This Week’s Market Commentary

This holiday-shortened week brings us the release of five important economic reports for the markets to digest. Two of the five are considered to be of very high importance to the bond market and mortgage rates. The remaining reports are considered to be of moderate importance to the markets.

The financial and mortgage markets will be closed today in observance of the Memorial Day holiday and will reopen Tuesday morning.

The Conference Board will start the week’s more important releases by posting their Consumer Confidence Index (CCI) at 10:00 AM Tuesday. This is data measures consumer willingness to spend. If the index rises, it indicates that consumers feel better about their personal financial situations and are more apt to make large purchases. If confidence is sliding, analysts think consumer spending may slow in the near future. The latter is good news for the bond market because consumer spending makes up two-thirds of the U.S. economy. A decline in the index should boost bond prices and push mortgage rates lower Tuesday morning. It is expected to show a reading of 66.3, up from April’s 65.4 reading.

The Institute for Supply Management’s (ISM) manufacturing index will be posted late Wednesday morning. This highly important index measures manufacturer sentiment. A reading above 50 means that more surveyed manufacturing executives felt that business improved during the month than those who felt it had worsened. Analysts are expecting to see a 57.6 reading in this month’s release, meaning that sentiment fell during May. A smaller reading will be good news for the bond market and mortgage shoppers while an unexpected increase could contribute to higher mortgage rates Wednesday.

The revised 1st Quarter Productivity and Costs data is the first of two reports that will be released Thursday morning. This data measures employee output and employer costs for wages and benefits. It is considered to be a measurement of wage inflation. It is believed that the economy can grow with low inflationary pressures when productivity is high. Last month’s preliminary reading revealed a 1.6% increase, but I don’t think this piece of data will have much of an impact on the bond market or mortgage pricing unless it varies greatly from that reading.

The second release of the day will come from the Commerce Department, who will post April’s Factory Orders data during late morning trading. This manufacturing sector report is similar to last week’s Durable Goods Orders release, but also includes orders for non-durable goods. It can cause some movement in the financial markets if it varies from forecasts by a wide margin, but it isn’t expected to cause much change in rates this month. Current forecasts are calling for a decline in new orders of 1.0%.

Friday’s sole report is arguably the single most important report that we see each month. The Labor Department will post May’s Employment data early Friday morning. This report gives us key employment readings such as the U.S. unemployment rate and the number of jobs added or lost during the month. Analysts are expecting to see the unemployment rate remain at 9.0% this month with approximately 185,000 jobs added to the economy during the month. A higher than expected unemployment rate and a smaller number than 185,000 in new payrolls would be great news for the bond market. It would probably create a sizable rally in bonds, leading to lower mortgage rates Friday. However, stronger than expected numbers may lead to a spike in rates Friday morning.

Overall, Wednesday or Friday is likely to be the most important day of the week as they bring us the two most important reports on the agenda. If they give us weaker than expected results, we could close the week with lower mortgage rates than Tuesday’s opening levels. However, if we see stronger than expected readings in those two releases, I expect mortgage rates to move higher on the week.

But that is very much dependent on seeing a relatively calm week in stocks. As we have seen the past two weeks, stock market volatility can heavily influence bond trading and mortgage rates and significantly minimize the impact that these economic reports normally have on rates. Accordingly, it would be wise to maintain contact with your mortgage professional if still floating an interest rate.

Six Unobvious Reasons to Recycle

1. Protect your home from hazardous waste. The average American home accumulates up to 20 pounds of hazardous waste each year. Even more frightening, usually 100 pounds of waste is stored in cabinets, the garage, closets, basements, and other storage spaces in the average home.

2. Help the community and local job options by donating to the Goodwill, which collects electronics as well as most other things, to recycle or sell. They use the profits to help fund job training and employment opportunties in the local community.

3. You can hold a recycling event as a fundraiser for one of your favorite causes (a local school, sports league, church, etc.) with the help of http://www.recyclingforcharities.com/

4. According to the Environmental Protection Agency, American households own an average of 24 electronic products that could be potentially donated or recycled. 85% of them end up in landfills instead.

5. Recycling is less expensive than sending trash to a landfill. According to http://www.ecocycle.org/, recycling instead of landfilling saves $55 per ton, saving you money, along with the environmental benefits.

