The US economic data released last week struggled to elicit a reaction in the market. Instead, investors focused on increased expectations for asset purchases by the European Central Bank (ECB). This news was favorable for US mortgage rates, which ended near the lowest levels of the year.
The ECB has a reputation for being tougher on inflation than the Fed, and monetary policy has been tighter in the euro zone than in the US. Recent comments suggest that the ECB is headed in the opposite direction, though. While an improving US economy has caused the Fed to wind down its bond purchase program, ECB officials have expressed growing support to implement an asset purchase program to counter weak euro zone economic growth. Investors have added European bonds to their portfolios ahead of this expected added demand from the ECB, pushing their yields lower. This has made global bond yields in other regions relatively more attractive, including US mortgage-backed securities (MBS). The extra demand for MBS has helped push down mortgage rates.
Recent data on the US housing market has been mixed. The Existing Home Sales report released last week showed nice improvement, while last week's New Home Sales data revealed a slight decline. The July Pending Home Sales report, which is a leading indicator of future activity, rose to 105.9, the highest level since September 2013. The National Association of Realtors (NAR), which issues the report, defines a reading of 100 as an "average level of contract activity".
Looking ahead, there was a summit on Saturday between EU officials and Ukrainian officials. This may lead to additional sanctions against Russia. In the US, the important monthly Employment report will be released on Friday. As usual, this data on the number of jobs, the Unemployment Rate, and wage inflation will be the most highly anticipated economic data of the month. Before that, ISM Manufacturing will be released on Tuesday. The ADP Employment Change will come out on Wednesday. Productivity and ISM Services will be released on Thursday. Mortgage markets will be closed on Monday in observance of Labor Day.
Tuesday, September 2, 2014
Monday, August 11, 2014
Caroline's Weekly Market Review
With a light slate of economic reports last week, the conflict in Ukraine had the greatest effect on mortgage rates. Shifting sentiment about the likelihood of escalation caused some market volatility during an otherwise quiet week. Mortgage rates ended the week a little lower.
On Tuesday, a Polish official suggested that Russia is massing troops on the border with Ukraine to prepare for an invasion. While there has been a lot of debate about the accuracy of this statement, just the suggestion was enough to worry investors. The concern centers around how the US and European nations would respond. Another round of sanctions would be expected. The level of uncertainty about the outcome of this conflict is very high.
Europe is still struggling to avoid another recession, and trade restrictions with Russia make this even more difficult. GDP growth in the euro zone has been just slightly positive for four quarters after several years of negative readings. Since slower global economic growth reduces future inflationary pressures, this has been favorable for mortgage rates.
The conflict in Ukraine will remain a primary focus this week. The biggest economic report will be Retail Sales on Wednesday. Retail Sales account for about 70% of economic activity. Before that, the JOLTS report, which measures job openings and labor turnover rates, will come out on Tuesday. The Producer Price Index (PPI) focuses on the increase in prices of "intermediate" goods used by companies to produce finished products and will come out on Friday, along with Industrial Production. In addition, there will be Treasury auctions on Tuesday, Wednesday, and Thursday.
On Tuesday, a Polish official suggested that Russia is massing troops on the border with Ukraine to prepare for an invasion. While there has been a lot of debate about the accuracy of this statement, just the suggestion was enough to worry investors. The concern centers around how the US and European nations would respond. Another round of sanctions would be expected. The level of uncertainty about the outcome of this conflict is very high.
Europe is still struggling to avoid another recession, and trade restrictions with Russia make this even more difficult. GDP growth in the euro zone has been just slightly positive for four quarters after several years of negative readings. Since slower global economic growth reduces future inflationary pressures, this has been favorable for mortgage rates.
The conflict in Ukraine will remain a primary focus this week. The biggest economic report will be Retail Sales on Wednesday. Retail Sales account for about 70% of economic activity. Before that, the JOLTS report, which measures job openings and labor turnover rates, will come out on Tuesday. The Producer Price Index (PPI) focuses on the increase in prices of "intermediate" goods used by companies to produce finished products and will come out on Friday, along with Industrial Production. In addition, there will be Treasury auctions on Tuesday, Wednesday, and Thursday.
