Archive for the 'Mortgage and Finance' Category
Bernanke Stirs Up Inflation Fears
Categories: Chattanooga Market Conditions, Chattanooga Real Estate News, Mortgage and Finance
By Angel Sherlin
Usually the monthly Employment report is the main event of the week, but Fed Chief Bernanke stole the show. Following the theme of other Fed officials in recent weeks, Bernanke focused on inflation risks in multiple speeches, and his comments were unexpectedly direct. According to him, inflation expectations are a “significant concern.” He explained that the decline in the value of the dollar and the increase in the cost of energy were adding to inflationary pressures. Inflation is negative for mortgage investors, and mortgage rates rose for the fourth straight week due to increased concern.
At the end of a volatile week, investors were closely watching Friday’s important Employment report. The headline number came in right on target, with a loss of -49K jobs in May. The big surprise came from the change in the Unemployment Rate. Expected to rise slightly to 5.1% from 5.0% in April, it instead jumped to 5.5%, the highest level since October 2004. Economists attributed the spike to an unusually large influx of young adults entering the labor force to find summer jobs, so the reaction in the mortgage market was modest.
ALSO NOTABLE:
* In May, the Unemployment Rate showed the largest monthly increase since February 1986
* The Bank of England and the European Central Bank both held rates steady
* The Fed’s Lacker suggested that the programs put in place to ease the credit crunch may encourage excessive risk taking
* Oil prices declined as low as $122 per barrel, but then rose again to record levels near $135 per barrel
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Tame Inflation Data Turns Rates Lower
Categories: Chattanooga Real Estate News, Mortgage and Finance
By Angel Sherlin
Mortgage rates ended the week close to where they began the week, but the end result masked a lot of movement. The week began poorly for mortgage markets. Stronger than expected Retail Sales data and tough talk on inflation from Fed officials pushed mortgage 
rates higher on Monday and Tuesday. In particular, Tuesday’s Fed speakers suggested that the economy was beginning to recover - even if there is still a long way to go - and that inflation concerns have increased. The tide turned on Wednesday, however, when CPI, the most closely watched inflation report of the month, showed a lower than expected increase in inflation. Mortgage rates fell every day through the remainder of the week.
The April Core Consumer Price Index (CPI) rose at a 2.3% annual rate, below the consensus forecast of 2.4%. So far, higher food and energy prices have not been passed through in a large way to the prices of other goods. The Fed has been emphasizing inflation fears for a couple of weeks, which has had a negative impact on mortgage markets, so the good news on inflation was a relief to many investors. The Fed is generally considered to be comfortable with Core CPI readings below 2.5%.
In the housing sector, this week’s news was mixed. Against a consensus forecast of 940K, April Housing Starts rose 8% to an annual rate of 1,032K units. Building Permits, a leading indicator of housing market activity, rose 5%, the first increase in in five months. The construction of single family homes remained weak, however. The strength in the Housing Starts report came from new apartment construction, which is extremely volatile on a monthly basis. Separately, the National Association of Realtors (NAR) reported that median home prices fell 8% during the first quarter from the same period one year ago. The chief economist of the NAR suggested that the data may be a little misleading, since a smaller percentage of high end homes were sold during the period due to the difficulty in obtaining jumbo mortgages. In addition, the results varied in different parts of the country. 100 out of 149 metropolitan areas saw price declines during the first quarter.
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Fed Minutes Reveal Growth Concerns
Categories: Chattanooga Market Conditions, Chattanooga Real Estate News, Mortgage and Finance
By Angel Sherlin of Greater Chattanooga Lending, Guest Mortgage Author
While there were no quiet days in the mortgage market during the week, the enormous swings in rates seen recently were absent. The sparse economic news did little to change the outlook for future economic growth and inflation, and the net result of a series of medium sized daily rate movements was a slight drop in mortgage rates for the week.
The most notable economic news during the week was the release of the minutes from the March 18 Fed meeting. According to the minutes, the three quarters point rate cut was made to help avoid a worse than expected downturn in economic growth. The Fed forecasted that rate cuts and government stimulus packages will lead to faster economic growth during the second half of the year. Falling home prices and turmoil in financial markets were cited as the two most significant reasons for the slowdown. Two of the ten voting Fed officials wanted a smaller rate cut due to inflation concerns. Investors are now evenly split between an additional quarter point or half point rate cut at the next meeting on April 30.
