Finance Update April 14, 2008 - Brentwood TN Real Estate

Brentwood TN Real Estate


Mortgage bond prices rose slightly last week pushing mortgage interest rates lower. Most of the data showed signs the economy continued to struggle. Unfortunately the Fed minutes showed increased inflation concerns, which tempered any major improvements in mortgage interest rates. Stocks bounced up and down, which resulted in continued whipsaw trading in mortgage bonds.

For the week, interest rates on government and conventional loans fell by about 1/8 to 1/4 of a discount point.

The consumer price index data Wednesday will be the most important event this week. The potential for market volatility is high surrounding the other releases as the economy continues to struggle.

Economic Factors
Economic Indicator Release Date Time Consensus Estimate Analysis
Retail Sales Monday, April 14, 2008 Up 0.1% Important. A measure of consumer demand. Weakness may lead to lower mortgage rates.
Producer Price Index Tuesday, April 15, 2008 Up 0.4%, Core up 0.2% Important. A measure of inflation at the producer level. Lower than expected increases may lead to lower rates.
Consumer Price Index Wednesday, April 16, 2008 Up 0.3%, Core up 0.2% Important. A measure of inflation at the consumer level. Lower than expected increases may lead to lower rates.
Housing Starts Wednesday, April 16, 2008 Down 3.8% Important. A measure of housing sector strength. Larger than expected decrease may lead to lower rates.
Industrial Production Wednesday, April 16, 2008 Down 0.1% Important. A measure of manufacturing sector strength. A larger than expected decrease may lead to lower rates.
Capacity Utilization Wednesday, April 16, 2008 80.4% Important. A figure above 85% is viewed as inflationary. A decrease may lead to lower rates.
Fed "Beige Book" Wednesday, April 16, 2008 None Important. This Fed report details current economic conditions across the US. Signs of weakness may lead to lower rates.
Leading Economic Indicators Thursday, April 17, 2008 Up 0.1% Important. An indication of future economic activity. Weakness may lead to lower rates.

Producer Price Index
The producer price index is a measure of prices at the producer level and is important because it is the first inflation report to be released each month. Investors are typically able to gain an initial indication of inflationary pressures from the release. If producer prices are increasing, there is a tendency for producers to pass the increases on to consumers in the form of higher priced goods. It is important to note that the PPI is only a measure of goods, while the consumer price index is a measure of goods and services. It is possible for the price of goods to remain stable, while the price of services increases. In this scenario PPI would do little to warn of a change in inflationary pressures, while the CPI report would provide an indication of the inflationary effects of the service component. This distinction between the two reports shows why most analysts view the CPI as a more accurate indicator of inflation. Nevertheless, market participants still gain valuable insight into potential volatility in the financial markets from the PPI.*Information courtesy Tonya Esquibel, WR Starkey Mortgage, Franklin TN*

Vanessa Stalets
Brentwood TN Real Estate
RE/MAX Elite
615-957-6333/615-661-4400

Brentwood TN Real Estate - Finance Market Update April 7th, 2008

Brentwood TN Real Estate

Mortgage bond prices rose last week pushing mortgage interest rates lower. Stronger than expected manufacturing data shocked the market a bit and set the tone for early trading in the week pushing bonds prices lower. Fortunately the employment report showed higher unemployment and lower payrolls, which helped bonds recover Friday. Market participants viewed the weaker employment figures as more evidence for additional Fed rate reductions at the end of April.

For the week, interest rates on government and conventional loans fell by 1/4 of a discount point.

The Fed minutes Tuesday will be the most important event this week. Trade and consumer sentiment data also have the real potential to cause mortgage interest rate volatility.

Economic Factors

Economic Indicator Release Date Time Consensus Estimate Analysis
Consumer Credit Monday, April 7, 2008 Up $6 billion Low importance. A significantly larger than expected increase may lead to lower mortgage interest rates.
Fed Minutes Tuesday, April 8, 2008 None Important. Details of the last Fed meeting will be thoroughly analyzed.
Trade Data Thursday, April 10, 2008 $57.4 billion Important. Affects the value of the dollar. A falling deficit may strengthen the dollar and lead to lower rates.
U of Michigan Consumer Sentiment Friday, April 11, 2008 69.4 Important. An indication of consumers' willingness to spend. Weakness may lead to lower mortgage rates.