Monday, August 4, 2014
Caroline's Weekly Market Review
In a packed week, the two big economic reports were the main drivers of mortgage rates. The outperformance of the GDP data relative to expectations outweighed the small miss in the Employment report, causing mortgage rates to end the week a little higher. Last week's Fed meeting contained no surprises and had little impact.
Investors expected that the economy had bounced back during the second quarter from weather related weakness in the first quarter, but they were still caught by surprise by the strength of Wednesday's GDP report. The first reading for second quarter GDP, the broadest measure of economic growth, showed an increase of 4.0%, far above the consensus of 3.0%. In addition, revisions to the first quarter results caused improvement from -2.9% to -2.1%. The second quarter recovery was seen in nearly every area, including the key components of Consumer Spending and Business Investment. The GDP report was great news for the economy, but faster growth raises future inflationary pressures, which is negative for mortgage rates.
Friday's Employment report also showed continued improvement, but it fell slightly short of investor expectations. Against a consensus forecast of 230K, the economy added 209K jobs in July. The Unemployment Rate increased from 6.1% to 6.2%. Average Hourly Earnings, a proxy for wage growth, came in below the consensus. Bottom line, the sixth straight month of job gains above 200K was also great news for the economy, but because investors had anticipated even stronger results, mortgage rated declined following the news.
The economic calendar will be very light this week. ISM Services and Factory Orders will be released on Tuesday. The Trade Balance and Productivity will come out later in the week. None of these reports are generally market movers. Investors likely will be more focused on events outside the US. The number of potential trouble spots around the world has increased. Growth fears in Europe, conflicts in Ukraine and the Middle East, banking troubles in Portugal, and a debt default in Argentina all could influence US mortgage rates.
Investors expected that the economy had bounced back during the second quarter from weather related weakness in the first quarter, but they were still caught by surprise by the strength of Wednesday's GDP report. The first reading for second quarter GDP, the broadest measure of economic growth, showed an increase of 4.0%, far above the consensus of 3.0%. In addition, revisions to the first quarter results caused improvement from -2.9% to -2.1%. The second quarter recovery was seen in nearly every area, including the key components of Consumer Spending and Business Investment. The GDP report was great news for the economy, but faster growth raises future inflationary pressures, which is negative for mortgage rates.
Friday's Employment report also showed continued improvement, but it fell slightly short of investor expectations. Against a consensus forecast of 230K, the economy added 209K jobs in July. The Unemployment Rate increased from 6.1% to 6.2%. Average Hourly Earnings, a proxy for wage growth, came in below the consensus. Bottom line, the sixth straight month of job gains above 200K was also great news for the economy, but because investors had anticipated even stronger results, mortgage rated declined following the news.
The economic calendar will be very light this week. ISM Services and Factory Orders will be released on Tuesday. The Trade Balance and Productivity will come out later in the week. None of these reports are generally market movers. Investors likely will be more focused on events outside the US. The number of potential trouble spots around the world has increased. Growth fears in Europe, conflicts in Ukraine and the Middle East, banking troubles in Portugal, and a debt default in Argentina all could influence US mortgage rates.
Monday, March 24, 2014
Caroline's Weekly Market Review
A short comment by Fed Chair Janet Yellen caught investors off guard on Wednesday, and the reaction was not good for mortgage rates. In addition, a reduction in tensions in Ukraine caused investors to return to riskier assets, hurting safer assets such as mortgage-backed securities (MBS). As a result, mortgage rates ended the week higher.
