Interest rates are currently 4.50% with one point for a conforming 30 year fixed rate loans (This rate assumes: primary or secondary residence, excellent credit, 20% down for a single family dwelling or 25% down for a condo and impounds of taxes and insurance).
This is an economy that, like a rainstorm, we have no choice but to cover up and trudge through to the other side, and I’m inclined to think it will stay this way–rather than breaking into a vibrant and convincing recovery–for quite some time. You can sense Old Man Winter out there keeping things cold and strange…teasing us with better economic data one day, then dropping another pessimistic bomb or two the next.
The good news is that, on balance, the recovery is indeed moving forward, though very slowly. The bad news is that this sort of economic environment can be devastated by the element of surprise. If we get some news or economic data that shocks or surprises investors, today’s pendulum will swing uncomfortably far in one direction–and it could take some time to work its way back to where it was before the explosion of bad news.
It is a terribly difficult time to be investing, of course, though a lot of money has been made in bonds this year. In gold, too. But when a market is rewarding investors in gold so liberally, you can be certain there is great fear and uncertainty in the air. It’s not a time to leave home without a warm coat and umbrella.
I wish you warmth, by the way, in the coming holidays and hope they will help remind us all of why we work so hard in such an unpredictable economy.
Sierra Pacific Mortgage
November 25, 2009
Gold $1165.80/ounce [up]
Crude Oil (Brent) $76.58/brl [down]
U.S. Dollar to…
Euro .6680 [down]
Japanese Yen 88.50 [down]
6-mo Treasury Bill Yield 0.13%
10-yr Treasury Note Yield 3.34%
[6-mo down 2 bps, 10-yr up 3 bps]
11th Dist Cost of Funds 1.272%[-]
30-yr Fixed-rate Mortgage 5.27%
15-yr Fixed-rate Mortgage 4.76%
1-yr ARM 4.61%
[HSH averages rates: 30-yr
up 5 bps,15-yr up 4 bps; 1-yr ARM up 28 bps]
Mortgage Bankers Association Mortgage Applications Index
week ending 11/13
611.7 (down 2.5%; up 3.2%
the week prior)
Purchase Money Loans
210.6 (down 4.7%; down 11.7%
the week prior)
2955.4 (down 1.4%; up 11.3%
the week prior)
Jobless Claims 11/14
505,000 – prior week 502,000 – continuing claims fell to 5.611 m
Consumer Price Index (CPI) Oct
Up 0.3% – core (excluding food & energy prices) up 0.2%
Housing Starts Oct
The headline on Monday read, “Housing Recovery Is Back on Track” (Moody’s Economy.com). On Tuesday, the headline read, “House Prices Falter; Further Declines Seen.” Thus do we move from one day to another. As with the weather, if you don’t like it now, just wait a day, and vice versa.
On Monday, the big news was that existing home sales for October rose by 10.1% relative to the prior month’s sales, according to the National Association of RealtorsÒ. This also pushed sales up by almost 24% compared to sales levels this time a year ago. Understandably, this brought a bit of jubilation to real estate observers.
Most of us, though, have been trained by now to wait for the other shoe to drop. And indeed, we learned Tuesday that the S&P Case Shiller Index showed the smallest advance in home prices in a few months. And if that wasn’t daunting enough, real estate information group, First American CoreLogic reported that 23% of all American homes are currently worth less than their mortgage loan balances. Nearly 10.7 million homes, the firm reported, are “under water.”
To make certain Monday’s optimistic parade was thoroughly rained on, the Bureau of Economic Analysis reported that the third quarter growth in the economy, as measured by the Gross Domestic Product, was only up 2.78%–not the 3.53% reported earlier. (Remember that the BEA sends out a sequence of reports, each one revising the last. We face at least one more revision.) Even the Index of Leading Indicators, as reported last week, disappointed most analysts, though it did end up on the positive side.
But don’t jump to the conclusion that the economy and, with it, the real estate market is about to dive into the tank again. The market is suffering from a massive case of mood swing, and it would be unwise to take a firm stand in either optimistic or pessimistic territory.
Indeed, it appears that we’ll be experiencing a pendulum-like market, the good news following the bad and that bad following the good, for quite some time. Meanwhile, important matters like the level of mortgage rates don’t change all that much—until the markets face news and/or data that surprise them. That raises fears, though not for long in the current markets. Still, an unforeseen event could be temporarily devastating. Then we’d most likely work our way back to solid ground, and the recovery would continue to slog forward. Or more forward than backward.