Money, Debt, Real Estate, and Credit talk with Jeff Underwood

Mortgage markets improved last week ahead of Memorial Day and a 3-day weekend. Bond pricing ending the week higher, pushing conforming mortgage rates in Arizona down for the 5th week out of six.

Most economic news reported worse-than-expected. Initial Jobless Claims increased sharply, GDP was unchanged, and Durable Orders posted the largest one-month decline since October. Each of these stories reduced inflationary pressures on the economy, contributing to lower mortgage rates.

However, the main driver for U.S. mortgage rates last week was Europe.

One year ago, Greece pledged to lower its spending, cut its deficit, and reduce the number of public programs and benefits. In economic circles, this is known as austerity. For more than a month, however, despite the austerity measures, there has been concern that Greece will fail to meet its debt obligations.

Last week, that concern spiked. It triggered a flight-to-quality that helped U.S. mortgage bonds, and led mortgage rates lower.

Conforming and FHA mortgage rates are now at their lowest levels in more than 6 months.

This week, the biggest news is May’s Non-Farm Payrolls report. Although, expect for rates to carve out wide ranges from day-to-day. Until the Greece scenario reaches a resolution, Wall Street will be on edge.

• Tuesday : Consumer Confidence, Case-Shiller Index
• Wednesday : ADP Challenger Report
• Thursday : Initial Jobless Claims
• Friday : Non-Farm Payrolls Report

Plus, four members of the Fed have scheduled speeches.

If you’re still floating a mortgage rates, or have otherwise not locked in, luck is on your side. Mortgage rates look poised to fall over the next few days, however, markets have been known to reverse quickly. Therefore, if you’ve been quoted on a rate that looks acceptable to you, you may not want to gamble on mortgage rates falling further.

The safest decision may be to commit to what’s available to you today.

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Jeff Underwood, The Street Economist
The Ugly Truth About Money

The Ugly Truth About Money

Home values dropped for the sixth straight month in March 2011, according to the Federal Home Finance Agency’s Home Price Index. The Home Price Index is a government-sponsored home value tracker.

The HPI report is the latest in a string of “falling home values” stories — a trend that’s troubling home sellers across Chandler and nationwide.

However, although the Home Price Index says home values are falling, that doesn’t necessarily mean that they are. Like most statistics in the housing sector, the Home Price Index is plagued by poor methodologies and a lack of timeliness.

In short, the Home Price Index is flawed. In three ways.

The first big flaw in the Home Price Index is that it only measures the values of homes with mortgages backed by Fannie Mae or Freddie Mac. Homes financed via FHA, or via other means are specifically excluded from the calculation. For today’s purchase market, that leaves more than 1 in 4 homes “uncounted” — a big percentage of the market.

Second, the Home Price Index determines home values by measuring price change from sale to subsequent sale. This eliminates new homes — a major market segment.

And, lastly, the Home Price Index reports on a 60-day delay; we’re only now seeing data from March. This two-month lag renders the HPI a trailing indicator for the housing market instead of a forward-looking one. If you’re a home buyer looking for market insight, the HPI can’t give it — it’s out-dated and out of season.

Despite its shortcomings, though, we can’t ignore the Home Price Index completely. It’s among the most thorough home valuation models available, and it’s used in public policy discussions. When the HPI says prices are down, Wall Street and Capitol Hill take notice, and that trickles down to everyday life on Main Street.

Since peaking in April 2007, the Home Price Index is off 19.1 percent.

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Jeff Underwood, The Street Economist
The Ugly Truth About Money

The Ugly Truth About Money

Mortgage rates across the state are near year-to-date lows, but locking them in this week may be difficult. As Memorial Day nears, and Wall Streeters get a head-start on the long weekends, trade volume in the mortgage bond markets will dip.

When bond volume drops, mortgage rates get jumpy. It’s a relationship based more on scarcity than actual market fundamentals.

It works like this:

1. Conforming and FHA mortgage rates are based on the “market price” of a mortgage-backed bond
2. Mortgage-backed bonds can’t be bought or sold without a buyer and a seller at a specific price

As Friday gets closer this week, and more and more Wall Street traders will leave for their “extended” 3-day weekend, and bond markets will be left with fewer and fewer participants. This will create a market situation in which it’s harder to match a buyer and seller at any given bond price, resulting in larger mortgage rate shifts than usual.

These jumps in rates are exaggerated during periods of economic uncertainty like these. What’s more, there’s a lot of economically-important data due for release this week. That, too, can put markets in hysterics.

If this were a “normal” week, mortgage rates would be volatile. The coming of Memorial Day is just adding to the mix.

Mortgage rates may rise in Gilbert, Arizona this week, or they may fall.  Either way, if you have the opportunity to lock something favorable, consider doing it.  Rates are low and likely won’t last.

Also, join me at Facebook.com/TheUglyTruthAboutMoney.

Jeff Underwood, The Street Economist
The Ugly Truth About Money

The Ugly Truth About Money

The Real Estate Collapse Was No Accident! Join Jeff Underwood on The Ugly Money Show.

