Please keep in mind layered risk pricing for all loan products for credit score and loan to value mixes.  Call for quotes.

 

"But Dennis I saw on the news and heard on the radio that rates had dropped a lot....."  They did, for much of Tuesday and then about ten minutes on Wednesday--then the market looked like a check mark, a small little decline and then a big tail going up.  As the stock market turned from a 300 point pre-market loss to a 300 point gain at close on Wednesday bonds were pounded and we saw a one-quarter percent increase in rate in half an hour.  I was speaking with one client and quoting 5.125% for a purchase mortgage, but the time we finished the call the rate had gone to 5.375%--and it got worse yesterday as the stock market continued it gains and economic news (notably unemployment filings) came in contradicting many media reports about our economy on the edge of a cliff.

 

This chart shows the stock market this week (DJIA in blue) and the 10 year treasury note yield (orange), i.e. interest rates.  Note the drop on Tuesday and then the huge jump on Wednesday (markets closed on Monday):

 

 

 

 

Some points I would like to make sure are understood for everyone regarding rates, the ecomony and perception:

 

* Mortgage rates are related to the stock market in our current environment.  Stock prices go up, interest rates go up.  Stock prices go down, interest rates go down.

 

* Good economic news sends stock prices up (rates up), bad economic news sends stocks prices down (rates down)

 

* More people working, or less people not working, is good economic news--it means there is still job growth in our economy

 

* Media reaction/reporting has been almost solely based on the 4th quarter of 2007.  Many financial and banking sector companies reported losses in the 4th quarter--but were still positive for the year, yes they had profits!  Many stocks lost ground on earnings reportings because their dividends were less than expected--dividends are only paid when companies are profitable.

 

* A 200 point drop in the stock market is less than a 2% adjustment with today's value---that is how much lower the Dow Jones Industrial Average is today (12,200) from one year ago (12,500) and in between it hit 14,300.  

 

* The Fed surprise on Tuesday and the stimulus package being debated in the Senate may be over reaction to what is actually happening in the economy.

 

* The media, especially television, reports tend to lag the data by at least 24 hours--that is what has happened after the rate swing on Wednesday and Thursday up to last night they were reporting Tuesday's news

 

My advice:  keep a calm mind!  Call for accurate information specific to individuals and transactions.  Use the reports in the media as a guide to sentiment and the particular spin or story they want to cover.  Read the data.  Call me--accurate, informative and able to interpret what is happening for you and your clients. 

 

Because of the uncertainty still in the market and the hedge funds currently taking a beating following the fraud situation in France, Jumbos are not doing well this week and conforming loans are off their lows from Tuesday and their highs from yesterday and flat Friday to Friday:

 

Rain in Southern California this week and this weekend...the PERFECT to look at homes and buy one!  Why?  Because as a buyer one does not have that many opportunities to see how a property reacts to rain: leaks, where water puddles and/or flows on the property, drainage issues---these are items you cannot find out typically between March and October.

 

Please feel free to forward this email to your co-workers and clients--or send them to my Mortgage Blog where it is posted weekly.

 

Have a great weekend,

Friday, January 25, 2008

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