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While basic understanding of the "book smarts" within the mortgage industry will help you understand specific terminology, loan programs, and features, there is so much more you will need to know in order to make an informed financial decision.
My approach to providing education strives to further your understanding beyond the "book smarts" of the mortgage industry, and learn the valuable "street smarts" that will help you achieve the best possible results, while avoiding the most common pitfalls that non-informed Borrowers and Real Estate Professionals have experienced.
The Mortgage Street Smarts of where mortgage interest rates are going (and why):
The following information is current as of Friday 1-28-2011. If you are a Buyer/Borrower who is still on the fence (or if you are a Real Estate Agent attempting to educate your "on the fence" Buyer), please review these trends and secure an historically low interest rate before it is too late.
The market closed Thursday with an IMPROVEMENT to pricing (as indicated by the green arrow pointing upward). Note that any movement that exceeds 25 basis points is significant (and will typically warrant a pricing adjustment by most Lenders). Tuesday's IMPROVEMENT was 38 basis points.
The following chart shows the market activity thus far today (hint: upward activity is good, downward activity is bad):
The following chart shows market activity over the past 10 days (hint: green is good, red is bad):
The following chart shows market activity over the past 1 month:
Daily Interest Rate Snapshot (sample of rates from one of the country's largest Lenders...individual pricing will vary based on specific Borrower qualifications)
Analyst: Neil Trenerry
FNMA 30-YR 4.0%
Previous close 98.940
Opened Down 0.19bp @ 98.750
Key Economic Data:
EUR / USD 1.3693 Down 0.0041
USD / JPY 82.3890 Up 0.5298
GBP / USD 1.5909 Down 0.0020
Key Economic News:
A solid report on growth in the fourth quarter with sharp but offsetting influences from inventory investment and the trade deficit. Real final sales to domestic purchasers rise 3.4%, in line with the firm trend of the prior two quarters; final sales to private domestic purchasers up more than 4%. Core PCE inflation remains subdued; sharp slowing in GDP price index appears to reflect trade swing. Employment cost index remains fairly subdued an uptick in government compensation.
Real GDP +3.2% in Q4 (qoq, annual rate, +2.8% yoy) vs. median forecast +3.5%.
GDP price index +0.3% in Q4 (qoq, annual rate, +0.8% yoy) vs. median forecast +1.6%.
Core PCE price index +0.4% in Q4 (qoq, annual rate, +0.8% yoy) vs. median forecast +0.4%.
Employment cost index +0.4% in Q4 (qoq, +2.0% yoy) vs. median forecast +0.5%.
1. The real story in this report is underneath the hood, as the headline figure was buffeted by a sharp slowing in inventory accumulation, which took 3.7% points off the growth rate, and a similarly sharp drop in the trade deficit, which added 3.4% points. Stripping these factors away, final sales to domestic purchasers rose a 3.4% annual rate despite a 0.6% drop in government consumption. Thus, growth in fianl sales to private, domestic purchasers topped 4% in a remarkably balanced fashion, as real consumer spending and business fixed investment each rose at a 4.4% rate and real residential investment rose at a 3.4% rate.
2. Given the sharp swings in the trade balance and inventory investment in recent quarters, some of which appear to be due to imperfect seasonal adjustments, it is probably beat to average over several quarters to assess the underlying trend.
3. Price indexes were "benign" in this report, as the core price index for personal consumption expecnditures rose 0.4% at an annual rate, in line with market expectations. We put quotation marks because Fed officials are concerned that this rate of inflation is a bit too low for comfort. The 0.3% increase reported for the GDP price index appears to have been affected by the sharp move in the trade balance; the price index for gross domestic purchases rose 2.1%.
4. The employment cost index rose 0.4% during the fourth quarter, a bit less than market expectations. Government (state and local) compensation rose somewhat faster (+0.6%) during the quarter as wages and salaries rebounded from a slight setback in the third quarter. Private compensation was also up 0.4% over the final three months of 2010, balanced between wages and salaries and benefits.
10:00: Reuters/University of Michigan consumer sentiment for Jan (final)...recoup some of that loss? This index weakened unexpectedly in early January, and most forecasters appear to think this was a fluke. The median expectation for inflation five to ten years ahead held steady at 2.8%, where it was in the preceding three months.
Median forecast (of 67): 73.3, ranging from 71.8 to 76; last 72.7 (Jan prelim).
With this morning's news showing signs of growth, and consumer sentiment expected to improve. I would expect the market to sell off during the day.
I would lock today.
My position on MBS changes to short today (seller).
Analyst #2 (Dan Rawitch)
Here is the link to our daily update http://ratewatch.com/ratewatchnow.html
Things just won't get easy for bond traders. So much to balance and consider. Now GDP is looking better, but hell, that's with training wheels on...this kid still can't ride the bike. The auction went well yesterday, we should be stealing some Japenese bond money and the POMC yesterday actually stirred some buying.
In the end, we know we need GDP over 7% for 2 plus years to create meaningful jobs. We are a long way from that and this will play well for rates over the next several months. Meanwhile, we are locked in this range. If the DOW keeps falling we could get the fuel to blow through 99 later today. At this point, I would watch carefully what happens when the FED comes in to buy 10 year maturities later today.
For more information on topics like this, please feel free to visit www.GordonMortgage.com (an educational resource for Borrowers, Real Estate Agents, and Financial Professionals). Educational content provided by:
Jason E. Gordon
Branch Manager | Sr. Mortgage Loan Officer
CMPS, CDLP, CDRE, RCS-D, CDPE, CMHS, CMC, NMLS 259027
11440 W. Bernardo Court, Ste. 300, San Diego, CA 92127
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