No New ECB Stimulus

After spending the last couple of weeks at or near the lowest levels of the year, mortgage rates rose this week. The cause came from investor disappointment with Thursday's European Central Bank (ECB) meeting. The U.S. economic data contained few significant surprises and had little effect.

At its last meeting in March, the ECB announced significant new stimulus measures to spur economic activity and inflation in the eurozone. In speeches following the March meeting, ECB President Mario Draghi emphasized the ECB's readiness to do more if needed. Investors liked what they heard and pushed interest rates around the world lower in anticipation of more stimulus. This week, however, the ECB chose to add no new measures, and some of the improvement in rates was reversed.

The recent housing data was mixed. The existing home sales data for March revealed a solid increase of 5% from February, and they were higher than a year ago. Also notable,inventories of existing homes for sale increased 6%. Tight inventories have been a big factor holding back home sales activity in many regions. National median sale prices were 6% higher than a y ear ago.

In contrast to home sales, housing starts declined 9% from February, but they still were 14% higher than a year ago. The drop was evenly split between single-family and multi-family units. Building permits, a leading indicator of future activity, fell 8% in March but also remained above year ago levels.

The figures for housing starts and building permits are very volatile from month to month, which makes it necessary to look at a longer time period to determine the underlying trend. Housing starts in 2016 are well above the levels seen a year ago.

Looking ahead, the next Fed meeting will take place on Wednesday. No change in rates is expected, but the statement could have an impact on mortgage rates. This will be followed by a Bank of Japan meeting which could influence U.S. markets on Thursday. Before the meetings, durable orders will come out on Tuesday. The first reading for first quarter gross domestic product (GDP), the broadest measure of economic activity, will be released on Thursday. The core PCE price index, the Fed's preferred measure of inflation, will come out on Friday.

Inflation Declines

While the U.S. economic data released over the past week generally was a bit weaker than expected, it was offset to some degree by stronger than expected data in China. The net effect was small, and mortgage rates ended the week just a little higher, up from the lowest levels of the year.

 

While explaining why the Fed plans to move gradually to tighten monetary policy, Fed Chair Yellen said that she was concerned that the recent increase in core inflation may be due totemporary factors. The consumer price index (CPI) report for March released on Thursday might be a sign that her concerns are justified.

 

Core CPI inflation, which excludes the volatile food and energy components, was 2.2% higher than a year ago, down from a 2.3% annual rate in February, and below the consensus forecast. This follows four straight months of increasing levels of core inflation and may be the start of a trend lower. It would be good for mortgage rates if inflation continues to decline.

 

Retail sales in March were a good deal weaker than expected. The results were decent, but investors were looking for better. Excluding the volatile auto component, retail sales increased 0.2% from February, which was the largest increase in four months, but it was half the expected level. Consumer spending is an important component of gross domestic product (GDP), and it was somewhat surprising that the report caused so little reaction.

 

 

Looking ahead, the biggest event next week may be Thursday's European Central Bank (ECB) meeting. Bond purchases by the ECB have helped keep global bond yields low, so comments about future policy could have an impact on U.S. mortgage rates. Before that, the NAHB housing index will be released on Monday. Housing starts will come out on Tuesday. Existing home sales will be released on Wednesday.

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Central Banks See Continued Support

Mortgage rates improved again this week and are now near their best levels of the year. Again the improvement resulted from statements by central bankers. The economic data had little effect.

Statements by the heads of the International Monetary Fund (IMF), the European Central Bank (ECB), and the U.S. Fed shared the same sentiment, the global economy needs support. IMF Managing Director Lagarde described economic growth in Europe as "too slow, too fragile". ECB President Draghi said the ECB will do what ever it takes to stimulate growth and raise inflation. Inflation in the eurozone is now -0.1%. The target is 2.0%. The minutes from the U.S. Fed meeting on March 16th supported recent comments that the Fed will take a gradual approach to raising the federal funds rate. These dovish comments were well received by the bond markets, including U.S. mortgage-backed securities.

The economic data released this week shows that the U.S. economy is on far better footing than the overall global economy. The JOLTS report, which measures job openings and labor turnover rates, showed that job openings rose and voluntary quits increased. Both are signs of an improving labor market.

