE)
Crude Oil Inventories (MODERATE, BUT LATELY HAS HAD A HIGH IMPACT ON RATES)
Productivity (Moderate)
Friday - Friday brings the monthly employment report for May, including:
Non farm payrolls created or lost (HIGH)
Unemployment rate (HIGH)
Hourly Earnings (HIGH)
Average Work Week (HIGH)
So, the big news of the week will be released on Friday. Last month, the report surprised the markets with news that the economy had lost 20,000 jobs, which was less than the 70,000 that was anticipated. Often times these reports are revised from month to month, so we could expect to see April's number revised to show more jobs were lost. If there is another surprise, with a better than expected number, we could see mortgage bonds sell off and mortgage rates rise in the process. Last month, when the better than expected news was released, mortgage bonds sold off drastically on the news, but then recovered most of their losses before days end.
In other mortgage news, FNMA has announced that, beginning June 1, they are doing away with their declining markets policy, and will once again offer high LTV financing (to as much as 97%) in all markets. At the same time, they announced that they have made significant changes to their automated underwriting system (Desktop Underwriter). While we have not seen the changes yet, they are expected to have been re-set to help minimize FNMA's risk, especially in high LTV lending. As we start to see the impact of these changes, we will send out an alert to you. Freddie Mac has also announced that they are doing away with their declining markets policies. Although FNMA and FHLMC have made these changes, the leading private mortgage insurance companies have not. So, FNMA may approve a 97% loan, but lenders may not be able to get PMI coverage on the loan without reducing the LTV. I am hopeful that as the PMI companies start to see the affects of the underwriting changes put in place by FNMA and FHLMC, they will begin to reduce the constraints they have placed on high loan to value loans. This is especially important when it comes to financing condos, as most of the PMI companies have set a limit of 90% LTV on condo financing.
We will keep you posted with any significant movements in the market. Above is the mortgage bond chart from last week. Remember that the most recent day (Friday) is on the far right. Green and up is good, while red and down are bad. Notice how the week got progressively worse, although Friday showed some improvement. From the time that I started writing this, until now, the market has improved and is currently above the 200 day moving average. If it is able to hold at that level, that would be a good thing for mortgage rates!
Have a great week!
Jay Skwierawski
President
First Sterling Mortgage Services, LLC
737 North Michigan Avenue, #1900
Chicago, IL 60611
312.268.7601
WE CLOSE ON TIME - EVERY TIME!
A Mortgage Update from Jay Skwierawski for the week of May 19
Hello Everybody!
Apparently someone from FNMA read my "Mortgage Minute" on declining markets this week, because they've changed their policy! Well, maybe not, but more on that later.
Mortgage rates finished the week slightly lower than where they were when the week started. News out on the economy was mixed, as far as mortgage rates are concerned. Here's a recap:
The Retail Sales figures announced on Tuesday were mixed, with the headline number coming in at -.2%, just as expected, but Retail Sales excluding autos came in much better than expected at +.5%. Both of these numbers have a HIGH impact on mortgage rates. On Wednesday, the Consumer Price Index (CPI) and the Core CPI (excluding food and energy costs) came in lower than expected. For the inflation hating bond markets, these lower than anticipated numbers were a welcome sign. Thursday brought a higher than expected number for first time unemployment claims, a worse than expected Empire States Index (showing a downturn in manufacturing in NY), and a slightly better than expected Philadelphia Fed Index. Also released on Thursday were Industrial Production and Factory Utilization, both coming in worse than expected. Finally, on Friday we found out that new housing starts and new housing permits both came in higher than expected - does this mean that our housing problems have "bottomed out"? Hopefully, however also released was the most recent measure of consumer sentiment from the University of Michigan, showing the lowest number in 26 years. A rally in bonds on Friday fizzled as the price of oil reached $128 per barrel. This completely took the wind out of the bond market's sails, and bonds ended up finishing the week very close to where they started.
Also on Friday, we heard some great news as Fannie Mae (FNMA) announced that they are revamping their "declining markets" policy, effective June 1. One thing that remains to be seen is if the PMI companies will sign on to FNMA's new policy. It won't do any good for FNMA to offer 97% mortgages, even in "declining market areas" if lenders can't obtain PMI coverage on those loans. We should hear from the PMI companies in the coming week, and as any important news is announced, we will share it with you.
