Blogs WRE City Group
Monday Update
Posted on June 8, 2009
There is a lot to get to this week! Rates are the hot topic right now. There are two different scripts I can use to describe rates; you choose which one you like best. "Conventional 30-year rates have increased almost .625% in the last 8 days." Or... "Conventional 30-year rates have seen an increase in the past week; however they are still far below the historical average of 7.5%." Taking a look at this morning's rate sheet, 5.5% is the lowest conventional 30-year rate that does not cost additional points or fees. Take into consider the tax savings, and you are still at a net-taxable rate below 5%. Rates are great, not as good as they were the end of May, but still very, very good!
"IT'S A RECESSION WHEN YOUR NEIGHBOR LOSES HIS JOB; IT'S A DEPRESSION WHEN YOU LOSE YOURS." Harry S. Truman. The big headlines of the week had everything to do with job losses...and some surprising twists within the monthly Jobs Report that arrived on Friday, and caused home loan rates to worsen yet once again. Despite their efforts to improve early in the week, Bonds and rates ended the week .375% to .5% worse than where they began.
Week in Review -
We probably never thought we would see the day in which almost 350,000 jobs lost in a month would be considered good news. Considering the fact that this number was down from over 700,000 during the month of January and the lowest monthly loss since September of last year, the markets are reacting positively. Even the increased unemployment rate which is now approaching 10.0% is considered good news because many who had given up on their job search are now looking again. This news does not mean that the economy is about to burst into a growth mode. We understand that the bankruptcies of GM and Chrysler will translate into more job losses in the next few months.
On the other hand, the stock market is reacting positively because many feel the worst is behind us. We are not only talking about higher stock prices, but also the fact that oil prices hit $70 per barrel this past week and rates are up as well. Even higher priced oil may be good news in the long run as many oil producing countries are saying that the price must go to $75 before countries and companies will make the infrastructure investments necessary to prevent $200 oil some years from now. Oil at $75 would not seem to have a great affect upon our economy, but $200 certainly would.
Interest Rates -
Rates on home loans rose sharply last week. Freddie Mac announced that for the week ending June 4, 30-year fixed rates averaged 5.29%, up from 4.91% the week before. The average for 15-year rose to 4.79%. Adjustables rose more moderately with the average for one-year adjustables increasing to 4.81% and five-year adjustables rising to 4.85%. A year ago 30-year fixed rates were at 6.09%. "30-year fixed-rates caught up to the recent rise in long-term bond yields this week to reach a 25-week high," said Frank Nothaft, Freddie Mac vice president and chief economist." And the slowdown in the housing market has now detracted from economic growth for the past 13 quarters, the longest quarterly stretch since at least 1947, according to the Bureau of Economic Analysis. Yet, there are signs that the housing market may be moderating. Housing affordability rose in April to the second highest reading since January 1971 when records began, according to the National Association of Realtors® (NAR). As a result, pending existing home sales rose for the third consecutive month by 6.7 percent in April and represented the largest monthly increase since October 2001."
Rates on home loans rose sharply last week. Freddie Mac announced that for the week ending June 4, 30-year fixed rates averaged 5.29%, up from 4.91% the week before. The average for 15-year rose to 4.79%. Adjustables rose more moderately with the average for one-year adjustables increasing to 4.81% and five-year adjustables rising to 4.85%. A year ago 30-year fixed rates were at 6.09%. "30-year fixed-rates caught up to the recent rise in long-term bond yields this week to reach a 25-week high," said Frank Nothaft, Freddie Mac vice president and chief economist." And the slowdown in the housing market has now detracted from economic growth for the past 13 quarters, the longest quarterly stretch since at least 1947, according to the Bureau of Economic Analysis. Yet, there are signs that the housing market may be moderating. Housing affordability rose in April to the second highest reading since January 1971 when records began, according to the National Association of Realtors® (NAR). As a result, pending existing home sales rose for the third consecutive month by 6.7 percent in April and represented the largest monthly increase since October 2001."
Forecast for the Week -
In terms of economic reports, Thursday will be the big day this coming week. We'll learn more about the health of the retail sector via the Retail Sales Report for May. April's Retail Sales Report was worse than expected and marked the eighth decline in the past ten months for Retail Sales. While May's Report isn't expected to show the consumer out spending wildly, it would be a positive sign to see a turnaround instead of a continued slide lower.
In terms of economic reports, Thursday will be the big day this coming week. We'll learn more about the health of the retail sector via the Retail Sales Report for May. April's Retail Sales Report was worse than expected and marked the eighth decline in the past ten months for Retail Sales. While May's Report isn't expected to show the consumer out spending wildly, it would be a positive sign to see a turnaround instead of a continued slide lower.
Also on Thursday will be the next Initial Jobless Claims Report. Particularly given the high Unemployment Rate in last week's Jobs Report, it will be important to see if this number shows any improvement.
If today is any indication as to what the markets hold for us this week, we are in for another volatile week as it relates to mortgage rates. Most Lenders issued new rates mid-morning, making them worse not better.
