Monday, January 21, 2013

Mortgage Market Guide Weekly Issue 3

Last Week in Review: There was good news on the housing front, plus inflation remains tame.

"There is magic in that little word, home." Robert Sotheby. And last week, there were more signs that the housing sector continues to improve. Read on for details.

Housing Starts surged by 12.1% in December to 954,000 units on an annualized basis. This was above expectations and the highest level since June 2008. Building Permits, a sign of future construction, also increased, coming in slightly higher than the November reading.

In addition, research firm CoreLogic reported that home prices rose by 7.4% in the year ended in November. This figure, which includes the sales of distressed properties, was the largest year-over-year increase since 2006 and it has been positive for nine straight months. Also, the Obama Administration's December Housing Report showed that home prices had solid annual gains for the year ended in October, with the Federal Housing Finance Agency (FHFA) and Case-Shiller housing price indices up 5.6% percent and 4.3%, respectively, from one year ago.

It's also important to note that RealtyTrac's year-end 2012 foreclosure report showed that foreclosure activity increased in 25 states. However, median home prices also increased in 25 states, which pulled 1.6 million homeowners out of negative equity in 2012.

So what's the takeaway? Goldman Sachs has reported that the fundamentals are pointing towards larger gains for housing prices in the next couple of years. And with home loan rates remaining near record lows, great opportunities are available.

As always, one thing that's important to monitor is inflation. Since inflation reduces the value of fixed investments, inflation is considered the arch enemy of Bonds–and, therefore, of home loan rates, which are tied to Mortgage Bonds. However, last week's wholesale-measuring Producer Price Index and the Consumer Price Index showed that inflation remains tame, meaning inflation is not a factor at this time.

The bottom line is that now remains a great time to consider a home purchase or refinance, as home loan rates remain near historic lows. Let me know if I can answer any questions at all for you or your clients.

Forecast for the Week: It's a holiday-shortened week and while the economic calendar may be quiet, earnings season heats up.

The markets are closed on Monday in observance of Martin Luther King, Jr. Day and the economic calendar is pretty quiet the rest of the week.
  • More housing news is ahead, with Existing Home Sales on Tuesday and New Home Sales on Friday.
  • The only other economic report will be Weekly Initial Jobless Claims on Thursday. Last week, claims fell to a five-year low and this may have been due to seasonal factors. Investors will be looking for any uptick in the numbers.
In addition, many companies will be reporting their earnings numbers and the markets will be closely watching the results. Positive earnings data could help push Stocks higher and shift investing dollars out of the Bond markets, which could have a negative impact on home loan rates.

Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result. The chart below shows Mortgage Backed Securities (MBS), which are the type of Bond that home loan rates are based on.

When you see these Bond prices moving higher, it means home loan rates are improving – and when they are moving lower, home loan rates are getting worse.

To go one step further – a red "candle" means that MBS worsened during the day, while a green "candle" means MBS improved during the day. Depending on how dramatic the changes were on any given day, this can cause rate changes throughout the day, as well as on the rate sheets we start with each morning.

As you can see in the chart below, Bonds worsened last week due in part to the better-than-expected housing news and an influx of investing dollars into Stock mutual funds. I'll continue to watch this situation closely.

Chart: Fannie Mae 3.0% Mortgage Bond (Friday Jan 18, 2013)

View: Writing articles for local papers or newsletters is a great way to show your expertise. Check out the tips below, and be sure to share them with clients and colleagues.

Writing Business Articles That Get Read

"The easiest thing for a reader to do is to quit reading."
Michael Gartner, Pulitzer Prize winner and former President, NBC News

To some people, writing a business article can seem almost as daunting as public speaking. And yet, just like public speaking, business writing presents a variety of opportunities to share your expertise. Be it through local news outlets, community newsletters or shared access to a strategic partner's database, you can grab some fresh exposure for yourself or your business by writing a timely, helpful article.

Here are a few tips on how to write one that people will read and remember:

The Inverted Pyramid. Your goal should always be to create an easy reading experience for your audience. And there's no easier way to write an article than to follow in the footsteps of the experts. The inverted pyramid is a tool many journalists use to explain the structure of most news articles. For a classic example, read this news story (scroll down to the heading that says "History") that originally appeared in the New York Herald in April of 1865.

Start At The Bottom. You want to make sure all the newsworthy information is in the beginning, but not go into too much detail. It's critical you answer the Who, What, When, Where, Why, and How as early and as briefly as possible. If you skip this in favor of a long narrative, you're more likely to lose readers you wouldn't have lost otherwise.

Details, Details, Details. The benefit to keeping your introduction short and to the point is your readers are more likely to follow you into the nitty-gritty. This is the stuff you really want to talk about and here's where you'll expand on your message and deliver the value promised by your introduction. Make sure, however, you deliver the goods–or "pay off"–to your readers by giving them the information you've promised in your headline and introduction.

The Kitchen Sink. The ending is reserved for other information needed to back up your case, lend credibility to your point, or include relevant but non-essential information on the subject.

Call To Action. This step doesn't appear on the inverted pyramid model, but if you're writing for business, and your publication allows it, put a very clear call to action that lets readers know you take questions and are happy to receive a call from them if they want to talk more about it with you!
Economic Calendar for the Week of January 21 - January 25

The material contained in this newsletter is provided by a third party to real estate, financial services and other professionals only for their use and the use of their clients. The material provided is for informational and educational purposes only and should not be construed as investment and/or mortgage advice. Although the material is deemed to be accurate and reliable, we do not make any representations as to its accuracy or completeness and as a result, there is no guarantee it is without errors.

As your mortgage professional, I am sharing with you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

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