Next week isn't a huge one on the news front, but recently the quiet weeks have been the most volatile for mortgage rates. Here's what we have to look forward to:
Monday - Index of leading economic indicators (expected to be flat at 0.0) Moderate Impact on mortgage rates
Tuesday - Producer Price Index (PPI) is expected to show inflation at the wholesale level rising at .4% (better than last month's +1.1%) HIGH
Tuesday - Core PPI, excluding food and energy costs, is expected to come in at +.2%, same as last month. HIGH
Wednesday - Minutes from last Federal Reserve meeting are released. The market will watch this information closely, as the Fed signaled at this meeting that they were probably done lowering rates during this current cycle. HIGH
Thursday - First Time Unemployment claims for last week. MODERATE
Friday - Existing Homes Sales is expected to show a slight decline. MODERATE
You will notice on the chart on the top of the page some pretty big swings in mortgage bonds this past week. Remember, the most recent days are to the right. Green and up are good for mortgage rates, red and down are bad!
With the good news out of FNMA, and very favorable mortgage rates, we should start seeing buyers coming into the market. We've even sited some positive articles in the press regarding housing, which should hopefully offset some of the doom and gloom that had been reported.
Have a great week!
Jay Skwierawski
President
First Sterling Mortgage Services, LLC
737 North Michigan Avenue, #1900
Chicago, IL 60611
312.268.7601
WE CLOSE ON TIME - EVERY TIME!
A Mortgage Update from Jay Skwierawski for the week of May 11
Hello Everybody!
Mortgage rates ended last week pretty much where they started, as mixed economic news pushed rates both lower and higher. The end result was that the market finished almost dead even on the week.
Before we get to last week's news, I want to be sure to tell you to watch for today's "Mortgage Minute (or two)," which will have information on "Declining Market" designations and how it could affect your business in the future.
There was not a lot of news released last week, but there was enough to shake up the markets a bit:
On Wednesday, Productivity in the nation's factories was reported up 2.2%, which was better than expected. That means that factories were producing more. However, looking into the report, it appeared that a lot of those goods being produced were ending up as inventory, instead of being sold. The more inventory there is, the less likely that factories have to continue to produce at such a brisk pace. Also on Wednesday, U.S. crude oil inventories were reported to be almost one and a half times the expected amount. This usually helps the price of oil, but the cost of a barrel of crude oil (black gold, Texas tea) continued its trek higher to never before seen highs of $126 per barrel. This does not bode well for inflation fearing treasury and mortgage bonds. On Thursday, first time unemployment claims came in slightly lower than expected, but the four week moving average continued its move into recessionary levels. And finally, on Friday, we had the U.S. Trade Balance coming in better than expected. The two biggest news items for the week were the cost of oil and the news that insurance giant American International Group (AIG) had a loss last quarter of $7.81 Billion, compared to income of over $4 Billion for the same quarter last year. This took some wind out of the sails of the people that are thinking that the credit crisis is nearing an end. AIG is one of the largest insurers of mortgage bonds.
This week, there is more market moving news set to be released, including:
Tuesday - Retail Sales for April, which are expected to show no increase over March's numbers - (HIGH impact on rates)
Wednesday - The CPI (Consumer Price Index) and Core CPI (less food and energy) is set to be released (HIGH)
Wednesday - Crude oil inventories (Moderate)
Thursday - Philadelphia Fed Index of activity on the east coast (HIGH)
Thursday - First time unemployment claims for last week (Moderate)
Thursday - Industrial Production and Capacity Utilization (Moderate)
Thursday - Empire State Index showing activity in New York (Moderate)
Friday - Building Permits and New Housing Starts (Moderate)
Friday - Consumer Sentiment (Moderate)
In addition to the news listed above, the markets will continue to focus on earning and losses from large mortgage companies and banks, as well as the cost of oil.
The chart above shows the movement of the price of mortgage bonds over the last three months. The most recent days are shown on the right side. Remember that green and up are good, red and down are bad! As you will notice, the week ended up on Friday (lower end of red bar) almost exactly where it started the week. The market sold off on Friday with the price of oil increasing to $126 per barrel.
We will keep you posted on any major movements in the market.
Thank you and have a great week!