Credit Demand

Inflation is typically the most important focus for the mortgage interest rate market. Unfortunately, mortgage interest rates have recently pushed higher from the fear of inflation. Most of the recent increases in interest rates have come following stronger than expected data despite uncertainly regarding the future of the economy.

The level of interest rates reflects the balance between the supply of money from investors and the demand for money by borrowers. Rising inflationary expectations cause investors to require higher rates of return on investments to compensate for the erosion of the principal that eventually is returned to them. Regardless of inflation levels, though, rising economic activity can increase the demand for investors' funds, and thereby lead to higher interest rates.

The demand for money diminishes as the economy struggles. The Fed lowers interest rates as an incentive to businesses and consumers to increase their borrowings. The Fed hopes manufacturers will increase their investments in plants, equipment and inventories and that consumers will push housing construction higher along with consumer spending and with that, consumer debt. The inverse is also true.
Analysts will monitor this week's consumer credit levels for any indications that consumers may be tapped out. The economy has been wobbly for some time now and even Fed Chairman Bernanke has voiced recession concerns.

There is much debate in the financial community about the future. Economists, market analysts, and traders all seem to have a different opinion about the future state of the economy and especially the effects of rising energy prices. One thing most market participants agree on is both the bond and stock markets are going to see some volatility until a direction is clear. Remember, the Fed cuts rates to spur the economy, which generally helps stocks at the expense of longer-term bonds. Now is a great time to take advantage of rates to avoid the uncertainty in the credit markets and mortgage interest rate volatility in general.*Information courtesy of Tonya Esquibel, WR Starkey Mortgage, Franklin TN*
Vanessa Stalets
Brentwood TN Real Estate
RE/MAX Elite
615-957-6333/615-661-4400

THDA Raises Rates- Brentwood TN Real Estate

Brentwood TN Real Estate
Tennessee Housing Development Agency (THDA)
THDA has increased their rates. Please see the information below received from THDA.
Effective Tuesday, April 8, 2008, the interest rate on all Great Rate Program Applications will increase to 5.80%, Great Advantage Program interest rate will increase to 6.30%, and Great Start Program interest rate will increase to 6.80%. All Program application submissions received on or after Tuesday, April 8, 2008 must be at the higher rate.
If you have been approved for a THDA loan please contact your lender and/or your agent for further information.
I am always available for client questions!
Vanessa Stalets
Brentwood TN Real Estate
RE/MAX Elite
615-957-6333/615-661-4400

Brentwood TN Real Estate - Mortgage Pricing Update

Brentwood Tn Real Estate
Update on more pricing hits/changes with credit scores. Some lenders rolled out these changes last week, some are rolling them out this week and so on, but it is industry wide in the coming.

Conventional Loans - FNMA/FHMC - higher add ons to rates for credit scores 620 to 699

FHA - Govie Loan - Pricing hits now on govie - below 600 score - cut off for most investors unless you receive an automated approval is now 580.

Good news of this change is some pricing improvement on the higher credit score buyers doing FHA financing now.

Investor loans are being hit with higher rate add ons then previously and stated income is tightening even more and cutting LTV's with not offering as many exceptions.

97% conventional is becoming the max on a one loan within the industry due to the Mortgage Insurance changes I mentioned coming back in February.
*Information courtesy Tonya Esquibel, WR Starkey Mortgage, Franklin TN*

Vanessa Stalets
Brentwood Tn Real Estate
RE/MAX Elite
615-957-6333/615-661-4400

Finance Market Update March 31, 2008 Brentwood TN Real Estate

Brentwood TN Real Estate

Mortgage bond prices fell last week pushing mortgage interest rates considerably higher. Most of the data was bond friendly showing signs the economy continued to struggle. Unfortunately Fed warnings of creating "conditions for sustainable inflation over the long term" rekindled inflation concerns. Inflation erodes the value of fixed income securities and generally leads to higher mortgage interest rates.

For the week, interest rates on government and conventional loans rose by over a full discount point.

