Today opened up with a little bump to yesterdays close as the opening bell brought a +3bps gain pushing the FNMA 3.5 coupon to 103.750 however that was fleeting and the only gain for the Rate driving bell weather bond for the days trading session.

As the day progressed sell off appeared and at the close it reached its low of the day (not a good sign for the trading session tomorrow)

Ultimately the FNMA coupon lost 27bps and ended just below the 103.5 mark. If we fall too much further I expect to see a potential repeat of today and a possible close could see the 103.25 range. The 10yr Treasury followed suit with a -10/32 loss pushing its yield up to 1.971.

Mixed news and a so so 2yr auction helped push a potential correction from erasing a 6 day run of gains. Tomorrows 5yr auction and durable orders reports could be the catalyst to bring the Treasury and FNMA coupon back to its recent position of gains or it could add to today’s losses.

Please return to your seats and fasten the seat belts the ride will likely be a bit bumpy…

Lock if closing in under 14 days and watch closely or lock if closing in 30 days or less (my opinion)

Make it a great and positive day…

A nice uptick to start the week is not that surprising. The FNMA 3.5 coupon took some nice gains to raise appx 18bps to close at 103.719. What this means is those who have not yet locked in on their loan, pricing may see a little relief / better prices for the rate they are looking at.

Even though the overall feeling of the economy is starting to shift to improved we still have a long way to go to get beyond this catastrophe that almost wiped out the global economy. EU concerns still loom large as does issues in the Middle East. We still MUST face the real hard fact of our National Debt and Education of our kids which keeps dropping and dropping.

With employers here in the US starting to feel like letting loose on the glut of cash reserves they have been stocking up analysts are expecting new hires to start coming back soon as a shift in hiring policy may be at the door. I think this summer poses to be an interesting one. With good leadership and the Bipartisan BS / political posturing needing to get behind us for the good of ALL in this country, if this can happen we can start to see a longer term trend in this direction instead of little blips then retraces, as has been the case recently.

I think we test hitting the ceiling of 104 on the FNMA 3.5 coupon this week but I don’t think there is enough support to break through it. If we do hit that level my advice is LOCK and do it fast as I don’t see us sustaining much time up in that rarefied air (or in this case bond prices).

Don’t get greedy there are a lot of really great deals to be had out there in both the buying side as well as the financing side and I think more good news will break soon for those who got caught in this mess and more help and hope will be coming to underwater homeowners looking to save money and take advantage of these all time low 30 year fixed rates.

be good, have a productive week, protect yourself from inflation and… Go Buy A House!!!!

Well it goes without saying the last couple weeks have been volatile. The FNMA bonds that help set the price and rates for mortgages have seen their levels drop from near 103.500 to 101.600. So what does this mean you might be asking?

Simple the bonds reflect the value of the long term security created from the MBS market. As those levels increase the cost of the rate decreases. So with that new found knowledge here is what the 190bps drop in value has meant to rates. From their low point you could have obtained a 3.75% 30yr fixed rate with no fees and (lender dependent) even receive credit to cover the cost of the title fees as well. At its low point the same loan now cost over 1.5% more and gave no credit to title fees.

So if you had a 200,000 mortgage the difference between locking 2 weeks ago and locking when the FNMA 3.5 bond hit its recent low of 101.600 meant that loan would have cost you 3000 + the cost of title so all in all close to a 4000 difference!

Sure rates are low and times are favorable for housing, both in price and in cost of credit, but missing out or falling into a trap believing low rates are a lock and guaranteed to stay has resulted in many not closing or paying significantly more for the same loan just a week earlier.

Today the bonds have improved some and retraced some of their previous losses to climb the FNMA 3.5 coupon back to its current level of 102.250 but again even with this improvement the difference in cost for a 200,000 mortgage loan will equal appx 1800-2000. That’s still a significant amount of money.

Personally I feel the equities market is overbought and will see its sell off soon. That coupled with the over-exuberant belief that all is now well and issues resolved in the EU should erode and that will bode well for a bond market recovery but NOTHING is guaranteed. When you are getting the deal you want LOCK IT IN! Tomorrow is definitely not guaranteed in life nor in this crazy mortgage market. I see a slight trend to improve in mortgage rates but remember NOTHING is guaranteed so…

Take care and mitigate risk…

I get the fact everyone is under the impression that low rates are probably here to stay, or at least for the next couple years seems to be the consensus. I think the lackadaisical approach to this caught a lot of people sleep walking and the last 2 days have been proof positive things can and DO change constantly, in our industry. Since Mondays opening bell the FNMA 3.5 coupon was hovering around the 103.25 area, as of closing bell today it IMPROVED just to get back to a 100bps LOSS closing down at 102.25!

