Low Interest Rates

Freddie Mac reported this week that home loan rates for the 30-year fixed mortgage fell to 3.69% in the last week in March. The low rates should spur on the spring buying season, which could ignite a housing market that slowed a bit in 2014, after stellar numbers in 2013.  Everybody that I am talking with seems to be experiencing a healthy flow of business right now.  Let’s hope it continues!

A Foreboding Storm

Earnings on Stocks and Bonds are both nil today as investors digest the final calculation of the Gross Domestic Product for the 2014 fiscal year. That number of 2.42% is right in line with the Fed’s expectations, but short of where most believe that our economic growth should be given 50 all-time-record-high stock index pricing and interest rates on the floor.  I continue to see a storm on the horizon in the form of a massive devaluation of stocks once interest rates start to rise.

Durable Goods?

While this photo represents 66% of every lunch prepared for my younger two boys (dino nuggets being the third component), it also showcases the two staple products behind the newly formed Kraft Heinz Company.  The mega merger, financed in part by Warren Buffet’s Berkshire Hathaway will be the fifth largest food and beverage company in the world (Nestle being numero uno).

This has about as mucho to do with mortgages as does the Durable Goods report out today, showing that Americans purchased 1.4% less long-lasting stuff than we did the month before.  Incidentally, Mac-n-Cheese could count in those statistics as the shelf life does in fact exceed one year.

Trends in Home Sales

As Existing Home Sales ebb, New Home Sales are on the rise.  February saw an 8% uptick to 539,000 annualized units closed, which is 14% above expectations and represents roughly 10% of all homes sold last month.

The Consumer Price Index (which measures the relative cost that we retail suckers pay for our stuff) rose 0.2% last month, and 1.7% from last year–right in line with the Fed’s generalized inflationary goal for the year.

Mortgage Pricing on Wall Street continues upward, helping set the stage for lower interest rates ahead.

Existing Home Sales

As you know all too well, the amount of existing homes available for sale is running low.  This is pandemic of the entire country, where Inventory just dropped to a 4.6 month supply.  Part of the “problem” is that Existing Home Sales increased by another 1.2% last month and 4.7% from this time last year.

Special Circumstances

The Federal Open Market Committee held interest rates at 0-ish% this week and indicated that they would do whatever they want when they want without being held to silly criteria like the Unemployment Rate or Gross Domestic Product  growth.  This is a slight exaggeration on the gist of the read statement wherein is was given to understand that despite moderate growth and healthy looking employment headlines, the economy of the United States is not well enough to be left well enough alone.  Mortgage interest rates continue on at crazy cheap levels.  Isn’t that special?

A Dove-ish Fed

The Federal Reserve removed the assurance that it will be patient in raising interest rates, a policy that the Fed has used since late 2008 to keep longer-term borrowing costs low–which is kind of a big deal for most folks who want to purchase a home.  The Fed will now set policy at each meeting based on the latest economic data, and those expectations have moderated even from the last few meetings.  The GDP is now projected to expand by 2.3-2.7% this year, and Core Inflation is anticipated at best at 1.4%.

Without using the “D-Word”, Mrs. Yellen stated that “inflation is anticipated to decline further in the near term”. The allusion then of the current Fed Chair to a dove is indicative of the lack of action being taken by the Committee, despite non-patient stance (which is not to be confused with impatience).  The  characterization is better understood perhaps in marked contrast to the term “inflation hawk” which characterizes in general the Fed’s overriding mission to keep costs rising at a measured pace.
Stocks and Bonds had a good day yesterday, though both are paralyzed like a deer in the headlights today.

All We Need is Patience

No economic reports out today; the entire free world awaits the utterance of one word from the lips of one woman.  Will she say it?  Will she not?  Has she been walking the streets at night just trying to get it right like Axel Rose did?  My thoughts are that the prepared statement read by Fed Chair Janet Yellen this afternoon will not include the word “patience”.  The Fed will wait at least another month before raising the Fed Funds Rate and even then it’s iffy through summer.  However, just the insinuation that the FOMC is prepared to hike rates at any given meeting has the strength to move the markets one way or the other. Consequently we will listen at 12:15 our time to determine if we should be patient while the Federal Open Market Committee leaves their rate at zero, where it has been since October 8, 2008.

Underwater Homes

Not a lot of chatter ahead of tomorrow’s conclusion of the FOMC meeting.  Analysts wait on baited breath to see if the term “patience” gets included in the prepared statement.

Building Permits are up 3% and Housing Starts are down 17%.  Considering the warm weather we have had this spring, yikes.

As home values continue to rise, equity in said homes has been increasing.  CoreLogic estimated that over a million more people regained positive equity in their homes during the 2014 fiscal year.  There are allegedly still 5.4 million properties that have outstanding mortgages higher than the current values.

Financial Jeopardy

Buy bonds and sell stocks or sell bonds to buy stocks?  Sizeable price fluctuation continues today following the announcement of the fourth consecutive month of declining prices at the manufacturing level.  The Producer Price Index dropped 0.5%, below the +0.3% expected by the Alex Trebeks of the financial forecasting world.  This has all of the contestants asking aloud, in the form of a question, “What is deflation?”.  The next pressing issue is whether the Fed will raise rates in June, or September, or?  That topic indeed is today’s Double Jeopardy.