6. Stimulate the economy by creating jobs. Eco-Cycle states that “or every one job at a landfill, there are ten jobs in recycling processing and 25 jobs in recycling-based manufacturers. The recycling industry employees more workers than the auto industry.”

Tagged as: budget, energy, environment, recycling, saving money

An Important Issue Requiring Action

Every day I hear people complaining about how hard it is to get a loan these days with all of the paperwork that needs to be provided to even have a shot at being approved.  I've got news for you; it isn't getting any easier.

Some of you may have heard the phrase, "Dodd-Frank Bill" running amongst the Real Estate profession.  This bill has made a significant impact on Loan Officer compensation, Private money lending and will soon impact even more arenas of Real Estate Lending.

The hottest topic regarding the bill right now is the "Qualified Residential Mortgage" (QRM).  For bullet points on what QRM entails, please visit this link: Dodd-Frank-QRM-April-28-2011 .  The impact of QRM won't just be on Lenders.  It will affect Real Estate Agents, Buyers and Sellers.

REALTORS--I ask that you help take action on this bill.  Once you have made your decision please visit: NAR Realtor Action

Homeowners and Potential Buyers--you can still have your voices heard!  Let our Senators and Congressman know your feelings on the issues.

Congressman Sam Farr: Email
Senator Dianne Feinstein: Email
Senator Barbara Boxer: Email

I felt this issue important enough to share with everyone.  Please share this information with everyone you know.  The more people who participate, the better!

This Week’s Market Commentary

This week brings us the release of five important economic reports in addition to two Treasury auctions that may influence rates. Only two of the five reports are considered to be of fairly high importance to the bond market and mortgage pricing. The remaining reports are considered to be of moderate or low importance and will likely not heavily influence mortgage rates.

April’s New Home Sales data will be released late Tuesday morning. This report gives us a measurement of housing sector strength and future mortgage credit demand. However, it is actually the least important release of the week and probably will not have much of an impact on mortgage pricing because it tracks only approximately 15% of all home sales. It is expected to show little change in sales from March’s level, meaning the new home portion of the housing sector was flat last month.

Wednesday has one of the week’s more important reports scheduled with April’s Durable Goods Orders being posted. This data gives us an indication of manufacturing sector strength by tracking orders at U.S. factories for big-ticket products.

It is currently expected to show a decline in new orders of approximately 2.0%, indicating manufacturing sector weakness. That would be good news for the bond market and mortgage rates, but this data is known to be quite volatile. Therefore, a small variance from forecasts would likely have little impact on mortgage rates Wednesday.

The first of two revisions to the 1st quarter Gross Domestic Product (GDP) will be released at 8:30 AM Thursday. The second revision to this report comes next month but isn’t expected to carry much importance. The GDP is the sum of all goods and services produced in the U.S. and is considered to be the best indicator of economic growth. Last month’s preliminary reading revealed a 1.8% increase in the annual rate of growth. Analysts expect a slight upward revision to this reading with the consensus being a 2.0% rate of growth. If the upward revision is much stronger than expected, we may see the bond market react negatively and mortgage rates move higher because it would mean the economy was stronger than thought last quarter.

April’s Personal Income and Outlays data is the first of two reports due Friday. It will be posted at 8:30 AM and gives us an indication of consumer ability to spend and current spending habits. An increase in income means that consumers have more money available to spend. Since consumer spending makes up two-thirds of the U.S. economy, this data can cause movement in the financial markets and mortgage rates. Current forecasts are showing a 0.4% increase in income and a 0.5% rise in spending. Weaker readings would be considered good news for bonds and mortgage rates.

The second report of the day and the last relevant data of the week will come from the University of Michigan who will update their Index of Consumer Sentiment for May. It is forecasted to show a small increase from this month’s preliminary reading of 72.4. A reading above 72.6 would be considered negative for bonds and mortgage pricing.

Overall, I think we have a fairly busy week ahead of us. The big report of the week is Wednesday’s Durable Goods Orders. If Thursday’s GDP revision varies greatly from forecasts, it can also lead to sizable changes in rates. There are also a couple of Treasury auctions that are worth noting. The 5-year Note sale is Wednesday and the 7-year Note auction will be held Thursday. Both may influence bond trading and possibly mortgage rates if they are met with an exceptional demand or if there is lackluster interest from investors.