What does this mean to rates?

Simple most lenders have repriced at least 3 times since Monday and these rates have spiked between .25 – .375 depending on the product type and borrowers scenario.

That is a HUGE spike in such a short amount of time!

Reality is I am not watching the US and global markets near as close the last few months, as I have been inundated with business and its been everything just to stay on top of it all. So I did a little research and saw the reports that caused this. Truth is the economic numbers really are better than they have been in recent past but by NO means do they represent any kind of drastic swing that has taken place since Monday. To see numbers, slightly improved but still missing expectations you have to wonder, “what is behind this Equities rally”? Is it sustainable? Doubt it.

Here is what I saw that is likely a driving force in this (what I believe to be a short lived equities rally)

Retail Sales – actual 1.1, consensus 1.8, prior .6 (good but not near consensus should not cause this rally)

Retail Sales Ex Auto – actual .9, consensus 1.2, prior 1.1

Business Inventories – actual .7, consensus .6, prior .6

MBA Mortgage Index – actual -2.4, prior -1.2

I am not saying that rates are going to immediately snap back as I dont think they will, I do think they will recoup some of their losses and see maybe a trading range between 102.50 to 103 top end but that still is yet to be seen. I have heard that some bond traders are upset that Bernanke did not mention QEIII and that is a reason why the bonds took such a beating while equities rose. Is that accurate? Who knows. I also heard its because he hinted at inflation? I guess we are all too stupid to see that is the next BIG issue to contend with if its not spoken?

The bottom line is rates are still very good and very favorable. I do think they will snap back some and tomorrow is a heavy news day with PPI, Unemployment and Manufacturing and several other key indicies being released.

Better hang on we can either see a nice rebound or a continued sell off and driving rates even higher.

This week saw some sell off in the markets and its not directly tied to one thing or event. For a brief moment this is tied directly into common sense. Last week the markets rallied to high levels and the FNMA 3.5 coupon hit 104.219 as it high for the week. Shortly thereafter and with no other support to make sustaining it seem likely the bond started selling off and profit takers sold positions to move on to more fertile grounds. What happened next is also normal, but been seldom seen as of late, and that is the bonds moved back down to a position that showed signs of testing and strength which is the levels it currently is sitting at of 103.6  – 103.8 levels.

I got nervous today when the bond slipped below the 103.6 level as the next real sign of stop, or support, looks to be 102.8 – 103.00 thats a pretty strong fall considering the top was 104.2 that 120bps move would likely set rates at least .25% higher.

Luckily the 103.6 level did support the bonds rebounded, if ever so slightly to end the day today at 103.656 just 10bps off its opening days level of 103.750

I do think rates have seen their best days for a while and possibly ever. I am NOT saying rates spike as that looks to clearly NOT be the case but the 3.75% 30 yr fixed no cost loans are likely gone.

Tomorrow is not guaranteed nor are the rates or pricing or even the potential availability of the house you like so instead of making your home purchase simply on the terms of a dollar amount, interest rate or monthly payment, why not look at it as the place you will LIVE and raise kids and enjoy your friends and family and all the other conveniences of home. Life is simply not about just the best deal and dollars and sense and we need to bring some sense back into the markets. The only real sense that seems to be left is that you can buy a home for cents on the dollar and rates help drive that down to the most affordable housing market EVER! WInners will take action and advantage of the opportunities around them. Others will do nothng and then kick themselves for failing to act. If that doesn’t make sense then you may be the person in the old saying of… “that guy lets dollars fall out of his pocket every time he bends over and pick up the cents”

GO BUY A HOME time is NOT on your side and the best of the deals may be gone but great deals still are there for those who act!

Lots of good stuff coming our way…

(lol)

Actually we have some interesting news for this week and it could be a mini fireworks display of increase or decrease… or possibly just an “all show no go” dud that lights with expectation and then ends with a big nothing.