The ISM Services index measures expansion or contraction in the services sector of the economy. Readings above 50 indicate expansion. The index for March, at 54.5, shows that the service sector expanded again and did so at a better pace than the previous two months.

Looking ahead, the Retail Sales report will be released on Wednesday. Consumer spending accounts for about 70% of economic output in the U.S., and the retail sales data is a key indicator. The consumer price index (CPI) will come out on Thursday. CPI is a widely followed monthly inflation report that looks at the price change for goods and services which are sold to consumers. Industrial production, another important indicator of economic activity, will be released on Friday.

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Who knew? The Federal Reserve raised its funds rate barely two months ago, and all that worry about higher interest rates for mortgage borrowers ended up being positively unwarranted. The average rate on the popular 30-year fixed mortgage began a free fall, reacting to financial markets overseas rather than monetary policy here at home.

"Mortgage rates are going down again, and it's good for borrowers, but is it really good for the housing market and the broader economy? The answer is no," said Guy Cecala, CEO and publisher of Inside Mortgage Finance.

Mortgage rates are falling because investors are flooding the U.S. bond market. Mortgage rates follow the yield on bonds that loosely follow the 10-year Treasury. Investors are buying bonds as a safety play in a highly volatile and largely negative stock market. Signs of weakness in the U.S. economy, in addition to trouble in overseas markets, pushed the yield on the 10-year Treasury to its lowest level since 2012, and mortgage rates followed south.

"If stocks are selling, and if people are generally pretty panicked about the state of the global economy, bond markets are a natural safe haven," said Matthew Graham, chief operating officer of Mortgage News Daily. "Popular opinion about rates moving higher only helped. Too many people were on one side of that trade, and it almost always makes sense to root for the underdog in those scenarios."

Lower mortgage rates certainly offer homebuyers lower monthly payments and at the same time help them to qualify for larger loans, so they can buy more expensive homes. The latter is particularly pertinent this spring, as home prices are rising due to record low supply of homes for sale. On the flip side, a weaker economy, stock market losses and general unease about the fate of employment and wage growth all hurt housing. 

"Frankly, a healthier economy would be mortgage rates in the 5 percent range, but that's also assuming you could get 2 percent in your checking account," Cecala said.

Read MoreWhat negative rates mean for average investors

Now not only are mortgage rates nearing their record lows set in 2012, there is new talk of the Federal Reserve moving to a negative interest rate policy. Fed Chair Janet Yellen said Thursday it was not out of the realm of possibility.

This would not, however, translate to negative mortgage rates. That is impossible. Lenders only lend if they can make money.

"As far as the connection to mortgage rates, it's no different than it was," said Graham. "The Fed rate is only loosely connected over longer time horizons. Whether the Fed hikes or cuts below zero, the global economic panic will be good for rates."

Wealthy borrowers behind 9.3% jump in newmortgages

It could, however, push rates into the 2 percent range, which would have a significant impact on borrowers. It would help those on the low end but could hurt jumbo loan borrowers. Banks, which generally hold these larger loans on their own books, would not want to lend in that environment,

"We would go back to a situation where conforming government mortgages are considerably cheaper than private jumbo," said Cecala. "All you're doing is asking them [banks] to shrink their margin and get nothing in return because there is no way to lower their cost of funds from 0 to 0."

Cecala does not expect the Fed to move rates lower. He cites the fact that the nation went through one of the worst recessions in history, and the Fed never moved below zero. The bigger issue is that most lenders have stopped hedging for rate drops, so, Cecala added, "It may to cause a lot of losses and shake up things."

For entire article follow the link below

http://www.cnbc.com/2016/02/12/mortgage-rates-could-cross-a-record-low.html

Mortgage Rates Lower With Help From Central Bank

Ron and Julie Wish You A Happy Thanksgiving !!!

October Financial Updates From Ron Black and Julie Bailey

By Louis S. Barnes                                                      

This week an exercise in perspective, stocks versus bonds and mortgages, and here versus over there.

     In a week with little new US data (apartments hot, single family not), bonds and mortgages stayed the same -- which is remarkable given the performance of stocks. The 10-year T-note could not break below 2.00%, mortgages just under 4.00%, but unchanged all through October while the Dow rocketed 500 points in the last two days.