As widely expected, the Fed scaled back its bond purchases by $10 billion to $55 billion per month. According to Yellen, if the Fed's economic outlook does not change significantly, the bond purchases are expected to end in the fall of this year. Fed officials have long maintained that they expect that the fed funds rate, the Fed's primary tool for monetary stimulus, will remain near zero for a "considerable period" of time following the end of the Fed's bond purchases. The big surprise came during Yellen's first press conference as Fed Chair, when she defined the meaning of a "considerable period" as about six months. This would place the first fed funds rate hike in the spring of next year. Before Yellen's comments, the market consensus was for the first rate hike to take place near the end of next year. While mortgage rates are not directly tied to the fed funds rate, the economic strength implied by the expected timing of the first fed funds rate hike was unfavorable for bonds of all maturities.
The housing reports released last week revealed that conditions in February were little changed from January. February Existing Home Sales decreased slightly from January. Total inventory of existing homes available for sale rose 6% to a 5.2-month supply. February Housing Starts declined slightly, while Building Permits increased 8%. The March NAHB Housing Index showed that home builder confidence increased slightly. It is widely believed that housing activity over the last couple of months has been depressed by the unusually severe winter weather, which means the pent up demand could be a positive in coming months.
There is a wide range of economic data for investors to consider this week. The primary reports will be New Home Sales, Durable Orders, Pending Home Sales, and Core PCE inflation, the Fed's preferred inflation indicator. Personal Income, Consumer Sentiment, and Consumer Confidence will round out the schedule. In addition, there will be Treasury auctions on Tuesday, Wednesday, and Thursday. Changes in the situation in Ukraine also could influence mortgage rates.
As widely expected, the Fed scaled back its bond purchases by $10 billion to $55 billion per month. According to Yellen, if the Fed's economic outlook does not change significantly, the bond purchases are expected to end in the fall of this year. Fed officials have long maintained that they expect that the fed funds rate, the Fed's primary tool for monetary stimulus, will remain near zero for a "considerable period" of time following the end of the Fed's bond purchases. The big surprise came during Yellen's first press conference as Fed Chair, when she defined the meaning of a "considerable period" as about six months. This would place the first fed funds rate hike in the spring of next year. Before Yellen's comments, the market consensus was for the first rate hike to take place near the end of next year. While mortgage rates are not directly tied to the fed funds rate, the economic strength implied by the expected timing of the first fed funds rate hike was unfavorable for bonds of all maturities.
The housing reports released last week revealed that conditions in February were little changed from January. February Existing Home Sales decreased slightly from January. Total inventory of existing homes available for sale rose 6% to a 5.2-month supply. February Housing Starts declined slightly, while Building Permits increased 8%. The March NAHB Housing Index showed that home builder confidence increased slightly. It is widely believed that housing activity over the last couple of months has been depressed by the unusually severe winter weather, which means the pent up demand could be a positive in coming months.
There is a wide range of economic data for investors to consider this week. The primary reports will be New Home Sales, Durable Orders, Pending Home Sales, and Core PCE inflation, the Fed's preferred inflation indicator. Personal Income, Consumer Sentiment, and Consumer Confidence will round out the schedule. In addition, there will be Treasury auctions on Tuesday, Wednesday, and Thursday. Changes in the situation in Ukraine also could influence mortgage rates.
Monday, March 17, 2014
Caroline's Weekly Market Review
Tensions in Ukraine flared up again last week, causing investors to shift assets from stocks to the relative safety of bonds. Weaker than expected economic data in China also favored bonds over stocks, while the US economic data was roughly neutral. As a result, mortgage rates ended the week lower.
The most significant US economic report released last week, Retail Sales, contained some good news and some bad news. On the positive side, the results for February were stronger than expected. Unfortunately, the figures for January were revised lower. Overall, this left the data over the two-month period a little weaker than expected. Given the offsetting effects of the solid headline number and the downward revisions, combined with weather related distortions, the report caused no change in the economic outlook and had little impact on mortgage rates.
There was a lot of talk in the mortgage industry last week about a proposal out of the Senate Banking Committee that would replace Fannie Mae and Freddie Mac. Together Fannie and Freddie purchase or insure the majority of fixed-rate mortgages, so any changes to their structure would have enormous implications for mortgage lending. In the proposal, a new government entity would take over many of the functions of Fannie and Freddie, while some of the default risk would be shifted to private insurers. Both political parties support a reduction in the risk to taxpayers, but beyond that opinions vary widely about the appropriate role of government in the housing market. As a result, this proposal is viewed as a starting point for a long political debate, and the implementation of major reform of Fannie and Freddie is projected by most experts to be many years away.