Tomorrow is the “Obama Tuesday” and his State of the Union Address that will get focus. Wednesday is the FOMC direction on interest rates, that helped push our bond prices down recently, in hedge against the comments in the report. If news of housing not favorable look for a further sell off and this next wave could be 50bps or more. GDP and Durable orders come at end of week and will also give some further insight to the state of our “recovery” and what direction rates may be headed.

I believe the problems are not over and news is by no means going to cause a shock wave into the rate markets. I think tomorrow and Wed bring us back up closer to the 102.75 – 103.00 level (FNMA 3.5 coupon). If not and news is bad (for rates) its quite possible we could fall all the way down to the 102 level.

Don’t get lulled into complacency the markets want to rally but there is nothing substantive to rally on yet however we have all seen rallies being built form an attitude or opinion or even a feeling. We are still volatile and LOCK while pricing is favorable the upside is limited and the downside has much more weight.

Currently the FNMA 3.5 closed at 102.625

This week does not look to be anything of earth shattering swings in either direction. The FNMA 3.5 coupon is still at incredible levels of 103+- which is whats helping sustain our historic all time low interest rates. The 10Y Treasury is currently trying to gain back some of its early losses today and both French and Spanish auctions have gone better than expected. Yield on the 10Y is currently sitting at 1.92% and is up slightly from 1.89% where it opened this session.

Here is the data driving the markets…

Initial Claims: Actual 352K, prior 399K (consensus 385K) – Number can be viewed a couple ways so don’t get too excited. (1 – yes its good to see this number starting to get closer to mid 300k mark instead of 400k+ but some of this is from people giving up looking for work. 2 – Population growth says to keep pace this needs to be at 200k for many years to recover) However I like seeing some progress albeit very slight.

Continuing Claims: Actual 3430K, prior 3628K (consensus 3600K) – Similar to above number is not that stellar and some of it is derived from those losing hope and running out of benefits not finding employment

CPI: Actual 0.0%, prior 0.0%, consensus 0.1% -No news

Core CPI: Actual 0.1%, prior 0.2%, consensus 0.1% – similar to CPI nothing to move the markets either direction

Housing Starts: Actual 657K, prior 685K, consensus 673K – this is not good seeing it down but some of this is seasonal and remember we are in January and many parts of the US are not as fortunate as the “sand” states with good building weather year round.

Building Permits: Actual 679K, prior 681K (consensus 680K) – similar and reasoning follows suit with “starts” above

Philly Fed: Actual 7.3, prior 10.3 , consensus 10.0 – This number is well below expectations and is the main reason the Treasuries are starting to recover from larger losses now and why I don’t think we see anything alarming in rates today or tomorrow.

If nothing else please let me be the alarm clock for all that these glory days (glory in the context of low home prices and all time low rates) will NOT last. Anyone renting and anyone looking for a hedge against pending inflation needs assets! Housing (you need this anyway) gold, silver and other items that fed cannot simply turn on the reproduction machine will help you curb against it. The time for action is NOW do not get lulled into the belief great homes and great prices and low rates are simply the next wave of “entitlement” mentality as they WILL NOT last and things WILL recover.

Dont let fear stop you from trying, or make up other excuses either, there are other companies similar to ours that do not charge to run credit and schedule and interview to either see what you can qualify for or what steps are needed to put you into a place you can qualify for a loan.

The worst thing that can be done is nothing so take action and MAKE it a great day!

Well its been a long time since I posted one of these updates. Between holidays, end of month and end of year chaos and being incredibly busy, I have fallen out of the groove a but but now its a new year and things are going to calm down a tad (the holidays anyway).

So with my attention going back to the factors that really cause markets to move here is what I am hearing and seeing…

Unemployment – still very high but 8.5% “claimed” (I get the big picture but lets just go along with it and compare apples to apples) its better than recent months at 9%

Consumer Confidence – to me this is one of the biggest factors as happy people spend money and scared people stash it highest its been in the last 6 months. It has hovered around the mid 60s (64-67) for a while but now just south of 70 at 69.9 up over 2 full points!

Election Year – Obama has had a bad 4 years no matter if your Blue or Red or an indy White. I see rates climbing if it were in any other year, since this year he needs every vote he can get to keep power I think he will force pressure on the parties who do control to keep rates down through election time…

Deflation – If this occurs and it very well could we will see it for a while then an immediate turn into high inflation.

Inflation – if deflation arrives, as many call for, you better protect yourself, your clients and your assets by having them own ASSETS! Homes, Gold, Silver items that the government cannot simply mass reproduce and things with intrinsic value.