     These two markets usually trade opposite each other, stocks up on good economic news, bonds down in price and up in yield, and vice-versa on bad news. Good news should help corporate earnings and stocks, but any good news brings fear to bonds that the Fed will do something awful.

     I have worked in or near credit markets for forty years, and like all colleagues regard the stock market as cognitively impaired and bi-polar, heavily overweighted to the manic side. Those people reciprocate, viewing us as depressed and void of imagination. How could these two pathologies join minds this week?

     The first stock up-burst coincided with ECB chief Mario Draghi’s suggestion that he would expand its QE and perhaps drive euro-zone rates more deeply negative. The German 10-year fell in yield from 0.63% to 0.51%, pulling downward on US 10s. Meanwhile stocks interpreted more central bank easing as economic stimulus good for them. Then today, the People’s Bank of China cut by surprise its overnight and reserve rates -- more glee for stocks, but bonds holding.

     Who is right here? My bias declared, of course bonds are right, and stocks don’t get it. In a normal world, big central bank stimulus would be good news for stocks, but this world is not at all normal. Unprecedented, fantastic stimulus by the ECB, PBOC, and BOJ has done nothing more than to hold up the economic floor and to buy time.

     Europe is caught in its own wire and trenches, the euro a proxy for the Western Front in 1917. Germany profiteers and the weak cannot recover while the ECB merely maintains the meat-grinder -- a situation unique to Europe, but real recovery impossible no matter what the ECB does.

     China is different. It has hit its head on the ceiling of investment-led growth, and reforms attempted in the last year have all backfired. On Monday it reported Q3 growth slipping below its imaginary 7%, to 6.9%. Other indicators suggest a far deeper slowdown: as of September, industrial production is down 5.7% year-over-year, and fixed investment is off 6.8%.

     More to the story: unadjusted for inflation, reported China growth was only 6.2%. China is in deflation, an upside-down adjuster. Factory prices have fallen there for 43-straight months. As China in some desperation tries to keep the machine going, it holds its export volume (down only 3.7% YTD) by predatory pricing, exporting its deflation and unemployment to the world while constricting its imports. Double damage.

     Stocks misinterpret China stimulus even more than European. The weaker China becomes internally, the more harm it can do to the rest of us. I do hope that more people will understand that ongoing global economic mire has far more to do with the rise of China and its misbehavior than the financial crisis.

     Okay, if it’s that ugly, why didn’t bonds and mortgages do better instead of just holding? Because of the great disconnect of our time: were it not for the rest of the world’s self-entanglement, the US would be rocking. Fed-haters here include automatically in their screeds: “The Fed’s stimulus has failed to produce economic growth.” Horsefeathers. We have been growing so well that the Fed fears overheating, its leadership dying for an excuse to lift off, and might even be right.

     Take some credit. No, not the Fed -- take credit for US flexibility, and endurance of pain. We have recovered from the Great Recession as nowhere else, our government dysfunctional throughout, because we alone could inflict millions of foreclosures and job losses, adjust and move forward. The rest of the world is politically and culturally stuck.

Mortgage Time From Ron Black and Julie Bailey

Mortgage Time Update For The Week Ending August 28th, 2015

Happy 4th Of July From Julie and Ron !

Happy 4th Of July !!!

Ron Black's Mortgage Time Week Ending July 2nd, 2015

Mortgage Time Week Ending June 26, 2015

Mortgage Time June 2015

Happy Father's Day From Julie and Ron!!