Jay Skwierawski
President
First Sterling Mortgage Services, LLC
737 North Michigan Avenue, #1900
Chicago, IL 60611
312.268.7601
WE CLOSE ON TIME - EVERY TIME!
A Mortgage Update from Jay Skwierawski for the week of May 4
Hello Everybody!
Another roller coaster week in mortgage rates and like most roller coaster rides, this one ended up pretty much where it started! There was A LOT of news on the economy released this week - some good for rates, some bad, and some downright confusing!
Tuesday brought news that Consumer Confidence had dropped, again, to a number that was worse than estimated. On Wednesday, the Gross Domestic Product news showed that the economy grew at a .6% pace in the first quarter of 2008. This was slightly better than the markets expected, but still anemic. It also was a positive number, which goes against the beliefs of those people that think that we are currently in a recession, since the definition of a recession is two straight quarters of negative growth. Although, .6% is pretty close to negative. The Chicago Purchasing Managers' Index (PMI) release on Wednesday was better than expected, but still a bad number. That's the kind of news week it was. Numbers were bad, just not as bad as expected. Wednesday afternoon brought the announcement that the Federal Reserve's Open Market Committee (FOMC) had voted to lower the Fed Funds rate by 1/4%. In doing so, they also "hinted" that they may be done lowering rates for this cycle. The market reacted very favorably to this news. Almost every other time that the Fed has dropped rates, the markets have had a negative reaction because lower interest rates can lead to higher inflation, and inflation has been a problem lately. So, the Fed signalling that they might not lower rates any more was welcome news to the bond markets. Thursday's news was on Personal Spending and Income. Spending came in higher than expected, but that may have been more as a result of inflation, and income came in slightly lower than expected. The big news on Thursday was the release of the Personal Consumption Expenditures and Core PCE. This is the Fed's favorite inflation gauge, and it came in a tad higher than expected, and a tad higher than the range accepted by the Fed. Normally, the markets would have sold off on this news, but inflation isn't new news right now, and with the Fed's announcement from the previous day, the markets pretty much shrugged it off. Initial Jobless Claims jumped to 380,000, much higher than expected. The Industrial Supply Managers index came in better than expected, but also a pretty bad number - just not as bad as the market was expecting. On Friday, the big numbers of the month were released - the monthly employment numbers. The Unemployment Rate decreased to 5.0% in April, down from 5.1% in March, and better than the 5.2% that the markets expected. Also, the economy lost 20,000 jobs, instead of the 80,000 that the market was expecting. The markets actually rallied on this news. The economy loses 20,000 jobs, and the market rallies. Again, because the news wasn't as bad as expected. Kind of like going to the dentist and he tells you that your teeth are fine, but your gums have to go!
So, the markets were up one day, down the next. Make that up one hour, down the next! It could have been worse with all of the news that was released. The markets will now focus on any news being released with the notion that the Fed probably won't be lowering rates again. There is not a lot of news coming out next week, which doesn't mean that we won't have mortgage rate movement. Every time there has been a "quiet week," some other news has come out unexpectedly that has caused rates to move. Time will tell!
News due this week:
Monday - Industrial Supply Manager's Service Index (Moderate)
Thursday - Initial Jobless Claims (Moderate)
Friday - Balance of Trade (Moderate)
The chart above shows the price movement of mortgage bonds over the past three months. Remember, green and up are good, red and down are bad. The longer the line for the day, more volatile the market was that day. The most recent day (Friday) is to the far right. It was quite a volatile day!
Have a great week!
Jay Skwierawski
President
First Sterling Mortgage Services, LLC
737 North Michigan Avenue, #1900
Chicago, IL 60611
312.268.7601
A Mortgage Update from Jay Skwierawski for the week of April 27
Hello Everybody!
Interest rates rose slightly last week. The economic news was mixed, while there was some favorable news for one large bank, and less than favorable inflation news from abroad. Although it was a relatively quiet week, from a news standpoint, the news that was released caused much volatility in the mortgage bond market. The week ahead is chock full of news, including a Federal Reserve meeting, and the all important employment report.
