The wild ride over the last few weeks continued again last week, as the US markets danced to the tune of the European debt and economic crisis. Here's what it means to home loan rates here in the US.
Even inflation hasn't stopped Bonds. Last week, consumer inflation and producer inflation came in above expectations. Remember inflation is the archenemy of Bonds and home loan rates, so hotter inflation would normally negatively impact Bonds and home loan rates. But even last week's inflation news didn't impact Bonds.
Seeing Bonds dismiss that inflation news indicates that the Bond market senses that the economy (which is already hardly growing) is in a very vulnerable position with things in Europe uncertain and gloomy at best. And when the situation deteriorates further, it may push many world economies into a recession.
It's all about Europe. US Bonds - including Mortgage Bonds - have been seen by the markets as a safe haven bid on existing and growing fears that Europe's debt crisis is coming to a head…and global growth, which is already anemic, is being threatened further. Not helping the situation was the news last week that there is no concrete solution to the European debt problems. Last week, French President Nicolas Sarkozy and German Chancellor Angela Merkel met. However, following the meeting, Sarkozy stated that "EuroBonds can be imagined one day, but at the END of the European integration process, not at the BEGINNING."
That was a pretty clear message to the financial markets that the creation of a EuroBond is not within the remote daydreams of Germany, which is the strongest nation in Europe and who will determine whether it gets created or not. So let's be clear, the German taxpayers want no part of a EuroBond, since it would use the surplus that Germany has worked hard to create to fund the poor habits and debt of weaker and less responsible member States.
The bottom line is that the fear and uncertainty right now is pretty overwhelming, which is supporting Bonds and home loan rates. But Bonds are at "nose bleed levels" and sentiment can change very quickly.
Monday, August 29, 2011
Tuesday, August 23, 2011
Majority of Renters Say Owning a Home is a Top Priority
Most Americans still believe that owning a home is a solid financial decision, and a majority of renters aspire to home ownership as a long-term goal. According to the 2011 National Housing Pulse Survey recently released by the National Association of Realtors®, 72 percent of renters surveyed said owning a home is a top priority for their future, up from 63 percent in 2010.
Defining the QRM rule is important because it will determine the types of mortgages that will generally be available to borrowers in the future. As currently proposed, borrowers with less than 20 percent down will have to choose between higher fees and rates today — up to 3 percentage points more — or a 9-14 year delay while they save up the necessary down payment.
Over half — 51 percent — of selfdescribed “working class” home owners as well as younger non-college graduates (51 percent), African Americans (57 percent) and Hispanics (50 percent) who currently own their homes reported that a 20 percent down payment would have prevented them from becoming home owners.
Pulse surveys for the past eight years have consistently reported that having enough money for a down payment and closing costs are top obstacles that make housing unaffordable for Americans. Eighty-two percent of respondents cited these as the top obstacle, followed by having confidence in one’s job security.
We need to make sure that any changes to current programs or incentives don’t jeopardize our collective futures.” When asked why home ownership matters to them, respondents cited stability and safety as the top reason. Long-term economic reasons such as building equity followed closely behind. On a local level, respondents said neighbors falling behind on their mortgages and the drop in home values were top concerns. Foreclosures also continue to remain a large concern, with almost half of those surveyed citing the issue as a problem in their area.
Seven in 10 Americans also agreed that buying a home is a good financial decision while almost two-thirds said now is a good time to purchase a home. The annual survey, which measures how affordable housing issues affect consumers, also found that more than three quarters of renters (77 percent) said they would be less likely to buy a home if they were required to put down a 20 percent down payment on the home, and a strong majority (71 percent) believe a 20 percent down payment requirement could have a negative impact on the housing market. “Despite the economic setbacks Americans have experienced in today’s current climate, it is clear that a strong majority still believe in home ownership and aspire to own a home,” said NAR President Ron Phipps, broker-president of Phipps Realty in Warwick, R.I. “However, achieving the dream of home ownership will become increasingly difficult for buyers if they are required to make a 20 percent down payment, which may be a reality for many of tomorrow’s buyers if a proposed Qualified Residential Mortgage rule is adopted. That is why Realtors® are strongly urging regulators to go back to the drawing board on the proposed rule.”
Defining the QRM rule is important because it will determine the types of mortgages that will generally be available to borrowers in the future. As currently proposed, borrowers with less than 20 percent down will have to choose between higher fees and rates today — up to 3 percentage points more — or a 9-14 year delay while they save up the necessary down payment.
Over half — 51 percent — of selfdescribed “working class” home owners as well as younger non-college graduates (51 percent), African Americans (57 percent) and Hispanics (50 percent) who currently own their homes reported that a 20 percent down payment would have prevented them from becoming home owners.
Pulse surveys for the past eight years have consistently reported that having enough money for a down payment and closing costs are top obstacles that make housing unaffordable for Americans. Eighty-two percent of respondents cited these as the top obstacle, followed by having confidence in one’s job security.
