Dennis' Mortgage Blog

Question of the week:  Most of your questions are directed to people buying homes, how about one this week for those of us who already own our homes?

Answer:  My apologies for seemingly ignoring you with my weekly Q&A!  Here is something for homeowners:  Take advantage of the weather in the coming weeks to prepare you home for fall and winter, and in California our rainy season.  While in Southern California we are finally experiencing summer heat with triple digit temperatures in most areas that may cause some to eschew any hard labor, there are plenty of weekends left before late October and the on-set of fall.  Keep in mind many are predicting an El Nino phenomenon this winter, which as residents know will bring high volumes of rain.  So be prepared!

Clean gutters  Make sure your gutters are clean and flow freely.  While being mindful of the various water regulations in the region, run some water through your gutters to make sure the water gets through and also check where it drains.  Extend your downspouts so they drain away from your foundation and water does not collect in pools against your home or in areas it can seep under walls.

Scrape and Paint Trim  Exposed wood on trim around your home is susceptible to retaining and wicking moisture.  This can lead to wood rot and damage.  Scrape your exposed wood, peeling paint, put on some Kilz or other undercoating and then apply outdoor paint.   This is a good chore to accomplish with a small cooler following you around the house!

Gardens and walkways Again with the water!  Check where water pools in your flower beds and walkways near your home, if they puddle with just your sprinklers you know they will overflow with El Nino rains.  See if you can create easy drains or outlets for the water to flow away from your home.

Chimney Sweeps  If you have not had your chimney cleaned in several years, and use your fireplace regularly in the winter, have it looked at and cleaned to prevent any fires.

Seal it!  Are the seals on your door bottoms (I’m sure there is a technical term I am unaware of, I will ask my friend and inspector extraordinaire George Harper) adequate?  How about on your garage door?  Windows? 

Closets  All the fun is not outside the home.  If your family is like ours the hall closet tends to collect a lot of things besides coats through the year.  Are your closets ready for wet coats, umbrellas and boots?  With the on set of winter many homeless and charity organizations will be in need of coats and sweaters so those less fortunate can stay warm—do you have any you can donate? 

Cupboards  Finally, make sure you have room in your cupboards for marshmallows, cocoa, cookies and other morsels that make cuddling with the kids under blankets on the couch while watching “Mary Poppins” or sitting fireside with your spouse just listening to the pop and crackle that much more homey as you enjoy your beautiful home!

I will keep this link on my “Question of the Week” section to assist new homeowners:

IRS Form 5405 for First Time Buyer Tax Credit for those eligible for the up to $8000 credit. Note credit only for those who close escrow before November 30, 2009 under current legislation.

Have a question for me?  Ask me!   

Our Mortgage Market had a lot of activity this week with most days slightly positive.  Every day we have seen big swings in the mortgage backed securities markets with an end result of very little change from beginning to the end of the day. 

What moved the rate markets this week?  Overall nothing much, but this is what usually would have moved the markets:

Fed Governor said that he does not think the Fed will fill its entire commitment to purchase $1.5 trillion in mortgage securities.  This should have had a strong impact in lower bond prices and raising rates, market somewhat shrugged this off.

Stocks are on a roll heading into today stocks have closed positive for eight straight days, the longest consecutive day streak since April 2007.  As I write this between 10-11:00 PST stocks or slightly down and in danger of stopping the streak.  This should move bond prices lower—and did with last Friday’s big stock rally—but again bond markets sort of shrugged this off with positive closings every day this week.

Tame inflation numbers should definitely have moved the needle on bonds to the better, however when the number came out flat bond prices barely moved—in the past this type of number would have pushed prices higher and rates lower.

Consumer data came in positive with consumer spending up for the 3^rd month in a row and consumer confidence higher than expected.  This news strengthens the argument for the economic recovery being underway and should have the impact of lower bond prices—market gave little reaction.

Employment data came in mixed with initial jobless claims higher than expected following several weeks of declining numbers, should be good for bonds.  At the same time consumer income was flat, an improvement over lower personal income, this should be not so good for bonds.  Cancel, cancel bonds did not really react to this news either.

Durable goods orders increased almost 5% for July, up over 6% from last year and way above expectations.  This number definitely should move the market and increase the yields on bonds and mortgages—not so much as prices climbed and yields dropped on the day of this announcement.

New home sales “surged” in July up almost 10% from last year and way above expectations. This number is based on units and not prices so it probably reflects low rates and builders lowering asking prices, however still very positive economic news that briefly affected mortgage backed securities to the negative as expected, but they rallied back to positive before the end of the day.

Gross Domestic Product was the elephant for me this week.  The number came in with GDP shrinking 1% in the 2^nd quarter, it was estimated to shrink by 1.4% so the economy shrank about 30% less than “experts” estimates.  This is positive news for the economy being in position to start growing, and bonds went, “Eh, okay. So what?” and ended that day just positive.

Everyone of these announcements carries significance to investors, economists and members of the media who make a living telling us what they want to say, and combined they should have moved bond prices higher and interest rates lower—with the exception of the flat inflation numbers.  They all add up to an economic recovery. Manufacturers are buying more supplies (Durable goods), employers are paying more overtime (personal income up) which is prelude to higher, consumer confidence and spending rose (75% of the economy is consumer spending), stocks are rising (investor confidence and predicting of economic recovery), the Fed sees mortgage markets stabilizing and no need to spend billions on supporting the market.

It appears that the rate increases that should have occurred this week did not.  Why? Also this week the Treasury again auctioned off billions of dollars of U.S. debt and the markets responded somewhat favorably.  Most responsive were the usual cast of foreign investors who now hold over $3.4 trillion of our debt (while the Chinese get most of the attention by holding $776 billion, Japan is right on their heels at $711 billion).  It appears those with cash are betting on our economic recovery and the ability of Uncle Sam to pay back his mortgages via the Treasury. 

Rates for Friday August 28th:

FIXED RATE MORTGAGES AT COST OF 1 POINT*

30 year conventional  4.875%                           Unchanged

30 year conforming-jumbo 5.25%                     Down 0.125%

30 year FHA    5.00%                                      Unchanged

30 year FHA jumbo 5.25%                              Down 0.125%

Please note that these are base rates and adjustments may be added for condominiums, refinances, credit scores, loan to value, and period rate is locked (i.e 45 days instead of 30 days).

Please note that rates quoted are based on average of several lenders for a purchase transaction with 20% down payment and a minimum FICO score of 740; APR is not quoted as it is dependent upon specific loan amounts, lenders and services selected.  Numbers provided are for comparative purposes only.

Well for those who were complaining about our cool summer I hope you are happy with our current weather in Southern California!  It is a good weekend to move slow, sip something cool and shade hop in your travels.

I am not yet certain but next Friday could be the first Friday in quite a while that I will not send my weekly rate and market update.  Leslie and I will be getting away for a long weekend to celebrate our 15^th Anniversary and the decision has not been made yet as to whether the laptop goes or stays.  If you don’t get your update next week you’ll know why!            

Have a great weekend,

Dennis

Remember this update is posted weekly on My Blog at www.DennisCSmith.com ; feel free to forward the link to family and friends who may be interested in past commentaries.

Follow me on Twitter for market updates throughout the day.