The bond market will close early Friday afternoon ahead of next Monday’s Memorial Day holiday. With all this, there is a pretty good possibility of seeing mortgage rates change several times this week- especially if there is more volatility in the stock markets. Accordingly, please proceed extremely cautiously if still floating an interest rate.

Foreclosure rate retreats from record high from Inman News

This may not be new news to most of you, but I found it to be interesting.

MBA: Improvement in performance of 2005-07 loans

By Inman News, Thursday, May 19, 2011.

Inman News™

The percentage of homeowners with mortgages who were in foreclosure or seriously delinquent fell during the first three months of the year, and improvement in the performance of loans taken out from 2005-07 suggests a sustainable trend, the Mortgage Bankers Association said today in releasing its quarterly National Delinquency Survey.

The serious delinquency rate -- the percentage of loans in foreclosure or delinquent by 90 days or more -- was 8.1 percent during the first quarter, down from 8.6 percent during the last three months of 2010 and 9.54 percent a year ago.

The percentage of mortgages in foreclosure was 4.52 percent, down from a record high of 4.64 percent in the fourth quarter, and the percentage of loans behind by 90 days or more dropped for the fifth consecutive quarter, to 3.58 percent.

"Of particular importance is that the drop in the percentage of loans 90 days or more past due was driven by improving numbers for loans originated between 2005 and 2007," said MBA chief economist Jay Brinkmann, in a statement.

Those loans -- originated before many lenders tightened their underwriting standards -- drove the mortgage market collapse, and now represent about 31 percent of loans outstanding but 65 percent of the loans seriously delinquent.

"Given that loans originated during this period are now past the point where loans normally default, and that loans originated since then generally have better credit quality, mortgage performance should continue to improve," Brinkmann said.

The survey covers about 88 percent of an estimated 49.7 million outstanding first mortgages. Extrapolating the survey's serious delinquency rate to all of those loans suggests about 4 million residential mortgages were in foreclosure (2.24 million) or delinquent by more than 90 days (1.78 million) during the first quarter.

Although the owners of some of those homes may be able to get current on their loans or negotiate a short sale, recent trends suggest most will lose their homes -- making them part of a "shadow inventory" of homes destined to be put up for sale by lenders as real estate owned (REO) properties.

The combined percentage of loans in foreclosure or behind by at least one payment was 12.31 percent, down from 13.6 percent during the fourth quarter. That equates to about 6.1 million loans.

But Brinkmann said short-term delinquencies remain at pre-recession levels, and foreclosure starts marked their second-largest drop ever during the first quarter, bringing them back to the lowest level since the end of 2008.

The survey showed 1.08 percent of outstanding mortgages entered the foreclosure process during the first quarter, or roughly 536,000 loans.

Although useful for gauging trends, Brinkmann acknowledged that national delinquency statistics "are somewhat meaningless" in real estate because local market conditions determine values and people's perception of values.

More than half of all loans in foreclosure are located in just five states: Florida, California, Illinois, New York and New Jersey.

In Florida, for example, 23 percent of loans are at least one payment behind or in foreclosure, and nearly one-fourth of all homes in foreclosure are located in the state.

Brinkmann noted that the survey showed foreclosures are still being initiated in Nevada at an annualized rate of more than 9 percent, and in Arizona the annualized rate of foreclosures started is more than 7 percent.

Although not all homes that enter the foreclosure process are ultimately repossessed by banks or sold to investors on the courthouse steps, a glut of of REO properties and short sales has depressed prices in many markets, discouraging some owners of non-distressed properties from putting them on the market.

The California Association of Realtors today reported that distressed properties accounted for 48 percent of all home sales in the state during April, down from 51 percent in March but about the same as the 49 percent share registered a year ago.

CAR said REO properties accounted for 28 percent of sales in April, down from 31 percent in March, and that 19 percent of sales were short sales, down from 20 percent in March.

The MBA's National Delinquency Survey also sheds some light on the impact of the robo-signing controversy, which has slowed the flow of properties through the foreclosure process. Those impacts are greatest in judicial foreclosure states, where courts are typically involved in the process.