In the US, the next Fed meeting will take place on Wednesday. Investors expect the Fed to proceed with another cut in its bond purchase program. Industrial Production will be released on Monday. Core CPI inflation and Housing Starts will come out on Tuesday. Existing Home Sales and Philly Fed will be released on Thursday.
The most significant US economic report released last week, Retail Sales, contained some good news and some bad news. On the positive side, the results for February were stronger than expected. Unfortunately, the figures for January were revised lower. Overall, this left the data over the two-month period a little weaker than expected. Given the offsetting effects of the solid headline number and the downward revisions, combined with weather related distortions, the report caused no change in the economic outlook and had little impact on mortgage rates.
There was a lot of talk in the mortgage industry last week about a proposal out of the Senate Banking Committee that would replace Fannie Mae and Freddie Mac. Together Fannie and Freddie purchase or insure the majority of fixed-rate mortgages, so any changes to their structure would have enormous implications for mortgage lending. In the proposal, a new government entity would take over many of the functions of Fannie and Freddie, while some of the default risk would be shifted to private insurers. Both political parties support a reduction in the risk to taxpayers, but beyond that opinions vary widely about the appropriate role of government in the housing market. As a result, this proposal is viewed as a starting point for a long political debate, and the implementation of major reform of Fannie and Freddie is projected by most experts to be many years away.
In the US, the next Fed meeting will take place on Wednesday. Investors expect the Fed to proceed with another cut in its bond purchase program. Industrial Production will be released on Monday. Core CPI inflation and Housing Starts will come out on Tuesday. Existing Home Sales and Philly Fed will be released on Thursday.
Tuesday, February 11, 2014
Caroline's Weekly Market Review
Caroline's Weekly Market Review
Last week's key economic data showed that the performance of the economy in January was weaker than expected. The shortfalls caused stocks to decline and mortgage rates to improve, but the impact was surprisingly small.
Both the Employment report and the ISM Manufacturing data saw big misses. Against a consensus forecast of 185K, the economy added just 113K jobs in January. Also disappointing, many investors had hoped to see a large upward revision to the weak December reading, but it was little changed. The ISM national manufacturing index declined sharply to 51.3, far below the consensus of 56.0. For perspective, the increase in jobs reflects improvement in the labor market, and readings above 50.0 indicate an expansion in the manufacturing sector. The issue is that the pace of economic growth has slowed.
The relatively minor impact of this week's data must be considered in light of the performance of the stock and mortgage markets so far this year. Entering the week, stocks had experienced significant losses, as the Dow was down roughly 5% in January. Similarly, mortgage rates have seen significant improvement since the start of the year. To some degree, investors were already positioned for weak data this week. In addition, questions about the effect of unusually severe weather caused some investors to question how accurately recent data reflects the underlying strength of the economy.
This week, Janet Yellen, the new Fed chair, will testify before Congress on Tuesday and Thursday, and her comments could influence mortgage rates. The most significant economic report will be the Retail Sales data on Thursday. Retail Sales account for about 70% of economic activity. Before that, the JOLTS report, measuring job openings and labor turnover, will come out on Tuesday. Industrial Production, Import Prices, and Consumer Sentiment will be released on Friday. In addition, there will be Treasury auctions on Tuesday, Wednesday, and Thursday.
Thursday, February 6, 2014
Can I use my tax refund towards a down payment on a home?
It is tax refund time. Many people ask us if tax refunds can be used to pay for a mortgage down payment or closing costs.
All a borrower needs to do to document the tax refund is to provide a copy of the refund check and a bank statement showing that the refund has been deposited into their account. If the refund was automatically deposited into their account, they won’t have a copy of the check, but the notation on their bank statement will show that it is a tax refund. In the case of automatic deposits, the only documentation necessary is the bank statement.