The survey also found respondents were adamantly against eliminating the mortgage interest deduction. Two-thirds of Americans oppose eliminating the tax benefit, while 73 percent believe eliminating the MID will have a negative impact on the housing market as well as the overall economy.
“The MID facilitates home ownership by reducing the carrying costs of owning a home, and it makes a real difference to hardworking American families,” said Phipps. “Home ownership offers not only social benefits, but also long-term value for families, communities and the nation’s economy.
We need to make sure that any changes to current programs or incentives don’t jeopardize our collective futures.” When asked why home ownership matters to them, respondents cited stability and safety as the top reason. Long-term economic reasons such as building equity followed closely behind. On a local level, respondents said neighbors falling behind on their mortgages and the drop in home values were top concerns. Foreclosures also continue to remain a large concern, with almost half of those surveyed citing the issue as a problem in their area.
Tuesday, August 16, 2011
The Top ‘Lifestyle Factors’ When Home Shopping
If you want to make a sale, selling the lifestyle in a community or neighborhood is becoming an important piece of the presentation of a home, according to a new survey. One in five home owners have moved or would like to move because they don’t think their neighborhood or community is a good fit to their lifestyle, according to a recent survey of more than 1,000 home owners and future home buyers
The majority of those surveyed said they would place more weight on lifestyle factors–such as family-friendly neighborhoods or easy access to cultural activities like museums and music venues–when shopping for a future home. The survey was conducted by Better Homes and Gardens Real Estate LLC and and Meredith Corp.
“While the relation of price to features has become very favorable in many areas throughout the country, ultimately the surrounding community may determine how happy you are with your home purchase,” says Sherry Chris, president and CEO of Better Homes and Gardens Real Estate LLC, which used the survey results to launch a “Lifestyle Search” tool on its web site to help buyers factor in community preferences–such as “arts and recreation” and “family and community”–more in their search.
Here are some of the top lifestyle priorities survey respondents reported they’ll be looking for in their next home:
The majority of those surveyed said they would place more weight on lifestyle factors–such as family-friendly neighborhoods or easy access to cultural activities like museums and music venues–when shopping for a future home. The survey was conducted by Better Homes and Gardens Real Estate LLC and and Meredith Corp.
“While the relation of price to features has become very favorable in many areas throughout the country, ultimately the surrounding community may determine how happy you are with your home purchase,” says Sherry Chris, president and CEO of Better Homes and Gardens Real Estate LLC, which used the survey results to launch a “Lifestyle Search” tool on its web site to help buyers factor in community preferences–such as “arts and recreation” and “family and community”–more in their search.
Here are some of the top lifestyle priorities survey respondents reported they’ll be looking for in their next home:
- Ease of commuting by car: 38%
- Access to health and safety services: 34%
- Family friendly neighborhood: 33%
- Availability of retail stores: 32%
- Access to cultural activities: 21%
- Public transportation access: 19%
- Nightlife and restaurant access: 18%
- Golf friendly area-access to golf courses: 6%
Tuesday, August 9, 2011
This week in history..."
And last week was indeed one for the record books, between the last minute debt ceiling debate deal, credit rating agency Standard & Poor's decision to downgrade the United State's credit rating one notch from AAA to AA-plus for the first time ever, the Dow Jones plummeting, and home loan rates approaching historic lows once again. Why does all of this matter? Here's what you need to know.
With just hours to spare before the deadline, Congress passed and the President signed the Debt Ceiling/Deficit Reduction Bill last Tuesday, which among other things called for a deficit reduction of $2.4 Trillion over the next 10 years. While this was certainly a good (albeit small) step towards lowering our enormous budget deficit, the uncertainty surrounding the deal combined with continued weak economic reports (including Personal Incomes for June, which grew by the lowest measure since November and Personal Spending, which was at the lowest levels in 2 years) and the credit crisis in Europe caused Stocks to plummet late last week.
Last Thursday was the single worst day for Stocks since October of 2008 and pushed the Dow, Nasdaq and S&P 500 Index into negative territory for 2011. In fact, the Dow has lost nearly 11% after hitting a 2011 high of 12,807 back on May 2. And while it is important for our economy to improve, one result we often see during weak economic times is an improvement in Bonds, including Mortgage Bonds, and therefore home loan rates, to which Mortgage Bonds are tied. Think of it this way: Investors move their money back and forth between Stocks and Bonds, moving their money into the safe haven of Bonds when there is uncertainty or weakness in the economy. That action last week helped Bonds and home loan rates approach their historic best levels once again.