The states with the biggest increase in the number of loans in foreclosure during the first quarter -- Florida, New Jersey and Illinois -- are all judicial foreclosure states, Brinkmann noted.

In states with the largest decreases in loans in foreclosure -- California, Arizona and Michigan -- most foreclosures are processed non-judicially.

ForeclosureRadar, which tracks foreclosure-related filings in five Western states, this week reported that foreclosure-related filings in California fell in April to lows not seen since the fall of 2008.

Notice of default filings, auction notices, bank repossessions, and sales to third parties were all down dramatically in California and Arizona, the company said. While Nevada saw declines in notices of default and auction notices, bank repossessions were largely unchanged and sales to third parties jumped.

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Creative Ways to Retire Without Savings

Like many baby-boomers today, you may be faced with an upcoming retirement and a lack of a retirement savings account due to the rough economic times of the past few years.

A recent CBS MoneyWatch article tackles this problem by suggesting resourceful ways to make retirement work for you.

One bold idea is to pair up with another married, retiring couple, pooling together Social Security income for a manageable budget. Social Security income at age 66 will be $2,000 per month, with an additional $1,000 per month for the spouse, resulting in a $36,000 per year income.

If you find a like minded couple, consider moving into a three bedroom house together, making the combined household income $72,000. This is higher than the 2009 national average income.

Another tactic is to delay retirement until age 70, in which case your monthly Social Security income will increase to $2,640 per month. In this situation, your spouse would not need to delay past age 66 to receive the $1,000 per month. “You’d want to file and suspend your Social Security income at age 66, so your spouse can start the $1,000 monthly spousal benefit income at age 66,” advised the article.

At age 70, your combined income would be $43,680 per year following this plan. If you were to pair up with another married couple, that Social Security income would increase to $87,360 per year.

Your circumstances may not be right for such an arrangement, but this is just one example of creative and resourceful ways to head into retirement in this economic climate.

This Week’s Market Commentary

This week brings us the release of four pieces of relevant economic news in addition to the minutes from the most recent FOMC meeting.

None of the economic reports are considered to be highly important to the markets or mortgage rates, but they do carry enough significance to influence mortgage rates if they show a wide variance from forecasts.
Nothing of importance is scheduled for today, so look for the stock markets to be a major influence on bond trading and mortgage pricing. If the stock markets open the week with sizable gains, bonds will likely suffer and mortgage rates will probably move higher tomorrow. However, more stock weakness could translate into slightly lower rates tomorrow. The mortgage market took a small turn for the worse Friday afternoon, so unless your lender revised pricing higher late Friday you may have a slight increase in rates waiting for you.

The week’s first data comes early Tuesday morning when April’s Housing Starts will be posted. This data measures housing sector strength and mortgage credit demand by tracking newly issued permits and actual starts of new home construction. It is expected to show an increase in new starts from March’s readings. Since this report is not considered to be of high importance to the bond market, it likely will have little impact on mortgage rates unless it varies greatly from forecasts.

The second report of the day is April’s Industrial Production at 9:15 AM ET. It measures manufacturing sector strength by tracking output at U.S. factories, mines and utilities. It is expected to show a 0.5% increase in production, indicating that manufacturing activity is growing.

A smaller than expected increase in output would be good news for the bond market and mortgage rates because it would indicate that the manufacturing sector is not as strong as thought. This report is equally important to the markets as the earlier housing report, so they both will likely need to show unexpected strength or weakness for them to cause a sizable movement in mortgage rates.

Wednesday’s only relevant release is the minutes of the last FOMC meeting. Market participants will be looking for how Fed members voted during the last meeting and any comments about inflation concerns in the economy and economic growth. The goal is to form opinions about when the Fed may make a move to key short-term interest rates. Since the minutes will be released at 2:00 PM ET, if there is a market reaction to them it will be evident during afternoon trading.

The National Association of Realtors will give us their Existing Home Sales report late Thursday morning. This data tracks resales of homes in the U.S. during April, giving us a measurement of housing sector strength. This type of data is relevant because a weakening housing sector makes a broader economic recovery less likely. Current forecasts are calling for a small increase in home sales between March and April. Ideally, the bond market would prefer to see a decline, indicating further housing sector weakness. A large increase in sales could lead to bond weakness and a small increase in mortgage rates Thursday morning.

