Brentwood TN Real Estate: Finance Market Update August 23, 2010
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"There is nothing wrong with change, if it is in the right direction." Winston Churchill .
And certainly, seeing our economy improve is change in the right
direction. But what steps will get us there... and how will those steps
impact home loan rates. Here’s what you need to know.
Last Tuesday, the government held a "Future of Housing Finance"
conference to discuss changes needed in this area. Most participants
agreed that government assistance for housing must be reduced but not
eliminated. Bill Gross, from PIMCO and one of the panelists, called for a
massive
refinancing of certain mortgages backed by Fannie/Freddie/FHA, believing
such a move would lift home prices 5% to 10% and provide a $50 Billion
stimulus to the economy. I will be watching this situation closely for
further developments.
Home sales and the job market - two key aspects to our continued
recovery - are also areas we need to see change in an improving
direction. Last week, the NAHB Housing Market Index came in a bit worse
than expectations and showed housing to be at a 17-month low. It can be
argued that the tax credits actually hurt the housing market by not
adding any sales, just pushing them up. This has now resulted in a void
or softer period in the market, potentially wasting billions of dollars.
Housing Starts and Building Permits were also reported lower than
expected last week. Clearly, demand for housing has slowed over the past
few months, due to the expiration of the Home Buyer Tax Credit and
persistently high unemployment.
Speaking of unemployment, awful is the only way to describe last
week’s Initial Jobless Claims report. According to the report, 500,000
people filed to receive unemployment benefits for the first time, which
was well higher than the lofty 475,000 expected and the highest reading
since November 2009. In addition, between Continuing Claims and people
receiving Emergency Unemployment Compensation or EUC, the combined total
of people receiving unemployment benefits now equals 9.25 Million
people.
The bottom line is this: The labor market is the foundation of our
economy. Job growth and confidence is the best and most sustainable way
for our economy to recover. The present anti-business regulatory
environment is pushing Initial Claims, a leading indicator on the health
of the labor market, in the wrong direction.
But home loan rates, meanwhile, continue to remain at historic low
levels. Though keep in mind, inflation is the arch enemy of Bonds and
home loan rates, which means it can cause both to worsen. Both the
Producer Price Index (which measures inflation at the wholesale level)
and the Consumer Price Index were recently reported hotter than
expected. If rates do start to rise, they will likely do so quickly.
If you or anyone you know would like to learn more about
taking advantage of historically low home loan rates, please don’t
hesitate to call or email. Or forward this newsletter on to anyone you
think may benefit and I’d be happy to talk to them free of charge.
WHEN YOU’RE BUYING A HOUSE, THE LAST THING YOU WANT IS AN
UNSUCCESSFUL CLOSING. CHECK OUT THE MORTGAGE MARKET GUIDE VIEW FOR SOME
INFORMATION THAT WILL HELP ENSURE YOUR HOMEBUYING EXPERIENCE MOVES IN
THE RIGHT DIRECTION.
Existing Home Sales Report , Wednesday’s New Home Sales Report , and Thursday’s Initial and Continuing Jobless Claims Report .
Durable Goods Report ,
which gives us an update on consumer and business buying behavior on
big-ticket items that last for an extended period of time. Meanwhile,
Friday will bring another read on the economy with the Gross Domestic Product Report , which is the broadest measure of economic activity.
Remember: Weak economic news normally causes
money to flow out of Stocks and into Bonds, helping Bonds and home loan
rates improve, while strong economic news normally has the opposite
result.
Chart: Fannie Mae 3.5% Mortgage Bond (Friday, August 20, 2010)
Credit Reports: One May Not Be Enough
This summer, Fannie Mae instructed lenders that they should adopt a
new policy that would include a second review of an applicant's credit
report just prior to closing. Why? The answer is simple: the credit
profile of a borrower may have changed between the time of the initial
review of the credit report and the time of closing.
How will this impact the home loan?
The potential impact to a borrower who has utilized credit to make
significant purchases after the initial credit report could include:
A delay in closing Increase of closing costs and/or interest rate A decreased loan amount Denial of the loan That’s right, in the worst-case scenario, a change in credit could
even result in a loan being denied - even after an original approval had
been granted.
What should homebuyers do (or not do)?
In order to eliminate any possibility of potential problems before
closing, anyone in the application process should use credit sparingly
and make sure they adhere to the tips provided below by credit expert Linda Ferrari of Credit Resource Corp :
Don't do anything that causes a red flag to be raised by the scoring system. Don't apply for new credit of any kind. Don't pay off collections or charge offs. Don't max out or over charge on your credit accounts. Don't consolidate debt onto one or two credit cards. This list is not comprehensive, but it does give you a
peek into situations that could create issues and could also be contrary
to some ideas you have read previously.
--------------------------
Economic Calendar for the Week of August 23-27, 2010
Remember, as a general rule, weaker than expected economic data is good for rates, while positive data causes rates to rise.
Economic Calendar for the Week of August 23 - August 27
Date
ET
Economic Report
For
Estimate
Actual
Prior
Impact
Tue. August 24
10:00
Existing Home Sales
Jul
4.75M
5.37M
Moderate
Wed. August 25
08:30
Durable Goods Orders
Jul
3.1%
-1.2%
Moderate
Wed. August 25
10:00
New Home Sales
Jul
330K
330K
Moderate
Wed. August 25
10:30
Crude Inventories
8/21
NA
-0.818M
Moderate
Thu. August 26
08:30
Jobless Claims (Initial)
8/21
485K
500K
Moderate
Fri. August 27
08:30
Gross Domestic Product (GDP)
Q2
1.4%
2.4%
Moderate
Fri. August 27
08:30
Chain Deflator
Q2
1.8%
1.8%
Moderate
Fri. August 27
10:00
Consumer Sentiment Index (UoM)
Aug
69.4
69.6
Moderate
Courtesy Billy Winfree Pinnacle Financial Partners 615-743-8397
VANESSA STALETS
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