First, let's take a look at the news that came out:
The week started on Monday with news that National City Bank announced that it was receiving a $7 Billion cash infusion from some investors. This was looked at very favorably, as it signaled that perhaps investors are starting to see value in the battered financial sector and just maybe we could be nearing the end of the credit crunch. On Tuesday, Existing Home Sales came in at 4.93 million units, slightly higher than the 4.92 million that were expected. Although the number was better than expected, it was still a large decline from the month before. On Thursday, Durable Goods Orders came in less than expected, while first time unemployment claims were reported at 342,000 vs. the 375,000 that was expected. Also on Thursday, New Home Sales came in less than expected at 526,000 units vs. 585,000 expected and 575,000 from the month before. The feeling is that the credit crunch is affecting the ability of some "would be" buyers of new homes to be qualified for mortgages. Finally, on Friday, the University of Michigan Consumer Sentiment report came in lower than expected. Gee, you think? Consumers are being hit over the head everyday with bad news on the economy and inflation, and are paying $4.00 per gallon for gas. One might suspect that consumer sentiment might be down.
Next week could be one of those trend setting weeks as far as mortgage rates are concerned, and that only has to do with the economic news that is expected to be released. Who knows what other surprises are in store for us. Here's what's coming up this week:
Tuesday - Consumer Confidence, another measure of the "mood of the consumer" - (Moderate impact on rates)
Wednesday - Federal Reserve Open Market Committee will announce their decision on short term rates - (HIGH impact on rates)
Wednesday - Employment Cost Index, measuring if inflation is making its way into our paychecks - (HIGH)
Wednesday - 1st Quarter Gross Domestic Product - will this number confirm that our economy is in a recession, or just really, really slow? The definition of a recession is when the GDP number is negative two quarters in a row. As you may recall, the 4th quarter GDP came in at a very slow .6%, but still positive. (Moderate)
Wednesday - GDP Price Deflator, a measure of inflation which is part of the GDP report - (HIGH)
Wednesday - Chicago Purchasing Managers Index (PMI), a measure of the economy in the Midwest (HIGH)
Thursday - Personal income and spending (Moderate)
Thursday - Personal Consumption Expenditures (PCE) and Core PCE, excluding food and energy - the Fed's favorite measure of inflation that is highly watched every month. (HIGH)
Thursday - First time unemployment claims, a measure of the number of people that are losing their jobs - (Moderate)
Thursday - The Industrial Supply Manager's report (ISM), a measure of the state of the economy across the country (HIGH)
Friday - The April Employment Report, including:
New jobs created (In March, 80,000 jobs were lost. The market is anticipating the same size loss for April)
Unemployment Rate (In March, this number jumped, unexpectedly to 5.1%. The market is expecting another increase to 5.2% in April)
Hourly Earnings (an increase would signal another sign of inflation)
Average Work Week (a decrease is expected)
All of the employment numbers have a HIGH impact on mortgage rates
Individually, each of the numbers could have a HIGH impact on mortgage rates, but what will probably happen is that we will have some good numbers and some bad, and mortgage rates could have the same kind of week ahead that they did last week. A lot of volatility in the market up and down, and rates ending up the week only slightly changed from where they started out.
The chart above shows the movement of mortgage bond prices. Each bar represents a trading day, with the most recent (Friday) on the far left. On the chart, remember that green and up are good, red and down are bad.
Here's some good news:
SPRING HAS SPRUNG...
...and that means it's time to wash away those winter blues! In fact, according to the Soap and Detergent Association - did you even know there was such a thing? - three-quarters of Americans engage in spring-cleaning. In fact, their surveys indicated that more than 80 percent of people who spring clean agree that it helps them save time throughout the year, and 96 percent of people donate or discard items during their spring-cleaning.
But the advantages can go much further than that. Check out these top ten spring-cleaning activities, compiled by www.medicinenet.com, that can help make your home healthier and safer:
1. Thoroughly dust your home. Also clean any air conditioning and heating filters, ducts, and vents to minimize pollens and other airborne allergens.
2. Organize your medicine cabinet. Throw away expired medications and old prescription medicines that you no longer need.
3. Inventory your garage and basement. Get rid of any old paint, thinners, oils, solvents, stains, and other similar items you no longer need. Note: You may need to take these items to a hazardous waste drop off center.
4. Inventory under your sinks and around your house. Dispose of old or potentially toxic cleaning products.
5. Have your chimney professionally cleaned. This will help you lessen the chances of carbon monoxide exposure when the cold weather returns..
6. Clean all mold and mildew from bathrooms and other damp areas. Use nontoxic cleaning products.
7. Check your rugs. Make sure that rugs on bare floors have nonskid mats and that older or dusty mats are either washed or replaced.