The last data also comes late Thursday morning with the release of April’s Leading Economic Indicators (LEI). This Conference Board report attempts to measure economic activity over the next three to six months. It is expected to show no change from March’s reading, meaning that economic activity is likely to remain flat over the next few months. A decline would be good news for the bond market and mortgage rates, while an increase could cause mortgage rates to inch higher Thursday.

Overall, it looks like we may see a fairly calm week in mortgage rates unless something unexpected happens or the stock markets make a big move upward or downward. I can’t really label one particular day as the most important one. If the stock markets remain fairly calm, I would guess the middle part of the week will probably be the most active for mortgage pricing. However, sizable gains or losses in the major stock indexes could influence bonds and mortgage rates more than this week’s economic data can.

Understanding Your Credit Score

Your credit score is one of the biggest determining factors in your ability to get a quality loan, and it is far more complex than just a three-digit number.

Yahoo! Personal Finance recently wrote an in-depth piece about understanding the intricacies of your credit score and what it means.

According to the article, “consumer research conducted by the Consumer Federation of America and VantageScore Solutions shows that many Americans don’t really understand their credit scores.”

The lower your credit score, the higher interest you will pay on loans and any line of credit. Understanding the basics of credit scores can help you achieve your goals, including home ownership.

Click here to view the article and learn more about credit scores.

Spring Cleaning 101

It’s that time of year again – time to get rid of the clutter and clean up your home. In this video from CBS, O Magazine’s Creative Director Adam Glassman shares some tips on identifying and clearing clutter and older things you no longer need.

This Week’s Market Commentary

There are five pieces of relevant economic data scheduled for release this week that may affect mortgage rates, in addition to two important Treasury auctions.

The four most important four reports will be posted over two days, meaning the markets will have to rely on factors other than economic news for direction several days. There is no relevant data due today or Tuesday, so expect the stock markets to help drive bond trading and mortgage rates those days.

March’s Goods and Services Trade Balance report will be released early Wednesday morning. This report gives us the size of the U.S. trade deficit but likely will not have much of an impact on the bond market or mortgage pricing. It is expected to show a $47.8 billion trade deficit, but it is the least important of this week’s data and likely will have little influence on Wednesday’s mortgage rates.

The Treasury will hold a 10-year Note sale Wednesday and a 30-year Bond sale Thursday. Results of the auctions will be posted at 1:00 PM ET each day. If they are met with a strong demand from investors, we could see bond prices rise enough during afternoon trading to cause downward revisions to mortgage rates. However, lackluster bidding in the sale, meaning longer-term securities are losing their appeal, could lead to higher mortgage pricing those afternoons.

The first important piece of data this week is April’s Retail Sales, which will be released at 8:30 AM ET. It is an extremely important report for the financial markets since it measures consumer spending. Consumer spending makes up two-thirds of the U.S. economy, so this data can have a pretty significant impact on the markets. Current forecasts are calling for a 0.6% increase in sales from March to April.

A weaker than expected level of sales should push bond prices higher and mortgage rates lower Thursday morning as it would signal that economic activity may not be as strong as thought. However, a larger increase could fuel fears of economic growth that would lead to bond selling and higher mortgage rates.

April’s Producer Price Index (PPI) will also be released early Thursday morning. It helps us measure inflationary pressures at the producer level of the economy. If this report reveals weaker than expected readings, indicating inflation is not a concern at the producer level, we should see the bond and stock markets rally. The overall index is expected to show an increase of 0.5%, while the core data that excludes more volatile food and energy prices has been forecasted to rise 0.2%. No change or a decline in the core data would be ideal for mortgage shoppers because inflation is the number one nemesis for long-term securities such as mortgage-related bonds.

Friday has the remaining two reports. The first is April’s Consumer Price Index (CPI) at 8:30 AM ET. It is similar to Thursday’s PPI report, but measures inflationary pressures at the more important consumer level of the economy. These results will be watched closely and can lead to significant volatility in the bond market and mortgage pricing if they show any surprises. Current forecasts are calling for a 0.4% increase in the overall index and a 0.1% rise in the core data reading. As with the PPI, the core data is the more important of the two readings.