The money does NOT have to be “seasoned”, meaning it has been in their account for 60 days. As soon as the refund has been deposited, it can be used to pay the down payment or closing costs. Some lenders may want to verify tax transcripts with the IRS before the funds can be counted.
So if you are thinking of buying or selling a home,
Call Caroline S. Farmer, 803-707-9997
Kwest Mortgage Group/Independent Mortgage Professional
The answer is YES!
All a borrower needs to do to document the tax refund is to provide a copy of the refund check and a bank statement showing that the refund has been deposited into their account. If the refund was automatically deposited into their account, they won’t have a copy of the check, but the notation on their bank statement will show that it is a tax refund. In the case of automatic deposits, the only documentation necessary is the bank statement.
The money does NOT have to be “seasoned”, meaning it has been in their account for 60 days. As soon as the refund has been deposited, it can be used to pay the down payment or closing costs. Some lenders may want to verify tax transcripts with the IRS before the funds can be counted.
So if you are thinking of buying or selling a home,
Call Caroline S. Farmer, 803-707-9997
Kwest Mortgage Group/Independent Mortgage Professional
Monday, February 3, 2014
Caroline's Weekly Market Review
Bad news for stocks was good news for bonds again last week. Weaker than expected economic data hurt stocks and helped mortgage rates improve to the best levels since Thanksgiving.
At the start of the year, investors were optimistic that the momentum in economic growth seen during the second half of 2013 would continue during 2014. So far, though, the economic data has been disappointing. The Employment report set the tone early in the month. Then the shortfall in China caused global stock markets to fall. The US economic data released this week was weaker than expected as well. Durable Orders, Home Sales, Personal Income, and Jobless Claims all contained downside surprises. That said, it's difficult to determine how much the unusually severe weather experienced this winter affected the data.
The last Fed meeting, when the Fed decided to begin to scale back its bond purchases, was a major market moving event. There was little drama in this Wednesday's Fed meeting, however. As expected, the Fed announced that it will scale back its bond purchases by another $10 billion to $65 billion per month. The Fed statement was very similar to the prior statement. According to the Fed, "growth in economic activity picked up" in recent quarters. In other Fed news, Janet Yellen takes over as Fed Chair starting February 1. Investors expect that the Fed under her leadership will look and act very similar to the Bernanke Fed.
The important monthly Employment report will come out on Friday. As usual, this data on the number of jobs, the Unemployment Rate, and wage inflation will be the most highly anticipated economic data of the month. Before that, ISM Manufacturing and Construction Spending will come out on Monday. ADP Employment and ISM Services will be released on Wednesday. Factory Orders, Productivity, and the Trade Balance will round out the schedule. Investors also will be keeping a close eye on indicators of economic growth around the world.
Monday, January 27, 2014
A personal account of our VA financing nightmare and dream.
A personal account of our VA financing nightmare and dream.
Several years ago, before my wife and I were married, we moved to the midlands area from another part of South Carolina. She and I were fresh out of college and excited to start our lives together. We were young and foolish and didn't have anyone to direct us when we decided to buy a house rather than rent. Becuase I was in the military, I knew that a VA loan was my best option. We didn't talk to a lot of family and friends about our decision to buy a home, just incase it didn't go through....
We told our close family of our plans, but they did not think that local lenders were able to provide VA financing. Social media wasn't as popular as it is today and we were new to the area, so we really were not exposed to the local lender's advertising. Just as I assume most young people do when they don't have a clue - I got online and started searching the search engines. I knew enough that I needed to get a pre-approval before I sought out a real estate agent. Immediately, I was bombarded with advertisements on these national level lenders that only work with VA financing. I clicked on one of the first one that I saw and had a pre-approval with in a matter of minutes.
I printed off my pre-approval letter and headed to the real estate office. I was excited that I was approved and once I had that approval, I stopped worrying about my lender. My real estate agent was happy that a potential homebuyer was approved and never said anything to me about local lenders offering VA loans. I even reached out to my attorney who I knew personally. My attorney didn't say a thing when I said I was financing with this "national" VA lender....