Capital Markets This Week - Get To Know Ron and Julie

Click On Video Above To Get To Know Ron and Julie 

Click the following link to be introduced to Ron and Julie: Introducing the Ron and Julie Team                        By Louis S. Barnes                                                                 Friday, June 12, 2015 Long-term rates have run up again, now to levels of last fall: mortgages are close to 4.25%, the 10-year T-note cresting Wednesday just under 2.50%. Today, 2.36%. Possibly fatal stubbornness, but I think most of this up-lurch is a correction from overreaction last winter, not the threshold of a sustained swoop-up. That may come, but it will require sustained economic data at least as strong as this spring’s revival. Beginning mid-fall last year, Europe appeared headed into deflation. The ECB would embark on QE, but its effectiveness was very much in doubt. Oil crashed, removing all fear of inflation, and a lot of us discounted its stimulus potential. QE in one form or another spread everywhere outside the US, producing a dollar rocket, which at minimum created buyers for US financial markets (stocks-up rates-down), stimulated all of the export-based economies overseas (that would be all of them), and undercut the US. The icing: the weird US winter slowdown. All of that has now either reversed or stabilized. Rates up. Maybe, maybe, maybe at last a genuine turn in the world economy, which will self-reinforce. But the odds are that the great charge of the central bank cavalry has only bought more time, and the deflationary pressures are all still in place, especially overseas -- and above all, hyper-competition compressing wages. In the last two weeks both the IMF and World Bank have downgraded their forecasts for global growth, the latter to just 2.7% for this year. The aspect without precedent is the divergence between the US and the rest. This certainly would not be the first time the US did better than the rest, even the locomotive for the others. But the divergence among central banks is without precedent, all-out printing over there, and tightening beginning here. The US is by far the world’s most adaptable economy. That, our greatest strength, can be cruel to our people, more so than political structures overseas can survive. Europe is having an impossible time calibrating its several labor forces to one currency. China is trying to change its engine without slowing the car, fearful that any downturn will expose the Party as the fraud that it is. The Emergings are all in similar soup. US data has picked up, I think more than just a rebound from another odd winter. The NFIB survey of small business is an especially important indicator, and it has nearly normalized. There are flickers of rising incomes especially at the low end, although compressed incomes for the lower two-thirds of our people are our principal headwind. Defying our fabled flexibility: the runaway cost of health care, acting as an anti-productivity tax, and the same for higher education. Still, the Fed has to come up from zero. Clue: the IMF is so worried about the effect of liftoff on the dollar, and its effects on the weak Emergings, that it asked the Fed to hold off until next year. The huge dollar rise last winter versus all of the others (or their devaluation versus us -- all is relative) was in response to the fact of QE overseas but anticipation of Fed liftoff. QE elsewhere is not going to change much. But nobody knows the moment of Fed liftoff or the slope of increase beyond. Shoot, the Fed doesn’t know. This liftoff process is going to last a long time, and we should expect BIG volatility in things like mortgage rates. Not just up, but up and down and up. Liftoff is a given, but the future slope of increases is not. Since the Fed is data-dependent -- all of its forecasting models worse than useless, misleading -- then so are we. The world is going to stay in a low-rate era so long as competitive pressures cap inflation. In many places, central banks may have to QE-lean against deflation open-ended. However, mortgage rates can ricochet rapidly in the post-bust range, 3.50% to 5.50%. Even a careful, "crawling" Fed pace (Vice-Chair Fischer’s word) of increase in short-term rates will beget wild anticipation in long rates. One month thinking the Fed is coming hard (mortgages up) the next thinking it’s overdone (back down). As we come out of a place we’ve never been before to a new place we’ve never been before, the bond market will have no bearings. Moving, but busted compass. ------------------------------------------------ 10-year T-note in the last year, an obvious bottom in April after an hysterical one in February. Add 1.80% to get 30-fixed no-point mortgages. I do not expect any big retreat from here, not without some very bad news somewhere.

Mortgage Rates Rise Based On Economic Factors

The Basic Concept Of A Mortgage

If you are new to borrowing and are just looking for your first home, then you probably are unsure about how mortgages work, and what the various types of mortgages are. If you are about to get your first mortgage, then you need to know the basics of what mortgages are and their various features. Here is some useful advice on the basics of mortgage lending:

What is a mortgage?

A mortgage is the loan that you take out to pay for a property. The loan is split into the capital and interest. The capital is the amount you have actually borrowed to buy the property, and the interest is the amount the lender charges you for the privilege of borrowing. There are various types of mortgages, but in general the two main types are repayment mortgages and interest only mortgages. Repayment mortgages are ones that require you to pay back the capital and interest each month. Interest only mortgages require you to pay just the interest each month and then the final capital amount at the end of the mortgage term. Whatever type of mortgage you are looking for, there are a number of features you should consider:

Interest rate

The interest rate of the mortgage is very important, because the lower the interest rate, the less you will pay back over the loan term. Mortgage rates are lower than most other types of loans, at around 5 or 6 %.

Exit fees

When you take out a mortgage, you agree a length of time over which you will repay the loan, known as the mortgage term. If you leave during the mortgage term to use another lender, then the current lender will often charge exit fees to allow you to leave. You want a mortgage with low interest rates, but also make sure that you are fairly free to change lenders if required.