The last report of the week is May’s preliminary reading to the University of Michigan’s Index of Consumer Sentiment. This index measures consumer willingness to spend, which relates to consumer spending. If consumers are more confident of their own financial situations, they are more apt to make large purchases in the near future. This report usually has a moderate impact on the financial markets though, because it is not exactly factual data. It is expected to show a reading of 69.8, which would be no change from last month’s final reading.

If it shows a large decline in consumer confidence, bond prices could rise and mortgage rates would move slightly lower, assuming the CPI does not give us a significant surprise. The CPI is much more important to the markets than the sentiment index is, so look for it to be the biggest influence on Friday’s mortgage pricing.

Overall, it likely will be another active week for mortgage rates. Besides the week’s important economic news, look for the stock markets to be a major influence on trading. The most important day of the week is Thursday with the Retail Sales and PPI reports on the agenda, but Friday’s CPI is extremely important to the bond market. It appears we will likely see the most movement in mortgage rates the latter part of the week unless the stock markets post sizable gains or losses the first part. With some very important data being posted this week, it would be prudent to be attentive to the markets if still floating an interest rate.
For the most recent daily market commentary, click here.

5 Things to Think About When Looking for Your Dream Home

While on the hunt for a perfect home, it can be immensely helpful to create a wish list of sorts. This can help you and your real estate agent obtain a clear picture of what type of home would best suit you.
Some things to consider:

1. Move-in ready or fixer-upper?
Making a home “your own” can make fixer-uppers an attractive option, along with the lower cost. Making a mark on your new home via renovations. Take some time to think about what homeownership means to you, and whether you are interested in renovation.

2. Upgrades
Certain upgrades in a home, such as marble or granite counters, are often coveted by buyers. Consider what type of upgrades are important to you – energy-efficiency, professional grade appliances, luxury tiling? Make a list and show your Realtor.

3. The Yard
What type of backyard are you looking for, and how important is it to you? Think about low versus high maintenance yards, the amount of space you’d like, and what kind of yard would best suit your lifestyle.

4. Swimming Pools
For some homebuyers, having a swimming pool can be a dealbreaker. If this is something that you really desire in your dream home, make that clear to your real estate agent so that they can narrow the search for you.

5. Schools in the Area
Last but certainly not least, the quality of the schools in the area of a dream home should be an important thing to research. Ask your Realtor for information about schools in the area of your search, and comparisons between them. This information is easily obtained, and real estate agents will be more than happy to show you school scores and more. Also consider private schools, if that is an option for your family.

Blood Drive Coming Soon

Mortgage California will be holding a blood drive on May 13 at our company headquarters in Los Gatos. Every three seconds, someone is in need of blood, and by donating, you can save lives.

The drive, run by Blood Centers of the Pacific, will be held on Friday May 13th from 10 am to 2 pm at 16780 Lark Avenue in Los Gatos.

To sign up for this live-saving event, call our front desk at (408) 355-2000. You can also sign up online by going to www.bloodheroes.com, click “Donate Blood,” and enter the Sponsor Code princeton.

If you have any questions, feel free to e-mail Laurie De Mello at lauriedemello@rmrfinancial.com

Four Ways to Spice Up an Open House

Open houses are a great way to meet potential clients, and showcasing the home in an attention-getting way can cement potential sellers’ confidence in the Realtor.

1. Take advantage of branding opportunities.
Water bottles on hot days with a custom label can be a great source of advertising. A picture of the house with contact information on the bottle is not only fun, but a way to keep both the home and the Realtor in the mind of the visitor after the open house.

2. Go beyond the basics with food.
You may have heard the age-old technique of baking cookies in the home to infuse it with the scent of homemade treats. However, food at an open house can be another way to stand out. It can encourage people to stay longer and strike up a conversation. Think outside the box – ice cream, chocolate fountains with strawberries, or lattes from an espresso machine.

3. Don’t forget the music.
Having music softly playing enhances the atmosphere and detracts from an empty feeling in the home and makes it more inviting. Soft jazz or other non-lyrical music can be played from an iPod and dock system. Have it centrally located so the music is heard throughout the home.

4. Consider the early evening
A recent Realtor Magazine article suggested holding open houses not only on Sundays, but during twilight hours. This way, people can visit the home directly after work, expanding the potential buyer pool.