Join Jeff Underwood as he explains how this happened. Real Estate And Mortgage Talk with Jeff Underwood The Street Economist on BlogTalkRadio.com. Or, cut and paste this link http://www.blogtalkradio.com/jeffunderwood/2011/05/23/the-real-estate-collapse-was-no-accident-join-jeff-underwood

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Jeff Underwood, The Street Economist
The Ugly Truth About Money

The Ugly Truth About Money

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Mortgage markets were unchanged last week, despite improving on four of five days. Economic data was worse-than-expected almost across the board, but neither FHA nor conforming mortgage rates in Arizona budged.

Instead, markets grappled with the just-released Fed Minutes which weighed heavily on investors and on Wall Street.With the release of the minutes, it’s increasingly clear that the Federal Reserve will end its support for bond markets on schedule in June, and that a Fed Fund Rate hike is possible within the next 12 months.

Not surprisingly, the date of the Fed Minutes release — Wednesday — was the singular “down day” for mortgage markets last week.

After falling for 4 straight weeks, Phoenix mortgage rates appear to have troughed. This week they could rise, and there’s no shortage of data on which for bonds for trade.

• Tuesday : New Home Sales; Speeches from Fed’s Plosser and Bullard
• Wednesday : Durable Goods; FHFA Home Price Index
• Thursday : GDP; Initial Jobless Claims
• Friday : Core PCE; Pending Home Sales; Consumer Sentiment

There’s other forces on markets, too. First, there are 3 bond auctions — a 2-year, a 5-year, and a 7-year. Weak demand for any of the three will lead mortgage rates higher.

And, second, this is a holiday week. Memorial Day is next Monday and, with the 3-day weekend ahead, expect large numbers of Wall Streeters to skip out on Friday (and likely part of Thursday, too). As the week concludes, therefore, bond volume will thin, amplifying mortgage rate movement — up or down.

If you’re shopping for a mortgage, it’s a good time to look at locking in. As the week progresses, mortgage rates should become less predictable and more volatile.

Also, join me at Facebook.com/TheUglyTruthAboutMoney.

Jeff Underwood, The Street Economist
The Ugly Truth About Money

The Ugly Truth About Money

The Ugly Truth About Money

In this episode of The Ugly Money Show with Jeff Underwood, CLICK HERE.

http://www.blogtalkradio.com/jeffunderwood/2011/05/20/the-ugly-money-show-with-jeff-underwood

Spending / National Debt and the debt ceiling / And, would the economy get better quicker if more people were to walk away from large debts ?? What do think about this theory ???

Stay Informed throughout 2011!

Join me for an exciting year of fun education on money, debt, real estate, credit, mortgage, the economy, and how they all work together!

Also, join me at Facebook.com/TheUglyTruthAboutMoney.

Jeff Underwood, The Street Economist
The Ugly Truth About Money

The Ugly Truth About Money

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The housing market recovery stalled last month. At least temporarily.

According to the National Association of REALTORS®, Existing Home Sales slipped 1 percent in April from the month prior, falling to 5.05 million units on a seasonally-adjusted, annualized basis. The reading is exactly in-line with report’s 6-month average which also reads 5.05 million units.

The data may appear “average”, but there’s another angle to consider.

In April, as compared to March, the supply of existing homes for sales spiked. At the current pace of home sales, it would now take 9.2 months to exhaust today’s complete home inventory. This is almost one full month worse than March. It’s the worst home supply reading of the year.

There are also more homes “on the market” today than at any time since September 2010.

Other noteworthy statistics in the April Existing Home Sales report include:

• 31 percent of all homes sold in April were purchased with cash (that number is closer to 48% in Phoenix)
• First-time home buyers bought 36 percent of all homes in April
• Distressed properties typically sold at a 20 percent discount

This “discount”, it should be noted, is a major reason why distressed properties accounted for 37 percent of the home resales in April. Home buyers are finding bargains when they’re willing to consider homes in various stages of foreclosure and short sale.

Overall, the April Existing Home Sales report represents opportunity for home buyers in and around Phoenix. Home sales are stagnant, supplies are rising and there’s no shortage of properties from which to choose. Furthermore, mortgage rates remain low.

If you’re considering a home purchase this fall, home supply may not be as ample, and financing conditions may not be as favorable, post-Labor Day. Talk to your real estate agent about what’s possible today. You may want to move up your time frame.

Join me for my latest episode of The Ugly Money Show on iTunes or on http://www.BlogTalkRadio.com/JeffUnderwood. And on Facebook at Facebook.com/TheUglyTruthAboutMoney

Stay Informed throughout 2011!
Join me for an exciting year of fun education on money, debt, real estate, credit, mortgage, the economy, and how they all work together!

Jeff Underwood, The Street Economist
The Ugly Truth About Money

The Federal Reserve released its April 2011 Federal Open Market Committee meeting minutes Wednesday. In the hours since, mortgage markets have worsened; rates in Arizona are higher by 1/8 percent this morning, at least.

The “Fed Minutes” is published 8 times annually, three week after each scheduled FOMC meeting. The minutes are the Federal Reserve’s official recap of the conversations and debates that shaped the prior FOMC session.