The employment report Friday will be the most important event this week. The potential for market volatility is high surrounding the ISM Index and factory orders data.

Economic Factors

Economic Indicator Release Date Time Consensus Estimate Analysis
Construction Spending Tuesday, April 1, 2008 Down 0.9% Low importance. An indication of economic strength. A significant decrease may lead to lower rates.
ISM Index Tuesday, April 1, 2008 48.2 Important. A measure of manufacturer sentiment. A larger decline may lead to lower mortgage rates.
Factory Orders Wednesday, April 2, 2008 Up 0.7% Important. A measure of manufacturing sector strength. A larger decrease may lead to lower rates.
Employment Friday, April 4, 2008 Unemp. @ 5.0%, Payrolls -40k Very important. An increase in unemployment or a large decrease in payrolls may bring lower rates.

Liquidity

In years past a borrower would visit their local savings and loan to obtain a mortgage. The Loan Officer at the bank would approve the mortgage and fund it with cash reserves from the vault. This system worked well until the bank ran out of money to lend. Borrowers came to the S&L looking for a loan and were told to come back when a current mortgage paid off. What the bank needed was a way to sell the loans they made freeing up the capital to lend to new borrowers. This way they could lend the "same" money over and over, earning an income from servicing the loans and assisting the community by offering a near limitless pool of money.

To address this issue, FNMA and GNMA were established. The goal is to provide cheap mortgage money to prospective homeowners and a high quality bond for the investment community. The bond or Mortgage Backed Security (MBS) take mortgages with similar risk characteristics and pool them together. Investors in the MBS's know ahead of time the return they are going to receive, much like a Certificate of Deposit. To ensure the performance of the bond, each mortgage is underwritten to specific guidelines.

During the recent real estate boom underwriting guidelines were relaxed giving way to a whole new menu of mortgage products such as 100% financing. In addition, to streamline the influx of applications, income and asset verification took a back seat to a borrower with strong credit. With housing prices rising rapidly, the property could be sold to cover the note and foreclosure costs if this occurred. This cycle worked well until the price of houses moderated in 2006. Once the housing market began to cool and prices moderated, foreclosed homes were being sold for less than the notes. To add insult to injury, the loans underwritten to the looser guidelines did not perform as hoped. With the value of the collateral in question (falling home prices) and the future performance of the borrowers unknown, investors' appetite for this risk has waned. To attract investors in this environment, rates had to increase.

Unfortunately the liquidity issues associated with Alt A and subprime loans carried over to more secure AAA GNMA and FNMA loans. Sellers of AAA MBS's are finding it more difficult to find buyers. Many analysts believe the reaction has been too severe. Sanity will eventually return to the markets and AAA pricing will come in line with risk characteristics. Unfortunately it may take some time for this to occur. Be cautious during these times of extreme market volatility.
* Info. courtesy Tonya Esquibel, WR Starkey Mortgage, Franklin TN*

Vanessa Stalets
Brentwood TN Real Estate
RE/MAX Elite
615-957-6333/615-661-4400

Finance Market Update, March 17, 2008 - Brentwood TN Real Estate

Finance Market Update, March 17, 2008 - Brentwood TN Real Estate

Mortgage bond prices rose last week pushing mortgage interest rates lower. Trading was volatile the entire week. The Fed stepped in absorbing some of the oversupply of mortgage bonds. Inflationary pressures were eased with the consumer price index lower than expected. The financial markets were rattled a bit as the Fed and JPMorgan Chase helped Bear Stearns with funding.

For the week, interest rates on government and conventional loans fell by about a full discount point.

The Fed meeting Tuesday will be the most important event this week. The potential for market volatility is very high surrounding the Fed meeting. Industrial production, capacity use, housing starts, producer price index, and leading economic indicators data will also be important.