8. Inspect outdoor playground equipment. Make sure that all elements are sturdy and safe, especially guardrails, protruding bolts, and other potential sources of injury.
9. Change your batteries. Do so for both smoke detectors and carbon monoxide detectors.
10. Collect old batteries throughout the house for disposal. Dispose of them in a battery recycling or hazardous waste center.
And make it easy on yourself - take it one room, one cleaning task at a time. You'll be more likely to accomplish more if you tackle each spring-cleaning project separately. And that's great advice...any time of year!
Have a great week!
Some of the information contained in this update comes from Mortgage Market Guide, a service that I subscribe to.
Jay Skwierawski
President
First Sterling Mortgage Services, LLC
737 North Michigan Avenue, #1900
Chicago, IL 60611
312.268.7601
WE CLOSE ON TIME - EVERY TIME!
A Mortgage Update from Jay Skwierawski for the week of April 13
Hello Everybody!
Last week, the mortgage market enjoyed a rather quiet week, and interest rates remained steady from Monday to Friday.
But before I get into the markets and economic reports, reading some articles in the newspaper this week reminded me of a story I had heard a few years back:
Mr. Johannson, the top real estate agent in the community, had commissioned a local artist to paint a portrait of his family as a surprise for his wife Buffy for Christmas. The artist was busy at the time, but promised Mr. Johannson that he would start the painting in August, and it would, indeed, be finished by Christmas time so he could present it to Buffy. In August, the artist contacted Mr. Johannson and said that he was ready to start the painting. Mr. Johannson responded that he had read in the newspaper that the housing market was taking a turn for the worse, and that, although his business was still going strong, he would have to cancel the portrait, because "bad times were on the way". Upon hearing this news, the artist contacted his home improvement contractor. He was just about to have his basement finished, but "with bad times on the way," he decided to hold off until things got better. The home improvement contractor had not yet heard this news, but when the artist told him what was about to happen, he called his new truck salesman. He had just negotiated to buy a new truck for his business, but with "bad times on the way," he would hold off on purchasing the truck, until he would have enough business to warrant a new truck. The new truck salesman was quite dismayed upon hearing the news. He and his wife had just decided that they wouldn't put off getting their daughter's braces until high school. They would take care of her cross bite in 7th grade, as the orthodontist had recommended. But, upon hearing that "bad times were on the way," they called the orthodontist to tell him that they weren't going to be able to afford the braces at this time, and they would contact him when times got better. This news certainly caught the orthodontist by surprise. He and his wife had just decided it was time to "move up" to the North Shore. However, now that "bad times were on the way," they decided they better hold off on moving, so they contacted their real estate agent - Mr. Johannson, and canceled their appointment with him to list their home and start looking at new times.
The moral of the story - don't believe everything that you hear. Interest rates are near all-time lows. There are still plenty of mortgage programs out there for qualified borrowers, and home prices in most areas are not dropping as much as the media would have you believe.
So, back to the news. Last week, there wasn't much economic news released, but what did come out was, for the most part, favorable for mortgage rates:
First time claims for unemployment came in quite a bit smaller than expected, but still high enough to be worrisome for the employment picture. The trade balance came in higher than anticipated, meaning we were importing more than we were exporting, however much of this could have to do with the high cost of oil. Finally, the University of Michigan Consumer Sentiment index came in at a 25 year low. Talk about your self fulfilling prophecies. The more that consumers hear about how bad consumers think things are, the more likely they are hold back on making large purchases (like homes and automobiles). This would, of course, not bode well for future economic reports, which could lead to a further economic slowdown and MAYBE lower interest rates.
Although last week's economic reports were a "wash" for mortgage rates, this coming week could see some real movement. There is a lot of news slated to come out this week, including:
Monday - Retail Sales - (HIGH impact on rates) - Were consumers out buying last month?
Monday - Retail Sales, excluding Autos - (HIGH)
Tuesday - Producer Price Index (PPI) and Core PPI (excluding food & energy) (HIGH) - The first inflation index for March - inflation at the producer level.
Tuesday - Empire Manufacturing Index (Moderate) - How are things going in New York?
Wednesday - Industrial Production (Moderate) - How are the nation's factories doing?