My real estate agent found me a house well within my affordability range the first day that we went out. I was excited and my future wife was inlove. We negotiated a contract and got started with the mortgage loan and my nightmares began. My loan officer was out of California - so the time difference had a bit to do with the communication issues but the biggest problem was getting him to return my phone calls and emails. Sure, the home that I was purchasing wasn't pricey, but it was a big deal to me and noone would tell me what was going on. I recruited my real estate agent to harrass him also and we closed 6 weeks after our 30 day contract.
I wanted to write this letter because I recently purchased my second home. Now that my wife and I have been working our jobs for a number of years and have worked hard to save some money, we were excited to upgrade to a new home. Thankfully, I was smart enough to not go through the lender that first popped up on GOOGLE. I also knew through internet advertising that Kwest Mortgage Group right here in Orangeburg offers VA financing. Why didn't anyone tell me a few years ago that I didn't have to go with a "VA Mortgage Lender?" Why did I feel that I had to use a lender that only offered VA loans? Back then, I had no idea that local lenders were able to offer VA financing. These national VA lenders advertise that they are comitted to providing financing to Veterans, but in actuality, they sucker the Veteran's in with a $500 initial deposit and then take advantage of them with their high fees and points. If you read their fine print - they are not affiliated directly with any government agencies included the VA. They have no more authority to make a VA home loan than your local lender that offers VA financing.
My VA purchase with Kwest Mortgage Group was cleared-to-close 9 days before our 30 day contract ended and we closed right on time. I was well informed of the process throughout each step. It frustrates me that none of the professionals that I was working with on the purchase of my first home offered any advice against financing with a national lender. I realize that they may not have wanted to "rock the boat" with my approval but I would have appreciated the information and would have changed my financing path on spot. It is always easier to work with someone that you can get infront of personally. It is also important to work with someone that returns your calls and emails in a timely manner. This time around, I was able to save about $3,000 in fees and secured an interest rate that was .375% lower than what I would have locked in at with the national mortgage lender.
This time around, I kept expressing to my mortgage lender how easy the process was and how much I appreciated it when I was informed on the status of my appraisal, title work, insurance, etc.... My loan officer was thankful that I was showing appreciation, but couldn't understand my gratitude as that was their JOB. I told them of the nightmare that I had experienced and how glad I was to be working with them this time around. All local veterans should help support the local businesses that are working for their communities instead of getting sucked into the scam that these national VA lenders present in their advertising. Veterans should be appreciative of the local individuals who work for them - not the national folks with no ties to their community. It is up to the professionals in the real estate field to educate their clients on the options that Veterans have! I, myself, will be recommending Kwest Mortgage to every veteran that I know.
--- SGT. J.K. United States Army
Tuesday, January 21, 2014
Who do you call when shopping for a home??
Realtor? YES. Loan Officer? YES. There are a number of professionals who are critical to the home buying process!
What about your INSURANCE AGENT? Your agent may not be on the top of your list when shopping for a home, but you will want to call them earlier in the home buying process than you may think!
Why? Some homes cost significantly more to insure than others, which can drive up your monthly house payment. In other cases, there may be needed repairs before you can get coverage. That's something you don't want to discover the week before you are scheduled to close.
Here are some properties that can be costly to insure:
Foreclosures/Bank Owned Homes: These properties can be great deals, but they can also carry a number of issues such as peeling paint, a terrible roof, or a falling down deck. These issues would need to be addressed before the property would qualify for hazard insurance!
Older Homes: You need to make sure these homes meet construction code!
Homes with safety issues: Do all steps and stairs have handrails? Does your fence have a pool around it??
My advice? Call your insurance agent when you find a home that you want to put an offer on! This will prevent premium surprises during the loan process and any surprises that will prevent you from closing! It is important to work with an insurance agent that you trust. Do you need me to refer someone to you? I am happy to point you in the direction of trusted, local insurance professionals.
Happy House Hunting!!
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