Economic Factors
Economic Indicator Release Date Time Consensus Estimate Analysis
Industrial Production Monday, March 17, 2008 Down 0.1% Important. A measure of manufacturing sector strength. Weakness may lead to lower rates.
Capacity Utilization Monday, March 17, 2008 81.3% Important. A figure above 85% is viewed as inflationary. A decrease may lead to lower mortgage interest rates.
Housing Starts Tuesday, March 18, 2008 Down 1.7% Important. A measure of housing sector strength. Larger than expected decreases may lead to lower rates.
Producer Price Index Tuesday, March 18, 2008 Up 0.3%, Core up 0.2% Important. An indication of inflationary pressures at the producer level. Lower figures may lead to lower rates.
Fed Meeting Adjourns Tuesday, March 18, 2008 75 basis point cut Important. Fed expected to cut rates. Volatility may surround the adjournment of this meeting.
Leading Economic Indicators Thursday, March 20, 2008 Down 0.3% Important. An indication of future economic activity. Weakness may lead to lower rates.
Philadelphia Fed Survey Thursday, March 20, 2008 None Moderately important. A survey of business conditions in the Northeast. Weakness may lead to lower rates


Fed Meeting

The United States central bank, the Federal Reserve, coordinates the borrowing and lending activities of federally chartered banks. The principal reason the Federal Reserve was created was to reduce severe financial crises. One way of accomplishing this goal is to control the amount of money that flows through the economy. By manipulating the US money supply, the Fed influences inflation, unemployment, and the level of US economic activity. The Fed has a variety of tools that it uses to control the money supply, but its chief policy tool is the manipulation of short-term interest rates.

All eyes will be focused on the Fed meeting Tuesday. Most analysts predict a 75 basis point rate cut following the consumer price index data showing tame inflation. Others are less certain that inflation is in check and view the 0.5% decrease in the energy price component of the consumer price index with some skepticism. Oil prices remain high and the dollar weaker, which do little to help inflation expectations and "limit(s) flexibility" as Fed Chairman Bernanke indicated earlier this year.

Keep in mind that a Fed rate cut does not automatically mean mortgage interest rates will improve, as has been evident from recent history. The Federal Reserve has direct control over the level of short-term interest rates. The Fed’s influence over longer-term interest rates is less certain. A cautious approach to float/lock decisions is prudent heading into the Fed meeting this week. Market volatility is likely.
*Information courtesy of Tonya Esquibel, WR Starkey Mortgage, Franklin TN*
Vanessa Stalets
Brentwood TN Real Estate
RE/MAX Elite
615-957-6333/ 615-661-4400

The Sky Is Not Falling! Why This Is The Time For Smart Buyers To buy!

Brentwood TN Real Estate

Everyday seems to bring more bad news for the Housing Industry. Lenders caught in the sub-prime melt down are closing their doors while banks and prime lenders are tightening loan requirements. Mortgage rates are rising and PMI (private mortgage insurance) showing industry wide narrowing of guidelines and options all contribute to the general "panic" atmosphere buyers perceive in the Brentwood TN Real Estate market as well as other areas.

Add to that increasing tax, foreclosures and sellers who have not yet seemed to see the light and you have one big roller coaster ride, complete with stomach dropping fluctuations in the stock and bond markets. The FED has slashed rates attempting to hold off a recession that some say is already here. Too little too late? Will it get worse from here?

Maybe so, but I think the bottom is much closer than buyers may guess.
Now is the time to buy, before interest rates rise substantially.
I foresee 3rd and 4th quarter rises as the market adjusts and evens out more.

The spring season is almost here, now is the time to take the plunge. There will not be a better time for months, possibly a year or more. With FHA and conforming loan limits being raised for 2008 and Fannie and Freddie speculated to not be offering these until June or so there will be a small window in which buyers can scoop these "treats" up.

Buyers educate yourselves on the "real" numbers and take a pass on the news headlines decrying doom and gloom for buyers in general. The media is in full panic monger mode and nothing sells like recession fear!

Look deeper, engage the services of knowledgeable and integrity bound lenders and Realtors. We are here to help clear away the fog of fear and show the very real opportunities for the smart buyer in the current market.

So buyers, take your fingers off the panic button,
pick up the phone, grab your mouse and keyboard
and start looking for the the facts in your area!

The sky is NOT falling!

Those who move now will be ahead of the pack come next year!


Vanessa Stalets
615-957-6333
Brentwood TN Real Estate
RE/MAX Elite615-661-4400