Wednesday - Capacity Utilization (Moderate) - Are those factories working to their limits?
Wednesday - Consumer Price Index and core CPI (HIGH) - Inflation at the consumer level
Wednesday - Housing Starts (Moderate) - Have builders started building houses, again?
Wednesday - New House Permits (Moderate) - Do those builders have plans to build more houses in the future?
Thursday - First time unemployment claims (Moderate) - Was last week's decrease in claims a fluke, or was the week before's huge jump over 400,000 claims a fluke?
Thursday - Index of Leading Economic Indicators (Low) - What do the next six months hold for the economy?
Thursday - Philadelphia Fed Index (HIGH) - How is the economy on the east coast, which is an indication of the US economy?
With so many reports due out next week, it is bound to be a crazy week for mortgage rates. There hasn't been a lot of news out on mortgage companies and mortgage investments, so perhaps we're due for some of that too! The big news of last week was when Washington Mutual announced that they were closing most of their retail mortgage branches, and phasing out of the wholesale business where they purchased mortgage loans from mortgage brokers. This was not totally unexpected. If there are any other big stories reported, we will be sure to keep you in the loop!
In the meantime, have a great week!
Above is this week's candlestick chart (courtesy of Mortgage Market Guide, a paid subscription service that I subscribe to which helps to keep me informed of happenings in the economy which affect our business). Remember, green is good, up is good, red and down are bad. As you will notice, market movement lately has been very flat, which means mortgage rates are holding steady.
Jay Skwierawski
President
First Sterling Mortgage Services, LLC
737 North Michigan Avenue, #1900
Chicago, IL 60611
312.268.7601
WE CLOSE ON TIME - EVERY TIME!
A Mortgage Update from Jay Skwierawski for the week of April 20
Hello Everybody!
There's a guaranteed way to partially beat inflation at the bottom of this update!
Last week wasn't a good one for mortgage rates. The good news is that the increase in rates was mostly a result of positive news on the economy, and not more bad news in the mortgage or banking industries. Some inflation talk by members of the Federal Reserve didn't help matters, either.
First, here's the news that came out:
Retail sales came out slightly higher than expected, which is a positive sign that perhaps consumers are ignoring all of the bad stuff they're reading in the papers. The Empire State Index came out much better than expected. This news on the economy in the New York area doesn't usually move markets too much, but on that day it was also reported that the Producer Price Index (PPI) for March was up a whopping 1.1% (which would be a 13% annual inflation rate) and double what was anticipated. If you a regular reader of my reports, you know how much bond traders dislike inflation. The markets sold off on this news, causing rates to rise. On Wednesday, housing starts and new house permits both came in higher than expected. Finally, some good news on the housing front, and the mortgage market sold off on the good news, causing rates to rise again. Also on Wednesday, the government reported that the Consumer Price Index (CPI - inflation at the consumer level) came in just as expected. This was a good thing. If the CPI would have come in higher, as the PPI did, then we would have seen a huge increase in mortgage rates. On Thursday, Industrial Production came in lower than expected (factories not producing as much - typical in an economic slowdown) while Capacity Utilization came in higher than expected. First time unemployment claims came in a little lower than expected, but still at a relatively high number. The Index of Leading Economic Indicators came in as expected, predicting a flat economy over the next six months. The final economic release of the week was the Philadelphia Fed Index, a measure of the economy on the east coast. Although it came in higher than expected, it was still an awful number.
All in all, the positive news on the economy won out over the negative news, and mortgage rates rose. Also hurting mortgage rates this week was some positive earnings reports released by giant companies like Google. Positive earnings reports cause people to want to invest in the stocks of those companies. So investors pull their money out of other investments, like bonds, and put it into stocks. When they pull their money out of bonds, it causes rates to go up.
By the end of the week, we saw mortgage rates rise by about 1/4% from where they started. Even though rates ticked up a little bit, it is still a great time to take advantage of historically low mortgage rates before rising inflation pushes rates higher. If you, or a friend, family member, coworker or customer is in need of any advice on the changes in the market, please have them get in touch with us.
