Luxury Home Sales

Pending Home Sales for January are up 1.7% which is great, but it’s below the 2.4% expected.  As it happens, the luxury home market is seeing the largest growth across the country.  Not only are the number of sales increasing, but the appreciation rate of luxury homes is outpacing lesser expensive homes as well.  If this is your market, I think that I have the best jumbo loan programs out there with a fixed rate options from 2.875% to 3.875% for loans above $417,000.

Horse Wrestling

I sent this photo to some of my co-workers yesterday as a representation of what it feels like we do here at the office when interest rates drop and 100 loans need to fund by the end of the month.  That’s why I missed yesterday’s blurb and why I am not sending this email out until 1:30 today–it’s not that I don’t love you or anything.
Okay, back to the topic at hand:  The FHFA (Fannie & Freddie’s dad) reports that housing prices rose 1.4% in the last quarter of 2014, and 4.9% from the same time 12 months prior. For the more boring stuff that we don’t really care about, Inflation at the consumer level dropped by 0.7% last month, Unemployment Filings rose 10% last week,  and Durable Orders are up almost twice the expected level.

Janet Speaks and the World Listens

The S&P, Bonds and oil prices are all up marginally after Fed Chair Janet Yellen testified on Capitol Hill about the Fed’s monetary policy and the current state of the US economy.  A few highlights include:

  • Inflation remains below the target range
  • Although consumer spending is up and employment looks better, growth remains sluggish
  • There is still room for economic improvement
Chair Yellen then elaborated on the use of the term “patience” in the minutes of the last FOMC meeting to mean that they could raise rates at any meeting, but not likely to occur in the next couple of meetings.

In economic news, the Case Shiller 20-city Home Price Index rose by 4.5% from December 2013 to December 2014, above the 4.3% expected.  The month over month median price rose by 0.9%, the largest since last spring.

Home Boys

Existing Home Sales declined 5% to an annual rate of 4.82 million commissions checks being written.  I am not sure where in this country is experiencing slow sales right now; here locally the temperate weather and low rates have sparked one of my busiest late winters ever.  One demographic that is contributing to the slowdown however is the “young adult packs”–those 23-34 year olds who are living with their buddies, or with Mom and Dad, rather than contributing to America’s household formations.  From 2000 to 2013, the number of young adults hanging with family increased 46%, while the number cohabitating with a significant other fell 21%.

The Elephant

The elephant in the room is when interest rates will start to rise.  Is our economy strong enough to handle it this quarter, this summer, even this fiscal year?  Yes, I think so; from the look of the employment and housing sectors (determined to be the greatest contributors to the Great Recession), we have reason to believe that a .25% increase in the Fed’s Cost of Funds rate would not take our flow of money to a grinding halt.  Remember that rate has been at 0% for the last six and a half years.

Am I encouraging a rate hike?  Absolutely not; I make my meager living on low interest rates and affordable housing.  The reality though is that it’s probably time to get out of the way of that elephant.

Patience

Yesterday’s FOMC minutes mentioned the word “patience” in the context of how students of the economy should await the eventual rising of interest rates by our hey-we-are-doing-the-best-we-can policy makers at the Federal Reserve.  This one word alone has helped mortgage rates stabilize again, if only momentarily.

Fewer laid off (or just plain fired) workers filed for unemployment last week than was anticipated; Weekly Jobless Claims fell 21K to 283,000.  With the unemployment rate also stabilizing (remember that it increased 1/10% this month), those of us with jobs are caring less and less about the labor market as to the impact it has on our economy.  You see, it’s no longer the squeaky wheel.

The squeaky wheel, as it were, at the moment is being heard from the European Union.  Particularly, Greece still has once again failed to come up with a plan to repay its massive amount of debt (mostly owed to Germany).  The ancient country known as much for it’s history as for its gyros is at risk of its accumulating interest outpacing its shrinking GDP.

Mystery Finance Theater

The S&P closed at another all-time high and although interest rates took a beating yesterday as a result, I won’t bore you with another chart today.  Needless to say, the refi frenzy has cooled around the office.

Today we have Building Permits down 1.2% and Housing Starts down 2%.  The headline Producer Price Index dropped 0.8%.  Not much reaction from the markets: Stocks are marginally down and Bonds are marginally up.  The reading of the Fed minutes here in a half hour could give us further direction on whether yesterday was the beginning of the end of low interest rates or just a blip that we’ll overcome by the end of the month.  It’s a Mystery…

A Discussion About Nothing

It’s been quite a boring week in the world of economic data, and that has made for some interesting discussions.  Meaningless, but interesting all the same. It’s like my favorite show about nothing, but much, much less entertaining.  Here is a recap of the week’s events and how they impact you.

Our attitudes and expectations concerning present and future economic conditions declined 0.4% in the United States of America this month versus last month.  Moreover, as a collective body of consumers of retail goods, we Americans spent 0.9% less, comparing the same two time periods.  Why is that important to know?  It’s really not, but it beats writing about how the economic turmoil in Greece may lead to their secession from the European Union.

Have a great weekend!  Interest rates have risen just a touch in each of the last 11 days, but appear to have found a stop.  Next week we can talk about inflation indicators; join me next time won’t you?

Bears Take a Breather

Looks to be a quiet day in a world usually fraught with anxiety-inspiring headlines and scandalous stories of those in positions of influence.  The beating bears are taking a breather, giving our mortgage bonds a chance to do the same.  The bond has been beat down almost 200 points since the beginning of the month, slimming profits and pushing interest rates (particularly on no-cost loans) up about a quarter point. It has been a fun month, and it looks to be over.  Watch for interest rates to come up another 1/4% by March. (???)

The Prodigal Son

Not much out there today in the financial report arena.  Europe’s oldest prodigal son, Greece, appears to be willing to stay in the EU family, and has all but been granted a six month extension on their debt resolution.

Closer to home, foreclosures were down 16% from December 2013 to December 2014.

Mortgage Backed Securities are still drifting lower–having lost about a point and a half since the beginning of the month.