Affordability – without a doubt fence sitter and nay sayers need to arise from the slumber as consumer confidence rising, unemployment falling, home prices at 11-12 yr lows, interest rates at all time lows and banks sitting on a huge amount of shadow inventory means the best deals will be had by those who act first. It also protects you from inflation owning a home with a FIXED rate. ARMS gotta go and GO FAST to get out of them now. I get calls daily saying… “I want to buy a home and see what I qualify for, I know I can get a home for the same or less than I am paying in rent” and you know what… THEY ARE RIGHT!

So thats the economy snapshot here are the rate bell marks…

FNMA 3.5 coupon ended yesterday at 102.9 excellent but likely near it high and not sustainable for much longer. The 10Y treasury still under 2.0% – good and is up 10/32 and sits at 1.961% yield.

Driving the market today… (this really is positive so no sarcasm here)

Nonfarm Payrolls: Actual 200K , prior 120K (consensus 150K)

Nonfarm Private Payrolls: Actual 212K , prior 140K (consensus 170K)

Unemployment Rate: Actual 8.5%, prior 8.6% (consensus was to be up a tick at 8.7%)

Hourly Earnings: Actual 0.2%, prior -0.1%

Advice LOCK NOW if you have a loan in process or ACT NOW if you want to stop renting or take advantage of huge opportunities in the move up market. The reality of rates rising is REAL and you need to be paying attention to opportunity and not caught sleeping.

Well as the week closes in on Christmas and vacations abound, I see tomorrows data as only a slight risk of much movement for the remainder of this week, as it is already being priced in.

Pricing is at solid levels and,although down a touch from its highs earlier in the week, still very favorable! the cause of the downward pressure is two-fold. First you have the dollar doing well and we had a modest appetite at todays auction of 29B worth of 7yr Treasuries.

Here is tomorrow’s market driving / factor data…

Initial Claims: Consensus 380K, prior 366K

Continuing Claims: Consensus 3650K, prior 3603K

GDP – Third Estimate: Coinsensus 2.0%, prior 2.0%

GDP Deflator – Third Estimate: Consensus 2.5%, prior 2.5%

Michigan Sentiment -  Consensus 68.0, prior 67.7

Unless these numbers come in with much difference (either direction) tomorrow, dont expect to see much change next week either (other than the typical profit takers for end of year).

Currently the FNMA 3.5 coupon is trending down closing at 102.25 which is 50 bps down from its mid week high.

The 10Y Treasury is following suit and ended today down -14/32 with its yields at 1.975%(still a very strong number being below 2%) 

Advice: LOCK now while pricing is still at excellent levels and remove the year end risk, is my call.

This morning opens up with the long bonds gaining back some lost ground. The over zealousness of the EU “changing of the guard” and discussion for its “plan of attack” to resolve its debt have now subsided and the cold hard fact of REALITY (yes fools may think any way they want but the truth is REALITY gives no care and is not affected by others thoughts it does not go away or change because of words or emotion) of the gravity of the situation is taking hold. Add to this that Intel came out and warned about its 4th quarter earnings stocks have slid and bonds have gained back a nice piece of what was lost on Friday.

The FNMA 3.5 coupon is now back over its glass celiing of 102 and currently is sitting at 102.094. Still a bit off from its Thursday high at 102.5 but still in very positive territory.

The 10Y Treasury is following suit as well and it is currently up 14/32 and pushing its yields just over 2.0% as its current mark is 2.01%

Not a whole lot of news today but expect some more of this bouncing I believe the trading range will be in the 102 – 102.5 areas but another round of “positive spin speech” could give the markets an irrational day or two so don’t fall asleep.

We have a close of year upon us, an election year pending and an economy still not out of the woods but starting to show signs of some recovery. We have consumer confidence still at very low levels but more people out and spending than years gone by. We also have the not much talked about reality of MASSIVE Shadow Inventory from the big banks and because of this and the still high unemployment I don’t see us getting out of the woods to start making solid recovery any time during 2012 so expect very favorable rates with its typical peaks and valleys throughout next year, as will be similar to the rest of 2011.

Make it a great day have a Blessed Chrsitmas and a Happy Healthy New Year!

PS – Go buy a house you will be kicking yourself if you dont as deals abound and this time, like all others, will pass. These low prices combined with low rates will only be a memory but for those who acted will be a significant benefit to them and their family