In the housing sector, the February Pending Home Sales index fell a little more than the expected from January, and the index was down -21% from one year ago. Pending Home Sales are a leading indicator of future housing market activity, so the next Existing and New Home Sales reports may show small declines. The National Association of Realtors (NAR) latest forecast predicted that conditions will remain flat for the next few months, but that activity will pick up during the second half of the year. The Chief Economist of the NAR expects that higher mortgage loan limits will lead to increased sales later in the year.
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Don’t Ruin Your Credit with a Home Foreclosure; Try a Short Sale First!
Categories: Ask Andy, Chattanooga Real Estate News, For Home Sellers, Mortgage and Finance
By Andy Hodes, Realtor, Andy Hodes & The Scenic City Team
I ran into a friend a few days ago, let’s just call her Norma, who lost her great job several months earlier; her new job pays much less. Norma was struggling to barely pay all her bills, including a big mortgage. She asked if I could quickly sell her home so she could look for a place to live that would fit her new budget.
After a few questions I quickly determined that Norma couldn’t sell her home for a price high enough to pay off her mortgage. We call this being “upside down”- a bad place to be if you need to sell quickly. Norma said that if she couldn’t sell it, that she’d just walk way and let the bank foreclose. I suggested trying a “short sale” of her home instead, which could be a real win-win for her AND her lender. Norma wanted to know more.
In economic times when home prices keep going up, we don’t hear too much about short sales, but now that we’re in a buyer’s market with increasing inventory and declining home values, short sales become more prevalent. More and more people need to sell - and sell now - but they owe the bank more than their home is worth. There’s no need to walk away and have a foreclosure ruin your credit for years to come.
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Getting a home loan? Key Questions to Ask Your Lender.
Categories: Chattanooga Real Estate News, For Home Buyers, Mortgage and Finance
By Kacey Sides, Realtor, Buyer Specialist with Andy Hodes & The Scenic City Team
Need a home loan? Not long ago, that was the easy part of the home buying process. It seemed if you had a pulse, you were approved for a home loan . . . Not anymore! After the recent surge of foreclosures, alot has recently changed in the morgtage industry. Thus making who you choose as your lender that much more important!
A lender, educated in their constantly-changing industry, will keep more money in your pocket. There are still tons of great programs available for people with qualifying jobs and/or income. A lender that is aware of all the various programs for which you qualify can potentially save you thousands of dollars at closing and over the term of the loan! Ask your Realtor for a list of the most-qualified lenders in your area.
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Investors Push Up Mortgage Rates
Categories: Chattanooga Market Conditions, Mortgage and Finance
By Angel Sherlin of Greator Chattanooga Lending, Guest Mortgage Author
In a week packed with major economic news, the biggest story for mortgage markets was the widening spread between mortgage backed securities and Treasury bonds. Issued by the US government, Treasury bonds are generally considered to be the benchmark for a “safe” security, since the risk of default is extremely low. During the week, the economic news was mixed, and Treasury rates barely changed. Mortgage rates, however, jumped by about half a point. Investors are demanding a higher return from mortgage backed securities, and the result is higher mortgage rates. In another unusual reversal, the mortgage market has been more volatile than the Treasury market, and wide swings in mortgage rates have become a daily occurrence.
On the economic front, the highly anticipated Employment report failed to meet even Wall Street’s reduced forecast. 
Against expectations for a gain of 25K new jobs, the economy lost -63K jobs in February, and the figures for January and December were revised lower as well. This marked the largest monthly decline since March 2003. The Unemployment Rate surprisingly fell to 4.8%, but that reflects a large number of people who stopped looking for a job last month, meaning that they officially left the labor pool. Once again, the manufacturing and construction sectors showed the greatest weakness. Until November, the service sector had been steadily producing job gains of 100K or more per month, but even that sector barely produced any new jobs in February.
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Mortgage Rates Rise on Inflation Concerns
Categories: Chattanooga Real Estate News, Mortgage and Finance
By Angel Sherlin of Greator Chattanooga Lending, Guest Mortgage Author
Fed Chief Bernanke told politicians that the Fed stands ready to cut rates as needed to stimulate the economy. The politicians approved of faster economic growth, but mortgage investors worried that the stimulus could lead to higher inflation and pushed mortgage rates to the highest levels since January 2. According to Bernanke’s testimony on Thursday, the Fed’s next forecast will lower the economic growth projections made in November. The Fed expects a sluggish start this year followed by a second half pickup in growth. They are concerned that housing and labor market conditions could deteriorate more than previously anticipated, which led investors to expect additional rate cuts.
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