Next week, there aren't as many market moving reports coming out. We have:
Wednesday - Existing Home Sales for March, which have a moderate impact on mortgage rates
Thursday - New Home Sales for March (Moderate)
Thursday - First time unemployment claims for last week (Moderate)
Thursday - Durable Goods Orders, which are defined as items that are durable - made to last at least three years, like autos, furniture, electronics, appliances, computers, games, etc. (Moderate)
Friday - University of Michigan Consumer Sentiment Index (Moderate)
As you will see from the chart at the top of this page, mortgage bond prices fell this week to a significant level of support - the 200 day moving average, which seems to have held, and mortgage rates have recovered for the time being. If the price had dropped below the blue line, that is often an indicator of higher mortgage rates to come. Since there isn't much market moving news scheduled for next week, we shouldn't see much happening in the mortgage markets. However, if we have more inflation talk coming out of Federal Reserve members or negative news from any large mortgage lenders or banks, we could see rates rise.
Now, how can you beat inflation, one penny at a time? Starting May 12th, the cost of mailing a 1 oz. letter goes up to 42 cents. You can still purchase the "forever" stamp for 41 cents. The "forever" stamp can be used forever to mail a 1 oz. letter. That's your way of beating inflation one penny at a time! In addition to the change in the cost of a stamp, some other changes coming at the USPS:
Express Mail - The cost will now vary depending on where the mail is going. Sending something overnight closer may be cheaper. Also, you will get a discount if you purchase postage online.
Priority Mail - You can also save on Priority Mail when you purchase postage online.
Have a great week!
Jay Skwierawski
President
First Sterling Mortgage Services, LLC
737 North Michigan Avenue, #1900
Chicago, IL 60611
312.268.7601
WE CLOSE ON TIME - EVERY TIME!
A Mortgage Update from Jay Skwierawski for the week of April 6
Good Morning Everybody!
It's baseball season, finally! A sure sign of Spring.
The Box Score!
Last week's economic reports were, for the most part, mortgage rate friendly, including the all important employment reports released on Friday. We saw both Industrial Supply Manager's indexes come in slightly higher than anticipated, but still showing recessionary levels. Initial claims for unemployment soared to over 400,000, a number not seen in several years. Then, on Friday, the labor department reported that the economy lost 80,000 jobs in March, much worse than the 50,000 job loss that was expected. In addition, January and February's numbers were both revised downward to show an additional 70,000 jobs lost. The unemployment rate also climbed to 5.1% from 4.8%, also much higher than expected. As a result of these numbers, the mortgage bond market rallied and we saw mortgage rates end the week slightly better than where they started.
This week is a slow week as far as economic reporting goes, with the following reports set for release:
Tuesday - The minutes of the Federal Reserves most recent policy setting meeting are released. These can have a HIGH impact on mortgage rates, because it is a good measure of the "pulse of the Fed", and what it thinks about the economy and inflation.
Wednesday - Crude Oil Inventories are released (Moderate Impact on mortgage rates)
Thursday - Balance of trade and weekly initial jobless claims are released (Moderate impact on mortgage rates)
Friday - University of Michigan Consumer Sentiment Index. This is a widely expected measure of how consumers feel about the state of the economy and how they are doing financially.
Know your starting line-up at game time!
In addition to the above mentioned economic reports, there have been a lot of changes in the mortgage industry within the past several weeks regarding underwriting, pricing, private mortgage insurance and condo financing. Now more than ever, it is extremely important for you to have confidence in your mortgage lender. It seems like the major mortgage investors (FNMA, FHLMC and other large buyers of mortgages) are changing guidelines on an hourly basis! If you are dealing with a mortgage lender that is not paying attention, your deal could suffer as a result. Some of the changes that have been announced have gone into effect immediately upon notification, while others have come with some advanced warning. If you have a transaction already in process, and it hasn't been "locked in" with an investor, and the program changes or, worse yet goes away, then it's conceivable that you may be turned down for your mortgage. Also, if you have been pre-approved for your financing, it is very important that your loan officer check the status of the pre-approval as you are making an offer. There have been many instances where buyers have been pre-approved under certain mortgage programs that weren't available when the buyer finally found a house. If you are on the listing end of an offer, and the pre-approval letter that you are being presented is older, or even if it's not older, it would be a great idea for you to verify that the pre-approval is still good with the lender that issued it. Be wary of cheesy-looking preapprovals! We are more than happy to take a look at your pre-approval letters to give you our opinions of them.
Get in the game!
Even with all of the changes that have taken place, now is still a great time to buy. There are still great pr