Another way to consider the Fed Minutes is as the companion piece to the more well-known FOMC press release. The press release is issued on the day of adjournment, and is brief, narrow, and high-level. The statement makes broad comments on the economy and outlines new monetary policy.

By contrast, the Fed Minutes is delayed, lengthy, and rife with details. The minutes highlights arguments and discussion points between Fed members, and digs deep into underlying economic issues.

The FOMC press release is measured in paragraphs. The Fed Minutes is measured in pages.

Here is some of what the Fed discussed last month:

• On inflation : Higher levels are “transitory”; will level-off with commodity prices
• On housing : The market remains depressed. “Vacant properties” are harming construction.
• On stimulus : The Fed will stick to its $600 billion support plan

In addition, at its meeting, the Federal Reserve discussed an exit strategy for its market support. The details are undecided, but the debate shows that the Fed is anticipated a change in policy sometime soon.

Wall Street estimates that a gradual economic tightening will begin within 12 months.

Mortgage rates have been fading since mid-April. The Fed Minutes may be the catalyst of a reversal. The Federal Reserve expects growth in the U.S. economy and growth tends to boost stock markets at the expense of bonds.

As bond markets fall, mortgage rates in Phoenix rise.

Join me for my latest episode of The Ugly Money Show on iTunes or on http://www.BlogTalkRadio.com/JeffUnderwood. And on Facebook at Facebook.com/TheUglyTruthAboutMoney

Stay Informed throughout 2011!
Join me for an exciting year of fun education on money, debt, real estate, credit, mortgage, the economy, and how they all work together!

Jeff Underwood, The Street Economist
The Ugly Truth About Money

Single-family housing starts dropped by 21,000 units in April on a seasonally-adjusted annual basis.

The Housing Starts report measures the number of homes on which new construction “broke ground”. It’s tracked by the U.S. Department of Commerce which releases new data monthly.

Single-family housing starts fell 5 percent as compared to March 2011, and 30 percent as compared to April one year ago.

The figures were worse than what Wall Street expected. For just the second time in 2 years, monthly single-family housing starts dropped below 400,000 units. In addition, single-family Building Permits fell in April as well, shedding 2 percent from March.

A building permit is a local government’s approval to start home construction and when permits are down, new construction follows. This is because 93 percent of homes begin construction within 60 days of permit-issuance.

Fewer permits, as a consequence, means fewer new homes. Therefore, if you’re looking at new construction in or around Phoenix , April’s numbers may spark a sense of urgency.

Home prices are a function of home supply and demand and, based on the Housing Starts data, supplies appear headed for a fall.

Join me for my latest episode of The Ugly Money Show on iTunes or on http://www.BlogTalkRadio.com/JeffUnderwood. And on Facebook at Facebook.com/TheUglyTruthAboutMoney

Stay Informed throughout 2011!
Join me for an exciting year of fun education on money, debt, real estate, credit, mortgage, the economy, and how they all work together!

Jeff Underwood, The Street Economist
The Ugly Truth About Money

Home builder confidence can’t shake its range, according to the National Association of Home Builders. The group’s monthly Housing Market Index put May’s builder confidence reading at a level of 16.

The Housing Market Index is scored on a scale of 1-100. A reading above 50 suggests favorable conditions for the new home housing market, as reported by home builders. A reading below 50 suggests unfavorable conditions.

May marks the sixth time in 7 months that the HMI posted a 16, the longest such plateau in the index’s history.

The HMI has not posted higher than 50 since April 2006.

As an index, the HMI is a composite of three separate surveys sent to home builders each month. The surveys are meant to capture the current and projected single-family home sales volume, in addition to buyer foot traffic levels.

Versus April, there was little change:

• Current single-family sales : 16 (+1 from April)
• Projected single-family sales : 20 (-2 from April)
• Buyer foot traffic : 14 (+1 from April)

Broken down, the Housing Market Index for May shows that home builders are experiencing a boost in sales and foot traffic today, but expect that boost to fade between today and November. For home buyers in Phoenix , this can present an opportunity.

With home builder confidence stagnating, and with a worsening sales expectation for the next 6 months, builders may be more willing to negotiate with you on home prices and/or the costs of upgrades. Builders may also be more willing to make concessions in your sales contract that would otherwise be unavailable to you.

Your real estate agent can help you to identify the negotiable items of your offer.

In addition, today’s home buyers can exploit the recent strength of the mortgage market. Surging mortgage bond demand since April has pushed mortgage rates down to their lowest levels of the year. If you can find a home you love, therefore, it can be financed on the (relative) cheap, too.

Join me for my latest episode of The Ugly Money Show on iTunes or on http://www.BlogTalkRadio.com/JeffUnderwood. And on Facebook at Facebook.com/TheUglyTruthAboutMoney

Stay Informed throughout 2011!
Join me for an exciting year of fun education on money, debt, real estate, credit, mortgage, the economy, and how they all work together!

Jeff Underwood, The Street Economist
The Ugly Truth About Money