Insurance

As with all loans, you will be offered insurance on your mortgage, in case you are ill, out of work or die and can not make the payments on the mortgage. When getting mortgage insurance, make sure that you are not paying too much for it and that your other insurance policies do not already cover you.

How do you get a mortgage?

Mortgages can be obtained from banks, specialist mortgage lenders and online lenders. If you are looking for a mortgage, Cherry Creek Mortgage can help you find the best deals before committing to any particular loan program.

Ron Black Mortgage Time

Get To Know Julie and Ron

Economic News For The Week Of May 4th 2015

By Louis S. Barnes                                                                  Monday, May 4, 2015      The big news of the week: the US economy stalled in the first quarter, GDP rising 0.2%. And long-term rates, which go down on weak economic news instead went up.      There are several keys to this conundrum. The first: the economy did not stall. The most basic forward momentum in our economy (any economy): 321 million Americans need to spend money every day to live, and “personal consumption expenditures” in the first quarter plodded along at a 1.9% annualized rate. Second, there is no new evident weakness in employment, although next Friday’s payroll report could surprise.      Home sales are not rocketing, but not bad either: pending sales in March were 11% higher than one year ago. Today’s release of the manufacturing ISM index arrived unchanged in April at 51.5 despite weakness in the oil patch and the strong dollar hurting exports.      GDP calculations are weird. BTW: nobody should have been surprised by a poor number -- the Atlanta Fed’s real-time GDP tracker (“GDPNOW’) has had a near-zero figure for six weeks. Pulling GDP down: investments fell in Q1, everything from residential to business, some of that due to pullback in drilling. Another big sinker: imports rose, but exports fairly collapsed, down 7.3% in Q1 -- we were still spending, but buying the production of others.      The one aspect of the GDP report which does indicate a stall: businesses built a lot of inventory in Q1 which did not sell, but the production boosted GDP -- it would have been negative without the inventory accumulation. Now we infer that the overstock will mean underproduction in Q2. And the Atlanta Fed tracker shows no rebound in April.      If not a stall, certainly underperformance, then why the jump in mortgage and bond yields? Mortgages are still a hair below 4.00%, but the 10-year T-note is up to 2.11% and looks lousy. If ever you wanted confirmation that the outside world has more and more impact on daily life in the US, follow this bouncing ball.      Last winter the Fed adopted the rhetoric of inevitable rate-hikes ahead. If economic growth merely remained on current track, the Fed was coming. No need for inflation even to rise toward target, we’re coming. Simultaneously the European Central Bank and the Bank of Japan entered end-stage QE money-hosing -- panicked, really.      In the near term, currencies move relative to each other because of changes in local interest rates (longer term: inflation and trade balances). Money will flow to the highest return, and in the era of electronic money on 24/7 screens, moves FAST. So the dollar rocketed up, and the euro and yen crashed, as did nearly all important currencies, those central banks also hosing in order to be trade-competitive with Europe and Japan.      If you’re going to move to dollars you have to buy dollar-denominated bonds and stocks. Thus US bonds went up in price, down in yield, at max panic in early February, the 10-year to 1.65%. The NASDAQ returned to its all-time high. QE by the ECB and BOJ pushed yen and euro bonds almost to zero, adding to buy-pressure here.      Historically, big swings in currency values take a year or years to change the flow of exports and imports. In the modern era, not just money is made of electrons; so is a lot of world trade. The weak euro has suddenly pinked European economies, Spain now the strong man of Europe, second only to Germany. However, ruddy Europe is at the zero-sum cost of a pallid US, our exports tanking.      Hence the spreading global assumption that the Fed will have to hold off, maybe indefinitely. So the whole machine has run in reverse for 10 days: dollar down, euro and yen up. Euro bond yields up (all is relative, German 10s from 0.06% to 0.37%), US Bond yields up.      Hunch: all of this QE-currency hoo-ah has not changed a thing. The world is and has been caught in oversupply of labor, materials, commodities, and manufactures, soggy everywhere, German and Chinese predation making all worse. The Fed may lift off (Bill Gross: “If only to show they can still get out of bed”), but the economy and rates are not going anywhere. ------------------------------------------------------