But not all of the news last week was bad for our economy. Friday's Jobs Report from the Labor Department was better than expected, with 117,000 new jobs created during July, above the 84,000 that was expected.and better yet, May and June's numbers were revised higher to add 56,000 more jobs to the former tally! In addition, hourly earnings rose to 0.4% from 0.2% in June, which was a nice increase we haven't seen in quite some time, while the Unemployment Rate fell slightly to 9.1% from 9.2%. The Jobs Report was surprisingly good news, but it is only one report and we need to pay close attention to upcoming economic data. If future reports continue to improve, Bonds and home loan rates could worsen as investors would move their money back into Stocks, which is something we saw a little of late last week.
The bottom line is this: Home loan rates remain near some of the best levels we've ever seen, but about the only thing that is certain in the markets right now is the volatility.
With just hours to spare before the deadline, Congress passed and the President signed the Debt Ceiling/Deficit Reduction Bill last Tuesday, which among other things called for a deficit reduction of $2.4 Trillion over the next 10 years. While this was certainly a good (albeit small) step towards lowering our enormous budget deficit, the uncertainty surrounding the deal combined with continued weak economic reports (including Personal Incomes for June, which grew by the lowest measure since November and Personal Spending, which was at the lowest levels in 2 years) and the credit crisis in Europe caused Stocks to plummet late last week.
Last Thursday was the single worst day for Stocks since October of 2008 and pushed the Dow, Nasdaq and S&P 500 Index into negative territory for 2011. In fact, the Dow has lost nearly 11% after hitting a 2011 high of 12,807 back on May 2. And while it is important for our economy to improve, one result we often see during weak economic times is an improvement in Bonds, including Mortgage Bonds, and therefore home loan rates, to which Mortgage Bonds are tied. Think of it this way: Investors move their money back and forth between Stocks and Bonds, moving their money into the safe haven of Bonds when there is uncertainty or weakness in the economy. That action last week helped Bonds and home loan rates approach their historic best levels once again.
But not all of the news last week was bad for our economy. Friday's Jobs Report from the Labor Department was better than expected, with 117,000 new jobs created during July, above the 84,000 that was expected.and better yet, May and June's numbers were revised higher to add 56,000 more jobs to the former tally! In addition, hourly earnings rose to 0.4% from 0.2% in June, which was a nice increase we haven't seen in quite some time, while the Unemployment Rate fell slightly to 9.1% from 9.2%. The Jobs Report was surprisingly good news, but it is only one report and we need to pay close attention to upcoming economic data. If future reports continue to improve, Bonds and home loan rates could worsen as investors would move their money back into Stocks, which is something we saw a little of late last week.
The bottom line is this: Home loan rates remain near some of the best levels we've ever seen, but about the only thing that is certain in the markets right now is the volatility.
Wednesday, August 3, 2011
The Heat is On
The title of that Glenn Frey song not only applied to the sweltering temperatures around much of the nation last week, it also applied to the debt ceiling debate, as the heat was on our leaders in Washington to finalize a solution to our debt situation. Why is this important? Read on for details.
It only takes a look at what is happening in Europe these days to understand why it’s crucial that the United States finds a solution to the debt ceiling issue. Not only have eight European banks recently failed a stress test, but last week there was news that Greek, Italian, Portuguese, and French "credit default swaps" (which are insurance policies against default) were trading at record levels. While the European Union is continuing to work to contain Europe’s debt problems and prevent a default in Greece (and elsewhere), these events bode a very important lesson for the US.
Why? Because solving our debt ceiling debate and finding a long-term plan for lowering our deficit and being fiscally sound will raise confidence in our debt and help the US keep its AAA credit rating from the various credit rating firms like Moody’s and Standard and Poor’s. This will help investors continue to see the US as the ultra safe haven for their money, which is a key aspect of our continued economic recovery.
Speaking of our economic recovery, there was some good news last week for the housing sector, as June Housing Starts and Building Permits were both reported better than expected. While this is only one number and one number doesn't make a trend, this is a good figure, and I will be watching closely for follow through in future readings.
It only takes a look at what is happening in Europe these days to understand why it’s crucial that the United States finds a solution to the debt ceiling issue. Not only have eight European banks recently failed a stress test, but last week there was news that Greek, Italian, Portuguese, and French "credit default swaps" (which are insurance policies against default) were trading at record levels. While the European Union is continuing to work to contain Europe’s debt problems and prevent a default in Greece (and elsewhere), these events bode a very important lesson for the US.
Why? Because solving our debt ceiling debate and finding a long-term plan for lowering our deficit and being fiscally sound will raise confidence in our debt and help the US keep its AAA credit rating from the various credit rating firms like Moody’s and Standard and Poor’s. This will help investors continue to see the US as the ultra safe haven for their money, which is a key aspect of our continued economic recovery.
Speaking of our economic recovery, there was some good news last week for the housing sector, as June Housing Starts and Building Permits were both reported better than expected. While this is only one number and one number doesn't make a trend, this is a good figure, and I will be watching closely for follow through in future readings.
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